Canada's Know-Nothing Government At Work

After announcing his "clarification" of the federal government's policy on subsidizing investment abroad, Jim Flaherty reminds us just how little thought and preparation goes into so many of the Cons' policies:

Mr. Flaherty had promised in the federal budget to end what he described as a job-killing practice: allowing Canadian companies to deduct from their income the interest paid on loans used to finance business operations abroad.

But since then he has focused on tax havens, and also attacked ‘double dipping”. This allows businesses that operate in more than one jurisdiction to claim deductions for the same interest payments.

The minister said he wants to introduce legislation this fall that will take effect in 2012. The legislation would remove an existing tax deduction for any company that borrows money to expand abroad and also deducts similar taxes in another country.

Specifically, the measure will put an end to funnelling money through tax havens to claim multiple tax deductions, and will also target “towering”...

Mr. Flaherty told reporters after his speech that he and his department did not know how prevalent double-dipping and towering are, nor did they have any kind of calculation about how much government revenue would be gained by clamping down on interest deductibility.

Of course, there's always a danger in studying a loophole to death as an excuse to avoid acting to close it - as was done with income trusts under the Libs. And it's hard to argue with the seeming intent behind Flaherty's plans.

But the danger of over-analyzing doesn't justify acting without thinking. And Flaherty has gone to a ridiculous extreme in that direction, having now announced two different policy changes on investment tax credits without first taking even a cursory look at the effect which might result from those changes.

Fortunately, there should be time to work through the implications by this fall - and the legislative process should ensure that other parties receive the opportunity to fix any glaring issues that the Cons are too incurious to notice. But with even one of the Cons' supposedly most-competent ministers formulating policy based on a wilful lack of knowledge, the can be little doubt that the Cons' pattern of incompetence goes straight to the top.