Love tax theory, hate tax application

Tax is a subject that is near and dear to my heart, but not because I occasionally fill out a tax return. Tax theory is fascinating and relevant stuff, but I won’t ask you to take my word for it.

I think the reason why I like tax theory but hate applying tax law, is because it combines my love of accounting with my love of politics. Taxes are an intensely political subject. And I don’t mean office politics, I mean the good kind.

But the politicization of taxes if often detrimental to constructing a truly successful tax system. Witness the recent Canadian federal election, when the Conservatives won, partly on their promise to reduce the GST by 2%.

The GST is a consumption tax, which is the most efficient type of tax. Instead of cutting the GST, we should be cutting income tax or capital tax. Income tax discourages work, and tax codes across the globe have become convoluted with various tax credits and deductions, increasing compliance costs for everyone.

The US is even worse than Canada, because it doesn’t even have a consumption tax. But Europe is ahead of us with their VAT, which ranges from 18-25%. The GST in Canada is now 6%, with a further reduction to 5% coming. We’re headed in the wrong direction.

I’m convinced we need to do away with income taxes entirely, and replace it with a consumption tax. It would be fairer and would encourage saving and investment. A credit for low income earners could be employed to maintain the progressive nature of most income taxes.

What are we waiting for? Politics, as usual.

Microsoft invites Firefox developers to test for Vista

Microsoft has invited the Firefox guys up to Redmond to test Firefox and Thunderbird on Vista to ensure compatibility. The move isn’t entirely unexpected, after all, Firefox has been steadily eating into Internet Explorer’s market share ever since it was released.

It isn’t a wholly benevolent move, however. Microsoft is making sure all the big applications run smoothly on Vista because if they don’t, people won’t upgrade from XP. Microsoft is seeking out big developers now in a big effort to get all the major programs tested.

Previously Microsoft had focused exlusively on commercial developers but Sam Ramji, Director of the Open Source Software Lab at Microsoft posted on the mozilla.dev.planning newsgroup in an effort to get the ball rolling.

Microsoft splurges on more Microsoft stock

We’ve all been wondering just what Microsoft was going to do with that massive reserve of cash it’s been sitting on for years, not unlike a corporate Smaug. Turns out, they’re buying some shares in themselves.

It isn’t news that Microsoft is buying back some of their shares, but what is news is that they have decided to buy more back than originally announced. It sounds like Microsoft found a surefire way to increase their stock price without having to do anything productive with their assets like, oh, say, innovating.

The stock is getting the expected boost from the buyback, but I can’t but help wondering why Microsoft doesn’t have better things to invest in. Isn’t their industry just brimming with opportunities?

Casual Fridays become Casual Weekdays

What qualifies as acceptable attire in the workplace has been changing ever since the advent of Casual Fridays. Friday has become every day of the week, and there’s a growing backlash against the slackening of dress codes. Tie Tuesdays are beginning to crop up.

A couple days ago I blogged about going to client’s, which is relevant because I can attest to the fact that in nearly every workplace I’ve visited, the dress code has been very casual. Accordingly, our dress code has been loosened. We’re instructed to dress a degree more formal than the client, which makes sense.

You don’t want to show up at an office where the employees are dressed in jeans and you’re wearing a suit and tie. You’d look like a lawyer, and no one likes lawyers.

(I don’t have a problem with lawyers though, some of my friends are even law talkin’ guys. Although drinking with them is a bit trying at times because they keep talkin’ law.)

The exception for me is when I’m at law firm clients, where the employees are dressed to the nines and it’s literally impossible to dress a degree more formal, short of wearing a tuxedo.

So, is the casualizing of the workplace a good thing? To an extent, I think it is. Comfortable employees are happy employees, and happy employees are productive. What do you think?

Engagement letter update

Before accountants can get down to the business of providing service to clients, we have to issue what’s known in the biz as an “engagement letter.” Contrary to what I’d initially thought, this doesn’t tie me down to any one person for the rest of my life, for better or worse, in good times and bad.

What it does is provide in writing the services agreed to by both parties in case anything goes wrong over the duration of the letter. My firm requires new engagement letters every three years. It spells out the services to be provided and the liability assumed by each party. This basically involves reminding the client it is all theirs (liability for the statements).

Which is what brings me to the point of the post – most clients don’t like the wording of the engagement letter, and I don’t really blame them. They hire us to perform some work and the first communication we send them basically says “can’t be held responsible.” Reminds me of The Freshmen by The Verve Pipe.

Dennis, at AccMan, has come up with a much better engagement letter template in a recent post on his blog. I like it because it’s plain English and it doesn’t make the accountants sound like we’re washing our hands of the client before we’ve even started getting them dirty.

Should the engagement letter be updated and translated into a more understandable English? Is it even possible, given its nature as a legal document?