Financial Freedom Is Merely Organized Common Sense
Can you make good rules and fail to define crucial terms? Unlikely but most regulation follows that style.
The Income Tax Act in Canada is essentially Subsection 1 of section 2. Everything else is rules, exceptions and special cases.
An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year.
It would be nice to know what income and resident mean, but sadly they are treated as “matters of fact” and are not defined. You can learn retroactively that such and such is income or that you are still resident here even though you moved to Australia and inadvertently remained a member of your church or golf club or kept an old bank account. Not good enough.
A good rule should allow you to know beforehand how you will be treated. Everyone knows that tax law is a bit arcane and we have come to accept it, but the undefined crucial part seems to be a normal condition in other laws now.
Canada is busy regulating financial advice. The standard of choice appears to be “Client’s best interest” upgraded from “Appropriate” but not so far as “Fiduciary.” The term, “client’s best interest” is, of course, undefined.
That lack of meaning leads to future problems. All will require lawyers to sort out and at some considerable cost. Uncertainty is the enemy of efficient.
For the moment these problems are obvious.
We should assess the “qui bono” question. “Who benefits” from the regulation? The regulators, the regulated, their clients, society at large, or the lawyers who will defend situations where the claim arises on the basis of hindsight?
My instinct is regulators and defense lawyers, but maybe I overestimate how current laws already deal with most of the problems today. I don’t see how clients benefit and that is, after all, the point.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. don@moneyfyi.com 866-285-7772