Ca­na­da’s tax co­de is too com­pli­ca­ted - even for CRA of­fi­cials …

As tax com­ple­xity grows, so do tax com­plian­ce costs. Ca­na­dians spend nearly $7 bi­llion complying with the per­so­nal in­co­me tax sys­tem each year

La Jornada (Canada) - - PORTADA -

Ca­na­da’s per­so­nal in­co­me tax sys­tem is com­pli­ca­ted and the nuan­ces are of­ten cry­ptic. So ci­ti­zens rou­ti­nely rely on Ca­na­da Re­ve­nue Agency staff to help them na­vi­ga­te the sys­tem. Turns out, the sys­tem is of­ten too com­pli­ca­ted even for CRA of­fi­cials to un­ders­tand.

A re­cent re­port by Ca­na­da’s au­di­tor ge­ne­ral found that al­most 30 per cent of the ans­wers CRA of­fi­cials ga­ve to pu­blic que­ries we­re wrong. So­me ques­tions we­re mo­re li­kely to get in­co­rrect ans­wers than ot­hers. For exam­ple, when as­ked when in­te­rest be­gins to be char­ged on initial as­sess­ments, CRA of­fi­cials ga­ve the wrong da­te 84 per cent of the ti­me.

The au­di­tor ge­ne­ral doesn’t del­ve in­to why wrong ans­wers are gi­ven, but part of the reason is the sheer com­ple­xity of the sys­tem.

By mul­ti­ple mea­su­res, our per­so­nal in­co­me tax sys­tem has grown in­crea­singly complex sin­ce it was es­ta­blis­hed 100 years ago. In 1917, the In­co­me Tax Act con­tai­ned 3,999 words. By 2016, it ba­lloo­ned to 1,029,042 words. The num­ber of pa­ges - af­ter stan­dar­di­zing - in­crea­sed from a me­re six in 1917 to 1,412 a cen­tury la­ter.

So it’s no won­der CRA of­fi­cials re­gu­larly get de­tails wrong.

A key sour­ce of com­ple­xity is the long list of tax cre­dits, de­duc­tions and ot­her spe­cial pre­fe­ren­ces (co­llec­ti­vely known as tax ex­pen­di­tu­res). The­se co­ver a wi­de ran­ge of ac­ti­vi­ties such as do­na­ting to a po­li­ti­cal party, vo­lun­tee­ring as a fi­re­figh­ter and bu­ying a ho­me for the first ti­me. From 1996 to 2014, the fe­de­ral go­vern­ment ad­ded 27 per­so­nal tax ex­pen­di­tu­res for a to­tal of 128. That’s a 27 per cent in­crea­se in just 18 years.

Clai­ming the­se tax cre­dits ty­pi­cally re­qui­res tax-fi­lers to sto­re re­ceipts or fill out ad­di­tio­nal forms to de­mons­tra­te eli­gi­bi­lity. This adds sig­ni­fi­cantly to the ti­me and frus­tra­tion in­vol­ved in sub­mit­ting a tax re­turn.

As tax com­ple­xity grows, so do tax com­plian­ce costs. Di­rect costs to Ca­na­dian hou­seholds in­clu­de hi­ring pro­fes­sio­nals to help fill out tax forms (ac­coun­tants, law­yers, etc.) and pur­cha­sing spe­cia­li­zed soft­wa­re for the sa­me pur­po­se. In­di­rect costs in­clu­de the va­lue of the ti­me re­qui­red to un­ders­tand the tax ru­les, com­pi­le re­le­vant ma­te­rials and com­ple­te the tax form.

On­ce all of the­se costs are ad­ded up, Ca­na­dians spend nearly $7 bi­llion complying with the per­so­nal in­co­me tax sys­tem each year. That trans­la­tes to about $501 per hou­sehold.

CRA of­fi­cials are sup­po­sed to ma­ke the pro­cess ea­sier by pro­vi­ding clear and ac­cu­ra­te ans­wers to the pu­blic’s ques­tions. But clearly they too are of­ten con­fu­sed by the tax sys­tem.

It would cer­tainly be a good thing for the CRA to im­pro­ve the ac­cu­racy of its ans­wers, but the­re’s a broa­der pro­blem that should be sol­ved: the com­ple­xity of the sys­tem it­self.

Af­ter all, the­re would be less reason to call the CRA if the sys­tem was ea­sier to na­vi­ga­te. -TROYMEDIA Char­les Lam­mam is di­rec­tor of fis­cal stu­dies and Hugh Ma­cInty­re is a se­nior po­licy analyst at the Fra­ser Ins­ti­tu­te (www.fra­se­rins­ti­tu­

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