“New frontier” of research explores how low doses of alcohol affect grey matter

Jennifer Allford
The Province

Whether it’s Cabernet or Chardonnay, old world or new, millions of us like to toast the end of the working day by opening a bottle of wine. You pour a glass, take a sip or two and feel almost instantly relaxed. Yes, we do love our wine o’clock. Meanwhile in your brain, those first few sips of wine are spreading like wildfire.

“Alcohol doesn’t have a problem getting into the brain,” says Nicholas Gilpin, a researcher at Louisiana State University School of Medicine in New Orleans. “It permeates all regions of the brain, and within regions of the brain it permeates all aspects of that region — so, all cells.”

Having a couple of glasses of wine (or cold beer or shot of tequila — the brain doesn’t differentiate the type of alcohol) affects the whole shooting match: Your cortex, which controls executive function, cerebellum, which is responsible for motor function and your thalamus, which makes sense of all the information that pours in through your senses.

Other drugs, either by accident or design, can target, sniper-like, a particular effect in the brain. But booze works more like buckshot. “Alcohol is a really, really dirty drug,” says Gilpin, PhD and associate professor of physiology and associate director of the Alcohol and Drug Abuse Center of Excellence at LSU. “It has very widespread effects on our central nervous system, our brains, but it’s never really been understood what’s chicken and what’s egg, or what’s the first domino to fall.”

We know that alcohol affects our neurons, the cells in our brains that talk to each other to get pretty much anything and everything done. Even just a sip or two can interrupt that communication.

A “new frontier” of research is exploring how low doses of alcohol may affect other cells in the brain — astrocytes that help neurons communicate as well as regulate blood flow to the brain and microglia, cells that are responsible for immune responses, fighting off invaders and getting rid of inflammation.

“What’s really intriguing to me is whether there’s some predictive value of the way low doses of alcohol affect the brain of different people and whether they’re susceptible to developing a (drinking) problem later,” Gilpin says. “That’s something that I would say is completely unknown.”

But we do know that our brains sort of have our back when it comes to getting too I-luv-ya-man-drunk. “A lot of times people report being stimulated by their first sips of their first drink, you kind of feel energized, whereas on the third or fourth it has maybe more sedative effects,” Gilpin says. “That’s actually adaptive. It’s your body shutting you down so you don’t have a 12th or 15th drink and go into a coma.”

While there are fewer cute sayings on fridge magnets for that level of drinking, there is plenty of evidence that chronic alcoholism is very, very bad for your brain. Researchers are still figuring out the exact how and why, but they have determined that chronic alcoholism is one of the leading causes of dementia.

After years of heavy drinking your neurons may throw in the towel and stop working properly and your brain tissue may start to atrophy. “All corners of your brain are working hard to maintain normalcy in the presence of high alcohol doses, which has widespread negative effects that can include cell death,” Gilpin says.

As for “low-risk alcohol drinking,” there are some handy guidelines. In Canada, they suggest women should keep it to 10 drinks a week with no more than two drinks a day, most days. Men should have no more than 15 drinks a week with no more than three drinks a day, most days. Regardless of your gender, you should “plan non-drinking days every week to avoid developing a habit.”

As wine o’clock hits — it’s got to be 5 p.m. or noon somewhere — and you pour yourself that glass of wine, sit back and enjoy the little buzz, maybe give a toast to the researchers who are trying to understand what that first sip, and all the ones that come after, are doing to your brain.

© 2017 Postmedia Network Inc.

Canadian investors can make up to $50K tax-free, but they can?t have a job

Jonathan Chevreau
The Vancouver Sun

While early retirement may be a pipe dream for most of us, every once in a while I hear from readers who have pulled it off and are living almost tax-free on dividend income alone. An example is Torontonian Phil McKinley, who retired in his early 40s a couple of years ago and has been living on his non-registered dividend income tax-free.

While McKinley is reluctant to divulge his full financial situation, it’s consistent with a growing body of literature that reveals how it’s possible for Canadian investors to earn up to $50,000 a year in dividend income and pay almost no tax: provided they have no other sources of income.

That’s a big qualifier, of course. By definition, employees do have a rather large other source of income, namely employment income; as do seniors with generous employer pension plans. I’d argue people like McKinley are relatively rare: they have lived frugally and built a stake so that they can get by without employment income, but are too young to receive the usual sources of retirement income.

For those not in these special circumstances, non-registered eligible dividend income will be taxed at the usual rate (combined federal/provincial): In Ontario, roughly 25 per cent or more for those making more than $90,000 a year, rising to a whopping combined rate of 39.34 per cent for those earning more than $220,000.

The question arises: to what extent can retirees or semi-retirees who occupy more modest tax brackets generate tax-free or virtually tax-free dividend income? Note that some strategies — like drawing down RRSPs early — work against this approach. On the other hand, if you’ve opted to defer the Canada Pension Plan and/or Old Age Security till 70 or close to it, that might make the tax-free dividend income strategy partly implementable in semi-retirement.

According to a BMO Financial Group report from last May titled Eligible Dividend Income, at least eight provinces or territories make it possible to receive $51,474 in “tax-free” eligible dividend income, again provided there are no other major sources of income, and notwithstanding any provincial health levies.

These include Alberta, British Columbia, New Brunswick, Ontario, Saskatchewan, the Northwest Territories, Nunavut and Yukon. It’s only $45,309 in Prince Edward Island, $35,835 in Quebec, $30,509 in Nova Scotia, $24,271 in Manitoba and just $18,679 in Newfoundland and Labrador.

Note this data is as of 2016: According to John Waters, Vice-President, Director of Tax Consulting Services for BMO Wealth Management, BMO won’t update for 2017 until all 2017 provincial budgets are released. When it first began publishing the document for the 2012 tax year, the maximum amount of tax-free income on eligible dividends was $47,888 in Ontario and eight other provinces. The amount rose to $48,844 in 2013 and to $49,284 in 2014.

Also note that the amounts in the BMO table reflect the actual amounts of eligible dividends received, before applying the 1.38 “gross-up” factor. So as McKinley says, this equates to $71,034 of dividends in Ontario on a grossed-up basis on which tax does not have to be paid.

This low-tax phenomenon happens through a combination of the Basic Personal Amounts (which in 2016 made the first $11,474 tax-free federally) and the 15.02 per cent federal dividend tax credit on eligible Canadian dividends: once you “gross up” your eligible dividend income by 38 per cent (required when you file your annual taxes), the non-refundable dividend tax credit kicks in, reducing taxes owing. (Your T-5 slip will indicate if the dividend is eligible or non-eligible). There are also provincial dividend tax credits: in Ontario since 2014 it has been 10 per cent of the grossed-up dividend.

Given the right circumstances and planning, the strategy can work, says Aaron Hector, a certified financial planner with Calgary-based Doherty & Bryant Financial Strategies. So for couples in the $51,474 category, that’s potentially $100,000 worth a year of tax-free dividends, assuming each spouse declares 50 per cent of the dividend income on their tax returns. That seems to be the default assumption although it’s possible to adjust the split if you can satisfy the attribution rules and show a disproportionate amount of the non-registered capital came from one spouse or the other. Hector adds that by judicious use of spousal loans, the mix can vary.

Vancouver-based portfolio manager Adrian Mastracci, of Lycos Asset Management, says it’s rare to have the kind of portfolio that could generate $50,000 of dividend income and not also have other kinds of income (notably employment or pension income). He points out that if you can generate an average 4 per cent dividend income, you’d need more than $1 million in non-registered stocks to generate such income.

But to really benefit from all this — even assuming no other large sources of income — you really have to be in the lower tax brackets. According to this site at TaxTips.ca, the tax rate (combined federal/Ontario) on eligible Canadian dividends in 2016 was actually minus 6.86 per cent on the first $41,536 of such income. Between $41,536 and $45,282 the tax rate is minus 1.2 per cent. Waters says that merely shows the power of the dividend tax credit at lower tax rates exceeds the lowest marginal tax rates.

Those tax rates are much less than the capital gains rate of 10.03 per cent and 12.08 per cent in those first two brackets. Between $45,282 and $73,145 the tax rate on eligible Canadian dividends is still a modest 6.39 per cent (compare to 14.83 per cent for capital gains in that bracket, and a whopping 29.65 per cent for interest or other income in that bracket.) From there, the combined tax rate on eligible dividends steadily rises, reaching as high as 39.34 per cent for those making $220,000 or more in Ontario.

Waters agrees that for most people, it’s somewhat unrealistic to have zero income other than dividends, although it can come up if children are the beneficiaries of a trust that flows out eligible dividends, for example (being mindful of income attribution rules). Still, the key takeaway is that the dividend tax credit can provide very low effective tax rates for individuals in the lower marginal tax brackets.

The rest of us should scrutinize the tax brackets and tax treatment of investment income in each of those brackets and try to optimize it all. Of course, Ottawa is always changing the rules in midstream so it’s hard to plan too far ahead. While it largely stood pat in the recent federal budget, its moves to address “tax fairness” may have impacts later this year.

© 2017 National Post

As exports to China boom, spiralling debt threatens AAA rating

MICHAEL HEATH
The Vancouver Sun

Australia is close to seizing the global crown for the longest streak of economic growth thanks to a mixture of policy guile and outrageous fortune. But the nation is creaking under the weight of its own success.

While growth is being underpinned by population gains and resource exports to China, failure to spur productivity has meant stagnant living standards and electoral discontent; a property bubble fuelled by record-low interest rates has driven household debt to levels that threaten financial stability; and a timid government facing political gridlock could lose the nation’s prized AAA rating as early as May because of spiralling budget deficits.

Australia’s last recession — defined locally as two straight quarters of contraction — occurred in 1991 and was a devastating conclusion to eight years of reform designed to create an open, flexible and competitive economy. But it also proved cathartic, paving the way for a low-inflation, productivity-driven expansion.

As momentum started waning, China’s re-emergence as a preeminent global economic power sent demand for Australian resources skyrocketing, helping shield the nation from the worst of the global financial crisis. But the post-crisis return of the boom proved ephemeral, failing to boost government coffers and pushing the local currency higher, eroding competitiveness and driving another nail into the coffin of a fading manufacturing sector.

“There’s no country on Earth that’s derived more benefit from the rapid growth and industrialization of China over the last 30-odd years than Australia,” said Saul Eslake, an independent economist who’s covered Australia for over three decades. “After the end of the mining-investment boom, high immigration is helping us avoid a statistical recession, but it’s also contributing to other problems” like soaring property prices and household debt.

Outside postwar Japan, the modern economic growth record is held by the Netherlands, stretching from 1980 to 2008 and fuelled by the discovery of North Sea oil. Ian Harper, an economist who sits on the board of the Reserve Bank of Australia, says the nation’s two key drivers are best summed up by how it coped following the collapse of Lehman Brothers Inc. — the crisis that saw the Netherlands finally succumb to recession.

“We benefited from the Chinese stimulus, we benefited from the exchange rate being allowed to depreciate, we benefited from direct intervention in the financial markets, we benefited from government spending,” said Harper. “That’s good management and good luck.”

Australia also didn’t have a huge jobless spike — as in 1991 — that would’ve precipitated housing foreclosures and threatened the banks. “Had housing prices collapsed we would’ve been in much deeper doo-doo,” said Harper.

It was very different almost 30 years ago. Australia was a basket case, with Singapore Prime Minister Lee Kuan Yew warning it risked becoming “the poor white trash of Asia.”

A 17-year stretch of reform driven by Labor titans Bob Hawke and Paul Keating ensued. Starting with the currency’s free float in 1983, it included financial deregulation, tax reform, slashing tariffs, ending centralized wage fixing and creating a private pension system. When Labor lost office in 1996, Liberal leader John Howard took up the cudgels, making the RBA officially independent, returning the budget to surplus and liberalizing labour laws. The introduction of a goods and services tax in 2000 was the last major successful reform.

From then on, Howard would turn fiscally flippant as cash rained from the China-driven spike in commodity prices, allowing him to spend hard while keeping the budget in surplus.

The Labor government that succeeded Howard in late 2007 was widely hailed for its response to the global financial crisis a year later, steered by Treasury officials whose anti-crisis program was forged in the fires of 1991: get cash directly to households to spend and maintain confidence. Yet from that success, Labor would stumble on climate policy and then vacate the policy field altogether.

The current Liberal government has followed suit: avoiding tough decisions for fear of electoral backlash, then being pilloried for failing to tackle problems like a budget deficit that both sides have promised to fix since 2010. As a result, ratings agencies are now circling Australia’s top credit score ahead of the treasurer’s next budget in May.

The nation has seen five changes of prime minister since 2010 — compared with just three from 1983 to 2007 — raising questions about whether its politics can still produce reformist administrations. But this has happened before. Australia had five leaders between 1966 and 1972 after just three between 1941 and 1966. Simply put, following periods of dominant leadership, the system takes some time to rebalance.

In the economy, time is less forgiving. A record-low 1.5 per cent cash rate designed to steer Australia from mining investment back toward services is creating problems of its own. Sydney house prices have more than doubled since 2009 and Melbourne’s have also soared, sending private debt to a record-high 187 per cent of income. The RBA frets that anemic wage growth will force heavily indebted households to slash consumption, which could prove disastrous given their spending accounts for more than half of gross domestic product.

Australia’s banking regulator further tightened lending curbs Friday to try to cool investor demand for residential property that’s helped drive up prices. Under the new restrictions, home lenders will have to restrict interest-only loans to 30 per cent of total new residential mortgages, the Australian Prudential Regulation Authority said in a statement. Home values in Sydney rose at the fastest pace in 14 years last month, surging 18.4 per cent from a year earlier, according to data provider CoreLogic Inc.

While China’s demand for resources should keep Australia’s growth ticking over for many years yet, much of the spoils are going to overseas investors now that the mining boom’s investment phase is done. As iron ore prices surged from 2004 in response to Chinese steel demand, cash poured into new Western Australian mines and, together with associated industries, mining employed about 10 per cent of the workforce.

Australia has since become the developed world’s most dependent economy on China, which buys a third of its exports, compared with just two per cent back in 1991. But iron ore prices have more than halved since 2011, when the local dollar hit a post-float record of US$1.10. The Aussie would hover at or above parity with the greenback for the next two years.

The currency’s strength then saw off the car industry: two of the three manufacturers in 2013 said they were quitting Australia, with the last following suit the next year. While the currency would eventually retreat to the 70s, the damage had been done. Worse still, the trillion-dollar windfall from the boom had been spent, not saved, leaving no cash to plug yawning budget deficits or build much-needed infrastructure for an expanding population that would also support growth.

So while Australia’s ability to avoid recession is lauded, it’s also been argued it missed the cleansing fires of a slump to shake out areas of excess such as housing. Serious casualties of 2008 such as the U.S. and U.K. are now at or near full employment and growing robustly having cleared out their dead wood.

RBA’s Harper disagrees. Economists, at least since John Maynard Keynes, have been “raised on a steady diet of stabilization policy” because its alternative is “extremely destructive” due to the indiscriminate nature of recessions, he says.

“Central banks have published data — well look at Andy Haldane’s work at the Bank of England — just estimating the economic cost of downturns, particularly financial market collapses relative to the cost of intervention,” he said. “And you pretty soon see that this is a good bargain, being stabilized.”

There’s also debate on consecutive quarters of contraction as a definition of recession. Eslake says his preferred measure is whether unemployment has risen by 1.5 percentage points or more in 18 months or less. “It doesn’t really give any false signals,” he says of his measure, which occurred in Australia during the financial crisis.

In truth, Australia pretty much has a healthy starting point of 2.5 per cent expansion each year: about 1.5 per cent from population growth and one per cent from increased resource-export volumes due to the mining investment.

Australia’s then-Treasury Secretary Martin Parkinson highlighted the approaching growth record in a 2014 speech, when he put the Netherlands’ expansion at 26.5 years. That’s one year away from where Australia stands now. However, OECD data shows the Dutch grew from the fourth quarter of 1980 through the second quarter of 2008, or 27 3/4 years.

Eslake has crunched his own numbers and found that once OECD data is taken to two decimal points, the Netherlands had a technical recession in 2003 and so is already behind Australia. His analysis also has the Dutch tying with Austria, and includes Taiwan.

As for Australia’s recession risk, slumps have traditionally come from the RBA slamming on the brakes to try to rein in inflation — as before 1991 when interest rates hit 18 per cent. Given low wage growth and weak inflation, that seems less likely now.

Bob Gregory, a professor at Australian National University in Canberra who specializes in the labour market and has studied the economy for almost half a century, shares Eslake’s skepticism about two negative quarters to define recession. He instead focuses on full-time employment as a share of population, a measure which has been sliding markedly.

“What’s happening in Australia now is a long, drawn out, sort of slow recession,” said Gregory, who was on the RBA board from 1985 to 1995. “Nothing dramatic is happening, but each year it’s not quite so good as it was the year before.”

© 2017 Postmedia Network Inc

To mark Canada?s 150th birthday, we are counting down to Canada Day with profiles of 150 noteworthy British Columbians.

John Mackie
The Province

Robert Dunsmuir was the richest man in British Columbia in the 19th century.

How rich? He once owned two million acres between Esquimalt and Nanaimo — about one-fifth of Vancouver Island.

The giant land grant was his fee from the federal government for completing the national railway by building the Esquimalt to Nanaimo rail line in 1883. (He also got $750,000.)

But building the E&N Railway wasn’t the source of his wealth — coal mining was. When he died in 1889, the Vancouver News-Advertiser’s front page headline was “The Coal King is Dead.”

Born in Scotland, Dunsmuir moved to colonial Vancouver Island in 1851 to work for the Hudson’s Bay Company, which had several mines on the west coast.

In 1853, Dunsmuir discovered two seams of coal near Nanaimo. He went on to work for the Vancouver Coal Mining and Land Company, which bought the HBC claims, then was hired to run the Harewood Coal Company.

In 1869, he discovered coal while fishing at Diver Lake in Wellington, which is now part of Nanaimo. A few months later he found more coal, secured financing and started his own company.

According to historian Daniel T. Gallacher, within a decade Dunsmuir’s collieries “surpassed in size and output the combined value of all other British Columbia coal mines.”

Dunsmuir was a hard-nosed businessman and often fought with labour. Gallacher notes that when miners threatened to strike in 1877, Dunsmuir locked them out. The miners capitulated after four months, and he hired them back at a third of their previous wages.

Dunsmuir was elected to the provincial legislature as a member for Nanaimo in 1882, and built a big mansion, Fairview, in the capital. He was building an even bigger house, Craigdarroch Castle, when he died.

The News-Advertiser estimated Dunsmuir’s income “at $1,000 per day and upwards” when he died, in an era when there was no income tax. Dunsmuir’s empire was worth an estimated $15 million, which is about $400 million today.

His family fought over his fortune for years after his death. In 1908, his widow Joan sued their son James, who at various times was premier and lieutenant-governor of British Columbia.

Her statement of claim in 1908 said that Robert Dunsmuir had left her his entire estate in 1889, but a few years later her sons James and Alexander had bought her out for only $400,000.

Joan claimed her sons had “misrepresented” the value of the business, which amounted to fraud. But she didn’t win the suit.

© 2017 Postmedia Network Inc.

Personalization of content for users vital to survival

JOSH MCCONNELL
The Vancouver Sun

Many companies toss around tech buzzwords such as algorithms, machine learning or big data, but few embed them deep enough into their DNA that their business depends on them.

Netflix Inc. is one such company. It needs big data and algorithms to survive since it depends on getting more people to watch ever more programming, which means it must serve the most appropriate shows or movies for each of its more than 93 million subscribers. Otherwise, the company said, people will quickly move on to another activity to fill their time, threatening what has become a US$62-billion business.

“We (use) all of the information we have: what people watch, when they watch, how much do they watch, what time of day, on what device, what they watch (before or after) and on what profile,” said Todd Yellin, Netflix Inc.’s vicepresident of product innovation, during a media briefing.

“Some of that data is junk, some of it is gold and we figure out how to leverage that data to put the right content in front of the right people at the right time.”

Yellin’s team specializes in making the discovery process easier for users by adding new features that reduce friction for people to get into content faster. “We are addicted to the methodology of A/B testing,” he said. “We run over 200 tests a year. And until something shows green, that the people are getting more value for their money by streaming more hours on Netflix or sticking around Netflix and retaining better, we don’t launch a feature.”

As an example, Yellin points to a new content rating system for users that will soon be rolled out globally to replace Netflix’s longstanding five-star methodology, which the company has discovered has several flaws.

For one thing, there were too many steps involved in the rating system and subscribers tended to rate something they liked more often than things they didn’t, skewing the results to the positive side. The company said it’s received more than 10 billion five-star ratings.

“We made ratings less important, because the implicit signal of your behaviour is more important,” Yellin said. “We try to measure how important it is when you click ‘play’ on a title and watch for 20 minutes versus if you watched and binged for six hours.”

As a result, Netflix will give subscribers a thumbs-up, thumbsdown rating system, which it believes is easier, quicker and involves less thought. The company began testing it last year and ratings increased more than 200 per cent.

“The most important work I think we do is around personalization,” said Reed Hastings, the company’s chief executive, during a Q&A session. “This idea that the more you watch, the more Netflix learns your tastes. Personalization is really the thing that the Internet can do that linear (distribution) can’t, and that’s a real breakthrough.”

Netflix’s algorithms look at more than just an individual’s history when it comes to serving recommendations. The company said it also tries to contextualize suggestions based on regional preferences as well as what it calls global “taste clusters.”

For instance, someone who watches a lot of action flicks will get more suggestions in the same genre, but Yellin said the taste clusters help the algorithms to also recommend unlikely titles in completely different genres.

“We have over 1,300 taste communities,” he said. “We’re finding these clusters of people and then we’re figuring out who’s like you, who enjoys the same kinds of things, and then we’re mixing and matching those.”

Netflix is using the large amount of data it collects to also introduce another new, machine-learning feature called “percent match.” Like popular online dating websites or mobile apps, the feature will use personalization algorithms to match people with a TV show or movie.

“We’re trying to create our own love story between people and content,” Yellin said.

In addition to receiving recommendations for titles with a higher match percentage, subscribers will be able to see how strong the match is on a specific title, unless the match is below 55 per cent.

“Are we perfect at this? Far from it. If we were perfect at this, we’d show you one title whenever you come to Netflix and we’d be sure that’s the one you want,” he said.

“So we try to be transparent with you. The only things we’re not transparent about are sometimes the secret sauce in our algorithms and machine learning and what we do there.

“We invest a lot in them and that’s proprietary.”

© 2017 Postmedia Network Inc

Harcourt offers his train of thought

Glen Schaefer
The Vancouver Sun

Former B.C. premier and Vancouver mayor Mike Harcourt says transit authorities are thinking too small with the current plan to extend the Millennium Line underground to Arbutus Street.

“It’s crazy to end it there,” Harcourt said. “You should take it to Jericho and out to UBC.”

Harcourt, honoured last month with the Freedom of the City, is to join current Vancouver Mayor Gregor Robertson on Thursday evening for a public lecture on where the city is going.

Wherever that is, the city needs more trains to get there, Harcourt said. The Broadway subway, “should be like the Sixth Avenue line in New York — two trains, four sets of tracks.”

Even under current zoning, the Broadway corridor from Main to Burrard could be built up to accommodate 100,000 new workers and 50,000 residents, Harcourt said. As well, the 36-hectare Jericho lands are poised for development after the federal government struck a deal turning the bulk of the land over to three First Nations. And UBC is always growing.

Harcourt’s express-train idea envisions stops at Burnaby’s Willingdon, and along Broadway at Commercial and Cambie to connect with existing trains. He has pitched it to TransLink, the province and First Nations, with no one biting just yet.

“Not right now, but I’m a persistent guy.”

The 74-year-old Harcourt was mayor before and during Expo 86, served a term as premier in the 1990s, and has since advised cities on sustainability.

“We’ve really done some things badly (in Metro Vancouver), like having a referendum on transit,” he said, noting that the original Expo Line took just three years from proposal to completion.

“The minute they built the Canada Line, it was over capacity and the stations were too small,” he said. “We’ve had to expand and keep expanding the Expo Line since it was built. You say, well, maybe we can learn from that. We’re going to have another two million people in the next 40 years or so, to add to the two and a half million people already here.”

More trains south, north and east would be needed to meet that growth, he said.

Harcourt first got into politics when he was a lawyer in the 1960s, and he was approached by community leaders to join the fight against a freeway that would have carved up east Vancouver. Next year, work is scheduled to start demolishing the last vestiges of that failed freeway plan — the Georgia and Dunsmuir viaducts.

He will be talking with Robertson on Thursday about his ideas on other subjects ranging from high-tech industry to post-secondary education, housing and child care.

But transportation has always loomed large for Harcourt. He credits that early battle against freeways with aiding the later emergence of Vancouver’s downtown as a place where people could both live and work, unlike most North American cities.

“We danced to a different drummer on urban renewal and freeways.”

The Cambie Street Bridge was built under Harcourt’s tenure as mayor, so he is not entirely against bridges.

But asked about the worst-case future for the region, he cited “this really stupid idea of the bridge to replace the Massey Tunnel.

“If it gets built, all it does is shift the congestion from the tunnel to Richmond and the Oak Street Bridge. And then some blockhead is going to say, ‘Oh well, we can fix that. Let’s just build an eight-lane bridge and freeway down Oak Street.’”

© 2017 Postmedia Network Inc.

Douglas Todd
The Vancouver Sun

Thousands of permanent residents are renouncing their opportunity to immigrate to Canada — for reasons ranging from a dislike of the cold to a desire to avoid Canadian taxes.

More than 21,000 people with permanent resident cards who had the opportunity to become Canadian citizens have turned their back on the quest in the past two years. The highest number of  “renunciations” are from citizens of China, India and South Korea.

People who renounce their permanent resident status no longer have to prove they’re spending significant time in Canada when they cross the borders or fly into an airport, say immigration lawyers in Vancouver.

Nor do Canadian immigration process dropouts have to give up the passport of their homelands, where many continue to work or run businesses. And they are not expected to declare their foreign assets to Canada Revenue Agency.

“Renunciations are growing in number and will likely remain high,” says an internal report from Canada’s immigration office in Shanghai, China, the largest source country for immigrants to B.C.

“Many people are renouncing five years after landing (in Canada), rather than renewing their permanent cards, as they are working in China and do not meet residency requirements,” says the internal report, published in the Vancouver newsletter Lexbase.

“Their children often remain in Canada to complete school and to begin their careers.”

According to three Vancouver immigration lawyers, many people who renounce their permanent resident cards continue to return to gateway cities such as Vancouver and Toronto to visit their families as temporary visitors, especially on the increasingly popular 10-year visas.

“They were getting picked off at Vancouver airport for failure to meet residency requirements. This way they can avoid that problem and still come here,” said B.C. immigration lawyer Sam Hyman, noting the strong majority of migrants to Metro Vancouver are from Asia.

People with permanent resident status in Canada are required to spend two years out of every five in the country.

Vancouver immigration lawyer Jeffrey Lowe said many people who renounce their permanent status are breadwinners who cannot meet Canada’s two-year-residency requirement because they hold down jobs elsewhere, typically earning more money in their homeland than they believe they could in Canada.

A large number of these are so-called astronaut parents, who work offshore while their spouses and school-attending children remain in Canada, usually in urban centres, and own residential property, say the immigration lawyers.

The rapid rise in renunciations began in 2015 after then-immigration minister Chris Alexander, of the Conservatives, changed the rules to make it easier to voluntarily withdraw from the immigration process.

In the two years up to September of 2016, Citizenship and Immigration Canada figures show there were 5,407 renunciations by citizens of China, 2,431 by citizens of India, 1,681 by South Koreans, 1,416 by Britons and 1,129 by Taiwanese.

“A lot of people with permanent resident status have wanted to get their family and wealth transferred into Canada,” said Hyman. 

“Some have bought multiple properties. By renouncing their permanent resident status they can stay below the radar and avoid Canadian taxes,” he said.

“They can visit Canada whenever they want on a 10-year visa. Why would they want anything else?”

Another reason foreigners renounce the Canadian immigration process, according to Hyman, is so family breadwinners won’t have to give up their passport and citizenship privileges in economically vibrant homelands like China and South Korea.

China and India do not allow their citizens to hold two passports, and South Korea only in rare cases.

Lowe says he expects renunciations to jump even more since the federal government in November began requiring a new customs document for some travellers, called ETA, or electronic travel authorization.

Foreign nationals from certain countries can’t obtain an ETA if they are a permanent resident or if they are non-compliant with the terms of their residency card, Lowe said. As a result they’re not allowed to board a plane to come to Canada.

Given that problem, Lowe said many would-be immigrants choose to renounce their residency status and instead simply apply for temporary visas to Canada.

Richard Kurland, author of the Lexbase newsletter, said it’s become common for breadwinners to bring their entire family to B.C. as permanent residents and then to decide “either it’s too cold or there’s no way I’m going to file an income tax return and report my global interests and property and pay taxes in Canada on that. I’m returning to my country of origin.”

In many cases, Kurland said, just the spouse and children who physically stay in Canada for five years end up being the ones who become Canadian citizens.

“They get into the country. But not the person who brought them to Canada in the first place.”

In some cases, Kurland says, the family members who remain in places such as Vancouver, Toronto or Montreal while the breadwinner pays taxes elsewhere end up living, “technically,” below the poverty line.

Meanwhile, he said the family breadwinners “are happy to just come to Canada for two or three weeks several times a year. They just come to visit and for holidays.”

If the breadwinner should ever want to retire in Canada, Kurland said, their now-Canadian spouse or children could apply to sponsor them.

© 2017 Postmedia Network Inc.

HOLLIE SHAW
The Vancouver Sun

Canada is losing more than a billion dollars a year in overlooked taxes and duties on goods that Canadian consumers buy online from foreign retailers, according to a new study.

The analysis from Copenhagen Economics found a broad discrepancy in how customs treats packages imported using postal carriers and those transported via express services such as UPS or Federal Express.

The consulting firm’s research, commissioned by UPS, found that sales tax is collected on just 25 per cent of e-commerce postal imports into Canada, whereas express operators collected sales tax on 100 per cent of the shipments. Import duties were collected on only six per cent of e-commerce postal imports, while express operators collected 98 per cent.

“The incomplete collection of sales tax and import duty on postal shipments inbound into Canada is estimated to cause a loss of Canadian public-sector revenue of up to $1.3 billion per year,” says the report, released Thursday, which says postal services handle 46.5 per cent of such imports.

Copenhagen Economics based its data on an experiment it conducted between August and October 2016, when it made 200 international online purchases from Canadian addresses. The packages from China, France, Japan, U.K. and U.S., were all subject to sales taxes and import duties as their prices were higher than the legal $20 Canadian “de minimis” threshold on imports.

Half of the ordered items were shipped using national postal operators in the country of origin to Canada Post, and half were shipped through express carriers such as FedEx and UPS.

To arrive at the $1.3 billion in lost government revenue figure, Copenhagen Economics tied an estimate for sales taxes and duties to a projected value on Canadian e-commerce imports. It used an estimate of $30 billion in 2016 for Canadian online retail sales, with 70 per cent of that spent on nonCanadian e-commerce sites and 96 per cent of purchases subject to duty and sales tax.

The $30 billion estimate is high among Canadian industry estimates, as is the estimate that 70 per cent of those online sales go to foreign retailers. StatsCan reported that Canadian e-commerce sales were $19.2 billion in 2016, with about 60 per cent of the purchases made from domestic retailers and 40 per cent from foreign retailers. Industry reports peg the figure at closer to $22 billion, perhaps accounting for uncaptured postal shipments.

“Even if the number is hundreds of millions a year in lost revenue rather than $1.3 billion, that would be significant for the provinces and the federal government and for Canada Post,” said Karl Littler, vice-president at the industry association Retail Council of Canada.

He said the study’s methodology is sound and helps to substantiate widespread anecdotal reports about incoming e-commerce shipments. “There is a vulnerability for Canadian merchants generally if a bunch of stuff is coming in tax and duty free, and for online merchants in particular. From our merchants’ perspective, that is an unlevel playing field.”

If consumers search for goods online and find them priced cheaper at a foreign retailer than at a Canadian one, Littler said, they will be more motivated to buy internationally if they believe they do not have to pay taxes or duties.

Canada Post officials said in an emailed statement that the mail carrier “collects and remits all duties and taxes we are required to collect as instructed by the Canadian Border Services Agency (CBSA).”

Littler noted that the CBSA “sets an unofficial de minimis level in keeping with their capacity to process parcels.

“If it’s a $1,000 item you are almost certain to pay duties and taxes. If it is a $50 item, you are highly unlikely to pay duties and taxes.

“There is a greater incidence of collection the higher up the value scale you go.”

The study found that postal sales tax collection was higher (52 per cent) on more expensive items, averaging about $200, versus lower priced items, where it was collected on three per cent of items.

The CBSA said it would provide a comment when it has “thoroughly reviewed” the study.

© 2017 Postmedia Network Inc

U.S. evangelist?s ?confrontational? stance may incite hostility, clerics say in letter

DOUGLAS TODD
The Vancouver Sun

A leadership group representing more than half of Metro Vancouver’s one million Christians issued a public letter on Friday expressing deep concerns about the rally to be held here by American evangelist Franklin Graham.

“Our concern is that the contentious and confrontational political and social rhetoric that Mr. Graham has used has the potential to overshadow the message of Jesus and incite hostility in our highly charged social climate,” said the letter, signed by more than 30 prominent evangelicals, Catholics and mainline Protestants.

Graham — who presided at the inauguration of U.S. President Donald Trump and attributed the billionaire’s surprise election to “the hand of God” — has frequently denounced Muslims, homosexuals, former president Barack Obama, gun-control advocates and atheists.

“(Graham) has made disparaging and uncharitable remarks about Muslims and the LGBTQ+ community, while portraying the election, administration and policies of U.S. President Donald Trump as intrinsically aligned with the Christian church,” said the clergy’s unprecedented joint statement, which came after almost a year of failed negotiations with Graham’s team.

“Such blending of politics and religion is dangerous.”

The letter, which is available in full online, was signed by Vancouver Catholic Archbishop Michael Miller, Vancouver-area Anglican Bishop Melissa Skelton; Jeremy Bell of the Canadian Baptists of Western Canada; Garry Janzen of the Mennonite Church B.C.; Cari Copeman-Haynes of the B.C. Conference of the United Church; David Chow of Killarney Park Mennonite Brethren Church; Gordie Lagore of Vancouver East Vineyard Church, Daniel Louie of Urban Village Church and many others.

Despite Vancouver Mayor Gregor Robertson and some of the city’s Christian leaders meeting separately this week with top representatives of Graham’s organization, Graham issued a public statement saying he plans to go ahead and speak about “God’s love for each and every one of us” at his March 3 to 5 event at Rogers Arena.

Graham’s crusade runs the danger of dividing Metro’s ethnically diverse Christian population, since his event continues to be actively promoted, including on bus ads and by scores of prominent evangelical clergy, such as Norm Funk, Wayne Lo, Sandro DiSabatino, Daniel Chung, David Koop, Cheryl Koop, Darin Latham and Yani Lim.

More than 25,000 people are expected to attend the crusade, called The Festival of Hope.

The Christian leaders who signed the letter of concern had planned to release it on Tuesday, but agreed to hold it until Friday to give Graham time to reply.

Even though Graham responded, the opposition clergy’s public statement says Graham “neither retracted nor sufficiently addressed the harmful statements to which we drew his attention. … Therefore, we are releasing our letter.”

The signatories of the clergy’s letter of concern took special exception to statements made by Graham, who is the son of legendary 97-year-old evangelist Billy Graham, that condemn Muslims and homosexuals and praise Trump.

Their public letter cited how Graham has said:

“Islam is a ‘very evil and wicked religion’ at war with the Christian West.”

“LGBTQ+ persons should not be allowed to enter churches or even enter as guests into Christian homes, because ‘the Enemy (Satan) wants to devour our homes.’ ”

“The outcome of the recent U.S. presidential election was due to ‘the hand of God,’ giving the impression that the Christian church as an institution is partisanly aligned with an administration and its policies.”

Their statement says it’s dangerous to “align the power of the church with the power of the state.”

It criticized Graham for appearing to support an “exalted and troubling American nationalism,” “dividing Christians who do not view things the same way,” and supporting a Trump administration that puts “the most vulnerable in our world at risk of greater harm.”

© 2017 Postmedia Network Inc.

INSIDE THE BIG-BOX

HOLLIE SHAW
The Vancouver Sun

Not far from a table stacked high with men’s blue jeans at one of Canada’s busiest Costco Wholesale Corp. stores is a standalone display for the InstaShiatsu, a cordless neck and back massager that bears all the hallmarks of a juicy impulse buy.

Priced at $134.99, the InstaShiatsu gives off a quirky, as-seen-on-TV vibe that would not help its cause if it were inside Hudson’s Bay or Best Buy.

But this is Costco, so the InstaShiatsu is flying out the store even though it’s likely nobody who bought one came looking for a neck massaging apparatus.

“We put it on the floor to test it and … explosion,” said Andrée Brien, senior vice-president of national merchandising at Costco Wholesale Canada Ltd., on a recent tour of a warehouse in eastern Toronto.

The product’s apparent success is just another example of how Costco paradoxically breaks all of the Retail 101 rules and wins.

With a perpetually crowded parking lot, an aesthetically uninspiring and often difficult-to-navigate shopping area, and a highly limited choice of products within each category, Costco sells items in quantities that would be more suitable for an army squadron than a household of four. It also doesn’t bag customers’ items. And, just for the privilege of shopping there, Costco charges an annual fee starting at $55.

But its contrarian ways are the key to its staggering success in Canada, where Costco has 94 warehouses, more than 10 million members and steadily increasing sales that hit about $22 billion last year.

It turns out that its flouting of basic retail commandments actually taps into consumers’ deepest psychological impulses about security, scarcity, clarity and fear.

Take the membership fee. You might think paying one to shop would deter consumers, but studies show memberships can make people bond with institutions.

“Once you have paid to belong to something, once there is a cost to enter, you feel more strongly attached to it,” said Allison Johnson, a professor of business with a focus on consumer psychology at Ivey Business School in London, Ont.

“There is a psychological sunk cost, and an exclusivity. They check your card at the cash. It makes it seem as though there is something going on that is special in there.”

Clearly, it’s working. Costco Canada’s members renew at a rate of 90 per cent and Costco’s membership worldwide grew seven per cent last year.

Another way Costco taps into consumer psychology is by offering a limited selection. Retail orthodoxy suggests it’s critical to carry a vast assortment of goods. Costco more than two decades ago used to sell 5,500 SKUs — unique merchandise items or “stock-keeping units.” That number has slowly been whittled down to 3,500. To put it in perspective, Walmart and Canadian Tire stores carry about 150,000 SKUs each.

“We thought that by having more, it would produce (higher sales),” Brien said. “But no. By having fewer items in a category, people are not mixed up, and we produce more.

“The idea behind our approach is we buy it for you. We test the item, and we are confident that we are going to give you the best deal for your money.”

Another Costco tactic that should frustrate customers is its ever-shifting and roving product assortment. About 55 to 60 per cent of Costco’s assortment changes every few weeks, and many regularly stocked items can shift in location.

But moving merchandise around or offering it for a limited time taps into the scarcity principle: People are more motivated to buy something if the assortment of goods appears to be limited or temporary for fear they might miss out entirely.

“Strategically created scarcity conditions make consumers realize that if they do not get the desired product right away, they will not be able to get it in the future,” said Shipra Gupta, a marketing professor at the University of Illinois, Springfield, in her 2013 University of Nebraska study.

Perceived scarcity encourages people to buy items more readily and they do so in order to avoid feelings of regret, a “pervasive and powerful emotion that people try to avoid.”

Brien said the InstaShiatsu is one of 50 “road show” items that moves every 10 days from one Costco warehouse to another. “It has been one of our best road shows, and it will not be here for long — treasure hunt,” she said.

“Treasure hunt” is the mantra that echoes through every corner of Costco Canada. During the tour, Brien frequently returns to how critical the treasure hunt is for members.

Canada is Costco’s largest international division, representing 43 per cent of the retailer’s warehouse count outside the U.S.

Standard retail theory dictates that an optimal subsidiary has about one-tenth the number of retail outlets of a U.S. operation, given that Canada has 10 per cent of its neighbour’s population. But Costco Canada has nearly 20 per cent of the firm’s U.S. store count, and does not appear to be cannibalizing its business despite the higher-than-average penetration.

For the 22 weeks ended Jan. 29, Costco Canada’s same-store sales climbed six per cent over the prior year versus two per cent in the U.S. Within the four-week period in January, same-store sales were up 11 per cent, versus six per cent in the U.S.

One obvious explanation for Costco’s success in Canada is that it does not have a direct competitor. In the U.S., it competes with Sam’s Club, the rival warehouse club run by Wal-Mart Stores Inc., the world’s biggest retailer.

But Sam’s Club failed to catch on with Canadians after it opened here in 2003, when Costco had 61 stores. Walmart gave up in 2009, closing the six warehouses it had opened.

Kevin Grier, a food industry analyst in Guelph, Ont., said Sam’s Club mainly focused on small business customers whereas Costco focused on businesses and a growing customer base of families.

“Costco ended up growing faster than Walmart, and it is widely accepted now by the general consumer as a place to go for food,” Grier said.

“They have done so well in terms of gaining share.”

In 2010, CIBC estimated Costco Canada had a seven-per-cent share of food sales in Canada, ahead of Walmart at six per cent. In 2016, CIBC estimated Costco’s share of food at 10 per cent, and Walmart at seven per cent.

Canadians are notoriously pricesensitive, particularly when it comes to food, which has led grocers to become highly price-competitive. Costco’s everyday low price, with a handful of regular and rotating markdowns, might be easier for savings-minded customers to figure out than juggling rival grocers’ discounts.

Food sales have been key in enticing millions of consumer shoppers to Costco, so much so that it is now turning its attention back to corporate customers.

It will open its first business centre in Canada next month to target owners of corner convenience stores, restaurants and small businesses.

“At one time, we served them better than we serve them now,” said Brien, noting the warehouse retailer has added more and more merchandise products catering to families over the years.

© 2017 Postmedia Network Inc.