31 May 2010


While we're on the topic of money: Canada's banks (see last post) are of course not the only ones interested in my financial situation. The governments like to take a rather close look, as well. And the plural was not a typo: As a resident of la belle province, I have to deal not just with the federal agency, Canada Revenue, but also with its provincial counterpart, Revenu Québec. In other provinces, a citizen is prompted to fill in one tax declaration, based on which the federal authorities then collect both what's theirs and what the provinces tax, and remit the latter to the provinces. Interestingly, in Switzerland it's the opposite way around, with the cantons (= provinces) collecting taxes, and passing a share on to the federal government. Top-down or bottom-up, it's one single process.

But not here, where the mutual distrust between Québec and Ottawa is such that neither wants to rely on the other to do a proper job. (Admittedly, the federal government's track record on honesty isn't exactly unblemished...) In consequence, citizens are required to file their tax returns twice, once for the Maple Leaf and once for the Fleur de Lys.

"Well, if they can't get their act together, why bother?" my Swiss friends may ask. That was my first thought as well. Until I made a rather surprising discovery on my first Canadian paycheck. Unlike in throughly bottom-up Switzerland, Canada (along with most other states, or so I gather) in fact asks employers to withhold the estimated tax burden directly at the source, i.e. before that sum ever reaches an employee. To be on the safe side, they withhold rather too much. And burghers, if so inclined, can then jump through the hoops of filing two tax declarations, appying all the tax breaks they can think of, in the hope of getting some of that money back. Talk about smart incentives!

I have to concede that after an initial phase of outrage ("Where is the rest of my money??"), I came to like this system. It takes away the uncertainty that plagues taxpayers in the Swiss system, wondering how much money they have to put aside in order to pay that massive tax bill when it finally comes at the end of the year. Instead of that, Canadians usually know that whatever ends up in their accounts is theirs, and that they may get some additional cash back from the government if things go well.

And so it was with distinct enthusiasm that I fought my way through my first two tax declarations a while ago - without kids, property or student loans, the complexity was manageable. And sure enough, only three weeks after my submission, Canada Revenue deposited the expected tax return in my account. But what about the money Revenu Québec owes me? Another six weeks have passed and I've heard nothing, until I ran out of patience the other day and called their automated status hotline. After punching in my details, a cheery but automated voice confirmed: "Nous avons reçu votre demande. Mais nous ne l'avons pas encore traitée. Merci." Yes, they sit on my money. No need to rush. Smart incentives, indeed!

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22 May 2010

Boring banking

My foreign friends used to mimick envy and suspect something funny going on, but there was nothing I could do about it: Living in Switzerland, I quite naturally did have a Swiss bank account. Yes, it was numbered, just like the ones the villains in James Bond movies own (except that the balance in my accounts never really reached the same lofty heights).

The glamour and secrecy came to and end last year, for one of my first tasks in the New World was to get myself a Canadian bank account. I did a bit of research and consulted some colleages at work before picking one of the five retail banks which neatly split the market between themselves. As I quickly noticed, this brings them very cozy profit margins, obtained chiefly from nickel 'n' dime-ing their retail customers on each and every transaction they make. Being used to an efficient, sophisticated and reasonably competitive banking environment, I was taken aback by the countless fees and charges my banking adviser introduced me to. From making a debit card payment to using other banks' ATMs, or simply receiving an incoming payment, everything costs a loonie or two. Unless you are careful, you can easily spend a lunch's worth on bank charges each month.

Except of course if you do as I did and opt for a premium "all inclusive" package - in which case you vouch to deposit a significant amount of money in an interest-free account. So you just pay your fees through the back door.

And then there are the cheques. Yes, my dear North American readers, they may be as familiar to you as they are to my financial advisor, who was quite surprised when I asked him for a little checking 101 upon opening my account. "But aren't you from Switzerland?" he asked in disbelief. "The home of banks?". Indeed. And like most of Europe, we have done away with this arcane and risky way of transfering funds a long time ago, in favor of electronic means or payment slips. The e-banking capabilities I enjoyed in Europe for the past ten years are vastly superior and more flexible than what's in the Canadian market today. But hey, I get to choose my favorite cheque design!

Personal service, in general, is a much larger part of the experience here than it was in Switzerland, where bank branches have the polished, but formal and sterile ambiance you'd expect from a confession booth. Not in Canada. Here, my financial advisor is on a first name basis and greets me with the all-Canadian "How's it going, eh?". Branches are designed not in polished wood and bullet-proof glass, but wide open and with cheap cubicle furniture. Clients seem not to mind baring their financial situation within earshot of everybody else. And on the way out, they can help themselves to complimentary coffee and cookies if it's Customer Appreciation Day again.

Yes, retail banking in Canada is a mundane affair - cozy but ultimately boring. It took some time getting used to it, but I can't say I dislike it. And while reading the Economist on a plane today, I came across an article lauding the boring but reliable nature of Canada's banking landscape. As it stands, it saved the country from the financial troubles its southern neighbor has been going through over the last 18 months. Let me leave you with the magazine's words of wisdom:
The charms of Canada
From the Economist print edition

Good policies, good behaviour and good fortune: if only others could be as lucky
As they contemplate high unemployment, foreclosed homes, shrivelled house prices and the arrogant follies of their investment bankers, Americans may cast envious glances across their northern border. Despite its umbilical links with America, Canada’s economy suffered only a mild recession and is now well into a solid recovery. The Canadian dollar, having dipped sharply,is back up to rough parity with the greenback. The Bank of Canada has signalled that it may soon raise interest rates. When Stephen Harper, the prime minister, hosts the get-togethers of the G8 and G20 countries next month he will be able to boast to his visitors that his country’s economy is set to perform better than that of any other rich country this year.

How has Canada avoided the plagues that are afflicting everyone else? The short answer is a mixture of good policies and good luck (see article). The main reason for the country’s economic resilience is that neither its financial system nor its housing market magnified the recession. The banks remained in profit. House prices held up fairly well and are now rising. And for that regulators deserve a chunk of the credit.

Canada’s banks face high capital requirements and a cap on their leverage, such that their assets cannot exceed 20 times their capital (a lot less than the corresponding figure for many Wall Street firms and European banks). Canadians who take out mortgages worth more than 80% of the value of the property must also take out insurance against default from a federal agency, the Canada Mortgage and Housing Corporation. The banks must insure the rest of their mortgage book with the corporation. It helped, too, that Canada has a single banking regulator. The big five banks snapped up the leading stockbroking firms in the 1990s, becoming universal banks. But, whether through luck or judgment, they never became too dependent on investment banking. And, mirabile dictu, their shareholders managed to ensure that bankers’ bonuses were kept within modest bounds.

Many of these rules embody lessons learned the hard way from banking collapses in the mid-1980s. Something similar goes for the public finances. By 1995 Canada’s chronic fiscal deficits, towering public debt and stagnant economy prompted the Wall Street Journal to call it “an honorary member of the Third World”. Years of deficit cutting followed. The result was that Mr Harper’s government could easily afford the modest stimulus it applied in 2008. Government debt in Canada is still below 36% of GDP (and will soon fall), little more than half the (rising) ratio in the United States.

But there is also a large dollop of good fortune behind Canada’s resilience. If parts of eastern Canada resemble Europe in economic terms, the west looks more like Brazil. Its mines, oil and gas producers and farmers have benefited from the commodity boom brought about by China’s appetite for raw materials. This boom brings a problem: it is helping to drive up the Canadian dollar, which risks making life more difficult for manufacturers back east. And Canada’s fiscal health will soon come under strain from the treasured but expensive public health-care system and an ageing population. There is little sign that the country’s politicians are ready to deal with either.

The costs and benefits of conservative banking
How much of the Canadian model can, or should, be exported? Critics of the Canadian banks reckon that their conservatism was the flip side of a cosy oligopoly. The big five were barred from merging and partly protected from foreign interlopers. They shared out a profitable domestic market and gave up competing on price. And keeping tabs on the banks is much easier when all are relatively small by international standards and are based within a few hundred yards of each other and of regulators in Toronto.

The result is that Canadians pay more for financial services than others and there is little innovation. Even so, as taxpayers elsewhere dig deep to pay for their bankers’ wheezes they might think that Canadians got a bargain. Replicating Canadian banking elsewhere would be hard. But when Americans and Europeans press Mr Harper at the G20 meeting to accept a tax on banks to curb their riskiness, he has reason to retort that Canadian-style regulation does the job better.


14 May 2010

Walk in

When a Canadian comedian, living in Hollywood like most of his celebrity compatriots, was asked what he thought about the United States' health care system, he had this to say:
American health care is like American snow: sporadic, unreliable and distributed unevenly among the population.
Compare this of course to the Great White North, where not only the flurry white stuff evenly covers the land from coast to coast (I woke up to snow flakes last Sunday!), but an equally solid blanket of free tax-funded health care enchants the population. Or at least this is how the legend is being told among the great unwashed masses of Europeans looking for opportunity in the New World.

The beginnings were promising. Shortly after my arrival last year, I was made to apply to the provincial health plan, which in my province is yet another Q-acronym. And after a three month hold-out period (a polite way to say "quarantine", I thought), the mailman delivered a credit-card sized health card, which despite its tacky look (the sunset of life, perhaps) came with the promise of unlimited access to free health care. I tucked the card into my wallet, sat back and gleefully looked south, where Mr. Obama valiantly fought his battle to introduce Canadian-style socialist health care with death panels.

I also stayed healthly. Just in case, you know. For one of my close Canadian friends had shared with me the following nugget about government health care:
Oh, it's absolutely wonderful. As long as you're well.
Obviously, it was only a matter of time until I had to find out first hand what it is really like. And this week, the moment of truth had come. I read through the glossy directory of health services in my neighborhood, which the city has distributed earlier on, to find a place to see a doctor. Fortunately, my case was a very benign one: Upon preparation of the documents required to apply for permanent residence, I came across my vaccination records. They sported a little sticky note, reminding me that 2010 was when to get two booster shots. If I chose to continue roaming the streets of Montreal as the walking biohazard I had become, I would not stand a chance of being accepted to this country on a permanent basis. So I picked the clinic closest to my place, glanced at their website and gave them a call for an appointment. By which I probably made quite a fool of myself. "Oh no", chirped the lady on the other end of the line. "We are a walk-in clinic".

A walk-in clinic! I'd heard of them... in stories from England I believe. But I'd definitely never been to one. Until this week, when I, err, just walked in! I drew a number, sat down and started reading things I brought from work. After about 20 minutes, my number was called, an imprint of my health care card taken and a file opened. Fast forward another 20 minutes, and a friendly but no-nonsense doctor had seen me and written my prescription. One more wait before a nurse competently administred the two booster shots.

Wow! That went really well. I was quite impressed - until the nurse told me to stop by the reception once again on my way out, to take another card imprint. Except this time, it was one of my credit card! Turns out that the legendary free health care covered for the doctor's visitation and the nurse, but not for the actual vaccine the Canadian immigration guidelines wanted me to get. Outrageous! Of course, there was only one thing I could do in protest: I staged a walk out...

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05 May 2010

Climate change

Remember my last post? I wrote it last Tuesday, while there was snow on the ground, and an icy wind blew through the city. Yesterday, I bought a big fan to cool down my apartment.

Yes, the climate change over the last few days has been quite dramatic. The snow went as quickly as it came, and revealed nature in full bloom. Suddenly, the evenings are long, the trees are green and the grass is growing (never mind the lawn mowers adding their soundtrack to that of crickets and chirping birds). Dandelions push through the cracks (of which there are many) in the sidewalk, and the squirrels happily munch on my garbage bags. Oh, wait, they do this all year round...

Local friends have told me that Montréalers, much like Scandinavians, are particularly enthused by these wonderful days of spring, as they usually come after a long and joyless winter. Initially, I thought of this as a hopeless overstatement, but now I can vouch for it to be true. Strolling down Rue Ste-Catherine last Saturday afternoon, drifting along in this current of springtime emotions, I was still coherent enough to notice lots of students proudly parading their summer shorts and skirts for the first time - never mind the drizzle, it's time now!

The next day, stepping out of my apartment mid-morning, it hit me like a wall: The drizzle had gone, but the humidity had certainly stayed and, along with the radiant sunshine, created a climate more appropriate for a mediterranean summer's day. Down by the Canal Lachine, people were laying in the grass, having picnics and taking the pedalos on their maiden voyage. With every sudatory step, with every breath we sucked up this intoxicating scent of summer.

Good thing I'd gotten ready. Recent acquisitions include not just said fan to alleviate some of the pain when, in the coming months, the nights will be tropical again. I've also gotten hold of two balcony chairs and eagerly await the balcony to be renovated this month. And this Saturday, it's the beginning of the pre-season at the wondeful (and heated, this is Canada after all) 50m outdoor pool. Season tickets, anyone? I'm walking on sunshine...


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