Poloz did his job, did Pimco do its homework?
Re Pimco sells Canadian government bonds, blames Poloz for confusion (March 10): I was amused at the response of Pimco's Ed Devlin regarding our not being forewarned of the Bank of Canada's decision not to cut rates. It sounds a bit like sour grapes! I thought that deep and thorough economic analysis was what fund managers were paid to do. It seems they may rely on 'winks from the croupier' more than we thought! If, after discussions with his advisers, the Governor of the Bank of Canada decides on a course of action, it is what he is paid to do. No economist need be confused. David Rosenberg's credibility is at risk, not the Governor's. Surely, the Governor should be empowered to react promptly to events. Or perhaps some economists are being overpaid. - John Alston, Calgary
Tax-raiding the Caymans won't solve the incentive
Re Canadian documentary warns tax havens threaten democracy (March 12): Two factors inhibit the elimination of tax havens: information asymmetry (Canada doesn't know about its residents' activities in the Caymans) and incentive problems (Canadian taxpayers benefit from hiding income and wealth).
Double-tax conventions and tax treaties work as intended only if information is perfect, transaction costs are zero and everyone is an angel.
Absent incentive problems, Tax Information Exchange Agreements can be used to enforce tax treaties only if the partner jurisdiction has the infrastructure and the political will to conduct the necessary investigations. This might be encouraged by offering to share tax collections with the Caymans.
Unfortunately, incentives are also an issue. If the Caymans started intensively investigating suspected tax cheats and sharing the information with Canada, investors in the Caymans would flee to other jurisdictions, so the Caymans's shared revenues would diminish.
If the Caymans can't or won't investigate offshore accounts rigorously, the next step is to exert pressure on Cayman financial institutions to blow the whistle on their depositors, as the United States did with FATCA. But this raises privacy issues and harsher investigative mechanisms encourage tax evaders to implement even more expensive and sophisticated ways of hiding income and wealth. And so it continues.
Daniel B. Thornton, Kingston, Ont.
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Retailers peg prices on exchange rates – when it suits them
Comment from our Facebook page:
Re Retailers expect to raise prices, feeling pinch of weak loonie (March 8)
Interesting how they use the lower price of the loonie to raise prices, yet when the loonie is at par, they don't go down. They say it's the cost of stock. Well that goes both ways, doesn't it?
Kate Tagseth
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