Her comment on how tax creates and builds markets by supporting communities was refreshing. After all, communities are people, so she was saying taxes are how we build up people who share the common interests of our society.
I loved her framing of tax policy. Practically my entire lifetime taxes have been painted as an evil that should be lessened every chance politicians get. Incredibly we just did federally again.
Governments first decide how much they will spend and on what. Then they decide how to fund that spending - taxes and/or deficit financing. Developed countries tend to tax 32-35% of GDP, except the U.S. - always the outlier, in this case because of the absence of universal health care. The Scandinavian countries tax a higher percentage and have broader social security nets than most. Regardless, in the real world (not academia) we start with spending decisions.
Good discussion but not sure about a few comments.
1. "We may get to a point where we can get Netflix to collect some sales tax on the GST, for example.”
Netflix has collected sales taxes since 2021. Digital sales tax were addressed years ago and are collected and remitted by the tech companies.
2. The use more broadly of Netflix as the example doesn't really work. Netflix is not a target of the DST. The DST covers four digital services:
(1) online marketplace services revenue (which would cover an Ebay, Airbnb or Uber),
2) online advertising services revenue (Google or Microsoft),
(3) social media services revenue (Facebook or TikTok), and
(4) user data revenue (any company that collects and sells user data)
There are plenty of companies caught by the DST, but not the streamers. They’re subject to the Bill C-11 mandated contributions, which the government insists is not a tax (5% baseline currently being challenged in court, the rest TBD but some groups asked for an additional 25% of revenues this week).
3. "Google talked about passing those costs on to the customers.”
Google started levying a 2.5% fee back in October 2024. Amazon has one too.
Thanks Michael. I knew all these points, of course, by following your “Law Bites” podcast and Substack 😊. I highly recommend both to anyone who is interested in Canadian digital law and policy.
As a tax policy person myself, I have some issues with this piece.
First, Christians never says why we are having these discussions on digital taxation. The reason is that, since income tax was introduced in Canada in 1917, business profits have generally only been taxed here if a business has some type of physical presence in our country: an office, employees, a plant, a company. This fundamental principle of physical presence is imbedded, not only in our tax rules, but in tax rules around the world, and in tens of thousands of bilateral tax treaties. But the provision of digital services to Canadian consumers may require no physical presence, so what to do?
The best approach would be to agree on a new global set of rules: rules that allow net income from digital services to be divvied up between countries based in part on where the consumers reside. The new order would be incorporated into tax rules and tax treaties around the world. The OECD has been working on this approach for years (Pillar 1) but Trump has keeboshed it. (As the United States has most of the digital giants and would clearly be giving up taxing rights, the Biden administration wasn’t all that supportive either.)
Second, Christians seems to say that a digital services tax (DST) should help create a level playing field, but that isn’t true. Right now, Google and Netflix pay tax in their home country and also would have been taxed at 3% of gross revenue in Canada. Crave? Exactly the same thing. Crave is paying regular Canadian income tax on net income and would have also paid 3% tax on gross revenue. So a DST is duplicative and distortionary. And taxing the bejeezers out of Google is not magically going to create some type of new google in Canada.
Other Canadian companies like Loblaws and Canadian Tire may have been subject to the 3% levy as well, depending on whether their annual online sales exceed C $20 million.
So what to do now that Trump refuses to discuss global sharing of net income based in some part on where consumers reside? That is a tough nut to crack. Christians suggests double taxation by denying the deduction of expenses in Canada, or imposing withholding taxes that may or may not violate our tax treaties (if they do, they would be struck down by Canadian tax courts).
It is true that countries around the world are using DSTs as well as such approaches to grab some tax from digital services. But what a mess. In the case of Canada, I would have preferred that Carney had talked with the Americans at the earliest possible time about a bilateral deal for some sharing of net income from digital services, rather than caving in for nothing at the eleventh hour.
In the end, this is not about sensible tax policy. It is about the facts that tax rules and tax treaties that have been in place for more than a hundred years (well, the rules at least) now give a lot of tax revenue to the United States, and that other cash starved governments want to grab some of it, by hook or by crook and even though it results in double taxation.
Finally, on tax reform, I would only note that 1971 Canadian tax reform bore little resemblance to the Carter Commission recommendations on which it was based. A buck is a buck is a buck proved to be too much for the politicians to handle, so that fundamental principle was dropped. So that is a cautionary note for future, possible tax reform exercises in this country.
I now see that Christians has argued against the OECD Pillar 1 approach on the basis that the U.S. loss in taxing rights would have largely gone to countries which spend on consumption (including Canada), and little to poor, developing countries with large populations but small GDP. She would prefer rules that benefit the latter.
This is noble, and well suited for the ivory towers of academia. But I suggest that real world views come from those actually developing tax policy within government.
I liked the description of the Digital Tax. I haven't seen it put that way before, and it made sense as to what the purpose was.
I liked the broad point as well about tax, and how the purpose of tax is to do things. I've always felt, even though it would never happen, is that we should figure out what we want to do, and then set our tax rates to fund those expenses. Only run deficits for capital spending, and then tax use of infrastructure to pay off the capital expense.
But this interview is another good reminder of the value you deliver to your subscribers. Thanks.
As someone who practices tax, I can say that the DST exposes a weakness in the entire international tax realm. It was designed in and for an age where almost all trade was physical - in particular, wine going from France to England.
In the modern world much trade is virtual - intellectual property. Sales tax is much better suited to this new world order. It's time to revamp Canada's balance of taxation, tilting it more to GST (which is a far simpler tax)
I was struck by Prof. Christians’ framing of what taxes are for; the society they can help shape. Specifically: That’s only one interpretation of what taxes are for. One “school” if you will. There are people who really fundamentally disagree that taxes should be used to shape the society that “we” want!
This is partly why academia is seen to have a bias. It’s not deliberate. But if you’re a libertarian who thinks taxes are a necessary evil and should be as non-interventionist as possible to fund the required functions of the state, are you going to become a Professor of Tax Policy? Of course not — the only people who will devote their lives to this study are those who think taxes are an interesting tool to achieve technocratic aims.
As a retired CPA, I saw ever so many tax measures that were really social policy in disguise. From my perspective, taxes should be clear and simple. In our current environment, the simplest tax is the GST/HST: you sell something - collect and remit taxes on the sale price. Governments have made income taxation an incredibly complicated thing that no one really understands.
The point of income tax law now is not simply collecting revenue but it is making social and other policy. I firmly believe that, "The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing." [Jean-Baptiste Colbert, finance minister to Louis XIV]. Taxes should be collected and THEN governments should explicitly set social/etc. policy - my contention.
When I was in public practice I used to ask clients what the purpose was of the Income Tax Act. The naive ones simply replied that it was to raise taxes whereas the more sophisticated one could also enumerate other issues that were encompassed in the Act; I used to be able to list many tens of other issues that were explicitly in the Act, let alone the others that were clear consequences (deliberate or otherwise) of the explicit rules.
Income taxation should be the subject of another Royal Commission or such study to consider the purposes of taxation and how to best implement those purposes - but, I fear, no government has the courage to do such a thing. Pretty well the only praise that I have for Trudeau 1 is that he implemented (his version of) the Carter Royal Commission on Taxation which took effect on January 1, 1972, something that we do need again but, as noted, I think unlikely.
But note that 1972 tax reform bore little resemblance to the recommendations of the Carter Commission. Lobbyists and politics intervened, and most of the “buck is a buck is a buck” principle was abandoned.
You are quite correct but, as you and I both recall, many, many elements of Carter did make it into Edgar Benson's White Paper and then his final legislation. The one thing that everyone keeps harping on (sorry, no offense meant) is the issue of "a buck is a buck is a buck" that didn't make it into the the capital gains inclusion rate. That capital gains inclusion rate and the integration principal with tax credits for Canadian source dividends were political sops to assist in persuading the "usual suspects" in the tax and investment communities to support what was called "Tax Reform" and was, indeed, very much a tax reform at the time, unlike the various changes that have had that title (inaccurately) assigned to them over the last few decades.
The point is that at the end of such an exercise (which I hope to see before I die - but I am very suspect about the courage of the politicians) is a consideration of the recommendations arising therefrom and a subsequent political calculation of what is possible as compared to what is aspirational. Put differently, one should never confuse aspiration with expectation, particularly in political matters.
Yes, a number of elements of the Carter recommendations did make it into the final legislation. But as a result of lobbyists and politics, many did not. Gains on a personal residence were exempt, as were lottery winnings. The small business deduction was established, the nightmare that never ends. And I guess that taxing imputed rent of homeowners never made it very far.
Like you, I embrace tax reform in theory, but I wonder how practical it is. Remember the Ontario Fair Tax Commission, where we basically ended up with three reports - one from the commission itself, and stirring (and opposing) dissents from the co-chairs?
I don't particularly recall the Ontario Commission as I am an Albertan. What I can say, whether the Ontario situation to which you refer or to Carter or any other report is that anything that is suggested will be a) controversial because "you" suggested it and "I" did not; b) will result in winners and losers (and the losers squawk much, much louder); and c) is inherently political (see item b))
Yes, I embrace tax reform even though it is - at very, very best - a series of compromises but the existing system in Canada where to do one's own income tax return one needs to be an accountant and/or use good software is, I submit, an abomination.
I learned to do tax returns when in my teens and doing my own from summer jobs. Later, after computers came in and were to "make things easier" I still did some returns by hand each year to make sure that I had the relationships clear in my head. Today, in retirement, I use a computer program as, while I have relationships pretty clear, the comparisons of A must be greater than B but cannot exceed Q and must be divisible by the square root of something requires my computer. While I agree with your despair at the clearly political nature of "reform," I simply think the existing system is intolerable and is getting worse each year.
The interviewee resorts to many straw men and deflections, especially when arguing against any form of private health care, when mixed systems exist in most liberal democracies.
As a retired CPA, I agree with Ms. Christians: a) the tax system is WAAAAY too complicated; and b) it needs to be completely ripped up and re-thought - which won't happen, you can be sure, because too many oxen would have to be gored.
I disagree with Ms. Christians when she says, "Well, tax law is how we create our country. That's how we build our society. That's how we create the communities that we want to live in and the lifestyle that we want to share with our neighbours. That's how: with tax law." That means that we use taxes to shape society and that I abhor! In fact, I respectfully submit that that is how we got the Income Tax Act to be so complicated and foolish as it is today: it is full of little (and big) provisions that encourage/discourage/seek votes/etc. and that live on long after passage to skew economic and social behavior in both intended and (very frequently) unintended ways.
Simply put, taxes exist to raise money. Period. Or, that should be the case but, no, Canada (and so many other countries) use taxes encourage/discourage/seek votes/etc. Taxes are always with us (drat!); Jean-Baptiste Colbert, Finance Minister under Louis XIV, said, "The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing." Wise man.
So, my prescription is to raise the money in as neutral a way possible and to then EXPLICITLY choose whatever social and/or economic policy is decided to be favorable and use the funds so raised to implement that policy.
Of course, I do not expect that any government will implement such a utopian - and sensible - method of action.
Our governments (federal, provincial & municipal) don't have a revenue problem, they have a spending problem, and buying votes is the biggest culprit as you pointed out.
The government doesn't need to tax to raise money. The government literally prints the money. It uses tax to direct real resources towards social priorities.
We spend far too much time in Canada worried about how to raise money, and not nearly enough on how to produce more real resources.
As someone from Ontario, it seems like I pay HST on pretty much any US-based digital service already - Netflix, Spotify, YouTube, etc. That's not the same as income tax, but the interviewee seems to imply that GST/PST is not collected on US digital services, unless I misunderstood (I hope I did misunderstand, seeing as it's a tax lawyer being interviewed!).
Trump has taken issue with HST collection on US imports in passing as well. As a private citizen, I can send a lot more to the US tax-free than I can bring into Canada tax-free. The US doesn't have a national sales tax, whereas Canada can apply it on everything coming into the country, which is essentially a tariff (even though it's not an unfair one - Canadian companies have to remit it as well, so it is a levelling of the playing field, but the optics of Canadians paying a tax on US imports while not being subject to one on what they export to the US that's at issue).
Specific to Crave, they have created their own monopoly and I am not worried for them. If you want to watch HBO content legally in Canada, you can only watch it on Crave.
The framing of tax as a constructive rather than extractive exercise was interesting, but I think that comes down to what the money is being spent on. Some amount of waste needs to be tolerated because there has to be room for experimentation, but it's not a carte-blanche to collect an indefinite amount of tax and spend it on anything at all. I think most people recognize that there are good taxes and bad taxes, and that taxation isn't universally good or universally bad.
I am bit surprised it didn’t come up but the main judgement that arises for me with this DST issue is just how short-sighted and otherwise ill-advised the cut to the GST was. It was a really bad policy decision.
The Crave example seems to assume that the openness of the internet, the access it gives you to markets around the world, can only harm a Canadian company (foreigners competing for Canadian customers) and not help it (say, Crave making a play for US, UK, Aus customers).
That sounds lovely in theory, but streamers only have streaming rights within the countries that they buy the rights to stream in. That's how you get the "This content is not available in your country" notice. Crave won't buy streaming rights outside Canada.
Of course, you can get around this by being a "platform" (YouTube) and not paying for content, or by producing your own content (Netflix). Both of these recreate ancient problems of abuse of dominance in vertically integrated entertainment corporations. Essentially, the American digital giants are playing with different rules than traditional advertisers, and that's part of what has crippled traditional media.
Good point. This implicit assumption that Canadian products are only good enough for a protected Canadian market.
We see it all over the place eg dairy — why shouldn’t Quebec cheese welcome access to the huge European market?
I tend to think of it as a loser mentality, but maybe it’s a necessary one for a middle-sized country to survive among heavyweights. The problem is that for people who want to play for the global winners in any one industry, they end up leaving the country.
I mean, it might be true, but I don't think it should be assumed. The determination is probably industry-specific.
One big lesson from the last almost-20 years of streaming is that Americans will happily watch non-US movies and TV, even non-English-language international programming.
Thank you Paul for clarifying the fact that the DST is suspended and NOT rescinded as so many other media outlets have reported. It would take an Act of parliament to rescind the tax and since parliament won’t sit again until September, the DST cannot be rescinded before then. So, the PM’s proclamation was simply a tactic to get the Yanks to resume trade talks. I expect that if Canada doesn’t get much of what it is looking for from these talks, collection of the tax will be reinstated.
What a timely and well crafted interview with Professor Christians. I pay taxes and am usually happy to do so as I have been pleased with the services received for tax paid. The DST conundrum is now much better understood by me. The concept of taxation to enable society to focus, build and grow has appeal. I would like to know more about that.
Canada’s taxation system is not like that of the Scandinavian countries but I have often wondered if it could be and should be. Education, childcare, healthcare and end of life care for those who age slowly, painfully and without conscious thought seems to be more respectfully and generously provided by those states.
Post pandemic the shortcomings of the “warehousing” of seniors were very evident. For profit care facilities were the most egregious in their lack of care.
Paying tax requires a level of trust that money collected will be spent wisely. Pandemic spending broke that trust for me. I fear we might never get the final accounting of the wasted resources as well as those deemed worthy and essential. For a future “expert”, in that area of analysis, could you consider inviting a conversation with Canada’s Auditor General, Karen Hogan.
This was an excellent, highly informative piece. I would love to see more such interviews with articulate experts on current issues. Many thanks.
I've actually started doing this over the past few months. Others:
https://paulwells.substack.com/p/the-q-and-a-a-deep-fracture-within
https://paulwells.substack.com/p/youre-not-going-to-win-that-argument
https://paulwells.substack.com/p/the-q-and-a-trillion-dollar-love
https://paulwells.substack.com/p/the-q-and-a-ron-deibert-on-the-wild
Subscriptions make excellent gifts!
And thanks for delivering it as an edited transcript rather than as a podcast with a machine-generated one.
I would have liked her to say something about the OECD process though. Where is that going?
As I recall, the DST is originally an OECD brainchild.
Nowhere fast because the US isn’t interested?
Her comment on how tax creates and builds markets by supporting communities was refreshing. After all, communities are people, so she was saying taxes are how we build up people who share the common interests of our society.
I loved her framing of tax policy. Practically my entire lifetime taxes have been painted as an evil that should be lessened every chance politicians get. Incredibly we just did federally again.
Except it’s not really true.
Governments first decide how much they will spend and on what. Then they decide how to fund that spending - taxes and/or deficit financing. Developed countries tend to tax 32-35% of GDP, except the U.S. - always the outlier, in this case because of the absence of universal health care. The Scandinavian countries tax a higher percentage and have broader social security nets than most. Regardless, in the real world (not academia) we start with spending decisions.
I didn't find that assertion of market creation credible at all.
To be blunt, it is hogwash.
Good discussion but not sure about a few comments.
1. "We may get to a point where we can get Netflix to collect some sales tax on the GST, for example.”
Netflix has collected sales taxes since 2021. Digital sales tax were addressed years ago and are collected and remitted by the tech companies.
2. The use more broadly of Netflix as the example doesn't really work. Netflix is not a target of the DST. The DST covers four digital services:
(1) online marketplace services revenue (which would cover an Ebay, Airbnb or Uber),
2) online advertising services revenue (Google or Microsoft),
(3) social media services revenue (Facebook or TikTok), and
(4) user data revenue (any company that collects and sells user data)
There are plenty of companies caught by the DST, but not the streamers. They’re subject to the Bill C-11 mandated contributions, which the government insists is not a tax (5% baseline currently being challenged in court, the rest TBD but some groups asked for an additional 25% of revenues this week).
3. "Google talked about passing those costs on to the customers.”
Google started levying a 2.5% fee back in October 2024. Amazon has one too.
Thanks Michael. I knew all these points, of course, by following your “Law Bites” podcast and Substack 😊. I highly recommend both to anyone who is interested in Canadian digital law and policy.
As a tax policy person myself, I have some issues with this piece.
First, Christians never says why we are having these discussions on digital taxation. The reason is that, since income tax was introduced in Canada in 1917, business profits have generally only been taxed here if a business has some type of physical presence in our country: an office, employees, a plant, a company. This fundamental principle of physical presence is imbedded, not only in our tax rules, but in tax rules around the world, and in tens of thousands of bilateral tax treaties. But the provision of digital services to Canadian consumers may require no physical presence, so what to do?
The best approach would be to agree on a new global set of rules: rules that allow net income from digital services to be divvied up between countries based in part on where the consumers reside. The new order would be incorporated into tax rules and tax treaties around the world. The OECD has been working on this approach for years (Pillar 1) but Trump has keeboshed it. (As the United States has most of the digital giants and would clearly be giving up taxing rights, the Biden administration wasn’t all that supportive either.)
Second, Christians seems to say that a digital services tax (DST) should help create a level playing field, but that isn’t true. Right now, Google and Netflix pay tax in their home country and also would have been taxed at 3% of gross revenue in Canada. Crave? Exactly the same thing. Crave is paying regular Canadian income tax on net income and would have also paid 3% tax on gross revenue. So a DST is duplicative and distortionary. And taxing the bejeezers out of Google is not magically going to create some type of new google in Canada.
Other Canadian companies like Loblaws and Canadian Tire may have been subject to the 3% levy as well, depending on whether their annual online sales exceed C $20 million.
So what to do now that Trump refuses to discuss global sharing of net income based in some part on where consumers reside? That is a tough nut to crack. Christians suggests double taxation by denying the deduction of expenses in Canada, or imposing withholding taxes that may or may not violate our tax treaties (if they do, they would be struck down by Canadian tax courts).
It is true that countries around the world are using DSTs as well as such approaches to grab some tax from digital services. But what a mess. In the case of Canada, I would have preferred that Carney had talked with the Americans at the earliest possible time about a bilateral deal for some sharing of net income from digital services, rather than caving in for nothing at the eleventh hour.
In the end, this is not about sensible tax policy. It is about the facts that tax rules and tax treaties that have been in place for more than a hundred years (well, the rules at least) now give a lot of tax revenue to the United States, and that other cash starved governments want to grab some of it, by hook or by crook and even though it results in double taxation.
Finally, on tax reform, I would only note that 1971 Canadian tax reform bore little resemblance to the Carter Commission recommendations on which it was based. A buck is a buck is a buck proved to be too much for the politicians to handle, so that fundamental principle was dropped. So that is a cautionary note for future, possible tax reform exercises in this country.
I now see that Christians has argued against the OECD Pillar 1 approach on the basis that the U.S. loss in taxing rights would have largely gone to countries which spend on consumption (including Canada), and little to poor, developing countries with large populations but small GDP. She would prefer rules that benefit the latter.
This is noble, and well suited for the ivory towers of academia. But I suggest that real world views come from those actually developing tax policy within government.
I liked the description of the Digital Tax. I haven't seen it put that way before, and it made sense as to what the purpose was.
I liked the broad point as well about tax, and how the purpose of tax is to do things. I've always felt, even though it would never happen, is that we should figure out what we want to do, and then set our tax rates to fund those expenses. Only run deficits for capital spending, and then tax use of infrastructure to pay off the capital expense.
But this interview is another good reminder of the value you deliver to your subscribers. Thanks.
As someone who practices tax, I can say that the DST exposes a weakness in the entire international tax realm. It was designed in and for an age where almost all trade was physical - in particular, wine going from France to England.
In the modern world much trade is virtual - intellectual property. Sales tax is much better suited to this new world order. It's time to revamp Canada's balance of taxation, tilting it more to GST (which is a far simpler tax)
I was struck by Prof. Christians’ framing of what taxes are for; the society they can help shape. Specifically: That’s only one interpretation of what taxes are for. One “school” if you will. There are people who really fundamentally disagree that taxes should be used to shape the society that “we” want!
This is partly why academia is seen to have a bias. It’s not deliberate. But if you’re a libertarian who thinks taxes are a necessary evil and should be as non-interventionist as possible to fund the required functions of the state, are you going to become a Professor of Tax Policy? Of course not — the only people who will devote their lives to this study are those who think taxes are an interesting tool to achieve technocratic aims.
I absolutely agree.
As a retired CPA, I saw ever so many tax measures that were really social policy in disguise. From my perspective, taxes should be clear and simple. In our current environment, the simplest tax is the GST/HST: you sell something - collect and remit taxes on the sale price. Governments have made income taxation an incredibly complicated thing that no one really understands.
The point of income tax law now is not simply collecting revenue but it is making social and other policy. I firmly believe that, "The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing." [Jean-Baptiste Colbert, finance minister to Louis XIV]. Taxes should be collected and THEN governments should explicitly set social/etc. policy - my contention.
When I was in public practice I used to ask clients what the purpose was of the Income Tax Act. The naive ones simply replied that it was to raise taxes whereas the more sophisticated one could also enumerate other issues that were encompassed in the Act; I used to be able to list many tens of other issues that were explicitly in the Act, let alone the others that were clear consequences (deliberate or otherwise) of the explicit rules.
Income taxation should be the subject of another Royal Commission or such study to consider the purposes of taxation and how to best implement those purposes - but, I fear, no government has the courage to do such a thing. Pretty well the only praise that I have for Trudeau 1 is that he implemented (his version of) the Carter Royal Commission on Taxation which took effect on January 1, 1972, something that we do need again but, as noted, I think unlikely.
But note that 1972 tax reform bore little resemblance to the recommendations of the Carter Commission. Lobbyists and politics intervened, and most of the “buck is a buck is a buck” principle was abandoned.
You are quite correct but, as you and I both recall, many, many elements of Carter did make it into Edgar Benson's White Paper and then his final legislation. The one thing that everyone keeps harping on (sorry, no offense meant) is the issue of "a buck is a buck is a buck" that didn't make it into the the capital gains inclusion rate. That capital gains inclusion rate and the integration principal with tax credits for Canadian source dividends were political sops to assist in persuading the "usual suspects" in the tax and investment communities to support what was called "Tax Reform" and was, indeed, very much a tax reform at the time, unlike the various changes that have had that title (inaccurately) assigned to them over the last few decades.
The point is that at the end of such an exercise (which I hope to see before I die - but I am very suspect about the courage of the politicians) is a consideration of the recommendations arising therefrom and a subsequent political calculation of what is possible as compared to what is aspirational. Put differently, one should never confuse aspiration with expectation, particularly in political matters.
Yes, a number of elements of the Carter recommendations did make it into the final legislation. But as a result of lobbyists and politics, many did not. Gains on a personal residence were exempt, as were lottery winnings. The small business deduction was established, the nightmare that never ends. And I guess that taxing imputed rent of homeowners never made it very far.
Like you, I embrace tax reform in theory, but I wonder how practical it is. Remember the Ontario Fair Tax Commission, where we basically ended up with three reports - one from the commission itself, and stirring (and opposing) dissents from the co-chairs?
I don't particularly recall the Ontario Commission as I am an Albertan. What I can say, whether the Ontario situation to which you refer or to Carter or any other report is that anything that is suggested will be a) controversial because "you" suggested it and "I" did not; b) will result in winners and losers (and the losers squawk much, much louder); and c) is inherently political (see item b))
Yes, I embrace tax reform even though it is - at very, very best - a series of compromises but the existing system in Canada where to do one's own income tax return one needs to be an accountant and/or use good software is, I submit, an abomination.
I learned to do tax returns when in my teens and doing my own from summer jobs. Later, after computers came in and were to "make things easier" I still did some returns by hand each year to make sure that I had the relationships clear in my head. Today, in retirement, I use a computer program as, while I have relationships pretty clear, the comparisons of A must be greater than B but cannot exceed Q and must be divisible by the square root of something requires my computer. While I agree with your despair at the clearly political nature of "reform," I simply think the existing system is intolerable and is getting worse each year.
Damned politicians!
The interviewee resorts to many straw men and deflections, especially when arguing against any form of private health care, when mixed systems exist in most liberal democracies.
As a retired CPA, I agree with Ms. Christians: a) the tax system is WAAAAY too complicated; and b) it needs to be completely ripped up and re-thought - which won't happen, you can be sure, because too many oxen would have to be gored.
I disagree with Ms. Christians when she says, "Well, tax law is how we create our country. That's how we build our society. That's how we create the communities that we want to live in and the lifestyle that we want to share with our neighbours. That's how: with tax law." That means that we use taxes to shape society and that I abhor! In fact, I respectfully submit that that is how we got the Income Tax Act to be so complicated and foolish as it is today: it is full of little (and big) provisions that encourage/discourage/seek votes/etc. and that live on long after passage to skew economic and social behavior in both intended and (very frequently) unintended ways.
Simply put, taxes exist to raise money. Period. Or, that should be the case but, no, Canada (and so many other countries) use taxes encourage/discourage/seek votes/etc. Taxes are always with us (drat!); Jean-Baptiste Colbert, Finance Minister under Louis XIV, said, "The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing." Wise man.
So, my prescription is to raise the money in as neutral a way possible and to then EXPLICITLY choose whatever social and/or economic policy is decided to be favorable and use the funds so raised to implement that policy.
Of course, I do not expect that any government will implement such a utopian - and sensible - method of action.
Our governments (federal, provincial & municipal) don't have a revenue problem, they have a spending problem, and buying votes is the biggest culprit as you pointed out.
The government doesn't need to tax to raise money. The government literally prints the money. It uses tax to direct real resources towards social priorities.
We spend far too much time in Canada worried about how to raise money, and not nearly enough on how to produce more real resources.
Very informative Q&A!
As someone from Ontario, it seems like I pay HST on pretty much any US-based digital service already - Netflix, Spotify, YouTube, etc. That's not the same as income tax, but the interviewee seems to imply that GST/PST is not collected on US digital services, unless I misunderstood (I hope I did misunderstand, seeing as it's a tax lawyer being interviewed!).
Trump has taken issue with HST collection on US imports in passing as well. As a private citizen, I can send a lot more to the US tax-free than I can bring into Canada tax-free. The US doesn't have a national sales tax, whereas Canada can apply it on everything coming into the country, which is essentially a tariff (even though it's not an unfair one - Canadian companies have to remit it as well, so it is a levelling of the playing field, but the optics of Canadians paying a tax on US imports while not being subject to one on what they export to the US that's at issue).
Specific to Crave, they have created their own monopoly and I am not worried for them. If you want to watch HBO content legally in Canada, you can only watch it on Crave.
The framing of tax as a constructive rather than extractive exercise was interesting, but I think that comes down to what the money is being spent on. Some amount of waste needs to be tolerated because there has to be room for experimentation, but it's not a carte-blanche to collect an indefinite amount of tax and spend it on anything at all. I think most people recognize that there are good taxes and bad taxes, and that taxation isn't universally good or universally bad.
I think the professor should stick to tax law rather than politics.
Tax law is an appliance - an over complicated appliance that governments use to fund what is expedient in their quest to retain power.
Really informative and useful discussion. Refreshing given some of the public commentary.
I am bit surprised it didn’t come up but the main judgement that arises for me with this DST issue is just how short-sighted and otherwise ill-advised the cut to the GST was. It was a really bad policy decision.
Love the idea for a royal commission or some other mechanism for substantial tax reform. I’d like to see us seriously assess the feasibility of shifting to a geared to spending consumption tax https://cyrilhedoin.substack.com/p/on-progressive-taxation?triedRedirect=true
The Crave example seems to assume that the openness of the internet, the access it gives you to markets around the world, can only harm a Canadian company (foreigners competing for Canadian customers) and not help it (say, Crave making a play for US, UK, Aus customers).
That sounds lovely in theory, but streamers only have streaming rights within the countries that they buy the rights to stream in. That's how you get the "This content is not available in your country" notice. Crave won't buy streaming rights outside Canada.
Of course, you can get around this by being a "platform" (YouTube) and not paying for content, or by producing your own content (Netflix). Both of these recreate ancient problems of abuse of dominance in vertically integrated entertainment corporations. Essentially, the American digital giants are playing with different rules than traditional advertisers, and that's part of what has crippled traditional media.
Good point. This implicit assumption that Canadian products are only good enough for a protected Canadian market.
We see it all over the place eg dairy — why shouldn’t Quebec cheese welcome access to the huge European market?
I tend to think of it as a loser mentality, but maybe it’s a necessary one for a middle-sized country to survive among heavyweights. The problem is that for people who want to play for the global winners in any one industry, they end up leaving the country.
I mean, it might be true, but I don't think it should be assumed. The determination is probably industry-specific.
One big lesson from the last almost-20 years of streaming is that Americans will happily watch non-US movies and TV, even non-English-language international programming.
Thank you Paul for clarifying the fact that the DST is suspended and NOT rescinded as so many other media outlets have reported. It would take an Act of parliament to rescind the tax and since parliament won’t sit again until September, the DST cannot be rescinded before then. So, the PM’s proclamation was simply a tactic to get the Yanks to resume trade talks. I expect that if Canada doesn’t get much of what it is looking for from these talks, collection of the tax will be reinstated.
What a timely and well crafted interview with Professor Christians. I pay taxes and am usually happy to do so as I have been pleased with the services received for tax paid. The DST conundrum is now much better understood by me. The concept of taxation to enable society to focus, build and grow has appeal. I would like to know more about that.
Canada’s taxation system is not like that of the Scandinavian countries but I have often wondered if it could be and should be. Education, childcare, healthcare and end of life care for those who age slowly, painfully and without conscious thought seems to be more respectfully and generously provided by those states.
Post pandemic the shortcomings of the “warehousing” of seniors were very evident. For profit care facilities were the most egregious in their lack of care.
Paying tax requires a level of trust that money collected will be spent wisely. Pandemic spending broke that trust for me. I fear we might never get the final accounting of the wasted resources as well as those deemed worthy and essential. For a future “expert”, in that area of analysis, could you consider inviting a conversation with Canada’s Auditor General, Karen Hogan.