Law Times

Page 4 April 4, 2016 • lAw Times www.lawtimesnews.com NEWS Revenue Agency was "blessing" these PC structures for about the past seven years. Morris Kepes Winters does tax work for lawyers and part- ners in firms when they become partners, assisting in setting up a professional corporation. Kepes says individuals would write to the CRA and explain that they have an interest in a partnership and the structure was approved. The agency would issue an advanced ruling indicat- ing if they met certain conditions the structure would be fine. "With the new rules, it's pret- ty much shut down," says Kim Moody, of Moodys Gartner Tax Law LLP in Calgary, who now faces the challenge of helping cli- ents find a new solution to how much tax they will have to pay. "We are going to struggle with that." The impact is an increased rate from the small business rate, which is about 12 to 15 per cent on the first $500,000 of profits. Now, those profits will be sub- jected to a 25- to 27-per-cent rate depending on which province you're living in. Moody says the change will really affect practitioners who are prudent with their income and able to subject the profits to the lower rates. "That rate was intended to encourage you to preserve your income in your professional cor- poration. But if you're spending all your profits on personal liv- ing expenses, it's neutral because you'll be forced to pay the per- sonal tax no matter what." The PC structure was seen by many as a great way for lawyers to save smartly for retirement. The change for professional corporations is in effect for taxa- tion years that begin after the budget date. The effective change is about a 10-per-cent "immediate hit," says Moody. "It's going to be bad. Any pro- fessional firm in Canada — pick all the Bay Street law firms — they are going to be affected be- cause they have set up structures to essentially allow the multipli- cation of the small business de- duction," says Moody. Instead of having the profes- sional corporation be a direct member of the partnership, the firm would set up a side corpora- tion and have a contract for ser- vice with the firm, and because it isn't a partner, the rules don't apply to it and, therefore, it could use the full small business de- duction. Moody says that, for a large law firm with 200 partners across Canada, the government would like to see a scenario where they are all individually partners of the partnership, or their profes- sional corporations would be a partner of the partnership. LT phone. "It would upset the law related to searches of computers, cell phones and other electronic devices," argued Schwartz. Once a text message has been sent and stored on another phone, it does not fit the Crimi- nal Code definition of an "in- tercept" if it is later obtained by police, he said. e argument there is no pri- vacy right once a text message has been sent is a very "old school" notion based on control, which does not fit with modern com- munications, says Laura Berger, acting director of the public safe- ty program at the Canadian Civil Liberties Association. "For an increasing percentage of Canadians, especially young- er people, text messages are sup- planting voice telephone calls. We need to ensure that privacy protections in place [for phone conversations] are not diluted because of changes in technol- ogy," says Berger. e Supreme Court of Can- ada ruled in 2013 in R v. Telus Communications that po- lice needed a wiretap warrant, which is more onerous to obtain, to compel a service provider to capture prospective text mes- sages from an individual. However, the court did not deal with text messages that had already been sent, and only five of the seven judges directly ad- dressed the status of this form of communication. In a judgment for the majority of those five judges, Justice Rosalie Abella said that texts have several of the "hallmarks" of phone conver- sations. "Text messaging is, in essence, an electronic conversa- tion," she stated. Patrick McCann, who rep- resents Jones at the Court of Appeal, states in his written arguments that the decision in Telus supports the position that wiretap authorization under the Criminal Code is needed to obtain text messages. "ese unique requirements recognize the heightened expectation of privacy in private electronic communications and the public abhorrence of state sponsored snooping in private communi- cations," wrote McCann, a part- ner at Fasken Martineau Du- Moulin LLP in Ottawa. Last year, the B.C. Court of Appeal released its decision in R v. Pelucco, which concluded there is an expectation of pri- vacy, even if texts can be shared without the knowledge of the person sending the messages. "A person's right to privacy does not depend on there being no reasonable possibility of an in- trusion on that right," the major- ity wrote. Elizabeth Lewis, co-counsel for Pelucco, says the rules for po- lice should not depend on when a message is sent or whether a record of the conversation is preserved on another phone. "It is a massive triumph of form over substance to suggest that the state acquisition of word-for- word private communications should be characterized differ- ently on a matter of the num- ber of days or minutes that have passed since 'send' was hit. ey are all private communications that the state has intercepted," says Lewis, a partner at Cobb St. Pierre Lewis in Vancouver. e federal Crown had an appeal "as of right" in Pelucco because there was a dissent, but it decided not to take the case to the Supreme Court. In the hearing before the Ontario Court of Appeal, though, a federal Crown lawyer is sharply critical of the ruling, in his written submissions. "at decision is wrong," stat- ed Nick Devlin. "It obviates the need for privacy claims to be ob- jectively reasonable and creates justice-defeating absurdities in the operation of the Charter." LT Privacy concerns: CCLA Tax change means 'immediate hit' Continued from page 1 Continued from page 1 The Food & Beverage Industry in Canada Food & Beverage Laws are Changing, are You? 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