I met with a few overseas business colleagues this week and we wandered down a rabbit hole discussing the merits of getting tax benefits for investing in projects that revitalize urban areas or assist in poverty reduction.
Our current system actually creates a disincentive for successful people to take on the task of assisting in poverty reduction.
After some lengthy discussion, we decided that the two things preventing progress in the private sector reducing poverty were:
- Regulatory environment
Any smart person will find a way to get things done, but when it comes to poverty, the red tape can be a barrier to success. In fact, when it comes to business, the red tape is a significant barrier to overcome in almost every instance.
One example may be Canada’s inability to vaccinate the population in any meaningful timeframe. We rank 38th in the world in terms of our success in distributing the much needed solutions for our health sector and our economy.
Why is this?
As I understand it (aside from not placing orders for vaccines early enough), one reason is that unlike other Western countries, Canada did not create any emergency legislation to approve vaccines based on other countries approvals.
This is clearly an emergency for the whole country and yet, we favour leaving all the regulations in place so our regulators, Health Canada, are taking the same process as always and we are falling further and further behind the field.
If I had access to a new vaccine that could solve the problem, I would have to run the vaccine through the approval process before I could talk to anyone about purchasing my vaccine. The government, it appears is not wiling to take that risk (at least in my discussions).
This example serves to show how when we are solutions oriented, the only thing that can prevent progress is an over-regulated environment.
The second area is taxation. The problem with how taxation has evolved is that most people, once they reach a certain level of success, spend a lot of time trying to figure out how to be more tax efficient.
What if, as an example, the City of Kelowna, in conjunction with the provincial and federal governments, created a project or zone that needed funding to solve a particular humanitarian or community problem, perhaps homelessness.
They could attract money as donations, but with a further benefit of the donor receiving direct tax benefits.
Would it be possible to create the correct incentive that benefits society, take the financial aspect of the problem away from government and benefit the donor?
Many countries have adapted to a taxation regime because it is demonstrated to benefit the quality of life in the country, for example some of the Scandinavian Countries.
I often find myself asking the question, what do I get for my taxes? Where am I taking from the system?
It is not an easy question to find a satisfactory answer to.
I think if we don’t look at solutions like this we will fall further and further behind the curve in trying to catch up to problems we have created.
We enjoyed the discussion and decided we will keep thinking about it. Let’s hope some others do also.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.