One Comment About Taxation – Alternative Minimum Tax Legislative Proposals

As mentioned in last week’s newsletter, there was a large release of tax technical amendments by the Canadian Department of Finance on August 4, 2023.  Such proposals, scheduled to come into effect for the 2024 taxation year and forward, contain the alternative minimum tax (“AMT”) amendments as promised by the 2023 Federal Budget.  The technical amendments do not seem to contain any surprises and basically confirm in a legislative format what the 2023 Budget had promised.  However, some of the concerns practitioners have expressed do not seem to have been heard by the Department of Finance.  For example, the AMT proposals will indeed affect high-income earners and/or high-net-worth individuals when making significant donations.  Moodys Tax / Moodys Private Client will release a blog on this topic shortly.

In addition, some of the concerns about trusts that earn investment income being negatively affected by the AMT proposals have not been addressed by the draft legislation.  For example, as discussed by my colleague, Kenneth Keung – and his co-authors Henry Shew and Hugh Neilson – in an excellent Canadian Tax Foundation article (that can be found here for CTF members only) – most trusts that have “prescribed rate loans” will be affected.  This is because the incurrence of interest costs will now be subject to a denial of 50% by the trust when calculating AMT.  Combine that with the fact that a trust does not receive the AMT exemption of approximately $173,000 that individuals are able to claim, and AMT will result.

Bottom line: AMT exposure for trusts and high-net-worth / high-income earners is real.  Keep abreast of this topic.

One Comment About Leadership – Start With Why

One of the leadership speakers and authors I have admired for about a decade is Simon Sinek.  His 2009 Ted Talk “Start With Why – How Great Leaders Inspire Action” is a riveting discussion about what he calls The Golden Circle.  He describes that all organizations know what they do (the outer ring of the Golden Circle).  Most know how they do it (the middle part of the Golden Circle). But very few know why they do it (the smaller inner part of the Golden Circle). Why is not profit; that’s a result.  Instead, why is your organization’s purpose, its cause and beliefs.  His proposition is that inspired leaders and their communications should always start with “why” – the inner part of the Golden Circle – and then work towards the outer ring of what.  In practice, most leaders and their organizations’ communications are just the opposite; they start with the outer ring of what, work towards the middle ring of how and often don’t reach the inspiring ring of why.  In his TED talk, Simon gives many examples of the power of starting with why communications.

Simon’s TED talk on this topic has been viewed 10.5 million times.  His book on this topic has sold more than one million copies. If you haven’t already done so, I’d encourage you to watch his 18-minute TED talk and think about your organization’s why.

As Simon says: “People don’t buy what you do; they buy why you do it.”

Leaders, take action to become an inspired leader and figure out the “why” of your organization.  And communicate it.

One Comment About Economics – The Importance of Private Businesses to Canada’s Economy

When I was a young boy growing up in an entrepreneurial family in Fort McMurray, AB, I witnessed first-hand how hard my parents worked to put food on the table and provide for their family.  There were many ups and downs.  It was this experience that I took away to my young adulthood and professional career and thus my admiration for entrepreneurs in general.  I knew first-hand how hard they worked and the risks that they took to create something.

Entrepreneurs are job creators; community builders; philanthropic supporters; and generally just good people.  They should be celebrated, not vilified like they often are – by left-leaning, ideologically driven people – that they are “rich” and should give back to society even more.  Entrepreneurs are famous for creating something out of nothing and dealing with change.

Are there statistics to back up the importance of entrepreneurs to Canada’s economy?  Yes.  One such report – Key Small Business Statistics 2022 – is an interesting read.  Section Two of the report – Employment – has some revealing statistics.  In 2021, approximately 16.2 million individuals were employed in Canada. Of this number, 74.8% – or approximately 12.1 million people – worked in the private sector, and 25.2% worked in the public sector.  (As an aside, I look forward to reviewing 2022 and 2023 statistics since I suspect that public sector employment growth has been growing much faster than the private sector). Of the 12.1 million individuals working in the private sector, 8.2 million work in small businesses that employ between 1-99 people.  This would include many “Mom and Pop” businesses around your community.

It should be evident from the above statistics – and many other interesting stats that appear in the report – that small business owners are critically important to the economic success of many people and Canada as a whole.  Go out of your way to support them. How?  Well, how about the next time you want to buy something online from a convenient big-box retailer or one of the internet giants, you consider shopping local.  Entrepreneurs and their employees – and Canada in general – thank you for your support.

Bonus Comment – Quote From Socrates About Change

As mentioned above, entrepreneurs are known for dealing with changes like evolving marketplaces, employment conditions, economic conditions, technology, etc. Given such, the Greek philosopher Socrates (who is known as the founder of Western philosophy) stated the following about change:

The secret of change is to focus all your energy not on fighting the old but on building the new.

Very wise.  And worthy of reflection.

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