One Comment About Taxation – Comprehensive Tax Review / Reform – What Would I Change?

 

Adam Smith, the Scottish economist and philosopher, laid out his four basic tenets of a sound taxation system in his 1776 landmark writing – The Wealth of Nations:

1. Equity – the taxation of persons should be proportional to their income;
2. Certainty – the system should be clear and transparent;
3. Convenience – the timing and system of payment should be convenient for taxpayers and
4. Economy – the costs to administer and collect taxes should be minimized.

Given the above, I’ve been a loud advocate for Canadian comprehensive tax review and reform for more than a dozen years. I think it’s finally time to review Canada’s taxation system to return to Adam Smith’s four basic tenets. However, I’m a purist.  I believe the government of Canada should convene a well-qualified committee of experts (that would include academics, economists, practitioners, representatives from the small business community, large corporation representatives, union representatives, charitable / non-profit representatives and public policy experts, whose members would be directed to quell their vested interests as best as possible) who would have an open book to review our current taxation system and recommend changes.

The last time such a comprehensive review happened was in 1962 when then-Prime Minister John Diefenbaker convened the Royal Commission on Taxation. The commission released its voluminous report and recommendations in 1966.  Such proposals were vigorously debated, but ultimately, they served as the impetus for significant income tax reforms effective January 1, 1972.  Some of the commission’s recommendations were implemented, but many were not.

I’m a tax review purist because I believe the review should be as free from political pressure as possible.  However, in today’s day and age, such a view is admittedly naïve. No matter your political stripes, it is doubtful that “your” political party would agree to an open-ended review of Canada’s taxation system.  Why?  Because it’s very risky politically.  Who knows what a review panel would ultimately recommend?  Would it align with the politics of the government of the day?  Would the ultimate report cause political harm to the governing party?  The answers to these questions are unknown, and thus in today’s environment, what is ultimately good for the population takes a back seat to the risks of whether or not the governing party would get re-elected.  I acknowledge that.  But it is without doubt that Canada needs a review. I’d be happy with even a limited-time review since much needs to change.

Given the above, I’m often asked what I would change if I had my way. Well, to answer such a question might presuppose the purpose of a comprehensive review, so I’m often hesitant to answer.  In other words, if a thorough review was to be completed, all parties at the table should have an open mind, be prepared to look at all sides of an issue, and, as previously mentioned, not have vested interests.

Notwithstanding, here are some obvious issues that I would hope would be front and centre:

• The role of personal income tax in overall government revenues. Should it be the biggest revenue driver?
• For personal income tax, why is family taxation not the primary taxing unit as compared to the individual?
• What rates of personal income tax would help improve Canada’s productivity and help attract the best and the brightest minds?
• What should the role of consumption tax (like the GST / HST) be? Should it be increased in favour of reduced personal income tax revenues?
• How should capital gains be taxed?
• Should the principal residence exemption be an unlimited amount? Or should it be restricted?
• Should Canada have an estate tax like that of the United States? Canada had an estate tax, but it was abolished as of January 1, 1972.
• Why are unions not taxed?
• Is there a better way for government to support charities other than through the taxation system?
• Should there be a better effort to coordinate the provincial and federal tax laws? If so, how exactly could that be done?
• Today’s Income Tax Act is incomprehensible – even to tax professionals. How could this be dramatically simplified?
• How could Canada’s income tax administration be simplified? What role does improved technology play in such a simplification while safeguarding privacy?
• Despite the OECD’s (Organization for Economic Cooperation and Development) efforts to change the taxation of international businesses that Canada is following and implementing, could Canada simplify its international taxation system and make it fairer?
• What role does “reporting” and penalties for the lack of reporting play in the future? Today’s system is becoming increasingly draconian with “carrot and stick” changes occurring.

The above short list is dramatically incomplete and is simply the obvious…there’s a ton more.

Adam Smith was onto something more than 200 years ago.  It’s time for Canada to modernize its taxation system and return to the core principles he laid out.

 

One Comment About Leadership –  Dress For Success

 

In 1975, John T. Molloy wrote the classic book Dress For Success. It was essentially about the effect of clothing on a person’s success in business and life.  Fast forward a few decades later and it became fashionable for some businesses, like the tech sector, where jeans, turtlenecks, running shoes and other casual clothing were the norm.  “Casual Fridays” has become more and more common in professional services firms.  Many professional services firms now have no dress codes. In some cases, some larger professional service firms have even advertised to prospective employees that they have a casual dress policy to try to attract people to their firm.

Medical practices almost always never had one, and “scrubs” were the norm.

When the COVID mess started more than three years ago – with many people working from home – dress standards took an even further decline and have been very slow to climb back.

So, what do I think about dressing for clients?  I have views similar to my friend, Trevor Parry, who recently posted that dressing formally / respectfully for clients and others shows respect.  I agree.  In my view, whether you’re a salesperson, administrative assistant, doctor, lawyer, entrepreneur, accountant, or others who deal with the public, you should show respect for the people you are dealing with.  Dressing respectfully is one small but essential step to convey that.  Whenever I rarely speak on the topic, I get the usual following responses:

• Oh, come on, Kim, times have changed….don’t be an old fuddy-duddy;
• But, Kim, I’m way more comfortable dressing casually and I’m very successful…. dressing formally / respectfully does nothing for me;
• I’ve been dressing casually for years…and look at me, I’m very successful;
• I like a lot of what you have to say, Kim, but I don’t agree with you on this one…I like dressing casually.

The above rebuttals have one thing in common:  the responses are often self-centered and not focused on who they serve. A good leader always puts their audience first and doesn’t concern themselves with how they “feel” or put themselves first.

Now, having said that, there is a balancing act.  For example, if I visit one of my clients at their farm, I’m not showing up in a three-piece suit.  I will try to respectfully dress to that audience and ensure that they know I can relate to them.

There is no shortage of opinions on this topic, but, for me, I have little tolerance for self-centered views. I believe the “best you” should be showing up in whatever form that demands.  It’s simple respect. And it’s a rare day that ripped jeans, running shoes and a wrinkled t-shirt convey respect.

 

One Comment About Economics – Further Interest Rate Hikes on Hold?

 

According to an October 23, 2023, Reuters news story and poll, further interest rate hikes are not expected by the Bank of Canada as inflation has cooled faster than expected.  And interest rates can be expected to start to decline by mid-2024.  If such predictions turn out to be true, that will be good news for many Canadians who are on pins and needles and are praying that their floating lines of credit and variable-rate mortgages won’t be affected.

If true, many Canadians should use this time (if they haven’t already) to look at their debt and consider alternatives to reduce their exposure to high interest rates.  While some may be able to hold onto continuing exposure, many cannot.  There’s a reason why I’m seeing and hearing more ads for bankruptcy and insolvency services.

As I’ve mentioned many times before, our government needs to constrain unnecessary spending and bring our budgets back into balance.  This would go a long way to easing inflationary pressures and even accelerating interest rate reductions by the Bank of Canada.  And this would go a long way to helping vulnerable Canadians.

 

Bonus Comment – Quote From Susan C Young – Speaker and Consultant – About Dressing For Success

 

“The first thing others see is YOU—not your resumé, background, or credentials. A picture is truly worth a thousand words, and how you dress is the “picture” you provide for all the world to see.”

Totally agree!

 

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