China's great fall, loonie's swan dive & some mushy math on taxes: BUSINESS WEEK WRAP
China dominated the business headlines this week, as the world's second-largest economy took investors on a white-knuckle ride on equity markets.
On Monday, Shanghai's stock exchange had its worst day since 2007, losing almost nine per cent of its value as the money fled for the exits.
The reason? Slowing growth, or fears that China's booming economy is slowing down enough to hurt just about every nation on earth that exports there. Exchanges in Europe were also lower, but most of our audience was focused on what happened in North America. The Dow lost 1,000 points at Monday's open, before clawing back 90 per cent of that throughout the day.
The TSX fared little better, racking up big losses to start the week before bouncing back by week's end. The word on the lips of traders was "volatility" as investors realized few people know the true health of China's economy.
"This is not about a slowdown in China's economy," Capital Economics' Mark Williams told us this week, "it's a bubble bursting."
Investors seemed to be in a better mood by the end of the week, but with the daily spikes of this week as a warning, the China story is certainly one to keep an eye on.
Loonie dives
"The Great Fall of China," as some wags put it, was trouble for oil, as crude prices sank to a new low below $39. And it knocked back the loonie, which sank below the 75-cent US level for the first time since 2004 this week.
That's bad news for anyone trying to take a trip abroad, but a cheap dollar is actually great news for Canadian manufacturers and service providers who export. That's a group that includes Influitive, a Canadian company we spoke to this week that creates software to help other companies run customer loyalty programs.
Most of its staff and head office are paid for in Canadian dollars, but most of its customers are in the U.S. — and pay their bills in U.S. dollars that are now worth a lot more to a company like Influitive.
"It will be a benefit for sure," CEO and founder Mark Organ said. "Our costs are 20 per cent lower than what they would've been. That is definitely an attractive thing but, it's not what makes or breaks an industry."
Good to see a ray of sunshine in the midst of all the gloom about Canada's plunging currency.
A taxing argument
And speaking of rising costs, the right-leaning Fraser Institute was back at it this week with their annual report on how overtaxed Canadians are.
How bad is it? Well, according to the group's math, the average Canadian household's tax burden has gone up by 1,886 per cent in the last five decades or so.
According to the Fraser Institute, the average Canadian family earned an income of $79,010 and paid $33,272 in taxes, or 42.1 per cent of their money. That compares with 1961, when the average family had an income of $5,000 and paid a total tax bill of $1,675 or 33.5 per cent of their income.
- DON PITTIS: Not all rich people hate paying taxes — they just won't admit it
By its own admission, Fraser's numbers include all forms or taxation — everything from corporate taxes, to excise tariffs and payroll taxes. So it's not as if the average Canadian was directly cutting a cheque for $33,272 to the government last year.
Their calculation even includes things like CPP and EI premiums, but the group says it includes such a wide swath of taxes and user fees because all of those costs are ultimately borne by taxpayers, whether they pay them directly through things like HST and income tax, or indirectly through corporate taxes and resource royalty rates.
At least one economist took issue with the specific time frame of the report. A base year of 1961 stretches back to a time before Canada had a robust social safety net full of things like the CPP, Old Age Security and national health care.
"Consider for example that our taxes pay our medical costs," Rotman professor Peter Dungan said. "Back in 1961, we paid them directly. So to take a tax burden from 1961 and compare it to the present, you're definitely … comparing apples and oranges."
Other stuff
Those were just a few of our best stories of the week. Be sure to check out our website often for more, and remember to follow us on Twitter to stay up to date. In the meantime, here's a day by day list of our most-read stories from the past week.
Monday
Tuesday
- DON PITTIS: The world is afraid of China's panda bear market
Wednesday
Thursday
Friday
