One Comment About Taxation – There’s a Shortage of Accountants…and That’s Not Good For Canada’s Tax System.

 

There’s a shortage of accountants.  If you’re an accountant like me, that’s not news. I’ve been recruiting and hiring accountants for almost 30 years and there’s been many ups and downs throughout that time.  However, we’re now in a tough part of a cycle that is challenging.

The number of graduating accounting students in North America is down overall.  There is no shortage of articles and studies to confirm that simple fact.  But why?  Well, it appears that the ancient profession is not all that appealing to many youngsters today.  Some of the factors that often appear as issues when dealing with recruiting youngsters into the profession are:

• The profession – especially in public practice – demands long hours and is often perceived as a grind;
• Accounting is often considered “boring”;
• The pay – especially at the commencement of the accounting career – is not as high as some other areas of specialization in commerce / management degrees such as finance, marketing, technology, etc;
• Some of the work can be particularly mundane (think auditing); and
• The cost of obtaining the education is perceived to be high compared to the eventual return.

While there are elements of truth to many of the above issues, I think it’s fair to say that overall, the accounting profession is a challenging and rewarding career.  I’d certainly recommend it – and do – to many youngsters. Is it easy?  Nope.  As most know, the road to success is filled with challenges.

In Canada, accountants dominate the practice of taxation especially in the area of tax filings.  Frankly, if there were no accountants in Canada (yes, an exaggeration), the entire tax filing system and the vast majority of the tax advisory availability in Canada would collapse.  In other words, Canada – like many other countries around the world – rely heavily on accountants to ensure their tax administration systems work.

In the last number of years, Canada has released a host of incomprehensible new tax legislation.  Recent examples include the “tax on split income” rules, the restrictions on the use of the small business deduction, massively complex restrictions on the ability to deduct interest and a host of changes to the taxation of foreign sourced income.

In addition, there have been a number of significant reporting changes including expanded reporting for foreign income verification (via form T1135) and ownership of foreign affiliates (via form T1134) and most recently the pervasive and dense “mandatory disclosure rules”.  In addition, the new trust reporting rules are complex, dense and require tax preparers to assess various legal relationships (which many accountants are not wholly trained to do) to determine if there is a required reporting.  The ridiculous new “Underused Housing Tax” legislation also requires tax preparers to assess various legal relationships and file returns that can be complex to prepare.

With many of the above new filing requirements, the penalties to taxpayers are very high for foot-faults and other forms of non-compliance.  In the case of the mandatory disclosure rules, such penalties could be financially ruinous for tax professionals who do not diligently comply.

The above does not even include some of the very silly new tax legislation such as the changes to the taxation of short-term rentals and the duplicative and unnecessary “anti-flipping” tax for residential properties.

With all of the above, it’s left to the tax specialist community to interpret and assist the general accounting, legal and taxpayer community to apply such legislation. But it’s generally left to the accounting community to assist taxpayers to comply with all of the new reporting requirements. In my view, the system is very close to a tipping point of massive non-compliance in a number of areas of tax law.  Put simply, if taxpayers and their advisors (and even tax specialists) have a hard time understanding new legislation, it can and will lead to non-compliance.  The system then breaks down.

So, combine the above challenges in finding new talent to enter the accounting profession, massive new and complex legislation and reporting requirements and increased attrition (because of many older accountants retiring and some outright leaving the profession because of the above mentioned issues) and there is a significant shortage of accountants that may leave some people having trouble finding accountants to help them out.

So where does all of this leave us? The above is only skimming the surface on a multi-faceted and complex topic but Canada needs to start talking about this.  The taxpayer community – and in particular the business community – can ill afford to have long-term problems trying to adhere to complex tax legislation by not having available talent to help comply or properly plan.

Many in the tax community, including me, believe it’s long overdue for Canadian comprehensive tax review and reform.  A key objective of comprehensive review / reform should be to simplify many aspects of our taxation system (to encourage compliance) and increase the number of qualified tax advisors who are able to advise Canadians on taxation matters without increasing their financial risk to being such advisors.

I’m concerned that the slow-moving train (of incomprehensible new tax legislation being released, complex new reporting requirements, a significant decline in the number of accountants entering the profession and many accountants retiring) will eventually crash in a horrible wreck if not dealt with effectively. Obviously, this is not good for Canada.

In the meantime, the accounting profession has work to do to bring back the allure to prospective students.  It’s a great career.

If you work with a good accountant, give them a hug this tax season. They’re valuable, important and dealing with very difficult issues.  And it may be tough to find a replacement.

 

One Comment About Leadership – “We Don’t Keep Any Brilliant Jerks”

 

Last week, during a coaching session, one of the group members described their firm’s hiring philosophy as: “We don’t keep any brilliant jerks”.

I reflected on that for a few moments and then instantly resonated with it.

You see, over the years, given how hard it is to find good talent, I’ve been guilty of hiring people that are simply brilliant. They are smart. Sometimes exceptionally so.  But they are jerks.  They know they are smart and bring important intelligence to the firm and their job.  But they purposely and intentionally go out of their way to do their own thing and not “fit in” or be part of the team.  They do this, of course, because they feel they are smarter and know better than everyone – including the leadership.  Again, they are jerks.

Such people can be poison to a culture and business.  If a “jerk” is able to get away with disruptive or behavior that is not conducive to building a great culture, then the message it sends to the rest of the team is simply not good; it speaks volumes.  Unfortunately, it is all too common since it is tough to find good talent and even rarer to find excellent technical talent that wants to do everything they can to help build the vision and contribute to building a great culture.

I’ve been guilty many times of this over the years.  In hindsight, I should have fired such “jerks” almost immediately upon them displaying their true self.  However, like many leaders, I was always hopeful that such jerks would turn it around and / or turn into a non-jerk.  My batting average on such hope is close to 0.00.

Leaders, do you have “brilliant jerks” on your team?  If so, do yourself a favor and and get rid of them quick.  They’re poison.

[Hat Tip to Tim C.]

  

One Comment About Economics and Politics: The ArriveCan App Contracting – Report of the CDN Auditor General

  

Hopefully you’re aware of the scandal involving the contracting of the app technology to build the “ArriveCan” app that was built during the midst of the COVID pandemic to presumably assist in tracking Canadians’ international movements.  As some of Canada’s political parties identified, there were significant inconsistencies on how such a contract was awarded by the government of Canada.

On February 12, 2024, The Office of the Auditor General of Canada released its report on the ArriveCan app contract.

Some highlights from the executive summary:

“Overall, the Canada Border Services Agency, the Public Health Agency of Canada, and Public Services and Procurement Canada repeatedly failed to follow good management practices in the contracting, development, and implementation of the ArriveCAN application. As a result of the many gaps and weaknesses we found in the project’s design, oversight, and accountability, it did not deliver the best value for taxpayer dollars spent….

The Canada Border Services Agency’s documentation, financial records, and controls were so poor that we were unable to determine the precise cost of the ArriveCAN application. Using the information that was available, we estimated the cost at approximately $59.5 million….

The Canada Border Services Agency’s disregard for policies, controls, and transparency in the contracting process restricted opportunities for competition and undermined value for money. We found that the agency had little documentation to support how and why GC Strategies was awarded the initial ArriveCAN contract through a non‑competitive process. We also found that GC Strategies was subsequently involved in the development of the requirements that the agency ultimately included in the request for proposal for its competitive contract. Although departments and agencies were encouraged to be flexible given the urgent need to respond to the pandemic, the need to document decisions and demonstrate transparency and prudent use of public funds remained.

We also found deficiencies in how the Canada Border Services Agency managed the contracts, again raising concerns about value for money. Given the number and value of competitive and non‑competitive contracts used to carry out this project, we are concerned that essential information, such as clear deliverables and required qualifications, was missing. We found that details about the work performed were often missing on invoices and supporting time sheets submitted by contractors that the agency approved.”

I want to say I’m shocked.  And certainly I am by the blunt language of the AG in this report.  And for those saying “whatever…this is only $60M”…shame on you.  This is an example of a blatant disregard of taxpayers’ money handled extremely poorly – and perhaps criminally? – by government bureaucrats and the government.

Heads need to roll.  This is an example of extremely poor controls and leadership. Canada needs better controls and leadership on how it handles taxpayer funds.  Like I said, heads need to roll on this.

 

Bonus Comment – Quote From Brad Warner – Author of Don’t Be a Jerk: And Other Practical Advice From Dogen, Japan’s Greatest Zen Master – About Being a Jerk

 

“Even if the whole universe is nothing but a bunch of jerks doing all kinds of jerk-type things, there is still liberation in simply not being a jerk.”

 

Yep, totally agree!  Leaders, are you always practicing good critical thinking?

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