The first one is an example of how the assignment should be done. the issue and the sources should be getting from the second and third attachment (the third one, only the introduction and chapter 1 included
Example Briefing Note: Tax Reform in CanadaIssue
Due to the effects of ongoing fundamental changes to the structure of the Canadian economy in twenty-first century, the existing Canadian tax system is no longer meeting standards in the areas of efficiency, transparency, and neutrality. As a consequence, it is imperative that there be a systematic overhaul of Canada's tax code so as to modernize its structure, and ensure continued economic growth and competitiveness in an increasingly globalized world.
Background
- The Canadian tax code was last augmented in 1987 with the release of the White Paper on Tax Reform, which reduced the number of tax brackets, introduced the Goods and Services Tax, and enlarged the corporate tax base.
- The job of imposing and regulating taxation in Canada is shared by federal and provincial governments. Federal rates are usually higher than their provincial counterparts.
- As of 2014, government tax revenues constitute approximately 14% of GDP (See: Canada Federal Budget 2014).
Economic Analysis
A number of structural difficulties face the Canadian Economy:
- The continued growth of developed nations is expanding demand for many key natural resources of which Canada is an exporter. As a result, this increasing demand for the Canadian dollar is pushing up exchange rates, and making the potential exports of Canadian non-commodity producers less attractive, thus threatening several industries.
- The economies of traditional trade partners such as the United States have faced stagnant growth and have begun to undergo trade diversification, thus further endangering the markets for Canadian goods, and subjecting domestic firms to increased competition.
- Canada's aging population demographics leaves the country with a diminishing tax base, a shrinking workforce, and higher rates of required future expenditure.
A reform of the tax code could potentially address these problems by:
- Making the country attractive to foreign investors, incentivized by the transparency and efficiency of an improved tax code, thus potentially offsetting the losses of exporters and contributing to long run economic growth.
- Increasing the amount of revenue collected by closing loopholes, preventing evasion, and reducing the incentive for capital flight, thus establishing a more stable tax base.
- Amplifying incentives for work and domestic investment (and thus increasing economic growth) by eliminating the distortionary effects of high levels of taxation on personal income and business investment.
Risk Analysis
- The highly toxic nature of tax reform could see policymakers refuse to address the issue, as adequate reform requires closing many popular exemptions and loopholes that benefit certain constituencies (See: Tax Simplification Benefits and...). Furthermore, the public's general lack of knowledge on the issue means popular support for this motion may be lacking.
- Even following the passage of comprehensive tax reform, future elected officials may be tempted to promise tax exemptions for certain demographics in order to win election cycles, thus imperiling any reform in the long run.
- Failure to augment its tax code could mean key industries begin to leave Canada in favor of more accommodating tax regimes elsewhere, thus hampering long run growth and scarring the Canadian economy.
Option Analysis
- Simplify and Reduce Personal Income Tax: Eliminate majority of existing exemptions while retaining basic three-bracket structure with lower rates in each bracket.
- Shift Taxation Towards Consumption: Rebalance personal taxation by reducing income taxation and increasing consumption taxation.
- Simplify and Reduce Business Taxes: Remove majority of business exemptions while moving towards "sustained lower rates of business taxation."
- Implement a Series of Taxes on Negative Externalities: Promote social surpluses by taxing carbon emissions, unhealthy foods and other negative externalities.
Analysis of the Proposal
Strengths
- The argument that simple and efficient taxation regimes can make the Canadian economy more competitive is claimed by many to be supported by historical evidence. Some have made the case that similar attempts to increase economic competitiveness by reducing corporate taxes were successful in Ireland, where they helped stimulate strong growth and attract investment (see: Why Ireland Boomed).
- Takes the effects of positive and negative externalities into account in its models of the effects of taxes, and thus includes a more complete picture of the effects of taxation on social welfare.
- Though advocating reduced rates of taxation in many areas, it avoids the common mistake of advocating for the widely discredited theories of supply side economics (see: Peddling Prosperity).
Weaknesses
- Nobel Laureate Joseph Stiglitz and others, argue that decreasing business/corporate taxes (and eliminating exemptions) as a means of attracting investment is misguided, and corporate tax regimes can be non-distortionary. It is argued instead that deductions should be granted at increasing rates proportional to a firm's domestic investment levels (see: Reforming Taxation to Promote...).
- Though there is heavy emphasis on augmenting direct rates of taxation, important parallel issues regarding government expenditure that concern many economists, including large amounts of waste in the area of subsidies, are not addressed as they are in similar papers (see: Tax Reform in Canada...).
Personal Recommendations
- Accept the Conference Board's proposal to simplify the Canadian tax code by slashing the majority of tax exemptions.
- Place legal caps on the physical length of the Canadian Tax Code in order to the limit the range of legal interpretation and make it more accessible to the general public.
- Avoid calls to indiscriminately decrease income tax rates across the board. Instead pursue a coordinated effort of lowering rates on the two bottom brackets, while increasing rates on the highest bracket. Piketty, Saez, and others suggest that higher rates of marginal taxation on the top income bracket are necessary to combat soaring wealth inequality (see: Capital in the Twenty First Century).
- Implement the suggestion of Stiglitz to augment the system of corporate taxation to allow for tax credits that proportionally increase in scale relative to a firm's rate of domestic investment so as to incentivize this behavior (see: Reforming Taxation...).
- Begin the transition towards consumption taxation with moderate decreases in income tax rates for lower brackets while simultaneously increasing consumption taxes so as to prevent a decline in government revenue. This method may be more politically viable in the short run, and if successful could be expanded in the future.
- Accept the Conference Board's proposal to place "sin taxes" on consumption goods that contribute to poor public health, as well as carbon taxes on greenhouse gas emissions to increase public welfare.
- Form a panel consisting of representatives and economists from the federal as well as various provincial governments, with the goal of investigating policy options that allow for the harmonization of tax policy between both levels of government.
Reports:
THE FUTURE COST OF HEALTH CARE IN CANADA, 2000 TO 2020
Balancing Affordability and Sustainability333-01 Detailed Findings By Glenn G. Brimacombe, Pedro Antunes and Jane McIntyre
BUILDING VALUES THE FUTURE OF HEALTH CARE IN CANADA on by ROY J. ROMANOW, Q.C. COMMISSIONER
https://www.dropbox.com/s/5f762zta7ycba5y/Assignment%20-%20attachment.rar?dl=0