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Opinion  

Who gets the tax breaks?

By Dermod Travis

They're the stories that tug at us. Here's one from Waco, Texas:

“My 86 year old mom...is losing her money to these people who promise her in order to accept her "sweepstakes" she has to keep sending them money for processing fees. She suffers from dementia and this company is taking advantage of her. Someone needs to find this company and make them stop abusing and taking money from the elderly.”

Someone did – the U.S. Treasury Department. They found the company, PacNet Services, on Howe St. in downtown Vancouver. 

According to the department, it had “a nearly 20-year history of knowingly processing payments related to fraudulent solicitation schemes.” U.S. officials shut it down last year.

In a plot twist, it turns out the B.C. government was giving PacNet a 100 per cent corporate tax break on its international financial transactions, through the little-known International Business Activity program at AdvantageBC.

AdvantageBC and its Quebec counterpart, Finance Montréal, trace their origins back to 1986, when the federal government established the International Banking Centre designation “to encourage the repatriation of non-resident loans booked in low-tax jurisdictions.”

But, over the last decade, the government extended the AdvantageBC program into new industries, including the pharmaceutical industry, film distribution, wastewater treatment and fuel cell technology. The incentives kept getting sweeter and sweeter as well.

Along with the program's morphing, came a rapidly escalating cost. In the nine years from 1999 to 2007, the province forewent $26 million in potential tax revenue through the program. In the nine years since, $176.3 million. 

Today, 66 members are listed on AdvantageBC's website. There may be more, as there's no obligation on the part of AdvantageBC to identify its members. Three are part of HSBC Bank.

Four of Canada's five big banks are members.

Not including PacNet and its two associated companies, four other members were among the Top 25 banks implicated in what became known as the Global Laundromat, a four-year scheme to launder $US20.8 billion in organized crime proceeds from Russia. 

Unlike Finance Montréal, not a single member of the AdvantageBC board of directors represents the B.C. government.

The organization takes a 0.45 per cent cut of the “income earned by the international business in the preceding year” to help finance its operations. In 2016, the cut accounted for $1,027,582 of the organization's funding. Membership fees brought in $78,845. CEO Colin Hansen is paid $189,000.

Some of the companies in the roster of members make one wonder what the extent of the government's due diligence was before the tax breaks were extended.

– Dermod Travis is the executive director of IntegrityBC.



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Nature's best defence

By David Suzuki

Spring flooding in Canada this year upended lives, inundated city streets and swamped houses, prompting calls for sandbags, seawalls and dikes to save communities.

In the Okanagan, rapidly melting snowpack and swelling creeks caused lake levels to rise to record heights, prompting evacuations. Ontario and Quebec’s April rainfall was double the 30-year average, and parts of New Brunswick recorded more than 150 millimetres of rain during a nearly 36-hour, non-stop downpour. 

Floods have become one of the most visible signs of climate change in Canada.

Spring floods aren’t unusual, but the intensity and frequency of recent rains are breaking records. When temperatures rise, the atmosphere carries more moisture so when it rains, it dumps. 

With more than 80 significant floods in Canada since 2000, insurance costs are skyrocketing. The 2013 Alberta floods alone cost more than $6 billion. Canadians personally shoulder about $600 million each year in losses related to flooding.  

Deforestation, wetland destruction and artificial shoreline projects worsen the problem. Insurance agencies recognize that keeping ecosystems healthy prevents climate disasters and saves money. Lloyd’s of London encourages insurers to consider the value of natural coastal habitats when pricing flood risk. One study found ecosystems such as wetlands are more effective than seawalls in protecting against coastal storms. Insurers say conserving nature is about 30 times cheaper than building seawalls.

Urban concrete and asphalt surfaces prevent water from infiltrating into the ground and increase storm-water runoff. Rain gardens, bioswales and permeable pavements better manage flooding by reducing runoff and protecting flood plains and foreshore areas. 

Many local governments are trying to keep up by limiting development in flood zones, better managing flood plains and updating flood-management systems. Some, such as Gibsons, B.C., are using a new approach that considers nature as a vital part of the town’s infrastructure and puts “natural capital” assets on equal footing with built assets. 

The federal government has set aside $2 billion to help local governments defend against natural disasters like fire and flooding. It should allocate a significant portion to natural infrastructure solutions. 

It’s time we recognized the importance of intact nature and built green infrastructure as central to flood-prevention efforts. Nature can help us — if we let it. 

David Suzuki is a scientist, broadcaster, author and co-founder of the David Suzuki Foundation



Paying to be Green

By Charles Lammam and Hugh MacIntyre

The power-sharing deal struck by the New Democratic Party and Green Party means British Columbians could soon see an NDP minority government propped up by the Greens.

But if NDP Leader John Horgan becomes premier, the deal with Andrew Weaver's Greens would commit the NDP to policies and government spending that was not part of the NDP's election platform.

Under these circumstances, will a Horgan-led government keep the NDP's election promise to balance the budget and, if so, how?

On election day, more than 80 per cent of B.C. voters supported political parties (the Liberals and NDP) that promised consistent balanced budgets. The Greens are the only party that didn't commit to balancing the budget every year while in power.

But the initiatives outlined in the NDP-Green deal - including new spending initiatives - suggest British Columbians could be in store for budget deficits.

The deal doesn't provide details on how much the new policy commitments will cost. However, some of these policies come straight out of the Green Party platform, which contains cost estimates of the initiatives.

For example, the agreement commits a Horgan-led government to hiring new government workers. The Green Party's platform puts the cost of increased staffing at public care homes (nursing homes, for example) at $200 million over four years, and projected $100 million for additional social workers. Other new initiatives - a work experience program for students and skills training for some displaced workers - would cost more than $100 million over four years.

This new spending alone would put the NDP's balanced budget pledge at risk. But there's more. The NDP-Green deal calls for a basic income pilot similar to the one happening in Ontario. (The Ontario version costs $50 million annually.)

Additional spending increases will be needed for other new commitments made by the NDP in their pact with the Greens, including the creation of an essential prescription drugs program, an innovation commission and a new task force on the economy. According to the agreement, the budget for the latter two initiatives will be decided jointly between the NDP and Greens at a later date.

To pay for the new spending required to gain support from the Greens, a Horgan-led government would either have to cut other spending, raise taxes or run a deficit.

However, the uncertainty - particularly from the potential for higher taxes - will undermine the province's attractiveness as a place to do business.

If a Horgan-led government decides to raise taxes to pay for new spending to appease the Greens, it will come on top of economically-damaging tax increases (including personal, business and carbon tax hikes) already proposed in the NDP platform.

Running a deficit and increasing government debt would also be problematic. A deficit today is nothing more than a tax that must be paid by taxpayers in the future.

Adding debt will leave businesses and households uncertain about future tax hikes, and that uncertainty impedes investment and entrepreneurship today. Increased government debt can also lead to higher debt interest payments, which will take away resources from the public programs that British Columbians value.

To alleviate some of the uncertainty in what has become an uncertain time in B.C., and to inform British Columbians wondering about the future, the NDP should clarify whether it remains committed to a balanced budget and how it intends to pay for its deal with the Green Party.

Charles Lammam is director of fiscal studies and Hugh MacIntyre is policy analyst at the Fraser Institute.

– Troy Media





Who has biggest tent?

By Ian Holliday

There is a conventional wisdom in Canadian politics that the Liberal Party – flanked on both sides of the political spectrum by more ideological parties – is better able to “find the centre” and appeal to more voters.The history of elections in this country, with its long periods of Liberal government, suggests there is some truth to this assessment.

Ask Canadians about their willingness to consider each of the three main parties, however – as the Angus Reid Institute did just last month – and it becomes clear that there’s less of a “big tent” advantage for the Liberals than might be expected.

The percentage of Canadians who rule out even considering casting a ballot for each party is remarkably consistent. Ranging from a low of 37 per cent who say they would “definitely not consider” the Liberals to a high of 40 per cent who say the same about the New Democratic Party. The percentage who would never consider voting Conservative? 39 per cent.

These totals are all within the margin of error of each other. In other words, each party has roughly two-in-five Canadians who say they won’t even consider it.

The inverse of each of these numbers could be described as each party’s “consideration set” – the people who say they would be open to voting for the party in the future.

For each party, the total consideration set is roughly 60 per cent of Canadians. Though, as the following graph illustrates, there’s a big difference between those who say they might think about voting for a party and those who are hardcore supporters.

The darkest party colours in the graph are those who say they “definitely” will support the party in a future election. The lighter colours are, from left to right, those who say they will “certainly consider” the party, and those who say they will “maybe consider” the party. (Data in the graph comes from ARI’s June 1 report: “As Conservative leader, Scheer must balance core voters’ values with party’s need for growth”)

By this measure, the Conservative and Liberal parties each have a very similar make-up, with a committed core of slightly fewer than one-in-six Canadians. While the Liberals have slightly more people who would “certainly consider” them, while the Conservatives have slightly more people who would “maybe consider” them.

The NDP, by contrast, has a committed base less than half the size of those of the other parties.

– Ian Holliday is a research associate with the Angus Reid Institute.



Not all votes created equal

By Dermod Travis

Elections have two key components: the race and the mechanics – the legislative process and administration of the vote.

The race gets the media coverage, not so much the mechanics, even though it can have far more impact on the results than many might imagine.

The number of registered voters didn't get much attention during the campaign. In April, there were 3,156,991. Notable because it's 19,464 voters less than there were in 2013. 

Using data provided by Elections Canada, roughly 40,000 voters were purged from the list in 2016, according to Elections B.C.

"In December 2016, we processed a file of records of voters whose address on the (national list) changed from within B.C. to outside B.C. 

"We removed approximately 40,000 voters. We believe this process, which was not performed in the lead-up to the 2013 general election, improved the overall accuracy of the voters list."

Something else of note about the race was how remarkably efficient the B.C. Liberal party's vote was.

The party only needed 170,234 votes – 21 per cent of their 796,672 total – to lock up 20 ridings, nearly half of their seats. The Liberals put 10 into their column with 69,857 votes. 

After every other election, B.C.'s electoral boundaries commission goes into action to ensure the electoral map meets a relative parity between riding size and number of voters.

According to its 2007 report, “B.C. is among the group of jurisdictions that gives their commissions the greatest latitude, adopting a plus or minus 25 percent deviation limit.” 

In 2014, the commission was given its marching orders by the B.C. government: two new seats could be added to the existing 85, but 17 hand-picked ridings had to be protected.

At the end of the day, the 17 first-class ridings had an average of 25,382 voters and the 70 second-class an average of 38,935.

Stitkine has the lowest number of voters at 13,240 and Vernon-Monashee the highest with 47,373. Vernon-Monashee would need three MLAs to come close to matching the weight of Stitkine's clout in the legislature.

Using the April voters list, the 25 per cent rule would see Nelson-Creston with 27,338 registered voters on one end, Parksville-Qualicum (44,743) on the other and 68 in between.

Seventeen ridings overshoot the 25 per cent deviation, but only 10 are among the 17 “protected” ridings.

Since land mass is part of the special circumstances test, let's see how much it mattered in the government's selection. The 17 first-class ridings range from 2,437 to 196,446 square kilometres, but nine other ridings are within that range. Can't be size. 

Perhaps it's the number of voters? The 17 range from 13,240 to 42,054 voters, but 54 ridings fit within that spread. Can't be voters. 

How did the 17 ridings vote? Thirteen went for the Liberals – representing 30 per cent of their total seats – and four went to the NDP.

Under the Liberals, the number of protected ridings has nearly tripled from six in 2001 to 17 today.

– Dermod Travis is the executive director of IntegrityBC.



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