Canada's 2012 Economic Outlook: Positive and Negative
In December 2011, the Canadian industry saw an economic upturn, something that was quite unexpected. A direct result of holiday spending, Canadians’ generosity proved beneficial to the somewhat unfruitful economy of 2011.
Estimated in late December, BMO found that Canadians’ spending and expenses were expected to reach $1598.80 per person throughout the holiday season—good news for Canada, overall. Due to holiday gift giving, family dinners and travel, Canadians amplified the economy. WestJet, as an example, had a fairly high capacity in passenger travel due to Canadians’ pursuit of spending the holiday with loved ones.
Although Canada saw this economic upturn in the late months of 2011, the economic outlook isn’t picture perfect for 2012. In a survey conducted by the Economic Club of Canada and Pollara Strategic Insights, it was found that Canadian residents are actually “more worried than ever” about Canada’s economy in 2012.
The poll found that many believe their income will fall below cost of living, a statistic seen for the first time in 15 years. Even more, 70 per cent already believe Canada is in a mild recession.
The poll, conducted online, surveyed 2,878 Canadians through mid-December. The survey found economic optimism low, with only 25 per cent of surveyors feeling optimistic—compared to 2010’s figures of 36 per cent and 2009’s that reached 54 per cent. It seems that many have a fairly negative outlook on Canada’s recovery from the 2008 economic crisis.
"This is the most pessimism we've seen, except for briefly in 2008, since 1996," said Michael Marzolini, Chairman of Pollara Strategic Insights, in presenting the poll findings at The Economic Club of Canada's annual Economic Outlook. "Canadians not only believe we're now in a recession, but expectations for the length of the recession are actually longer than they were in any year since 2008."
On the other hand, the poll found that Canadians believe that Canada is the best place to be during this estimated economic downturn. The poll found that Canadians do not expect the US to do well in the upcoming year. 54 per cent expect the US economy to worsen in 2012 and 63 per cent expecting the global economy to do the same.
"We should also recognize the impact this economy is having on specific groups," said Rhiannon Traill, President and CEO The Economic Club of Canada. "42% of students are very concerned about paying for their education, 31% under age 25 are very concerned about finding a job, and 46% of women with children are very concerned about paying for their children's education."
In the end, not everyone in Canada expects economic doom. In early January it was found in a survey conducted by Sage that small business owners actually have an upbeat economic outlook, with 43 per cent expecting a better year than 2011. Sage’s results found small business is less concerned about issues such as the global economic crisis and the rating of the Canadian dollar.
Either way, 2012 is in for a wild ride. Forecast and predictions are just that—estimations—and as we enter the new year it seems Canadians, no matter if they’re positive or negative, seem to agree that they’re in the right location to ride out the potential economic volatility.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.