Monster tax act costing taxpayers billions: report

Tax complexity infographic by The Fraser Institute.

Stop the presses: a new report says Canada’s tax system is too complicated.

Hardly news, we know. But this study from the Fraser Institute has some astounding stats on just how bloated our system has become, how it’s impacting taxpayers and how it could be fixed.

Measuring Tax Complexity in Canada kicks off by breaking down how much the actual Income Tax Act has ballooned over time, measuring by text area. It’s a funny gauge, but the numbers don’t lie. Since 1960, the act has grown 62 per cent, from 974,050 sq. cm. to well over 1.5 million.

That takes up the same space as 40 king-sized beds.

Okay, that’s an interesting statistic, but does it make any real difference to you? According to the report, it makes a huge difference.

The increased complexity means taxpayers are increasingly turning to accountants, lawyers and computer software to complete their returns. That, plus the financial cost of the time spent, means Canadians are spending about $6 billion a year to comply with the tax system.

Learn about the law: How the tax system works

On top of that, it’s become harder for the government to administer our tax system, amounting to annual costs between $25 and $30 billion. So more of your tax dollars are covering costs of the system that takes in your tax dollars.

The report also says the avalanche of new credits and deductions, while ostensibly a boon to taxpayers, simultaneously makes returns more confusing and increases the likelihood of overlooking those credits.

So, the system is a mess. What’s to be done? The report doesn’t offer concrete solutions and notes that there’s no current government initiative to streamline our tax system (and we don’t have anything like the U.K.’s wonderfully-named Office of Tax Simplification).

In an interview with the CBC, Fraser Institute spokesman Charles Lammam proposed a major overhaul: trim the system down to just two tax brackets and eliminate some $20 billion in credits. That’s unlikely to gain much popular support, but he says it will result in lower taxes for all.

Lower taxes, fewer complications? Who’s going to say no to that?

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