Interventions in Committee
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Clayton Achen
View Clayton Achen Profile
Clayton Achen
2019-05-14 11:05
Thank you, Mr. Chair.
Thank you very much for allowing my voice to be heard in this committee. I am truly honoured and humbled to be here with you all today.
My name is Clayton Achen. I'm a founding partner at Achen Henderson CPAs in Calgary. Given my practice area, my primary interest with respect to Bill C-97 is tax—specifically the taxation of private companies and small businesses and their owners. I'm primarily interested in what's missing from Bill C-97.
My firm's day-to-day work as a chartered professional accounting firm is to work directly with middle-class small business families. This has given us better perspective than most to see how hard it is for entrepreneurs to earn a living. We also see how easy it has become for our government to take those hard-earned dollars away, sometimes under the guise of fairness, which is a clever word that does nothing to consider the risks and ultimate hardships that an entrepreneur endures.
I'll spend a few minutes talking about some of their more recent challenges, including economic challenges, increases to tax, increased compliance burdens and uncertainty, and challenges in dealing with the CRA and navigating our tax system. I'll then make some brief comments on Canada's desperate need for a modern tax system and close with my thoughts on a few business-related items that are contained in Bill C-97.
It cannot be understated how complicated our tax system has become in the last 50 years, which was the last time that a comprehensive review was undertaken. Our last three budgets have heaped more and more layers of complication and burdens of compliance onto Canadian small businesses. While I am grateful that the attack on private corporations and their shareholders appears to have subsided in 2019, I am disappointed that the bill contains nearly nothing to help them.
What we've seen, particularly in my home province of Alberta, is that entrepreneurs have faced tremendous adversity in the last five years and particularly in the last three and a half.
In Alberta, some small businesses have managed to survive a long and sustained economic downturn with very little help from our governments. A lot have simply closed their doors and are out of work.
For all Canadian small businesses, the cost of compliance has increased dramatically as a result of changes to the inter-corporate dividend rules, tax on split income, the specified corporate income and association rules, changes to family trust reporting and new penalties for saving too much in your business regardless of the reason.
Many wealthier clients have increased their risk tolerance with regard to tax planning strategies and reduced their tolerance for economic risks. Many wealthier clients are shifting their wealth out of Canada.
Most of this is a direct side effect of the offensive and ill-conceived attempt at tax reform for private corporations and their shareholders that was announced on July 18, 2017. Moreover, all companies, including small businesses, are now shouldering significant CPP increases for the next seven years.
According to research conducted by the CFIB, Canadian small businesses are now being asked to shoulder nearly half of the federal carbon tax take, which increases the cost of everything—and I mean everything—while receiving disproportionately small rebates.
In many cases, small businesses have tried to pass these costs on to consumers in order to remain viable. In many cases, they simply can't. This results in corporate inequity, meaning smaller companies are simply unable to compete with larger corporations and multinationals who are better positioned or better equipped to shoulder these additional tax and compliance burdens.
I share these insights with you today not to complain, but rather to highlight that there have been real, rapid and sustained challenges for middle-class small businesses owners across Canada and Bill C-97 offers very little in the way of assistance or stimulus.
The next issue is the CRA's service levels. I can confirm the substance of the 2017 Auditor General's report, which says it is very difficult to reach the CRA by phone and even more difficult to get a complete and correct answer. We still deal with this daily. At Achen Henderson, we have been forced to add this to our service levels and have elected to do so at no additional cost to our clients.
While I'm thankful for my newfound love of chamber music and encouraged that the government recognizes the problem, we must ask ourselves if the measures in Bill C-97 are the correct approach. While advances have been made by the CRA to be more accessible and user-friendly online, it confuses us that the CRA requires five times the staff per capita to administer our tax system than the IRS does, with more hiring announced in the 2019 federal budget.
Based on our extensive experience in dealing with the CRA and helping many organizations who have experienced similar challenges, we've come to believe that the CRA's issues are cultural in nature. Defective cultures always result in operational bottlenecks. These bottlenecks are magnified by a tax system that is far too complicated for the average CRA agent or taxpayer to navigate, which is further magnified by a lack of or inadequate professional training, in our opinion.
Next, instead of taking steps toward modernizing our tax system to make it more transparent, competitive and easy to comply with and administer, Bill C-97 is a continuation by our government of using taxation to pick winners with tax breaks in various economic areas and industries. Furthermore, C-97 does nearly nothing to address tax competitiveness with the United States. Instead, the bill stretches the fabric of our tax act even further, mending holes where the fabric breaks with more patches, resulting in legislation that is impossible to comply with and administer.
lt's not all bad. There are some welcome patches in the bill, such as the improvements to the RDSP rules and the specified corporate income rules, but I can't help but wonder how many more holes will need to be patched until we consider modernizing our tax system.
The patch to the SR and ED program is a step in the right direction. lt undoubtedly makes the program more accessible to certain CCPCs. For them, this should help to tip the balance between compliance costs versus benefits and increased support. Unfortunately, these changes do not address the administration issues in the SR and ED program, and they only impact a very small portion of private companies in Canada.
While the accelerated investment incentive will be helpful to some private companies—namely those who are doing well and/or those who are able to expand or upgrade—the full expensing of M and P equipment, clean energy equipment and electric vehicles seems like boutique benefits that will only help certain private companies. We are disappointed that the accelerated CCA measures are temporary in nature.
ln closing, entrepreneurs have endured a lot these last few years. Many continue to struggle with uncertainty and excessive tax complexity, and have received very little from their government in return. While C-97 doesn't ask them to shoulder much more, it doesn't offer much in the way of assistance or stimulus.
We've seen improvements in the CRA's online offerings, but we have experienced very little improvement in hold times or service levels, and we question if Bill C-97's approach to resolving these problems is the correct one. Bill C-97 is a missed opportunity to initiate a comprehensive review of our tax system with the goals of modernization and simplification at its core.
Lastly, the accelerated CCA measures in C-97 are targeted at specific industries and temporary in nature, and we think they miss the mark on tax competitiveness with the United States.
Thank you very much for inviting me to speak today. I'd be happy to take your questions.
View Blake Richards Profile
Thank you. Unfortunately, I hear those types of examples all too often. Those are the types of things that we obviously need to be looking at to try to address with regulatory compliance.
Mr. Achen, regarding the CRA, you raised an issue that is also one I hear so frequently. You mentioned, and I actually hadn't heard this statistic before, that we have five times the number of agents per capita in the CRA than does the IRS. I've heard that expressed in different ways before, about the thousands and thousands of agents that we have at CRA, yet when you make a phone call, you can never get any one of them on the phone. People always wonder how the heck it is possible, with all those people there, that you can't even get someone on the phone. Then they say, if you ever do get someone on the phone, you might talk to four different agents and get six or eight different opinions, so that's obviously a source of frustration.
I wonder if you might speak to the opportunity that's lost for our businesses, particularly our small businesses, when they're dealing with these types of compliance burdens with the CRA. Obviously the complicated nature of the tax code and the fact that even the CRA agents can't really give you a proper interpretation of it, what do those effects mean for our small businesses in terms of lost opportunity to be able to be competitive and to be able to grow their businesses, mentor employees and so on?
Clayton Achen
View Clayton Achen Profile
Clayton Achen
2019-05-14 11:52
In terms of one of the biggest challenges, of course, we live in a self-assessment system where you're expected to file your own taxes and the tax of your corporation. You're responsible for those. A common source, particularly for middle-class small business owners who can't afford a fancy accountant, is to turn to the CRA for answers, and unfortunately, we get the wrong answers a lot.
Coming back to the impact that has on them, that results in improper tax filing, probably, in some cases, diminished revenues to the government, and a very high level of frustration when the CRA figures out that they've filed something wrong, and particularly in the area of GST/HST we see this quite a lot.
In a lot of cases, for people who can't afford tax accountants, the real costs are a sense of frustration, followed by a sense of a lack of trust in the tax system, followed by CRA reassessments because they got something wrong when they tried their best to comply with it.
Bruce Burrows
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Bruce Burrows
2019-05-02 11:40
This change alone would be a huge improvement to the out-of-date system that currently exists in other pilotage areas.
However, one issue that was not included for reform is one that we on the industry side believe is critical in giving pilotage authorities the full control of their service delivery. Authorities do not have the ability to choose the hiring model that meets their needs, often locking them into costly contracts with monopoly pilot corporations, instead of being able to hire employee pilots or contract with individual pilots.
This lack of flexibility will hamper pilotage authorities from being able to choose the service delivery model that is right for them, and will result in higher charges for their customers, while at the same time not providing any service improvements. This is a major concern. It was a recommendation in the review, but it has not carried through into the act recommendations.
I know that there will be a 10-year review of the Pilotage Act, should this pass, and we will continue to seek this reform in future reviews.
We're cautiously optimistic as this point. While a great suite of reforms has been proposed per this division in the budget implementation act, passing the bill is half the battle in reforming Canada’s pilotage system. The heavy lifting to reform the system will take place in the transition of the regulatory reform and the supporting policies and programs from the pilotage authorities to Transport Canada.
The updated system must take the clear direction provided by this bill, and that provided by the Pilotage Act review report, and apply it based on the new purpose and principles contained in the act.
Once again, thank you for the invitation to appear, and we'd be happy, of course, to answer any questions later.
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