by Klaus Rohrich
January 12, 2004
With the improvements in graphic reproduction technology, counterfeiting has become a problem of major proportions for both retailers as well as consumers. There are so many stores that refuse to accept denominations larger than a $20 bill, that attempting to make a major purchase and paying in cash is all but impossible, unless one is prepared to carry a six-inch stack of twenties.
Most stores would prefer their customers to pay with credit or debit cards, rather than take a chance on accepting a bogus bill. While this will result in the loss of some sales for these stores, Canadians, who as a rule will follow almost any "official" directive, will comply with the stores’ wishes and pay by card for items of more than several hundred dollars.
This preference helps the Government of Canada put a damper on the so-called "underground economy", as electronic transactions are traceable, and thus ensure that all taxes on an applicable purchase are paid. In fact, it seems to me that the Government of Canada in some ways encourages counterfeiting and the fear thereof in order to stimulate the use of electronic payments. How else can one explain the fact that while retailers were refusing to accept $50s and $100s, the government was proudly proclaiming that the newly-issued $5 bills were the most difficult bills yet to counterfeit? What counterfeiter in his right mind would bother counterfeiting a $5 bill? In order to generate legitimate cash from the proceeds of passing off the phony $5s, counterfeiters would have to have a dump truck to haul off all the loonies and twoonies they get in change. Besides, there isn’t much anyone can buy for under $5 in Canada today.
It is my opinion that if the Government of Canada really cared about the impact of counterfeiting on the economy, they would take steps to create large denomination bills that could not be counterfeited. Such steps could include special fibers in the paper, the use of specialty inks and the use of holograms, all of which would put the damper on all but the most organized counterfeiters. It’s almost as if the mouth breathers at Canada Customs and Revenue agency sat down and made a conscious decision that the underground economy, which deprives the government of tax revenue, is more of a threat to their well-being than having bogus currency in circulation. Therefore, the lack of action on creating large denomination bills that can’t be counterfeited.
Think about it: counterfeiting really only hurts the economy when large amounts of bogus bills are in circulation, as was attempted by Nazi Germany, who had a special directorate which produced billions in British Pounds and US Greenbacks. Having a gang or two of garden-variety counterfeiters float phony fifties and hundreds will hurt the retailers who accept them, but will not significantly affect the overall Canadian economy.
However, alternative economies are a lot more damaging. The effect that Canada’s tax burden has had on the economy, as a whole is devastating. In addition to the wholesale flight of investment capital to other countries whose taxes are less onerous, our high taxes have also created a totally separate shadow economy that deals only in cash. No taxes, no receipts. This economy deprives government of substantial amounts of tax revenue, hence government’s encouragement of electronic (i.e. traceable) transactions. What better way to achieve this than getting retailers to refuse to accept large denomination bills?
The average Canadian now works 181 days of the year before attaining "tax freedom" day. This means that a couple who both work essentially cede the entire proceeds of one person’s income to the government. Fixing this will be no mean feat, as the important thing for government is not so much the spending of the revenue, but the acquisition thereof. If government spending represented anything more than buying our votes with our own money, then we would have the best health care system in the world. We would have the best education system, the best transportation infrastructure and the best-paid military.
However, we sorely lack on most of these fronts, as there is no accountability in government spending. almost daily the media details instances of profligate spending on the part of government departments. Sheila Fraser, Canada’s auditor General has over the past few years detailed irregularities and wanton waste in government that if they were to occur in the private sector, would result in substantial prison sentences for those responsible. as it stands, Canada’s two great "boondoggles", the Human Resources Fiasco and the Federal Gun Registry each of which has squandered in excess of $1 billion ($1,000,000,000.00) of taxpayers’ money, have not resulted in the government doing anything differently. On the contrary. More money has been thrown down these same toilets since the misappropriations were revealed.
If the government of Canada really wanted to increase its tax revenues it would lower the tax rates. Time and again this ploy has proven to work. It worked in the 1960s, when John F. Kennedy initiated the largest tax cut in the history of the United States, which resulted in an unprecedented period of economic growth (and government revenue). Most recently, it worked in alberta and in Ontario, where Mike Harris’s tax cuts resulted in increased government revenue, increased spending on health care, increased spending on education and a balanced budget. It should be noted that concomitant to the Harris tax cuts, the federal government increased taxes and decreased spending on health care.
So, lowering tax rates would accomplish several things. First, it would increase government revenue, as it would put more money into circulation, thus stimulating the economy through increased spending. Second, it would encourage investment in Canada, as investors reasonably like to show a return on their investments. This would create new jobs. Third, it would take the wind out of the underground economy’s sails, as the lower taxes would encourage more people to purchase mainstream. Finally, it would give the government some incentive to create money that isn’t so easy to counterfeit and at the same time instill a sense of general confidence in our often lack luster currency.