Paying income taxes is bad enough. Canada's brutally complicated system makes it worse

The length of the Income Tax Act, its inaccessible language, and its numerous exceptions increase the cost of compliance for taxpayers, which amounted to an average of $501 per household in 2012, say researchers. Peter J Thompson/National Post

The payment of income taxes is undoubtedly bad enough. Now, to this is added the system, which is brutally complicated and therefore as expected, makes it worse. It has been established that during the month of April a constant perennial headache will be established for taxpayers. In this way, they should spend precious hours of their time completing their tax returns or paying someone else to do it for them.

It is necessary to highlight that the Canadian tax system is very complex and in this way it has become even more complex over the years. While the Income Tax Law had an extension of 4,000 words when it was enacted in 1917, today it comprises more than 1.1 million words. Therefore that is the equivalent of the seven volumes of the Harry Potter series, although it is considerably less exciting reading.

In the same way, we could bring up the fact that in addition to being massive, the Law of Income Tax is not easy to understand. In fact, it is necessary to add that government audits have found that almost a third of the answers given to taxpayers by the Canadian Revenue Agency is incorrect.

Extremely complex system

As already mentioned, the Canadian system is really complex. As a result, it makes the payment of income taxes worse, which is bad enough. An example of this is the high number of personal tax credits, which represent exceptions that must be taken into account when completing a tax return. The number of these credits increased by 26 percent between 1991 and 2015.

The Guide to Federal Benefits and Taxes, a kind of instruction manual for taxpayers, could also be simplified. Despite recent efforts to do so, it still had 52 pages in 2018. The very existence of such a voluminous guideline is, in itself, evidence of the complexity of the task of completing the tax return

Likewise, both the duration of the Income Tax Law and its inaccessible language and its numerous exceptions increase the compliance cost for taxpayers. Since in fact, this amounted to an average of $ 501 per household in 2012. This complexity affects even more low-income taxpayers since they devote a greater share of their income to compliance with the law.

But not only does it make everything more complex for taxpayers, being that fiscal complexity is also costly for them. This is due to the resources that the government has to devote to administering its tax system. From an administrative point of view, the Canadian system is one of the most expensive among the OECD countries. Likewise, Canada also requires that a large number of public officials apply their tax laws: there are about 40,000 employees of the CRA, half of the people employed by the Internal Revenue Service in the US. UU., A country nine times bigger than us.

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Source: Kevin Brookes and Mathieu Bédard | Financial Post