Canada’s federal government recently announced a Start-Up Visa Program aimed at attracting international entrepreneurs to the country.
Overall it is sending the right message to global entrepreneurs, that Canada welcomes them and their ideas in the hopes of creating jobs in here in an area of growth.
I hope it won’t create an uneven playing field against homegrown entrepreneurs, but my contacts in the industry think it’ll be a net positive. Deal flow will increase in Canada, which will benefit existing start-ups and innovators. The rising tide of more money sloshing around this part of the economy will lift all the boats, as it were.
Existing companies stand to benefit from at least one of the explicit goals of the Program, which is to bring in motivated individuals from around the world, deepening the talent pool for all companies.
One of the bigger news stories in Canada of late is the ongoing hunger strike of a First Nations chief, ostensibly being carried out to force a meeting with the Prime Minister to discuss conditions on the remote northern Ontario Attawapiskat reservation.
The legacy of the “discovery” and settlement of North America by Europeans and their subsequent relationship with natives is a topic far too complex for this blog, but the story took on an element of particular interest with the “leak” of a Deloitte audit report on the administration of the community.
Deloitte sampled 400 transactions from the G/L across the 6⅔ years in scope. Sixty per year and 40 for the eight month period ending November 30, 2011. Slightly less than 20% of the 400 had no issues. No supporting documentation was available for just over 60% of the sample, and the other 20% was either incomplete or the occurrence of the underlying event was questionable. It should be noted though that in the most recent 20 months reviewed, only for 31 of the 100 samples was there no supporting documentation.
What the audit didn’t do (and wasn’t designed to) was determine whether $104M over that time period is adequate for the population on the reserve. It’d be an interesting analysis to look at the number of households, average people per household, repairs and maintenance funding per household and per person, and figure out whether there is enough funding to support their needs or not. That’s the heart of the issue.
The Tax Foundation’s Ten principles of sound tax policy are a must-read for those influencing tax policy. I think the list can be further refined down to about half that, but maybe they wanted to get an even ten.
For instance, maintaining the neutrality of the system (#2) will result in broad bases (#3). It’s when the system gets less neutral (i.e. favours certain groups or behaviours) that the base is narrowed. Various special interest deductions put in place to encourage desirable behaviour or punish undesirable behaviour have narrowed the base and caused rates to be kept high unnecessarily.
Harmonization of federal, state/province and local/municipal taxes (#10) is part and parcel with creating a simple tax system (#4). The provincial government has been criticized recently about its reluctance to harmonize Ontario’s sales tax with the Federal GST. The premier’s misguided reasoning for the reluctance? It would place a tax on certain exempt items, thus eliminating some of the complexity and non-neutrality in the tax.
Tax stability (#5) is important because it makes them predictable, which is also aided when there is no retroactivity (#6). When politicians can make changes to taxes retroactive, tax is not predictable. The Canadian government announced recently the retroactive increase in the Basic Personal tax credit. You’re unlikely to hear anyone complain about this, but nonetheless it isn’t ideal tax policy.
Transparency (#1) is important no matter what government initiative we’re talking about, and an open process (#9) is one manifestation of this requirement. All the workings of a democratic government must be open to its citizens and open to criticism and debate. Tax is no different from anything else in this respect.
So I humbly put forward my own principles of sound tax policy: simplicity, neutrality, transparency, and predictability. I think that basically covers it at a more abstract level than the Tax Foundation’s ten.
The Canadian government released a mini-budget this past week that featured serious tax cuts. The GST goes down another point to 5% and the lowest bracket of personal tax is lowered back down to 15%. Corporate taxes continued their downward trajectory.
The CICA focused first on the reduction to corporate taxes:
“The government’s commitment to reduce the general corporate tax to a rate of 15% by 2012 is a positive step toward making Canadian companies more competitive,” said Kevin Dancey, FCA, President and CEO of the CICA.
Their media release about the announcement actually doesn’t even mention the GST or personal tax. That’s a little strange. I hope they’re just working on something really special and it’s taking longer than expected, because they would be remiss to miss out on commenting on these topics as well.
Clearly we as a profession should have something official to say about personal and consumption taxes. I know I do, as an individual member.
The Basic Personal tax credit amount was raised to $9,600 in 2007 and is scheduled to rise further to $10,100 in 2009. This is a positive step and smart policy, as a strong argument can be made to increase the limit to the poverty line. Any increase here is progressive and ought to be well received.
The cut to the GST from 6 to 5% as of January 1, 2008 is essentially regressive and rewards increased consumption. Shifting the savings here to the Basic Personal credit or lowering the general rate on income tax would have been better and greener.
Canada is riding high on a wave of prosperity, the loonie has reached levels not seen since before the 20th century, and unemployment is reaching all-time lows. It is only fitting that the Federal government return some of its surplus to Canadians.
Lotteries are a source of implicit tax revenue and exemplify poor tax policy for a number of reasons. They are not economically neutral; they are regressive; they lack transparency; they unnecessarily complicate the tax system; earmarked funds are often not used as promised; and lotteries are a business for the private market, not a state government.
Roughly 60,000 lottery ticket sellers in Ontario, retailers won nearly 200 times in the past seven years, with an average prize of $500,000. A statistician with the University of Toronto called those numbers a statistical anomaly, saying there is a “one in a trillion, trillion, trillion, trillion” chance of that many retailers winning.
The head of B.C.’s Lottery Corporation was fired last week, three days after a scathing ombudsman’s report, which found that the Crown-owned corporation was not doing enough to prevent unscrupulous retailers from fleecing the system.
Privatization is one option the BC is looking into, and the pressure is growing in Ontario to consider the option as well. What do you think? Should the lottery be a tax tool used by governments or a revenue tool used by private (for-profit or not for-profit) organizations?