Thursday, June 30, 2011

Thursday Afternoon Links

This and that for your Thursday reading.

- Andrew Jackson points out and sums up a Statistics Canada study showing how much possible revenue is lost to the underground economy:
Statscan have produced interesting and important new estimates of the upper bound size of the “underground” or “non observed” economy, putting it at a seemingly modest 2.2% of GDP in 2008. (Some of this is already included in GDP which is adjusted to take into account some hidden and unreported economic activity.)
Overall, Statscan estimates that corporations made as much as $17 Billion on underground activity in 2008, about half of which was in the construction sector.

Unincorporated businesses make up a much smaller share of the economy but are much more likely to skim and not report income. The estimated maximum is $10 Billion, about one half of which comes from skimming. Underground construction and contraband sales of alcohol and tobacco also loom large for this sector.

Not to make too one-sided a moral story of it, consumers are clearly complicit in a great deal of underground economy activity, getting goods and services at lower prices than in the formal, taxed economy. The underground economy is strongest in construction and in sales of tobacco, alcohol, and domestic and child care services.

Still, you can’t help but think that more stringent auditing of businesses by the tax authorities could turn up quite a useful amount of extra revenue if there is up to $27 Billion of under and unreported business income sitting on the table.
- Greg Weston sums up the Cons' AECL giveaway:
The federal government's long-awaited deal to sell off its money-losing nuclear reactor business is more like a perpetual partnership than a sale, leaving Canadian taxpayers stuck with the fiscal fall-out for years to come.

The government-owned Atomic Energy of Canada Ltd. has announced it has finally reached a tentative deal to sell its commercial reactor development and repair division to Quebec-based engineering giant SNC-Lavalin.

The Montreal-based company was the only suitor in the world left at the negotiating table, a fact that helps to explain why the government is effectively paying SNC-Lavalin to take over the Crown corporation.

Under the deal, SNC will pay a paltry $15 million for AECL's nuclear reactor division, plus some as yet undisclosed "royalties" on future reactor sales.

In return, the government will give SNC up to $75 million toward the development of the next generation of AECL's once internationally successful Candu reactors.

In other words, Canadian taxpayers are giving the Quebec company $60 million to take AECL off their hands.
Most of AECL's massive past liabilities and a lot of the financial risks going forward will remain exactly where they have always been — on taxpayers.

For instance, SNC-Lavalin will complete the current refurbishments of four reactor projects, but only "through subcontract service agreements with the government of Canada."

Translation: SNC-Lavalin will get paid for doing the work, but taxpayers will likely be on the hook for massive cost overruns and potential lawsuits that could run into the billions of dollars.
AECL's commercial partner in (the Chalk River) snafu, MDS Nordion, is now suing the federal agency for $1.6 billion in damages.

Of course, if putting AECL under private-sector management successfully turns the nuclear reactor company into a commercial powerhouse, the federal government could ultimately reap a windfall in royalties from the sales of CANDU nukes the world over.

The fact the deal was announced by the government on the eve of summer doldrums suggests even the new owners of AECL aren't exactly overwhelmed with optimism.
- Dan runs the numbers on how a merged NDP/Liberal party might have affected this year's election - with the results showing that even under highly optimistic assumptions, the result would have been little different from the actual outcome. Which should offer reason for both parties to agree that they're best off using their time and energy to challenge the Cons, not to try to fuse two substantially different party formations.

- And finally: lest there was any doubt, no, a declaration that the Cons might eventually release notice of future regulations which could someday be adapted to apply to oil sands production isn't a departure from their usual plan to delay, distract and do nothing on climate change.

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