Baker Tilly Canada’s National Director of Tax Services John Oakey considers three items in the federal budget that almost flew under the radar: cryptocurrency non-compliance, beneficial ownership transparency and the future of surplus stripping.
1. Cryptocurrency: beware, CRA is coming
For the past few years, the Canada Revenue Agency (CRA) has been investing in the research and development of audit techniques for cryptocurrency transactions and the digital economy. We have recently seen a multi-page CRA taxpayer questionnaire asking questions about the investing, trading and mining of cryptocurrencies. In Budget 2019, the Liberal government allocated $150.8 million to the CRA over five years to fund new and existing initiatives targeting non-compliance associated with cryptocurrency transactions and the digital economy. If you invest, trade, accept or mine cryptocurrencies, you should consult your local Baker Tilly advisor to ensure you are properly recording your transactions.
2. Beneficial ownership transparency is your business
Our March Tax Alert (Corporate transparency under the CBCA) provides information regarding the first step of legislative changes aimed at creating transparency with Canadian corporate ownership. Budget 2019 announced the government proposes further amendments to the Canada Business Corporations Act (CBCA), making the beneficial ownership information – currently legislated to be maintained starting June 13, 2019 – more readily available to tax authorities and law enforcement.
These changes are a result of the G20 calling on countries to strengthen implementation of the international standards on transparency and beneficial ownership information and its international exchange. The initial changes legislated for June 13, 2019 are just the first step in the recommended standards by the international organization Financial Action Task Force (FATF). The next steps are the continued collaboration with the provincial governments to amend the various provincial incorporating statutes – to follow suit with the CBCA – and consider the development of a private or public central registry. Stay tuned for further developments.
3. Surplus stripping survives, but for how long?
In my article Surplus stripping: Will it survive the budget?, I predicted surplus stripping would be eliminated with Budget 2019. Well, it turned out I was wrong, but I do believe surplus stripping is still on the chopping block for the Department of Finance, and it is only a matter of time before we see new legislation eliminating or restricting surplus stripping to acceptable transactions such as intergenerational transfers of businesses. The budget left the door open with two comments:
- “The Government will continue its outreach to farmers, fishers and other business owners throughout 2019 to develop new proposals to better accommodate intergenerational transfers of businesses while protecting the integrity and fairness of the tax system.”
- “Budget 2019 also reaffirms the Government’s commitment to move forward as required with technical amendments to improve the certainty of the tax system.”
These comments lead me to believe my 2019 budget prediction will eventually come true. The question is when. Perhaps the Department of Finance will deliver another summer gift on July 17, 2019? We will just have to wait and see. The moral of the story is, if you are considering any form of surplus stripping, it would be wise to carry out the transaction sooner than later because we don’t know when the eventual bomb is going to drop.
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