Ottawa should carefully weigh new tax changes, expert says
FCPA Bruce Ball says time should be allowed for meaningful consultation on proposed tax changes
The past two years have ushered in a great deal of change—and often a greater workload—for businesses of all kinds, small and medium-sized practitioners (SMPs) included.
With so much change, many tax practitioners and their clients have expressed the need for more information on (and more time to adjust to) many of the tax plans announced by the federal government over the past year.
Here, Bruce Ball, FCPA and CPA Canada’s VP of taxation, shares what members are saying and why the government needs to carefully consider any new changes it introduces.
HOW HAS THE PANDEMIC AFFECTED SMPs PRACTISING IN TAX?
Bruce Ball (BB): COVID-19 has taken a toll on everyone, so tax practitioners are no exception.
In addition to dealing with pandemic-related issues of their own, tax practitioners have had to meet their clients’ tax obligations. And, apart from the extensions provided in 2020, they have had to do this largely within the same general timeframes as they did pre-pandemic.
Many are also providing additional services for those who qualify for COVID-19 assistance and subsidy programs. And we have heard that a sizeable number of firms are going through higher than usual staff turnover and have had difficulties in finding new staff members.
All of this means many members, and SMPs in particular, are having trouble keeping up with their usual work along with the additional work brought on by the pandemic.
HOW HAS THIS SITUATION IMPACTED CPA CANADA’S RECOMMENDATIONS TO THE FEDERAL GOVERNMENT?
BB: Given that taxpayers and their advisers are not in the best position to deal with more change at this time, we are asking that the federal government carefully consider any new tax changes it proposes.
In our view, any change during what we hope will be the last stages of the pandemic should be examined from the perspective of both necessity and urgency. Moreover, time should be allowed for meaningful consultation and timely updates should be provided on key initiatives.
For example, in the April 2021 budget, the government proposed that the delivery of Notices of Assessment (NOA) in paper form be eliminated for T1 returns that are filed electronically. We later learned that the change would apply to the 2022 busy season. And, if that was the case, it would have a significant impact on EFILERs, since they would have had to take care of NOA delivery for some clients in addition to explaining the new rules to those who have signed up for My Account.
Fortunately, the government has now confirmed that the change will not apply to the 2022 filing season for 2021 T1s. Instead, we understand that it will be deferred until July 2022. They also said they would consult with stakeholders.
While the clarification on timing is helpful, we believe earlier updates could have been provided to avoid uncertainty for practitioners. Also, we think the implementation date should be further delayed to allow for more discussion. Practitioners will be busy at least until June 30 and we believe there are still a lot of important logistical issues for CRA to deal with. To allow enough time to consider all the issues, the changeover should wait until at least the fall.
WHY IS THE TIMING OF IMPLEMENTATION SO IMPORTANT?
BB: Since all stakeholders need time to adjust to a change, this should be taken into account in the selection of an effective date for any new tax initiative. In particular, time should be provided so that the government can consult with taxpayers before legislation is passed, address significant issues, and taxpayers can implement any changes they need to make to their processes.
This is especially important for proposals such as the luxury tax that businesses must administer at the time of sale. Although the implementation of the tax has been deferred from January 1, 2022, the revised date has not been announced.
It takes time to create a system to collect and remit tax and, as the luxury tax is transactional in nature, businesses will have to be ready before (not after) the effective date. In addition, time must be set aside for the CRA to provide forms and guidance. We are concerned about whether this will occur in a timely manner.
ARE THERE OTHER CHANGES THAT ARE STILL AWAITING CLARIFICATION?
BB: Yes, many SMPs have mentioned that no additional information has been provided on several other proposals from the 2021 federal budget. For example, there has been no official update on whether Canadian-Controlled Private Corporations (CCPCs) can start claiming an immediate deduction of capital costs rather than tax depreciation on qualified expenditures. According to the 2021 federal budget, this deduction was to apply for eligible property acquired after April 18, 2021. For some CCPCs, they have already had to file their tax returns without knowing whether the rule will apply.
We also actively engaged with the government and prepared regular updates for members on the proposed trust reporting changes and the uncertainty around how CRA would administer these proposals. Although the changes have been deferred and apparently won’t apply for the 2021 tax year, final details are still to come on when the reporting will be required.
WHAT OTHER ISSUES ARE YOU DISCUSSING WITH THE CRA?
BB: Among other issues, we are looking at ways to improve communications on changes the CRA makes to its website. The site contains a lot of good information, but as the volume of material grows, it becomes much more difficult to track new information, including amendments to prior announcements. We have made suggestions, such as introducing a tracking system. And we’re looking forward to more discussions with the CRA on this subject.
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