Taxes

Ottawa should kill its tax on booze-free beer

Before the pandemic, while at a Blue Jays game, my head turned when a patron at the bar ordered a non-alcoholic beer. At first, I thought this might just be a new hipster fad, but I couldn’t have been more wrong. Non-alcoholic beer isn’t only for designated drivers or pregnant women anymore. It is a continuously growing market with forecast worldwide sales over $4 billion (U.S.) by 2025. While I may not be the target audience for these new beverages, other Canadians clearly are.

This is where federal tax policy comes into play, because, oddly enough, non-alcoholized beer is subject to federal excise taxes, albeit less than what is paid on regular beer. Despite containing virtually no alcohol at all and therefore posing no real risk to consumers other than caloric intake, non-alcoholic beer is charged an excise tax of $2.82/hectolitre — a hectolitre being 100 litres. The application of an excise tax is a problem for several reasons.

The first problem with the excise tax for non-alcoholic beer is that non-alcoholic wine and spirits are exempt from the tax. For some reason, the federal government doesn’t treat all non-alcoholic beverages equally. Removing the excise tax for non-alcoholic beer would simply apply the government’s own logic consistently across the entire non-alcoholic sector.

Beyond consistency, removing the tax on beer would help reduce costs for health-conscious consumers, giving them better access to reduced-risk products. It would also very likely help expand the domestic production of these beverages, given that Canada is unique in its excise treatment of non-alcoholic beer.

The tax also puts Ottawa offside with the provinces, which, as regulators of where alcohol products are sold within their boundaries, have already recognized that there is no justification for treating non-alcoholic products as strictly as standard beverage alcohol. That is why, from coast to coast, you can buy these products outside of each province’s alcohol retail system at grocery and convenience stores, often alongside carbonated water and pop.

Finally, exempting non-alcoholic beer from the federal excise tax would be consistent with the principles of harm reduction, a policy approach the Trudeau government has championed, albeit selectively. When regulating and taxing products that could present some risk to consumers, it is important that legislators evaluate what that risk actually is. For non-alcoholic beer it is near zero, which is why it is not appropriate for the government to treat it the same as beer. Apart from residual puritanism, the main justification for taxes on beverage alcohol is to help cover any alcohol-related health-care costs that might arise. But what is the alcohol-related health-care burden of non-alcoholic beer? There isn’t any, which is why it should be exempt.

At the end of the day, Canada’s beer drinkers already pay enough in taxes — fully $676 million in excise taxes alone in 2020. And because it is indexed to inflation the alcohol excise increases every year without review, which is one reason, in addition to provincial markups, why on average 47 per cent of the price you pay for beer goes to the government. That is an exorbitant amount that should be reduced significantly.

Removing the excise tax for non-alcoholic beer would be a small first step in re-thinking what the appropriate level of tax is in Canada. It would give consumers more health-conscious choices, at better prices, and do so in a way is consistent with the government’s own logic for non-alcoholic beverages.

Originally published here

No reason to toast federal tax on non-alcoholic beer

Across the board, we should expect better from Ottawa, and the tax on non-alcoholic beer is yet another example of where they’ve gotten it wrong.

Sin-taxes, across all sectors, are fairly excessive in Canada. At almost every turn the government sinks its tax teeth into the process of you purchasing the products you like. This is true for cannabis products, alcohol, tobacco, vaping, gas, and annoyingly so, non-alcoholic beer. Yes, non-alcoholic beer in Canada is not exempt from federal excise taxes.

You read that right. The federal government also extends its sin-tax regime for non-alcoholic beer, at a rate of $2.82/hectolitre.

The application of excise taxes for non-alcoholic beer is problematic for a variety of reasons. The first, and most glaring, is that it is hypocritical given that the federal government has exempted non-alcoholic wine and spirits from the excise tax. Why apply it for beer, but not wine and spirits? Obviously, a more consistent approach would be to simply exempt all non-alcoholic beverages from the excise tax, because the purpose of the sin tax is to recover alcohol-related healthcare costs. That said, there are no alcohol-related healthcare costs at all from non-alcoholic beer, which immediately shows the lunacy of sin-taxing these products.

In addition to correcting hypocrisy, removing the excise tax for non-alcoholic beer would put federal policy in line with how the provinces treat these products. Provincial regulators, including Alberta, don’t require non-alcoholic beverages to be sold at licensed alcohol retail outlets, because they’ve accepted the obvious that these products don’t have alcohol in them and thus shouldn’t be strictly regulated. That is why in Alberta these products are often sold alongside carbonated water and pop. Removing the excise tax would be the federal government following the lead of the provinces in treating non-alcoholic beer differently than beer, because they are in fact different.

On the industry side, the federal excise tax acts as a barrier for product development in Canada, mostly because other beer producing jurisdictions (US,EU,UK) don’t tax non-alcoholic beer. Because of this the domestic industry in those jurisdictions has flourished, offering consumers more choice and at better prices. Their sane tax policy, coupled with increased consumer demand, is in large part why the non-alcoholic beer market is expected to grow to over $4 billion by 2025. These drinks aren’t just for hipsters, designated drivers and pregnant women anymore.

Lastly, and most importantly, is how non-alcoholic beer is yet another example of new products reducing harm for consumers. And while I don’t personally enjoy these drinks, I can see why someone would still want to enjoy a beer with their friends, or at a bar, without the alcohol that comes along with it.

From a harm reduction perspective, it makes perfect sense to have different tax strategies for products that vary in risk. The Trudeau government, at times, has championed harm reduction for illegal drugs but appears to have a blind spot when it comes to legal substances. This is an uncomfortable trend from Ottawa that is perfectly exemplified by the excise tax on non-alcoholic beer. Ottawa has kept the excise tax system for non-smokable THC cannabis products, like edibles and beverages, despite the fact they are significantly less harmful. They’ve sought to ban vape flavours, despite the fact that vaping is 95% less harmful than smoking, and flavours are an incredibly useful tool for adult smokers trying to quit.

Across the board, we should expect better from Ottawa, and the tax on non-alcoholic beer is yet another example of where they’ve gotten it wrong. Hopefully, come Budget 2022, they can correct this mistake and remove the excise tax from these products entirely.

Originally published here

Qui paiera les “ressources propres” de l’Union européenne?

Depuis que le plan de relance de l’Union européenne a été lancé par les institutions européennes à Bruxelles, tout le monde sait que les obligations de la dette commune que l’UE a contractée jusqu’en 2058 devront être remboursées d’une manière ou d’une autre. C’est d’autant plus vrai que maintenant que nous avons ouvert la boîte de Pandore d’une dette européenne, il y a fort à parier que ce ne sera pas la dernière fois que nous allons lever des fonds de cette manière. Selon l’accord effectué, les 750 milliards d’euros de prêts sont censés être payés par les ressources propres de l’UE, c’est-à-dire les impôts.

Le 1er janvier de cette année, la taxe sur le plastique de l’UE est entrée en vigueur. Cette taxe facture les États membres de l’UE pour leur consommation d’emballages plastique et exige qu’un montant proportionnel soit envoyé à Bruxelles pour le budget de l’UE. Il est également question d’une taxe d’ajustement aux frontières pour le carbone (des termes créatifs pour décrire une taxe sur le CO2), d’une taxe numérique et d’une taxe sur les transactions financières. Selon certains commentateurs, cela permettrait à l’Union de devenir plus indépendante des intérêts du Conseil européen, auquel la Commission se sent trop souvent redevable, alors que la plupart de ses soutiens “intégrationnistes” se trouvent au Parlement européen.

Mais qui va réellement payer ces taxes ? Une taxe numérique sur Microsoft, Amazon, Google, Apple ou Facebook sera-t-elle payée par ces grandes entreprises de l’autre côté de l’océan et ira-t-elle dans les poches du Berlaymont ? Pas du tout. L’UE propose de taxer les services numériques là où la transaction a lieu, et non dans le pays de résidence de l’entreprise. Dans le cas d’Apple, les ventes européennes sont organisées par le siège de la société à Dublin, en Irlande, afin de bénéficier du système fiscal irlandais plus avantageux. De la même manière, Amazon bénéficie de règles au Luxembourg. Google et Microsoft vendent davantage de services numériques, Google surtout à travers des services publicitaires. Ici, le coût de cette taxe serait, à l’instar de la TVA, supporté par les consommateurs finaux. Les partisans du libre-échange et opposants à ces taxes prouvent ici leur point : le protectionnisme qu’implique ces taxes n’est pas payé par les entreprises étrangères mais bien par les consommateurs locaux.

C’est également ce que provoque la taxe carbone sur les importations. Certains biens provenant de pays qui ne partagent pas les réglementations climatiques ambitieuses de l’UE seront bien plus compétitifs en raison des faibles coûts de production dans leurs pays. Si l’on tente d’écarter ces produits du marché au moyen d’une taxe sur le carbone, les consommateurs européens paieront simplement la facture .

Une taxe sur les transactions financières est un exemple encore plus flagrant de pensée fiscale erronée. Aux yeux de ses partisans, elle frappera les grands acteurs des marchés financiers internationaux, alors qu’elle ne sera payée que par les investisseurs particuliers et les petits actionnaires qui commençaient à apparaître récemment grâce à l’utilisation de plateformes de trading accessibles.

Il faut comprendre une réalité économique malheureusement peu comprise : les entreprises ne paient pas d’impôts ou de taxes, ce sont toujours des personnes qui les paient. Une entreprise est toujours un nœud de contrats entre des personnes physiques. Cette entité fictive ne peut pas payer d’impôts ou de taxes : soit ce sont les propriétaires qui les paient (par une baisse de leur dividende), soit ce sont les consommateurs (par une hausse des prix des services ou une baisse de la qualité) soit ceux sont les employés (par une baisse de leurs salaires et conditions de travail). D’ailleurs, c’est bien souvent cette dernière solution qui est privilégiée.

Les taxes européennes discutées actuellement sont censées créer une indépendance pour l’Union et taxer les grands acteurs financiers pour réduire les inégalités. En réalité, seul le premier objectif sera atteint. Devrions-nous s’en étonner ?

Who will really pay the “own revenues”?

Spoiler alert: consumers will.

Ever since the recovery package of the European Union was sent on its way through the institutions in Brussels, everyone knew that the joint debt obligations that the EU took up until 2058 need to be paid back somehow. This is particularly true because now that we’ve opened the slippery slope of taking up EU debt, you can rest assured that it won’t be the last time we will do it. The 750 billion Euros are said to be paid by own EU resources, meaning taxes.

On January 1st this year, the EU’s plastic tax has come into effect. The tax charges EU member states for their plastic packaging consumption and demands that a pro-rata amount be sent to Brussels for the EU budget. Also being discussed are a carbon border adjustment (fancy words to describe a CO2 tax), a digital tax, and a financial transaction tax. For many in the EU, this will allow the Union to become more independent from the interests of the European Council, to which the Commission all too often feels, and is, beholden when most of its more integrationist support lies in the European Parliament.

But who will actually pay these taxes? Is it that a digital tax on Microsoft, Amazon, Google, Apple, or Facebook, will be paid by these big corporations from accross the pond and flow into the pockets of Berlaymont? Hardly so. The EU suggests taxing digital services where their transaction occurs, as opposed to taxing in the company’s country of residence. In the case of Apple, European sales are organised through the company’s HQ in Dublin, Ireland, to benefit from Ireland’s more advantageous tax system. In a similar way, Amazon benefits from rules in Luxembourg. Google and Microsoft sell more digital services, in the case of Google advertising services. Here, the cost of a tax would, much like VAT, put on the end consumers. This comes down to much of the free trade argument: the resident consumers pay protectionist tariffs in the country that imposes the tariff, not by the exporting party.

A carbon tax on imports does exactly that. Some goods coming from countries that do not share the EU’s ambitious climate regulations are competitive in price due to the low production costs in those countries. Attempting to push these goods off the market with a carbon tax means that EU consumers will pay more.

A financial transaction tax is an even more egregious example of misguided fiscal thinking. In the eyes of its advocates, it will hit the big players on the international financial markets, when instead it will be paid by low-level investors, low-level shareholders, consumers playing around with investment services that have popped up, particularly during the pandemic.

It narrows down to the economic reality that companies do not pay taxes; people do. The building of a company cannot pay taxes; but is being paid because either the company reduces its share dividends of its shareholders, pays its workers less, or increases prices for consumers. All too often, the latter is the preferred solution.

The discussed EU taxes are supposed to create independence for the Union and tax big players to reduce inequities. It is more likely to do the former than the latter.

Originally published here.

Une taxe sur le carbone de l’UE est une erreur politique

En novembre 2020, la “European Round Table on Climate Change” a accepté un document sur le concept de taxe carbone prélevé à la frontière, également connu sous le nom de taxe carbone. Il est maintenant largement entendu que l’UE envisage sérieusement de mettre en œuvre un nouveau régime de taxes carbone dans le cadre de sa stratégie écologiste globale.

En termes simples, il s’agit de taxes sur les marchandises provenant de pays qui ne respectent pas le niveau de protection environnementale de l’UE. Leur principal objectif est d’éviter les “fuites de carbone”, c’est-à-dire le déplacement des entreprises vers des pays qui n’imposent pas de coûts sur le carbone.

Le problème, avant tout, est que les droits de douane sont des taxes payées par les consommateurs nationaux, ce qui signifie que ce sont les consommateurs européens qui vont payer la facture en raison de l’augmentation du prix des produits internationaux. À l’heure où l’Europe tout entière attend la fin de la pandémie et l’inquiétante reprise économique qui s’ensuivra, un ajustement du prix du carbone qui gonflera les prix serait pour le moins gênant.

Les partisans de cette politique soutiendront qu’un ajustement aux frontières aura l’avantage d’encourager les exportateurs à fortes émissions à assainir leurs pratiques et de profiter ainsi à l’industrie européenne. L’idée est que si les produits étrangers deviennent plus chers, les produits européens deviendront comparativement moins chers.

Pour ce qui est d’amener les pays à fortes émissions à respecter les normes européennes en matière de climat, il est naïf de penser que les pays en développement peuvent satisfaire à ces critères. Comme de nombreux acteurs de la politique de développement l’ont souligné à juste titre, le monde développé s’est propulsé vers son statut actuel en se concentrant d’abord sur la croissance, ce qui permet aujourd’hui à l’Europe de s’offrir le luxe d’adopter des politiques de protection de l’environnement. De ce fait, il est peu probable de voir les pays en voie de développement avoir la capacité, à court et moyen terme, de créer les infrastructures nécessaires pour répondre aux normes européennes.

Cela signifie que l’ajustement ne sert qu’à faire pencher la balance en faveur de l’industrie nationale. Si ce changement peut sembler positif pour certains, les tarifs douaniers imposés sous l’administration Trump nous donnent une étude de cas sur les impacts négatifs de ces sanctions douanières. Si l’objectif politique de Trump était d’une toute autre nature, il est important d’observer les impacts d’une hausse des tarifs douaniers sur la population et l’industrie.

Pour les machines à laver, les tarifs douaniers de Trump étaient de 20 % sur les 1,2 million premières unités importées, puis 50 % pour toutes les unités importées au-delà de ce montant. Il en a résulté une augmentation de 12 % du prix des machines à laver et des sèche-linge importés, qui, bien que non taxés, sont souvent vendus par paire.

Malheureusement, les consommateurs ont également dû faire face à des prix plus élevés pour les lave-linges nationaux, en grande partie parce que les producteurs nationaux ont pu augmenter leurs prix à mesure que les prix de leurs concurrents augmentaient. Pour les consommateurs, le résultat final de cette politique a été une augmentation des prix d’environ 88 dollars par machine, ce qui a représenté une inflation totale des prix de 1,56 milliard de dollars, générant 82,2 millions de dollars de recettes tarifaires.

Les partisans des droits de douane pourraient faire valoir, comme l’a fait M. Trump, que même si les consommateurs payaient plus cher les produits importés, et ironiquement les produits nationaux aussi, cette politique a eu pour effet positif de renforcer l’industrie nationale et de créer des emplois. C’est effectivement vrai, la politique a créé des emplois dans le secteur manufacturier aux États-Unis, environ 1800 nouveaux postes. Le problème est que ces emplois ont eu un coût énorme pour les consommateurs américains, à tel point que ces derniers ont payé 811 000 dollars de prix supplémentaires par emploi créé. Ce chiffre est loin de correspondre à un bon résultat coût-bénéfice.

Nous ne savons pas quel serait le taux de l’ajustement carbone, mais il est probable que, conformément aux règles de l’OMC, il devrait correspondre aux taux actuellement appliqués par cette nation européenne. Si le tarif du carbone devait correspondre à la taxe carbone nationale française de 44,81 euros par tonne d’émissions de carbone, l’impact d’un ajustement carbone serait significatif. Si l’on reprend les chiffres du fiasco des lave-linges de Trump et qu’on les applique à tous les produits importés en Europe depuis des pays à fortes émissions, la facture que les consommateurs devraient payer serait tout simplement astronomique.

California’s AB 286 is a hidden tax on consumers and small businesses. The legislature should vote NO

Our coalition of community organizations, minority-owned businesses, small businesses,
taxpayer advocates restaurants, merchants and app-based drivers strongly oppose Assembly
Bill 286. While AB 286 purports to help restaurants and merchants, the bill will result in
increased costs to consumers, reduced business and revenues for restaurants, and fewer
income-earning opportunities for drivers.

AB 286 is a hidden tax on consumers and small businesses and would hurt the very restaurants
it is intended to protect.

App-based delivery platforms connect restaurants, customers, and drivers. Fees are carefully
balanced to reflect the mutual benefits to each party: fees on restaurants help pay for marketing,
payment and insurance for drivers, customer service, and other services that help restaurants
gain customers and grow business. Fees on customers reflect the convenience and value of the
delivery service while also ensuring fair payment to drivers.

AB 286 would arbitrarily and permanently cap fees paid by restaurants and will force prices to
rise on consumers in order to ensure adequate revenues to provide app-based delivery
services. For instance, a 15% cap on a typical $20 food order is $3. That $3 is insufficient to
pay for the driver, insurance, marketing, credit card processing fees, customer support,
technology, and costs of operating the platform.

Because of this, in communities that have passed these arbitrary fee caps, consumer prices
have increased to compensate and ensure that app-based delivery remains viable. In cities that
have implemented these arbitrary fee caps, consumer costs have immediately gone up by $2-3
per order.

Higher prices are proven to reduce demand by as much as 30%, taking away customers and
business from restaurants that are struggling to stay afloat during these challenging times. AB
286 will be particularly harmful to small independent restaurants trying to compete with larger
chains that have their own marketing and even delivery services. Furthermore, while AB 286
purports to help restaurants struggling with the pandemic, it is permanent in nature and won’t
even go into effect until 2022.

And the higher prices also harm drivers working with app-based platforms, as reduced demand
for services means fewer work opportunities for drivers, less income for drivers and reduced
sales tax revenues for municipalities.

Finally, AB 286 is unnecessary. California recently passed legislation (AB 2149) that requires
app-based platforms to enter into a contract with every restaurant and merchant they list on
their app. As a result, every restaurant or merchant that utilizes app-based delivery services
has voluntarily entered into an agreement with full transparency into the terms, fees, and
benefits of partnering with these platforms.

We strongly urge you to vote No on AB 286. It hurts restaurants, customers, and app-based
drivers.

Sincerely,

Lily Rocha, President, Latino Restaurant Association
Julian Canete, President & CEO, California Hispanic Chambers of Commerce
Pat Fong Kushida, President & CEO, CalAsian Chamber of Commerce
Rev. KW Tulloss, President, Baptist Ministers’ Conference of Los Angeles and Southern California
Matt Regan, Senior Vice President, Bay Area Council
Cindy Roth, President & CEO, Greater Riverside Chambers of Commerce
Reuben Franco, President & CEO, Orange County Hispanic Chamber of Commerce
Elise Swanson, Chair, South Bay Association of Chambers of Commerce
Jessica Lall, President & CEO, Central City Association – Los Angeles
Yaël Ossowski, Deputy Director, Consumer Choice Center
Heidi L. Gallegos, President & CEO, Brea Chamber of Commerce
Leah Vukmir, VP of State Affairs, National Taxpayers Union
Moises Merino, President, Latino Leadership & Policy Forum
Ruben Guerra, President and Chair, Latin Business Association

Rev. Jonathan E. Moseley, Western Regional Director, National Action Network – Los Angeles
David Cruz, President, League of United Latin American Citizens Council 3288
Jay King, President & CEO, California Black Chamber of Commerce
Faith Bautista, CEO, National Diversity Coalition
Stuart Waldman, President, Valley Industry & Commerce Association (VICA)
Marc Ang, Founder/President, Asian Industry B2B
Peter Leroe-Muñoz, General Counsel, SVP, Tech & Innovation, Silicon Valley Leadership Group
Thomas Hudson, President, California Taxpayers Protection Committee
Adam Ruiz, Chair, Southwest California Legislative Council
Faith Bautista, President & CEO, National Asian American Coalition
Brandon M. Black, Director of Public Policy, Sacramento Metropolitan Chamber of Commerce
Thomas Hudson, President, Placer County Taxpayers Association
Dominik Knoll, CEO, Redondo Beach Chamber of Commerce
Cindy Spindle, CEO, Garden Grove Chamber of Commerce

PDF LINK HERE

A liberal solution to Britain’s obesity crisis

Once an ardent opponent of sin taxes, Boris Johnson has now experienced a mighty change of heart. We don’t yet know what his new strategy will look like but one thing is clear: more nannying won’t solve Britain’s obesity problem.

In April 2018, as part of the government’s childhood obesity strategy, the UK government introduced a sugar tax to reduce sugar consumption. A year later, it was announced that plain packaging of crisps, sweets and fizzy drinks was also on the agenda.

In light of the coronavirus pandemic and excessive weight having been recognised as a risk factor, the discussion around obesity and ways to tackle it has been spurred into motion again. The lockdown made things even worse. Almost half of Brits – 47 per cent – have put on weight since lockdown began in March.

The UK government has been using various types of interventions to solve the rising national rates of obesity, and more of those are seemingly on the way. However, a substantial societal shift can only be achieved through a partnership between government and other actors such as business, civil society organisations and advocacy groups and education systems.

Challenging times require innovative solutions. In order to drive down obesity, we have to review our incentives. Longevity and a healthy lifestyle is an excellent motivation in itself but monetary incentives might turn out to be more successful.

Obesity is a societal issue, so fighting it requires a multi-faceted approach. Nowadays, companies go out of their way to improve the wellbeing of their employees by providing gyms, yoga classes, company-wide fitness programs and so on.

Many American firms are now incentivising their employees to become healthier in order to reduce overall insurance costs for those in pooled insurance programs. In the UK, if companies were given tax relief when its provisions allow obesity rates among its employees to decrease, it is likely they would take up the burden to solve this social and public health issue themselves.

The results could be astounding provided that transparency is guaranteed. In a similar fashion, the government could cooperate with the IT sector to create an app where citizens could track their lifestyle, earn rewards for eating healthy food and exercising more in the form of income tax reduction upon reaching specific milestones.

One example of such an idea is the Sweatcoin app which converts steps into a currency that can be spent on various goods and services. The UK could succeed in solving one of the world’s most pressing issues if it decides to embrace innovation.

Lastly, we should also focus on educating students about sugar consumption, and generally about health to ensure they are able to make informed and responsible consumer decisions.

Daily calorie intake in the UK is also decreasing with each decade. It is exercise that many people are lacking, and we should educate consumers about this fact. In particular, education should draw the attention of consumers to sugar so that consumers don’t make these consumption choices by inertia but take time to balance out the present and future costs and benefits.

Coronavirus has spurred a great deal of fear, especially around our health and wellbeing. It is, however, key to remember that that government interventionism is expensive, short-sighted and ignores the complexity of the consumer decision-making process. Education and innovation are a smarter way forward.

Originally published here.

The Consumer Choice Center is the consumer advocacy group supporting lifestyle freedom, innovation, privacy, science, and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle & consumer goods, and health & science.

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org

Fairness formula: free markets, rule of law, and consumer choice

June 11, 2020
By Maria Chaplia
In Blog, Branding Ban, Consumer Goods/Lifestyle, Taxes
5 comments

In light of the Black Lives Matter protests, a statue of former UK Prime Minister Robert Peel, who, among other things, abolished the disastrous Corn Laws in 1846, has been defaced with socialist graffiti. As someone coming from a post-communist country who came to recognise and appreciate the role of free markets in bringing about prosperity, I was heartbroken.

Communism, or socialism as its lower and more feasible version, has come to personify the Garden of Eden, the idealist dream of liberté, égalité, fraternité. In modern European history, socialism, as we know it today, started off as an outraged response to the ever-growing wealth gap between the rich and the poor. The complete lack of economic freedom in the form of excessive taxation and irresponsible public expenditure was at the heart of the French revolution. The same story then played out in Russia and resulted in the establishment of the USSR. The social order leading up to these and many similar uprisings was extremely unfair, but the cure was free markets, rule of law, and peace, not socialism, cronyism, and tyranny.

This lesson of history is especially important and is usually overlooked. Free markets, and in particular free trade, have been key to reducing poverty all across the world. The right to choose that comes with economic freedom has led to individual empowerment in various other areas of life. While socialists’ promise of fairness and equality results in one type of consumer goods available on the shelves, long queues, one haircut for all, one school uniform, and extremely low level of innovation, capitalism celebrates the plentifulness of choices, individuality, and entrepreneurship. And yet free markets are increasingly blamed for all the evils in the world: wealth gap, gender inequality, and even climate change.

It would be a mistake to claim that free markets are a perfect solution to all problems in the world, but it’s the best we have. If left unchecked and without proper incentives, capitalism can really become a brutal race in which those who obtained the most wealth – sometimes not by legal means – win. However, combined with institutional integrity, and the rule of law, free-market capitalism isn’t only the fairest solution based on merit and choice, it’s also the most desirable one.

Let’s imagine, as in the famous Rawls’s experiment, that we know nothing about our individual identity meaning that we don’t know what gender we have, whether we are straight or gay, what is our skin colour, and whether we are rich or poor. For the experiment to work, we have to imagine that all of the people are in this position and we have to establish a new social contract. What would we want it to be?

Regardless of who we turn out to be, we would all end up as consumers and would want to enjoy the freedom to choose from the widest array of products. We would prefer them cheap – so taxes have to be low – and would like to get all the information we can about those products, and of course more innovation. When considering our position in the world under the veil of ignorance, we would likely also think about our lifestyle. Would we all want to agree to the state of things when we are told what to consume, or when someone intervenes into our voluntary exchange with other people? Likely not, unless we think about it from the standpoint of a government bureaucrat who might be driven by noble motives but still wants to control our lives. The majority of people standing behind the veil of ignorance wouldn’t buy into that anyway.

In this experiment, I’m focusing on us as consumers because that is one of the key things that socialism in its pursuit of justice gets wrong. If we look at the world through the veil of ignorance, we would like to be able to make decisions for ourselves, we would want to coordinate in the markets between each other through price mechanisms, not have everything centrally planned. Government is an artificial creation with the mission to deliver on the social contract, and therefore protect our rights, in particular the right to live and property rights. What actually happens, though, is that governments often take our desirable social contract from us by force in favour of fewer markets, less economic freedom, and less consumer choice.

Fairness doesn’t mean equality of outcome, it is the equality of opportunity or the freedom to choose. Only free markets combined with the rule of law can safeguard these.

A soda tax is a bad idea, and we can prove it

May 29, 2019
By David Clement
In Canada, Public Health, Recent Media, Soda Tax, Taxes
0 comments

Opinion: A sugary drink tax shouldn’t be dismissed just because it fails to achieve its goals. It is also heavily regressive.

By David Clement

Canada has an obesity problem, both for adults, and for children. When you look at the numbers, they immediately jump off the page. Since 1978, the obesity rate for Canadians has more than doubled. In 1978, the number of adults who were considered obese was 14 per cent. In 2014, that figure was 28 per cent. General forecasts on this trend state that the number of adults who are obese could rise to 34 per cent by 2025. Rates of obesity this high create a myriad of negative health outcomes, and cost the health-care system billions of dollars annually.

There have been a variety of policies proposed to help curb obesity. Most recently was the call for a national soft drink tax by Liberal MP Julie Dabrusin. Specifically, Dabrusin is calling for a 20-per-cent tax on sugar-sweetened beverages. The thought process here is simple: if you excessively tax a product, it will end up discouraging the purchase of that product, which will lead to better health outcomes and lower expenditures on obesity-related illnesses. The problem with this new tax proposal is that these sin taxes almost always fail to achieve their desired outcome, and have the negative externality of being heavily regressive against the poor.

Sin taxes almost always fail to achieve their desired outcome

Dabrusin’s goal of healthier outcomes is a noble one, but excessively taxing sugary drinks isn’t a serious solution. We know from other jurisdictions that additional taxes on sugary drinks rarely achieve their goal of reducing caloric intake in any meaningful way. For example, Mexico, a country with an obesity rate near 70 per cent, enacted a sugary drink tax with the goal of reducing caloric intake, thus producing better health outcomes. An analysis of the impact of the tax showed that it reduced consumption of these drinks by only 3.8 per cent, which represents less than seven calories per day. A reduction of this size can hardly be considered a success.

Domestically, we have seen several proposals for sugary drink taxes. In the past provincial election in New Brunswick, Green Party Leader David Coon proposed that the province enact a sugary drink tax of 20 cents per litre. The proposed tax would have added taxes on all pop, most juices, all carbonated water, all non-carbonated flavoured water, most teas, drinkable yogurts and flavoured milk. The major issue with this provincial version of what Dabrusin is proposing is that the designers of the tax scheme openly admitted that it was unlikely to make any significant impact on caloric intake. According to the Green Party’s own submission, the 20-per-cent tax was at best going to reduce overall sugary drink intake by two per cent a year.

In the past provincial election in New Brunswick, the Green Party proposed a sugary drink tax of 20 cents per litre. *Getty Images/iStockphoto*

At the most, the New Brunswick tax would reduce caloric intake for the average resident by a measly 2.5 calories per day. This estimate was created by using full-calorie soft drinks as a reference point, meaning that the total caloric reduction could actually be much less than 2.5 calories per day given that consumers often consume other sugar-sweetened beverages with fewer total calories than full-calorie soft drinks. It is safe to say that reducing caloric intake by, at most, 2.5 calories per day would have no significant impact on public health. We don’t yet have Dabrusin’s projections on caloric-intake reductions, but from what we can see at the provincial level, the impact wouldn’t be significant in any way.

A sugary drink tax shouldn’t just be dismissed because it fails to achieve its goals. It should also be dismissed because it is heavily regressive. Mexico, again as an example, shows that taxes like the one proposed have a devastating impact on low-income families. The majority of the tax revenue generated from the Mexican tax came from low-income families. Specifically, 61.3 per cent of the revenue generated came from households with low socioeconomic status. Thus, the funds raised were derived from the most vulnerable in society. Supporters of Dabrusin’s proposed tax have cited that the revenue generated would be around $1.2 billion per year. If the Mexican regressive trend holds true for Canada, which can be assumed because it was apparent in cities like Philadelphia, then $732 million of that $1.2 billion will come directly from low-income Canadians. This is an uncomfortable fact that supporters of the tax have yet to sufficiently address.

$732 million of that $1.2 billion will come directly from low-income Canadians

Soft-drink taxes are simply bad policies being used to combat a real problem. These taxes almost always miss their mark, and disproportionately impact low-income consumers. These truths are part of the reason Cook County, Ill. (which includes Chicago) repealed its soft-drink tax. Because of these fairly consistent trends, the New Zealand Institute of Economic Research, in a report to the Ministry of Health, stated that “We have yet to see any clear evidence that imposing a sugar tax would meet a comprehensive cost-benefit test.” It’s clear that obesity is a problem in Canada, but it is also clear that soft-drink taxes don’t pass the cost-benefit test, and shouldn’t be considered as a serious solution.

— David Clement is the North American Affairs Manager for the Consumer Choice Center.

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Democratising travel

May 17, 2019
By Bill Wirtz
In Airlines, Blog, Cheap Flights, European Union, Recent Media, Taxes, Transportation
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The #HandsOffMyCheapFlights campaign is about more than just what its name suggests. Cheap flights are what consumers know and love about air travel in the past years, but it is the overall phenomenon of democratised travel that should have us stand in awe. For people in upper-middle-class and wealthy conditions, the world was just the purchase of a ticket away for much longer. Whether it’s €300 or €30 to Milan, doesn’t really make much of a difference to them. So to the privileged (you’ll excuse the word) eye, travelling has remained the same, with one notable change: there are more people on the airport. Shockingly, it’s low-income consumers who suddenly fly into the same airport as the privileged travellers. It takes more time to get your suitcase, getting through security is a hassle, and for goodness sake, you can’t even get a seat while waiting to board.

No wonder some people are a bit annoyed. But saying that you don’t want people to fly just so that you don’t have to pay for fast-track security control isn’t marketable, so sustainability comes into play. What about all the noise and pollution? Don’t bother considering the fact that innovation in the aviation sector is continuously improving fuel efficiency, since carriers have no incentive to waste kerosene needlessly. Also, don’t mention that improved aircrafts, more efficient flight routes, and reduced speeds have made the sector much more efficient than it was 20 or 30 years ago.

That’s all a bit hyperbolic, and you’ll maybe even consider it bad faith. And maybe it is.

But for some reason, not everyone rejoices at the democratisation of travel. In a time in which the debate about inequality is so predominant, we’re not lending an ear to consumers who want to go on holidays, or visit a friend, just as much as all those with higher income than them. Modern aviation has made it possible, yet activists and governments around the world are there to roll this back.

The Consumer Choice Center fights the EU departure tax from the beginning. We will stand up for consumers who want to have choices when it comes to the means of transportation. We are making people aware that flights are emitting much less carbon than they were in the past, and that this level innovation is set to continue in the future. If however, we choose to limit this development in an effort to answer to alarmism, then we will inevitably fail.

Let’s not let that happen.

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Cuomo’s Out of Control Craving for an Opioid Slush Fund

March 21, 2019
By jstier
In Healthcare, Recent Media, Science, Taxes, United States

Sometimes a bad idea is a bad idea, no matter how you package it. New York Governor Andrew Cuomo is trying again, after his $600 million opioid tax was slapped down in December by an Obama appointed federal judge. Proponents of the earlier tax scheme pointed to a key provision which forbade manufacturers from passing along […]

Dutch Plans of an EU-wide Air Passenger Tax won’t fly High with Consumers

March 18, 2019
By Fred Roeder
In Airlines, Cheap Flights, Recent Media, Taxes, Transportation

Last month, the Dutch government began circulating a position paper suggesting the EU should introduce a Union-wide air passenger departure tax on flights departing from the European Union. The paper promoted by the Netherland’s Secretary of State for Finance Menno Snel suggests a 7 EUR per passenger flight tax be rolled out within all Member […]