Saturday, December 29, 2018

Three Canadian tax loopholes that cost the Canadian government billions in revenue

New data released by Finance Canada shows that the amount of revenue the government lost through tax loopholes mostly benefiting the very rich has risen sharply since last year.

The annual Federal Report of the Department of Finance on tax expenditures shows the government is losing many billions of dollars in tax revenue through a number of tax loopholes. We look at three main loopholes. Five loopholes are discussed in this article.
Partial inclusion of capital gains
Capital gains are treated differently than wages for tax purposes. An article in National News explains: "Income from capital gains, usually made as profits from the sale of financial assets such as stocks and bonds as well as non-owner occupied real estate, is not treated in the same way for personal income tax purposes as income from employment. While 100% of wages is included in taxable income, just one half of capital gains income are taxable. The cost to the federal government of this special tax break is significant, almost $6 billion ($5.95 billion) in 2016 according to the Department of Finance. Provincial government revenues are also reduced."
Research published in the Canadian Tax Journal in 2015 found that 87 percent of all the benefits from this loophole went to people earning $200,000 or more. The latest data shows that this loophole cost the government $6.9 billion in 2017 up a whole billion from 2016. Finance Canada estimates that the amount will rise further to $7.07 billion by the end of 2018.
Dividend gross-up
This loophole compensates stockholders for taxes that are paid by companies they have invested in. According to the latest data a full 91 percent of benefits go to the richest ten percent of Canadians. Half of the amount goes just to the top one percent of richest Canadians. Given that Canadian corporate tax rates are at historic lows, it is hard to see the logic in the loophole. Perhaps, it is meant to encourage people to buy stocks.
This loophole lost Canada $5 billion in revenue in 2017. This was up from $4.4 billion in 2016. This year it is projected to reach $5.3 billion according to Finance Canada.
Stock Options
This loophole is much used by corporate executives and directors who compensate themselves in stocks rather than salary to take advantage of the lower tax rate. When employees of a company exercise their stock options, they are taxed only upon 50 percent of the total value of the stocks.
The Liberal government promised during the last election that it would close this loophole. The Liberal platform even cited Finance Canada's data which showed that three quarters of the benefits went to 8,000 very high income Canadians.
However, following the election the Finance Minister Bill Morneau announced that the government had changed its mind. He claimed that this was in response to small tech feedback. However, internal documents show that it was probably due to Bay Street lobbyists' influence.
Some claim that the stock options loophole is falling out of favor. However data shows that after a brief decline during the last election it is again increasing, no doubt because it still exists. The loophole saved $530 million in 2016 but $635 million in 2017. By 2019 it is expected it will cost Canada $740 million in lost revenue.
There are many other ways of avoiding taxes such as using tax havens as discussed in the appended video.

Previously published in Digital Journal

Tuesday, December 25, 2018

Bombardier to cut 5,000 jobs and also sell some assets

Bombardier, based in Montreal Quebec, has announced measures that will see it lose 5,000 jobs over the next year and a half. It will also sell its Q Series turboprop aircraft program to Longview Aviation Capital for a price of $300 million.

Technical training business to be sold to CAE
Bombardier will also sell its business aircraft flight and technical training business, run out of Montreal, Quebec City, and Dallas Texas to another prominent Montreal-based multinational CAE. The sale price for the services is $640 million. In total sales to CAE are $800 million and are expected to be finalized by the middle of next year.
The deals with Longview and CAE should net $900 million in income.
Bombardier estimates the job cuts and sales will save about $250 million annually.
Bombardier Chief Executive Officer(CEO) says the company is on track to meet turnaround goals
Bombardier's revenue for the third quarter was $3.6 billion US a drop of about five percent from the same period in 2017. However, the company did eke out a profit of $149 million US an improvement on a 100 million loss in the same quarter last year.
Alain Bellemare, Bombardier CEO claimed the cuts and sales were necessary and that the company would continue to streamline its business operations.
In a conference call with investors this morning, John Di Bert, the chief financial officer of Bombardier said that the announced actions were designed to show that the company's focus was on efforts to grow earning and cashflows saying: "We continue taking concrete actions to reshape Bombardier's portfolio."
Analyst judged that Bombardier's Q series would provide little or no profit
Before, Bombardier announced the sale of the turboprop division analyst George Ferguson of Bloomberg Intelligence said that he thought that the Q Series would generate little or no profit for the company this year. He claimed it made good sense to sell it.
Although most of the attention on Bombardier is on its jet planes, most of the money for the company comes from its rail transportation division. Ferguson said:"Transportation will generate almost all of cash flow as aerospace ... will be flat at best during 2018."
The company had received 66 firm orders for the Q400 turboprop jets as of the end of this September. That is up from just 45 last December.
Bombardier union calls the moves unfortunate and distressing
Simon Letendre a spokesperson for Bombardier, confirmed 500 jobs will be cut in Ontario. The company employs 6,500 people in the province. It will also cut even more 2,500 jobs in Quebec. Globally the company has 70,000 workers. The remaining job cuts about 2,000 will be in operations outside Canada not year identified.
Quebec government support questioned
In 2016 when it looked as if the C Series project was doubtful, the Quebec provincial government gave Bombardier $1 billion to keep the project going. The federal Canadian government also later presented the company with a $372 million interest free loan. The appended video by the inimitable Rex Murphy has a caustic commentary on the loan.
At the time many questioned the provincial expenditure obviously made to save jobs. Anthony Scilipotti, founder of Veritas Investment Research in Toronto said: "Bombardier is desperate and it's unfortunate that the unsuspecting taxpayer is shouldering the burden for management's awful decision making. What's the future? This aircraft isn't selling."
The future was that Bombardier virtually gave away the program to Airbus without charge about a year ago. With the company laying off thousands of workers again for the third time in three years, there will be even more questioning of the company's operations.
Analyst Ferguson claims that the company is committed to streamlining its operations and expects even more asset sales that will turn the company into a shadow of its former self. The companies argues that its shift of the C series to Airbus will allow it to focus on regional planes. Ferguson noted: "It's likely if C Series is a success, that Airbus will purchase the remaining at cost given their options. Bombardier seems ready to slim down to a business-jet and rail manufacturer."

Previously published in Digital Journal

Friday, December 7, 2018

More Canadians disappointed with USMCA the NAFTA replacement than are pleased

More Canadians say they are disappointed with the USMCA, the US, Mexico, Canada Agreement that replaces NAFTA than pleased with the new agreement.

 1 of 2 
Poll taken by Angus Reid
Just three weeks after the new NAFTA deal renamed the USMCA who rejected to the old name, Canadians are split on their feelings about the pact. The latest poll by Angus Reid shows that more Canadians are disappointed by the deal than pleased.
The attitudes are split along party lines with supporters of the ruling Liberal party having a more favorable view. Those supporting the Liberals are twice as likely to have a favorable view of the agreement as are either the right-leaning Conservative party supporters or those of the leftist New Democratic Party.
Half of Canadians think that Canada's negotiating team were too soft in dealing with their US counterparts, and they gave up too much to get a deal. Just over a third, 35 percent, felt that the agreement reached was better than nothing. About the same number, 34 percent, felt it would be worse.
Canadian view of US becoming more negative
The survey found that Canadians are feeling more negative about the US than in almost 40 years. 49 percent of Canadians say they have a very favorable or mostly favorable view of the US. That's a big drop from their views in June 2016 when 62 percent had a favorable view and the lowest since 1980. Previously, 59 per cent represented the low-mark, during the turmoil of the Bush administration’s war in Iraq.
Quebec province least favorable towards the new deal
Regionally, residents of Quebec had the least favorable view of the USMCA, no doubt because the Liberals sold out on their promise not to touch the Canadian supply managed markets for dairy poultry, and eggs. The US has now increased access to Canadian markets. While many of the largest dairy farms are in Quebec producers in other provinces as well were angry that Trudeau broke his promise not to touch the area.
Trump viewed negatively
After the USMCA was signed, half of Canadians view of Trump and Co. was negative, while only 11 percent have a very positive view. 64 percent of Canadians viewed the Trump administration negatively. In contrast to the declining view of the US, the favorable view of Mexico by Canadians is up 7 percent with almost 6 in 10 Canadians saying they have a favorable view of Mexico.
USMCA still a deal to advance global corporate interests
A recent Digital Journal article points out that in spite of some significant improvements compared to the original NAFTA the entire deal is still in the interests of global corporations and there are even new negative features including more access to Canadian markets where there is supply management.
An article in Rabble also points out a new negative feature: "In Article 32.10 Canada agreed not to negotiate commercial agreements with non-market countries. That would be China. Should Canada decide to sign a trade agreement with China, the non-market country, it would be booted out of USMCA. For trade expert Peter Clark this amounts to Canada being treated as a vassal state by the U.S". This provision is discussed on the appended video.
Crown corporations have been one of the key instruments in economic development in Canada. Now they are defined as State-Owned Enterprises. Their activities must be restricted to non-competition with private sector companies. There are even penalties spelled out for non-compliance. This is just one of many provisions that protect private corporations and their profits.
The new deal also provides a two year extension to patents on biologic drugs. This will prevent lower cost generic drugs from entering the market. This will make it difficult for Liberals to keep their promise of a national pharmacare program as it will now be said to be too expensive.


Previously published in Digital Journal


Friday, November 23, 2018

Winnipeg police issue a ticket for consuming pot in a car just about an hour after legalization

(October 18) Yesterday at around one AM just an hour after use of recreational marijuana was legalized in Canada, during a traffic stop, Winnipeg police issued a ticket for consuming marijuana in a vehicle.


You cant smoke pot in a car
Consuming cannnabis in a car is a specific offence under the Highway Traffic Act. Inspector Gord Spado said: "An hour into legality and something illegal." It is not clear if the offender was the person driving at the time. Consumption of alcohol in a vehicle is also illegal.
Spado said that the cannabis was likely not purchased legally. Although online sales started at 12:01 AM they weren't being delivered yet at 1 AM. However, no ticket was issued for that.
Spado said: "It doesn't look like anything was pursued as far as the illicit component of it goes. I think that's just the education piece of our members, knowing where to go with that. It's still new to us, too, right, so we're still learning."
Spado said it would be difficult to determine if marijuana has been purchased illegally. Another challenge will be ticketing people for consuming cannabis edibles in a vehicle. He notes that if someone has an edible in a car and we can prove it that is an offence. On some occasions Spado notes they can but in others they cannot. Right now the edibles are not legally on sale. When the edibles are legal it may be easier to prove consumption in a vehicle through the presence of packaging that may be visible.
There are hefty fines for offences
The fine for smoking pot in a car was $672 dollars. There is the same fine for consuming cannabis in or on an off-road vehicle. Other fines are even higher.
Supplying marijuana to someone under age 19 or growing non-medical pot in a residence in Manitoba carries a fine of $2,542.
Other fines of $672 are for smoking or vaping cannabis in a provincial parks or doing so in a public place.
There is a $237 fine for carrying marijuana in or on a vehicle including an off-road vehicle. However, there can be marijuana in the trunk of a car.
Where can you buy marijuana?
Where you can buy pot and who can sell it varies from province to province. Manitoba has a hybrid public/private model. The Manitoba Liquor and Lotteries Corporation will buy cannabis from licensed producers and deliver it, or arrange for delivery to approved privately operated marijuana stores. Details of the arrangements can be found here.
Many stores have yet to be opened.

Previously published in Digital Journal

Wednesday, September 19, 2018

Second Cup in Ontario looks to change some stores into marijuana retailers

The Second Cup Ltd. is reviewing locations in Ontario to be potentially converted to cannabis retail stores after the Conservative provincial government has changed it policies to allow private retailers to sell recreational marijuana.

Ontario to allow private sales of marijuana
Second Cup Ltd. says it is actively reviewing locations in Ontario for potential conversion to cannabis retail stores in light of policy changes in the province.
The company’s announcement comes after Ontario’s Progressive Conservative government said it would allow private retailers to sell recreational marijuana starting next April.
Second Cup had announced a partnership with marijuana clinic operator National Access Cannabis in April to potentially convert coffee shops to retail stores under the brand Meta Cannabis Supply Co.
The companies said they had been focused on Western Canada, as Ontario had planned to sell cannabis through provincial liquor commissions, in line with policies in Quebec and several Atlantic provinces. However that has now changed.
Second Cup and National Access Cannabis say any conversions of coffee shops to cannabis shops is conditional on securing a retail license from provincial regulators, and approval from franchisees and landlords.
Second Cup has numerous locations in Ontario

Second Cup claims to have more than 130 location in Ontario and it can potentially use some to enter the cannabis market.
National Access Cannabis has a target of opening 50 to 70 retail stores in Manitoba, Alberta, and British Columbia this year.
Privately run cannabis stores are the best way to curb black market sales, Ontario Conservatives claim.
The Conservative government is abandoning plans to sell marijuana through stores run by a subsidiary of the lCBO the Liquor Control Board of Ontario.
Other companies scrambling to purchase store locations
A recent article in the Ottawa Citizen notes the companies involved: "Three of the companies have Ottawa-area connections. Canopy Growth Corp. is in Smiths Falls, National Access Cannabis has headquarters in Ottawa and Fire & Flower is partly owned by Gatineau cannabis grower Hexo (formerly Hydropothecary). The fourth is Aurora Cannabis based in Western Canada, one of the country’s largest cannabis growers."
Jeffrey Lizotte, CEO of Next Wave Brands a cannabis consulting company pointed out that Ontario is the largest market for marijuana and will become the primary target and battleground for cannabis retailers. He also remarked that major retailers would want to set up stores in the province. Loblaw has already won the right to set up stores both in the province of Newfoundland and the city of Calgary in Alberta.
Ontario Finance Minister Vic Fedli said that Ontario would learn from the experiences of Manitoba, Saskatchewan, and Alberta which have adopted private store models.
Previously published in Digital Journal

Tuesday, August 7, 2018

Greyhound to cancel almost all western Canada bus service as of October

Until now one could get on a bus on the west coast of Canada in Vancouver and travel by Greyhound all the way to the capital of Ontario in the south of the province.

As of October this year, the company plans to drop all its Canadian routes west of Sudbury in northern Ontario all the way through the three prairie provinces and BC. Only one route will remain in BC run by the US branch of the company from Vancouver to Seattle. Only parts of Ontario and Quebec will house the few remaining Greyhound routes.
The official explanation
Greyhound Canada senior vice-president Stuart Kendrick said in an interview with the Canadian Press: "This decision is regretful and we sympathize with the fact that many small towns are going to lose service. But simply put, the issue that we have seen is the routes in rural parts of Canada — specifically Western Canada — are just not sustainable anymore."
Kendrick claimed that 415 people will lose their jobs and he estimates the ending of service will impact about two million consumers. The many small towns that the decision will impact include Winnipeg, Regina, Saskatoon, Edmonton, Calgary, and Vancouver, all of the major cities in western Canada.
The company is blaming a 41 percent decline in ridership since 2010, competition from subsidized national and inter-regional passenger transportation services, the growth of new low-cost airlines, regulatory constraints, plus the growth of car ownership. Kendrick said declining ridership was the primary culprit. Kendrick noted that in many communities there will be no alternate bus service.
Kendrick claimed: "The company has experienced significant losses despite continued efforts to return to viability. In the affected regions, the company has run an operating deficit since 2004. We have had substantial losses over several years as a direct result of declining ridership."
Some questions about the official story
Greyhound is owned in Great Britain by First Group and headquartered in Dallas Texas. They have little interest in serving the vast reaches of western Canada on routes that do not make a profit. They have already discontinued routes in northern BC as of June 1 and other routes, even one along the Yellowhead main highway from Winnipeg to Saskatoon detours now up to Dauphin and then to Yorkton and Saskatoon.
Often there is little or no competition along the major routes such as the Trans-Canada. Last March the main competitor in Saskatchewan, the government owned 70-year old Saskatchewan Transportation was shut down as the government refused to keep subsidizing the service that served many rural communities throughout the province. An article in Digital Journal reported on the closing.
It is not surprising that ridership has declined in that the company has been cutting service even between major centers or the service is at times that may not be convenient for customers. The bus station in Brandon is now open only at certain times.
While the major routes along the Trans-Canada probably make a profit the company no doubt prefers to operate only in areas with high population density that generate more traffic and revenue rather than serve a smaller population over a huge area.
The decision will have very negative effects on remote communities
Sheila North, grand chief of the Keewatinowi Okimakanak said that Northern Canada would be where the change would be felt most deeply: “I think this is abandoning the North,” she said, citing a high demand in the region for transportation services — “especially for those that live in poverty, but also who have medical needs that need to get down to the south for resources that are not accessible in the North.” Darlene Okemaysim Sicotte of Saskatchewan said the decision would provoke a northern crisis and said: “It’s going to affect a lot of people (who will be) very, very isolated, especially the vulnerable people who have to deal with poverty and mental health and physical health issues that need treatment.”
Claire Trevena BC Transportation Minister said the decision would make it very difficult for those who use the service in the interior and depend on it to go to and from Alberta. Trevena said: “At no point did Greyhound reach out to me, or my staff, to have a conversation on solutions to keep people connected — something I would have expected, given their long history in this province. In the weeks and months ahead, I will be sitting down with other service providers, the private sector and local government to discuss how we can ensure people have access to safe, reliable and affordable transportation to get from one community to the next.”
Grand Chief of the Assembly of Manitoba Chiefs, Arlen Dumas, noted that its members were heavily reliant on Greyhound for transportation especially for medical conditions. Dumas said: “It is already well documented that our citizens have to ride the bus for hours, some longer than 14 hours, in order to see a doctor. How will they get access to adequate health care now?” Grand Chief Arlen Dumas wondered in a statement, which also noted that “health care is a treaty right.”
Deregulation contributed to the loss of service
A recent article in The Star by Thomas Walkom blames governments' fascination with deregulation that has forced Greyhound into abandoning its western Canadian routes. In earlier periods, when bus travel was much more prevalent companies were given a specific deal. They would be licensed to serve very profitable routes but in return had to operate less profitable often rural routes. This system worked by and large as most small communities in Ontario at least had some form of regular bus service.
However, in the province of Saskatchewan the government owned Saskatchewan Transportation served the whole province including many small rural communities whose service was subsidized by profits from routes such as that between Regina and Saskatoon. The service ran for 70 years and when it was ended last year the decision was extremely unpopular.
However, governments began to move towards deregulation arguing that this would encourage competition and drive down prices. The situation varied from province to province. On well-traveled routes between big cities such as Montreal and Toronto fares did fall but then companies had less extra funds to subsidize unprofitable routes. Naturally companies began to drop these routes. The problem is that instead of being a public service travel becomes a source of profit.
The Ontario system favored large operators such as Greyhound according to Walkom: "It was a system that benefited big operators, such as Greyhound (which by the mid-1990s had purchased most of Gray Coach Lines). On the one hand, their profitable routes were protected from too much competition. On the other, they had to give almost nothing in return."
In 2009 Greyhound had demanded government subsidies as a condition for keeping bus services alive in the western provinces but only Manitoba provided a degree of subsidization.
The solution to the problem is to consider buses as a public service. Private enterprise will not operate a bus business if it will not make a profit but given the large number of far flung rural and northern communities in the west there is no way that such routes would be profitable. We don't expect our schools or courts to make a profit. Each province could have a system such as the Saskatchewan government had for 70 years. Or alternatively the federal government could set up a Canada-wide system owned by the federal government.

Previously published in Digital Journal

Wednesday, July 25, 2018

Canadian consumer confidence slides as trade friction increases between US and Canada

(June 26) Canadian consumer confidence slides as trade friction between Canada and the U.S. escalates. A new poll by Nanos Research shows a sharp drop in household sentiment two weeks after Trudeau and Trump had a tiff after a G7 summit.

Canadian consumer confidence at lowest level in 2 years
Trump had threatened that his dispute with Canada over tariffs he levied on steel and aluminum would end up costing the Canadian people a lot of money. The consumer confidence level has fallen to the lowest level in two years.
Nick Nanos, the chair of Nanos Research said: “We rarely see an all out economic threat issued by anyone to Canada. It’s probably fair to say a certain proportion of Canadians think that Canada will pay and it won’t be a pleasant experience.”
The survey shows the extent to which the trade tensions are creating anxiety about the Canadian economy. The Canadian economy is highly dependent on that of the US for exports. The heightened uncertainty created by Trump's policies could prompt both consumers and businesses to scale back spending. This uncertainty could have a greater negative threat than the actual tariffs themselves.
Later this week the first survey of business sentiment since the recent G7 meeting in Canada are expected to be released. These should provide more insight into the extent to which the trade dispute is impacting investment decisions. On Thursday the Canadian Federation of Independent Business (CFIB) will release it small business barometer. On Friday, the Bank of Canada publishes a quarterly survey of executives.
The Nanos survey
Each week, Nanos Research polls 250 Canadian asking questions on personal finances, the outlook for the economy, job security. and where real estates prices are going. Bloomberg then publishes four-week rolling averages of the 1,000 telephone responses. The Bloomberg Nanos Canadian Confidence Index is calculated from the rolling averages of the above-mentioned four questions.
For the week ending June 22, the overall index was down to 55.3 the lowest since 2016 and down from the 57.1 of the previous week. The one week gap is the largest since Nanos began its polls in 2013
The results show a decline in sentiment for all questions but the largest drop is in the outlook for the economy. Only 14.7 of those polled thought that the economy would get stronger over the next six months. This is the lowest since 2015 when Canada was technically in a recession. The percentage who thought the economy would weaken was 38.2 the highest since back in 2016.
Nanos chair, Nik Nanos said: “Of note, there was negative pressure on all four economic indicators – personal finances, future strength of the Canadian economy, job security and future value of real estate. The most pronounced one-week drops in consumer confidence were in the Prairie regions and Ontario.”
US Canada relations are strained
An article in the Star shows the complex events that led ultimately to the Trump outburst against Trudeau at the end of the G7 summit in Canada. The articleconcludes: "In the end, a summit meant to patch trade rifts ended with a deeper acrimony and questions about the Canada-U.S. relationship and how it could recover in the crucial weeks ahead."
Trudeau had said at a press conference at the end of the conference that the decision to impose tariffs on Canadian aluminum and steel was insulting. Trump and his advisers were angry and Trump tweeted from Air Force one that Trudeau was dishonest and weak. His trade adviser, Peter Navarro even said that there was a special place in hell for leaders such as Trudeau who negotiated in bad faith Navarro later apologized, at least for his wording. Trump refused to accept the final joint communique.
Consumer confidence often a good guide to economic health
The tension with Trump has just added fears to households that were already uneasy about the future. For much of this year consumer confidence has been low. Headwinds have included higher interest rates and a slowing of the real estate market. For three quarters in a row economic growth has been unable to grow above 2 percent. Such a slow growth rate has not happened since 2015.
While most economist expect the economy to grow over 2 percent for the remainder of 2018, the recent tariffs and looming trade war could change the outlook. Nanos said: “We have to see whether things settle in terms of people thinking this is maybe a one-off or a significant decline is on the way."

Previously pubolished in Digital Journal

Tuesday, June 19, 2018

Canadian indigenous groups and others purchase Hudson's Bay railway

A tentative deal has been reached to bring both the port of Churchill and the rail line from the port on Hudson's Bay south to the Pas back under Canadian ownership after the US company Omnitrax refused to repair flooded and damaged tracks.

Indigenous groups and others involved in the deal
The Canadian federal government announced that a number of First Nations many of whom depend on the rail line and also groups representing northern communities, One North and Missinippi LP, have joined up with Fairfax Financial Holdings to purchase the port and railway from Omnitrax. Fairfax, an investment company based in Toronto had announced back in November 2017 their intent to try along with others to purchase the railroad There are 30 First Nations and 11 communities in northern Manitoba as well as others participating in the project.
Specifics of the deal have such as financing, and a timeline have not been announced.
Omnitrax owner Pat Broe and Fairfax president Paul Rivett negotiated the agreement but a number of legal issues need to be completed before the deal is finalized.
Churchill Mayor Mike Spence calls the agreement historic
Spence said: "This is an historic partnership involving Indigenous and northern communities with industry leaders that now positions the Port of Churchill as an Arctic gateway for future prosperity...Priority No. 1 will be rail line repairs in the very near future and to finalize the acquisition." Spence is also co-chair of One North. Spence has been lobbying to purchase the port and rail system from Omnitrax since the US company began cutting service to his community almost two years ago.
Jim Carr Manitoba Natural Resources Minister said: "The people of northern Manitoba have long understood the value of the rail line. This agreement in principle allows those most affected to have a direct stake in the future and long-term interests of their communities."
Christian Sinclair, Chief of "Bold investments into much needed infrastructure will create long-term socioeconomic growth for the North. We see immediate opportunities to support the success and growth of the business, creating opportunities for OCN and for all of our partners in northern Manitoba."
Lack of a rail line isolates Churchill
The lack of a rail line has created great hardships for the eight to nine hundred inhabitants of Churchill. Omnitrax shut down both the port and major railroad operations in August of 2016. It continued to bring goods and passengers until the damaging floods in May of 2017. The company has not repaired the line and insists it has not the money to repair it.
The only way out of the town is by air which is very expensive. A return flight to the Manitoba capital city Winnipeg is about $1,200. The town attracts some tourists in winter to see polar bears which are common in the area- as shown in the appended video- and also to see fantastic displays of northern lights. However, tourist numbers have dwindled drastically since the rail link to the south has been closed. There are no roads into the town connecting them to the south. The costs of basic foodstuffs has also skyrocketed. Many are leaving the town.
Omnitrax taken to court by federal government
After Omnitrax refused to repair the tracks last year, the Canadian government took Omnitrax to court. Omnitrax says it simply cannot pay up to $60 million to repair the line. However, a consultant puts the cost at more like $43.5 million. The federal government has offered subsidies to northern residents to help with rising costs to those affected by the rail closure.
At least now, the railway and port will be owned by those in communities served by the railway and are interested in seeing that it does not shut down as it did before because it was no longer profitable for a large US corporation Omnitrax.
Previously published in Digital Journal

Sunday, May 20, 2018

Canada's revenue from oil and gas industry in decline

A new comprehensive report on Canada's energy sector has been released. The report claims that Canada's remaining fossil fuels are being sold off at low prices and with declining returns to federal and provincial governments.
The full report or a summary can be downloaded here.
Revenues from Canadian oil and gas production are declining
Three decades ago, many Canadian governments earned substantial income from the country's oil and gas production mostly through royalties or taxes. This is no longer the case the report claims.
Just since 2000 revenue from hydrocarbon production has plummeted 63 percent. Revenue from corporate taxes on drilling and refining activity has declined by more than half as well.
The report, Canada's Energy Outlook
The report is researched and written by David Hughes, an earth scientist and one of Canada's foremost energy experts. His report takes a hard look at Canadian energy production, emissions, low carbon alternatives, and the decline of revenues over time from our energy resource-based industries. The data used comes from a wide range of resources and data bases such as that of Natural Resources Canada, Drillininfo, BP Statistical Review of World Energy and also provincial budgets.
The lucrative energy industry is putting less and less money into the governments coffers even though it is claimed that the energy company profits are paying for such items as better schools and hospitals. The overall picture is one of dramatic and continuing revenue shrinkage.
Many sources show that revenue to the government from fossil fuels actually peaked in 2008 along with a spike in the price of gas and oil but since then revenues have been in decline.
As mentioned, just since 2,000 royalty revenue has declined from oil and gas production by 63 percent even though national oil production grew by 75 percent.Hughes notes: “Canada’s non-renewable energy resources are clearly being sold off for ever-decreasing benefit."
Alberta as a case study
The province of Alberta is Canada's largest extractor of oil. Oil and gas production in Alberta has doubled since 1980, primarily due to expansion of production in the Oil Sands. Yet, revenue from royalties has declined from 80 percent of provincial revenues in 1979 to just an estimated 3.3 percent in 2016 according to Hughes, a huge decline.
There was a peak in Alberta's revenue from oil and gas of $14 billion in 1979. The next record was a spike to $17 billion in 2005 much of this from natural gas. Ever since that time there has been a steep decline. The government has a policy of favoring an increase in production rather than attempting to maximize value produced for the government. The report said that in 2016 the estimated revenue from oil and gas extraction was only $1.4 billion — down fully 90 percent from the 2005 levels.
The report also claims that data compiled by the Canadian Association of Petroleum producers shows that royalty revenues paid to oil exporting provinces, Alberta, Saskatchewan and Newfoundland, declined from 2000 to 2015 from $11.1 billion to $4.1 billion. This was a period during which the price of oil had climbed to highs of more than a hundred dollars a barrel.
Corporate tax payments from oil and gas extraction also declined
Between 1997 and 2015 tax revenue from oil and gas extraction, made up 30 percent of total government revenues. But that amount has been declining. Corporate income tax peaked back in 2006 and has declined 51 percent since that time. Although there has been a 45 percent growth in oil production since 2006. The report notes that the oft-cited claim that growing oil and gas production is vital to Canada's economic being has become less true over the past decade.
British Columbia is also experiencing declining royalties
Gas production has doubled in BC since 2005 but royalty and other revenue from non-renewable resource has declined by 84 percent and constituted only one per cent of government revenue last year.
The Tyee has reported that between 2009 and 2014 the BC government subsidized oil and gas companies fracking shale basins by extending them more than $1 billion in tax credits.
The energy industry is mature and shrinking
The industry is now becoming dependent upon extracting resources of lower quality and which require intensive use of energy to extract and often contribute to greenhouse gases.
The percent of the overall workforce in the oil and gas industry is only 2.23 percent and often the jobs are temporary construction work, such as that in the Oil Sands. Even in Alberta there are fewer than seven percent of the workforce employed in fossil fuel extraction and distribution.
In 1997, the percentage of Canada's GDP contributed by the energy industry was 9.2 percent, whereas in 2015 it was only 7.4 percent.
Conclusion
The report claims that politicians do not understand that oil and gas producers exploit the most high grade resources first and leave "the lower-quality, higher emissions, and higher environmental-impact resources for the last."
We do not know how long it will take to transfer to renewable energy resources. Currently, renewable sources make up only three percent of the energy supply. Hughes argue that we should not be selling off our dwindling oil and gas resources at low prices as they remain a valuable backstop for us. Hughes claims: “Selling off the best of Canada’s remaining non-renewable resources at low prices, with minimal and declining returns to the public, compromises future energy security.”
Previously published in Digital Journal

Monday, April 30, 2018

University of Waterloo in Ontario opens an Artificial Intelligence Institute

The University of Waterloo in Waterloo, Ontario, Canada has opened its Artificial Intelligence Institute. The institute will concentrate on foundational artificial intelligence (AI) and operational AI.

Foundational AI includes research on statistical learning, deep learning, game theory and data science. This is research that advances the whole technology industry. Operational AI research develops scalable, secure and transparent solutions for a wide range of applications.
Officials praise new institute
Feridun Hamdullapur, president and vice-chancellor of Waterloo University said: “The launch of Waterloo AI enhances Canada’s leadership in foundational and operational AI as it brings together world-renowned researchers with industry to accelerate innovation and prepare for future disruptions. By connecting research talent with industry expertise, Waterloo AI will identify problems and produce solutions that will actively benefit our society.”
Navdeep Bains, Minister of Innovation, Science and Economic Development said that as a world leader in AI, Canada's talent and expertise attract millions from foreign investors each year. AI is expected to contribute up to $15.7 annually to the world economy by the year 2030.
Waterloo AI will pursue new areas of research that have important societal and business effects. The areas include healthcare, environmental protections, urban planning, manufacturing, autonomous systems and human-machine interaction. It will provide access to expertise by individuals and industry.
Waterloo AI is a joint venture between the two faculties of science and engineering. However, it will also include researchers from other departments including arts, applied health sciences, environment and science. It is also affiliated with a number of existing labs and institutes at the university.
The University of Waterloo
UW or UWaterloo is a public research university with its main campus in the city of Waterloo Ontario. It has a large main campus if 404 hectares or 1,000 acres of land besides the uptown of Waterloo and Waterloo Park It has academic programs in six different faculties and ten faculty-based school. It also has three satellite campuses plus four affiliated colleges.
Waterloo is a member of a group of research intensive Canadian universities called U15.
The university is famous for its cooperative programs. These programs allow students to integrate their education with applicable work experiences. The university claims to have the largest coop program of this kind in the world with 17,000 undergraduate programs and over 140 cooperative programs.
According to Wikipedia: "The university operates and manages 41 research centres and institutes, including the Centre for Applied Cryptographic Research, the Waterloo Institute for Nanotechnology, the Centre for Education in Mathematics and Computing and the Institute for Quantum Computing. Official recognition and designation of all centres and institutes requires the approval of the university's Senate."
As discussed in a recent Digital Journal article the university has partnered with China in research on autonomous electric vehicles.


Previously published in DIgital Journal

Ontario Securities Commission (OSC) is examining the activities of cryptocurrency trading platforms in the province

The Ontario Securities Commission (OSC) is examining the activities cryptocurrency trading platforms that are operating in the province.

OSC claims that cryptocurrencies may qualify as securities
An OSC spokesperson, Kristen Rose reported that the OSC had received a number of complaints about platforms selling cryptocurrencies. She said that the cryptocoins could qualify as securities:"These platforms, and any businesses that allow coins/tokens that are securities to trade on them, may be offside securities laws."
The OSC also noted that any platform offering cryptocoin trading had to determine whether it was a marketplace. Marketplaces must comply with rules governing exchanges or alternative trading systems.
Ontario law on security exchanges
Security exchanges in Ontario must apply to the OSC for recognition. The applications ask firms to describe their business, including corporate governance, operations, access requirements as well as fees and financial viability.
None of the platforms that the OSC is examining have been recognized as exchanges. None have been exempted from regulation either.
The examination is not a full investigation. At the present stage the OSC is simply gathering information about the activities of the platforms. However, the OSC in a recent document for this year said that it would focus on cryptocurrencies. The OSC said that its aims were to provide consumer protection, while at the same time allowing innovation as well letting capital formation to go ahead without disruption.
OSC claims that Initial Coin Offerings ICO's in particular present investor protection issues. However, the OSC is not always hostile to ICOs. Last October it allowed a TokenFunder sale. ICOs are a way by which startups raise capital. Many worry that without regulation some ICO's could be financial scams.
The exchanges and ICO's are operating in grey areas as regulators have yet to define clearly which security laws and regulations apply to the new offerings.
Other jurisdictions cracking down on cryptocurrency exchanges
In the United States the Securities and Exchange Commission (SEC) has been investigating a number of cryptocoin exchanges and ICOs.
In February this year the SEC charged the former exchange BitFunder with fraud for operating without a licence when it was a securities exchange. The SEC said that any platform that engaged in the activities of a national security exchange must register and this included digital assets, tokens, or coins.
The SEC said at the time, that it would continue to focus on these types of platforms to ensure compliance with securities laws and protect investors.
Australia earlier this week released new regulations that will require all exchange platforms to register and comply with anti-money laundering regulations. If they do not they will face criminal offense and civil penalty charges.


Previously published in DIgital Journal

Sunday, April 15, 2018

Trump administration positive about NAFTA renegotiations

(March 29)Although the Trump administration sounds upbeat about the progress of NAFTA negotiations and the chances of reaching an agreement the chief Canadian negotiator claimed that the US had yet to make compromises necessary for an agreement to be reached.
US and Canadian negotiators gave quite different assessments of the situation.
Trump's chief negotiator Robert Lighthizer, who has publicly criticized both Mexico and Canada said that he was optimistic that an agreement "in principle" in the next little while is possible with some effort and compromise. In contrast the Canadian chief negotiator Steve Verheul said that significant gaps remain and that Canada is not sure what the US means by an agreement "in principle". He also complained that the US had yet to make the necessary compromises to reach a deal.
Verheul told reporters in Ottawa: “An agreement in principle, to our understanding, means some sense of direction on the big issues, the important issues. We’ve not seen that from the U.S. so far. We’ve not seen any proposals in that regard. If we’re going to achieve that, we would fairly require some considerable flexibility in U.S. positions.”
Canada's large Unifor union also criticized the US assessment

President of Unifor union, Jerry DIas, representing autoworkers was quite blunt in an interview: “I don’t know what Lighthizer is smoking, but he should stop it.” Dias said that at most the three countries could complete negotiations on a number of smaller issues by the end of April. On bigger issues they still remain far apart.
Auto manufacturing issue still not solved

Verneul played down recent reports of a breakthrough on the auto manufacturing issue that had been a source of tension. Lighthizer had said last week that the countries were "starting to converge" on the issue. David MacNaughton the Canadian ambassador to the US said that the talks took a positive turn when the US had placed a compromise proposal to its earlier demands that were rejected by both Canada and Mexico. Nevertheless, Verheul claimed that the auto manufacturing issue was still not close to being resolved saying: “We welcome that signal, but ... we are still quite a distance away from any kind of agreement on the approach to auto rules of origin."
The earlier US demand was that 50 percent of a car had to be made in the US in order to qualify for tariff-free treatment plus there would be an increase from 62.5 percent to 85 percent in the amount of a car that would be required to be made in North America.
Factfile on NAFTA. US President Donald Trump has denounced NAFTA as a "disaster" and the w...
Factfile on NAFTA. US President Donald Trump has denounced NAFTA as a "disaster" and the worst agreement ever signed by the United States, blaming it for a $64 billion trade gap with Mexico and loss of countless jobs
John SAEKI, AFP
The new proposal
The publication Inside US Trade reported on Tuesday that the US would drop its US content proposal if Canada and Mexico agree to count autoworker's wages toward the North American content requirement. Mexico could avoid tariffs by paying their auto workers higher wages. However, the qualifying wage for this is thought to be around 15 dollars per hour. This is more than three times higher than the average current Mexican wage.
This could be a boon for Mexican workers but big automakers no doubt would reject it, as one of the main reasons for moving production to Mexico is the lower wages. The Mexican government might reject it as well since there would be no motive for automakers to increase production in Mexico and some production might even move back to the US. No doubt this is part of the aim of the proposal.
Horacio Lopez-Portillo, a trade lawyer with Vazquez Tercero and Zepeda in Mexico said that fifteen dollars as a cutoff was not workable. Lopez-Portillo claimed: “There is no way it’s going to happen. Can the Mexican government be pressured to increase wages in the auto industry higher than they currently are? Maybe. But it won’t be much higher than where they actually stand.”
In contrast to this rejection of the new proposal Canadian PM Justin Trudeau said on March 21st that there was a certain momentum in negotiation. The US confirmed that there had been a breakthrough in negotiations over the auto sector. In Mexico Trudeau said: “There is very strong resistance to including this. Having said that, will it happen? Maybe. And I say maybe because we’re trying to reach common ground ... so Mexico might actually cede a little bit here. How much, I don’t know.”
US wants a deal soon
From time to time Trump threatens to simply terminate NAFTA but in March his administration has struck a more positive tone, indeed more positive than that of Canada or Mexico. The Inside US Trade reports that US trade representative Lighthizer wants a deal by May 1. However, the three countries have yet to even agree to a calendar for the next round of negotiations that are expected to take place in Washington DC in April.
The Mexican presidential election is on July 1 and Andres Obrador the front runner is left-leaning NAFTA skeptic. Obrador is sure to drive a harder bargain that Enrique Nieto the present president.
The last talks were in Mexico in early March. At that time Trump announced that exemption of Mexico and Canada from steel and aluminum tariffs would depend on the completion of successful NAFTA renegotiations. In effect he is using the tariff threats to drive a harder bargain.
Conclusion
NAFTA is basically a trade agreement meant to increase the power of global corporations in North America and foster their interests. Trump wants to change the agreement so that more jobs are created in the US and have the terms align more closely with US national interests and national corporations in line with his America First policy.
Canada continues to take the perspective of global corporate interests. Basic imperfections in NAFTA such as the proportionality clause are not even opened and the press for the most part does not even talk about it. The issue is discussed in a http://www.digitaljournal.com/news/politics/op-ed-canada-s-nafta-priorities-excludes-key-proportionality-clause/article/500171 in August of last year.


Previously published in Digital Journal

Saturday, April 7, 2018

Trudeau Liberal government will spend $25 million over three years to advance green agricultural technology

The Trudeau government will dedicate $25 million over three years to aid the agricultural sector to reduce greenhouse gas emissions through the adoption of green technology. The program will begin on April 1st of this year.

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Provinces as well as territories are eligible to apply for this federal funding and are encouraged to cooperate with industry on projects focusing on precision agriculture and bioproducts.
Precision agriculture
Precision agriculture (PA), sometimes called satellite farming, or site specific crop management (SSCM), manages crop production by observing, measuring, and responding to inter-field and intra-field variability of crops. The goal of precision agriculture is to create a decision support system of management for the entire farm that will optimize returns on inputs while preserving resources.
New satellite technology is crucial to much of precision agriculture although surveillance drones are also of use. Wikipedia describes the technology: "The practice of precision agriculture has been enabled by the advent of GPS and GNSS... This data is used in conjunction with satellite imagery by variable rate technology (VRT) including seeders, sprayers, etc. to optimally distribute resources."
The use of some of these technologies by a Saskatchewan farmer was reported in a Digital Journal article last year. The Western Producer newspaper also has an article on precision agriculture on the Canadian prairies.
Government statements on funding cleantech
Lawrence MacAulay, Minister of Agriculture ad Agri-Food said: “This investment will help Canadian farmers stay on the cutting edge of clean technology by targeting developments in bioproducts and precision agriculture. Our government has made both agriculture and clean technology a priority for growth in our economy. This new program will contribute to Canada’s place as a world leader in agricultural clean technology, helping farmers to develop new and efficient uses of energy, while also protecting our environmental resources and mitigating climate change.”
The government also notes that a further $155 million will also be provided by Natural Resources Canada for research, development, and demonstration projects of clean technology.
In the 2017 budget the government announced a number of clean technology programs and initiatives. $130 million was directed to cleantech research and development. $400 million over 5 years funds the Sustainable Development Fund that focuses on cleantech projects. Finally, $14.5 million over four years is used to develop Clean Technology Data Strategy.


Previously published in Digital Journal