The two Montreal firms will merge into a single entity, Spiegel Ryan, on Jan. 1
As the country grappled with Canadian Finance Minister Chrystia Freeland's abrupt resignation on Monday, Montreal law firms Spiegel Sohmer and Ravinsky Ryan Lemoine were in the midst of rolling out an announcement of their own: the two firms will merge into a single entity on Jan. 1.
As it happens, the uncertainty that followed Freeland’s decision – and the federal government’s disclosure, hours later, that last year’s deficit had blown well past a previously announced benchmark to $61.9 billion – is emblematic of why the two tax practice-driven firms decided to join forces.
Canada is in “a post-COVID environment where government spending was out of control, and now there's a tremendous need to fill up [government] coffers,” says Morris Jacobson, managing partner of Spiegel Sohmer. “There's only so many sources you can go to, and the taxpayer is the number one source.”
Combined with the uncertainty introduced by amendments to the Income Tax Act this year, this economic environment has created “what we call a ‘perfect storm’ [of complexity], which is probably unprecedented,” Jacobson says.
Paul Ryan, founding partner at Ravinsky Ryan Lemoine, notes that substantial government spending typically presages an onslaught of tax litigation.
“The environment is very dangerous and very risky,” Ryan says. “When Morris and I decided to become partners and join our two firms, this was one of the key components – that we were going to double up on the expertise in tax so that we're able to have in-depth internal discussions whenever transactions are planned to make sure that we expose our clients to as little risk as possible.”
Slated to operate under the banner of Spiegel Ryan, the merger of the two firms seemed like a natural move to both lawyers. Both Ryan and Melvin Ravinsky, the co-founder of Ravinsky Ryan Lemoine, are Spiegel Sohmer alumni. The firms share a “common culture, common values, and even common views on finances and how we manage things financially,” Jacobson says. They’re also located virtually across the street from one another, separated only by a park and, in the winter, what Ryan describes as “probably the worst wind tunnel in Montreal.”
Most significantly, however, is their shared focus on tax planning and tax litigation. While Spiegel Ryan aims to serve owner-managed businesses and boasts experts in commercial law as well as civil and estate litigation, both firms are “heavily tax-driven,” Ryan says, adding that this focus has equipped the firm to help clients navigate the economic challenges to come.
The lawyers say they expect many of these challenges to stem from increased tax enforcement activity by the Canada Revenue Agency and recent revisions to the Income Tax Act’s general anti-avoidance rule (GAAR), which aims to stop taxpayers from benefiting from abusive tax planning. Under the decades-old rule, the CRA can deny tax benefits to taxpayers when they follow the letter of the law but not its spirit, resulting in a misuse of the Income Tax Act.
This year, amendments to the GAAR broadened its scope, effectively making it easier for the CRA to deny tax benefits to taxpayers. “The line between what flies and what doesn't fly is more gray than it's ever been,” Ryan says.
“The way it's been drafted now, there's a lot of uncertainty in the community as to when it would apply or not, which puts a lot more pressure on firms like us that provide tax advice, particularly to small and medium-sized businesses… that have to decide whether to take the risk or not of making a transaction,” Ryan says. He adds that the stakes are especially high in Quebec, where entities penalized for GAAR violations are ineligible for public contracts for five years.
As baby boomers continue to retire en masse in the coming years, Spiegel Ryan also expects increased demand for tax planning. “There will be an unprecedented number of business transmissions to purchasers or to the new generation,” Ryan says.
Jacobson says Spiegel Ryan has received numerous applications from lawyers looking to join the firm since announcing the merger. He adds that the firm aims to invest in continuing education, mental health resources, and other benefits supporting its lawyers, especially those starting in their careers.
“We're creating a firm that we want to build to last,” he says. “The only way a firm is going to prosper is through developing young and excellent lawyers. Really, that's one of our major purposes and motivations.”
