SOCIAL: PROPOSED POLICY CHANGES/ TAXATION

 

SUBJECT:  TAXATION

PURPOSE:  This briefing note is a recommendation for changes in policy pertaining to taxation in Canada. 

ISSUE:  There is too much regulation for the appropriation of public funds obtained via taxation.

Background:

There are many sources of funds in which the government can attain to fund their initiatives.  One such source is taxation.  In British Columbia there are taxes on many goods and services.  These taxes provide the government with the funding it needs to be able to build infrastructure, support the medical system, income assistance, disability assistance, pensions, employment insurance amongst others.  It is clear that the government has created these systems in order to give each citizen equity.  However, the limitations of the use of the funds received by the government has caused this government to be in deficit.  Taxation in Canada is stipulated by the Canadian Constitution under S91 (3) and S92 (2).  The management of funds as per current legislation prevents the government from what is called, “miss appropriation.”  Miss appropriation is the criminal act of using funds in such a way other than its intended purpose.  In this case if the government were to utilize funds gained via taxation for the creation of capital, it would thus be guilty of miss appropriation.  Formally this is refered to as embezzlement.  It is evident that the government of Canada is in dire straits as they have been consistently experiencing trade deficits, let alone the debt incurred as a result of the COVID 19 pandemic. 

The Canadian government has a fiduciary duty to its citizens.  By embezzling money into capital making initiatives, currently, it would be considered a form of deceit.  Deceit could be defined as where one lies to another causing a loss.  Furthermore, if this miss appropriation occurs, it is a breach of contract against the citizens.  Therefore, the government needs to rework the legislation pertaining to taxation.  They also need to add limitations on the capacity of the government to be able to use such funds for capital attaining initiatives.  Currently, the government, if they have not already been doing so, can redirect some funds to the investment in financial markets.  If this were to occur, the government would need a task force capable of making competent decisions related to the matters of trade within the financial markets.

Considerations:

According to the Huffington Post, Canadas budget deficit has grown by more than any other G20 country amid the pandemic.  The deficit amounts to nearly one fifth, 19.6% of the country’s economic output.  The specific amount is about $330 billion this fiscal year.  For comparison during fiscal year 2017 – 2018, Canada posted a budgetary deficit of $19.0 billion although revenues in increased by $20.1 billion.  The federal debt totaled to $671.3 billion on March 31, 2018.  Currently Canadas combined federal- provincial debt will reach $1.5 trillion during 2019 & 2020.  As evidence by these figures, it is clear that Canada is incurring debt because of the support systems in place which provide equity to citizens.  For more reference, Canada spends and allocates significant tax payer money to these social support programs.  In 2016 – 2017 they allotted $48.1 Bn to elderly benefits, $22 Bn to children’s benefits, $20.7 Bn to employment insurance and $13.3 on Canada social transfer.  As it becomes evident this is a significant portion of the budget.  These social supports aim to bring people back into the community as active citizens. 

 

Options: 

Option 1:  Minimum and scaled payments.

As a result of inflation, the value of the dollar has been consistently reduced.  Through investing taxation funds, the government should guarantee a minimum payment to recipients of its services furthermore, they should create a scale whereby, citizens can benefit off of the government initiatives related to capital investments.  By implementing a scale, it increases the equity in which citizens can ascertain.  It also assures that the ratio of the inflation or devaluing of the dollar is in direct proportion to what each citizen receives.  As an example, to depict the critical issue of inflation, in 1988 the United States Department of Labor, Bureau of Statistics, indicate that a loaf of bread cost approximately $0.59.  In January of 2013, that same loaf of bread cost $1.42.  This is the least feasible option as it would require a large task force to administer this program.  Every month, these government workers must calculate how much is to be given to recipients of services designed to socially lever them back into society.  Selecting this option will give people equity as the government seeks to pay its recipients proportionately to the economy.  Clearly, this policy serves to give people equal treatment as citizens.  This option is the most sustainable and will allow people to enjoy the benefits of government initiatives aimed to increase the living standard of the nation.

Option 2:  Status quo.

This option is very feasible.  Selecting this would not require additional staff.  By offering minimum support, the government is relieved from the risk of contemplating whether the market goes down under.  Unlike, option 1, this option has more stability for the citizen.  Citizens won’t have to then worry about a depression or recession affecting the amount of payments they receive from government programs.  They will receive the stipulated amount as per government provisions therefore, they will still ascertain equity.  This is also a sustainable option however, it limits the standard of living by only ensuring that the poverty line is kept at bay thus not doing anything else to elevate the citizen such as by offering them the ability to reap the rewards from Canada’s financial success. 

Recommendation:

Option one is recommended.