What was the most significant development in your region/jurisdiction's tax practice in the past 18 months?
In the past 18 months, our Tax & Legal practice nationalized our service lines. We gradually introduced the national model, starting with a few service lines that lent themselves well to a national structure due to their size and the nature of their work. Throughout the process, the benefits to this approach for both our clients and our talent were clear, and today, all 11 of our service lines operate on this model.
We also enhanced our service offerings, building out our legal practice and introducing our Operations Transformation for Tax program, to the market. We consolidated our go-to-market approach for our cross-border service lines (International Tax and Transfer Pricing). We have also been expanding the scope of our National Tax Office in order to enhance our capability to bring world-class tax advice in the face of ever-increasing complexity of tax issues.
What was the most notable effect of that change?
The most notable effect from our decision to nationalize our practice is our ability to collaborate for a measurable impact, both internally and in the marketplace. We now have a framework that improves our efficiency in bringing the right resources to the right opportunities. This increases the synergy among teams, both our client teams and our internal teams, which produces impactful results in our service delivery.
Where is the market moving in this practice area?
The market is moving towards consolidated market offerings and our national structure positions us well to deliver against this expectation. Clients want trusted business advisors not just single service delivery professionals.
A significant number of companies across all industries are undergoing digital transformation and this impacts all aspects of their business. The onus is on Deloitte to bring specialists to the table so we can have holistic discussions with our clients about the implications and opportunities associated with these types of transformations. For Tax & Legal, this means we are frequently collaborating with other parts of our business, such as Consulting, to bring increasing value to clients during these discussions and having greater impact through our ability to provide tax advice and guidance as organization undergo transformation.
We have also been seeing a significant increase in the amount of cross-border tax advisory work related to the impacts of tax reform, which has occurred in several jurisdictions relevant to both Canadian in-bound and Canadian out-bound investments. Our consolidated market offerings and our national structure has enabled us to respond to these changes in an efficient, proactive, and consistent manner.
What kind of impact will this have on your work?
I am noticing the impact of this through my own work, where clients reach out to Deloitte Canada as a problem solver for their business problems, and not just a firm that can service their tax functions. With respect to the digital transformations, Tax & Legal is teaming more frequently with the firm's advisory businesses to help the clients navigate all the components of their business impacted by this transformation. Deloitte's unified presence in the market with our tax and advisory services differentiates us, because not all of our competitors can bring these perspectives to the table.
Do you anticipate any significant legislative changes in the future with a material impact on tax in your region?
Based on the Liberal Party election platform and subsequent Mandate Letters from the Prime Minister to the Minister of Finance and the Minister of Revenue, some legislative developments were anticipated including Canadian versions of Actions 2 (anti-hybrid rules) and 4 (interest expense restriction rules) of the OECD led Base Erosion and Profit Shifting (BEPS) project. It remains to be seen if this will move forward in the context of the global financial crisis caused by the COVID-19 pandemic.
Like a number of other countries, Canada implemented very significant emergency relief monetary and fiscal measures, including tax measures, in response to the crisis. On a short- to medium-term basis, we will likely see a phasing out of the emergency measures along with some new (but more limited and focused) stimulus measures to help the economy restart. However, on a longer-term basis the unpresented deficits and resulting level of debt will need to be addressed – likely through a combination of reduced spending and tax increases. However, this will be challenging, as it will need to be done in a way that does not impair Canada's competitiveness with other countries or impede growth.
If these come into force, how will the industry look in the future?
These changes are expected to impact in-bound and out-bound financing within corporate groups, the location of debt within corporate groups, as well as corporate capital structures. As is the case with other BEP driven initiatives, we anticipate a material rise in the need for transfer pricing services, international tax consulting services, and compliance services.
How would you describe the tax controversy landscape in your region/jurisdiction?
The past few years have seen the Canada Revenue Agency become increasingly aggressive and ambitious in its efforts to ensure compliance with Canada's tax laws and generate tax revenues. The Canada Revenue Agency is raising large reassessments and leaving taxpayers to dispute them through the lengthy administrative appeals process and litigation in the courts. With the expected deficits and shortfalls in revenue due to COVID-19, we anticipate that the Canada Revenue Agency will become even more sensitive to preserving Canada's tax base, so we expect this trend to continue. More than ever, it is important for taxpayers to plan their affairs and transactions carefully to minimize tax disputes, and to manage disputes strategically when they do arise.
Do you expect tax procedures in your region to move towards common standards or diverge in the future?
We expect the tax procedures in Canada to continue to move towards a common standard in the future.
Is the global drive towards regulation going to affect tax practice? If yes, in which areas?
The global drive towards regulations will affect tax practices because it will increase the standard for compliance and the volume of compliance. This will increase the importance of tax reporting and compliance work and the need for the right resources to serve clients. This will make operating nationally and using technology all the more critical.
What do you see as direct impact of COVID-19 in your practice?
COVID-19 has highlighted the importance of being agile and digital. Our practice pivoted quickly to a work-from-home model and experienced less of a disruption because our practitioners regularly work virtually with teams across the country. Our team has stuck together, supported each other, and adapted to meet the needs of our evolving situation.
The current pandemic has created major disruptions and sparked a sense of urgency for changes including a massive update in digital transformations. The accelerated pace of these changes will require businesses to outsource their tax functions or to be nimble in how they adapt. Our advisory and consulting services can help with this and support clients' entire businesses throughout this transition, including the evolution of their business model. We are already seeing an increase in demand for our grants an incentives team, employment law team, and our restructuring business as they help clients navigate their digital transformation journey.
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