Tax Planning and Tax Risk
The tax rules are byzantine. Businesses require advisors to help them structure and properly report the appropriate amount of tax. However, it is crucial to remember that this responsibility is ultimately borne by the person taxed and not the advisors (I affectionately call the “tax nerds”). Businesses, whether active or passive, international or domestic, large or small, should consider handling their affairs like Canada’s largest institutions do; by hiring a tax manager.
At Shea Nerland, we offer to act in the role of tax manager. We catalogue all tax structures and identify the associated tax risk of each structure (whether as simple an eligible dividend from a private corporation or as complex as a cross-border financing structure). We regularly check the efficacy and risk of structures. We also forecast the future planning requirements of our clients’ affairs and ensure that any required planning is identified well in advance.
Tax risk management, like most other elements of business, requires the ability to communicate properly and facilitate understanding amongst business stakeholders. We see tax risk as similar to investment risk; properly communicate the issues to the client, establish a governance strategy, and execute and monitor.
To oversimplify how we think about tax, we explain the range of tax structure opportunities and use specific fact scenarios to explain the various risks. Audit risk, reassessment risk, handling complexity, communication in complex situations and comfort with litigation would all be factors discussed during this process.
Like investment risk, a baseline is established on a spectrum from aggressive to conservative, and our tax risk management filters tax structuring opportunities to fit this tax risk profile. Although tax is a complicated and difficult topic (what isn’t these days?), we ensure that our families are informed and stay within their comfort zone.
Shea Nerland believes in aligning our tax planning with our client’s tax risk profile; there is no such thing as a perfect tax plan but we strive for the plan to be a perfect fit.
Invitation for Discussion:
If you would like to discuss this article in greater detail, or any other business law matter, please do not hesitate to contact one of the lawyers in the Tax group at Shea Nerland LLP.
Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.