NAFTA Talks Continue NAFTA Talks Continue

by Mike Godfrey,, Washington

24 November 2017

Negotiators from Canada, Mexico, and the US have concluded a fifth round of talks on the modernization of the North America Free Trade Agreement.

According to a trilateral statement issued by the parties, chief negotiators concentrated on making progress, “with the aim of narrowing gaps and finding solutions.” The statement added that “progress was made in a number of chapters.”

The statement also explained that negotiators “reaffirmed their commitment to moving forward in all areas of the negotiations, in order to conclude negotiations as soon as possible.”

A sixth round of negotiations will be held at the end of January. Negotiators will continue their work in intersessional meetings in Washington, DC, through mid-December. They will report back to chief negotiators on the progress achieved.

Published at Thu, 23 Nov 2017 19:00:00 -0500

Halfway through fiscal year, here’s where federal deficit stands

Halfway through fiscal year, here’s where federal deficit stands


The federal government ran a deficit of $5.9 billion over the first half of its fiscal year, a more modest dive into the red over the same period last year, the monthly fiscal monitor report says. Between April and September of the 2016-17 fiscal year, the Liberals ran a deficit of $7.8 billion.

But for September alone, the government ran a budgetary deficit of $3.2 billion, which was higher than the $2.4 billion recorded during the same month last year.

The report says government revenue between April and September of this year was up $6.9 billion to $146.3 billion, a 4.9% increase over the same period last year.

Personal and corporate tax revenues climbed by 6.2% and 6.8%, respectively, compared to last year. Excise taxes and duties were up $2.3 billion, or 8.9%, and GST revenues rose by $2 billion, or 11.5%.

Energy taxes increased by about $100 million, or 2.9%.

Program spending increased $5.7 billion, or 4.2%, to $140.4 billion.

Public debt charges fell $600 million to $11.9 billion due in large part to lower average effective interest rates.

The government’s fall economic update projected a spending shortfall this fiscal year of $18.4 billion, down from the $25.5 billion outlined in the March budget.

For the next fiscal year starting in April 2018, the Liberals now predict a $15.6-billion deficit, compared with the $24.4-billion projection from the spring.

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Published at Fri, 24 Nov 2017 12:40:54 -0500

RBC, CIBC and FTI execs win WCM awards

RBC, CIBC and FTI execs win WCM awards


RBC’s Harleen Bains, CIBC’s Susan Rimmer and Franklin Templeton Investments’ Duane Green received leadership awards Thursday from Women in Capital Markets (WCM).

The awards recognize senior executives, male and female, who have combined professional excellence with a commitment to advancing and championing women in capital markets.

Bains is managing director and head of Canadian rates trading and sales at RBC Capital Markets; Rimmer is managing director and head of global corporate banking at CIBC Capital Markets; and Green is FTI’s president and CEO.

Scotiabank’s Priya Radha, director of rates trading and head of options trading for global banking and markets, won the award for rising star.

“These leaders know that the economy as a whole, and capital markets in particular, enjoy increased profitability, competitiveness and innovation when leadership teams include more diversity of all kinds,” said Jeannie Collins-Ardern, WCM’s interim president and CEO, in a statement. “They have also demonstrated both the integrity and courage to inspire change, and the perseverance to make it happen.”

Award winners are nominated based on an extensive set of criteria and selected by a jury panel of five industry leaders.

You can watch videos about the winners on the WCM website.

Also read:

More women on boards is ‘high priority’ for CCPIB

Leaders want OSC to set targets for female board representation

Published at Thu, 23 Nov 2017 15:13:48 -0500

Looking at real estate? Go global

Looking at real estate? Go global


The key to real estate investment is taking a global approach, says Chip McKinley, senior vice-president and portfolio manager with Cohen & Steers in New York.

Listen to the full podcast on AdvisorToGo.

Doing so means “you can take advantage of different property cycles that are going on in relatively uncorrelated or, in some cases, diametrically opposed directions,” says McKinley, whose firm manages the Renaissance Global Real Estate Fund.

Read: Why real estate investing beyond Canada can pay off

It’s also important to recognize that different property types tend to react differently to economic cycles. For example, hotels won’t perform the same way as a senior living facility or an office tower.

But, says McKinley, if you stick to one region, “the problem is you’re still captive to a single macro cycle. So if you’re going through a recession, there’s really no place to hide. You can go into more defensive property types but that won’t allow you to grow.”

Also read: How e-commerce upswing is disrupting REITs

A tale of two cities

McKinley has his eye on Tokyo for its office market. The city is growing much faster than the rest of the country, he says.  Despite Japan’s broader growth issues, “what goes on in a single city doesn’t necessarily coincide with what’s going on at the country level. We all know that Tokyo is the economic epicentre of all of Japan,” he says.

Boons for Tokyo are its “healthy job growth and earnings growth, and companies there are actually increasing their spending and hiring people—and they have to put them somewhere.” That’s creating demand for office space, he says.

On the other end of the spectrum is London, bogged down by Brexit. Traditionally, says McKinley, “we think of the U.K. as a strong economic power, tied with New York, but Brexit has had a massive blow on the property market, which was already facing a decelerating cycle.”

The reason for that is “the great times of economic growth” for London had dissipated. At the same time, “a lot of supply had come in to that market,” he adds. Then Brexit happened and the office market “went from bad to worse. It’s the least healthy in the developed world right now.”

Tokyo and London show that the same property type can experience different cycles at the same time. This can even happen within a single region or country. “We’re seeing a bit of that in Canada,” says McKinley. “You have a very hot Toronto market contrasting with a very unhealthy Calgary market. But there are very few opportunities to play that.”

Read: Commercial real estate in Toronto to heat up

“We’re talking about one small city and one big city,” so it’s not as compelling, he says. Instead, investors should “open up your opportunity set to the world.”

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Published at Thu, 23 Nov 2017 00:00:32 -0500 Canada Pledges To Respond Better To Taxpayer Relief Requests Canada Pledges To Respond Better To Taxpayer Relief Requests

by Mike Godfrey,, Washington

21 November 2017

The Taxpayers’ Ombudsman has said that the Canada Revenue Agency (CRA) must improve its response to taxpayer relief requests.

The Ombudsman’s latest report, entitled “Without Delay,” examined the service experienced by taxpayers who are waiting for a decision on a relief request. The investigation was launched following complaints by taxpayers about the length of time it took for the CRA to acknowledge receipt and respond to their relief requests.

Under taxpayer relief rules, the Minister of National Revenue can cancel or waive penalties or interest in the case of taxpayers who are unable to meet their tax obligations due to circumstances beyond their control. The CRA administers the taxpayer relief provisions on behalf of the Minister.

The Ombudsman, Sherra Profit, said: “The Canada Revenue Agency must manage the Taxpayer Relief Program in a manner that ensures consistent and timely communications, and decisions, to taxpayers. Unreasonable delays matter. While taxpayers wait for a decision, interest continues to accumulate on the outstanding balance and if the relief is rejected, taxpayers could end up with a considerable debt.”

The Ombudsman recommended that the CRA:

  • Advise each taxpayer whether their request is routine or complex, and provide a clear and accurate estimated processing time;
  • Maintain nation-wide consistency in the processing times;
  • Review and identify the factors that contribute to fluctuations in the number of taxpayer relief requests, as well as the impact they may have on the Taxpayer Relief Program; and
  • Allocate sufficient permanent funding to the Taxpayer Relief Program to ensure that it consistently meets and/or improves upon its processing times.

The Ombudsman said the CRA has accepted two of the recommendations, and accepted a third in principle. The CRA has also confirmed that it will review the Program to determine the resource requirements and appropriate allocations.

In 2015-16, the Taxpayer Relief Program received approximately 40,000 relief requests related to penalties and interest, and completed more than 55,000 requests. The average wait time for the CRA to issue a decision was 6.5 months for routine requests and 18 months for complex requests.

Effective April 1, 2017, the CRA established a 180-day processing standard for the processing of taxpayer relief requests. It intends to meet this expectation 85 percent of the time.

Published at Mon, 20 Nov 2017 19:00:00 -0500

CRA misinformed 30% of callers, auditor finds

CRA misinformed 30% of callers, auditor finds


Some taxpayers may be filing tax returns using erroneous information supplied by Canada Revenue Agency, the federal auditor general warned Tuesday after tabling an audit that found just getting through to the department’s helplines is an even greater challenge than the government lets on.

Michael Ferguson’s latest report to Parliament said callers all too often get a busy signal or a message to hang up and try back later when they try to contact the taxman by telephone—and when they do get through, they’re not guaranteed of getting the right answers to their questions.

“When we called the call centres of Canada Revenue Agency and we posed our questions, about 30% of the responses that we got back were not right,” Ferguson told a news conference—a “very concerning” finding that could be causing problems for Canadians who file their own returns.

“We just have to assume that if people are getting wrong answers, then sometimes they are filling out the tax return based on those wrong answers.”

Ferguson couldn’t say how many people might be affected—only that some surely have been.

“It’s very much reasonable to extrapolate that that is going to have an impact on people,” he said.

“If people aren’t told the right date for when interest will be charged on how much they owe, they may make a payment later than they should and they might get charged interest that they weren’t expecting.”

Ferguson’s auditors also found that more than half of the 53.5 million calls that came in to the call centre during the audit period had to be blocked, since the system lacked the capacity to handle them. That meant callers either heard a busy signal or a message asking that they try back later.

Actual agents answered only 36% of all incoming calls—the rest of those that weren’t blocked were directed to an automated self-serve system—and provided incorrect information to auditors about 30% of the time.

Those numbers fly in the face of the agency’s own claims that 90% of callers are able to connect when they reach out for service either through the self-service centre or by speaking to an agent.

But that doesn’t take into account the fact that, on average, a taxpayer has to call about four times in a week just to get through to the agency, or the fact that more than half the calls are blocked outright due to volume, the report said.

“We found that the agency’s numbers didn’t account for the 29 million calls it blocked in a year—more than half of its total call volume,” Ferguson said. “Those calls either get a busy signal, a message to visit the agency’s website or a message to call back later.”

In its written response to the report, the government said it agrees there’s a need to improve the accuracy of information provided to taxpayers.

To that end, CRA said it will launch a new system early next year for training its call centre agents.

It also acknowledged that its current call centre technology is “outdated” and said an upgrade will be forthcoming.

Also read:

CRA in hot seat over buildup of tax assessment disputes 

Evaluating the feds’ tax cheat crackdown

Toronto man sentenced to 5 years in jail for fraud

Published at Tue, 21 Nov 2017 14:37:42 -0500

More to U.S. corporates than interest rates

More to U.S. corporates than interest rates


Andrew Kronschnabel has more on his mind than rising interest rates in the U.S.

Listen to the full podcast on AdvisorToGo.

With the odds of a December Fed rate hike at 91.5%, according to CME’s FedWatch Tool on Nov. 20, the markets are already prepped.

If the expected hike happens, “we don’t expect much volatility in the market,” says Kronschnabel, portfolio manager at Logan Circle Partners in Philadelphia. He’s co-manager of the Renaissance U.S. Dollar Corporate Bond Fund.

Read: Fed leaves key rate unchanged but hints at future hikes

When positioning his portfolio, interest rates play second fiddle to other factors. That’s because it’s difficult to “consistently generate alpha” from interest rates, he says. So, “We don’t typically have large duration positionings within our portfolio.”

Instead, his firm sources alpha “from security selection, sector rotation and, to a lesser degree, quality rotation,” he explains. To help with bond selection — both investment-grade and high-yield — the firm’s analysts provide research.

Read: Longer low for bond yields

Still, it’s important to monitor interest rates.

“We do have opinions on interest rates,” says Kronschnabel. “Even though we don’t express them in a large way in our portfolios, […] we do manoeuvre around the edges.”

For example, in response to the flattening bond curve this year, his portfolio is overweight at the long end and underweight at the short end. With U.S. rates expected to continue rising, “we’ve seen the Treasury curve flatten pretty dramatically,” and that’s affected everything from the two-year to 10-year point, and even out to the 30-year point.

He adds he’s “slightly short duration.”

His outlook on interest rates is steady as she goes—steady as Fed Chair Janet Yellen goes, that is. Her term expires in February.

Her successor, Jerome Powell, is similarly dovish, says Kronschnabel, so “this will be a pretty seamless transition.”

Read: Powell to replace Yellen as U.S. Fed leader

Waiting on opportunity

More interesting to Kronschnabel are potential U.S. tax reforms, which made some progress last week when they passed in the House. Proposed corporate tax cuts, for example, will benefit U.S. corporate issuers, he says.

Read: U.S. tax bill passes in House

Of more concern to the bond market are proposals to limit or remove interest expense deductibility, he says. If the proposals pass, corporate credit issuers would have less incentive to carry debt on their balance sheets, potentially resulting in fewer bonds being issued.

The result: “longer-term, upward pressure on prices, and lower pressure on spreads and yields,” says Kronschnabel.

Most affected would be highly leveraged companies with large interest expense. Such companies “tend to have less net income,” he says. “So the benefit they receive from a reduction in the tax rate would not necessarily help to offset the [loss of ] deductibility of their interest expense.”

If corporate bond spreads tightened significantly, Kronschnabel says, it would be “a structural change for the market.” It could also result in “significant gains to be had in corporate credit in the near to intermediate term.”

Also read:

Foreign purchase of Canadian bonds hits all-time high

Expect ‘significant’ increase in bond yields: economist

Published at Tue, 21 Nov 2017 00:00:29 -0500

These 12 states would feel impact of U.S. NAFTA pullout

These 12 states would feel impact of U.S. NAFTA pullout


A new projection from the biggest business lobby in the United States shows the 12 states that would likely feel the impact of NAFTA’s cancellation the most also voted for Donald Trump.

The U.S. Chamber of Commerce has stepped up its efforts to save the North American Free Trade Agreement amid threats of an American pullout.

Read: What nixing NAFTA would mean for markets

The group’s newest projection shows the states exporting the most to Canada and Mexico in total dollars, or as a percentage of their overall global exports.

Trump won all 12 states—Michigan, Wisconsin, North Dakota, Texas, Missouri, Ohio, Iowa, Indiana, Arizona, Nebraska, Pennsylvania and North Carolina—which delivered more than half his electoral college votes.

The current round of talks, underway in Mexico City, is expected to represent a calm between two storms. The countries have now made their demands on key issues, but are likely still months away from revealing their bottom lines.

Officials have played down expectations for this week’s talks. The lead NAFTA ministers for the three countries aren’t even attending the Mexico round, and Canadian officials suggest there won’t likely be movement on the most controversial issues.

Canada and Mexico have suggested one potential area for compromise—the U.S. idea of regular reviews of the agreement—but don’t want it to include a so-called termination clause. The Trump administration wants the agreement to lapse after five years unless all three countries agree to extend it.

That’s one of several U.S. demands that shocked observers—Canada, Mexico, numerous American lawmakers, and the business community. Several dozen U.S. lawmakers wrote to the administration this week expressing concern.

And the Chamber of Commerce has begun organizing regular NAFTA events in an effort to save the agreement. It released its projections in an op-ed today headlined, “Which states would be hit hardest by withdrawing from NAFTA?”

“Imagine the scene: The U.S. unemployment rate is climbing. Crops in the heartland are rotting. Manufacturers are moving abroad. Consumer prices are rising,” the piece begins. “That’s the picture painted.”

Read: NAFTA dedicates chapter to small biz, but issues still remain

Published at Fri, 17 Nov 2017 14:22:02 -0500

Feds name new infrastructure bank board

Feds name new infrastructure bank board


The federal government has named the 10 board members who will steer the new Canada Infrastructure Bank.

The arm’s-length corporation based in Toronto will be responsible for financing large infrastructure projects across the country, leveraging $35 billion in government funding. Former RBC executive Janice Fukakusa is chair of the board and will lead the search for a CEO.

The 10 board members are:

  • Kimberly Baird, founder of Kim Baird Strategic Consulting and former elected chief and strategic initiatives director of the self-governing Tsawwassen First Nation
  • Jane Bird, senior business advisor with the Vancouver office of Bennett Jones LLP
  • Dave Bronconnier, president and CEO of Interloq Capital Inc. and former mayor of Calgary
  • James Cherry, former president and CEO of Aéroports de Montréal
  • Michèle Colpron, who serves on the boards of the Fonds de solidarité FTQ, the Professional Insurance Liability Fund of the Barreau of Quebec and IIROC
  • Bruno Guilmette, president of the Plan A Capital Advisory Committee
  • Christopher Hickman, chairman and CEO of Marco Group of Companies
  • Poonam Puri, professor of business law at Osgoode Hall Law School in Toronto and a practising lawyer and affiliated scholar at Davies Ward Phillips & Vineberg LLP
  • Stephen Smith, co-founder, chair and CEO of First National Financial LP
  • Patricia Youzwa, former president and CEO of SaskPower and current chair of the pooled funds advisory committee for Greystone Managed Investments

Read: The good, the bad and the tepid: Reaction to the federal budget

Read: Digging deeper into Trudeau’s infrastructure plan

Published at Thu, 16 Nov 2017 16:28:44 -0500 Canada, Antigua And Barbuda Sign TIEA Canada, Antigua And Barbuda Sign TIEA

by Mike Godfrey,, Washington

15 November 2017

Canada and Antigua and Barbuda have signed a new tax information exchange agreement.

The agreement was signed on October 31, the Canadian Government announced on November 14. Negotiations were launched in November 2010.

The agreement provides for the mutual exchange of tax information that is possessed by, or is accessible to, the taxation authorities of either jurisdiction. Such exchanges are intended to facilitate the better administration and enforcement of taxation laws, and to prevent international tax evasion.

The agreement is based upon the OECD’s internationally agreed standard on the exchange of tax information upon request.

The agreement must now be ratified by both sides. It will enter into force on the date of the later of the two notifications of ratification.

Published at Tue, 14 Nov 2017 19:00:00 -0500