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December 2005 Archives

December 30, 2005

"I like paying taxes"

"I like paying taxes." How many of us have ever made that statement?

"I like paying taxes" or so Neil Brooks says he does. Mr. Brooks is a Professor at Osgoode Hall Low School and a Research Associate with the Canadian Centre for Policy Alternatives (CCPA).

His recent editorial on the CCPA web site might, at first, catch you off guard as who can really claim to enjoy paying taxes? Yet, a quick read will tell you that his enjoyment of paying his fair share is grounded in the real opportunities created by the tax system.

"Taxes allow us to pursue our aspirations collectively and thus they greatly enrich the quality of life for the average Canadian family. Taxes have brought us high quality public schools that remain our democratic treasure, low tuition at world class universities, freedom from fear of crippling health bills and excellent medical services, public parks and libraries, save streets and liveable cities. None of these things come cheaply."
"Taxes also assist us in spreading our incomes over our lifetimes to maximize our well being by, for example, transferring income from our high-income years to our retirement years, from times when we are supporting children to times when we are not, and from periods when we are well and able to take care of our own needs to periods when we are ill or suffering from a disability."
Points on which few of us will likely disagree. In essence, with the pending federal election in sight, as Canadians head to the polls the editorial serves as a political warning to Canadians.
"In spite of the fact that they enable us to collectively provide our most valuable goods and services, no one likes paying taxes. Therefore, promises of tax cuts are often a potent political ploy. However, before being seduced by the promise of lower taxes, Canadians ought to think seriously about the implications of a smaller public sector."

Perhaps a message easier to swallow at the polls in January than when you're filling out your tax return in March!

For Brooks' full editorial, see the CCPA web site at:
http://www.policyalternatives.ca/Editorials/2005/12/Editorial1255/

Posted by Taxes.ca Editorial Team [permalink]



December 29, 2005

Breathing Life into Canada’s Morbid Democracy

Many Canadians have come to realize that changes to Ottawa’s political structures and institutions are as important – and perhaps even more so – than the representatives that will be elected to Parliament on January 23rd. The Canadian Taxpayers Federation will release seven commentaries during this campaign that focus on broad themes of accountability and democratic reform measures. This fourth commentary in the series is written by CTF communications director Troy Lanigan on the subject of democratic reform. Troy is available for media interviews or comment on this subject by calling 250-888-5040 or e-mailing him at tlanigan@telus.net.

December 28, 2005

Breathing Life into Canada’s Morbid Democracy

Why vote? With each passing election a growing number of Canadians are concluding that all politicians are the same, their vote does not count, and nothing ever changes up in Ottawa. Can this antipathy be reversed?

Voter turnout in Canada’s federal elections has steadily declined from a high of 75 per cent of eligible voters in 1988 to less than 61 per cent in 2004. And although we Canadians like to thumb our noses at our American neighbours, it is worth noting that registered turnout for the 2004 presidential election was 70 per cent. Predictable remedies include changing the personalities, emboldened parliamentary committees, more “free-votes” and democratizing the appointment process. Each has been promised by a generation of politicians, and their proposed “reforms” have proven to be halfhearted and insincere.

“Our national parties and institutions are deteriorating through neglect, stagnation and inbred resistance to change,” says 20-year political insider Rick Anderson, his website www.fireweeddemocracyproject.ca invites a democratic renaissance in Canada. Anderson is right. So where do we start? Here are three suggestions to put in the ear of federal politicians out on the hustling for votes:

The Senate – elect it or abolish it: A fair debate can be had been between abolition and election of the Senate. Australia has been electing its senate since 1901 while neighbouring New Zealand abolished theirs in 1951. Significant debate surrounded the decision in each of the two countries. Putting aside the question of abolition or election, any country that anoints a quarter of its lawmakers via political appointment – as Canada does – stretches credulity in calling itself a representative democracy.

Change how Canadians vote: Randomly stop 10 citizens on the street and each will agree with the statement that a majority of voters should determine who governs the country. Yet our current first-past-the-post voting system regularly translates a minority of the vote into a majority of seats in our Parliament. In most of the world’s democracies, 40 per cent support would not grant a political party 100 per cent of the power, but that is almost universally what “elects” majority governments in Canada.

The vast majority of democracies have some form of proportionality that ties vote share to seat share in their parliaments. Many of those countries – as diverse as Ireland and New Zealand – do so while retaining strong local representation. Surely the most elementary building blocks of improving voter participation and accountability require that a majority of citizens have a say in who governs them.

Recall and Citizens’ Initiative: One of the great benefits of the marketplace is that consumers are empowered. If a product or service is misrepresented not only can you get your money back, but you have the option to sue for costs or damages. Try that the next time a politician says one thing during an election and does the exact opposite after getting elected. (Take a bow Ontario Premier Dalton McGuinty.) The ability for voters to remove their representatives from office or petition for a law between elections moves accountability from a one day window every four or five years at the ballot box to a full-time dialogue between citizens and their legislators.

Political outcomes stem from rules in which Members of Parliament operate. If, for example, a politician knows that he is subject to recall, he may think twice before voting along party lines for a measure unpopular in his community. A prime minister elected under a more proportional voting system understands his 40 per cent support at the polls places limits on his ability to ram through legislation, assign committees, stack courts and appoint party hacks like David Dingwall and André Ouellet to head multi-billion dollar Crown corporations.

Of course, politicians are reluctant to change the rules that put them in office in the first place. British Columbia, for example, has a Recall and Initiative Act in name only. The province’s referendum to change the voting system won the support of 58 per cent of voters in May, but it will not be implemented by the government, which won a majority with 46 per cent of the vote. Although the reform processes in Quebec, Ontario and New Brunswick are still unfolding, in Ottawa there is no debate or discussion – a void, in other words.

Systemic reform would not end all ills, but it will create different incentives and outcomes that will lead to a more accountable, inclusive and participatory kind of politics. Sums Mr. Anderson, “We have to free up the atrophied arteries of our democracy, to make it welcoming to innovation, more encouraging of good people and good ideas.” Until such time, expect voter turn-out to continue in one direction.

Troy Lanigan is national communications director of the Canadian Taxpayers Federation.

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

December 27, 2005

Meager Tax Savings in 2006

Meager Tax Savings in ’06 (But Taxpayers Gain in ’05)

Ottawa: The Canadian Taxpayers Federation (CTF) today released calculations of personal income and payroll tax savings that will come into effect on January 1st, 2006. Also included are retroactive personal income tax changes – which apply to the 2005 tax year – announced by the finance minister in the November economic update. The CTF tax calculations include those measures being administered by the Canada Revenue Agency, and apply regardless of the federal election outcome.

“Federal tax reductions will give all taxpaying Canadians some relief in ’05 and ’06,” said CTF federal director John Williamson. “Lower income taxes and employment payroll taxes will give the average taxpayer a net gain of $62 in 2006. However, last minute personal income tax changes announced in November will result in the average taxpayer savings $323 in 2005. Because these tax reductions are built into the tax code they roll into the next year. As a result, cumulative tax savings in ’06 will be $385.”

Tax Savings in 2005, 2006 & 2006 Cumulative – Annual Income of $45,000

Tax Year Higher BPE Lower PIT EI Reduction Total 2005 $75 $248 0 $323.00 2006 $30 0 $31.70 $61.70 2006 Cumulative $105 $248 $31.70 $384.70

CTF Calculations.


*** Savings do not include personal income tax indexation gains or Canada Pension Plan indexation losses. ***

Personal Income Tax Reductions and Savings (2006 and 2005) –

In 2006 the basic personal exemption (BPE) – which is the amount an individual earns before paying federal income taxes – will increase by $200 above the inflation rate (this change plus indexation will boost the BPE to $9,039 next year). This measure will save all taxpayers an additional $30 per year starting in 2006.

The November economic update increased the BPE by $500 (from $8,148 to $8,648), and lowered the bottom personal income tax bracket from 16 per cent to 15 per cent. Both measures kicked in retroactively to January 1st, 2005. Together, they will save all taxpayers earning $35,595 or more $323 a year, starting in 2005. (The BPE change results in a $75 savings and the lower tax rate translates into a $248 savings. Chart 1 highlights the tax changes – with indexation for 2006 – for various income levels and for the 10 provinces: http://www.taxpayer.com/pdf/2005-2006_Tax_Savings.pdf)

2006 Employment Insurance Reductions and Savings –

Effective January 1st, 2006, Employment Insurance (EI) premium rates will drop by eight cents to $1.87 for employees (per $100 of insurable earnings) from the current rate of $1.95. The corresponding employer rate will drop by 11 cents to $2.62 from the current rate of $2.73. These EI changes represent a 4.1 per cent reduction from 2005 levels. (The maximum insurable earnings will remain unchanged at $39,000 for 2006.)


Employee EI Savings in 2006 – Select Incomes

Income 2005 2006 2006 Employee Employee EI Savings Contribution Contribution (employee only)

$15,000 $293 $281 $12.00
$20,000 $390 $374 $16.00
$39,000 $761 $729.30 $31.70
(or more)
CTF calculations.

Unfortunately, the net payroll tax bill will increase because EI reductions will be gobbled up by the Canada Pension Plan payroll tax. CPP premium rates (per $100 of insurable earnings) will remain unchanged at 4.95 per cent paid by employees and 4.95 per cent paid by employers. Yet because the threshold will increase to $42,100 in 2006 from today’s $41,100 level, workers will pay $50 more in CPP taxes next year. (See Chart 2 for 2006 and historical payroll tax changes: http://www.taxpayer.com/pdf/2005_Payroll_Taxes.pdf)

And There is More to Come…

The two major political parties – the governing Liberals and opposition Conservatives – have each promised to lower taxes if elected on January 23rd. Prime Minister Paul Martin has said he will lower income taxes on the middle class – although has yet to provide any details. Opposition leader Stephen Harper will reduce the 7 per cent GST to 5 per cent, and he has also hinted at additional income tax relief. There are few votes to be won by way of higher taxes: Even New Democrat leader Jack Layton says his party will not raise taxes.

“Voters need to nail down the Liberal and Conservative tax reduction proposals before Election Day. Yet the fact both major parties are talking about tax cuts is good news for overtaxed Canadians,” continued Williamson. “This is mainstream recognition that Canadians have been suffering under an unnecessarily high tax burden.”

Why Suffering Taxpayers Need a Break –

Structural over-taxation occurs when a government consistently collects more revenues than it needs to meet its annual funding commitments. As Canadians have suffered from high taxes and income stagnation, government coffers have overflowed. Ottawa is running multi-year and multi-billion dollar surpluses. Studies have shown that after-tax household incomes have increased only 3.8 per cent in the last twenty five years while federal government revenues increased 372 per cent over the same period.

“The federal government is swimming in excess surplus money, while ordinary taxpayers have barely kept their head above water,” concluded Williamson. “A surplus is nothing more than over-taxation. It is high time for Ottawa to throw a lifeline and return surplus money back where it belongs, to Canadian taxpayers.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

December 24, 2005

Happy Holidays and All the Best for 2006

Wishing you and yours a safe and happy holiday season. Happy New Year! More to come in 2006...

Posted by Taxes.ca Editorial Team [permalink]

December 22, 2005

BC Personal Income Tax - 2006 Indexed Amounts

The Income Taxation Branch of the Ministry of Small Business and Revenue, Government of British Columbia, has updated information on its web site concerning Personal Income Tax TONI in 2006.


In the 2006 taxation year:

- 2006 tax brackets are indexed;

- indexing of credits and tax brackets is based on the Consumer Price Index for British Columbia (BC CPI) for the 12 month period ended on September 30, 2005 (see below);

- various non-refundable tax credits are indexed (see 2006 Non-Refundable Tax Credit Block);

- the BC CPI used to calculate 2006 amounts was 2.1%; and

- the tax credit for charitable donations in excess of $200 is calculated at the highest rate of tax - 14.7%.

For more information see the Income Taxation Branch What's New page at:
http://www.rev.gov.bc.ca/itb/whatsnew.htm

Posted by Taxes.ca Editorial Team [permalink]

December 21, 2005

Accountability on Canada’s Highest Court

Many Canadians have come to realize that changes to Ottawa’s political structures and institutions are as important – and perhaps even more so – than the representatives that will be elected to Parliament on January 23rd. The Canadian Taxpayers Federation will release seven commentaries during this campaign that focus on broad themes of accountability and democratic reform measures. This third commentary in the series is written by the CTF Ontario director Tasha Kheiriddin on the subject of judicial accountability and Canada’s Supreme Court. Tasha is available for media interviews or comment on this subject by calling 416-203-0030 or e-mailing her at tkheiriddin@taxpayer.com.

December 21, 2005

Accountability on Canada’s Highest Court

The Supreme Court of Canada is the ultimate arbiter of law and justice in our country. As evidenced by its recent decisions on the same-sex marriage reference and the health care case of Chaoulli v. Quebec (Attorney General), it can have a profound impact on laws affecting the day-to-day lives of Canadians.

And who sits on the court can have a profound impact on its decisions. This was never so clearly evidenced as in 1981, when Prime Minister Pierre Trudeau asked the Court to pronounce itself on his proposal to unilaterally patriate the Constitution. Seven of nine judges found the proposal legal; of these, all had been appointed by Mr. Trudeau. The two dissenting ones had been appointed by Prime Minister John Diefenbaker.

Yet the judges who compose the high court are selected by what is probably the least accountable and transparent process for any body of this importance. Currently, our Constitution gives the Prime Minister complete discretion to appoint whomever he chooses. There is no requirement for a review committee, no list of recommendations, and no obligation to consult anybody. Apart from regional balance (the Constitution mandates that Quebec gets three out of nine judges, by virtue of its civil law tradition), the matter of who dons the scarlet robe is completely up to the PM.

During the last round of judicial appointments in 2004, the government did constitute an all-party committee to hear about – but not from – the two proposed nominees, Rosalie Abella and Louise Charron. Neither was compelled to testify before MPs or answer any questions. Contrast this with the American system, where Supreme Court nominees must face a grueling committee hearing, complete with thorough questioning in front of television cameras, a Judiciary Committee vote, and then a full vote of the United States Senate before being confirmed. And this comes only after the president consults senators on who to nominate. Were President George W. Bush’s failed nominee Harriet Myers up for consideration in Canada, she would probably have landed on the high court instead of in hot water.

The Canadian legal community has repeatedly called for reforms to the appointment process. Voters should remind politicians, however, that justice is not the exclusive purview of lawyers and legalists. What is missing is the voice of Canadian citizens, who just happen to foot the bill for the entire justice system. And that system does not come cheap. The last time Statistics Canada checked these things in 2000/01, more than $1-billion was spent annually on the operation of Canadian courts. This included the employment of nearly 10,000 court staff and 2,000 judges, over half of whom were appointed by the federal government. Salaries and benefits paid to this judiciary totalled $382-million – an average of $191,000 per judge.

Public funding brings with it certain expectations, including accountability and transparency. But if an appointment is made behind closed doors, no one can be held accountable until after the fact – when it is too late to do anything about it. Small wonder then that Canadians are cynical about their courts. According to an Ipsos Reid opinion poll taken in March, 2003, a majority of respondents said they do not trust judges or the judicial system. Even more disquieting is the finding that two in three polled think that Supreme Court judges are influenced by partisan politics. Such a perception erodes confidence in the judicial system, and puts into question the leadership of those who appointed judges in the first place.

The Prime Minister must go further than a rubber-stamp committee if he is to increase judicial accountability and transparency. He should institute an open appointment process that lets Canadians judge the judges for themselves before they are chosen. He should also introduce term limits for judges as several European countries have done, so that no one administration can stack the bench indefinitely (Prime Minister Jean Chrétien appointed five of the current nine judges – two of them will not retire until 2022 and 2028). And to truly ensure regional representation, he should rebalance the court to ensure that Quebec does not have an over-representation in terms of population and caseload heard.

Taken together, such reforms would go a long way to restoring public confidence in the Supreme Court and ensure that Canada benefits from the best and most accountable legal system possible.

Tasha Kheiriddin is Ontario director of the Canadian Taxpayers Federation.

John Williamson
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

December 14, 2005

Accountability for Indian Affairs

Many Canadians have come to realize that changes to Ottawa’s political structures and institutions are as important – and perhaps even more so – than the representatives that will be elected to Parliament on January 23rd. The Canadian Taxpayers Federation will release seven commentaries during this campaign that focus on broad themes of accountability, systemic and democratic reform measures. This second commentary in the series is written by the CTF’s Aboriginal Division director Tanis Fiss on the subject of increased accountability for Canada’s Indian reserves. Tanis is available for media interviews or comment on this subject by calling 403-263-1202 or e-mailing her at tfiss@telus.net.

December 14, 2005

Accountability for Indian Affairs

One well known definition for insanity is doing the same thing over and over again expecting a different result. Canadians have witnessed this in the delivery of Indian affairs. Regrettably, Ottawa’s insanity is not likely to stop without our lawmakers first making a number of elementary reforms.

Canadian taxpayers spend approximately $10-billion each year, for federal and provincial programs for native Canadians. Regrettably, for both natives and taxpayers there is little to show for all the spending. The status quo is failing. Fortunately, change can provide new hope.

According to auditor-general reports, 80 per cent of the Department of Indian Affairs’ total expenditures are transferred directly to native bands. How these funds are disbursed is decided by the Chiefs and their band councils.

Accountability on native reserves is lacking today, but there are ways to solve that problem. One possibility is to have native governments collect taxes in the way other levels of government collect taxes: through income taxes, property taxes and a multitude of other measures.

To increase accountability, the payments currently transferred to native band councils should be re-directed to individuals. The money necessary for native governments could then be taxed back by the local native government. To ensure appropriate community support, this recommendation should be implemented on a pilot basis on one or more reserves over a set time-frame. That way the policy, if successful, can be expanded to other reserves.

Currently, once the federal government transfers money from federal departments to native bands, the auditor-general of Canada no long has the authority to audit how and where the money is spent. No checks and balances on tax dollars foster inefficiencies, redundancies, corruption and even abuse.

If the ultimate ambition is to eventually have all Canadians treated with the same rights and responsibilities, then creating another separate auditor’s office – as is being proposed – will not be the best route to achieve that important goal or ensure the best use of tax dollars. Expanding the existing auditor-general’s mandate to include native bands would instead require fewer tax dollars to operate due to the economies of scale. Moreover, the standard of audits, mandates and scrutiny would remain consistent.

The Canadian Taxpayers Federation (CTF) routinely receives calls from native Canadians either frustrated with their local council or with the Department of Indian Affairs. This is because, in part, the delivery of programs is in the hands of a few – the Chief and council.

Since there is little separation between politics and administration on reserves – and there is no requirement to do so – activities on a reserve that are related to band administration is often heavily politicized. This scenario provides the Chief and council with tremendous power and control over community members. Access to Information documents obtained by the CTF show in 2003, the Department of Indian Affairs received 297 allegations of corruption, nepotism or mismanagement by native band councils.

As an interim measure to ensure native Canadians receive appropriate redress, an independent ombudsman for aboriginal affairs needs to be established. The ombudsman would have authority to investigate complaints and propose changes to be made in a band’s administrative practices or the administrative practices of the Department of Indian Affairs. If the band or department fails to make the recommended changes, a report would be brought before Parliament.

Some might say such changes will lead to “cultural genocide.” Such overblown rhetoric has no merit. When native Canadians are enabled to succeed in the same way as other Canadians, they will be no less Cree, Mohawk or Ojibwas. In fact, by doing so, they will render the entire paternalistic mechanism of the Indian Act, and the Department of Indian Affairs irrelevant.

Regardless of who wins the election, the federal government must reform aboriginal affairs. It is only through major reform that aboriginal poverty on reserves will truly be eradicated. To do otherwise is insane. Even worse, it consigns many aboriginal Canadians to live in poverty and in despair.

Tanis Fiss is director of the Canadian Taxpayers Federation’s Aboriginal Division located in Calgary, AB.

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

December 12, 2005

Reduce Your 2005 Taxes

The end of 2005 is almost here, but there’s still time to reduce your 2005 taxes. Here are some ways to do so.

Contribute to your RRSP

If you haven’t yet contributed to your RRSP for 2005, perhaps you should. The earlier you contribute, the more quickly your funds will grow tax-free. You can find out your 2005 contribution room from your 2004 notice of assessment or by accessing "My Account" on the Canada Revenue Agency web site. Your maximum contribution will be the sum of (1) any unused RRSP contribution room from earlier years, plus (2) 18% of income earned in 2004 (usually employment and business income) up to $16,500, less (3) if you participate in a pension plan, any pension adjustment net of any pension adjustment reversal. Be careful not to overcontribute to your RRSP. Overcontributions in excess of $2,000 are subject to a penalty of 1% per month until corrected or until you are in a position to deduct the amount.

If you anticipate your spouse’s retirement income will be less than yours, consider contributing to a spousal RRSP. You will get the deduction for the contribution and your spouse will claim the retirement income when it is converted to a RRIF or annuity. Please note that a spousal contribution is still limited by your RRSP room, not your spouse’s room.

Make a donation

Now is the time to finalize your 2005 donation plans. The combined credit for an individual living in Ontario is 22.05% (16% federal and 6.05% Ontario) of the first $200 of donations paid and 40.16% (29% federal and 11.16% Ontario) of the remainder. Ideally all donations made by married or common-law couples should be claimed by one taxpayer, so as to maximize the amount of claim at the higher rate.

You could consider donating publicly traded shares, especially where there is an unrealized gain. In this situation, the capital gain will be taxed at 25% rather than 50% and the charitable organization will receive more than it would otherwise receive if you were to sell the shares and donate the after-tax proceeds.

Deduct loan interest

For loan interest to be deductible, the loan must be taken for the purpose of earning income from a business or property. It may be possible to reorganize your affairs to make loan interest deductible.

If you live in Quebec, a new rule for 2004 limits the deduction of financing costs related to passive investments to the amount of investment income generated from the investments, including capital gains.

Realize capital losses

If you have realized capital gains during 2005 and you have investments with losses, it may be worthwhile triggering those losses to help offset the gains. Just be careful of “superficial losses” which will result in the capital loss being denied. A superficial loss arises if you, your spouse, or a company you control purchases an identical asset within 30 days prior to or 30 days following the sale of the asset that resulted in the capital loss.

Defer capital gains

If you realize a capital gain on property you disposed of, you may be able to defer part of the capital gain. If you do not receive all of the proceeds of disposition in 2005, you may be able to claim a reserve for all or part of the amount of payments to be received in future years.

If the capital gain will be significant, it may be worthwhile trying to defer the disposition until January 2006.

Use the capital gains deduction

Small business corporation shares and qualified farm property qualify for the lifetime capital gains deduction of $500,000. This is a very complex deduction that interplays with such things as your cumulative net investment loss and whether you have claimed allowable business investment losses in prior years. If you are considering selling such assets, talk to your accountant first.

These are just some suggestions. It’s not too late to reduce your 2005 taxes.

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December 10, 2005

Alberta Finance: latest issue of Tax Notes

The Government of Alberta Finance Department's Tax and Revenue Administration has released its latest issue of Tax Notes (PDF format).

The issue includes articles and information on;
- Property that Vests in the Crown
- Letters of Authorization
- Tax and Revenue Administration Client
- Self-service System (TRACS)
- Tourism Levy Publications now online
- Clarifying IFTA/IRP Books and Record Requirements
- For your convenience – electronic payment

For more information on the Tax Notes e-Newsletter, see:
http://www.finance.gov.ab.ca/tax%5Fnotes/

Posted by Taxes.ca Editorial Team [permalink]

December 9, 2005

Taxes becoming a big election issue

It would appear that Stephen Harper and the Conservatives want to make taxes a big election issue. Last week the Conservatives offered up their plan to chop the GST from 7% down to 5%. You can also find Conservative campaign advertisements where Harper criticizes the Liberals for "over taxing Canadians" over the past twelve years.

This week the Conservative Party released its Opportunity Plan for Small Business, a package that will lower small business taxes and create apprenticeship positions. The plan will raise the threshold for the small business tax rate from $300,000 to $400,000 and reduce the small business tax rate from 12 per cent to 11 per cent over five years.

Meanwhile on the Liberal web site, the party is promoting its success in developing a strong Canadian economy over the past 12 years and in delivering eight consecutive balanced budgets. Yet the tax issue also figures prominently:

"The Liberal government is committed to providing tax relief - putting more money in the hands of Canadians and making Canadian businesses more competitive. To create the right investment for future prosperity, our government recently announced a new tax reduction plan that will deliver more than $30 billion in personal and corporate tax relief over the current year and the next five years. The majority of this, 95 per cent, , will go to individual Canadians – especially low- and modest-income Canadians."

Looks like we can look forward to both parties duking it out over the next month with election promises of both increased spending and tax cuts.

Posted by Taxes.ca Editorial Team [permalink]

December 8, 2005

Whistleblowers: our last line of defense

Many Canadians have come to realize that changes to Ottawa’s political structures and institutions are as important – and perhaps even more so – than the representatives that will be elected to Parliament on January 23rd. The Canadian Taxpayers Federation will release seven commentaries during this campaign that focus on broad themes of accountability, systemic and democratic reform measures. This first commentary in the series is written by the CTF’s British Columbia director Sara MacIntyre on the subject of whistleblower legislation. Sara is available for media interviews or comment on this subject by calling 250-388-3660 or e-mailing her at smacintyre@telus.net.

December 8, 2005

Whistleblowers: our last line of defense

The conclusions of the Gomery Report should not only shock Canadians but also propel us into action. Instead of just asking how could this have happened, we should be asking, how can we prevent it from happening again? In addition to scrapping partisan slush funds like sponsorships, advertising, polling and corporate welfare, Canada needs to implement a workable whistleblower law.

Justice Gomery referred to a “culture of entitlement” that characterized the Sponsorship scandal players. This attitude of arrogance resulted in reporting requirements skirted, guidelines sidestepped and the public trust usurped. The point is that there were rules, regulations and reporting requirements in place when the Sponsorship scandal was orchestrated. That is why it is critically important to offer protection to civil servants, who are the public’s last line of defense, when all other systems fail. Civil servants are the final check of accountability in a system that has thrived upon secrecy.

Whistleblower protection has been talked about in Ottawa for years. It has been studied, reported on and recommended. Almost two-thirds of all OECD countries have some sort of protection for civil servants who expose illegal, wrongdoing, maladministration, waste or fraud within government and/or bureaucracy. Canada, despite having a whole host of examples to demonstrate why we need such protection just recently passed what has been widely condemned as fundamentally and fatally flawed whistleblower law.

One of the biggest failures of the law is that it requires the whistleblower first seek resolution within their own department. Such a provision is absolutely laughable. For example, it would have done nothing to protect the Sponsorship’s whistleblower, Allan Cutler.

Cutler worked with the infamous bureaucrat Chuck Guite in 1994. They both handled advertising and public opinion research in Public Works. Guite- who allegedly had the vanity license plate “gravy”-- began to interfere with some files and contracts. Cutler noted several contracting irregularities and refused to sign off on them. He submitted his concerns to both his department supervisor and to the internal audit branch. Cutler was demoted while Guite continued to move up and eventually headed what we now know as the Sponsorship program.

The new law would have done nothing to protect Allan Cutler who did report problems to his department head only to be punished with a demotion. In fact, the new law includes a provision that prevents such disclosures be made public. So, taxpayers would have never known the name Alan Cutler or the wrongdoing he tried to expose. The legislation will do nothing to change the current culture in Ottawa and it will not protect those civil servants concerned with the public interest. It is nothing more than a paper tiger. And that’s not good enough.

The Conservative Party’s “Accountability Plan” addresses the weaknesses of the current whistleblower law and provides several remedial measures including: giving an independent office the power to enforce compliance, disclosure of information revealed by whistleblowers and has even added a monetary incentive for those that expose wrongdoing or save taxpayers dollars.

There are plenty of international models of whistleblower protection to choose from and although a well crafted bill may prove embarrassing for any sitting government, legislators must remember they are there to represent and safeguard the public’s interest—not their own. Model whistleblower legislation would include: more than one reporting avenue, an independent investigation branch and a separate mechanism that handles complaints against employer reprisals.

Critics have argued that such protection would result in disgruntled employees making false or self-serving claims. There are plenty of ways to mitigate illegitimate claims. In Australia for example, it is a punishable offence to purposefully make false claims.

There are lots of models to choose from and countless reasons to institute effective whistleblower protection. Hopefully, frustrated voters making their voices heard this election campaign will create the political will to make it happen. Accountable and transparent government requires no less.

Sara MacIntyre
British Columbia Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

December 2, 2005

Conservatives propose cutting GST to 5%

As they prepare for the upcoming federal election, Stephen Harper and the federal Conservative party have proposed cutting the Goods and Services Tax by 2% down to 5% from the current 7% tax.

Long controversial since it was implemented under the Mulroney government, the GST was once promised to be scrapped by the Liberals. As irony would have it, now Paul Martin and the Liberals are in a position of having to defend the GST and its 7% rate in responding to the Conservatives election tactic.

The text of the Conservative's promise can be found on the Conservative Party web site: "Stephen Harper to cut the GST to five per cent".

The Liberal Party response can also be found online: "Harper Tax Proposal Wrong for Canadians"

At the time of writing, there were no responses to the proposed GST cut on either the Bloc Quebecois or the NDP web sites.

Posted by Taxes.ca Editorial Team [permalink]

Calling All Party Leaders: What is the Kyoto Plan?

A United Nations conference on climate change in underway in Montreal. The purpose is to develop a roadmap to reduce carbon dioxide emissions (CO2) – more commonly known as greenhouse gases – when the Kyoto Protocol expires in 2012. Unfortunately, Canada’s election campaign is diverting media and public attention away from this global meeting, which concludes on Dec. 9.

Before a second international agreement is signed, it is probably worth reviewing Ottawa’s progress under the first. Kyoto requires Canada to cut emissions of carbon dioxide to 6% below 1990 levels by 2008-12. Six per cent might not seem like a big cut, but factor in Canada’s greenhouse gas growth since 1990, which the UN says had increased by 24% at the end of 2003, and suddenly the scope of reduction becomes clear. With today’s technology the only way for Ottawa to achieve Kyoto targets is to reduce energy output and slow economic growth.

Since 1990, the Canadian economy has grown an impressive 45%. Liberal Environment Minister Stéphane Dion has acknowledged a strong economy and job growth has worked against Kyoto. Unless Ottawa is willing to trigger a made-in-Canada recession it will fail to meet its emissions goal. If this sounds alarmist consider that greenhouse gases increase with economic growth. To roll them back means shrinking the economy or achieving negative growth. The economic term for 2 quarters of negative growth is a recession.

It is good news that no government hoping to be re-elected – today or down the road – can advocate inflicting the economic pain on Canadian workers that Kyoto requires. So how might Ottawa fulfill its obligations?

One scenario is for the federal government to purchase so-called greenhouse gas credits from developing nations, like Russia and the Ukraine. Because of the collapse of Communism in 1989 – and the economies of Eastern Europe and Russia soon after – Moscow and others have a surplus of “unused” emissions to sell today.

Many economists and environmentalists regard this as purchasing “hot air” since nations that sell surplus gases need not reduce their current CO2 output levels. The result is Canada will continue to pump out emissions and claim victory while it pays foreign governments for credits. This is absurd public policy: tax dollars spent overseas with no tangible benefits to our environment, the economy or Canadian taxpayers.

With Canadians voting in January, now is an ideal time to ask whether or not our political leaders support using tax money to buy emission credits from other nations.

Since political parties prefer not to develop policy during election campaigns this should be an easy one for them. Canada ratified the Kyoto agreement in 2002, giving all leaders ample time to develop a position. Taxpayers are seeking an answer to the following question: will a (insert party leader’s name here) government spend tax dollars to purchase carbon dioxide credits from other nations to meet Canada’s Kyoto targets?

A weasel response that “Canada will meet its Kyoto commitments” holds no water. Not when Canada’s emissions are up 24%. And certainly not when the UN reports emissions in the United States rose by 13% over the same time. (Washington rightly rejected Kyoto on grounds it is too costly. The U.S. is nonetheless achieving reductions through the use of new technology, not with subsidies and hot air gimmicks.)

Purchasing credits is no academic point. Ottawa has allocated $12-billion to its climate plan. In February, it was revealed the government is considering spending $1.4-billion to buy credits abroad.

If Canada is going to fulfill its Kyoto commitment, the heavy lifting should be done at home – not off the backs of eastern Europeans and Russians. What do party leaders Paul Martin, Stephen Harper, Jack Layton, Gilles Duceppe and the Green’s Jim Harris say about this important issue?

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John Williamson
Canadian Taxpayers Federation

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