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Briefing highlights

  • Ombud examines CRA
  • A Trump comment I’d love to hear
  • Markets at a glance
  • What to watch for at central bank symposium
  • What else to expect this week
  • Pepsi buys SodaStream
  • Catalyst seeks cash injection for fund
  • Andrew Willis on marijuana companies

Ombud probes CRA

The Office of the Taxpayers' Ombudsman is probing whether the Canada Revenue Agency is embracing the commitments of its Taxpayer Bill of Rights.

(You’re allowed a satisfied chuckle here if you’ve ever had a dispute with the CRA.)

Taxpayers' Ombudsman Sherra Profit has announced a “systemic examination” to find out whether the CRA is “effectively integrating the rights and values” of the bill of rights into its operations.

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It appears she's not convinced.

"The review began, in part, due to my outreach visits with the CRA regional offices across Canada," Ms Profit said.

"During these discussions, it often appeared many employees were not familiar with the Taxpayer Bill of Rights," she added.

“I also found ... there was no mechanism wherein the CRA was publicly reporting on how it was upholding the Taxpayer Bill of Rights.”

Not only that, but in speaking with “those responsible for setting the policies and procedures to which its employees adhere, it was not immediately apparent that the Taxpayer Bill of Rights was integral in building the foundation of the CRA’s day-to-day business operations.”

Taxpayers' Ombudsman Sherra Profit

Sean Kilpatrick/The Canadian Press

The review wasn’t sparked by complaints, but rather was initiated by Ms. Profit.

The CRA, in turn, said Ms. Profit’s office does these types of reviews “routinely,” that it welcomes the probe and will continue working with her group so Canadians get better service.

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(Does anyone welcome an audit?)

“The CRA and the OTO share the same goals: To ensure that the best possible service is delivered to taxpayers and that fair, equitable and respectful treatment is provided to all Canadians,” the CRA said in an e-mailed statement.

"The core values of professionalism, respect and integrity are at the heart of the CRA’s service mandate."

The Taxpayer Bill of Rights, adopted more than a decade ago, and which now even comes in poster form, pledges 16 things.

Among them are the right to get what you've got coming, and to pay no more and no less than the law requires.

(And to think I was hoping I had the right to pay less.)

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You’re also promised service in either official language, privacy and confidentiality, formal reviews and appeals, courteous and fair treatment and complete, accurate, clear and timely information.

You also don't have to pay a disputed sum until after a review, and you can escape penalties due to extraordinary circumstances.

(I must ask them if a dog on very expensive anxiety medication counts as extraordinary.)

The CRA also promises to warn you about sketchy tax schemes, and allows you to complain without being worried about reprisal.

(Which makes me feel more comfortable about writing this.)

These types of reviews can run between eight and 14 months, given that Ms. Profit’s office has to get certain information from the CRA, which may, in turn, prompt further questions.

Ms. Profit’s general process starts with a service issue being flagged, followed by preliminary research.

"If the CRA tells me it is aware of and addressing the systemic issue, we will monitor the issue for any additional complaints we may receive. Also, we consider all the factors, including the resources available within my office, before we open a systemic examination."

Minister of National Revenue Diane Lebouthillier

Adrian Wyld/The Canadian Press

Ms. Profit also sends a memo to the Minister of National Revenue, in this case Diane Lebouthillier. When all is said and done, she’ll give Ms. Lebouthillier her report, with what she has learned and what she recommends.

“If the CRA resolves the issues throughout the process of our examination, my report to the minister will detail the examination we conducted and the steps the CRA took during that examination to resolve the issue.”

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A comment I’d love to hear

Damn Canadians must have planted those trees here, like, 100 years ago.

Photo illustration

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Markets at a glance

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What to watch for this week

The issues dogging central bankers are many as they meet this week for an annual symposium at Jackson Hole, Wyo.

And each of the key players has their own points of focus.

This Economic Policy Symposium is hosted by the Federal Reserve Bank of Kansas City, one of the regional units that make up the U.S. central bank. The event is a potential feast for investors as it features policy-makers from around the globe.

“With the who’s who in the exciting world of high finance and monetary policy in attendance, the event will be closely watched,” Bank of Montreal senior economist Jennifer Lee said. “After all, there were years when certain figures gave hints of what could be in store for monetary policy, which markets jumped on.”

Ten years after the financial crisis, this year’s symposium comes amid several recent flashpoints, from troubles in Turkey and fears over other emerging markets to the Trump administration’s escalating trade battles.

This year’s topic is “changing market structure and implications for monetary policy.”

The agenda isn’t final yet, but Federal Reserve chair Jerome Powell speaks Friday, and Bank of Canada Governor Stephen Poloz on Saturday. It begins Thursday.

“I will also be very interested to hear from the [European Central Bank] and the [Bank of England], considering that both central banks have monetary policy meetings on Sept. 13, and both are facing a difficult landscape,” Ms. Lee said.

Here’s a mini-guide to what’s at play for the Fed, the ECB, the BoE and the Bank of Canada:

THE FED

The Fed's issues are unique as it sets a faster pace than others to get back to something approaching normal.

Federal Reserve Board chairman Jerome Powell

Yuri Gripas/Reuters

“With the Federal Reserve the only central bank on an aggressive tightening cycle, the rise in the U.S. dollar is likely to pose significant challenges for U.S. policy-makers in the coming months,” CMC Markets chief analyst Michael Hewson said.

“With this being Jerome Powell’s first symposium as Federal Reserve chief, markets will be looking for clues as to whether the recent currency crisis in emerging markets, and notably Turkey, is causing anxiety amongst U.S. policy-makers, at a time when they want to continue to normalize rates further.”

THE ECB

Mario Draghi’s ECB is juggling priorities as it winds down its asset-buying stimulus program, but Bank of Montreal’s Ms. Lee doesn’t expect a rate hike for another year. Markets will watch Jackson Hole for what to expect at the next ECB meeting Sept. 13.

"The ECB already announced plans to taper its asset purchases starting in Q4, and end the program this year, while rates will stay at current levels ‘through the summer of 2019,’ " Ms. Lee said.

“Although the commotion caused by Turkey and Italy (budget discussions) won’t make this a clear-cut decision, there is a small possibility that, on the 13th, the ECB may soften the tone a bit on interest rates,” she added. “Still, one could argue that the wording is already somewhat vague and the move is a year away.”

THE BOE

The unique issue facing BoE Governor Mark Carney, previously of the Bank of Canada, is Brexit. Plans to leave the European Union are in a critical phase.

Mr. Carney recently raised rates, and some observers speculate there could be another increase before the year is out, although Ms. Lee believes the central bank won’t do anything until next May.

This week “will no doubt be dominated by concerns of a ‘no deal’ Brexit, as the negotiations continue and the government publishes its contingency plans,” Liam Peach of Capital Economics said. “With little sign of progress on the talks – and every chance of further political turmoil – we no longer think that a deal in the autumn is realistic. Our expectations is for a deal to be reached at the 11th hour in Q1 2019.”

THE BOC

Mr. Poloz is dealing with a lot at this point: Determining how earlier rate hikes are affecting consumers, how Canadians are adjusting to measures to cool housing and consumer debt markets, and how negotiations to remake the North American free-trade agreement will play out.

Bank of Canada governor Stephen Poloz

Justin Tang/The Canadian Press

There's also the issue of inflation, which, as Statistics Canada reported Friday, hit 3 per cent in July, its fastest pace in about seven years.

That’s well above the central bank’s target of 2 per cent, although its preferred measures of inflation are stable.

While the Canadian dollar rose after Friday's inflation report, on speculation of a faster timeline for rate hikes, some economists are sticking to their projection for the next increase in October.

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The rest of the calendar:

MONDAY: ‘TURKS AND CHAOS’

All eyes will be on currencies and commodities – and stocks, of course – after the ups and downs of last week.

“The [U.S.] dollar surged to 15-month highs, crushing commodities from crude oil to metals,” BMO economic analyst Priscilla Thiagamoorthy said. “Copper entered bear market territory as it fell below US$6,000, ending the week more than 4 per cent lower. Not even gold, the usual flight-to-safety asset, was spared from the rout, with a 2-per-cent meltdown.”

The Turkish lira, which collapsed amid the troubles, managed to rebound late last week, so we'll see what a new week brings.

“So far, the contagion seems to be limited to economies with large current account deficits such as Argentina, South Africa and Brazil,” Ms. Thiagamoorthy said in a report titled Turks and Chaos. “But, the timing couldn’t be worse for other emerging markets, which are already battling headwinds from potential trade wars, a stronger greenback and rising U.S. interest rates.”

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TUESDAY: TRADE TALKS

Negotiators from Beijing are in Washington for further talks with U.S. trade officials, just a couple of days before the next round of American tariffs come into force.

WEDNESDAY: BANK EARNINGS

Royal Bank of Canada kicks off third-quarter earnings season for Canadian banks.

Here’s what analyst John Aiken of Barclays expects from the majors:

“We believe that Q3 results will showcase solid, positive earnings growth, on both sequential and annual basis. Heading into Q3, we anticipate the following themes will resonate in the quarter: Capital markets revenues to stabilize, buoyed by a stronger contribution from investment banking fees; moderating but still positive lending volumes, absorbed by stable-to-positive net interest margins; credit quality continuing to normalize, but on a relative basis still fairly benign; weighed by the longer quarter, expenses to edge higher; and positive [foreign exchange] translation.”

Mr. Aiken also expects RBC, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Canadian Western Bank to raise their dividends.

Also on tap are the release of minutes from the most recent Fed meeting, and Statscan’s monthly report on retail sales, which economists generally expect will show a drop of 0.2 per cent to 0.4 per cent for June

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THURSDAY: BANKS AND CANNABIS

CIBC reports quarterly results, as do CannaRoyalty Corp. and Alibaba Group Holdings Inc.

FRIDAY: INFLATION

Before markets focus on the Fed’s Mr. Powell, they’ll be watching for the latest report on consumer prices in Japan, which Capital Economics expects to show a rise in annual inflation to 1.1 per cent from June’s 0.7 per cent.

“This will probably mark the peak, as crude oil prices have started to soften in recent weeks,” said the group’s Capital Economics' Marcel Thieliant said.

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