Wimping our Way Back to Serfdom
Ron Bolin — September 16, 2010
Letter to the Editor:
Derek Spalding’s Daily News article, “Millennium ordered to repay $3M to city of Nanaimo” on Sept. 15 is a sad story as it suggests we may never see the money we are owed. But much sadder are the kinds of comments which it has attracted on line where most respondents seem to feel powerless to deal with the situation. This kind of “kick me, I deserve it” attitude permeates much of our political discourse in Nanaimo and BC.
Made a deal with shell companies costing me over $3 million: “Shame on you, but nothing I can do about it.”
Mislead me about implementing the HST and then kick my overwhelming displeasure down the road for over a year and a $30 million referendum: “Shame on you, but nothing I can do about it.”
With this attitude it is no wonder we get kicked.
There are things we can do about it. If deals were made with shell companies, those who made them can be appropriately dealt with. If we have been cheated on the HST, we can recall as many of the misleaders as we can, and we can begin today, not next year.
When citizens feel helpless, democracy is in danger. Those who have worked so hard to get us out of serfdom deserve better.
It’s called due dillegence. There should not have been a single official in city hall that felt it was a “good” decision to deal with a company of companies that was in this sort of financial mess. The writing was on the wall and the client (the city) should have spent some money and followed references, past projects, inspected the health of their economic stature etc. The problem there is that if the media managed that story it would read something like “City wastes money on study” or “City looking for consultants to address… money down the toilet”. The trouble is that would have been the right thing to do.
On the subject of the other, VAT or value added taxes are the most effective way to address taxation. Hidden tax, user fees and other such messes that we deal with (PST is an example of that) is a huge waste of our money. I don’t enjoy tax but if I’m paying it I’m much more willing to address a VAT than the previous garbage that the ZALM would have many believe is the right thing to do.
How about writing an article on the HST as a form of VAT which explains why it is a superior method of taxation to the alternatives. I keep reading assertions about this on both sides, but I don’t claim to really understand it. I could use a lesson and I expect that I am not alone. I would particularly like to understand the distribution of taxes using such a method and the nature of its regressivity.
I’m not an accountant but the one I use in town is a well respected CA and she has explained the benefits to me. I take examples of the VAT from the UK and other places in the EU where there are limited other taxes but instead 10 to 25% VAT depending on the country and so on. I can dig up what that does but I also know that it is far more efficient.
Ron, I snagged this from a tax preparation website and it outlines the issues fairly clearly.
How Does VAT Really Work?
Value Added Tax is applied to the difference in value between what the original supplier of a good or service charges and what the ultimate customer of that good or services pays. Hence the name “Value Added”, a tax on the increase in value from one supplier to another and from the last supplier in a chain to the ultimate customer.
Value Added Tax is charged to the supplier of a good or service at the time the supplier issues an invoice. The supplier is liable for the payment of the tax to the government. (The government where the supplier is registered.) The buyer pays the supplier the amount charged on the invoice, including the VAT charged by the supplier.
The buyer MAY be able to reclaim the amount of VAT paid to a supplier from the government if:
The buyer has a registered VAT number
The supplied goods are directly related to VAT income / activities that the customer conducts that are liable to VAT
The VAT system sounds an aweful lot like the kind we used to have. The systems that governments offer to us always state how much better they are than what we had before and how we, the consumers and taxpayers, will benefit and save money. No matter how they (governments) paint the picture, by the time we get it, the picture is two stickmen with the taxpayer paying more than we did before. Our own City Hall has a great method of telling us we have to pay 7% more in taxes and then work like crazy to reduce it to 6.4% and claim they are heros. Reduce the increase to ZERO and I will vote to re-elect. Give us an increase, any amount, and could end up with a new 9 panel council.
This City is a wonderful place and it can even be better. The City needs to manage itself (zero tax increases, adjust timelines for road and sewage projects and freeze hiring) and not worry about the BIG Multiplex type PROJECTS. The ones we have need to be taken care of are the ones already built and any new project needs to be done without CITY involvement. The Cruise Ship Terminal has no City money and hopefully the City does not give them a tax break or grant.
On this topic a rather thorough document on VAT can be found at:
This article notes in a section on “Fairness” that: “Thus, to the extent that special provisions and exemptions erode the VAT base, these exemptions also erode its neutrality. Typically exempt sectors include the public sector (even though it may provide services in competition with private firms), basic education and health services (inter alia, the rationale is that it competes with the tax-exempt public sector), and finance and real estate.
Note the exemptions on the public sector, real estate and finance. I would emphasize the latter as it is here particularly that income deviates, i.e. where low wage earners must consume virtually 100% of their income, the wealthy find that a much smaller percentage is consumed and the rest allocated to areas not subject to VAT. Of course income tax enters the picture here and some kind of balance must be reached. The fact that the gap between the rich and the poor has been rapidly rising over the past decades indicates that there is a problem in the balance -or that the previous balance was incorrect. I would hold that where the balance moves in favour of consumption taxes leaving the less wealthy to pay a greater portion of total taxes and thus with less disposable income with which to consume, such a system is headed for a serious reckoning.
Isn’t the HST a value added tax?
The problem is not whether you call it the PST the HST the GST the VAT of the BST.
The fact is that governments at all levels, driven by public and special interest agendas, simply keeps on spending more and more money. And the ‘system’ has to keep coming up with more and more ways of providing the money to cover the expenses.
Seriously, I doubt if anyone knows how to run this thing, our governance, economy and taxation is not exactly a time proven model. If anything we are clearly seeing just how flawed it is.
Thankfully we are currently living in a time when all out war is not how financial upheaval is being resolved.
The HST, as are the GST and the PST, is a VAT (Value Added Tax).
While I would quite agree that government at all levels is spending too much, the tax question is one about how to get the money to pay governments bills whether they are too high, too low or just right. What kinds of taxation, income, comsumption or user fees are to be used and how much of the revenue should be raised from each. There is no correct answer to this question. The dynamics of living require constant rebalancing as times and conditions change. A recent report from our neighbour to the south indicates an imbalance with which we are quite familiar.
The Chances of a Double Dip. from
Thoughts from the Frontline Weekly Newsletter
The Chances of a Double Dip
by John Mauldin
September 17, 2010
Spending by state and local governments is not one of the sources of economic revival after recessions end because it has been such a steady 12% to 13% share of GDP since the early 1970s. In the early post-World War II decades, it grew rapidly to finance the education of the postwar babies and the growth of mushrooming suburbs. Municipalities have also provided a steady source of jobs since, until recently, many fewer employees were laid off or fired than in the private sector and relatively few quit. Years ago, the “social contract” held that those employees received lower wages than private sector workers, so early retirement provisions and lush pensions allowed them to catch up in their later years. But since the early 1980s, the private sector has been globalized with very little growth in real incomes. Meanwhile, state and local government employees have continued to receive pay raises in excess of inflation and now have wages that are 34% higher than for private sector employees (Chart 8).
Currently we have gotten MUCH money by borrowing which would be alright, if we could see the day we are going to repay the loan. Does anyone know what the per Diem is on all of our debts? Can you imagine how much health care and schools that interest could provide without increasing taxes at all? I recently came across the number of the debt costing this province something in the order of $7 million PER DAY.
Taxes are just like electricity, in that they take the path of least resistance.
The unorganized masses who are not under the umbrella of a union, who don’t work for government, present the best chances of providing more grist to the mill. They would be your ‘target’ when crafting means of collecting some more money.
Can someone explain just what VALUE a TAX Adds?? :^)
I thinks it’s misleading to use quote countries using the VAT to justify it’s use in Canada & particularly BC.
Countries such as the UK, Germany & France have considerably higher levels of social services than we will ever have & none of them have the dismal child poverty levels we experience.
Industry in these countries have been enjoying tax breaks for many years & frankly they are no further ahead than we are.
The whole point is that it is industry, particularly manufacturing that reaps the eventual benefit (or so we are told I have seen no proof of it just rhetoric)& we are not a manufacturing Province.
Case in point; the soft wood lumber agreement.
Five billion dollars were returned to Canadian Forest companies of which , I guess, one billion must have come back to BC.
Since the return of the monies many more mills have closed & nary a dollar has been spent of this windfall in Island sawmills.
This , in my estimation, suggests that savings to these often multinational companies is seldom used to improve local economies but rather shareholders pockets.