There Are Solutions

In my previous post, I mused about how much better society could be if we had fair and progressive taxation, taxation that forced those who make a lot to pay a little more. It almost seems as if such talk today is heretical, given the anti-tax mania that is cultivated by the far-right.

But you get what you pay or don't pay for, and today that means multitudes of homeless who cannot afford the usurious rents being demanded, families lacking support or waiting for years on a list while their children grow up without the aid they need, overburdened healthcare systems that one strives to avoid except in extreme circumstances, etc., etc. - a dystopian nightmare that seems to only be getting worse.

In today's Star, a reader offers a sound suggestion that would help ameliorate our current crises:

If huge wage 'earners' paid their fair share, it could make a difference 

Swelling CEO salaries highlight income inequality, Jan. 22

Sadly, your editorial, truthful as it is, is not breaking news. For more than a decade, the Canadian Centre for Policy Alternatives (CCPA) has been telling its readers that the growing salary gap between the top one per cent and the rest of us is becoming more and more massive.

It is hard to believe, even for a cynical observer of world news, that in 2024, so many CEOs have earned more than $60,000 by Jan. 2, 2024 — more than the average worker earns in a year.

We’ve known this almost obscene fact for all these years, so we can’t plead ignorance. How fortunate that we have the CCPA to prod the consciences of our politicians and business leaders. These people with power do have some means to create a slightly less unbalanced society, smoothing that gaping wage gap even a little — by taxing the rich a bit more — most would not even notice the difference if they paid another $10,000 more in taxes each year. And if all of these huge wage “earners” actually paid their fair share, it could make a difference for the rest of us. Even billionaire Warren Buffett is famous for saying that his office staff pay more taxes, proportionally, than he does.

In this "Theatre of the Absurd" scenario, who will take the first step and raise the minimum wage to $25 or $30 per hour? This radical move might assure that the everyday worker, many with no sick days or health benefits, can at least avoid food banks and clothe their families for the winter weather.

Della Golland, Toronto

Clearly, there are at least partial solutions to the problems people confront on a daily basis. Unfortunately, those we elect to represent us are listening to only a small part of their constituency as they strive to perpetuate political careers that serve, not the common good, but only their own selfish interests. 

A Monday Thought Experiment

As a matter of course, I allow myself one hour of television news per evening, 30 minutes local and 30 minutes of either American or Canadian national news. It is a practice I highly recommend, not simply as a means of keeping up with events in this tortured world, but also as a window into the lives of others.

One conclusion I have drawn from this habit is that we can never know the lives of others, especially the burdens they must bear on a daily basis. In this, I am not talking solely about the very public problem of the homeless, but they certainly count. I am also talking about windows into the often fraught lives of people caring for special-needs children,  elderly parents, waiting in the ER, or any number of other exigencies that comprise life. The common denominator is insufficient funding for the support they need.

In my more wistful moments I imagine a regime of fair and progressive taxation, where those who are more than comfortable pay a little more for programs directed toward the public good. At the very least, some of the aforementioned problems would be ameliorated. Yet we live in times where we have little control over how our money is spent, as, truth be told, we are not the ones calling the shots, political theatre notwithstanding.

This post was prompted by two letters in today's Star, which I reproduce below:

• Facebook
• Twitter
• LinkedIn
• Email
• Print
• Save

Dental program leads to inequity

Federal dental care program will exclude 4.4 million uninsured Canadians: report, Jan. 17

Canada’s proposal for expanding health care coverage to dental and medical drugs is flawed. The law would have handsomely fed politicians arbitrarily sitting in judgment over who beneath them can afford dental care unassisted and who cannot. Further the plan cuts out any Canadian currently paying private insurance premiums, under the facile presumption that anyone — let’s say, a retiree struggling to support a live-in parent with dementia, and put food on the table under roof that is beginning to leak, heated by a furnace nearing the end of it’s projected life — who has private health insurance can comfortably afford it.

We live under the rule of governments that take their policy orders from corporate economists and boardrooms. We are told that fulsome public health care would be too costly, in the same breath that we are told the inflated prices corporations charge us for essentials must only be combatted by using interest rates to make those essentials too expensive, and that modest homes must be taxed yearly on speculated values.

Canada can afford universal dental, vision, medical care but taxing all wealth equitably. Level the field.

Darcy McLenaghen, Toronto

 

Health care crisis

No end to the ER crisis without investments and addressing workers’ concerns, Jan. 17

The conclusion of the authors of this article is that we just need to invest $1.25 billion annually to solve the health-care crisis. Where will the money come from? I would gladly pay a reinstated licence plate renewal fee of $120 per year, as would most people I suspect, if the billion dollars saved by cancelling it would be put toward our health care system. If that will reduce wait times, improve worker incomes and boost staffing levels across the province, I don't see a downside. Politicians are the only thing standing in the way.

Ken Beckim, Oshawa, Ont.

Telling It Like it Is

That's precisely what Rutger Bregman did at Davos last year:



H/t Alex Himelfarb

Breman talks about the reaction he received from his taxation proposal:

It's Time To Ask The Right Questions

The old myth that tax cuts, especially of the corporate kind, create jobs, continues to be circulated. Indeed, here in Ontario, PC leader Doug Ford is promising to reduce the corporate rate from the already historically-low 11.5% to 10.5% "to bring jobs back to Ontario."

In Australia The Canberra Times' Ben Oquist says it is time to reframe the tax discussion by posing a series of questions aimed at showing the destructive nature of such cutting:

Every proponent and lobbyist for the policy should be asked what social program or infrastructure project should be cut, or what other tax should go up to pay for boosting post-tax profits of large business. Indeed Treasury’s own modelling - often cited to support the tax cut legislation - assumes that either personal income taxes will increase or government services will be cut.

We hear almost exclusively from the "winners" of a company tax cut. But the public cannot be expected to make an informed choice as to whether this is the best way to create ‘jobs and growth’ if we do not know, specifically, where the off-setting cuts will be made. Will it be billions less for schools, or hospitals? Or will it be the infrastructure spend for our fast growing population that misses out?

Only the untutored mind will accept Doug Ford's bromide of tax cuts with no pain:

... while Ford likes the tax cuts, he doesn’t like the carbon tax (or any other tax), leaving a $10-billion hole in his budget.

Not to worry, says the self-proclaimed stopper of gravy trains. Ford insists the better part of the shortfall – about $6 billion – could be covered through the elimination of so-called inefficiencies.

In Australia, by contrast, some of the corporate sector is beginning to understand the folly of such short-sighted tax measures:

This week a survey of Australian company directors found that infrastructure spending, not tax cuts, should be the priority in this year’s federal budget.

Many company directors also know that ultimately business can only flourish if a decent society is maintained and that this requires a strong role for government providing quality services, training, education and modern infrastructure. This of course requires a strong revenue and taxation base to fund it.

Why don't corporate tax cuts work in creating jobs, jobs, jobs?

History shows that corporate tax cuts are largely spent on stock buybacks, increased dividendsand acquisitions, all of which only helps to benefit wealthier shareholders – not workers or the community.

That has been the Australian experience, and the same reality is unfolding in Trump's America:

Figures already released following Trump’s tax cut show that investment is down but there has been a frenzy of share buybacks, increased dividends combined with mergers and acquisitions that increase CEO power and drive inequality even higher.

For more discussion of the above, check out this New York Times article, which observes that

American companies have announced more than $178 billion in planned buybacks — the largest amount unveiled in a single quarter, according to Birinyi Associates, a market research firm.

Informed and serious discussion of taxation is hard to come by these days. Instead, shrill pronouncements from demagogues predicting financial Armageddon if fair taxation is imposed hold sway.

Clearly, it is time for all of us to put on our thinking caps, pierce through the hysterical proclamations and begin behaving like adults, not children who favour sweet lies over bitter truths.

Seeking Some Substance - Part 2

In Part 1, I tried to establish that there is a gross discrepancy between the rhetoric and the reality of Justin Trudeau's promise to makie sure corporations pay their fair share. Indeed, if truth be told, his government has done little or nothing to alter the CRA ethos, imposed during the Harper era, to give the corporate world an easy taxation ride. For example, as outlined in the previous post, where other countries are recovering significant sums previously lost to offshore tax evasion and avoidance, Canada has thus far recovered nothing.

The CRA, it appears, would rather indulge in some domestic spying than go after the real evaders:

The Canada Revenue Agency's Postal Code Project is targeting the wealthiest neighbourhoods in all regions of the country, those with gold-plated postal codes, where auditors will pore through the tax filings of every well-heeled resident, address by address.

They're looking for undeclared wealth, signs that a taxpayer is actually richer than their income tax filings suggest.

"Comparing someone's lifestyle — cars, boats, houses — to their reported income helps us identify people who are non-compliant," said CRA spokesperson Zoltan Csepregi.

Class warfare, anyone? Or how about a little misdirection to distract people from the real villains of the piece, the corporations?

In fact, the CRA is really not making any effort to conceal their true motives:

"The Postal Code Project also has the potential to demonstrate to the public that the CRA is actively working towards its fairness objective, which speaks to our integrity as an organization."

While not opposed to this measure, Diana Gibson of the Ottawa-based Canadians for Tax Fairness

said it deals with only a small part of the problem.

"It's a good step. It's a small step," arguing that Canada's big corporations are responsible for about two-thirds of the country's tax avoidance problems.

"We applaud it, even if it's small," she said. "It's nowhere near adequate."

While this government-approved misdirection is taking place,(and one would be exceedingly naive to believe the CRA acts independent of government direction) a new report by The Tax Justice Network shows that Canada is, effectively, one of the world’s more attractive “onshore tax havens.”

Every two years, the Network releases its Financial Secrecy Index, which shows how much

a country’s legal system facilitates global financial crimes such as money laundering and tax evasion.

Canada is No. 21 on the list, slightly higher than its 2016 ranking at No. 23. The higher the ranking, the more financially secret a country is.

“It’s a bad exam grade on the state of the country’s financial secrecy laws,” said Arthur Cockfield, a tax law scholar and policy consultant at Queen’s University. “It means that if you’re a crook or a super rich person who wants privacy, then you can use our corporate laws to hide the identity of the ultimate owner of the shares (of your company).”

You can read the details at the above link, but Cockfield draws a damning conclusion:

“The hypocrisy is that Canada is part of the OECD, forcing countries like the Bahamas, like Panama, to change,” Cockfield said. “We use our power to make them change their laws, but that just makes Canada (a) more attractive place for these crooks. We won’t change our laws.”

So, to repeat the question posed in Part 1 of this post, "What is to be done?"

There are some obvious answers, like closing the loopholes that allow this corporate cheating to take place. That is exactly what a strange alliance between the NDP and the Conservatives (politics does indeed make for strange bedfellows) is calling for:

“The system is designed for multinationals and big companies to avoid tax,” said NDP tax critic Pierre-Luc Dusseault in an interview. “The system is the problem.”

And that worm, Conservative finance critic Pierre Poilievre, chimed in:

“Those who have the financial means to set up complex arrangements are always better off under regimes that are highly complex.”

“The smaller, leaner entrepreneurial businesses can’t afford to have large legal and tax accounting departments that allow them to game the system. So they are automatically at an unfair and unjustified disadvantage,”

Do not forget that we are talking about some very, very significant lost tax revenue that the individual has to make up:

In 2016, Ottawa collected $3.50 in income tax from individuals for every $1 it collected from businesses.

The Star/Corporate Knights investigation revealed that Canada’s 102 largest corporations collectively avoided $62.9 billion in income taxes over the past six years. On average, that’s $10.5 billion less per year than if they paid the official corporate tax rate.

It’s also an average of $100 million missing from the public purse per company, per year.

The message about tax cheating is filtering down to the average citizen as well, with

more than 27,000 Canadians [having signed] a petition calling on the government to raise corporate taxes and close tax loopholes.

The petition also asks the government to consider imposing a special levy on banks, which are the country’s biggest tax avoiders.

While the Big Five banks are collecting record profits, their income tax rates have dropped to the point where companies in the banking sector paid 1/3 the rate of other large Canadian companies in 2015.

At 16 per cent, the tax rate paid by the biggest Canadian banks is the lowest in the G7.

Canada is hardly a passive victim of tax avoidance and evasion. It is clearly a facilitator. If Justin Trudeau's speech in Davos about the need for corporations to pay their fair share is to be seen as anything more than his usual pious pontifications, it is long past due that he finally prove that he is no longer interested in giving these entities the free ride they have thus far enjoyed.

Seeking Some Substance - Part 1

In yesterday's Star, Christopher Hume had occasion to call Prime Minister Trudeau the princeling practitioner of the politics of appearance. In light of an alarming shortfall in revenues that is crippling our services thanks to the government's anemic corporate tax policies, that struck me as a particularly apt description.

Indeed, that element of his persona was very much on display for the world to see last week at Davos, where Mr. Trudeau had some stirring words :

"Too many corporations have put the pursuit of profit before the well-being of their workers … but that approach won't cut it any more," Mr. Trudeau told the elite gathering at the chic ski resort of Davos. "We are in a new age of doing business – you need to give back."

Apparently, however, that sternness of tone seemed more designed for public consumption than real-world application. If that is not the case, one has to wonder why Canada appears to be very soft in the corporate taxation department:

In a joint investigation with Corporate Knights magazine, the Star last month revealed the government has never collected a lower proportion of its taxes from corporations than it does now.

In 2016, Ottawa collected $3.50 in income tax from individuals for every $1 it collected from businesses.

The foregone tax revenue is significant:

The Star/Corporate Knights investigation revealed that Canada’s 102 largest corporations collectively avoided $62.9 billion in income taxes over the past six years. On average, that’s $10.5 billion less per year than if they paid the official corporate tax rate.

It’s also an average of $100 million missing from the public purse per company, per year.

So what is to be done about it?

Well, first off, they can start by emulating other countries that have thus far recovered $500 million in unpaid taxes thanks to revelations from the Panama Papers.

The Panama Papers have proved a treasure trove for some countries, with Spain recovering the most unpaid tax so far. Its national revenue agency announced in November a $156-million windfall from taxpayers with hidden funds. Most of that — $128.4 million — came from voluntary disclosures, where the taxpayers came forward themselves following the leak to declare previously unreported income.

The Australian Tax Office said last month it has collected $49 million thus far as a result of the Panama Papers revelations. Australian tax officials snapped to action following the leak, executing 18 search warrants in just a one-week span in September 2016, at one point seizing 170 kilograms of silver bullion and coins.

Even Ecuador, which historically has had problems collecting tax from its citizens, says it has recouped $82.6 million.

Perhaps, not surprisingly, Canada has recovered nothing:

The Canada Revenue Agency maintains it will be at least another 2½ years before it will have an idea of how much it might recoup.

The stark contrast is fuelling criticism of the CRA's effectiveness at catching offshore tax cheats, and comes in the wake of a CBC investigation last month that found few, if any, of the criminal convictions the agency cites in defence of its record actually have anything to do with offshore tax evasion.

In fact, that investigation revealed that small businesses are the most likely targets of CRA wrath:

... Canadians convicted of tax evasion over the past two years are far more likely to be tax protesters or small business people who failed to declare all of their income.

And to make their statistics look better than they are, the CRA

counted each article of the law as a separate conviction.

For example, in the case of New Brunswick-based George's Heating and Plumbing, the agency counted two charges against the business as separate convictions, in addition to the convictions of five employees for having treated personal expenses as business expenses. While they were all part of the same case with the same court file number, on the CRA's list they counted as seven of the 78 convictions.

There is every reason to believe that the hands-off approach to corporate malfeasance, perfected during the Harper years and instilled as an operating ethos in the CRA, is alive and well; the current government apparently has no intention of changing that.

More evidence of this mindset, as well as the ongoing offshore tax evasion being widely practised by Canadian corporations, and what can be done about it, will be addressed in Part 2 of this post.

Mature Discussion About The Fiscal Cliff

Mature, that is, until CNBC's Rick Santelli opens his mouth:

Why the Occupy Movement Has Relevance in Canada

Thee are many who assert that the Occupy Movement has no relevance in Canada because we have a social safety net and other measures that provide a modicum of protection to the most vulnerable. They also argue for the superiority of our banking system, which required no government bailouts because it is more tightly regulated than in the United States and other jurisdictions. However, those espousing this perspective ignore a larger truth about the relationship between the powerful wealthy and government policy:

As long as provincial governments and the federal government continue to lower corporate tax rates despite the fact that current rates are more than competitive with those in the U.S. and despite the fact that we have a growing national debt;

As long as government tells its citizens that some hard choices are going to have to be made (i.e., health care spending, federal transfers to the provinces, etc.) because of that debt and deficit;

As long as the poor are made to pay by living on benefits that keep them well below the poverty line;

As long as government refuses to even consider increasing taxes on the ultra wealthy;

And as long as the working and middle classes are made to subsidize the lifestyle of the power elite while suffering a steady decline in their own standard of living, job and retirement prospects, there will be a need for an Occupy Movement that attempts to speak for those who have lost their voice.

TruthDig For A Different Kind Of Truth

I recently wrote a couple of blog posts on Warren Buffett and the need for higher taxation of the very wealthy, an idea that is gaining currency in a number of countries, including France and Spain, the latter actually recently imposing a new tax on the wealthy. While conventional news formats are reluctant to pursue the issue in any depth, alternative sites for news and opinions like our own rabble.ca and Truthdig, an American-based site, are not shying away from this contentious topic.

A Truthdig article entitled Why They Hate Warren Buffett examines the backlash from the right provoked by Buffett's plea for higher taxation of people like him, and is well worth perusal.

Fair Taxation

Democratic Senate hopeful Elizabeth Warren speaks on the topic of fair taxation: