Quebec in Last Place Regarding Entrepreneurship, Economic Growth
Last month, Quebec’s government tightened its purse strings, and since then, residents across the province have been up in arms over the expected cuts. Premier Philippe Couillard has pledged to fix Quebec’s economic issues, but a recent report from the C.D. Howe Institute predicts that the process will be a difficult one.
Authored by Philip Cross, the former chief economist at Statistics Canada, the report details the extent to which the economies of Ontario, Quebec and the Maritimes currently rely on public sector versus private sector investment. Since 2000, public sector investment as a share of GDP has doubled in Quebec to almost six percent. Conversely, private investment has stalled at seven percent, placing Quebec near the bottom of the list, just a notch above New Brunswick and Nova Scotia.
In order to have business investments, you have to have businesses, and this is the primary source of Quebec’s economic problems. Statistics Canada released a report in December outlining the rates at which new businesses had been joining and leaving the marketplace in each province. From 2000 to 2009, no province had lower firm entry than Quebec. Additionally, in the manufacturing, transportation, retail and finance sectors, more companies actually left the province than joined. No other province had such a disparity between comings and goings.
Quebec has also struggled in regard to entrepreneurship. Another report from earlier this year that was conducted by the Global Entrepreneurship Monitor ranked Quebec as dead last in Canada in regard to the percentage of working-age adults engaged in entrepreneurship.
Many are quick to blame Quebec’s business problems on the government, citing the fact that the province reportedly subjects businesses to some of the highest taxes in North America. Moreover, shareholders have had their rights reduced by the government in the defense of underperforming Quebec companies, thereby inhibiting potential investors. This puts Quebec in a difficult spot, as private investors are reluctant to step forward and contribute while businesses struggle to profit.
The Quebec government has taken steps to encourage entrepreneurship, doling out state-sponsored funds to those it deemed worthy entrepreneurs. In March, $230 million was distributed to small and medium sized enterprises. While the money seems to have helped those specific businesses, it has not done much to encourage new ventures.
Ultimately, in order for Quebec to emerge from last place, more entrepreneurs will need to set up shop while more private investors will need to step in. Otherwise, the province may have a difficult time rising among the ranks—and tackling its $2.4 billion deficit.
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.