As a Government there are a ton of little things that can be done in an economy that don’t involve increases in taxation. Simply the threat of imposed legislation is usually enough to spur large corporations to actions. And while the immediate threat knee jerk reaction is to claim foul, the end results can be nothing short of brilliant when they result in substantive overall net gains for the economy as a whole.
The essential problem however is this: As corporations become more and more powerful they in effect become bodies that are capable of developing regulatory and monetary policies that impact our society on a broad scale but for which the general public has no represenation. Take these three pet peeves of mine which impact millions of Canadians but for which the Government doesn’t have the Kahunnas to do anything about:
There are multiple examples of this but one in particular I like is this one by AirMiles.CA in which they offer to ‘allow’ people transfer their airmiles from one person to anyone else for the low low cost of only $0.15/airmile. This bothers me on two fronts. The first is that they have already been paid for these airmiles by the sponsoring organization. The second is that if you work out what you can redeem these airmiles for, the value of an airmile ranges from a low of 0.07/airmile for consumer goods to a high or 0.33/airmile for air travel. Since they have already been paid for the airmiles once (something that is reflected in the cost of goods purchased at point of sale) – charging an additional $0.15/airmile means that they are double dipping for the same airmile.
In short – we as the general public are charged a hidden tax on goods and services. And then asked to pay again, in full, when we want to transfer those credits to another person.
Airmiles and other incentive programs, should be treated the same as gift cards in that a company cannot tax consumers and then pocket the funds without providing due access to the promised services. Nor should they be allowed to charge twice for a product that has already been paid for. If a program like Airmiles wants to charge a reasonable administrative fee for handling the conversion that is one thing but to blatantly double dip like this is wrong and unethical.
This is a fairly easy one to fix. The Government should introduce an amendment to the tax code that taxes incentive companies a 100% tax on all incentive programs that deny consumers products and services for which they have bought and paid for in cases such as AirMiles where they double dip or Air Canada where they expire after a period of time if not used.
Banking Service Charges
Banking and investment houses such as BMO Investorline charge fees to people who do not maintain a minimum balance in their accounts as a means of recouping administrative fees. While this is what everyone is use to on the surface, underneath the banks are making money three different ways on funds that are on deposit. The first is the ability to loan money in excess of the amount of deposits on hand. So for example, for every $1M the bank has on deposit, they are able to loan out $20M or more. This is one of the primary income sources for banks and investment houses in that, by encouraging people to keep a “minimum balance” they have more funds on deposit and hence can make more income from loans and mortgages.
The second major stream is Interac transactions for which they charge the vendor a specific fee per transaction. For the most part the banks double dip on this account too by charging both the buyer and the seller a fee for using the service.
The third method is service fees simply for having an account in the first place. These fees are usually waived for people who keep a minimum deposit on hand. However for people who don’t, these fees can be fairly stiff. In fact it is often the people who can least afford service fees whom are the ones that are asked to pay them.
For example, BMO Investorline charges $25/quarter for investment accounts which do not maintain a minimum balance even thou the down turn in the markets from 2008 have meant that many people’s investments have been wiped out and can no longer meet the minimum requirements. This fee, and others like it, represents a corporate tax on the poor without representation and should be eliminated. While the banks might cry foul – these are the same banks and investment houses that are raking in BILLIONS in profits each year. It may have been necessary early on in the development of the Interac system to include an ongoing development cost component but it is now well past the time that this investment has been made up.
The solution: any bank or investment company that charges service fees to accounts based on minimum investment or deposit requirements obviously has enough cash on hand to look after their own deposit insurance and therefore should be dropped from the CDIC (Canadian Deposit Insurance Corporation). In addition, they obviously don’t need the support of the Bank of Canada in securing overnight (or longer) lending. These institutions are there to support the Public Trust, not bank profits.
Telecommunication rates are another area that has been bugging me for years – ever since Bell Mobility Cellular made the internal announcement back in 1997 that their core technological infrastructure had been fully recouped and that the company was now in a positive cash flow position. Great – wonderful – so why didn’t we switch to a flat rate telephone service like the landline service was built on? Because pay by the minute is more profitable.
Hence the strategy that has been in place ever since: how much disposable income can we relieve our customers of before they start to riot in the streets. Over the past 15 years, the telecommunication companies responsible for mobile and cable services have been conditioning their customers to be paying ever excessively more money out of pocket for declining levels of service.
For example, Rogers Cable ships every new internet customer a package of software that they say ‘must’ be installed in order to access the internet (something which isn’t the case btw). Essentially this is crapware which forces people to route though Roger’s services, search engines, etc while accessing the internet. Essentially it is advertising for free including any sponsored ad partners that Roger’s decides to promote.
Example 2: For customer that don’t use this software Roger’s has deliberately intercepted network traffic that generates an error code and forces it to error pages owned by Rogers – thereby again – giving Roger’s an unfair advantage in promote of its own products and services.
Example 3: Roger’s cable boxes have been designed deliberately to slow down channel surfing when television ads are inserted into the middle of a program. Consider that Roger’s sells advertising space on its cable programs by putting its own ads in place of that of the channel operators. This slow down means that in order to get to the programming guide you have to watch the ad an additional length of time and hence the advertiser, in theory, gets more of your attending while you are waiting for the channel guide to load. Beyond this – additional advertisements run as part of the channel guide experience. Add to this the fact that programs are more ads now than program and what you have is a system which double dips at every given opportunity rather than improving the experience for the individual user.
What bothers me about this is that we have gone from a society where news and information could be freely accessed via the airwaves to one in which people are spending $150-200-300 or more per month on in-home entertainment and telecommunications. While that seems like a petty beef – one only has to look at the costs and level of service being provided for comparible services south of the boarder to see how badly Canadians are being ripped off. Especially for those people in lower tax brackets who can least afford these ever increasing rates.
For the record Bell, Telus, Shaw and others are no better. There is no incentive for the Telecommunications industry in Canada to keep rates low when there is only ever two real players – and for some regions only one service provider – in each of the regional market spaces.
The solution: Open up the telecommunications field to competition. Let Rogers compete with AT&T, Cox, and others and see if rates don’t come down substantially.
There are a lot more examples than just these there however each represents a class of social impact for which society has little recourse to representation without Government intervention.
The role of governmental policy, therefore, isn’t to necessarily let the genie out of the bottle in terms of putting in place governmental programs to oversee industry, but rather to encourage industry to put in controls in order to be self-regulating. It is not in the best interest of the Public Trust to create oversight bodies every time an industry becomes too full of itself and starts to exceed the purposes for which it exists. Corporations get so wrapped up in who is making the most profit that it starts to become acculturated that this is the way things are suppose to be.
The role of government is to intervene when big business start to get too far afield from providing a service that is in the public interest and starts providing a service that is only to the benefit of its shareholders. Shareholders in a modern world need to include the customer base which it serves and the governmental principles by which that society places a high priority on. When products and services direct society towards patterns of behaviour that are unhealthy for the society as a whole – the needs of the Public Trust must necessarlycome first. And it is that point which these solutions are designed to reinforce with big business. Not in that these measures should be enacted but in that their potential use as a tool should be actively discussed with industry leaders as a possible reprecusive consequence if the industries refuse to self-regulate themselves in the public interest.
— Kevin Feenan