Simplify the overly complex frustrating Canadian tax system once and for all
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I, a simple grumpy Canadian tax accountant, have seen first-hand the nightmares, frustrations and horrifying outcomes that are caused by the Canadian tax system.
I could no longer stand idly by as, literally, millions of Canadians are suffering due to the absolute mess that is known as the Canadian tax system.
People are incurring penalties and interest at every turn. The system seems to be designed with complexity in mind to confuse people.
Canadians spend, on average, $500 per household to have their tax returns filed each year, totalling $7 billion per year. This does not include the cost for businesses and corporations.
The budget for the CRA is approaching $5 billion per year and the CRA employs over 44,000 employees, making them one of the 10 largest employers in Canada! The IRS, by contrast, only has 80,000 employees (less than double the CRA) even though the U.S. is 10 times the size of Canada. The CRA receives 53 million phone calls each year!
I have seen the absolute insanity, overly complicated tax system in action as people get ensnared in what are counter-intuitive, illogical, irrational and unfair laws and rules.
The Income Tax Act is now over 3,000 pages long, contains 1,000,000 words and hardly anyone can understand it. Even CRA employees frequently give incorrect information when people call in.
Why does every individual in the country have to file a tax return each year? Why does every individual have to keep countless receipts on file for 6 years? Why does every individual need to be dragged through potential CRA reviews, audits, and re-assessments?
Why does every self-employed Canadian have to become or hire a perfect bookkeeper just to comply with our tax system?
Is there a better, simpler way?
Many other countries have simplified their tax system to the point where the majority of tax filers do NOT have to even file a tax return at the end of the year.
In the UK, 90% of taxpayers do not have to file a tax return. Likewise, 87% of taxpayers in Denmark and 74% of taxpayers in Sweden do not have to file tax returns.
In Estonia, it takes the average taxpayer 5 minutes to file their tax return.
Is this possible in Canada?
I have outlined a realistic, practical, revenue-neutral, and non-partisan plan to massively simplify the Canadian tax system in a book I wrote entitled, The Grumpy Accountant.
Every single Canadian should read this carefully, take the message to heart, and spread this among their family, friends, and others and especially with their Member of Parliament, the Prime Minister and the Minister of Finance.
In my book, I call for the following to happen as soon as humanly possible.
- The Prime Minister and Minister of Finance must declare a royal commission to undergo a full and comprehensive review of the Canadian tax system in a non-partisan, serious fashion. The last time this happened in Canada was in the 1960s when the Carter Commission report was released. The world has changed tremendously in the past 50 years and it's time to update and simplify our tax system.
- The goal of the review should be with an eye towards simplification for the vast majority of individual tax filers. We must move towards a no-filing tax system. Even in our current system, the employer files the T4 to the CRA. CRA already has the T4 yet employees have to report the same information in that T4 in a tax return they must file to the CRA. Why? The CRA already has the T4! In fact, if you make a mistake inputting your T4 into your tax return, the CRA will automatically correct it!
- I hereby propose to eliminate and abolish as many tax deductions and tax credits as humanly possible and then simply lower the tax rates to make up the difference. Every tax credit and tax deduction adds more complexity and confusion into the tax system. Politicians use the individual T1 tax filing system to try to re-make the country in their own image based on their own political preferences and values. The deductions and credits force people to hire outside expertise to file their tax returns since the deductions and credits can change each year. The lowering of the rates can start at the lowest brackets (increase the basic exemption). Then, the correct amount of tax would be deducted at source and therefore no further tax filing would be required. The T4 becomes the tax return!
- Seriously consider a move to family taxation instead of individual tax filing. Many other countries have a system in which the family unit files one tax return. In Canada, each individual must file their own tax return but this creates a lot of confusion and unnecessary planning that could be obviated if we moved to family taxation. This was in fact recommended by the Carter Commission in the 1960s but the government back then did not listen to this recommendation.
- Allow self-employed individuals a simplified method of reporting their income (similar to GST/HST quick method) in which they show their revenue, and pay a lower rate of tax on their revenue. This would eliminate the need for these hard working people to become or hire a perfect bookkeeper, it would eliminate the need for them to keep receipts on file for 6 years, it would eliminate the need for CRA audits of business expenses, and would make everyone's life a lot simplier and easier and stress-free.
Every night, I lay awake in bed, unable to fall asleep, thinking about how strange it is that I have a job as a tax accountant. I believe it is truly shameful that my job is even necessary.
People should be able to file their own tax returns or not have to file at all!
We, the undersigned, hereby declare the Prime Minister and Minister of Finance must take this issue seriously. For far too long, Canadians have sufferred under a stress-inducing, costly, and unfair tax system.
We propose that the ideas put forth in The Grumpy Accountant, some of which are outlind above, be used a blueprint for the government to start a comprehensive review of the Canadian tax system with the goal of massively simplifying it once and for all!
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