Volume 8, Number 2
The information in Tax Perspectives is prepared for general interest only. Every effort has been made to ensure that the contents are accurate. However, professional advice should always be obtained before acting and TSG member firms cannot assume any liability for persons who act on the basis of information contained herein without professional advice.
By Michael Cadesky, FCA, TEP
Cadesky and Associates LLP (Toronto)
This Year-End Tax Planning edition of Tax Perspectives is devoted to tax strategies in difficult economic times.
Six months ago, I would have laughed at the very idea of such a collection of articles. It seemed likely that the excessive and irresponsible lending activities of opportunistic U.S. bankers would remain an isolated U.S. problem. But it did not help when former Federal Reserve Chairman, Alan Greenspan, told the U.S. Congress, and by that the world, that his model of how the global financial system worked was wrong. He had made a “mistake” in believing that banks would operate to protect themselves and their shareholders. In his words, “A critical pillar to market competition did break down. I still do not fully understand why it happened”. Full marks for being truthful, but not helpful in allaying people’s mounting fears.
The crisis that started in banking and housing quickly spread to oil, cars, and U.S. retail. Airlines came next, and by then the recession was so broadly based, everything was dragged in. Then came announcements from other countries that the infection was spreading – the U.K., Germany, Japan. A worldwide recession was in the making.
In Canada, the stock market followed the U.S. stock market and the Canadian dollar declined against the greenback, surrendering its gains of the past two years. We are now teetering on the brink of recession. How long and how deep? Nobody knows. Is there something fundamentally wrong with the Canadian economy? Nothing in particular is wrong, but we, too, are tied into the world economy, whether we like it or not. This is the price of globalization.
So what advice can we give to our clients on how best to weather the coming storm? In this edition of Tax Perspectives, we focus on tax losses, tax strategies for difficult economic times, the advantages that low asset values can bring, and other food for thought.
We hope you enjoy the mix of articles and find in them useful ideas and strategies to make the very best of the turbulent economic times ahead.