The right to be heard

Canda's business community was shut out of participating in the 2006 federal election.

With our 39th general election over, Canadians may well be impressed that voter turnout increased this time around to 64.9%, from 2004's 60.9%. That is a welcome development, but this election was also notable for the absence of one important segment of Canadian society. One group had no vote, no ability to communicate its message, and no right to even participate in the democratic process. Its issues were completely ignored. We are referring to the Canadian business community.

Corporations have, naturally enough, never been able to vote. But the business community has traditionally played an important role in elections by informing Canadians of policies that are in the best economic interests of the country, by making political donations and by discussing policy with governments in a professional manner. Now, all of these avenues of influence are being shut off. This is not good for Canadian democracy.

The business community made a vital contribution to the dramatic 1988 election and helped establish the North American Free Trade Agreement, arguably the most significant event in modern Canadian economic history. By contrast, the 2006 election was depressingly devoid of intelligent debate on business matters, including the productivity gap, innovation strategies or corporate tax policy.

Consider the winning platform of Stephen Harper's Conservatives. While it promised tax cuts for riding the bus, playing hockey and buying hammers, there was nothing new of significance for the large businesses that employ half of all working Canadians and make the bulk of R&D investments in this country. Indeed, not a single party seemed willing to recognize the importance of the business community in preserving Canadians' standard of living.

The fact that business issues were ignored in this election should come as no surprise, however, since this group has been stripped of any role whatsoever in the democratic process. Absurdly low limits on third-party advertising make a repeat of the 1988 free trade debate an impossibility; there is now no practical way for a group of business interests to communicate with the electorate. A ban on corporate donations has also cut the important link between political parties and businesses.

And the situation appears set to get worse. Harper's accountability package would strip corporations of the ability to donate to individual candidates. As a result, political parties will come to rely even more on taxpayer handouts–hardly a good thing for the marketplace of ideas. Further, Harper has called for a five-year time out for former government officials who wish to become lobbyists. Lobbying may be a pejorative for many Canadians, but it provides a valuable service in explaining how government policies are made. Limiting the ranks of lobbyists to folks with no current skills will simply make government an even larger mystery for the corporate world. (If there is a potential bright spot, it's that Harper has long opposed the ban on third-party advertising.)

While scandal and accountability were key issues in this election, it is important to remember that the Gomery report contained no evidence of any misdeeds by the business community at large or of corporate control over the political agenda. So why is corporate Canada being punished for crimes it did not commit? If we wish to raise Canadian living standards and secure a prosperous economy for future generations, business should be playing a bigger role in setting the course for the nation. Instead, it is being shut out of the process altogether.

As the exception that proves the rule, CI Financial Inc. did try to make an impact on the recent election. In ads that ran in major business papers, CI attacked the government's practice of levying GST on mutual and segregated fund fees, saying it's “draining an estimated $750 million a year from Canadians' savings.”

The GST was introduced in 1991 as a consumption tax, and savings were meant to be exempt. (The tax is not applied to most other financial services.) An annual management fee of 2% of assets becomes 2.14% after GST, and this is embedded in the total management expense ratio (MER). It's a continuous draw on invested amounts, CI president Stephen MacPhail charges. “We need to put an end to this absurd and unjustified application of the GST,” MacPhail writes in the ads, which ran from early December up until election day.

We applaud CI for trying to raise awareness of the issue on behalf of the one-third of adult Canadians who invest in mutual funds. Mutual funds are clearly savings, and should be given the same treatment as other financial services. But we also challenge the Canadian fund industry to do its part to lower MERs, which, on average, are about 1% higher than in the United States. According to financial services experts, every 1% paid in fees reduces an investor's capital by about 20% over 25 years. Add the fact that the MER often bears no relation to performance, and investors have a right to ask: what exactly is the “service” for which GST is being charged?