Sunday News Roundup 24.04.21 PwC layoffs, MNP BC turmoil, and more Canadian accounting news

Wrapping up the odds and ends from the past week in Canadian accounting news

Apr 22, 2024 Author: Canadian Accountant

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TORONTO, April 21, 2024 – Another round of layoffs has hit employees at Big Four accounting firm PricewaterhouseCoopers in Canada. About 60 individuals were impacted out of 7,700+ partners and staff across Canada according to a source familiar with the matter. The layoffs follow PwC Canada’s termination of roughly 150 employees or approximately two per cent of its workforce in November 2023.

Anuja Agarwal, spokesperson for PwC Canada, told Canadian Accountant: “We routinely review our business model to best meet the evolving needs of our clients, to enable us to deliver differently, as we adapt and respond to changes in the market. Due to our most recent review, we have had to eliminate some roles. These decisions are never easy to make. We are committed to treating people fairly and have provided all impacted employees with packages in excess of statutory requirements.”

An employment law firm based in Toronto has put the number higher on its website at 140 employees, closer to the number of layoffs last year, which are are occurring at a time of workforce reductions at the Big Four worldwide, particularly in consulting services, amid an industrywide slowdown in demand for some services.

And now, on to the rest of the news from the past week in Canadian accounting.

Tik Tok stirs up cleantech turmoil around MNP in BC

Homegrown national accounting firm MNP is at the centre of a controversy over conflict of interest allegations in British Columbia. According to the CBC, allegations over grant money mismanagement at CleanBC originated from the Opposition, but really took off when a small business owner posted a video to TikTok, asking if MNP was in a conflict of interest by providing both grant administration and grant writing services to clients.

At first the NDP government seemed to shrug off the allegations but did a quick about-face, saying “new information” had come to light, and ordered an investigation by the provincial auditor general. (The Opposition wanted a special prosecutor.) Rob Shaw, a reporter at Glacier Media, did a deep dive into the allegations and noted that MNP also administered the BuyBC agriculture grant program.

The Globe and Mail noted that MNP’s administration of the Commercial Vehicle Innovation Challenge (CVIC) and the Advanced Research and Commercialization (ARC) grants has been suspended. Several of the media outlets, including the CBC, Vancouver Sun, CTV, and more, have used the inflammatory phrase, “alleged kickbacks.” For its part, MNP wrote in a media statement that the “allegations are false and misleading."

As for the small business owner, he seems like just the kind of entrepreneur that Canada needs more of — a former logger with environmental credentials, who started a business in his parents’ basement, building and servicing hybrid logging trucks. Back in 2021, he had already built a following of more than 400,000 people on his Tik Tok channel. As Rob Shaw noted, the speed at which the NDP government was brought to its knees by a viral TikTok video is remarkable.

Liberals try to capitalize politically on capital gains

Much gnashing of the teeth this past week on the hike in capital gains by the Liberals. Where people tended to line up in the debate had a lot to do with vested interests — business on one side, wealth inequality critics on the other. CPA Canada seemed to frown at the details and even Bill Morneau, once tarnished by a similar tax hike, popped up to criticize his former colleagues.

This article from the Canadian Press sums up the arguments nicely. But it will be interesting to see what becomes of the hike in capital gains. Chrystia Freeland said she expected blowback but the Liberals have a poor track record of sticking to their policy changes (see bare trusts – or UHT, natch). While the hike helps the Liberals pay for pricey programs and positions them as more populist, a new government led by Pierre Poilievre could easily roll them back (and thus invite criticism that Poilievre was always working for the wealthy).

Canada Revenue Agency taken for a ride on carousel scheme

The CBC finally got hold of a court document it’s been wanting for months in the bizarre case of Gold Line Telemanagement before the Tax Court of Canada. It’s hard to believe that the CRA, which constantly warns consumers about tax scams, could have paid out more than a hundred million dollars “in what it now calls ‘illegitimate’ tax refunds,” according to the CBC.

It all has to do with carousel schemes, which The Fifth Estate devoted an episode to, called Swindling the System, in 2023. Gold Line is represented in Tax Court by KPMG Law, which wanted a CRA affidavit struck from the public record. KPMG eventually reversed its position late last year. The affadavit alleges the CRA lost $37 million of taxpayers’ money to a scheme that involved a complex supply chain web.

According to the CBC, “Previous filings made in the case, and not under seal, state that while KPMG provided Gold Line with external ‘accounting support’ and audited its financial statements, it did not prepare the GST returns at issue.”

The naked cost of the bare trust fiasco

How much did the federal government's bare trust reversal cost taxpayers? Joseph Devaney of Video Tax News released an open survey via Linkedin, targeted at accounting firms, that sought to measure the costs to both firms and taxpayers in terms of firm education, costs for filing, and work-in-progress costs. The Globe and Mail covered the results of the survey here.

Mr. Devaney shared the responses with Canadian Accountant and a few of the comments caught our eye. Some firms did not take on new clients due to the demand of the filings, which cost them business. Others tried to wait out the CRA, anticipating a reversal of the finance department's poor policy planning, and were not surprised when it happened. Others reported increased stress and impacts on the mental health of their staff at an already stressful time of the year. But the overall takeaway is that practitioners do not trust the federal government or the CRA to implement sound taxation policy.