Kim Resources@2x

Kim G C Moody’s 1-1-1 Musings For July 26, 2023

One Comment About Taxation – Amendments to the Canadian Alternative Minimum Tax

Canada has had an alternative minimum tax (“AMT”) – introduced as Division E.1 of Part I of the Income Tax Act – ever since 1986.  The federal government announced it in the 1985 Budget as a measure “…that will have the effect of increasing the tax liability of those high-income individuals who use the tax incentives provided by current law to structure their affairs so as to pay little or no tax.”

In my opinion, the AMT was introduced as a political response that high-income earners were apparently not paying enough tax because of certain discretionary deductions or preference items like utilizing dividend tax credits, the use of the capital gains inclusion rate, interest deductions, etc.  The exercise of computing AMT requires an individual taxpayer to compute their taxable income using the “ordinary” way and the AMT way (a calculation that ignores the preference items), compute taxes under both methods and if the AMT tax amount is higher (after applying an exemption amount), then you need to pay AMT.  The excess tax amount over the ordinary method is refundable to the taxpayer over the next seven taxation years if there is no exposure to AMT in that time frame.  Accordingly, the AMT is often just a prepayment of tax, with one going through tax gymnastics to get there.

The Canadian government, following up on a poorly thought-out 2021 Liberal Party election platform promise to introduce a 15% minimum tax, introduced amendments to the current AMT regime in the 2023 federal budget.  The amendments do not include a 15% minimum tax but, as stated, instead tweaked the current AMT regime.  Draft legislation is not currently available to understand the details of the proposals.  But from what we do know, there could be significant impacts to higher-income earners and those who make charitable donations.

There has been no shortage of writers on this topic, but I agree with my friend Kevyn Nightingale who posted a LinkedIn comment in response to an article co-authored by my colleague, Kenneth Keung.  The AMT, historically and today, has little policy grounding and should be scrapped.  That’s not likely to happen anytime soon, but Kevyn is right.  In the meantime, keep your ear to the ground for when the draft legislation is released to determine impacts.


One Comment About Leadership – What is Your Leadership Style?

Over a dozen years ago, I was fortunate to spend four days at a session with leadership guru Balaji Krishmamurthy.  It was a very inspiring session. To this day, I apply the tools and learnings to help me be a better leader.  The session spent a lot of time exploring and ultimately documenting each participant’s leadership style, legacy and leverage, brand and culture. Once documented, I had to present it to the small group and “own” it.  Over the years, I’ve refined my leadership style, legacy and leverage, brand and culture, but for the most part, it has stayed the same.  For me, my “style” (I’ll perhaps share my legacy and leverage, brand and culture another day) is as follows:

  • Transparent honesty in everything I do
  • Never settle….do it right!
  • Passionate about challenging the status quo for superior results
  • Empathetic empowerment for sustainable growth and excellent profits.

For those of you who know me, do you see that in me?  What is your style?  Haven’t thought of what your style is?  It’s worth the time to reflect hard on your leadership style.  And it requires more than five minutes.  I spent four full days of reflection on this before I was satisfied with my leadership style statement.  I challenge leaders to do the same.  It’s worth it.


One Comment About Economics – Government Subsidies

Recently, the government of Canada announced subsidies expected to be in the amount of $16.3 billion to Volkswagen to build a battery plant in Ontario.  It followed that up with a multi-billion dollar subsidy announcement for Stellantis.  Together, these two companies will receive over $30 billion from Canadian taxpayers!  Yep, $30 billion!  That is an enormous amount of taxpayer money.  Esteemed economist Jack Mintz ridicules these handouts in his well-stated July 14, 2023, National Post article – Forget the ‘just transition’. – It’s the Boondoggle Transition.  I couldn’t agree more.

The Parliamentary Budget Officer stated in his June 14, 2023 publication about the VW subsidy:

Based on our analysis, the federal government’s financial commitment to Volkswagen will total around $16.3 billion over the period of the agreement….the economic benefits of building the new facility are marginal. We estimate the plant will increase real GDP in Canada by 0.01 percent above its baseline projection by 2027, and will add around 1,400 jobs by the same time.

 Doing simple mathematics, $16.3 billion divided by 1,400 jobs equals roughly $11.6M of government “investment” for each job.  How in the world does this make economic sense?

In my opinion, Canadians need to push back against this kind of free-style spending.  Our economic future is at stake.  Unfortunately, many Canadians have little interest in this topic and get numbed by “the billions here, the billions there” or “everyone gets a car!” mentality without truly understanding the implications of this.

It’s time for the boondoggle to stop.


Bonus Comment – Quote From Peter Drucker (one of my absolute favorite all-time management gurus) about leadership:

Management is doing things right; leadership is doing the right things.

Yep – totally agree.

And, with that, Leaders go do the “right things”.


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