Canadians Pessimistic About the Economy
According to a recent consumer confidence survey, Canadians are becoming increasingly pessimistic about the economy and the availability of jobs, except for those in the West.
The Conference Board's survey, conducted in July, shows that optimism is waning or remains at very low levels in most regions of the country, except in the prairies and British Columbia.
Nationally, the Ottawa-based company’s confidence index slid one point to 85.9 in July, the third consecutive monthly dip.
Conversely, the confidence index rose 4.5 points to 107.8 in the prairies, the highest level in the country. The index remains high in British Columbia at 105.9, although July saw a decline of 9.9 points.
The Conference Board cited negative sentiments about the prospects for job creation over the next six months as the main reason for the pessimism among Canadians.
“On a national basis, pessimism about the labor market continues to hamper a true recovery in confidence,” wrote Todd Crawford, an economist with the Board.
“Although the economy has more than recovered all the jobs it lost during the recession and the unemployment rate has trended down in the past few years, consumers appear not to have noticed, or they have no faith that the trend will continue.”
The gloom is understandable given the recent record on job creation. Earlier this month, Statistics Canada reported that nearly 10,000 jobs were lost in June, and over the past 12 months, a mere 72,000 net jobs were added, marking the poorest extended performance since the recovery began in 2009.
At the same time, a consumer confidence survey in the U.S. found the index rising for the third consecutive month to 90.9, marking the highest reading since 2007.
The Bank of Canada and many economists believe that a U.S. recovery is a necessary pre-condition for bringing Canada out of its growth slump of the past few years.
The report contained some encouraging signals. More than 20 percent of respondents claimed to be financially better off than they were six months ago, up two percentage points from June.
Canadians were less hopeful about the prospects for improvement in their finances in the future. Fewer people said that this was a good time for a major purchase than they did in June.
Crawford said this could reflect the fact households are carrying heavy debt loads, jobs opportunities are scarce and media reports that homes are overpriced.
Negativity was at its highest in regard to the job market.
Only 15.9 percent of Canadians said they expected there would be more jobs available in six months, a drop of 1.2 points. In Atlantic Canada, that number drops all the way to 5.9 percent, the weakest response to the question since 1996.
Among Ontario residents surveyed, only 12.6 percent said they expected better employment conditions, down from 15.3 percent last month.
The Conference Board said that sentiment in Quebec improved in July, but from a low level.
Regionally, the July confidence index stood at 72.9 percent in Atlantic Canada, 80.5 in Quebec, 74.9 in Ontario, 107.8 in the prairies and 105.9 in B.C.
The results are based on phone interviews with 2,000 Canadians conducted in the first two weeks of July. The survey is said to have a margin of error of plus or minus 2.1 percentage points.
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.