1. What is the most significant change to your region’s/jurisdiction’s tax legislation or regulations in the past 12 months?
The indirect tax landscape has experienced several changes over the past few years. Notably, in the past 12 months, there have been sizable amendments to components of the sales tax legislation—including significant changes in the financial services and cryptocurrency space. Some amendments, such as confirming the taxability of certain services provided by payment card network operators, were announced without prior notice and came into force retroactively, which is not common practice.
2. What has been the most significant impact of that change?
The retroactive nature of this change brings with it the potential for a significant impact on taxpayers. Typically, a legislative change goes into effect shortly after a legislative change is announced, providing the taxpayer time to review the changes and respond accordingly. The current amendments have created a circumstance where taxpayers can receive an assessment request from the Canada Revenue Agency (CRA) regarding an amount collected or claimed prior to the recent legislation that will be reviewed from the perspective of the current legislation. The significance of the impact is challenging to anticipate, as there is little to no precedent for how to proceed under these circumstances.
3. How do you anticipate that change impacting your work and the market moving forward?
The recent changes to the sales tax legislation will influence our work in a few ways. With clients and taxpayers, we will work together to understand their responsibilities under the new legislation. We will review work completed within the timeframe specific in the retroactive clause and determine the risk and preferred course of action. Within the market, there is work to be done to understand when and how retroactive changes can be implemented so that we can prepare and respond efficiently.
4. How has this changed the way you offer tax advice?
These changes are a reminder that tax legislation is ever-evolving, and the provision of tax advice to our clients is a continuous relationship. As tax positions change, we work together with our clients to understand the changes and determine the preferred path forward for them. It also reaffirms that legislation is not permanent, and through government consultations, we can provide recommendations to the Department of Finance as they create new tax legislation within Canada.
5. What potential other legislative/regulatory changes are on the horizon that you think will have a big impact on your region/jurisdiction?
Other changes expected on the horizon that will impact Canada include more use of technology, especially as the tax function transforms within organisations. This might include e-invoicing and other processes that will lead to better traceability of transactions. These changes will increase efficiency and identify errors, especially human errors, in the process.
6. What are the potential outcomes that might occur if those changes are implemented?
These changes toward the use of technology should help standardise processes but may also increase the cost that taxpayers incur, as funding a technology integration is a significant investment. It may also result in taxpayers navigating an increasingly focused level of review from the government, which will likely become more common with technological advancements.
7. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
Change is inevitable and brings with it benefits, as well as adjustment periods, as people and organisations make the necessary shifts to keep pace. While change itself isn’t new, the pace of change is rapidly increasing. The timeframe in which we need to respond and implement change is shortening – and even ‘going backward in time’, as we recently experienced with retroactive amendments. Progress requires change, and I am optimistic that Deloitte Canada’s Indirect Tax practice and the Canadian marketplace will continue to see positive progress in our approach to tax advice and tax legislation.
8. How are issues surrounding the taxation of the digital economy affecting your work?
As more and more international taxpayers enter the scope of Canadian sales taxes, we are being confronted with a variety of issues, including, most notably, various pieces of legislation that conflict with one another (including within our Canadian borders), leading to potential double taxation. Further, our work has even more of a significant technological component, given the need to adjust systems to collect many countries’ taxes.
9. How would you describe the tax authorities’ approach in your region/jurisdiction?
In Canada, the tax authorities’ approach to certain issues, including the digital economy electronically supplied services (ESS) rules, which are new(er) digital rules for non-residents, has helped taxpayers determine if they need to register for Canadian sales taxes. In other areas, an increase in data being requested as part of a tax audit has increased the amount of preparation required, and we’re quickly adapting to the new approaches.
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