Wednesday, November 26, 2014

Canada Revenue Agency accidentally sent a database full of confidential taxpayer info to the CBC

From the Toronto Star: CRA blames human error for disclosing confidential tax data to CBC
The Canada Revenue Agency confirmed late Tuesday that it has accidentally disclosed confidential taxpayer information to the CBC. 
The agency said the document was “accidentally released” through human error and acknowledges this “constitutes a serious breach of privacy.” 
CBC reported that the tax information contains data about hundreds of Canadians — many of them rich and famous — including their home addresses. 
...The CRA said in a release late Tuesday that when it became aware of the breach, officials immediately contacted the CBC to retrieve the documents. 
The agency said the CBC ”regrettably” chose to disclose names and a response from the network was not immediately available. 
However, in its story on the breach, CBC News made clear it was not disclosing much of the information it had. The network said it was "withholding most details from the list, apart from the names of some of the people cited, out of respect for privacy."
Oops, presumably.

Questions on the Canada-US FATCA Agreement

MP Ted Hsu has presented an order paper question (OPQ 816) on the topic of the unusual process surrounding Canada's adoption of an intergovernmental agreement on FATCA. I have noted many times the anomalies surrounding the US approach to these agreements, and in Canada's case these anomalies appear to have been compounded by odd and unexplained internal procedural decisions. I am working on a paper on this topic but it is slow going, not least because it is tremendously difficult to study Canadian treaty policy--it is vague, features unwritten rules that are apparently made to be broken, and written policies that lack any semblance of meaningful procedural limitations or parameters. If there is a rule of law here, I have yet to find it.

Mr. Hsu's inquiry follows on a statement made by Peter Van Loan, Government House Leader, in the House on Monday, April 28, 2014, that the government, "actually did" comply with its own treaty tabling policy, in response to a point of order raised by MP Marc Garneau back in April regarding the failure of the Government to table the IGA prior to ratification. Mr. Hsu seeks a number of details from the Government; I take it that answers are due on January 26, 2015. Some of the questions clearly illustrate that treaty-making in Canada is really quite a mysterious process. Here are a few of the OPQ highlights--just a small selection of the many detailed aspects of the question:

  • was an exemption to the government’s Policy granted with respect to the Agreement;
  • on what date was the Agreement ratified; 
  • what steps and measures are in place to ensure that Parliament is informed of exceptions being granted to the Policy; 
  • what does “urgent” mean in the context of the Policy; 
  • did the Minister of Foreign Affairs “inform the House of Commons that Canada has agreed to be bound by the instrument at the earliest opportunity following the ratification” per the Policy; 
  • is the Government House Leader always informed of exceptions and exemptions under the Policy and, if so, how; 
  • is the House always informed of exceptions or exemptions under the Policy and, if so, how;
  • if the Agreement could have been tabled earlier in Parliament [than it was], (i) why was it not, (ii) what decisions were made in this regard, (iii) who made these decisions, (iv) how, (v) on what basis?
All good questions and I, for one, would like to know the answers, not just for better understanding the meaning and implications of the IGA in terms of both its legal status and its substance, but also for understanding the treaty process in Canada more generally. It is a maddeningly opaque regime.

Monday, November 17, 2014

Today at McGill: Dietsch on Catching Capital

Peter Dietsch, Professor of Philosophy at the Universit√© de Montreal, joins us today as the final speaker in the Spiegel Sohmer Tax Policy Colloquium at McGill. His presentation will focus on the opening chapters of his forthcoming book, entitled "Catching Capital." Here is the abstract:
 When individuals stash away their wealth in offshore bank accounts and multinational corporations shift their profits or their actual production to low-tax jurisdictions, this undermines the fiscal autonomy of political communities and contributes to rising inequalities in income and wealth. These practices are fuelled by tax competition, with countries strategically designing fiscal policy to attract capital from abroad. 
Building on a careful analysis of the ethical challenges raised by a world of tax competition, the book puts forward a normative and institutional framework to regulate the practice. In short, individuals and corporations should pay tax in the jurisdictions of which they are members, where this membership can come in degrees. Moreover, the strategic tax setting of states should be limited in important ways. An International Tax Organisation (ITO) should be created to enforce the principles of tax justice. 
The author defends this call for reform against two important objections. First, Dietsch refutes the suggestion that regulating tax competition will harm economic efficiency. Second, he argues that regulation of this sort, rather than representing a constraint on national sovereignty, in fact turns out to be a requirement of sovereignty in a global economy. The book closes with a series of reflections on the obligations that the beneficiaries of tax competition have towards the losers both prior to any institutional reform and in its aftermath.
The presentation will again take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm. As always, the colloquium is open to all: students, faculty and the general public are welcome.

Monday, November 10, 2014

Today at McGill Law: Martin O'Neill on Corporations, Tax, and Social Justice

Martin O'Neill, Senior Lecturer in Politics at the University of York, joins us as today's speaker in the Spiegel Sohmer Tax Policy Colloquium at McGill. He'll present a work in progress that he has entitled "Corporations, Conventionalism, Taxation and Social Justice." Here is an abstract:
A failure to take seriously the conventionality of corporations has led to an unimaginative view of corporate taxation as being structurally analogous to the taxation of individuals. There are, in fact, many disanalogies between the two: corporate profit should not be treated as analogous to individual income; low-profit corporations should not be treated advantageously by a tax system in the same way as it should treat low-income individuals; and, most significantly, corporations are not owed the same level of care and determinacy as individuals with regard to the tax rules that they face. Breaking the perceived link between individual taxation and corporate taxation makes room for a reassessment of the structure and purpose of corporate taxation. 
Taking a step back from issues focussed narrowly on taxation, as such, there is a general need to integrate normative issues regarding corporations into our understanding of the proper configuration of the basic structure of a democratic society. In our current non-ideal circumstances, the corporations we actually have are corrosive of the possibility of social justice. In part, this is because we’ve been blinded by a certain picture of corporations as ‘natural’ economic entities, and have been too timid and unimaginative in the ways in which we subject corporations to political regulation and constraint. A robust conventionalism would allow us to reverse the usual order of justification: from seeing corporations as placing constraints on government policy, to seeing corporations as conventional economic units that should be embedded in an institutional and regulatory structure that delivers social justice. 
This gestalt switch opens up wide vistas for public policy innovation. Thus, this is an area in which applied political philosophy has an important home. First, conceptually, it opens up policy spaces which are easy to ignore when one is in the grip of an earlier picture. Secondly, in order to make sense of theories of liberal egalitarian justice, we need a better idea of their institutional setting, and this means moving beyond (or at least supplementing) overly schematic debates about the relative significance of government agencies and individual behaviour. We also need to think about how the basic structure of society should be organized so as to marshal its most significant economic institutions in directions which are conducive to the pursuit of social justice within a democratic society.
The presentation will again take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm. As always, the colloquium is open to all: students, faculty and the general public are welcome.

Sunday, November 9, 2014

On Paperwork and Punishment: It's Time to Fix FBAR

I published this last month but neglected to post it: my latest column in Tax Notes International takes a look at the foreign bank account report, or FBAR. Feel free to download it, early and often, right here. Here is the abstract:
The Foreign Bank Account Report, or FBAR, is part of a regime designed to stop terrorists, money-launderers, and tax evaders. Unfortunately, its increasingly draconian requirements and consequences now apply to millions of innocent bystanders who are collateral damage in the ongoing battle against financial crime. Their inclusion in the FBAR regime is a massive waste of both government and taxpayer resources, effectively criminalizing activities that are wholly unconnected to financial crime, and perversely discouraging compliance. All of this is unnecessary because as the administrator of FBAR, Treasury can immediately fix the problems. The difficulty is that FBAR is still relatively obscure to those not caught in its grasp, and the extent of the damage it is doing to U.S. taxpayers and to the integrity of the tax system is thus under-appreciated. This damage is real, but it can be reversed by re-focusing FBAR where Congress intended: on likely criminal activity. In short, this Essay demonstrates that the FBAR regime is broken and it is time for Treasury to fix it.
As always, I welcome comments.

Wednesday, November 5, 2014

Canadian government unveils Re-election Tax Credit

The Canadian government announced a new package of "family" tax cuts/credits last week, with an income splitting scheme and modifications to child care benefits and expense deductions. These are, of course, really just re-election tax credits--announced at what the CBC describes as a "campaign-style event." Earlier this year, at the Tax Justice & Human Rights Symposium I hosted at McGill, Jonathan Rhys Kesselman explained the distributional impacts of the type of cuts announced by the government. He had to embargo his presentation so it's unfortunately not among those now viewable at the McGill Tax channel, but fortunately his paper is now available [pdf here], and the Vancouver Sun has a story: Detailed analysis exposes more income-splitting flaws.

Kesselman's main arguments are:

  • restricting the measure to couples with children is inconsistent with the purported fairness rationale of taxing couples at the same rates as singles
  • families with the greatest need will get no benefits at all
  • families don't have to demonstrate or undertake any actual child care obligations in order to get the benefits
  • the policy will decrease the after-tax value of a family's second earner (because earnings are effectively taxed at the higher-earner's marginal rate) 

He ends by suggesting a number of alternative ways the government could spend money to support families in need without introducing these distortions.

It does feel frustrating that everywhere one looks, politicians just seem have no shame about trying to buy their next elections, and populations seem all too willing to be bought so long as you tell them it's for the "hard working" among us. The question is, whom does the Harper government define as hard-working? With this announcement, the message is: you are only a hard-working family, and therefore deserving of tax cuts, if you
  • have a child under 18;
  • with two parents;
  • one of whom earns a lot;
  • and who earns a lot more than the other.
If this doesn't describe your family, then it seems you are not working hard enough.