A targeted program launched by Revenue Quebec to recover monies from employers and employees in the construction industry recouped nearly $1.2 billion in the past three fiscal years but critics say that the tax authority could recover more monies and curb black market activities more efficiently by introducing a series of easy-to-implement measures.
Tax
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Quebec tax authorities target construction sector
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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 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.
Categories: Accounting, Business, Federal Court of Canada, Legal Practice Management, Quebec, Rulings, Tax -
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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Quebec Court of Appeal holds accounting firm liable
An accounting firm that misstated audited financial statements and then concealed the blunder was ordered by the Quebec Court of Appeal to pay more than $300,000 to a shareholder who relied on the statements to acquire a company.
Mallette S.E.N.C.R.L., the sixth largest accounting firm in the province with more than 50 partners and 550 professionals working across 21 offices located in small and mid-sized cities, was held liable for breach of a legal duty after the court found that it was accountable for the loss of future gains the shareholder could have earned. Also held liable were two of the firm’s partners – Gratien Nolet, formerly of Arthur Andersen, who performed the audit from 1999 to 2003, and Marc Dagenais, a tax expert.
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Agreements provide unfair advantage over Canada’s tax treaty partners
In negotiations with a number of countries that have earned a well-deserved reputation for being tax havens, Canada is on the verge of signing its first bilateral tax information exchange agreement (TIEA) with Bermuda, granting the islands a significant tax benefit that would give it an unfair advantage over Canada’s tax treaty partners, according to tax experts.
“The Canadian government has long complained about Canadians using tax havens,” noted Lorne Saltman, a tax lawyer with the law firm Cassels Brock in Toronto. “This seems to encourage it – a rather perverse tax policy.” (more…)
