Hicks on Biz: Simplify the tax system! BY GRAHAM HICKS, EDMONTON SUN POSTED FRIDAY, MAY 16, 2014
I am just off the phone with my patient accountant Jane, i.e. my “paid tax preparer”.
(Being self-employed since retiring as a full-time Sun columnist in 2010, the deadline for my tax return is later than you employees.)
My head hurts.
Family medical premiums, liability insurance payments, investment reports, GST calculations, CPP owing, eligible charity receipts, RRSP contributions, RESP withdrawals …
For my unincorporated business, I track all revenues and expenditures. That takes four hours a month.
Then Jane goes through it for tax purposes.
No, you can’t claim golf course fees, even if you were golfing with your biggest customer. How much of this trip was for work, how much for pleasure? Yes, a new computer is a business expense. Annual vehicle mileage and all expenses, please. Was this restaurant bill for your Weekly Dish column, or entertaining a client?
It takes me at least 10 hours, on top of monthly book-keeping, to prepare for Jane’s audit.
And her billing clock is ticking every time she calls.
This procedure is infuriating!
Revenue Canada, as directed by our elected leaders, has made annual tax returns SO COMPLICATED that 51% of us hire a professional “tax preparer” to ensure things are done right.
Even more irritating is the lack of political interest in SIMPLIFYING our tax system.
The Fraser Institute has just released a superb report on the actual cost of complying with Canada’s oh-so-complicated personal income tax system.
That cost – factoring in your time in collecting, organizing and completing tax forms, fees to paid tax preparers, tax software systems purchased – is $5.84 billion to $6.95 billion, about 6% of the $125.7 billion collected in personal income tax in 2012.
The average Canadian household, the conservative think-tank calculates, is spending $501 to prepare its annual tax return– more than its monthly food bill!
It’s easy to understand how we got here – from the initial Income Tax Act bill 11 pages long in 1917, to a 3,200 page document in 2014.
Governments love to “reduce” your taxes by offering tax incentives.
Going to school? Taking care of aging parents? Taking the bus? Keeping your kids fit? Lost money in the stock market? Saving for your old age? Donating to a charity? Donating to a political party? Here’s a tax break!
But then things get complicated, this percentage on this amount, this much on anything over that amount, different circumstances, a tax “credit” or a tax “deduction”, different rates for different folks …
Here’s a mind-boggling figure.
The cost to the government of these incentives – a “hidden” cost, because it’s buried within these tax returns – is an astounding $1 for every $2 actually collected.
The Fraser Institute says these “deviations from the benchmark tax structure” pull $65.6 billion out of our collective personal income tax paid - $65.6 BILLION!
In 2012, the federal government actually collected $125.7 billion, leaving that $65.6 billion off the table to “encourage” us to take the bus, invest in RRSPs, and volunteer for worthy causes. Vote for us!
And this column isn’t touching corporate “deviations from the benchmark tax structure”.
The solution is so simple.
Stop using the taxation system for incentives, and lower taxes for everybody.
What was your gross income from 2013? X% please, for the taxman.
No tax incentives for anything. Nothing at all!
Just a one-page Revenue Canada form. Provide your gross income for the year, and send a payment for X% of that figure. Done, no need for special software, accountants, or whatever.
If government wants to encourage good behaviour, let it mail you a cheque, separate from the income tax system.
Thanks for all your help, Jane.
Your bill is in the mail? Eighteen hundred dollars for this year???
The cost of preparing your income tax return. (Source: The Fraser Institute, Cost to Canadians of complying with personal income taxes, April 30, 2014.)
Amount Canadians spent to prepare their 2012 personal income taxes: $5.85 to $6.96 billion.
Cost per household to prepare and file income tax return in 2012, $501 - more than the $464 average monthly food bill.
Cost to Canadian government in 2012, from tax incentives, credits, deductions etc.: $65.5 billion.
Actual amount collected in personal income tax in 2012, $125.7 billion.
Number of tax-forgivable mechanisms available: 109
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