Independent Insolvency Advisory

by Kent Blumberg

Not every client is your ideal client.  In fact, some clients are downright toxic.  They sap your energy, undermine your brand, waste your time, keep you too busy to take on better clients, send your staff running for the hills and send you running for the Valium.  In spite of the revenue toxic clients may bring in, I can think of at least nine reasons to fire them.

1. The client acts unethically, or demands unethical behavior on your part.  All we have, in the end, is our reputation – with others and with ourselves.  When we act out of alignment with our values and ethics, or support those who do so, we are out of integrity. When we are out of integrity, we are less effective and more stressed.
2. You don’t like the client.  This one doesn’t show up on most lists like this, but it’s crucial to me.  One of the advantages of owning my own business is that I can choose with whom I will do business.  I don’t have to work with a jerk if I don’t want to.  Why give up that hard-won freedom?  Why spend time with a client I don’t like?

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Here are five pointers picked up from discussions with firm leaders and advisers about the always-sensitive “dance” of how and how much to raise rates:

1. Do the math. Your costs may have risen this year, as the costs of a business often do: salaries, facilities, travel, equipment, software upgrades—all of those expenses involved in running a business have probably gone up. An overall assessment of higher costs can help your firm get a sense of how much firm revenue needs to increase to cover these costs.

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By: Stevan Novoselac and John Sorensen of Gowlings

Introduction

In early June, 2010, the Canada Revenue Agency (“CRA”) released its long awaited administrative policy on gaining access to taxpayer information and documents.  The policy reaffirms the CRA’s position that is entitled to virtually unrestricted access to taxpayer’s information and documents, subject only to solicitor-client and litigation privilege.  As a result, obtaining tax advice from accountants, without involving tax lawyers, puts the confidentiality of the advice, and all of the related information and documents, in jeopardy.

Background

The Income Tax Act (Canada) (“Act”) requires taxpayers to maintain “books and records” to enable taxes payable to be ascertained and to determine other amounts that should have been deducted, withheld or collected.  The Act also confers extremely broad powers on the CRA to access taxpayer information and documents, subject only to the protection of solicitor-client or litigation privilege. 

The CRA first discussed its intention to draft an administrative policy on access to taxpayer information and documents at the Canadian Tax Foundation national conference in 2004 and periodically updated the tax community on the progress of the policy.  As early as 2004, the Canadian Institute of Chartered Accountants (“CICA“) wrote to the Minister of National Revenue (“Minister”) urging that CRA access to accountant’s and auditor’s working papers be restricted to “exceptional and well-defined circumstances”, because untrammeled access would have a chilling effect on communications between taxpayers and their advisors.  The CICA’s position was that if the CRA can pry into taxpayers’ private communications with their advisors, taxpayers will be reluctant to seek advice.  This may deprive corporations and ultimately their shareholders of valuable advice, which jeopardizes the integrity of financial reporting, the audit function and corporate governance.

The New Policy

A pre-publication draft of the new CRA policy was released for comments in late 2008.  Unfortunately, the most troubling proposals in the draft remain in the final policy.  For example, both the draft and final policies state that CRA personnel are authorized to request relevant documents during an inspection, audit or examination for any purpose related to administering or enforcing fiscal statutes, where “any purpose” includes “acquiring information for the purpose of substantiating the taxpayer’s position on a specific issue, and identifying audit issues and concerns with regards to tax at risk.” 

Further, both versions of the policy state that CRA officials are authorized to inspect, audit, review or examine both “the books and records of a taxpayer” and any document of the taxpayer or any other person that relates or may relate to the information in a taxpayer’s books and records.  The phrase “any document” includes accountants’ and auditors’ working papers, including “working papers created by or for an independent auditor or accountant in connection with an audit or review engagement, advice papers, and tax accrual working papers (including those that relate to reserves for current, future, potential or contingent tax liabilities).”  Tax accrual workpapers are essentially a roadmap through all of the “soft spots” in a taxpayer’s tax return, prepared for the purpose of calculating reserves for uncertain tax filing positions.  In the draft version of the policy, the CRA acknowledged that tax accrual workpapers may be requested by auditors to expedite the audit and focus the examination on the most significant issues.  Although this language does not appear in the final version, it is obvious that the reason any tax authority seeks to obtain tax accrual workpapers is to have a guided tour of the taxpayer’s tax planning.

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