Law in Quebec

News about Quebec legal developments

Accounting

  • Ambitious international effort to rewrite tax rules at risk

    An ambitious international effort calling for a coordinated approach to rewrite global tax rules over profit shifting risks being undermined by the number of growing countries that are unilaterally introducing significant tax reforms, warn tax experts.

    The Paris-based Organisation for Economic Co-operation and Development (OECD), backed by the G20 Finance Ministers, proposed in July 2013 a sweeping series of proposals that take aim at aggressive international tax planning by multinational companies in the wake of intense political scrutiny and public outcry over the likes of Apple Inc., Google Inc. and Starbucks moving billions of profits out of higher-tax countries into low or no-tax jurisdictions.

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  • Task force proposes bold overhaul of Quebec tax system

    A blue-ribbon panel of tax experts has proposed a bold overhaul of Quebec’s tax system that would introduce a new tax mix by slashing $5.9 billion in Quebec personal and business taxes while increasing consumption taxes and fees in a bid to spur economic growth, job creation, and make the province a more competitive place to invest.

    The sweeping reforms, which represent a marked shift in tax policy by shifting the reliance on income taxes to provincial sales tax and user fees, could serve as a model for other provinces as they too are grappling with an ageing population and sluggish government revenue growth, said Stephen Gordon, a professor of economics at the Université Laval.

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  • Ruling extends reach of taxman’s demand letters

    Quebec’s tax authorities can issue demand letters and request the disclosure of financial information from third parties located outside of the province to determine whether the taxpayer is subject to the province’s tax laws, ruled Quebec Superior Court.

    The ruling illustrates the daunting challenge taxpayers face when trying to quash formal demand letters and requests for information by tax authorities, particularly when they are trying to ascertain the residency of corporations or trusts in order to establish where it makes its management decisions, according to tax experts.

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  • Tax authorities target undisclosed foreign assets

    A letter recently sent to some Canadians “strongly” encouraging the voluntary disclosure of potential undisclosed foreign assets and unreported foreign income is the latest indication that the Canada Revenue Agency is stepping up efforts to crack down on international tax evasion and aggressive tax avoidance.

    A growing number of wealthy Canadians are coming clean with concealed assets in foreign tax havens through the CRA’s voluntary disclosure program after lists emerged over the past couple of years with information revealing the names of supposed Canadians who allegedly have offshore accounts. The number of offshore disclosures increased from 1,215 in 2006‐2007 to 5,248 in 2013‐2014, representing over $2 billion in total unreported income since 2006‐2007, according to the CRA’s latest annual report. The CRA’s latest letter-writing campaign, which began last December, is widely expected to entice more Canadian taxpayers to come forward.

    “It’s an inexpensive way of encouraging a greater level of compliance,” noted Michael Friedman, co-chair of McMillan LLP’s tax group. “Having a one-on-one audit can be costly for the CRA, and while those types of audits may be more effective in generating revenue for the tax authority, writing a letter to a taxpayer is inexpensive. When someone receives a letter from the CRA, they think twice.”

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  • Protocol amends Canada – UK tax treaty

    After more than two years of negotiations, Canada and the United Kingdom signed a protocol to amend a tax treaty between the two countries that adds a new “exchange of information” provision and a new clause that would allow a tax authority from one country to “enter the other” to conduct tax audits.

    The 12-page protocol, which came into force just before the Christmas holidays, permits an authorized tax representative from the U.K. to enter in Canada to interview individuals or even examine a person’s books and records.

    “It used to be that foreign tax debt was viewed as essentially not enforceable in other countries so absent a law imposed through the enactment of a treaty, the Canadian courts would by and large not assist a foreign government in collecting from a Canadian resident,” pointed out Charles Taylor, a partner with Deloitte. “Now, as governments are intent on preventing fiscal evasion, they have agreed to help each other and we have a provision in the protocol that essentially says the two governments will assist in the collection of taxes covered by the convention.”

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  • Quebec’s anti-corruption law proves to be a niche market for accounting firms

    Quebec’s anti-corruption law, adopted more than a year ago in the wake of allegations of bribes, collusion, influence peddling, and widespread corruption in the construction industry, is proving to be good business for accounting firms.

    Adopted more than a year following the launch of the Charbonneau Commission, a public inquiry mandated to examine potential corruption in the awarding and management of public construction contracts, the Integrity in Public Contracts Act (Act) compels companies to obtain a seal of integrity if they wish to bid on the billion dollars in contracts awarded annually in the Quebec public sector.

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  • Quebec tax authorities chastised for expecting business to act as “tax police”

    The Tax Court of Canada, in yet another legal blow to Quebec’s tax authorities, chastised Revenue Quebec for expecting business to act as a “taxation police” after it withheld input tax credits from a meat processing company because it ostensibly had not been diligent in its dealings with its suppliers.

    The precedent-setting ruling, the third to harshly castigate the Quebec taxman in recent months, found that nothing in the Excise Tax Act (ETA) allows tax authorities to hold a company liable for the tax delinquencies of its suppliers. In uncharacteristically blunt language, Justice Alain Tardif noted that it would be unreasonable to expect business to perform complete background checks on all its suppliers, especially since legislation grants tax authorities large powers to investigate and demand information.

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  • Revenue Quebec ordered to pay $2 million in punitive damages

    A Montreal businessman who was forced to shut down his business after Quebec tax authorities mishandled his case was awarded nearly $4 million, including a staggering $2 million in punitive damages, following a precedent-setting ruling by Quebec Superior Court.

    In an extremely harsh judgment that sheds light on Revenue Quebec’s tax collection policies and questions its administrative practices, Justice Steve Reimnitz held that the provincial tax agency abused its powers, acted maliciously and in bad faith, and exhibited unjustified and blameworthy administrative doggedness in the way it handled the tax file of Groupe Enico Inc. and its founder Jean-Yves Archambault. The comprehensive 197-page ruling in Groupe Enico inc. c. Agence du revenu du Québec 2013 QCCS 5189 details a series of bizarre and improbable events, triggered by a dishonest auditor,  that has been likened by Quebec tax lawyers to an absurd “horror story” that “was bound to happen.”

    “There have not been many decisions that have been rendered by the courts where Revenue Quebec has been sued for damages,” pointed out Alexandre Dufresne, a Montreal tax lawyer and managing partner of Spiegel Sohmer. “Not only that, Revenue Quebec lost and the damages were very substantial so in that sense it is a very important decision. The judgment outlines what I would call a horror story – it really was an abusive audit.”

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  • Ruling limits powers of Quebec securities regulator to impose gag orders

    Days before the former head of Canada’s largest engineering firm was formally charged with fraud, SNC-Lavalin Group Inc. won a key legal battle against the provincial securities regulator who unsuccessfully tried to keep details of an investigation it was conducting into the scandal-ridden engineering powerhouse from the firm’s audit committee and external auditors.

    In a ruling that limits the powers of the Quebec securities regulator to impose gag orders, the Quebec Court of Appeal clarified the procedures the Autorité des marchés financiers must follow when issuing non-disclosure orders. The appeal court also upheld a decision by a specialized tribunal that oversees the securities watchdog, which allowed an SNC-Lavalin executive under investigation to provide details to the company’s audit committee and its external auditors Deloitte & Touche.

    “The Quebec Court of Appeal seems to have given the AMF a lot of latitude to use its discretionary powers but if it becomes excessive it will place limits,” observed Yves Robillard, a Montreal securities lawyer with Miller Thomson LLP. (more…)

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  • Class action authorized against three accounting firms in Mount Real financial scandal

    Nearly six years after 1,600 investors were bilked, left holding an estimated $130-million of worthless promissory notes when Montreal financial group Mount Real Corp. was shut down by the Quebec securities regulator, a Quebec judge authorized a class action against two former executives, two financial service companies and three accounting firms.

    In a ruling that appears to have lowered the bar for class action certification against accounting firms, Quebec Superior Court Justice Jean-François Buffoni held that the representative plaintiff demonstrated that the allegations she is trying to establish between the fault allegedly committed by the accounting firms and the harm suffered by the class does not “appear to be frivolous nor manifestly unfounded” and stands a reasonable chance of succeeding, even though the representative plaintiff admitted that she did not rely on the audited financial statements to make an investment decision.

    “This ruling represents an important precedent regarding the civil responsibility of accounting firms,” noted Bruce Johnston, a Montreal lawyer for one of the three law firms representing the investors. “I hope it sends a message to auditors. It’s very important that auditors do their work properly and be held accountable if they fail to do so.”

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  • New accounting rules making lawyer’s job tougher

    When a slew of Canadian organizations made the transition at the beginning of the year to an international financial reporting standard, lawyers faced almost overnight new ground rules that could prove to be burdensome, endanger solicitor-client privilege, and potentially prejudice defence in litigation cases.

    Misgivings arise from the way that unresolved legal claims, or “contingencies” in accounting speak, must be reported under International Financial Reporting Standards (IFRS). IFRS, quite simply, imposes a higher threshold for identifying claims, takes a different approach to estimating the expected value of a claim, and has more extensive disclosure requirements.

    “I don’t see lawyer’s lives getting any easier with IFRS,” remarked Stephen Kerr, a partner with Fasken Martineau Dumoulin LLP, who practices general corporate and commercial law. “Suddenly we’re going to be asked to do a lot more, with a lot more precision and a lot faster.”

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  • Mount Real scandal: Three more convicted

    Several weeks after three more individuals linked with the bankrupt Montreal financial group Mount Real Corp. were ordered to pay fines ranging from $7,000 to $104,500, its former president now faces charges in an another alleged fraud that dates back to 1998.

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  • IFRS spells changes for insurance contracts

    When the Finance Department introduced new transitional measures just before the Christmas holidays, it was welcome relief for life insurers coming to grips with a new standard introduced by the International Accounting Standards Board.

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  • News roundup: On crucifixes, missing judges and spying

    The City of Saguenay and Mayor Jean Tremblay has been ordered to pay $30,000 in moral and punitive damages by a Quebec Human Rights Tribunal to a citizen for discriminating against his freedom of religion and conscience. The City and the mayor were also ordered to remove a crucifix and a Sacred Heart statue from city council meetings as well as to stop reciting a prayer before each city council meeting.

    “By reciting a prayer and displaying religious symbols in a hall where all citizens are invited to participate in the life of a democratic municipality, the Mayor and the City of Saguenay did not respect its obligation to remain neutral,” said the Tribunal.

    In spite of the ruling, it appears that Quebec’s National Assembly will not follow suit. A crucifix placed over the Speaker’s chair will stay put.

    This is not the first time that Mayor Jean Tremblay lost an expensive court battle. In 2009, in a ruling that harshly castigates the mayor for providing testimony akin to science fiction, Quebec Superior Court condemned the city and the mayor to pay nearly $600,000, plus interest and legal costs, to the city manager for wrongful dismissal.

    Quebec crown prosecutors and government lawyers have long complained about being woefully understaffed. Now Court of Quebec judges have joined the chorus. The criminal section of the provincial court in Montreal is apparently in dire straits. Out of its roster of 32 judges, five have retired, one passed away, one is ill and one was nominated to Quebec Superior Court — and none have been replaced. All of which has led to lengthy court delays, said Justice Ruth Veillet, the Court of Quebec coordinating judge for the Montreal region. She has gone so far to wonder “whether if we are going to free people who have committed serious crimes?”

    Surreal, almost akin to a novel by John Le Carré. It appears that the City of Montreal conducted a ten-month long investigation against a public servant who has become its nemesis – the city auditor. City comptroller general Pierre Reid allegedly led the operation, and investigators ostensibly even examined confidential e-mails, apparently including  e-mails between clients and lawyers, which is supposed to be protected by client-sollicitor privelage, according to a report by Montreal newspaper La Presse.

    “By its length and magnitude, this intrusion, or this interference, are akin to systematic espionage and a real fishing expedition that were clearly meant to build a case against the auditor general,” city auditor Jacques Bergeron wrote in a three-page letter to members of city council.

    Quebec Municipal Affairs Minister Laurent Lessard publicly rebuked the city, pointing out that “the auditor must have a free hand. He’s there to audit the administration and not to be audited by the administration.”

    Gilles Ouimet, the head of Quebec’s legal society, told me today that even if the allegations are true (which he described as disturbing), there is little that the Barreau du Quebec would be able to do.

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  • Mount Real financial scandal – Conviction #19

    When Paul Messier Jr. pled guilty in mid-January to 10 counts before Court of Quebec Justice Jean-Pierre Boyer, it marked the nineteenth conviction against individuals in the Mount Real financial scandal.

    Quebec’s securities watchdog, the Autorité des marchés financiers (AMF) accused Messier of aiding Mount Real Acceptance Corporation and Investissements Real Vest Ltée. with illegal distribution,  and acting as a securities dealer or adviser without being registered. He was fined $104,000.

    After a three-year investigation involving six investigators who sifted through 375 boxes of evidence and 1.5 million e-mails and other electronic documents, the AMF filed four years ago 619 charges against 24 individuals who acted as representatives in the matter of Mount Real Corporation and its subsidiaries. So far, 19 have been found guilty on 498 charges, and fined a total of $2.3 million.

    Mount Real was a firm that provided management and accounting service and strategic advice to companies and individuals. Its principal business activity, though, was selling magazine subscriptions. In operation from 1997 to 2005, Mount Real’s structure was extremely complex, with up to 120 companies linked to it. A Toronto Stock Exchange listed company, the company boasted $5.7-million in revenues and $89.7-million in assets in fiscal 2004. In November 2005, the Quebec securities regulator shut down its offices after a probe.

    Approximately 1,600 retail investors lost $130-million on unregistered investment notes issued by Mount-Real and its affiliated companies.

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Law in Quebec
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