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Money in the bank: Ottawa looks for new ways to tax dormant accounts

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Millions of dollars owed to ordinary Canadians sits unclaimed in dormant bank accounts and terminated pension plans — and the federal Department of Finance is looking at fresh ways to tax some of that idle money and to reduce or eliminate any interest paid on it.

Proposals to significantly revamp the so-called “unclaimed balances” regime in Canada have undergone more than two years’ of consultations and review, and are now in the hands of department bureaucrats.

The goal is to modernize an archaic regime dating from the 1940s. The proposed changes also would save Ottawa money while modestly increasing federal revenues.

Each year, federally regulated banks and trust firms turn over to the Bank of Canada any money they find in accounts that have been inactive for a decade and are owned by people who can’t be located.

As of Dec. 31, 2017, the central bank carried $742 million in these unclaimed balances. A central registry allows potential owners to search an online database, and about $10 million in claims are paid out each year.

The system dates from 1944, the year the federal cabinet also set the interest paid on interest-bearing unclaimed accounts at 1.5 per cent — a rate higher than the one currently paid on ordinary bank saving accounts.

The Bank of Canada holds the money for 30 years if the account balance is under $1,000, or for 100 years if it’s more than $1,000. After the Bank of Canada releases the unclaimed cash, it goes into Ottawa’s general revenues.

Finance Canada wants to cut or eliminate the interest paid on these balances. And small balances — those less than $100, which account for 70 per cent of all unclaimed balances — would be held for an as-yet unspecified period much shorter than 30 years before reverting to general revenues.

And the department wants to add dormant accounts in U.S. dollars and other foreign currencies — now excluded — to the mix.

Unclaimed pensions

Finance Canada also proposes expanding the regime to include unclaimed pension balances. There are more than 500 of these dormant accounts in federally regulated plans that have been terminated.

Many active pension plans also have dormant accounts. Bell Canada, for example, says about 3,000 of its more than 100,000 pension plan members are owed benefits but can’t be located.

Dormant pension accounts eventually could be transferred to the Bank of Canada, where they would be included in a searchable online registry that lost owners could check, just as with unclaimed bank accounts.

But Ottawa first wants to deduct income tax on those transferred pensions, and to pay no interest on the balance.

The transfer would “be made on a pre-paid tax basis. That is, income tax would be withheld and remitted to the CRA,” says a Finance Canada document outlining its proposals.

Twenty-three stakeholders responded to the department’s online consultation on the pension proposals by the deadline — Aug. 21, 2018 — including plan sponsors, a union, actuarial firms, banks and others.

I just don’t understand why we are so far behind.– Accountant Brenda Potter Phelan on Canada’s weak record in reuniting Canadians with their dormant assets 

A Finance Canada summary of the submissions, obtained by CBC News under the Access to Information Act, says 16 key stakeholders generally support the proposals.

Indeed, many want to expand the unclaimed-pension proposal — currently restricted to terminated plans — to include active plans in the federal sphere and even provincially regulated plans.

The document suggests, however, that Finance Canada is rejecting any broader move at present: “Consideration may be given to extend framework to ongoing plans later, pending experience and lessons learned from proposed approach.”

Five stakeholders, including the major union Unifor, argued the Bank of Canada should pay interest on unclaimed pension balances. But the document says paying no interest is “consistent with unclaimed property regimes in other jurisdictions and would result in lower costs to the Bank of Canada.”

A spokesperson for the department, Karianne Laroque, declined to answer CBC News’ questions about when the new regime will be unveiled, saying officials are still reviewing the feedback.

At least two of the stakeholders who responded to the consultations say Finance Canada is proposing baby steps when the unclaimed balances regimes should include an estimated $6 billion in broader assets that Canadians appear to have forgotten.

Forgotten bonds

For example, the Bank of Canada says that as of Nov. 30, 2018, about $671 million in matured Canada Savings Bonds have yet to be redeemed — assets not currently included in the online unclaimed balances registry and not part of Finance Canada’s latest reform proposals.

The Toronto-based MaRS Centre for Impact Investing says Canada should follow the example of the United Kingdom and Japan, where unclaimed balances can be invested in socially responsible funds that support the public good, such as public housing, while still respecting the owners’ rights to eventually claim the money.

Accountant Brenda Potter Phelan, shown with CBC’s Diana Swain, estimates there is at least $6.3 billion in various dormant assets that Canadians have forgotten about and have yet to claim. (CBC)

Brenda Potter Phelan, an accountant at the firm Silver Compass Inc. in Cambridge, Ont., said Canada is falling far behind the U.S., Australia, New Zealand and Britain in creating legislation to register and manage all kinds of unclaimed property.

Adding up unclaimed tax refunds from the Canada Revenue Agency, unclaimed payments for Canada Child Benefits, unclaimed CPP and EI benefits and unclaimed HST rebates, Phelan estimates that — conservatively — there was almost $6.3 billion in unclaimed money left idle in Canada as of December 2016.

“It’s very un-Canadian for us not to help Canadians find unclaimed property balances when nobody loses their money on purpose,” she said in an interview. “It’s usually the result of an accident, a death. Increased longevity brings forgetfulness.”

The United States has a much better system to manage its estimated $75 billion US in unclaimed property, she said. In the U.S., assets-on-hold are invested in health care and education until the owner shows up. Phelan said American governments are also more aggressive in seeking out those missing owners.

“I just don’t understand why we are so far behind,” she said. “It’s a big opportunity.”

Follow @DeanBeeby on Twitter

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Future of Ottawa: Coffee with Francis Bueckert

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Francis Bueckert: When it comes to the current landscape of coffee-roasting companies and independent cafes in Ottawa, I think we are at a really interesting moment in time. There are more local roasters that are doing artisanal small-batch production—with more attention to the quality and origin of the beans.

With larger corporations such as Starbucks closing locations, it has opened a bit of space for local players to grow. We have been lucky to work with many folks in the coffee-roasting community, and we have found that there is a willingness to collaborate among different coffee roasters. For example, when Cloudforest started back in 2014, we were roasting our coffee at Happy Goat and it was the expertise of their head roaster Hans that helped me learn how to roast. Other companies such as Brown Bag Coffee have also lent a hand when we needed extra roasting capacity. There are others, such as Lulo, Mighty Valley Coffee, Bluebarn, The Artery, and Little Victories that are also part of the growing local coffee community. It’s small roasters like these who have shown me what a coffee community can look like, and that we can help to elevate each other, rather than being locked in competition.

If you care to make a prediction… What’s happening to the local café industry in 2021?

We believe that there is hope and that 2021 can be a big pivot year for small roasters and cafes.

This year will not be ideal from a business point of view. However, it could create a shift in people’s attitude toward where they get their coffee. We are holding out hope that people will support the roasters and cafes that are local to help them economically survive what is in all reality a very difficult time.

It all depends on where consumers decide to go this year. People are starting to recognize that supporting large corporations at this moment will be at the cost of the local roasters and cafes. There is the growing realization that a future where there is only Amazon, Walmart, and Starbucks would be pretty bleak. So we have an opportunity this year to support the kind of local businesses that we want to see thrive.

In your wildest dreams, what will the landscape for local coffee roasters and cafés look like in your lifetime?

In my wildest dreams, all of the coffee roasters and cafés would be locally owned and independent. They would all be focused on direct trade and artisanal coffee. Each different coffee roaster and café would know exactly where their coffee came from. Ideally, each company would be a partnership between the farmers who grow the beans and the people here selling them. There would be a focus on how to cooperate and collaborate with the farmers in the countries of origin to share the benefits around. We would all work together and share orders of cups, lids, and other packaging so that we could get better bulk pricing. In this way, we would make our local coffee community so efficient that the large corporate coffee companies wouldn’t even be able to compete.

We would also like to see people use coffee as a way to create social good. For example, we started Cloudforest as a way of helping support farmers in Ecuador who were taking a stand against large mining companies. This remote community stood up to protect their environment, so that they could have clean drinking water and soil for the next generation. They started an organic coffee cooperative to help show that there are other models of development, and we are doing our part year after year to help support their vision. They have a vision of development that does not include mass deforestation and contamination, and organic coffee is a key (among others) to show that another way forward is possible.

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Special events in the Ottawa Valley dominate annual OVTA tourism awards

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The Ottawa Valley Tourist Association hopes that its annual tourism awards will provide a little sunshine during what is a dark time for local tourism operators because of the pandemic.

The Ottawa Valley Tourism Awards are presented annually by the Ottawa Valley Tourist Association (OVTA) to individuals, businesses, and events that recognize the importance of working together for the growth of the local tourism industry, as well as offering exceptional visitor experiences.

“After a year that saw a lot of businesses in the hospitality and tourism industry being challenged like never before, the annual Ottawa Valley Tourism Awards represent a bit of light on the horizon” said Chris Hinsperger, co-owner of the Bonnechere Caves.

The Ottawa Valley Tourist Association’s (OVTA) Awards Committee co-chairpersons, Meghan James and Chris Hinsperger, said they were very pleased with the recent nominations received, especially in the Special Events category. Submissions were received for The Farm to Fork Dinner Series at the Whitewater Inn; Light up the Valley; The Eganville Curling Clubs’ Rock the Rings; The Ontario Festival of Small Halls ; The Bonnechere Caves On-line Underground Concert Series; The Opeongo Nordic Ski Clubs’ Ski Loppet; The Tour de Bonnechere — Ghost de Tour 2020; and The Bonnechere Caves Rock ‘n Roll Parking Lot Picnic.

“During a time when communities were challenged, it is nice to see that people still made an effort to get together and celebrate, albeit under certain conditions. It just shows the creativity and resiliency of our tourism Community here in the valley” said Meghan James, director of sales at the Pembroke Best Western.

There are three Award categories: The Marilyn Alexander Tourism Champion Award, The Business of Distinction and The Special Event of the Year.

Hinsperger, is excited about this year’s awards.

“During this pandemic the hospitality and tourism industry was the first to be hit, was the hardest hit and will be the last of our industries to fully recover. As Valley entrepreneurs we owe it to ourselves, to our businesses and to our communities to be an active part of that recovery. Our livelihood and economic recovery depends on our efforts. And we will get back to welcoming people from all over the world to share a little bit of the place we are privileged to call home. This awards process leaves myself and others fully optimistic about our positive outcomes.”

Award winners will be announced at the Ottawa Valley Tourist Association’s virtual annual general meeting on Monday, May 31.

The OVTA is the destination marketing organization for the Upper Ottawa Valley and proudly represents more than 200 tourism businesses, comprised of attractions and outfitters, accommodation, food, beverage and retail establishments, artists and galleries, municipalities, as well as media and industry suppliers. The OVTA is supported by the County of Renfrew, Renfrew County municipalities and the City of Pembroke.

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Future of Ottawa: Farming with Jeremy Colbeck

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Jeremy Colbeck: Well first, let’s talk about what we mean by farming. Although farms, and farming as an occupation, are in decline across Canada, they are still a major part of our rural landscape. That’s even more true for a strange city like Ottawa which includes a LOT of rural areas and whose urban boundary takes, what, three hours to cross? About 40 per cent of the rural land in Ottawa is farmland. Most of that farming is corn and soybean cash-crop, as well as some dairy and livestock farming. That’s mostly conventional farming (the kind that is profitable but not exactly where you take your kids on a Saturday).

There are also a lot of agri-tourism businesses in Ottawa, which give you that oh-so-good Saturday spot for family donkey-petting and apple-picking. And it’s totally understandable from a business perspective, but sometimes surprising to find out, that even though they grow some of the Christmas trees they sell, they might also be reselling some that come from much larger farms far away. The farmland around Ottawa is also inflated in price because of its proximity to the city, where it is in demand by would-be hobby farmers—folks who want to do some farming on their property in their spare time but make their money (to subsidize their small-scale farming habit) elsewhere. Unfortunately, many of these properties will have large mansions built on them, which will then make them completely unaffordable for the average farmer

There’s also a segment of small-to-medium-sized Ottawa farms that grow “premium” (artisanal, unique, extra-fresh, ecologically- or organically-grown etc…) products that they sell directly to local eaters via farmers’ markets or other direct marketing channels, including on-farm stores and farm stands. That’s where BeetBox fits in.

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