Peter S. Spiro

Class Actions in Employment Related Disputes

The traditional means by which workers asserted their collective rights was the union movement, but that has been in severe decline in the private sector. Class action lawsuits would appear to be the ideal modern substitute. There have been a few noteworthy successes for employees in the last few years, helping to ensure that employers in the banking sector abide by statutory requirements to provide overtime pay. Certification has proven to be a significant hurdle in these actions, and there appear to be some meritorious cases where certification was not achieved. It is arguable that the case law that has developed around the finding of a common issue for certification is too confining for the employment context. The application of the certification tests ought to be nuanced and contextual. Employment class actions typically involve a considerable amount of diversity among individual employees. In such situations, it makes sense for the court to focus on the overriding central principles as providing a common issue, rather than using the individual variations to reject certification.

Can a Dividend Tax Credit Be Justified in a Small Open Economy

The stated purpose of Canadas Dividend Tax Credit (DTC) is to avoid double taxation of shareholders, given that corporate income tax has already been paid by their companies. I argue that the double tax viewpoint is a throwback to a closed economy world. The rate of return on equity net of corporate tax in Canada is set by the global market. Canadian shareholders are not the marginal suppliers of capital to major Canadian corporations and they do not actually bear much of the burden of the CIT. This implies that the taxation of dividends does not significantly affect capital investment in Canada. The DTC is effectively a tax expenditure that subsidizes the ownership of shares in Canadian companies by Canadian residents. There is evidence that it has created a substantial degree of home bias on the part of taxable Canadian investors. However, the evidence is mixed on whether there is an economic benefit to having greater Canadian ownership of local corporations.The clearest impact of the DTC is on income distribution. A disproportionate share of dividend income is received by people with incomes over

A sectoral analysis of Ontario's weak productivity growth

250,000. Therefore, the DTC reduces the progressivity of the tax system. It deserves a hard look in the context of concern about growing disparity in income distribution.

Equity Versus Efficiency in the Design of the Tax Mix

Since 2005, labour productivity growth in Ontario’s business sector has been zero, greatly under-performing the rest of Canada and being single-handedly responsible for most of what has been described as “Canada’s dismal productivity growth.” This article examines the issue through detailed sectoral data, and finds a wide range of variation underlying the average productivity growth rate. Some important sectors have maintained decent productivity growth. Other sectors, especially manufacturing, saw the level of productivity decline significantly. Empirical evidence suggests that weak aggregate demand – due to the high Canadian dollar, the U.S. recession, and global restricting- was the main cause of weak productivity. Weak demand led to lost economies of scale, particularly due to compositional shifts in the economy

Evidence of a Post-GST Increase in the Underground Economy

It is frequently argued that it would be beneficial to move the tax mix towards greater reliance on consumption taxes, with offsetting reductions in income taxes. Proponents argue that this would increase the incentives to “work, save, and invest” and would help improve productivity growth. However, these claims rest on weak foundations and are not well supported by empirical evidence. Most studies have found that reducing personal income tax rates would have only a modest impact on labor supply and work effort. It is a fallacy to suppose that consumption taxes do not reduce work effort simply because they are not levied directly on income. The primary purpose of working is to earn income to spend. A higher consumption tax rate also reduces real after tax income, and dollar for dollar would have the same effect on the incentive to work as a flat income tax. In addition, when a higher sales tax rate is applied to services, it increases the incentive for “do-it-yourself” work to replace purchased services, which can range all the way from gardening to self-representation in court. This also leads to lower national productivity. The evidence that taxes have a significant impact on saving is also quite weak. In the case of people who are aiming for a certain level of investment income after retirement, a lower real after-tax rate of return on their investments forces them to increase their saving rate. Therefore, an income tax cut could have the perverse effect of reducing the national savings rate. Even if lower taxes did increase personal saving, it would be unlikely to have a significant impact on capital investment by Canadian corporations. The primary source of capital is from retained earnings, which are more than adequate for this purpose. A substantial portion of personal portfolio investment in stocks goes to foreign countries. By far the largest and clearest impact of changing the tax mix is on the distribution of income. Canadas GST is not a very regressive tax, as it has been offset by credits for low income people, and exempts basic necessities such as groceries and rent. However, unlike the GST, personal income taxes are highly progressive. Any shift in the tax mix away from income towards consumption taxes would therefore significantly reduce the overall progressivity of Canada’s tax system. In Canada, analysis of this issue has not placed much emphasis on fairness in taxation. In the United States, by contrast, leading legal scholars of taxation such as Barbara Fried, Alvin Warren and Reuven Avi-Yonah have viewed the policy question of fairness as central to the issue. The most credible estimates from economic models indicate at best a small positive impact on economic efficiency from changing the tax. Therefore, the positive impact on income would be too small to compensate most taxpayers, and middle income earners in particular are likely to be net losers from changes in the tax mix. Designing changes in the tax mix so as to make everybody better off is a complex task.