One Comment About Taxation – Canada’s Tax System Needs to be Free From Political Stunts and Instead “Plant Acorns”

 

I’ve written about this topic many times in the past.  But here we go again.  Our tax system is filled with legislation and its related administration that is motivated by simple, silly and and in most cases awful politics.  Tax and politics are inextricably linked and it’s virtually impossible to de-link them.  But it can certainly be minimized.

 

This past week, an egregious and obnoxious tax political stunt was introduced by our government.  Cloaked in cheesy language, the proposals were announced as “More money in your pocket:  a tax break for all Canadians”.

 

Assuming the measure gets passed, the GST / HST will temporarily – from December 14, 2024 until February 15, 2025 – be zero on a long-list of items.  How this list was determined is a mystery but I can imagine a bevy of out-of-touch politicians, their staff and bureaucrats hastily concocting the list. In my view, to be qualified to be at that table, one should have a minimum of 5 years experience working at a managerial level in a private sector business so as to have a tiny bit of empathy when drafting nonsense like this.

 

Why do I say that this group – and this government – is out-of-touch?  Well, for example, in this day and age of electronic point of sale registers, the effort to update such systems will not be insignificant nor instantaneous.  While larger retailers may have an army of staff that can afford to spend time on this, most affected private retailers will not and may have to hire expensive external consultants to update their systems and then revert back in February.  This assumes they have time to do the necessary changes.

 

What will happen if such systems are not properly implemented and the retailers collect too much tax?  Will consumers be able to demand refunds from the retailers? Will they be charged penalties for such overcharged amounts?  Presumably the yet to be released draft legislation will deal with this?

 

The above was accompanied by another announced stunt, “Working Canadians will also get some cash back. We’re doing this by providing a new Working Canadians Rebate. That means, Canadians who worked in 2023 with net earnings up to $150,000, will see a $250 cheque in their bank account or mailbox, starting early spring.”

 

Again, draft legislation has not yet been released so there are many questions.  Will the bribe, whoops, I mean “rebate”, be taxable to the recipient?  What does “earnings” mean?  If a person has solely investment income but no employment earnings, will they be eligible to receive the rebate?  What if a person, like a stay-at-home parent, has no income? Will they be eligible for the rebate? Available information seems to indicate that if you claimed CPP or EI credits on your 2023 tax return or you reported EI income, then you’ll be eligible.  That would carve-out a lot of people from eligibility for the bribe…whoops, there I go again, I mean rebate. Finally, to be eligible, you’re supposed to be a resident of Canada on March 31, 2025 and not deceased on April 1, 2025. Not sure how the CRA will know that before they distribute the cheques.

 

Unfortunately, these types of political stunts are not unusual.  There was no shortage of federal cash handouts during the COVID era.  The pathetic 2023 “Grocery Rebate” was another recent example.  The Ontario Ford provincial government is handing out $200 cheques to 15 million people soon.  The Conservative Party’s 2021 election policy platform contained a proposed GST holiday for a brief period of time. British Columbia sent out one-time “climate action dividends” to BC residents in 2008.  Alberta sent out $400 “Ralph bucks” to Alberta residents in 2006.  Even as far back as the 1930’s during the Depression, the federal government handed out cash administered by municipalities.

 

All of these stunts are not a good use of taxpayer money.  While some may be well intentioned, most are simple vote-buying attempts.  In the present case, these stunts will cost Canadian taxpayers at least $6.3 billion if not more.  You don’t think that’s a lot of money?  Well, it is.  And considering that such money will need to be borrowed, it will come with an interest cost as well.  Such interest costs alone are tremendous.  And it will be your kids and grandkids that ultimately pay such costs.

 

Instead of using our country’s tax system as a political stunt, it would be much wiser to use our system to introduce long-term productivity and prosperity measures.

 

An analogy to illustrate this would be the simple acorn.  It’s a small seed that can grow into one of the most impressive trees known to Man, the mighty oak tree.  During an oak’s lifetime – which can be hundreds of years – it can provide excellent shade and produce thousands of acorns that can produce forests of oak trees.  When its life is complete, the resulting hardwood can be used for numerous purposes such as the construction of homes and furniture.

 

Our politicians should consider this example with respect to our taxation policies and resulting administration.  We need to be planting acorns.

 

Instead, measures like the proposed GST / HST holiday and the Working Canadians Rebate is like handing out candy.  Once the candy is consumed, there will be a resulting sugar rush and then a collapse with zero lingering benefits.

 

In a recent conversation with one of my sons about leadership, he quoted a purported ancient Greek proverb: Society grows great when old men plant trees whose shade they know they shall never sit in.

 

Brilliant simplicity and wisdom.  Good leaders know that their actions – planting trees – will often have impacts that they will not see during their tenure. Canada needs political leadership, including tax policy, that thinks beyond their tenure. Yes, I know that is asking a lot.

 

Hopefully Canadians who don’t already know this will wake up to the fact that getting hooked on “tax sugar rushes” is simply not healthy.

 

One Comment About Leadership – The Importance of Vision AND Action 

 

Last week, I was at my quarterly Strategic Coach session in Vancouver, BC.  It’s a great time for me to get some excellent learnings from peers.  Nothing better than peer-to-peer learning.

 

During the session, a quote from Joel A. Barker was discussed.  It was about the importance of vision and action.  Here’s the quote:

 

​Vision without action is merely a dream.

​Action without vision just passes the time. 

​Vision with action can change the world.

 

I totally agree.  Both go hand in hand.  If you do one but not the other, why bother?

 

Leaders, do you have a vision and a plan of action that is being executed?

 

One Comment About Economics: You Mean Canada’s Deficit for 2023-2024 Will Be Larger Than Predicted?  Wow, I’m Shocked!

 

Canada’s Parliamentary Budget Officer expects Canada’s deficit for 2023-24 to be $46.8 billion as compared to the $40 billion estimated in the 2024 federal budget.  I’d like to say I’m shocked by this but, frankly, I’m not.  I predicted this over seven months ago when the 2024 federal budget was released.

 

This government has a significant spending and budgeting problem.  We need real leadership at the table.  Change can not happen soon enough.

 

Bonus Comment – Quote From Howard Schultz – American Businessman and Former CEO of Starbucks –– About Leadership Transparency

 

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”

 

Yep, totally agree.  Leaders, do you have a vision?  Are you taking action on it?  If not, start today.  Even if it is a small step.  Take action.

 

Hope you enjoyed this edition of 1-1-1…please sign up for my mailing list today.