In which we are reminded to be careful about “sharing our experience” when asked until we understand the details, no matter how tempting.
“Yeah, we’re already doing that…”
I spoke at a banking industry conference last week. During one of the breaks, I chatted with a conference participant; after a bit, he described a cross-selling sales challenge with his sales team. Interested, I said, “Interesting… tell me more about that.”
He went on for a bit, then asked, “What strategies have you seen other banks use to increase their cross sells?”
Without much hesitation, the “Oh, gosh, I’d love to be helpful” voice came out of my mouth. “Well,” I said, “two strategies we’ve seen work well in settings like yours are (strategy A) and (strategy B).”
I received the summary dismissal I deserved for my careless response: “Yeah, we’re already doing that.”
(In other words: “You haven’t told me anything I don’t already know” and “Unless you have something better than that, pal, I’m moving on.”)
Monthly Archives: September 2010
Sales Thought – Nothin’ But Trouble
New to the Stewart Hall Archives
New today to the Archives: Economics Data Note on July Retail Sales by Stewart Hall, HSBC Canada.
New to the Stewart Hall Archives
New today to the Archives: Economics Data Note on August CPI by Stewart Hall, HSBC Canada.
PPSA Haircuts – Part 1: A Spelling Error
In Fairbanx Corp. v. Royal Bank of Canada, the Ontario Court of Appeal considered a contest between two registrations under the Personal Property Security Act (Ontario) (“PPSA“): a registration made by Fairbanx to perfect its purchase of accounts receivable from the bankrupt debtor and a registration made by Royal Bank of Canada (RBC) in respect of security for a loan to the debtor. While Fairbanx filed first and would therefore normally have ranked ahead of RBC, it made a mistake in recording the debtor’s name in its PPSA financing statement. The debtor’s correct legal name was “Friction Tecnology Consultants Inc.”, spelling “Tec[h]nology” without the “h”.
$500,000 GST ITCs disallowed – Accountants liable?
In Comtronic Computer Inc. v. The Queen, the taxpayer who is appealing a GST reassessment is a wholesaler of computer parts with annual revenues of about $65 million. During the five-year period in question, it purchased approximately 15% of its parts inventories from five Canadian companies (the “Vendors”) which appeared to be connected to a single individual. Although the Vendors sent invoices bearing various tradenames and addresses, the taxpayer never suspected anything was amiss. However, following an audit, it was determined that the invoices issued by the Vendors contained GST registration numbers that, while validly issued, had been issued to persons other than the Vendors. As a result, the taxpayer’s claims for input tax credits (ITCs), for GST of approximately $500,000 paid to these suppliers, were denied. The taxpayer was also assessed a 6% penalty.
The taxpayer’s appeals to the Tax Court of Canada and the Federal Court of Appeal were denied on the basis that the legislative requirements for an ITC mandated the use of the GST registration number assigned to the particular supplier. The courts acknowledged that the result can be unfair to a business that pays the GST in good faith reliance on an invoice. However, the courts concluded that the legislative scheme dictated that the unsuspecting business, rather than the government, bears the risk of supplier identity theft and other wrongdoing in GST collection and remittance matters. The courts also stated that businesses must implement risk management systems when dealing with new and continuing suppliers, to identify supplier information that may require further investigation.
While the Court recognized that no online GST registration verification system existed at the time, it determined that there was an ability to verify registration numbers with the Canada Revenue Agency by telephone. The Court found that the taxpayer had not taken any positive steps to verify that the registration numbers provided by the Vendors were correct and denied it relief from the penalty on that basis.
I’ve hear no word yet on whether the taxpayer’s accountant has been attacked for any shortcomings in the advising of this client or in the detection of a material unrecorded liability.
A supplier’s GST registration may be verified at the following site: http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/gsthstrgstry/menu-eng.html. Be sure to keep a printed copy of the verification, and if a segregation of duties is possible, then have the printed verification checked by someone else.
Canada Revenue Agency’s Interpretation of: “Permanent Establishment”
By Colleen McMullin of Gowling Lafleur Henderson LLP
Under the Canada-U.S. Income Tax Convention (the “Treaty”), a corporation resident in the United States may be taxed in Canada where its activities give rise to a “permanent establishment”.
If a U.S. corporation is deemed to have a permanent establishment in Canada, the U.S. corporation will be subject to Canadian tax return filing obligations and will be required to pay tax to the Canada Revenue Agency (“CRA”) on business profits attributable to that permanent establishment.
A permanent establishment is generally defined to include either a fixed place of business (e.g. an office, branch, place of management, factory, etc.) or a dependent agent who habitually exercises the authority to conclude contracts on behalf of the U.S. corporation. Furthermore, a recent addition (effective January 1, 2010) to the Treaty provides that a U.S. corporation may be deemed to have a Canadian permanent establishment if it either:
