May 19, 2020

Conference Board of Canada downgrades 2016 growth forecast to 1.6%

conference board of canada
Fort McMurray fires
Canadian Outlook
Matthew Stewart
awrara ra
3 min
Conference Board of Canada downgrades 2016 growth forecast to 1.6%

The wildfires that damaged much of Fort McMurray and the surrounding areas, a weakening global economy, and the ongoing and significant deterioration in business investment have dimmed the growth outlook for Canada.

The Conference Board of Canada expects the Canadian economy to grow by just 1.4 percent in 2016, a downgrade from the 1.6 percent forecast in the previous edition of the Canadian Outlook.

“The economy got off to a good start at the beginning of the year but, unfortunately, that momentum has largely dissipated,” said Matthew Stewart, Associate Director, National Forecast, The Conference Board of Canada. “The economy will likely contract in the second quarter and then rebound towards the latter half of the year. However, this won’t be enough to offset the second quarter’s weakness.”

Highlights

  • The Canadian economy is expected to grow by an underwhelming 1.4 percent in 2016.
  • Business investment remains the largest source of weakness in the economy and is forecast to decline again in 2016.
  • Despite a low Canadian dollar, exports will slow this year due to sluggish US economic activity and a weaker global outlook.
  • The wildfires which engulfed much of Fort McMurray and the surrounding areas in May and June are expected to subtract 0.1 percent from overall economic growth this year.
     

The largest source of weakness in the Canadian economy continues to be the slide in business investment. Business investment in the oil and gas sector fell by almost $19 billion last year, and with the price of oil expected to remain near its current level of US $50, investment in the sector is forecast to fall by another $14 billion this year.

Unfortunately, non-energy firms have not picked up the slack. Non-energy investment is expected to decline for the fourth consecutive year in 2016. We expect non-energy investment to pickup in 2017 but stay below previous peak levels until 2018.

Global economic uncertainty is also dampening the Canadian growth outlook. The global economy, which is already experiencing lacklustre growth, will be hurt by the UK’s decision to leave the European Union and by other shocks to confidence like the terrorist event in Nice and the failed coup in Turkey. Although the direct impact of these events on Canada should be minimal, there could be an impact on already weak business confidence. This, combined with sluggish U.S. investment activity, will hold back export growth through 2016. Total export growth is forecast to slow to 2.5 percent in 2016, down from 3.4 percent last year.

The wildfires that engulfed much of Fort McMurray and the surrounding areas in May and June are expected to subtract 0.1 percent from overall economic growth this year. Many oil sands operations were forced to shut down production, resulting in a massive short-term loss in output estimated at 57 million barrels, equal to $3.5 billion in lost revenues this year. Although this will have a significantly negative impact on the economy, there are some mitigating effects that will offset some of the short-term production shutdown such as firefighting and clean-up efforts, and insurance payouts.

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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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