The latest edition of the Canadian Tax Journal [gated] has a nice article by Daria Crisan and Kenneth J McKenzie that documents Canada's relatively generous tax subsidies for R&D spending, yet relatively underwhelming investment by large corporations, over the period 1981-2016. The article briefly summarizes the chronology of federal R&D programs and gives an overview of provincial policies. It finds that while Canada's spending on R&D is high relative to peer countries, the amount of R&D being undertaken relative to GDP consistently underperforms these peers and continues to decline. The bulk of the article is a presentation of data showing these trends. The conclusion is intriguing, positing three possible explanations for the puzzle of high spending but low investment:
The first is the rather obvious point that it may well be that Canada’s r&d performance would have been even worse in the absence of the subsidies. Of course we don’t observe this counterfactual, but it is consistent with the above observations.
The second comment is more speculative ... Canada relies much more than
other countries on the type of “indirect” tax subsidies that we consider here, which
are generally available to all companies, as opposed to “direct” subsidies, such as
targeted grants. It could be that the nature of r&d subsidies in Canada—the reliance
on indirect tax incentives rather than direct grants—is the problem. ...
This leads to our third, and final, observation. To our knowledge, there is in factThe authors conclude that their own ongoing research involves an empirical investigation of the effectiveness of direct and indirect incentives in promoting business r&d investment in Canadian
very little rigorous empirical evidence regarding the efficacy of direct versus
indirect government subsidies for r&d. Moving in this direction may well be the
right thing to do, but this seems to us to be based more on faith, and perhaps some
frustration with the Canadian “r&d policy puzzle,” than on solid empirical evidence.
Our hope is that the data presented here provide, at least in part, the basis
for additional research in this regard in a Canadian context.
I don't know whether the type of spending matters in terms of investment incentives. I would think that it matters what the spending is related to. For example, does spending a lot of money on companies to patent things actually lead to "innovation," whatever that word means? What I have read to date suggests not. There seems to be a strong connection of innovation spending toward traditional legal rights in copyright and patent, but these rights seem decreasingly relevant to many contemporary innovative business models.
Despite a general lack of empirical evidence that taxpayer dollars are well spent on R&D subsidies, governments everywhere spend and spend and spend to spur innovation. As a result empirical studies that shed light on the efficacy of this spending will always be welcome. If the studies show that traditional modes of subsidizing R&D do not provide the intended results, the question is whether governments themselves will be willing and able to innovate in terms of how they support innovation. From the chronology presented herein and my own research on the topic, the prospects seem dim. I look forward to seeing more of this important research.
Tagged as: Canada innovation R&D scholarship subsidies
Tax Coop and the World Bank are hosting a conference on tax competition and cooperation to be held in Washington DC on May 23-24. As last year, I've constructed the debate, which this year will be livestreamed on May 23 at 16:15 EST. I'll post the link when I have that information. At last year's conference, Dan Mitchell (Cato) and Richard Murphy (TJN) put corporate taxation on trial, debating the continuing viability of this tax in the face of technological innovation and economic globalization. This year's debaters are Alison Holder of ActionAid and Veronique de Rugy of the Mercatus Center at George Mason University.
- First, be it resolved that: tax competition harms developing countries by reducing their capability to raise fiscal revenue to finance physical and social infrastructure needed for economic growth and social inclusion.
- Second, be it resolved that: tax competition increases developing countries’ reliance on foreign aid, making them more vulnerable to aid volatility.
- Third, be it resolved that: tax competition aggravates existing income disparities between developed and developing countries.
The Spiegel Sohmer Tax Policy Colloquium at McGill University continues today with a presentation by Richard Murphy of Tax Research LLP and the Tax Justice Network, on the Fair Tax Mark. This event is presented in conjunction with a collaborative project between the Stikeman Chair in Taxation and the Centre for Intellectual Property Policy at McGill Law on the topic of how regulation impacts innovation.
The Fair Tax Mark is a self-regulation project that seeks to intervene in the ongoing relationship between corporations, society, and the state. Like other certifications such as Fair Trade, the Fair Tax Mark is a voluntary program intended to project an image of openness, honesty and trustworthiness in tax matters to consumers and investors. The Mark is about paying taxes, but it is also about dramatically increasing transparency about how multinationals undertake tax planning as a business strategy. This places the payment of tax and the attendant planning and scheming squarely within the realm of corporate social responsibility. The Mark suggests that demonstrating some level of compliance with NGO expectations about global tax justice is becoming a cost of doing business, thus comprising a (or contributing to an existing) social license to operate.
This year's colloquium focuses on the fundamentals of corporate tax policy by critically examining issues in national and international tax policy; more information about the colloquium here. Today's talk will take place from 14:30-17:30pm in Room 202 of New Chancellor Day Hall, 3644 Peel Ave, Montreal. Students, faculty and the McGill community in Montreal are welcome to attend.
Tagged as: activism colloquium corporate tax CSR governance McGill tax culture Tax law
The Spiegel Sohmer Tax Policy Colloquium at McGill University continues today with a presentation by Steven Dean on “SE(c)(3): A Catalyst for Social Enterprise Crowdfunding.” This event is presented in conjunction with a collaborative project between the Stikeman Chair in Taxation and the Centre for Intellectual Property Policy at McGill Law on the topic of how regulation impacts innovation. In the paper, Prof. Dean proposes a novel tax regime that offers entrepreneurs and investors committed to combining financial returns and social good with a means of broadcasting that resolve and screening out "greenwashed" ventures.
This year's colloquium focuses on the fundamentals of corporate tax policy by critically examining issues in national and international tax policy. Today's talk will take place from 14:30-17:30pm in Room 202 of New Chancellor Day Hall, 3644 Peel Ave, Montreal. Students, faculty and the McGill community in Montreal are welcome to attend.
Tagged as: colloquium McGill scholarship tax policy
Martin O'Neill, Senior Lecturer in Politics at the University of York, joins us as today's speaker in the Spiegel Sohmer Tax Policy Colloquium at McGill. He'll present a work in progress that he has entitled "Corporations, Conventionalism, Taxation and Social Justice." Here is an abstract:
A failure to take seriously the conventionality of corporations has led to an unimaginative view of corporate taxation as being structurally analogous to the taxation of individuals. There are, in fact, many disanalogies between the two: corporate profit should not be treated as analogous to individual income; low-profit corporations should not be treated advantageously by a tax system in the same way as it should treat low-income individuals; and, most significantly, corporations are not owed the same level of care and determinacy as individuals with regard to the tax rules that they face. Breaking the perceived link between individual taxation and corporate taxation makes room for a reassessment of the structure and purpose of corporate taxation.
Taking a step back from issues focussed narrowly on taxation, as such, there is a general need to integrate normative issues regarding corporations into our understanding of the proper configuration of the basic structure of a democratic society. In our current non-ideal circumstances, the corporations we actually have are corrosive of the possibility of social justice. In part, this is because we’ve been blinded by a certain picture of corporations as ‘natural’ economic entities, and have been too timid and unimaginative in the ways in which we subject corporations to political regulation and constraint. A robust conventionalism would allow us to reverse the usual order of justification: from seeing corporations as placing constraints on government policy, to seeing corporations as conventional economic units that should be embedded in an institutional and regulatory structure that delivers social justice.
This gestalt switch opens up wide vistas for public policy innovation. Thus, this is an area in which applied political philosophy has an important home. First, conceptually, it opens up policy spaces which are easy to ignore when one is in the grip of an earlier picture. Secondly, in order to make sense of theories of liberal egalitarian justice, we need a better idea of their institutional setting, and this means moving beyond (or at least supplementing) overly schematic debates about the relative significance of government agencies and individual behaviour. We also need to think about how the basic structure of society should be organized so as to marshal its most significant economic institutions in directions which are conducive to the pursuit of social justice within a democratic society.The presentation will again take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm. As always, the colloquium is open to all: students, faculty and the general public are welcome.
Tagged as: colloquium corporate tax McGill philosophy scholarship tax policy
I took part in the latest McGill Law Journal Podcast, this time to talk about tax incentives and innovation. Have a listen.
Tagged as: Canada film tax incentives globalization tax policy
Recently the Washington Journal on Law Technology & the Arts issued a symposium issue entitled "Mobile Money Symposium 2013." Description:
This special issue of the Washington Journal of Law, Technology & Arts contains papers contributed to a conference held at the University of Washington School of Law on April 20, 2012. The conference, entitled Mobile Money in Developing Countries: Financial Inclusion and Financial Integrity, was organized by the University of Washington School of Law with the support of the Linden Rhoads Dean’s Innovation Fund, Deakin University School of Law, Australia, and the United Nations Commission on International Trade Law (UNCITRAL).
The one on Safaricom looks like a fascinating case study:
- The 2012 Revised FATF Recommendations: Assessing and Mitigating Mobile Money Integrity Risks within the New Standards Framework by Louis de Koker;
- Governance of Global Mobile Money Networks: The Role of Technical Standards by Jane K. Winn;
- Privacy and Security Concerns Associated with Mobile Money Applications in Africa by Andrew Harris, Seymour Goodman, and Patrick Traynor;
- The Role of UNCITRAL Texts in Promoting a Harmonized Legal Framework for Cross-Border Mobile Payments by Luca G. Castellani;
- Mobile Money as an Engine of Financial Inclusion and Lynchpin of Financial Integrity by Claire Alexandre and Lynn Chang Eisenhart;
- The Role of Anti-Money Laundering Law in Mobile Money Systems in Developing Countries by Emery S. Kobor;
- M-Payments in Brazil: Notes on How Country Background May Determine Timing and Design of Regulatory Model by Gilberto Martins de Almeida;
- Safaricom and M-PESA in Kenya: Financial Inclusion and Financial Integrity by Mercy W. Buku and Michael W. Meredith;
- Mobile Money, Financial Inclusion and Financial Integrity: The South African Case by Vivienne A. Lawack-Davids;
- Reporting of Suspicious Activity by Mobile Money Service Providers in Accordance with International Standards: How Does it Impact on Financial Inclusion? by Miriam Goldby; and
- Mobile Payments In The U.S.: How Disintermediation May Affect Delivery of Payment Functions, Financial Inclusion and Anti-Money Laundering Issues by Erin F. Fonté.
The recent and widespread availability of affordable mobile phone technology in developing countries has paved the way for the development of a number of mobile money and electronic remittance services. One of the most successful of these services is Safaricom’s M-PESA program, launched in the East African nation of Kenya in March 2007. Since then, the program has successfully enrolled 15.2 million users, transferred more than US$1.4 trillion in electronic funds, and contributed significantly to poverty alleviation and financial inclusion efforts in rural Kenya. This Article seeks to trace the development of M-PESA in Kenya, provide a snapshot of the Kenyan implementation of and experience with the program, and consider the role that services like M-PESA might play in national and international anti-money laundering and counter-terrorist financing efforts.Interesting throughout.
Tagged as: scholarship
I have no idea why these remarks ended up in a State Dept email distribution I got today, as they date back to a year ago, but they are fascinating anyway: a speech given by Thomas Nides, Deputy Secretary for Management and Resources, to something referred to only as "Global Business Conference." That's not very specific, but I think you'll agree the remarks tell us a lot about the audience and the speaker (and governance, and the revolving door between business and government, and the role of law and the rule of law, and the stories we tell ourselves about those things, and etc etc). Excerpts of note:
...as Deputy Secretary of State and as a recovering businessman myself, I am delighted to welcome so many of my friends from my past and present lives all in one room.
...First, why do we, as diplomats, care about economics? The simple answer is that good diplomacy is good economics, and good economics is good for diplomacy.A reminder: what's good for GM is good for America.
America's global leadership and our economic strength at home are fundamentally a package deal, and we need to shore up both of them. We live in an era where the size of a country's economy is every bit as important to exercising global leadership as its size of its military.Was that ever not the case? It takes big money to build a big army and supply it with big guns.
The reach of our corporations extend far beyond where even our most aggressive diplomats and development workers hope to go. And, closer to home, America's people are hungry for economic recovery. In a global economy, there's no such thing as a purely domestic recovery. That means the State Department, which manages our relationships around the world, is essential to exercising our economic influence, keeping America prosperous, and creating jobs here at home.
Second, why did we invite you? Because we believe that building sustainable global growth and creating jobs at home is fundamentally a joint venture. The private sector innovates and allocates capital, and delivers remarkable products and services. And the government opens new markets and ensures the rules are fair. At a time when competition is fierce and jobs are still too far scarce, we in diplomacy and business have to bring our partnership to the next level.You innovate, we make things fair, everybody's happy, to a whole nother level indeed. So, who got invited, who is in the room? Why, it's "Business leaders from across American industry, from large companies to small ones ... as well as organizations working to promote American business and fair competition, including my old friend, Tom Donohue." Don't know who that is? Read Matt Stoller's take from several years ago, it's important. And with whom will these business leaders be networking in the halls between remarks lauding their innovation and sheer excellence in creating jobs in America? "Vice President Biden, Commerce Secretary Bryson, our Trade Ambassador Ron Kirk, and the heads of Ex-Im, TDA, and OPIC and Secretary Clinton." And yet there's more, so much more to come.
Which brings me to my third question: What do we, as the State Department, bring to the table? I would submit that the answer is: a huge amount. We are the face of the United States in over 190 countries and at 274 posts around the world. We fight for your rights.I know you want to add "to party" and I think overall, you'd be right to add it there.
...Over the past 60 years, we have helped establish the rules and institutions to safeguard healthy economic competition and spur unprecedented global growth.Yikes. Just, yikes. But then there is this absolute gem:
...We have over 1,000 State Department economic officers around the world who wake up each day and ask themselves how they can help American companies large and small compete, connect, and win. From bilateral trade and investment treaties to open skies agreements, we open markets for your companies. We advocate on behalf of U.S. companies exporting to just about every country in the world. We make it a priority to help American companies take part in the growth unfolding across the developing world.
...And whenever we have seen barriers to open and free and fair and transparent competition, our embassies around the world push back. We push back against unfair barriers to investment. We push back to protect intellectual property, to protest discrimination against our companies, and to guarantee that all companies get a fair shake, whether the owners sit in corporate boardrooms or government ministries. When American businesses are not fairly treated, that's not just an economic issue; it's also a diplomatic issue.
And let me be clear. We just don't seek a fair shake for American companies; we seek a fair shake for all companies. ... We know that when the competition is open and free and transparent and fair to all people, American companies have what it takes to compete. And we know the same values that help our companies will also help local entrepreneurs, foreign businesses, and ultimately everyone for one simple reason: They create economic growth that improves lives.Yeah! That's how winning is done! Don't forget to visit your mother. Really, I just had no idea that the State Department had a pep squad of 1,000 "economic officers" [what is that? ah, negotiators of fair competition, economics knowledge helpful but not required] all over the world who woke up every day asking themselves those questions and then answering them. That really is remarkable.
Fourth and finally, what do we hope to accomplish here together? We want to hear from you. We want to know your concerns, where you see opportunities, where you see gaps in our work. We also want you to know that you can turn to us for support.
...We at the State Department want to help create the conditions that will empower American businesses to get out there and take the risks that will drive a recovery around the world. ... The idea that business, on the one hand, and government, on the other hand, can simply operate in parallel worlds just doesn't cut it. We have to work together. That's what this conference is all about, and that's why I'm glad you're here. Thank you very much. (Applause.)Then he introduces Ron Kirk. I always do enjoy a speech like this, even if I am a year late to the party. Number of times he used the word fair: 11. The word compete or competition: 8. The word help: 8. The word jobs: 6. The word business: 17. The word lobby: 0.
Tagged as: globalization institutions lobbying u.s.
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
Tagged as: conference scholarship tax policy
Peter Spiro notes that "appeals from courts in the cities would be to Mauritius and then to the UK Privy Council... This strikes me as the leading edge of a potentially huge development, in which private actors more formally get their own pieces of turf and the lines between sovereign entities further blur. ... it will require legal innovation to situate the new, private city-state in the world of international law."
I still think this is just a new twist on an old idea. But I agree that there are serious implications for thinking about the nation state, sovereignty, autonomy, and the rule of law.