Law in Quebec

News about Quebec legal developments

Accounting

  • Provincial tax authority cannot invoke Crown interests in access to information matters, rules commissioner

    A produce retailer that was targeted by provincial tax authorities won a legal battle after the Quebec Access to information tribunal held that Revenu Quebec must turn over information to the company as “Crown priority” cannot be invoked by the agency in access to information matters.

    The decision, a welcome development that took the tax legal community by surprise, appears at first glance to hand taxpayers, particularly those who have been charged or are facing criminal charges, with a tangible means to obtain information that the provincial tax authority may be reluctant or unwilling to share, according to tax lawyers.

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  • Federal Court of Appeal allows use of mark-to-market tax accounting

    Taxpayers are entitled to use the mark-to-market method to compute income for federal tax purposes if it provides a more accurate picture of a taxpayer’s income, ruled the Federal Court of Appeal.

    The federal appeal court decision bolsters the possibility for taxpayers to use methods to compute income  that are not forbidden by the Income Tax Act (Act), affirms Canada Revenue Agency’s administrative position that allows regulated financial institutions to tax derivatives on a mark-to-market basis, and may open the door to allow financial accounting to become more influential in determining what constitutes an acceptable method of computing income from business, according to tax experts.

    “The case confirms that taxpayers are to determine profit for tax purposes on the basis that reflects an accurate picture of the taxpayer’s income,” said James Morand, a Toronto tax lawyer with Cassels Brock & Blackwell LLP. “If mark-to-market presents a truer picture of a taxpayer’s income than realization or some other method of computation, it is preferable.”

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  • OSFI delays implementation of new disclosure requirements

    The federal financial watchdog has given Canada’s big banks an extension to implement global reforms that establish more consistent disclosure rules to allow them to focus and devote the “significant level of effort required” to implement new international accounting standards for financial instruments.

    The Office of the Superintendent of Financial Institutions (OSFI), globally renown as a dominant and strong regulator, originally adopted an aggressive timeline for the implementation of the revised Pillar 3 standards issued by the Basel Committee on Banking Supervision, an international banking regulator – and an equally aggressive stance towards the adoption of the International Financial Reporting Standard (IFRS) 9 Financial instruments accounting standard, according to financial services experts.

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  • Revenue Quebec intends to improve dealings with taxpayers

    An action plan unveiled by Revenue Quebec to improve its dealings with taxpayers after the Quebec ombudsman accused the provincial tax department of becoming more intractable and less respectful is viewed with cautious optimism by business and tax professionals.

    The action plan was ordered by Quebec Finance Minister Carlos Leitão to remedy an “unacceptable situation” following a scathing report by Quebec ombudsman Raymonde Saint-Germain who for the second year in a row found that Revenue Quebec frequently failed to apply the principles of natural justice or fundamental rules of procedural fairness, rigidly interpreted fiscal legislation despite being aware of jurisprudence contrary to its position, and provoked needless court action to resolve tax disputes with taxpayers.

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  • Revenue Quebec ordered to pay $2.4 million

    Revenue Quebec was ordered to pay $2.4 million, including $1 million in punitive damages, to a Montreal business after the Quebec Court of Appeal found that the provincial fiscal authority abused its powers and acted maliciously and in bad faith.

    In a decision that sternly rebukes the provincial tax authority for abusing its “extraordinary powers,” the appeal court ruling held that Revenue Quebec owes a general duty of care and good faith to taxpayers as well as an “obligation to compensate” taxpayers who were the victims of wrongful conduct, according to tax lawyers.

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  • Revenue Canada investigation highly reprehensible, says court

    A “highly reprehensible” and illegal probe by the Canada Revenue Agency that failed to draw the distinction between a civil tax audit and a criminal tax investigation has put into jeopardy several tax evasion criminal cases involving Quebec construction companies and corruption charges against former federal civil servants, according to tax experts.

    In a precedent-setting ruling that appears to bring more clarity to the leading Supreme Court of Canada decision in R. v. Jarvis , [2002] 3 SCR 757, Court of Quebec Justice Dominique Larochelle held that the evidence produced to charge the owner and three other company officials of a Montreal company, B.T. Céramiques, was obtained illegally because federal tax officials crossed the “Rubicon” and failed to inform the taxpayers that the inquiry had turned into a criminal investigation, thereby breaching their right to freedom from self-incrimination and right to reasonable expectation of privacy guaranteed under s.7 and s.8 of the Charter of Rights and Freedoms.

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  • Quebec accounting firm CEO calls for elimination of small business tax

    The Quebec provincial government should follow Manitoba’s lead and eliminate the business tax for small and medium-sized business with net taxable earnings under $500,000 so long as they invest the amounts saved in employment, innovation, and production, suggested the head of a Montreal accounting firm at a tax conference.

    The latest Quebec budget has put the province in a better position to grow and prosper by gradually lowering the general corporate tax rate but the provincial government should contemplate abolishing income tax for small businesses to stimulate the economy even more, said Emilio Imbriglio, the president and chief executive officer of Raymond Chabot Grant Thornton.

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  • OECD hopes reforms will end era of tax avoidance

    An unprecedented international collaboration on tax reform that recently unveiled sweeping plans to crack down on aggressive tax planning by multinational companies has the potential of becoming the biggest shake-up in international tax rules in nearly a century, according to tax professionals.

    Endorsed by G20 finance ministers and leaders, the ambitious proposals by the Paris-based Organisation for Economic Co-operation and Development (OECD) aims to close loopholes, increase transparency to assist tax authorities in risk assessments, and restrict the use of tax havens to curb many international tax planning strategies. The plan, known as the Base Erosion and Profit Shifting (BEPS) project, lists 15 specific actions intended to establish coherent rules for corporate income taxation, prevent tax treaty abuse, tackle the tax challenged posed by the digital economy, and amend the world’s 3,000 bilateral tax treaties through a multilateral instrument.

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  • Tax competition stirs controversy

    Barely a month after the European Commission ruled that Starbucks Corp. and Fiat Chrysler Automobiles NV benefited from illegal tax deals from the Dutch and Luxembourg governments, cross-border tax avoidance will be the subject of yet more intense scrutiny after European Union lawmakers decided recently to quiz 11 multinational corporations over sweet-heart tax deals with governments.

    Sophisticated tax avoidance schemes, under increasing political scrutiny as the likes of Apple Inc., Google Inc., and Wal-Mart Stores Inc. shift billions of dollars of profits out of higher-tax countries into low or no-tax jurisdictions, comes with a hefty price. The Organisation for Economic Co-operation and Development (OECD) conservatively estimates that profit shifting costs the world between US$100 billion and $240 billion in lost tax revenues. Another study revealed that the 500 largest U.S. companies hold more than US$2.1 trillion in accumulated profits offshore to avoid U.S. taxes, and would collectively owe approximately US$620 billion in U.S. taxes if they repatriated the funds.

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  • Ombudsman comes down hard on Revenue Quebec

    A blistering report by Quebec ombudsman recently accused Revenue Quebec of becoming more intransigent and less respectful report towards taxpayers, prompting an immediate reaction from the provincial finance minister who ordered the tax department to come up with a “concrete action plan” to remedy the “unacceptable” situation.

    Revenue Quebec “frequently failed” to apply the principles of natural justice or the fundamental rules of procedural fairness while recovering tax dollars, rigidly interpreted fiscal laws which often resulted in needless court action to resolve tax disputes with taxpayers, and “employed inadequate, and even abusive,” auditing methods, according to the latest report by the Protecteur du citoyen, the second year in a row that the taxman was castigated by the ombudsman.

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  • OECD report recommends giving tax authorities access to suspicious transaction reports

    An international think tank is calling for tax administrations to have the fullest possible access to suspicious transaction reports received by financial intelligence units to ensure tax compliance and to tackle serious crimes as tax evasion, bribery, corruption, money laundering and terrorism financing.

    The Paris-based Organisation for Economic Co-operation and Development (OECD) is calling on jurisdictions to provide the legislative framework to allow tax administrations to suspicious transaction reports (STRs) and to ensure that operational structures and procedures are put in place to facilitate the “maximum effectiveness” in the use of STRs.

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  • Quebec appeal court imposes duty to investigate on business seeking input tax credits

    Less than a year after the Federal Court of Appeal held that a supplier’s delinquent fiscal conduct is irrelevant to an input tax credit claim, the Quebec Court of Appeal has muddied the legal waters with a controversial decision that affirmed that Quebec business are expected as part of an effort to impede tax evasion to conduct due diligence on suppliers in order to be able to obtain input tax credits.

    In a highly-awaited ruling that startled tax professionals, the appeal court held that business are required to do more than simply confirm the validity of a supplier’s GST/HST registration number and confirm that invoices conform to the current legislation and regulations to qualify for input tax credit (ITC) claims. Business have the added duty to authenticate invoices used to claim ITCs originate from the person that actually performed the service, held the appeal court.

    “This is a very important ruling for the business and tax world because in a way it can change the way businesses operate in Quebec,” remarked Alexandre Dufresne, a tax lawyer and managing partner of Spiegel Sohmer in Montreal. “It’s unfortunate but you hear more and more people saying I am going to bring my operations in other jurisdictions because the administrative burden is just too heavy in Quebec. It’s reached that point.”

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  • More guidance needed over role of in-house legal counsel, say accountants and lawyers

    The accounting and legal community is calling on the Auditing and Assurance Standards Board and the Canadian Bar Association to provide more guidance over the role of in-house legal counsel in an exposure draft designed to assist auditors, law firms and management to communicate effectively with each other over audit inquiries.

    The exposure draft, two years in the making, updates the existing Joint Policy Statement (JPS) to reflect developments in accounting and auditing standards as well as in the legal environment since the original statement was issued in 1978. The JPS covers situations when auditors request management to prepare an inquiry letter to send to an entity’s law firm to confirm the fairness of management’s evaluation of the entity’s claims. It is intended to protect solicitor-client confidentiality and privilege while ensuring that auditors have access to sufficient appropriate information to fulfil their professional responsibility in conducting the audit of the entity’s financial statements.

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  • Court rules there are limits to reverse or correct unintended tax consequences

    Taxpayers do not have a general license to “travel back to through time” with the benefit of hindsight to reverse or correct unintended tax consequences of commercial dealings, held the Quebec Court of Appeal in two separate but related rulings.

    The rulings effectively limit the scope of the so-called rectification remedy in a tax context under civil law, according to tax experts. A powerful legal instrument, rectification essentially allows taxpayers, under certain conditions, to correct errors in legal documents or instruments that do not reflect the true intention of the parties, and which lead to unintended consequences. Rectification allows the parties to “fix” the terms of the transaction so that the intended tax consequences are achieved. Its effect is retroactive.

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  • Accountants with a conscience

    When Denis Sylvestre began teaching a business strategy course to students at the Université des Grands Lacs in Burundi, he began by citing the example of McDonald’s Corporation – and drew blank stares. He then rattled off the names of four other well-known multinational firms that he had used in the past while teaching at Quebec universities, and still there was no signs of recognition. Just as he had to set aside his PowerPoint presentations and use the chalkboard because of a lack of stable electricity, the Montreal CPA quickly realized his teaching material was out-of-step with the realities faced by students living in one of the five poorest countries in the world.

    “I had to adapt my course on the go,” said Sylvestre with a chuckle. “Over here we use examples of very large corporations to teach but the students in Burundi had no idea of who they were so we had to use local examples.”

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Law in Quebec
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