May 19, 2020

Canada’s Economy Accelerates at Fastest Pace in Two Years

Bank of Canada
Joel Cuttiford
2 min
Canada’s Economy Accelerates at Fastest Pace in Two Years

According to reports, Canada’s economy accelerated at its fastest pace in over two years in the second quarter, implying that the country could finally be emerging from a period of stagnant growth.

Statistics Canada reported today that GDP expanded at an annual rate of 3.1 percent in the second quarter, led by exports and household spending.  GDP grew 0.3 percent in June from May, according to Statscan.

Both figures were better than most on Bay Street had projected. The consensus forecast was for growth at a 2.5 percent rate in the quarter and a 0.2 percent gain in June from May.  Revisions left the first quarter even more disappointing than the dismal annual rate of 1.2 percent that Statscan first reported. The agency now says GDP grew at annual rate of 0.9 percent over the first three months of the year, reflecting a sluggish winter that slowed trade and weighed on household spending.

The lift is due to demand in the United States, where GDP surged to an annual growth rate of 4.2 percent in the second quarter. Exports, which the Bank of Canada says are central to the economy picking up steam, jumped 4.2 percent from the first quarter, reversing a small decline over the first three months of the year.  Household consumption increased 0.7 percent from the first quarter.

The GDP data are the last significant indicators the Bank of Canada will receive before it restates its policy position next week. Evidence of stronger economic growth will diminish lingering talk that the central bank could cut interest rates. Still, central bankers will want to see more evidence that Canada’s economy has accelerated.  In an interview last week, Governor Stephen Poloz clarified that he is in no hurry to raise the benchmark interest rate from one percent. He said there is still “slack” in the labor market and that the economy has “lots of room to grow” before it puts upward pressure on inflation.

“A stronger than expected GDP report, but will the Bank of Canada be satisfied with the composition?” Jimmy Jean, an economist at Desjardins Capital Markets in Montreal, asked in a note. “We are skeptical.”

In its latest economic outlook, the Bank of Canada predicted GDP would expand at an annual rate of 2.5 percent in the second quarter.  The economy grew at a rate of 2.7 percent in the fourth quarter.

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Jun 8, 2021

Six issues at the top of tax and finance leaders’ agenda

Tax
Compliance
financeleaders
Deloitte
Kate Birch
4 min
As businesses accelerate their transformation journeys, tax leaders are under increasing pressure to add strategic value. Deloitte reveals six tax trends

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.

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