Bad policy is not a hidden tax

Aug 19, 2014
miltons ip

Bad policy is bad policy. Don’t call it a ‘hidden tax’.

Even though no one ever lost an election because of their policy on copyright law reform,

good governance is about doing a lot of little things right, whether the electorate notices or cares.

Canada’s tax regime is actually pretty enterpreneur-friendly. Certainly, in the scheme of things that should be improved to support entrepreneurs, improving the tax regime is fairly low on the priority list. Our tax regime may be far too complex and unnecessarily reliant on income taxes but the negative consequences of this are felt across the economy and are no worse for entrepreneurs.

On the other hand, there is lots of bad public policy which has makes the environment more difficult for entrepreneurs than it needs to be.  These pieces of bad public policy rarely get much publicity. But each one adds a little more friction and makes it just a little harder for entrepreneurs and thus makes it that much less likely that they will succeed.

There is a wide-spread habit of referring to instances of bad public policy as ‘hidden taxes’.  This is very unhelpful – it besmirches all taxes, as if all taxes were bad, and it distracts attention from what the problems really are and what needs to be done to fix them. A much better analogy is that ‘bad public policy creates a headwind for entrepreneurs’. No one benefits from a headwind – it just makes life more difficult.

Most instances of bad public policy that impact on entrepreneurs are relatively obscure.  Many of them impact complex sets of stakeholders with competing or opposed interests at least some of whom are heavily invested in preserving the status quo (especially people in the regulated professions!).  Solving these challenges calls out for ‘good governance’.  They often require careful adjustment, not slogans or crude fixes.  They require attention to evidence rather than ideology.  Finding solutions requires thought, effort, and commitment to steady incremental improvement rather than quick wins.   Just preserving the status quo is a very common, easy, and often gutless choice to live with a headwind rather than attempt to fix it.

Think of an example like ownership of law and accounting firms.  The status quo is that only provincially-regulated professionals can own these businesses.  The result is that most law and accounting firms exist in some bizarre 19th century Brigadoon of under-capitalized weakly-managed parochial little ‘partnerships’, when the rest of the commercial world long ago moved on to ‘shareholder capitalism’.

Other examples abound, in areas ranging from securities law (raising money) through corporate law (how corporations are governed) and commercial law (how commercial parties interact), to property rights in areas like copyright, trademarks and patents. Some of these are provincial issues, some are federal. A remarkable number have been festering without resolution for years – largely for lack of attention and effort.

In a number of Rants to follow I will illustrate what I think are ‘low hanging fruit’ – unnecessary headwinds for entrepreneurs caused by bad public policy that I believe could be lessened without great cost to anyone.

Neil

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