Investment industry asks Ottawa for more time on GST and trailer fees
Wealth management industry groups are calling on the federal government to give investment fund companies, dealers and independent advisors more time to implement changes to GST on mutual fund trailing commissions.
They say the industry will be challenged to have systems in place to charge and remit GST by the Canada Revenue Agency’s (CRA) July 1 implementation date.
Earlier this year, the CRA confirmed trailing commissions would be subject to GST/HST, reversing its longstanding position on the issue. Dealers and independent advisors will have to collect and remit GST/HST.
The CRA first signalled the policy change in a letter to the Securities and Investment Management Association (SIMA) in December.
Now, SIMA is advocating “for a more realistic, phased implementation approach,” said Christine Harminc, director of communications and public affairs with SIMA, in a response sent by e-mail to questions from The Globe and Mail.
The group has submitted a proposed implementation timeline to both the Department of Finance and the CRA based on members’ input and has been engaging directly with government officials on the issue, she said.
“SIMA’s focus has been on ensuring that any approach is workable in practice, minimizes unintended consequences and reflects the complexity of the current operating environment,” Ms. Harminc said.
Several industry players say it will be difficult to meet the CRA’s implementation date.
Peter Bowen, vice-president of tax and retirement research at Fidelity Investments Canada ULC, said in an e-mail to The Globe that “many dealers and advisors will struggle to be ready by July, which is why the industry, including representation from Fidelity, is meeting with the government to try to get the implementation significantly deferred.”
Matthew Latimer, executive director of the Federation of Independent Dealers, said his organization is calling on the government to extend the implementation deadline by at least a year “to bring this giant project to fruition successfully” and to provide the industry with more information about the change.
In a response sent by e-mail to questions from The Globe, CRA spokesperson Nina Ioussoupova said, “No changes are planned, at this time, for the implementation date related to the application of GST/HST to trailing commissions. If a decision is made to change the implementation date, the [CRA] will communicate this information in a timely manner.”
Meanwhile, firms are taking steps to prepare for the change.
Jason Bobee, president of Portfolio Strategies Corp. in Toronto, says his firm is working with fund companies, intermediary FundServ Inc. and SIMA on back-office system changes to allow for the tracking of GST/HST and the division of those payments with advisors.
“It may take more time to integrate these flows [of data] as a starting point than what CRA expects or wants,” said Mr. Bobee in an e-mail to The Globe. “Ultimately, once this is completed, advisors will need to register for GST/HST numbers.”
However, until the industry receives greater clarity on the change, “we are in a holding pattern,” Mr. Bobee said.
Nelson Cheng, chief executive officer of Sterling Mutuals Inc. in Windsor, Ont., said the CRA is “asking the industry to change a long-established practice and it is going to be disruptive.”
Mr. Cheng said his firm will advise all its advisors to register to collect and remit GST as the July deadline draws closer. While a “handful” of advisors are already registered, “we have never had a reason to keep track of that [before].”
