Monday, February 17, 2014
Former Canadian Forces lieutenant-general Andrew Leslie - and federal Liberal advisor and prospective star candidate - is being attacked by the Harper Conservatives for claiming $72,000 in retirement moving expenses under a policy that applies to RCMP officers and the military.
The Intended Place of Residence policy covers retiring Mounties and military personnel for one last move after they retire. The idea is that if you end your career in Newfoundland, but want to move back to be closer to your grandkids in Saskatoon, the government will pick up the cost. It’s a reward for accepting a series of transfers over the course of a career.
But the Leslie case raises some questions.
1) Was the information about Leslie’s expenses a political smear engineered by the Conservatives? CTV News broke the story, saying it had “obtained” documents on the moving expenses. But the TV network did not say how it got the documents, or from whom. That should be part of the story.
2) Is the Conservative government suggesting its policy should be changed, and the costs of a last move should not be covered by taxpayers? If so, why has the change not been made over the eight years the Conservatives have governed?
3) What was Leslie thinking? Just because the benefit is in place doesn’t mean you need to claim it. Leslie was highly paid, over $250,000 a year, and retiring on a pension that most Canadians could only dream about. He decided he wanted a different house in Ottawa. Why did he choose to have taxpayers pick up the costs - moving fees, real estate commissions, property transfer taxes - for what was a personal choice?
4) How much is the policy costing taxpayers? About 3,500 Mounties and Canadian Forces employees are retiring each year.
5) And given that volume, why hasn’t the federal government negotiated a better deal? The largest chunk of Leslie’s expenses were real estate fees. Surely the government, with thousands of moves a year, could get a better deal on real estate commissions.
Posted by paul at 11:00 AM
Tuesday, February 11, 2014
Back in September the Honduran government started seizing the assets of Los Cachiros, an alleged drug and crime organization. The $500 million in seizures included a zoo and resort business the organization had established between San Pedro Sula and Tegucigalpa. We had meant to go; the TripAdvisor reviews were pretty good.
Uh-oh, I thought, when news of the seizure broke. Those animals were a lot better off in a zoo owned by narcos than one run by the Honduran government, which has demonstrated a consistent lack of competence in almost everything it touches.
Sadly, that seems to be true. La Tribuna reports today that the government agency responsible for seizures has fumbled around with the zoo, with no one consistently responsible. (A Google translate version of the story is here.)
The only money available to feed the animals and maintain the zoo comes from park revenues, which have fallen because there is no advertising or promotion, many people think it was closed after the seizure and it is not being maintained.
The current revenue isn’t enough to cover food and vet care for the animals - tigers, giraffes, zebras and a collection of animals native to Central America.
The government could have put in a trustee to manage the zoo, with a budget to run the business and look after the animals. Or it could have hired a competent management company on contract. Instead there has been a succession of people within government responsible.
That’s not just bad for the animals. The zoo and resort provided jobs and economic activity in the region. As the government bungles its management, those will be lost.
The seizures from Los Cachiros were co-ordinated with the U.S. government, which had targeted the family-based group under the “Kingpin Act” aimed at foreign crime groups.
The zoo’s struggles raise questions about government management of other assets on the U.S. hit list and apparently seized, like African palm plantations, cattle ranches, hotels and mining and roadbuilding companies.
Posted by paul at 5:06 AM
Tuesday, January 28, 2014
The news keep getting worse for investors in Victoria-based League Assets. And the financial disaster is still not getting adequate media coverage.
Back in November, I predicted massive losses for the investors League, which promised investors security and great returns through real estate investments.
Based on the latest filings from PWC, the news is even worse than I expected.
League Assets, the creation of Adam Gant and Emanuel Arruda, is broke and filed for protection under the Companies’ Creditors Arrangement Act. PWC is being paid to manage the mess.
The best estimate, in November, was that League’s properties could be sold off and net $227 million.
But there are $186 million in mortgages, PWC reported in its latest filing, and $6.3 million owed on outstanding property taxes and liens. They get paid first.
Some 460 trade creditors are owed $19.5 million. They get paid next.
Which leaves about $15 million for League’s investors, who entrusted the fund with $370 million of their money - retirement savings, money set aside for children’s education and the like.
There are 4,280 investment accounts, which means an average investment of about $86,000. Blogger Rachel Berube has shared case studies from the company’s sales material, which include investors who talk about mortgaging their homes to invest in League and counting on the investments for their retirements.
Based on the PWC reports, those investors will be lucky to get back four cents on the dollar. A typical $86,000 investment entrusted to League will be reduced to about $3,400.
It’s extraordinary. Investors put $370 million into League based on promises, and now $15 million is left.
Money doesn’t disappear, and many creditors are asking where the missing $355 million has ended up.
Posted by paul at 8:28 AM
Sunday, January 26, 2014
There’s a certain over-the-top, bread and circuses aspect to tomorrow’s ceremonies for the swearing in of the new president of Honduras.
Especially for a country that is, effectively, broke, with desperate unmet needs.
The government has given all employees a half day off, in case they want to attend the ceremony or watch it on TV. A fleet of 450 buses has also been lined up to bring people from around the country.
The national stadium in Tegicugalpa, the venue for the big event, is being repainted, and beginning Sunday night the roads in a wide area around the stadium will be closed to traffic.
And 8,000 police - 4,000 of the new military police and 4,000 regular officers - were pulled from duty beginning Saturday to prepare security for Monday’s event. They will set up a series of security cordons and guard the hotels where representatives from some 60 countries will be staying (including Canada).
It’s a far cry from the Canadian process where the new prime minister and his cabinet are sworn in, there are some photo-ops and a cocktail party for party supporters, and everyone gets back to work.
You could argue, I suppose, that all the spending and pomp and pageantry are a legitimate celebration of democracy in a country still scarred by the 2009 coup. The November elections, while flawed, where the second since the widely criticized post-coup elections.
Or alternately you could argue that the giant public event is in effect a victory celebration for the National party, which succeeded in capturing the presidency and a plurality of congressional seats, designed in part to reinforce the power of President Juan Orlando Hernandez.
Mostly though, you have to wonder about the lavish spending on a spectacle at a time when hospitals go without medicine and the government has claimed an urgent need to cut spending.
Posted by paul at 9:03 AM
Friday, January 10, 2014
I’ve come up with a clever, no-cost way to reduce poverty and increase school attendance in Honduras.
Get rid of school uniforms.
The uniforms - white dress shirts, navy blue pants or skirt, black shoes and white socks - are mandatory in public schools. Teachers are quite crabby about it, to the point of telling kids to stay home if they aren’t dressed in the right kit.
|No desks, but kids better have uniforms|
For many parents, the costs are huge. Some children don’t go to school because they don’t have the right clothes.
It’s getting worse. The government’s latest tax increases took the sales tax from 12 per cent to 15 per cent. It also applied the tax to items that had been exempt - including school uniforms.
La Prensa reported on the issue this week, and quoted typical prices for school uniforms - $6.50 for pants, $7 for shirts, $12 for leather shoes. (Which, based on the experience outfitting the Angelitos kids, will last about as long as you would expect a pair of $12 shoes to last.)
So, figuring two sets of clothes (one to wash) and three school-age kids, estimate $120 for the uniforms. That’s before backpacks, notebooks and all the other things on the mandatory supply list that teachers send home.
That’s a lot of money in a country where 74 per cent of the population lives in poverty and 47 per cent in extreme poverty.
We’re acquainted with a woman with two school-age children, and little steady employment. She worked for 12 hours cleaning and plucking chickens one day this week, and was paid $5.
That’s not atypical. For her, school uniforms and supplies and the fees levied through the year are a huge challenge.
Get rid of the uniforms, and poor families have more money to spend on things they need and one less reason to keep children home from school.
I can’t think of any good argument for the uniforms. It’s not as if poor children will be singled out for having bad clothes. Almost everyone is poor. (And people with any money send their children to private schools.)
And blurring individual differences isn’t necessarily such a great idea.
In fact, Honduran schools would do well to put a lot more emphasis on individuality and creativity and a lot less on rote learning.
Schools are generally dismal. An international test of math and science knowledge in 45 countries found Honduran students ranked at the bottom, with South Africa and Botswana.
Children here aren’t less intelligent. But they don’t learn much, for a variety of reasons. In the U.S., 68 per cent of students performed at the intermediate level in the math tests; in Chile, 23 per cent. In Honduras, four per cent. When one in 25 students is doing OK in math, a country has a bleak future.
I admit to a strong anti-uniform bias. I went to public schools, but did my final year in a Quebec public high school where grey flannels, white shirt, tie and blazer were required. The pants itched. The costume had nothing to do with our education. It seemed mostly like a chance for those with power to demonstrate it by telling other people what they must wear.
Letting Honduran kids come to school in whatever they have to wear simply makes sense. Any barrier to education hurts kids, families and the country. And uniforms are a barrier.
The other interesting aspect is that Honduran parents put up with all this. They don’t, generally, show up at the school and insist that their children be allowed to attend in flip flops instead of leather shoes. They don’t demand better from the schools. The failure rate is extremely high, but parents don’t demand to know why their children didn’t learn enough to advance to the next grade.
My hope is that Paul’s Law will abolish school uniforms in Honduras. My best guess is that parents would save more than $40 million a year, with most of the benefits going to poor families. More children would be in school.
And a small blow would be struck to the culture of conformismo.
Posted by paul at 12:13 PM
Thursday, January 09, 2014
The latest grim quarterly report from Postmedia sharpens questions about the company’s future.
Continuing declines in revenue and circulation are too great to be solved by the company’s current approach.
The corporate strategy is straightforward. Cut costs, find ways to get readers to pay more, in part through innovations like tablet editions, and convince advertisers that they should pay more for more effective ads.
It might work, if revenue was not continuing to vanish at such an amazing rate.
Revenue fell 8.4 per cent compared to the same quarter a year earlier, or $17.7 million. Print revenue - the largest category - was down 12.2 per cent.
Revenues have been eroding for two years - down 7.4 per cent in the 2012 fiscal year and 9.6 per cent in the 2013 year. Print revenues were down 10.3 per cent and 13.4 per cent in the same two years.
Based on the first quarter results of this fiscal year, which ended last Nov. 30, the decline isn’t slowing in any significant way.
That highlights the problems with Postmedia’s strategy.
Cost-cutting can only work if revenues, at some point, stabilize. Otherwise, it’s an endless process of cuts that weaken the quality of the products and services and lead to more revenue losses and more cuts.
In the quarter, Postmedia revenue dropped $17.7 million, but its operating expenses, despite the major cost-cutting initiative and falling circulation, were only reduced by $13.7 million.
The corporation launched its cost-cutting ”Transformation Program” in July 2012, with a target of $102 million to $135 million in annualized savings within three years.
But since Dec. 1, 2011, revenue has fallen by $165 million. The expense-reduction program goals are far short of what’s needed. And the gap looks to keep growing.
New revenue generation initiatives haven’t worked either. Postmedia was enthusiastic about increasing digital revenues for a while, but they actually fell 5.1 per cent in the quarter.
And the plans to increase the number of people reading and paying for digital products have been slow to show results. Postmedia said 135,000 people have registered to access the newspaper websites, now paywall protected. But it won’t say how many are paying customers and how many receive free access as subscribers. Digital circulation revenue is up only $300,000 over a year earlier, a suggestion that few new paying customers are signing up.
And at the same time, print circulation was down 13.4 per cent over the previous year. Price increases offset the loss in customers, but prices can’t keep rising indefinitely.
It’s another grim quarter. Postmedia needed to show that the revenue declines were at least slowing significantly. That would have given hope.
As it is, unless the corporation comes up with a more effective, bolder strategy, and a much faster rollout, the future looks bleak.
Posted by paul at 12:02 PM
Wednesday, January 08, 2014
Taxes are big news in Honduras, as the outgoing Congress pushes through a bunch of last-minute increases.
The Congress is controlled by the National party, which won the November election. The increases are a way to get the unpopular deeds done before the new president takes over in two weeks.
It doesn’t look much like good governance, mostly because there are apparently no studies of the impact of the increases, or whether they are the best way to raise more revenue.
|Taxed into poverty?|
I was going to write about the increases anyway, but a Guardian blog post this week added an interesting element by arguing that donor countries should cut aid to at least some countries with lousy tax policies. (I’ve become a bit of a development geek, after two years as a Cuso International volunteer. The issues are complex, interesting and important.)
The blog post, by Kieran Holmes, is based on a British Commons committee report that recommended chopping aid to Pakistan unless the government started collecting more in taxes from its own people.
Why should British taxpayers subsidize the government if Pakistan’s citizens - especially the rich - won’t pay up?
It’s an easier argument to make in the case of Pakistan, which is a middle-income country able to find money for a giant military budget, but seeks foreign aid for education and basic services. In poorer countries - like Honduras - an end to aid would mean disaster.
But the principle is interesting.
Honduras collects about 16 per cent of GDP in tax revenue, more than Pakistan but not enough to cover expenses. Government debt is up to 42 per cent of GDP, at high interest rates because there’s a lack of confidence in future repayments. The accepted ceiling seems to be about 35 per cent.
Holmes argues in his blog post that big donors - organizations and governments - should also consider how the tax revenues are raised and whether the system is equitable and supports poverty reduction and development.
The latest round of Honduran increases would not likely meet that test.
The government is already much more dependent on consumption taxes - sales taxes - then taxes on income. Sales taxes were expected to bring in about $1.1 billion last year. Income taxes about $865 million.
That’s out of whack with many countries. In Canada, the government takes in $3.50 in income taxes for every $1 in sales taxes.
And most economists would agree that the dependence on sales taxes serves the interests of the rich. Income taxes are generally progressive - the more an individual or business earns, the more paid in taxes.
Consumption taxes - sales taxes - are at best flat, and often regressive. Low-income people see a higher proportion of their income taken in taxes than the much more affluent. (The Honduran sales tax regime includes exemptions for some necessities - the “canasta basica,” or basket of necessary goods. That theoretically reduces burden on the poor.)
The latest round of tax increases in Honduras increases the burden on the poor and middle class. The basic sales tax rate jumps from 12 per cent to 15 per cent. That’s pushed up the cost of almost all goods and services by about 2.6 per cent. The list of tax exemptions designed to protect low-income consumers was dramatically - and apparently incompetently - trimmed.
The inflation rate was about five per cent before the tax increase. Price increases - including for the buses that people need every day - will make life harder for the poor. (That is to say, for Hondurans. About 74 per cent of the population live in poverty, and 47 per cent in extreme poverty.)
The leading social watchdog group predicts the tax increases will push another 100,000 people into poverty over the next four years. A spokesman for the government says it’s impossible to predict what will happen as a result of the increases, which serves to show the lack of research on the impact on the economy and families.
It’s all made more confusing because the tax system is a total mess. Tax evasion of all kinds is the norm, with estimates of 20 to 40 per cent of taxes owed going uncollected. There are a huge number of exemptions - fast food restaurants pay no taxes under a tourist-promotion tax break. The tax collection agency doesn’t work, according to the incoming director.
Holmes says funders have a right to push governments toward fair, effective tax systems in return for aid, and the ability to help them achieve those goals.
Based on the tax chaos and unfairness in Honduras, he might have a point.
Posted by paul at 1:25 PM