One Comment About Taxation – The Need For a Tax Designation

Practicing taxation is not for the faint of heart. The Income Tax Act (the “Act”) is, by far, the largest statute (and likely the most complex) in Canadian law.  I think it’s fair to say many Canadians believe that most accountants understand tax. Accountants dominate the practice of taxation in Canada even though the interpretation of the Act is a legal function and not an accounting function. However, the truth is that the vast majority of Canadian accountants only have a very basic understanding of income tax law.  This can be a real problem when non-specialist advisors dispense taxation advice to clients who rely on it, but don’t understand advisors are likely not qualified to provide such advice. It’s the public that ultimately pays the price when such advice turns out to be incorrect.

I’ve long been an advocate for Canada’s need for a tax designation to help the public identify who are tax specialists and who are not.  It would also reward younger accounting and legal professionals who put in the work to truly understand the Act, related case law, and administrative positions, and keep up to date on new revisions.  Practicing taxation is truly a specialist career if done correctly, and new practitioners who work diligently should be recognized for their efforts.  A tax designation does just that.  For those reasons, other jurisdictions – like the UK and Australia – introduced the Chartered Tax Advisor (“CTA”).

Canada, however, has had a choppy history of trying to introduce a tax designation.  The most recent legitimate effort – roughly ten years ago – was led by the Canadian Tax Foundation (of which I am a former Chair), which investigated the merits of introducing a tax designation.  The effort failed when various constituent groups did not agree on the need for a tax designation.  A similar result occurred approximately 20 years ago with a group led by the then-Canadian Institute of Chartered Accountants.

The usual cries about introducing a new tax designation, overly simplified, from the opposing side are:

[from Senior Practitioners] – “I don’t need a designation…it will do nothing for my established career.”

[from large firms] – “Why would we pay for a tax designation and add costs when we already dominate the space?  And wouldn’t it help legitimize our smaller competitors?”

[from General Practitioners] – “If I don’t get the tax designation, that would have a material and negative impact on my practice.”

There are other opposing arguments as well but suffice it to say, I’m not convinced.  Ultimately it’s the public that is harmed when incorrect tax advice is provided from non-qualified practitioners from all sizes of firms.

In the meantime, Canada continues to release incomprehensible new tax legislation.  It’s left to the tax specialist community to interpret and assist general accountants, lawyers and taxpayers in applying such legislation. In my view, the system is very close to a tipping point of massive non-compliance in several areas of tax law.  Put simply, if taxpayers and their advisors (and even tax specialists) have difficulty understanding new legislation, it can and will lead to non-compliance.  The system then breaks down.

Combine the above with the fact that there is a material decline in the number of North American graduates from accounting schools, and one can’t help but wonder how many new tax practitioners will be entering the profession.  Will the new practitioners replace the aging ones who are retiring?  Today, it doesn’t look like it.

So, where does all of this leave us?  The above only skims the surface on a multi-faceted and complex topic that Canada needs to start talking about.  The taxpayer community – and particularly the business community – cannot afford long-term problems adhering to complex tax legislation by not having available talent to help comply or properly plan.  Some obvious agenda items that need to be part of a discussion include:

• Recognition that taxation is a special and unique area of law and accounting that deserves recognition by way of a tax designation. Such a tax designation, if implemented properly, would help new professionals be recognized for their efforts and help protect the public so they are adequately informed as to who is qualified to assist them in their taxation affairs.  Such a discussion should also come with the recognition that tax compliance and advice are not the sole domain of the larger firms. There are many excellent small-firm tax practitioners, and their voices should be heard just as loud and as clear as their larger firm colleagues despite the fact that large firm members are much more voluminous than smaller firms.

• A commitment by the government of Canada that it is long overdue for comprehensive tax review and reform. While Canada has had limited review and reform in its recent past, the last whole-scale effort to comprehensively review Canada’s taxation system was 61 years ago when The Royal Commission on Taxation was appointed.  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 can advise Canadians on taxation matters.  In other words, we need to increase the population of qualified and visible tax advisors to benefit our country.

Without concrete action, I’m concerned that the slow-moving train of incomprehensible new tax legislation being released, a significant decline in the number of accountants entering the profession, and no visible recognition of who the qualified tax professionals are will eventually crash in a horrible wreck.  We need to get ahead of this slow-moving train, apply the brakes and quickly build a new track so the train can get on a better and more productive route.

 

One Comment About Leadership – The Importance of Speaking Up

 

For those of you who follow and / or know me, you’ll see that I have strong opinions on a variety of topics.  For example, if you glorify virtual work in front of me, you’ll get an instant rebuttal.  You think reckless spending by governments is a good thing?  You’ll get a rebuttal and opinion from me.  You think “diversity, inclusion and equity” is a good thing for an organization to trumpet?  You’ll get a strong rebuttal.  And it goes on…

So, why do I have strong opinions?  Well, I like to think my opinions are carefully thought through with well-rounded consideration of the issues.  And if the issue affects the people and / or organization that I am responsible for and lead, then it’s my view that I need to speak up to protect / defend that constituency. In today’s environment, that takes courage, given how easy it is to criticize and “cancel” someone.  Most humans do not like to be criticized.  That is one of the reasons why most are terrified of public speaking. They are on display and open to criticism for their speaking style, content, appearance, etc.  While many can be trained to improve their public speaking skills and manage their fears, it’s not the same for being on display when they speak out on an issue (another form of “public speaking”).  There is an enormous fear amongst many for publicly speaking out on issues since they don’t want the negative feedback that may come with it.

It is common for me to receive feedback about my writings, postings and lectures with comments like:

• “Thank you for saying what I’m thinking!”
• “I’m glad you had the courage to speak up!”

That is somewhat validating but not the reason I speak out on specific issues.

I do get my fair share of critical /negative comments as well, but I’m not generally fazed since having the courage to speak up on topics that need discussion is a critical function of being a leader.  Feedback is also critical to ensure I’ve considered many sides of an issue.  Perhaps I hadn’t thought about certain considerations when I formed my opinion.

I think there’s nothing worse than a “leader” who does not dare to speak up on issues and take a stand.  And by that, I don’t mean taking stands on “flavour of the day” issues often trumpeted blindly by media or wearing “ribbons” or other symbols that are simple virtue signaling (recall the classic Seinfeld episode on that topic…brilliant).

Leaders, have the courage to speak up when appropriate (which is more often than not).  Politely, of course.  Ensure you have thoroughly considered your position and be willing to consider other sides of the issue when presented.

The people you lead are relying on you to speak out and defend their interests.

 

One Comment About Economics and Politics – The Impact of High Personal Tax Rates on Productivity

 

Earlier this week, I had the pleasure of speaking at a conference.  The eminent Dr. Jack Mintz was also a speaker at the conference, so I had the opportunity to spend time with him.  We have gotten to know each other over the years, and I admire him as someone who truly cares about Canada.

I asked Dr. Mintz about Canada’s high personal tax rates and what that does to Canada’s productivity and GDP, and we did a video on the topic.  His analysis on this topic is straightforward but fascinating.  Have a peek at the video here.

 

Bonus Comment – Quote From Albert Einstein About The Importance of Speaking Up

 

“Be a voice.  Not an echo.”

 

Brilliant, and totally agree!

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