Happy Canada Day!

 

Before diving into this week’s newsletter, I wanted to wish all Canadians a very happy Canada Day.

 

As many of you know, I’m incredibly proud to be Canadian. Like every country, ours has a history with moments of great achievement and moments we can certainly learn from. We should not ignore either. We should learn from both. A mature nation does not rewrite its history or apologize for its existence; it understands its past, celebrates its accomplishments, acknowledges its mistakes, and uses those lessons to build an even better future.

 

Despite the economic and policy challenges our country faces today, I remain deeply optimistic about Canada’s long-term future. We continue to be blessed with extraordinary people, abundant natural resources, strong institutions, and remarkable opportunities. Those advantages have not disappeared. They simply require thoughtful leadership, sound public policy, and citizens who are willing to think critically and engage constructively.

 

Canada is not perfect. No country is. But it is home. And it is worth celebrating, protecting, and continually improving.

 

Canada has given me, my family, and countless others opportunities that much of the world can only dream about. For that, I remain profoundly grateful.

 

So today, celebrate our country with pride, appreciate how far we have come, reflect honestly on where we have stumbled, and look forward with confidence to where we can go next.

 

Happy Canada Day!

 

One Comment About Taxation – Bare Trust Reporting is Coming Back!! Are You Ready??

 

I recently re-watched the classic 1993 movie, Groundhog Day. Every morning, Bill Murray wakes to relive the same day. As another trust filing season is less than nine months away, many tax practitioners must wonder whether they will re-live their own version of that movie soon.

 

A little background. In the 2018 federal budget, the government proposed rules to expand reporting and disclosure requirements for trusts with a first-year application date of 2021. A global push for trust transparency was underway and Canada was arguably behind.

 

The first proposals did not include “bare trusts” – a label that describes where the trustee holds legal title to property but has no discretionary powers or duties beyond following the beneficiary’s instructions, with the beneficiary retaining full beneficial ownership and control. That was no surprise: for decades, subsection 104(1) of the Income Tax Act has ignored bare trusts for most purposes and looked to the beneficiaries as the taxpayer.

 

Because of COVID issues, the implementation of the new rules was delayed until 2022.  However, bare trusts were swept into the proposed regime by a 2022 amendment (a change the Joint Committee on Taxation, and other organizations, warned against but ultimately ignored by the government). The rules were then delayed again to the 2023 taxation year and passed into law.

 

Bare trusts include some of the most ordinary arrangements in Canadian life: a parent on a child’s home title to help with a mortgage, an adult child added to an elderly parent’s bank account and a nominee corporation used to acquire title to numerous properties for different beneficiaries are common examples. None of these examples are mischievous for tax purposes.

 

A foundational problem with the reporting rules is determining who needs to file. Determining if the legal relationship is a “trust” is very much the domain of lawyers – or very experienced accountants – who are trained in determining the difference between various legal relationships like trusts, partnerships, agency, joint tenancy, co-ownership or joint ventures. The difference between all of these relationships is subtle but important and has significant tax implications. However, the duty to file returns often turns on tax preparers who are not lawyers.

 

Given the above, the first reporting period for 2023 was a fiasco. Taxpayers and their advisors struggled mightily after finally waking up to how difficult the new rules were to apply. CRA, to its credit, devoted real resources to helping taxpayers understand the rules, especially for bare trusts – but it was too little, too late. The result: more than 44,000 Canadians filed returns for bare trusts in early 2024, many after paying their advisors, only for the CRA to cancel the requirement days before the deadline. The government was rightfully roasted for this wasted effort.

 

Chastened, the CRA deferred bare-trust reporting again for 2024 and 2025 while Finance issued draft amendments in August 2024 and August 2025 to relieve certain trusts – including bare trusts – from filing. Those revisions are now law – folded into the 609-page omnibus that became Bill C-15, which received Royal Assent in March 2026. The new rules apply for most trusts for 2026, with returns due by March 31, 2027.

 

The revised rules exempt more arrangements than the original version did. However, the exceptions are mind-bogglingly complex, best illustrated through flowcharts and aids.  But the foundational problem remains: tax preparers are still being asked to assess legal questions they are generally not trained to answer – and that is why the 2023 filing season may prove to be a preview rather than a one-off.

 

Complexity in tax law is often unavoidable. The problem is not complexity in the abstract, but who gets caught in it. And the design of the legislation can guarantee a wide catch. For the new trust legislation, it casts the broadest possible net and then cuts holes in it – a design inherently complex to navigate. The result is that the broader exemptions reduce filings, not effort: millions must still work through the rules to learn whether a carve-out spares them, even if only a fraction ultimately file.

 

The costs for non-compliance are real. A late return runs $25 a day to a $2,500 maximum, and the gross-negligence penalty climbs to the greater of $2,500 or five per cent of the highest fair market value of the trust’s property – payable even where no tax is owing.

 

All of which raises a question no one in government has answered: what will the CRA do with the haul? It will gather names, birthdates and tax numbers for the trustees, beneficiaries and settlors of the trusts that do file. Will the information serve a purpose proportionate to the cost imposed on taxpayers?

 

The renowned Scottish economist Adam Smith saw the issue 250 years ago. Among his maxims of taxation was the canon of convenience: a tax should be levied in the manner most convenient for the person paying it. Ask a sophisticated taxpayer with a complex structure to navigate complex rules – fair enough. But bare trusts are woven through ordinary life and demanding that millions of average Canadians resolve questions of trust and agency law, under threat of penalties, is exactly where these rules fail Smith’s test. Again, the trouble is not complexity. It is complexity imposed on a broad and unsuspecting audience.

 

There were better options: the original proposal was far narrower before the 2022 amendment pulled bare trusts into the reporting regime adding unnecessary complexity on a large and unsuspecting audience. Not cool.

 

Instead, ordinary families face possible penalties to produce information where it is doubtful the government will put such information to good use. And, once again, practitioners will be asked to answer legal questions they were never trained to answer.

 

The rules have changed. The day has not. Bill Murray, at least, had a screenwriter.

 

One Comment About Leadership – Leaders, You Need to Encourage Critical Thinking

 

Weak leaders want agreement, and the weakest go a step further – they manufacture it through fear.

 

A team that suspects there’s a price for disagreeing will respond to you in silence, and silence is the most expensive thing an organization can buy. Viktor Frankl, writing from the experience of the concentration camps, held that the last of the human freedoms is the ability to choose one’s response to any circumstance. A leader who rules by intimidation or fear strips that freedom away – people react to protect themselves rather than think to serve the organization.

 

Critical thinking is the first casualty of a fearful room, because it’s the one activity that requires a person to feel safe enough to be wrong out loud. The work of leadership is to build that safety: to make it possible for someone to tell you your decision is flawed before the market does it for you. That isn’t tolerating dissent for its own sake; it’s developing people who pressure-test ideas instead of pressure-testing your mood.

 

Reward the person who disagrees or challenges you – respectfully, of course – well. The leaders who compound over time would rather be corrected in a meeting than vindicated in a post-mortem.

 

One Comment About Economics / Politics  – Government Money?

 

There is no such thing as government money – only money the government has not yet returned or never will.

Bonus Comment – Attributed To General George S. Patton – U.S. Army Officer – About Fear and Courage

 

“If everyone is thinking alike, then somebody isn’t thinking.”

 

Exactly. Leaders should never strive for unanimous agreement. They should strive for robust discussion, respectful challenge, and ultimately the best decision. If everyone around you always agrees with you, you’re either the smartest person in the room – or you’ve unintentionally taught everyone else that disagreeing isn’t worth the risk. My experience is that it’s almost always the latter.

 

I hope today’s newsletter has been thought-provoking for you.

 

As many of you know, I’m passionate about helping people make better decisions – whether in tax, leadership, or business. If you’d like to go deeper on those topics, my recently released book, Making Life Less Taxing (Version 2), is now available and expands on many of the practical ideas I’ve written about over the years.

 

I’m also putting the finishing touches on my next book, Leadership Compounds: How Small Decisions Build Culture, Credibility, and Legacy. It explores a simple but powerful idea: leadership isn’t about grand gestures – it’s about the small, consistent decisions that compound over time.

 

For those interested in a more hands-on approach, I’ll soon be announcing a bespoke consulting initiative – The Acorn Growth Program – designed to help leaders and organizations grow intentionally, one small (but important) decision at a time. Feel free to reach out to me directly for more information.

 

And if you’re not already on my mailing list, feel free to sign up for my In the Mood Network newsletters to receive more content. No fluff – just practical insights on tax, leadership, and economic policy.

 

Thanks for reading. As always, I welcome your thoughts and feedback.

 

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