Meet The Band: Midday Swim

"A day at the beach." That's how the summery Toronto indie rockers Midday Swim describe their music. "Our sound is deep and heavy, and it washes over you in waves, but on the surface it's carefree and sunny." It's also very catchy. "We essentially write pop songs," they explain, "we've had audience members singing along with us to brand new material by the time the final chorus rolls around (which is a really great feeling)."

Listening to a song like "Summer Eyes" is bound to take you back to the carefree days of July and August, when the air outside wasn't hurting your face. But the band's been busy during these cold winter months, too. Last week, they played the Horseshoe as part of Indie 88's Nu Music Night. They've got a brand new single: the slow burning "We Got The Feeling". And we already know that in a couple of months, as the weather turns from spring into glorious summer, Midday Swim will be one of the local bands we're planning on catching during Canadian Music Week.

Before then, get to know them a little bit better:


VITALS


Members: David Krygier-Baum (Vocals, Guitars); Stephan Ermel (Keyboards, Vocals); Sebastian Shinwell (Guitar, Vocals); Craig Saltz (Bass, Vocals); Max Trefler (Drums)

Hometown: Toronto



FIVE QUESTIONS


1. If you could open for one current band that you haven't played with before, who would it be?

We’d love to open for Kurt Vile. I’m not sure how his fans would react to our music, but whenever we listen to Smoke Ring for My Halo.We’re blown away by how well crafted and intelligent his music is, while still seeming apathetic and sedative. You get the sense that his lyrics are very misleading. On the one hand he sounds like he sits around all day doing nothing, but you know there’s no way that’s actually true.


2. If you could play one venue you've never played before, what would it be?

It would maybe have to be a variation of tunes, but Roy Thompson Hall or Massey Hall would be a dream. Even with the best sound guy/girl, it sometimes feels like you’re fighting a venue’s acoustics. We’d love to set up our gear at Roy Thompson Hall and just start wailing.


3. What’s the craziest live show you've ever seen?

Crazy show? Back in their heyday a couple of us went and saw Sigur Ros live at Massey Hall. It felt like our faces were melting off. We might have just been crying though, it’s pretty emotional music.


4. Say, for some strange reason, all the music in the world is going to be destroyed, but you can save all the songs from one decade. Which decade's records would you save?

That’s an impossible question to answer! Does it make us huge nerds to admit that we’ve genuinely considered this in the event of a Zombie Apocalypse? It’s basically like the desert island question with way higher stakes, because it includes all of mankind. We would argue that any decade would be as important as the next. But if we had to choose, we would say the last decade. At least the totality of music would find its way in what is being created now and it would all survive as being influential.


5. If you were going to be a groupie for one band, who would it be?

Milk Carton Kids. Not many bands are making music as beautiful as them.



LISTEN





WATCH





LINKS


Website: www.middayswim.com

Facebook: www.facebook.com/middayswim
 
Twitter: @MiddaySwim

Bandcamp: middayswim.bandcamp.com


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Meet The Band is a regular feature in which we introduce you to bands we like.

 




Posted by Adam Bunch, the Editor-in-Chief of the Little Red Umbrella and the creator of the Toronto Dreams Project. You can read his posts here, follow him on Twitter here, or email him at adam@littleredumbrella.com.


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Here's One Of The Best Velvet Underground-Inspired Albums of the Year by David Ball

Frank Zappa once said: “Never stop until your good becomes better, and your better becomes the best.” Well, 10-years and counting into a prolific underground indie career, Purple Hill’s better has become best with the release of Top 40 Radio Memory Dream (Oh Yeah!).

Truth is, the latest offering hatched from the unusual mind of svengali frontman Owen Marchildon (former bassist from the late great math rock outfit From Fiction) isn’t much different than his Toronto quartet’s string of stellar LPs that unabashedly channel, and nail, Loaded-era Velvet Underground and noisy three-chord garage rock.

But this 10-song collection bests all, even 2011’s acclaimed low-fi gem Bring On The Macho, mainly because it’s more cohesive and accessible; helping matters is that it’s packed with at least six radio-friendly tracks including the joyous slice of '80s dream pop “Being Young (Like It’s So Far Behind), the obviously VU-inspired “I’ve Been Listening To Nico”, and rootsy standout single “Six String All To My Heart”, the latter evoking the Byrds-esque psychedelic-country spirit of Purple Hill’s 2005 debut EP and 2009’s Beechnut Street.
 
Still, newfound accessibility doesn’t mean Marchildon has turned in his crazy calling-card just yet. The prolific singer/guitarist’s vivid and sparsely subversive lyrics remain Purple Hill’s most compelling and funny feature, and this effort is no exception: Highly personalized true stories that manically flip between celebrating everyday slices of life (guilt by eating too much junk food on the mid-tempo power-pop opener “Sweat Out The Take Out”) to occasional fits of lunacy (being driven mad by bedbugs on the suped-up VU rocker “I Am Ripe”).
 
The live-off-the-floor, one-or-two-takes-and-it-is-a-wrap approach (with a few overdubs), was captured by Jeff McMurrich (Constantines, Danko Jones), a wise decision by the revered engineer and producers Purple Hill, since the warts-and-all, 35-minute recording, comes off like a raw live album featuring a fearless band swinging for the fences.
 
Don’t be surprised if you find Top 40 Radio Memory Dream (Oh Yeah!) on a few year-end “Best Of” lists. Heck, “Six String All To My Heart” should even garner spins on radio outside of the usual college variety.
 
Are you listening, Indie88? You should be.


WATCH



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David Ball is a Toronto-based freelance writer, long-time reviewer and quasi music historian for the late great SoundProof Magazine and past contributor to Jambands.ca. Along with submitting occassional articles for Little Red Umbrella, David also writes for the US-based horror, sci-fi, cult website, Rabid Doll.
 

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PUP's New Live Video Is Better Than Yours

PUP play a shitload of shows. Like, a really big shitload: 250 of them last year. We're pretty sure that's more days in 2014 than we even bothered to get out of bed, never mind dragging a bunch of gear across the surface of the Earth and climbing up on stage every night to rep the 6ix with a set of roaring, manic, shout-along punk rock. And when they're not on stage, PUP don't seem to be spending much time relaxing — instead, they're busy putting out a streak of kickass videos, like the demolition derby epic for "Mabu" (RIP) and the Prism Prize nominated "Guilt Trip" — which is, frankly, better than most entire movies we saw last year.

Now comes a new live video for "Back Against The Wall." And it's not your usual live video. This one stitches together footage from various stops on the band's "Everything Gets Worse" tour. Behold:


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Posted by Adam Bunch, the Editor-in-Chief of the Little Red Umbrella and the creator of the Toronto Dreams Project. You can read his posts here, follow him on Twitter here, or email him at adam@littleredumbrella.com.


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Go! Now! Get Valentines from Alvvays, PUP, Stella Ella Ola & more

Ooh look at that! There's a nice V-day surprise from one of the best labels in the city: Royal Mountain Records has teamed up with local artists to release a series of seven free valentines for the bands on their label. Which, uh, just so happen to be some of the best bands in the city: PUP, Alvvays, Hollerado, Stella Ella Ola, Pkew Pkew Pkew (gunshots) and The Plateaus — plus one for the label themselves. The artists are pretty rad, too, including Edith Boucher, Brittany Farhat, photographer Yoshi Cooper and Stella Ella Ola's own Anne Douris (who drew that flamingo right there). You can collect all the valentines by tracking them down at some of most awesome spots around T.O., like Sonic Boom, Sneaky Dee's and The Garrison. So you can buy some records, eat some nachos, and get trashed while doing it. Plus, each valentine comes with a download code for a brand new Royal Mountain Records sampler.

Sounds like a pretty good Valentine's Day to us. For the full deets including a list of all the valentines and their locations, head to the Royal Mountain Facebook page here.

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Posted by Adam Bunch, the Editor-in-Chief of the Little Red Umbrella and the creator of the Toronto Dreams Project. You can read his posts here, follow him on Twitter here, or email him at adam@littleredumbrella.com.


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Better Call Saul: The Jimmy McGill Story by Alex Snider

There will be a lot of Breaking Bad spoilers in these BCS recaps so fare thee warned. 

I don't miss Breaking Bad. I missed it between episodes and between seasons, as soon as the credits rolled I yearned for next hit (maybe there's a meth analogy in there somewhere??), but Vince Gilligan and his writers did a phenomenal job of telling, then ending Walter White's story, that as a viewer, my job was finished. BB had a narrow scope and a short time-line with not a single superfluous detail so that at the end, nothing was left wanting. It was like a beautiful, mutual breakup where you both just legitimately loved each other but wanted different things.

But then Better Call Saul came along and just like a particularly fine Instagram pic of your amicable ex, it's all coming back to me. Now all I can hear are the dulcet twangs of BB's intro ricocheting through my head. That and all the various accents of Jimmy McGill's "secretaries".
 
Gene is a surprisingly hands-on manager
The beauty so far of BCS is that you get the familiarity with the new. From the opening scene of the pilot where we watch Walter White's doppelganger (whom he had no small part in making) go through the motions of his mundane job (using the chemistry of baking, natch) to stand-offs in the desert set against the expanse of the bright New Mexico sky to the impeccable courthouse montage, the unmistakable watermarks of the Breaking Bad universe are all there. At the same time, we are given something completely new and, based on clips like this, unexpected. Saul, or rather, Jimmy was one of the more one dimensional characters on BB. Armed with  over-sized suits and killer one-liners, he delivered comic relief and did Walt's lawyerly bidding but barely graduated past stock sleazy lawyer character by the time he called the vacuum salesman. He straddled the line between not bad and bad, giving the idea that he did have a moral compass just that it had been dropped a whole bunch of times.
 
There must be an eight syllable German word for welcomely familiar
After spending two episodes with Jimmy, I'm completely willing to forgive him all his trespasses and that he once, without blinking, suggested having Badger killed. Turns out Jimmy is kind of a sweetheart. No angel but he's out there fighting the good fight. He's looking after his brother who is suffering from electromagnetic hypersensitivity. He's defending those who have no one else to turn to (for a measly $700 a pop). He's driving a shitty ass car. He's getting bullied by a parking lot attendant (MIKE). He's getting marked by two of the stupidest people who have ever been on the show (and I'm including No-Doze in on that because apparently that guy never learned in how many years not to interject on Tuco). He's getting taken out to the desert, being made to beg for his life and then, worse, made to argue for the lives of those awful twins (honestly, I've never wanted anyone in the BB universe to die but for them, I make an exception).

It's clear that like Walter White, Jimmy McGill always had a dark side but Jimmy lacks whatever it was that made Walt Heisenberg. Heisenberg never would have shrank before some rando in a Nebraska Cinnebon. He would have sneered and stared him down and used a cinnamon reduction to make a bomb. Walt wanted to break bad. He sought the dark out and let The One Who Knocks in. Jimmy has already repented his old Slippin' Jimmy ways and refused to open when The One Who Knocks knocked (in his case it's Nacho). I'm very curious as to what the impetuous will be for Jimmy to break bad. Will it be his sick brother and empty bank account? Will he get tired of being a loser? Will Betsy Kettleman somehow be involved??? Whatever the reason, I fully trust Gilligan and Co. to make the journey wildly enjoyable.
 
Next Gilligan project idea: a spin-off about her (the woman drawing)
(Also, a little nod to Jesse, maybe?)
Other thoughts:

Michelle MacLaren directed the second episode. She directed a number of my favourite BB episodes including season 4's "Salud", and season 5's "Buried" and "To'hajiilee". She is brilliant.

It's going to be easier than expected to exercise patience for familiar faces to show up and for more action from Mike because I'm so engaged with Jimmy's story particularly whatever is going on with his brother, Chuck.

Love that Chuck is played by Michael McKean, and that he looks remarkably like Bob Odenkirk. Also very happy to see Julie Ann Emery from Fargo playing Betsy Kettleman, and Michael Mando from Orphan Black playing Nacho.

Bob Odenkirk is a great actor.

LOVE that Jimmy is from Cicero. Great orator.

I hate those goddamn twins and I hope we never see them again. They are no Jesse. And they are a blight on the BB universe's twin record. RIP Leonel and Marco.

Good to see Gonzo again and as I mentioned before, interesting to see that No-Doze never did know when to shut the hell up. I guess Tuco was sort of justified...

Having a hard time understanding the claims that BCS will not be as dark as BB. So far it's seems pretty on par, right? Although I guess skull-fucking is totally lololololololol.

I like that we're going to get to see Tuco less deranged by meth but still wildly violent. And always a real sweetie to his elders.

The cold open was so beautiful and reminiscent of all Walt and Jesse's cooking session montages but my favourite part was when Saul broke out the VHS of his old commercials and the black and white was broken only by the flicker of colour reflected in his Walter White glasses. Truly the only colour in his life. And that is why Vince Gilligan shows are elevating the whole damn medium.

Loved that Saul predicted correctly where the vacuum salesman would take him and what his job would be. A nice lil' Easter egg for all us loyal BB fans.

Speaking of Easter eggs, the garbage can that Jimmy demolished after his fruitless meeting at HHM, was already dented, leaving me to believe that wasn't Jimmy's first tango with it. In fact on his way up, he takes a moment to look at it, reminding me so strongly of all the times Walt had to face down that paper towel dispenser he punched at his doctor's office.

One thing I noticed and really, really appreciated was that Jimmy speaks or at least has a passing understanding of Spanish, something that Walt never had. It's a small thing but you can see the difference even between him and those horrid twins – the way they disrespect Tuco and his grandmother before Tuco goes Tuco on them is compounded by their demanding that his grandmother speak English. I'm curious to see how the language thing plays out.

Until next week!!
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Alex Snider watches a lot of TV and reads a lot of books. Follow her on Twitter where she'll be super active for a week then be quiet for months – she's a social media cicada



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Sir John A. Macdonald, Drunk & In Flames by Adam Bunch

It's one of the best-known facts in all of Canadian history: our first Prime Minister drank. Like, a lot. Sir John A. Macdonald wasn't just a charming social drinker; he got the kind of drunk where you find yourself puking on a chair at the Governor General's residence. Or throwing up on stage during a public debate. There were times when he went on benders that lasted for days, too drunk to show up for his official duties. And on a winter night in London, England — right in the middle of the final negotiations over Confederation — it seems to have nearly cost him his life.

This was in 1866. Canada was on the verge of becoming a nation. All the biggest politicians from the Canadian colonies had already met at two big Confederation Conferences — first in Charlottetown and then in Quebec City — to hammer out the basic framework for a new country. Drinking had famously played an important role right from the very beginning. In Charlottetown, Macdonald and his allies from Ontario and Québec showed up with $13,000 worth of champagne. Boozing and dancing and getting to know each other socially became a vital part of the nation-building process. And by the end of the meetings in Quebec City, the delegates had agreed on a list of 72 Resolutions. Now, all they had to do was to turn those resolutions into a Canadian constitution and get it officially approved by the British parliament.

So they headed off to England for one last big push.

They called it the London Conference. And it got off to a very slow start. The delegates from the Maritimes arrived in July. But the others were nowhere to be found. They were still back in Canada — delayed, in part, by Macdonald's drinking. The strain of Confederation and other political stresses were taking a toll on the man. That year, his alcoholism got worse. "He was drinking more heavily, more continually than he had ever done before," Richard Gwyn explains in the first volume of his Macdonald biography, "at times having to grip his desk so he could remain standing in the House." It wasn't until November that Sir John A. and the others finally showed up.

Macdonald was no stranger to drinking in London, either. In fact, he'd already been made an honorary member of one of the most exclusive gentlemen's clubs in all of England. The Athenaeum Club is still there today, right in the middle of the city, between Downing Street and Piccadilly Circus. Many of the most famous people in Britain have been getting drunk there for nearly 200 years: members have included Darwin, Dickens, Churchill, Kipling, Sir Arthur Conan Doyle, The Duke of Wellington, T.S. Eliot, W.B. Yeats, Thomas Hardy, Michael Faraday, Sir Walter Scott... the list goes on and on. It became one of Macdonald's favourite haunts on his frequent trips to the capital. And it was far from the only place where he drank when he was in town.

The London Conference was being held just a few blocks away: at the Westminster Palace Hotel, right across the road from Westminster Abbey. The delegates spent their days in a big room on the main floor, working out the details of the bill that would need to be passed by the British parliament. Macdonald, as always, led the way — one British official called him, "the ruling genius and spokesman." By the end of the conference, he was a celebrity in England, getting recognized on the streets of London.

At night, the delegates would head upstairs to sleep. Macdonald — whose wife, Isabella, had died many years earlier after a long battle with illness and an opium addiction — had a room all to himself.

So that's where he was was on a Wednesday night just a couple of weeks before Christmas, reading that day's newspapers in bed. He'd already changed into his old-timey pyjamas. A candle flickered on the night table beside him. And while there is, of course, no detailed record of just how much Sir John A. had been drinking that night, it seems very likely that alcohol helped lure him into an early sleep.

He woke to the smell of his own burning flesh. He'd passed out while reading the paper and the candle tipped over, setting the room ablaze. The curtains, the sheets and blankets, even the pillow beneath his head and the nightshirt he was wearing were all in flames. Just months before he became the first Prime Minister of Canada, Sir John A. Macdonald was on fire.

Suddenly awake, he leapt to his feet, tore the blazing curtains from the window and stomped out the flames. He ripped the burning blankets from his bed and doused them with water from a jug on his nightstand. Then Sir George-Étienne Cartier came to his rescue.

Macdonald and Cartier hadn't always been on the same side. During the Rebellions of 1837, Cartier had fought with the rebels in Québec while Macdonald stood guard for the Loyalist militia in Kingston. But now, Cartier was Macdonald's most important ally, bringing Québec into Confederation. His room was just next door. So as Macdonald's bed and curtains smouldered, the two most notable leaders of French- and English-Canada worked together to make sure the flames were all completely smothered.

It was only then that Macdonald noticed just how badly he'd been hurt. His hair, his hands and his forehead were all burned, but the wound on his shoulder was the worst. If it weren't for a thick flannel shirt he'd worn under his nightshirt, he admitted, "I would have been burned to death." Suffering from those injuries and a subsequent infection, Sir John A. would spend eight straight days in bed.

But he survived. And so would Confederation. Months later, the delegates' bill was passed by the British parliament. It was called the British North America Act; it came into effect on July 1, 1867. The Dominion of Canada was officially born.

And Macdonald's battle with the fire in his hotel room wasn't the only life-saving event during his trip to London. Just a few days before the blaze, he ran into an old friend while walking down one of the most fashionable streets in the city. By the time they left London, Macdonald and Susan Agnes Bernard were married — celebrations included a breakfast feast at the very same hotel where Sir John A. had nearly lost his life. His new wife would prove to be unshakeable in her quest to curb his drinking. And while, in the end, it was a losing battle — there were still plenty of benders to come — one of Macdonald's biographers figures that her efforts may have added as much 20 extra years to his life. Enough time to spend nearly two decades as Prime Minster and leave a deep and lasting legacy — for better and for worse — on the country he helped to create.

So today, 200 years after Sir John A. Macdonald was born, he's still the most famous drunk in all of Canadian history.

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A version of this post was originally published on The Toronto Dreams Project Historical Ephemera Blog. You can find more sources, links, photos, and other information there.

Posted by Adam Bunch, the Editor-in-Chief of the Little Red Umbrella and the creator of the Toronto Dreams Project. You can read his posts here, follow him on Twitter here, or email him at adam@littleredumbrella.com.


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Raising Raised by Swans by Veronica Zaretski

Eric Howden had felt a strong connection to Iceland since his first visit in 2010. “I get inspiration for my lyrics everywhere,” he explained. “But being in Iceland inspired my lyrics the same way that being ferociously in love colours everything.” So he went there to be alone in the Winter of 2011, and to work on Öxnadalur, the third album of Raised by Swans, his alter ego and solo musical project.

The process of putting the album together started during six weeks on a farmhouse in a desolate area in Northern Iceland. “I had these amazing long nights in Iceland in which I was forced to write as much as possible.” The five-hour days made it easy to get into a songwriting routine — he would spend all five hours of daylight outside, hiking, climbing, even sleeping. Then when it would get dark, he would cook himself a dinner and work into the night. Howden would continue to work for over three years after that trip to complete the album, as the songs changed and evolved. “I needed a seed of inspiration, and I found it in Iceland. I could then take that seed and grow it anywhere,” he said. The finalized songs reflect the beauty of Winter itself — otherworldly and a little melancholy, while unfolding a warmth all at the same time.

That mood was revealed when Howden performed a release show on Dec. 18 at the Horseshow Tavern, where there was an undeniable sense of intimacy between musician and audience. There were the small jokes inserted between songs and show of support yelled by some audience members, but there was also a thoughtful mood that permeated throughout the performance. This was one of only three release shows in 2014 — a solo show in Akureyri, Iceland and two full band performances in London and Toronto, Ontario, and the first performance with a full band in over two years, accompanied by Andy Magoffin (Two Minute Miracles) on bass guitar, Ray Cammaert (Pink Moth) on keyboards, and Brady Parr (Tournament!) on drums.

For his part, Howden is humble, if not downright self-deprecating about his place in the independent music scene in Canada: “I only write the way I know. I just desperately want to express things that are inside me.” But Raised by Swans has been around and garnering fans from all parts of the world since 1998. The previous two albums, Codes and Secret Longing (2005) and No Ghostless Place(2010) received the attention of filmmaker Atom Egoyan, who featured songs from the two albums in his films Adoration (2009) and Chloe (2010). Meanwhile Canadian novelist and artist Douglas Coupland featured “Violet Light” in his film Everything’s Gone Green (2007).

Somehow, though the project has been around for over sixteen years, Howden managed to keep it from completely entering the mainstream consciousness. “Every single time I hear from someone about my music its a moment of wonder and humility,” he says. “Raised by Swans is such a tiny thing and it absolutely blows my mind. The people who reach out to me would expect me to continue to make music that's original."



LISTEN



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Photos by Veronica Zaretski

Veronica Zaretski is a freelance writer by night, communications and media professional by day. She is interested in producing stories on music, arts, culture, urbanism and travel in Toronto and beyond. You can connect with Veronica by following her on Twitter @vzaretski.


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Songs You Can Dance Around Your Apartment To: The Best of Toronto 2014

This, we suppose, will be remembered as the year Toronto got rid of our crack-smoking mayor, but it was also yet another kickass year for music in our city. So we're ending the calendar by looking back at some of our favourite tracks released by Toronto bands in 2014, including PUP, Greys, Allie X, Stella Ella Ola, DFA1979, Alvvays & more.



TRACKLIST

1. "Trainwreck 1979" by Death From Above 1979
2. "The Noise of Carpet" by Greys (Stereolab cover)
3. "Lionheart" by PUP
4. "I Killed My Baby In Mexico" by The BB Guns
5. "Blood + Honey" by July Talk
6. "Heart" by The Beverleys
7. "Try Not To Laugh" by Unfinished Business
8. "Boys And Girls" by The Balconies
9. "Buzz Off" by Little Junior
10. "Don't Wanna Say Goodbye" by The Meligrove Band
11. "Peter Sellers" by Stella Ella Ola
12. "Buttercup" by Weaves
13. "Archie, Marry Me" by Alvvays
14. "Prime" by Allie X
15. "Meteor" by TOKEN
16. "The Bells" by Lowell
17. "She Just Wants To Drive" by Matt Raudsepp
18. "Cold Dead Hands" by Pkew Pkew Pkew (gunshots)
 
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Compiled by Adam Bunch, the Editor-in-Chief of the Little Red Umbrella and the creator of the Toronto Dreams Project. You can read his posts here, follow him on Twitter here, or email him at adam@littleredumbrella.com.







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Songs You Can Decorate Your Christmas Tree To

We don’t know anyone who loves Christmas more than Laurie, our Editor-at-Large. She spends our meetings doodling Christmas trees and snowflakes (even in August). To keep her happy, we let her hijack our regular playlist with a special edition of festive songs. Break out the rum, eggnog and sparkly ornaments: it's Bing Crosby, The Muppets and more.



TRACKLIST

1. "Sleigh Ride" - Leroy Anderson
2. "Twelve Days of Christmas" - John Denver & The Muppets
3. "Winter Wonderland" - Liz Phair
4. "Silver and Gold" - Burl Ives
5. "Rockin' Around The Christmas Tree" - Brenda Lee
6. "Must Be Santa" - Bob Dylan
7. "Frosty The Snowman" - The Ronettes
8. "Jingle Bells" - Frank Sinatra
9. "Mele Kalikimaka (Merry Christmas)" - Bing Crosby & The Andrews Sisters
10. "Christmas In Prison" - John Prine
11. "Little Toy Trains" - Roger Miller
12. "Joy To The World" - Sufjan Stevens
13. "Silent Night" - Low

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Originally posted December 10, 2011.

Laurie McGregor is a Toronto-based dilettante. She is the co-founder of The Holy Oak Book Club, a sort-of monthly reading series in Toronto, and seating engineer and curator for Trampoline Hall, a very excellent monthly lecture series. She likes books, soft things, baking, unicorns, robots and has an unnatural love of vending machines. You can find her posts here and email her at laurie@littleredumbrella.com.



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Corporate Tax Loopholes & How We Should Close Them: Part One by Umar Saeed

Developed nations have a problem. GDP isn’t growing the way it used to. Job prospects have diminished for the young and middle class. That means government tax revenues aren’t growing either. But the public still maintains a high level of expectations for government programs and services. Nations are struggling to find additional sources of revenues to bridge this fiscal gap. They know that debt only defers the tax burden — it doesn’t eliminate it. How can governments raise more money when the overall economy is struggling?

This struggle to find tax revenues without taxing the public further has highlighted an old and often ignored problem: corporate tax loopholes. There is a great deal of political will to eliminate tax loopholes. The public is tired of hearing about corporations reporting profits yet somehow evading taxes. This isn’t about tax rates being too high or too low. This is about the profits that form the tax base, the very thing being taxed, somehow eroding when it comes time to pay Uncle Sam. But this won’t be easy. Corporations play this game too well to simply change one rule or another. If governments want to win, we have to change the game itself. 


What is tax arbitrage?

On 29 June 2009, despite most of its stores and revenues being in Canada, Tim Hortons had officially repatriated back to Canada for tax purposes. So at some point after former NHL player Miles G. Tim Horton started the first “Tim Hortons Doughnuts,” in Hamilton, the company grew so large that it made sense to situate itself in Delaware for tax purposes. Tim Hortons was American. That was, until 2009 when it was again advantageous to move back to Ontario. This specific strategy is simply called “inversion.” The name stems from the fact that a company’s corporate presence is inverted from its primary place of business.

At a basic level, we all know what these companies are doing. Once companies get big, expectations of profit go up. Even something as simple as a coffee shop, once it’s big enough, spends a lot of money hiring tax lawyers and accountants to find strategies to “create value.” 1

The most basic tax arbitrage tenet is to recognize revenues in a country where the tax rates are low and then recognize expenses and losses in an area where tax rates are high. In other words, setup the books so the profits and gains show up in a low tax regime and losses get stuck in a high tax regime. Inversion is just one step. To go further, companies use something known as “transfer pricing.”

Large companies often structure themselves as parents with children. The parent might reside in a low-or-no tax jurisdiction. Its child will reside in a place that provides good market demand for the product being sold. There may even be siblings. In the end, all of these children are controlled by the parent. The parent can initiate transactions that will vacuum profits from its children to itself. For example, a parent might purchase supplies for its child’s coffee shop at $1 per roll. It would then sell these cups to its children for $5 per roll. By overcharging its children for paper cups, it is effectively shifting profits from a higher tax jurisdiction into its lower tax one.



Does there have to be a jurisdiction?

Apple, Google and others have created a more convoluted and aggressive corporate structure to evade tax. They have setup their parents in tax havens, a practice that is common among hedge funds and more sophisticated offshore investing. They channel their profits to countries where income tax is low or non-existent. The dad is American and holds an investment in a foreign mother. The mother is Irish, and holds rights to royalties and international profits from its children around the world, which may be taxed mildly in Ireland. Whatever profits make it to the father are treated as investment income, which is a most favourable tax treatment in America.

What is most disturbing of this strategy is that legally, the mother claims no jurisdiction for tax purposes. Irish law asks where a company is managed and controlled to determine its tax residence. U.S. law asks where the company was organized, that is, where the articles of incorporation were filed. If neither country regards a particular corporation as a resident, there is no treaty to force a jurisdiction on that company for tax purposes. This tax loophole resembles a black hole.


Closing the loops

An estimated 44 countries accounting for 90% of the world economy are on board with a plan to reform corporate tax laws and treaties. They have asked the OECD to tackle the basic issues above as well as treaty shopping (manipulating tax treaties), hybrid mismatches (double dipping on deductions in different jurisdictions) and patent boxes (favourable treatment of intellectual property income). As a big step forward, on September 20th the Group of 20 finance ministers agreed to proceed with free exchange of tax information across jurisdictions. This cross-jurisdictional transparency is imperative toward understanding the extent of tax evasion in the first place. This type of exercise may lead to, “oh, I thought you were collecting their taxes.”

But many remain skeptical about whether governments will actually go through with closing these loopholes. First, it brings up fundamental questions about a nation’s sovereignty. For example, shouldn’t a country and its elected leaders be in control of its most significant power — the ability to tax its own citizens? Second, politicians may not follow through on reforming loopholes because they are caught in a “prisoner’s dilemma” with each other. Exploring these two issues may actually lead us to a different path to solve the problem at hand.

Next time, we’ll address these two issues and whether the game can be changed — for good.


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Umar Saeed is an accomplished professional in finance and accounting. On his website (www.umarsaeed.ca), where this post originally appeared, he writes essays to explain the elaborate connections between people and money, without making your head hurt. You can follow him on Twitter @UmarSaeedCA. You can read the rest of his posts at The Little Red Umbrella here.

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Image via Consortium News.


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