Last week, Canadian Finance Minister Bill Morneau insisted that despite the nation’s current financial pickle, he is not contemplating raising taxes just now, even as the Parliamentary Budget Office suggested public debt could this fiscal year for the first time reach $1 trillion at the federal level alone.
While now may not be the time, at some point soon governments around the world will have to face up to how they are going to pay for all their COVID-19 largesse.
As some economists consider using artificial intelligence to improve revenues or modern monetary theory to pay the bills, and while others call for a universal basic income, there is no question that historically, times of crisis have been times of radical financial innovation.
It is well documented that voters love handouts and new spending from one finance minister but normally loathe the tax increases or austerity when a later finance minister decides spending is getting out of hand.
But historian Elsbeth Heaman, author of Tax, Order and Good Government, contends that while people generally dislike the idea of governments taking a bigger bite in taxation, there are many historical examples where a crisis of the kind we are experiencing now can dramatically shift opinions.
New attitude to taxes
“A catastrophe, a war, a famine, something like that creates a different kind of attitude toward taxation,” said Heaman, a McGill University professor whose specialties include social, medical and taxation history and who edited the Who Pays for Canada? volume.
And while in good times, people tend to accept the kind of market forces that offer greater rewards to the rich for their efforts in creating wealth, that attitude can change markedly once a crisis shines a light on the disproportionate suffering of the less fortunate.
The Irish potato famine that led to thousands of deaths in the fever sheds of Canada, including Montreal and Toronto, might be such an example. The Great Depression of the 1930s was another.
“Whenever you have these major events that have differential consequences for different kinds of people, where the rich don’t actually seem to be suffering very much and the poor seem to be suffering very, very acutely, then you do tend to get kind of a backlash against a tax system that seems to mimic the market,” said Heaman.
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She said the historical evidence is plentiful and the changes caused have been momentous.
The backlash against suffering during the Depression permanently remodelled the structure of Canadian taxation power, said Joe Martin, director of Canadian Business History at the University of Toronto’s Rotman School of Management.
Based on recommendations from the Depression-era Rowell–Sirois Commission to expand federal taxation for redistribution from wealthy Ontario and Quebec to the drought-battered Prairie provinces, the federal government used the crisis of the Second World War to expand personal and corporate income tax at the expense of the provinces.
From crisis to innovation
“[There was] strong opposition from both Ontario and Quebec, but it passed because of wartime conditions,” said Martin. That transformation formed the basis of Canada’s postwar welfare system and evolved into the current system of equalization payments that is still contested today.
Geoffrey Hale, the Lethbridge, Alta.-based academic and author of The Politics of Taxation in Canada, said that rather than taxing back the money the government is lavishing out now, Morneau would rather coax the economy into growth so that debt shrinks gradually over a period of years, not in absolute terms but as a percentage of GDP.
That’s why Hale doesn’t see governments boosting corporate taxes: for fear of chasing investment away. Similarly, he does not think there is a lot more opportunity for taxing the rich who would merely be driven toward tax shelters. Hale suggested a more politically palatable source of revenue would be to go after foreign digital sales, which for a large part escape Canadian taxation.
But everyone interviewed agreed that if finance ministers decide they need revenue, there are always places to find it.
Expanded consumption taxes or increased premiums for employment insurance are two examples. But more radical innovations might include wealth taxes, increased capital gains tax, death duties, financial transaction taxes (a Tobin tax), a flat tax or a poll tax, maybe aiming the revenue at a specific need, such as seniors’ care or better overall health care.
In a simulated economy, an AI came up with a counterintuitive tax policy that led to a smaller gap between the rich and the poor. <a href=”https://t.co/gavOrrBdLL”>https://t.co/gavOrrBdLL</a>
The experts said that projected borrowing so far is no danger to the country and has been higher before in relative terms. Some said we may be better placed than the United States just now.
‘We have the tools’
But as tax historian Shirley Tillotson from Halifax’s Dalhousie University said, evidence from the past shows that government confidence or even cockiness when a financial crisis begins can turn into alarm if the crisis worsens over a period of months or years. That is certainly what happened in 1917 and at the start of the Depression.
As both she and Morneau said last week — though each with a slightly different meaning — these are early days yet.
In the Canadian case, in particular, we have the fiscal capacity, both the scope for borrowing and if necessary, the scope for expanding some element of our tax system.– Shirley Tillotson, tax historian at Dalhousie University
Perhaps, as optimists say, the Canadian and global economy will bounce back soon. But if things do get worse, Tillotson said, Canada is luckier than most.
“We have the tools,” she said. “In the Canadian case, in particular, we have the fiscal capacity, both the scope for borrowing and if necessary, the scope for expanding some element of our tax system.”
Recovery may be around the corner. But early days or not, the time to begin exploring alternative tax options is before a financial crisis turns into something worse.
Follow Don on Twitter @don_pittis
Coronavirus cases in Canada continue steady decline, death toll increases by 139 – Global News
New novel coronavirus cases in Canada have been dropping for the past several days, with Ontario and Quebec continuing to account for the vast majority of new cases and deaths.
Canada saw 637 new lab-confirmed cases of COVID-19 reported on Thursday, slightly lower than 705 a day earlier and 994 a week earlier, bringing the country’s caseload to more than 93,500 cases.
The national death toll rose by 139 deaths, for a total of more than 7,600.
New modelling data revealed Thursday that Canada could see up to 9,400 deaths by mid-June.
Quebec remains the hardest hit province, with 55 per cent of the country’s cases and more than 60 per cent of Canada’s fatalities. The province reported 259 new cases and 91 deaths on Thursday — a drop from last week’s numbers, which hovered in the 500 range.
More than 52,000 cases have been reported overall, with over 17,000 recoveries. Nearly 4,900 people have died.
Ontario reported 356 new cases and 45 new deaths, bringing its figures to nearly 29,500 cases and more than 2,300 deaths.
British Columbia saw no new deaths on Thursday and five new cases, as well as four “epidemiologically-linked” cases — people who are symptomatic or have had close contact with a COVID-19 case, but haven’t been tested.
Global News has only included the five lab-confirmed cases in its official tally.
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B.C. has seen more than 2,600 cases and 166 deaths, along with more than 2,200 recoveries. The number of people in hospital in the province has hit an 11-week low.
Alberta reported 15 new cases and one new death Thursday. More than 7,000 people have been diagnosed with COVID-19 and 146 people have died. More than 6,600 people are considered recovered so far.
Saskatchewan reported just one new case and saw its active COVID-19 cases drop below five per cent. The province has seen nearly 650 cases so far, including more than 600 recoveries and 11 deaths.
New Brunswick reported one new case as well as its first COVID-19-related death on Thursday.
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The province’s first death related to the coronavirus is linked to the ongoing outbreak in the Campbellton region — a cluster that has been traced back to a doctor who contracted the virus in Quebec and did not self-isolate upon his return.
The man who died was an 84-year-old resident of a long-term care home in Atholville, N.B.
Nova Scotia reported one new death, bringing its tally to 1,058 cases and 61 deaths, as its active case total continued to go down. The majority of its death toll is linked to one long-term care home in Halifax.
No new cases
Three provinces didn’t report any new cases or deaths on Thursday, while two territories that have seen all their COVID-19 cases resolved have not seen any new ones. Nunavut is the only region in Canada that has not reported a positive case.
Manitoba says it has seven active cases, out of a total of 287 lab-confirmed cases. That number includes seven deaths so far. The province says it has no COVID-19 hospitalizations at the moment.
Newfoundland and Labrador is left with two active cases out of 261 total cases, including three deaths.
Globally, the virus has caused more than 1.8 million cases and close to 389,000 deaths, according to data tracked by Johns Hopkins University.
© 2020 Global News, a division of Corus Entertainment Inc.
State Department says U.S. will reassess intelligence-sharing with Canada if it lets Huawei into 5G – CBC.ca
The United States is prepared to reassess its intelligence-sharing arrangement with Canada if Huawei is given the green light to take part in building Canada’s 5G networks, a State Department spokesperson said today.
The federal government still has not announced its decision on whether the Chinese telecom giant will be allowed to participate in building Canada’s next-generation wireless networks, despite more than a year and a half of assessing the question.
“We in the U.S. government have made it very clear to all of our friends and allies around the world that if Huawei is allowed into a country’s national security systems, we will have to protect our intelligence-sharing relationship,” Morgan Ortagus, spokesperson for the U.S. State Department, told CBC News today.
“We’ll have to make an assessment if we can continue sharing intelligence with countries who have Huawei inside their most sensitive technology, in their most sensitive national security areas.
“We think that the Canadian government will make their own sovereign decisions and what’s best for Canada’s national security.”
Watch: Prime Minister Justin Trudeau on Huawei and 5G
The prime minister didn’t say today when Canadians can expect a decision on Huawei and 5G, or whether he’s willing to risk injuring the relationship with Canada’s closest ally by allowing the Chinese telecom giant to participate in the networks.
“Every step of the way, we have listened to our security agencies, our intelligence agencies, worked with our allies,” Trudeau said in response to a reporter’s question today. “We will make the right decision for Canadians to both keep Canadians and businesses safe while at the same time ensuring competitiveness in our telecom industry.”
Some private companies aren’t waiting for Ottawa to make a decision. Bell and Telus announced yesterday that they would not be working with Huawei as they pursue their 5G plans. Instead, both are opting to use equipment from European companies Ericsson and Nokia.
Washington has long argued that Huawei poses a national security threat because the Chinese government has the power to compel private companies like Huawei to hand over sensitive information. Huawei’s critics say they fear the company would conduct espionage on behalf of Beijing.
U.S. tries to clip Huawei’s wings
Contacted by CBC News, Huawei’s VP for corporate affairs in Canada said State’s “threats” are consistent with “the Trump administration’s preference for bullying and coercing rivals and allies alike. “
“Huawei has operated in Canada for more than a decade without a single security incident related to our equipment. Not one,” said Alykhan Velshi. “We look forward to the Government of Canada making an evidence-based decision on Huawei’s role in Canada’s 5G rollout.
“This decision should be made by, in, and for Canada, not Donald Trump’s Washington.”
In recent weeks, while much of the world has been focused on the pandemic’s rising death toll, Washington has announced new measures aimed at curbing Huawei’s global influence.
On May 15, the U.S. Department of Commerce changed its export control rules to restrict “… Huawei’s ability to use U.S. technology and software to design and manufacture its semiconductors abroad.”
The move is meant to make it harder for Huawei to obtain the supplies it needs, to significantly raise its operating costs and to force the company to rely on goods that may be less reliable and more vulnerable.
As a middle power, Canada often has found itself taking collateral diplomatic damage from tensions between U.S. and China, as both superpowers fight to become the global leader in technology.
That damage started ramping up in December of 2018, when Canada arrested Huawei CFO Meng Wanzhou on a U.S. extradition request.
Beijing immediately demanded her release and executed swift retaliatory actions. Two Canadians — Michael Kovrig and Michael Spavor — were arbitrarily detained in China; they’ve been held for more than 500 days. Beijing took trade action as well, halting large purchases of Canadian canola and, for a time, Canadian pork.
Ortagus condemned China’s imprisonment of the two Canadians. She said U.S. Secretary of State Mike Pompeo has brought this issue up regularly during high-profile meetings with his Chinese counterparts.
“The United States, we’re taking a lot of actions, doing everything we can behind the scenes with the Canadian government,” she said.
Asked if the United States might deploy sanctions to pressure China to release the two men, Ortagus said “we’re not going to preview any public actions that we may take.”
Ontario, Quebec account for more than 90% of national COVID-19 cases: federal data – CBC.ca
While new federal figures show the emergence of new cases of COVID-19 is slowing in some parts of Canada, the pandemic continues — and some regions and age groups are being hit particularly hard.
During a briefing in Ottawa this morning, Canada’s Chief Public Health Officer Dr. Theresa Tam and her colleague Dr. Howard Njoo walked Canadians through their updated modelling on the number of COVID-19-related illnesses and deaths Canada could see over the next few weeks.
The new figures show that Canada could see between 97,990 and 107,454 cases and between 7,700 and 9,400 deaths by June 15.
The report highlights how different provinces are experiencing the pandemic.
Ontario and Quebec have accounted for more than 90 per cent of national COVID-19 cases in the past 14 days, according to Tam and Njoo.
There has been no community transmission in Prince Edward Island, the Northwest Territories and the Yukon, and no cases have been reported to date in Nunavut.
The numbers show COVID-19 is still disproportionately hitting Canadians in long-term care and seniors’ homes; they represent 18 per cent of all cases and 82 per cent of Canada’s 7,495 deaths.
It’s the third time Canada’s leading public health officials have given an update on the expected impact the novel coronavirus will have on the Canadian population. It comes as some provinces have reported a downturn in cases and are beginning to reopen their economies, including some schools, stores and parks.
The doctors said the evidence shows health measures have been effective in controlling the epidemic. They also warned that lifting those measures without strengthening other public health measures likely would cause the epidemic to rebound.
‘Not out of the woods:’ Trudeau
“The data shows that we are continuing to make progress in the fight against this virus. In many communities, the number of new cases is low and we can trace where there came from. That’s an encouraging sign that the virus is slowing and in some places even stopping,” Trudeau told reporters outside his home at Rideau Cottage Thursday morning.
“But I want to be very clear, we’re not out of the woods. The pandemic is still threatening the health and safety of Canadians.”
As of Thursday morning, Canada has 93,085 confirmed and presumptive novel coronavirus cases, with 51,048 of the cases considered recovered or resolved, according to data compiled by The Canadian Press.
Ontario reported 356 additional cases of COVID-19 on Thursday as the province’s network of labs processed a record number of tests for the novel coronavirus.
The 1.2 per cent jump in cases brings the total in Ontario since the outbreak began in late January to 29,403.
The federal projection figures don’t always pan into reality.
At the end of April, the government estimated that Canada was on a path to between 53,196 and 66,835 cases of COVID-19, and between 3,277 and 3,883 deaths, by May 5.
According to CBC News figures, as of May 5 there were more than 62,000 confirmed and presumptive coronavirus cases and 4,166 people had died.
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