Underground Economy in Canada, 1992-2009

Interesting stats, suggesting that the underground economy is not currently growing in Canada.  The CRA is careful to say that the UE is not an estimate of the tax gap, but CRA will look at these stats in light of the need to ensure everyone is "paying a fair share."  I'm only aware of an official statement of a "tax gap" by the U.S. and U.K.   

Carter Commission after 50 years, cont'd

Today's panels were interesting and informative. Neil Brooks kicked things off with a lively and wonderful introduction to the politics and process of the commission and the hopes for tax reflection and reform today (they are dismal, I'm afraid). Tomorrow promises to be equally full, with a deep lineup. Speakers:

• Jinyan Li - Would Mr. Carter be Happy with the International Tax Developments in Canada
• Yan Xu - Enduring Echoes in a Changing Landscape: China’s Tax History?
• Carl MacArthur - From Carter to Copthorne: Judicial Inactivism and the Rise of the GAAR
• Michelle Markham - Advance Pricing Arrangement Reform in Australia – Is this Relevant to any Future Reform in Canada?
• Kathrin Bain - Research and Development Tax Incentives: What can Canada learn from Australia’s experiences?
• Steven Dean - Tax Apps: 50 Years of Tax Expenditures
• Lisa Philipps - The Role of R&D Tax Expenditures in Canada’s Innovation Strategy: From Carter to Jenkins
• Michael Livingston - Convergence, Divergence, and the Limits of Globalization in Tax Matters: The Canadian Experience
• William McCarten - Provincial Strategies for Corporate and Personal Income Tax Design: Positive, Zero, or negative Sum Games?
• Kathryn James - The Carter Commission and the Value Added Tax
• Lori McMillan - The Non-charitable Non-profit Subsector in Canada: An Empirical Examination
• Richard Schmalbeck - The Income Taxability of Gifts: Haig-Simons, the Carter Commission, and the Real World
• Shu Yi Oei - Who Wins When Uncle Sam Loses? Social Insurance and the Forgiveness of Tax Debts
• Catherine Brown - Revisiting the Carter Commission's International Tax Policy Analysis
• Elsbeth Heaman - The Personal Income Tax in Canada Before 1917
• David Tough - Carter and Company: The Commission’s Critique of Inequality in the Context of Canada’s Rediscovery of Poverty in the 60s
• Neil Buchanan - The Trinity without the Holy Ghost: Tax Scholarship Without the Illusory Goal of Efficiency
• David Duff - Haig, Simons, and Carter: Rethinking the Concept of Income in Tax Law and Policy
• Richard Krever - What is an “Enterprise” in GST Law?
• Shirley Tillotson - The Politics of Carter-Era Tax Reform: A Revisionist Account

More at the conference website, here.

Carter Commission After 50 Years

Tomorrow is the first day of the Dalhousie Law conference, The Carter Commission 50 Years Later: A time for reflection and reform."   On the schedule for tomorrow:

Neil Brooks - The Carter Report: Brilliant, Imaginative and One of a Kind

Ajay Mehrotra - The VAT Laggards: A Comparative History of US and Canadian Resistance to the Value-Added Tax

Miranda Stewart - Tax Reform and Legitimacy in the Global Era

Faye Woodman - Should the Tax Burden on Babyboomers Be Reduced Because They are Getting Older?: The Age Tax Credit, the Pension Income Credit, and Income Splitting of Pension Income

Claire Young - Beyond Conjugality: Time for the Tax System to Take that Concept Seriously

Allison Christians - Drawing the Boundaries of Tax Justice

Peter Dietsch - Fiscal Obligations to Redistribute in an International Setting

Thaddeus Hwong - A Comparison of Trends in Tax Levels and Tax Mixes in Canada and Other OECD Countries Before and After Carter

Chris Sprysak - Taxing Me or We: Yet Another Look at the Carter Commission’s Recommendation for Joint Returns

Tamara Larre - Dependency Under Canada’s Income Tax System

Kirk Collins - Capital Markets, Interest Imputation, and the Carter Report’s Proposed System of Full Integration of the Corporate-Shareholder Income Taxes

Martha O’Brien - Corporate Group Taxation: Here and Now, There and Then

And that's just the first day.  You can access the full schedule at the link.

Today at McGill Law: Miranda Stewart

Miranda Stewart will present a paper on the sham doctrine today as the first speaker of the McGill Tax Policy Colloquium.  It's an interesting paper that raises difficult questions about form and substance in tax law.  If you're in Montreal, I invite you to attend, details at the link.

Why does Apple have so much cash offshore?

And Google and GE and etc etc?  Contrary to popular sentiment, it is not that pesky uncompetitive U.S. tax regime, with its punitive rules that would impose corporate taxes on repatriated cash.  At least, there is not enough empirical evidence to pin solely on this well-worn scapegoat.  Instead, three economists examined the evidence of the growing MNC overseas cash stash and conclude that rather than regulation or governance, a company's spending on research and development intensity explains its cash overseas.  

The paper is called Multinationals and the High Cash Holding Puzzle.  Here is the abstract:

Defining as normal cash holdings the holdings a firm with the same characteristics would have had in the late 1990s, we find that the abnormal cash holdings of U.S. firms after the crisis represent on average 1.86% of assets. While U.S. firms held less cash than comparable foreign firms in the late 1990s, by 2010 they hold more. However, only U.S. multinational firms experience an increase in abnormal cash holdings during the 2000s. U.S. multinational firms had cash holdings similar to those of purely domestic firms in the late 1990s, but they hold over 3% more assets in cash than comparable purely domestic firms after the crisis. Further, U.S. multinationals increased their cash holdings since the late 1990s relative to foreign multinationals by roughly the same percentage as they increased their cash holdings relative to U.S. domestic firms. A detailed analysis shows that the increase in cash holdings of multinational firms cannot be explained by the tax treatment of profit repatriations, that it is intrinsically linked to their R&D intensity, and that firms that become multinational do not increase their abnormal cash holdings after they become multinational. There is no evidence that poor investment opportunities, regulation, or poor governance can explain the abnormal cash holdings of U.S. firms after the crisis. 

The authors discuss the paper here, including these interesting facts:

U.S. firms hold more cash than comparable firms whether these firms are in developed countries or not, in common law countries or not, in countries that tax income worldwide or not, and in Eurozone countries or not. 

...We find that U.S. multinationals held comparable amounts of cash than purely domestic firms in the late 1990s, but now hold significantly more cash than similar purely domestic firms. 

...Foley, Hartzell, Titman, and Twite (2007) show that the tax treatment of remittances makes it advantageous for multinationals to keep their earnings abroad and they find that firms for which repatriation is more costly hold more cash. Our findings suggest that the tax costs of repatriation are not the whole story for the increase in cash holdings of U.S. multinationals in the 2000s. ...[T]he Homeland Investment Act of 2004 ... failed to reduce the cash holdings of multinational firms. ...[I]t could be that the incentives of the Act were insufficient to affect firms’ cash holdings. ...[T]he repatriation tax costs could affect more where firms locate their cash rather than how much cash they hold. We expect that the tax cost of repatriation would be more important for high cash flow multinationals, but empirically these multinationals do not hold more cash than low cash flow multinationals. The increase in cash holdings of multinationals is strongly related to their R&D intensity, so that multinationals with no R&D expenditures do not have an increase in abnormal cash holdings compared to domestic firms with no R&D expenditures. Further, a striking result is that, among high R&D spending firms, firms that were already multinationals before 1998 do not hold more cash now than firms that were purely domestic firms before 1998. Among these firms, cash holdings increase sharply for multinationals relative to purely domestic firms, but that is because the cash holdings of multinationals are becoming more comparable to the cash holdings of purely domestic firms. Finally, and perhaps most importantly, we find no evidence that firms that become multinationals start holding more cash after they become multinationals. It appears that firms that become multinationals are firms with attributes that lead them to hold large amounts of abnormal cash even before they become multinationals. 

 Emphases mine.   

An emergency room is not a health care plan.

American College of Emergency Physicians (ACEP):

 "Emergency departments have become a health care safety net for everyone, but that safety net is breaking. If you continue to take emergency care for granted, and don’t support it, it eventually won’t be there for anyone.” 

So, it's not a vey good hammock then, either.  It seems sad to me that the ACEP has to explain why emergency room care is not health care.  An ounce of prevention is worth a pound of cure.  That's a conservative (small c, obviously) idea.  Yes, both cost money.  One you plan for, and it costs x.  The other you don't plan for and it costs x+.   Not having national health care doesn't get everyone out at zero.  I would rather pay for everyone at x instead of everyone at x+.

US to Europe: our airlines won't obey your tax laws

The EU is trying to take the high road on pollution, but the US insists on the low road:

The Senate unanimously passed a bill on Saturday that would shield U.S. airlines from paying for their carbon emissions on European flights, pressuring the European Union to back down from applying its emissions law to foreign carriers.

...Republican Senator John Thune, a sponsor of the measure, said it sent a "strong message" to the EU that it cannot impose taxes on the United States. 

The aviation industry is happy of course; as the EU was already considering backing down, "to avert a trade war with major economic powers such as China and the United States, allowing time to forge a global agreement on climate charges for the aviation industry."  But that's waiting for Godot: "attempts to address this problem on a global basis have been festering for more than 15 years in ICAO and the United States is at the centre of the problem," according to Transport & Environment, an NGO based in Brussels.

In the meantime, I'm not sure I understand how the U.S. can simply declare that its airline industry can ignore the law in Europe.