There has been a lot of fury about Bill Morneau's tax changes. His failure to disclose the full story behind his French villa hasn't helped his cause. But the main problem he has faced is that his changes aren't simple enough to understand. Robin Sears recalls a conversation he had with New Zealand's former finance minister, Roger Douglas -- who introduced the developed world's first GST:
“Listen,” he told me, “our bloody income tax systems — personal and corporate — look like bloody Swiss cheese! And, by the way, so do yours. Every country has more loopholes and giveaways in its income tax system than they can count. And any finance minister who claims he can fill even half of them is either lying or stupid or both,” he added.
He went on, that with a VAT or GST he could equally tax a rich man’s mink coat purchase and a working boy’s hamburger — everyone pays. He conceded that some cheating was always possible if cash and no receipts were involved, but he added, it was a lot easier to catch a GST cheat than an income tax cheater, with the help of a good tax lawyer.
It’s not regressive, depending on what we do with the revenue, Douglas argued. He planned to take a big slice of the GST revenue and give it back to those who needed it most — and did, setting up a generous rebate structure. His pioneering was copied all over the developed world. As Douglas said that day, when you want to get a big tax reform done quickly you need to do three things: keep it simple, open and transparent.
These days citizens -- with justification -- feel that legislators are deliberately trying to pull the wool over their eyes. The Republican health care plan was cobbled together behind closed doors. Then they tried to push it through without hearings. It failed. Somebody's missing something.
Morneau shouldn't expect any tax change to slide through without tough parliamentary oversight. And, if it looks like he's playing a shell game, his proposed changes will never get off the ground.
Roger Douglas' advice was eminently sensible.
Image: thestar.com
14 comments:
we have the names of all the offshore people, why crickets there?
You'll need to expound on that a bit, Steve.
If tax fairness is a laudable goal, why not as the famous bank robber said, go where the money is. The panama papers and other leaks have identified hundreds of high net worth individuals at the very least sheltering money offshore. Thats the palace to start.
I would also tinker with the GST, add a 2% carbon tax but offset it 100% with full reimbursement of solar installations under 3kw. Just like one LED light bulb in every house can make a huge overall difference, if half the houses and apartment buildings only had one 300 watt panel, the cumulative effect would create a snowball of green goodness.
Three institutions need a kick in the nuts, the power, the legal and the financial.
Let's see what others have to say about your proposals, Steve.
Economist Dean Baker floated a very good idea: stop taxing companies and instead require them to turn over a percentage of their shares, in the form of nonvoting shares, to the government. So, if the company paid a dividend, then it would pay the same per share dividend to the government. If it bought back 10 percent of its shares, then it would buy back 10 percent of the government’s shares at the same price. In the event of a takeover, the buyer would have to pay the same per-share price to the government as it did to the holders of other shares.
This way, there is no way for a corporation to escape its liability. A portion of whatever profit it makes will automatically go to the government.
While this doesn't address the issue of professionals reducing their personal income tax through income sprinkling, that issue results in a far smaller reduction in tax revenues than do sophisticated corporate tax avoidance schemes.
Cap
Thgis was on CBC this morning.
"Opponents of the Liberals' proposed tax reforms may not be telling the truth"
http://www.cbc.ca/radio/thesundayedition/the-sunday-edition-october-15-2017-1.4353223/opponents-of-the-liberals-proposed-tax-reforms-may-not-be-telling-the-truth-1.4353235
It would help the good readers to have more context. In my seminal post on the subject Idiot Wind, I think I capture the jest of the lie that is the source of big energy power.
In summary like most things in life its the cost of the whole cycle thats important, the down payment is meaningless. Its the down payment that attracts the grifters likes wasps to an empty beer can tossed on a late October lawn.
An interesting new way to look at corporate taxes, Cap. But, as you point out, it leaves unanswered the question of what is the best way to approach personal income taxes.
Thanks for the link, Toby. With taxes, the devil is always in the details. These days there are few details. The wealthy will always applaud a tax cut. But I would not expect them to applaud a tax hike.
Owen the best way to approach taxes is to follow Pareto's law. It may not be perfect but it is mathematical. The top 20 should pay 80. They can have their fun, we can live and everyone
is wiser.
A good point, Steve. We've gotten used to thinking of things in terms of fiscal quarters. Usually, life is longer than that.
Back in the fifties -- they seem so long ago -- that was roughly the ratio, Steve.
When the government cracks down on KPMG and the other major tax evaders I'll have more confidence in their bona fides. This is top level organized criminal activity crafted in boardrooms and implemented in offices far and wide and it's all for the same purpose, allowing those who can pay to avoid much larger obligations for taxes, debts owed to creditors, spousal claims, etc.
I might be naive, Mound, but it seems to me that back in the fifties wealth was perceived to bring not just privileges but obligations. It appears the word "obligation" is no longer in the lexicon.
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