Researching Resilience: Two Osgoode Tax Experts Envision a Disaster-Proof Economy

Jinyan and Scott.

The global COVID-19 pandemic spawned untold tragedy. But for Osgoode Professor Jinyan Li and Distinguished Professor of Practice Scott Wilkie, the experience – both good and bad – has triggered big ideas about how Canada can develop better, more targeted responses to tackle the fiscal fallout from future emergencies.

In October 2020, Li and Wilkie received a $100,000 SSHRC Insight Grant for a “COVID Lab” – a project intended to analyze the government’s economic response to the pandemic and ultimately develop what Li and Wilkie call “fiscal antibodies” to help immunize the Canadian economy against future calamity.

“Tax people typically don’t think beyond the limits of the tax system,” says Wilkie. “One of the things that we’re trying to do with this project is encourage and excite people to do that.”

There are few experts in Canada better qualified to articulate those big ideas than Li and Wilkie. Li is co-director of Osgoode’s master’s in tax law program and has consulted with the International Monetary Fund (IMF), the Organization for Economic Co-operation and Development (OECD) and Canada’s auditor general. Her research has often focused on modernizing Canada’s tax system, which is still rooted in the family, economic and commercial structures of previous generations.

Wilkie, a partner in tax law at Blake, Cassels & Graydon LLP in Toronto, is one of Canada’s best-known practitioners in the field and a respected consultant and academic who has provided guidance to the OECD and the United Nations on international tax co-operation.

A modernized tax system could be an ideal way to provide a financial lifeline to Canadians during times of crisis, says Wilkie.

“Its tentacles are broad and deep,” he notes. “What happened during COVID was that, in a very short order of time, the tax system went into reverse. Instead of collecting, it disbursed. And it took advantage of the breadth and the depth of its connections to taxpayers of every stripe.”

The goal of the fiscal antibodies project is to devise an emergency toolkit that would allow the federal government to deliver emergency support through the tax system in a more efficient, effective and less wasteful way.

That toolkit could include fiscal and tax-policy levers that the government could activate as soon as disaster strikes. Rather than cobbling together a mixture of supports via employment insurance, student benefits, old-age security and other programs, Li and Wilkie envision “one instrument to sustain people during an emergency.

It would also include built-in accountability provisions to prevent abuse, with support targeted to those most in need and ready to flow fast.

In one scenario, the system could be administered by a Canada Emergency Bank, which could dispense money in the form of low-interest loans. The loans would be forgivable depending on the recipient’s income, as determined by income tax returns.

Li and Wilkie are also exploring a “fiscal vaccine” – a longer-range, more fundamental set of policy solutions designed to embed resilience and equity into the Canadian economy and make it less vulnerable to sudden hard knocks.

“In the long run, we can think about having an ongoing universal basic income (UBI) that is delivered through the income tax system,” says Li. “We call it negative income tax. Instead of collecting tax, the government pays income to the individual.”

A UBI would be means-tested but would provide a basic safety net.

“There are a lot of justifications for a UBI,” says Li. “Personal dignity, entrepreneurship and autonomy, and developing full individual potential.”

A UBI would also take some of the financial sting out of the cyclical nature of some industries such as agriculture, which could become more cyclical in the future due to the effects of climate change.

To be effective, the Li and Wilkie’s toolkit would have to be adaptable to any kind of crisis – a vaccine that works against any variant of disaster.

Perhaps most critically, says Wilkie, it must aim higher than simply digging people out of dire circumstances. It must help individuals to reinvent their own and the nation’s economic future.

That means designing fiscal antibodies to align with big-picture industrial and economic goals, such as helping displaced or disrupted workers retrain for new industries identified as national priorities. This way, emergency expenditures help keep people fed and sheltered in a short-term crisis and also act as investments in human capital that will ultimately help to achieve long-range economic and industrial priorities.

“[The tax system] doesn’t exist for its own sake,” he says. “Its purpose is as an enabler of social and economic policy in a country, and that is directly a manifestation of that country’s view of itself.”