Have previously written about the comparatively low numbers of qualified professional accountants who hold public office. Thought about this in when coming across a submission made in 1985 to Financial Post Magazine. Rejected by Paul Rush, though without discouragement. Paper concerned a debate in the House of Commons as to whether corporations were somehow taking advantage of the taxpayer through the existence of “deferred tax” accounts, as they were then known. Became a major point of opposition concern and media coverage. People not checking with professional accountants as to whether deferred taxes were in fact a liability. Had they done so, they would have realized that the existence of such an account was essentially an accounting convention, to recognize the differences in income being reported for tax purposes at any given point in time, and the income as recognized for accounting purposes. The two income numbers, at least in Canada and a number of other countries, are not identical.
The article and the rejection letter may be found here:
On a reread, the rejection was well-founded. Too technical. Still, some concluding points in the article that may still resonate a bit:
When one criticises deferred income taxes on the basis that corporations are obtaining an unfair advantage, one is really criticising the availability of certain tax deductions which (sic) are available to anyone operating a business.
In the accounting world, there have been several articles in accounting journals debating (sic) the practical utility of presenting deferred income taxes. One argument put forward in support of getting rid of the account is that the account is too confusing to the average reader of financial statements, who believes that deferred income taxes represent amounts currently (owed) to the government. Given the views recently expressed in the House of Commons, accountants, businesspeople and elected representatives might well be advised to pursue this line of argument further.
Examples from the 1985 debate, extracted from the paper:
…I want to return to a matter I have raised in every budget debate since 1968. At that time, deferred corporate taxes amounted to a little under $20 billion. They now amount to around $35 billion. No other citizen, individual farmer, fisherman, small storekeeper or anyone else, can defer his taxes. Just try it and you will have Revenue Canada on your neck
Les Benjamin (NDP, Regina West), House of Commons Debates, June 18, 1985.
The Income Tax Act does not allow corporations to defer the payment of income taxes. However, there is a quite separate item known as the “Provision for Deferred Income Taxes” that is often reported in a corporation statement as an expense. The amount shown is an estimate of taxes payable in future years because of timing differences in accounting for book purposes and taxation purposes. This amount is accumulated over the years and is reported as a liability item “Reserve for Future Income Tax” in the company’s balance sheet.
Perrin Beatty, Minister of National Revenue (as he then was), House of Commons Debates, April 17, 1985.
Now, had there been more professionally-qualified accountants to comment in the House of Commons at the time…