Ottawa estimates corporations dodged up to $11.4 billion in 2014 tax payments

Very interesting article published on June 18th, 2019 via the Canadian Press, regarding what appears to be Canadian Corporations avoiding the payment of $11.4 billion dollars in taxes owing to the CRA.

My initial reaction to that headline was likely similar to what others who saw this headline probably felt – that corporations are not paying their fair share of taxes, that corporations get all these tax breaks and that the government allows corporations to not pay taxes.

But before I would be able to properly comment on this, I would have to read the article a few times to figure out what the actual story is.

According to the article, the issues are these;
“Corporations avoided paying Ottawa between $9.4 billion and $11.4 billion in taxes in 2014″, according to a new federal report created by the Canada Revenue Agency (CRA), which estimated these figures.

The report estimates the “tax gap”, or the difference between what is owed to the government and what was collected by the CRA — for small and medium enterprises is between $2.7 billion and $3.5 billion and for large corporations, between $6.7 billion and $7.9 billion.

“The corporate figures bring the total estimated 2014 tax gap from a series of studies by a dedicated CRA unit to between $21.8 billion and $26 billion — or 10.6% to 12.6% of revenues — not including funds recovered or lost due to audits.”

By not including funds recovered or lost during audits, and not going into detail as to what “audit” specifically means, it could represent the amount of taxes assessed during an audit (where the CRA found additional taxes owing), or lost (where the CRA had assessed a corporation, only to find out during an audit that the assessment was inaccurate or invalid, and thus reversed, revised or reduced).

Taking a closer look at the figures, might be a huge shock to anyone who feels that corporations get it easy in Canada.

In 2014, Corporate tax filers reported approximately $298 billion in taxable income and $40.9 billion in total federal tax payable. Even though they made up only about 1% of the 2.1 million corporate tax filers, large corporations reported about 52% of the total corporate taxable income and contributed about 54% of the federal tax.

More than half the taxes collected in this country come from large corporations!

After being fed data which explained that the corporate tax gap for 2014 was between $9.4 billion and $11.4 billion, then the government goes on to mention that the “total” estimated 2014 tax gap is $21.8 billion and $26 billion, meaning between $12.4 billion and $14.6 billion is taxes owed by individuals who are not paying their taxes…

Then the government explains that after the audits, which were left out of the equation, are finalized, the corporate tax gap will actually be reduced by between 31-40% for small enterprises and between 64-75% for large corporations, which means overall, the corporate tax gap for 2014 is actually somewhere between $3.3 billion and $5.3 billion and not $9.4 billion to $11.4 billion.

Clear, right?

So that means the actual tax gap, taking into consideration the post-audit figures that the CRA anticipates, is actually between $15.7 billion to $19.9 billion, and of those taxes owing, most of it is owing from individual Canadians who are not paying.

Meanwhile, large corporations pay 54% of the total taxes paid to this country to fund services, roads, healthcare, and the many benefits that we have all come to appreciate.

Why is this article geared towards corporations? Shouldn’t it be thanking the corporations and pointing fingers at the Canadians who are not paying their fair share? Why was it positioned this way?

Since that answer could be anything, ranging from inaccurate reporting to political manoeuvring, then the only question that remains from this article surrounds what constitutes “taxes owing”? Is that figure based on amounts reported by Canadians who just never paid the taxes, or does that figure include assessed amounts owing that the CRA created, and which may or may not be owing? If it’s the latter then it’s highly likely that the tax gap is even smaller.

NOTE

Ask me one day to tell the story about the notional assessments that I raised while working at the CRA at the request of my team leader to “get the attention” of the business… It got the attention of more than the business! It got the attention of the Minister of Finance. Lesson learned.

So, to conclude, there is a tax gap. There will always be a tax gap because not every Canadian has the ability to pay their taxes in full and on time, each and every year. As well, not every Canadian files their taxes on time, or are required to file on time, which means the full picture will never be forthcoming because of all the moving parts.

The timing and content of this article leads me to believe that the Federal government and the CRA going to come after corporations.  They shouldn’t, based on the actual figures, but corporations do not vote in elections – people do.

What the true intent of this article is, however, is very unclear to me.

Advertisements

Importance of People Skills in the Workforce

Want to be an effective manager?  Having good policies and processes in place will help get the job done, but getting the most from your staff requires you to pay some attention to your people skills.  People skills are important because they tell and show others how effective you deal with many different types of individuals on a daily basis.  The wider the range of others in terms of ages, cultures and company levels that one can deal with, the better that person’s skill level.

It really does not matter which field you work in, whether it is tax, accounting, HR or marketing, the most successful individuals in each area are not necessarily the ones who had the highest university GPA or those who are the most technically gifted, but rather the top stars in each field are the ones with the best people skills.

So where can you learn or develop these soft skills?  They are not taught in school and while you can learn them on the job, that would only be the case if you work with someone with exceptional soft skills (or horrible ones) and they are  willing to mentor you to develop yours.  In school we focus all our time and energy on maximize our grades and probably spend zero time learning to effectively interact with others

Then into the workforce come these brainiacs with super-high GPA’s and they work hard and talk about how smart they are, and watch those with superior personal talents moving up the corporate ladder faster them they do. 

By the time they realize what it takes to advance in an organization, it is usually too late, as people tend to get set in their ways after being passed over by someone not as smart but who pleases everyone.  These individuals will have reached a ceiling in their fields relatively quickly in their careers.

The world, both corporate and non-corporate, desperately needs more leaders and this lack of leadership will not be filled anytime soon if the majority of the workforce is lacking in people skills. Fortunately, this problem can be addressed in two ways. For those already in the workforce, companies can utilize seminars and workshops as part of on-going professional education on these skills including diversity training. All management, current and potential candidates, should attend such development sessions or take online courses.  The result will be a much more efficient management which in turn will mean bigger profits.

The other way is to start in school and expose students at every level and as early as possible to principles of people skills. It may need to be made part of the regular curriculum. Of course, staff including teachers and professors should also be exposed to their own developmental workshops as well since they were most likely not given the opportunity during their own years as students for this type of training.

It might also help to include parents in the education process from the get go so they can foster a more balanced development for their children besides focussing the balance on education and sports / arts.  

But at some point every good manager should have that talk with their staff about their soft skills and if the staff member reacts defensively, then sign them up for all the courses because that might just be the justification you were looking for!

Mentoring

Mentor?  Who needs a mentor?  Seriously…

Well…  I do. A mentor is that person who can help to steer you clear of troubled waters, and help to shed light on the positives when things get rough.  You chose them because they have qualities your desire to learn, develop and nurture.  If you were put in a formal mentoring program then someone else thought you needed to develop certain skills which your mentor possesses.  Use the opportunity to learn, experience, partake and grow as a human and as a businessperson.

But here the thing…

Don’t take a mentor’s advice as the end-all-be-all on whatever topic is being discussed. They are people just like you and me and are capable of being wrong, just like you and me. They may mean well, but sometimes it is better to trust your gut and not your mentor when deciding to move or not move ahead with a business idea. If you have the power to turn your business idea into a success, then why hand the power to turn your idea into a failure over to another person?

I had to ask myself this question recently, after leaving a meeting with a mentor feeling confused and frustrated. The 1st meeting with my mentor went quite well.  I learned a lot, and was completely overwhelmed at what to learn first.  It appeared there was too much to learn.  How was I ever going to know as much as they do?  Will I ever come close?  The discussion was informative and encouraging.   My mentor was honest about their area of expertise and offered advice from that knowledge base.  It was GREAT!  After the second meeting however, I questioned EVERYTHING and that sucked the confidence right out of me. 

I took a while to think things over from their perspective.  Was that just wasted time  Absolutely not!  The best laid plans can appear to be no-brainers if you don’t have the opportunity to see them from the other side.  Having that chat with my mentor helped me do just that.  Besides, you know your vision and your potential better than anybody.  Appreciate mentors for who they are…  Folks who can provide information to HELP you make a decision. Don’t let them make the decisions for you.  Use them to play devils advocate and tell you how they would do something.  Unless they were in exactly the same situation dealing with the same person, the ball is still in your court.  They want you to succeed as much as you do or they would not have agreed to mentor you.

So for the next session I discussed my fears and concerns and that meeting helped bring everything into context.  I felt so much better. 

Enjoy your mentor, and use them to help you get a better understanding on your strengths and weaknesses and life.