At this particular time, unless the Department has good PDF scraping software, I doubt that anyone has even read this yet, and one columnist in The Globe and Mail has calculated that the resources needed to do it manually are too huge to be realistic. I essentially argued that the principal proposal relating to taxation of passive investments harkens back to the original concept of tax reform that was introduced in 1972, which I still believe should have been retained instead of being abandoned in 1973.
Interestingly, the original proposal that was promoted in the 1970 White Paper called for private corporations to be treated the same as partnerships. Ottawa has scanned the original white paper to the Web, and a copy is here:
The feds backed away from that when they introduced the actual bill in 1971, and a handy summary of it is here:
This eventually translated into the Act that implemented it all:
The intended tax on passive investments was abandoned in 1972, with retroactive effect:
What just happened now
Enough about the history. In any case, I did my civic duty, but subsequent events showed the the feds had no real intention of fully assessing the content of these submissions, and their response reeks more of panic than anything else:
- town hall sessions started to be held before the consultation period had ended
- a "national listening tour" also began a month before
- the government announced, shortly after the period ended, that the small business rate would be reduced from 10.5% to 9%
- as well, the government also announced very quickly changes relating to smaller amounts of passive investments and the abandonment of proposals to combat the conversion of income into capital gains
- the above changes were confirmed in today's Fall Economic Statement
All of this suggests that the initial consultation was essentially a sham. Perhaps someone may analyze the submissions some day through Access to Information requests, but I'm not holding my breath. All in all, this was a bush-league exercise, and a huge embarrassment.
Could this have been done better?There are more sophisticated procedures that are in place elsewhere in the world, but I prefer what has been put in place in the UK, which has been summarized in a very good set of principles, available here. They can be expressed as follows:
- Consultations should be clear and concise
- Consultations should have a purpose
- Consultations should be informative
- Consultations are only part of a process of engagement
- Consultations should last for a proportionate amount of time
- Consultations should be targeted
- Consultations should take account of the groups being consulted
- Consultations should be agreed before publication
- Consultation should facilitate scrutiny
- Government responses to consultations should be published in a timely fashion
- Consultation exercises should not generally be launched during local or national election periods
The English jurisprudence on the subject is very enlightening as well, as seen in this article. Notably, it must "take place when policies can be influenced and views genuinely taken into account," and the decision-maker must give "'conscientious consideration' to the outcome of the consultation process." Quite a contrast to what we have just witnessed.
There were extensive submissions from CPA Canada and the Joint Committee on Taxation of the Canadian Bar Association and CPA Canada that I won't reproduce here, but for which I've provided links. The latter group's package of submissions add up to more than 150 pages in total.
I've only been able to find one submission online from any of the Big Four accounting firms, in this case from Deloitte, and it's quite comprehensive. It contrasts quite sharply with my polemic, but I'm not ashamed of that.
The initial analysis coming out on Finance's panic is rather interesting. Here is the Tax Alert put out by EY this week:
The repercussions will be coming out fast and furious now.