If there is a more hated ritual of modern life than filing an income tax return, it doesn’t come readily to mind. Everything about this tedious duty, now upon us, dulls the mind.
Layers of red tape that defy comprehension. Rules that even the experts seem unclear about. A playing field tilted hopelessly against us.
Underpay your taxes, and Ottawa will charge you five per cent interest, compounded daily, on the amount outstanding. Overpay, and Ottawa will refund the difference at three per cent. In casinos, this is called the dealer’s advantage. In the world of tax collection, it’s called being fair.
Part of the problem is mission creep. What started out as a scheme to help pay for the First World War has taken on much broader goals.
The Canada Revenue Agency lists more than 300 different deductions, entitlements and credits that you may be able to claim, depending where you live. Everything from purchasing a musical instrument (though only if it generates income), to caring for an aunt, to enlisting your child in a prescribed program of physical activity, has been added to the list.
Perhaps you’ve taken a vow of perpetual poverty as a member of a religious order? No problem. According to line 256 of the form, you can claim the amount of income you’ve forgone as a deduction against tax payable. Don’t ask us how someone living in perpetual poverty could owe income tax.
Or maybe you teach at a child-care centre? Then you can claim as a deduction any personal funds you spent on supplies for the facility. But only if you live in Prince Edward Island.
However, these surface-level complexities disguise a deeper absurdity that brings the whole process into question. While you sit at the kitchen table wrestling with a year’s worth of household records, the CRA is miles ahead. In all likelihood, they already know how much you owe before you even start.
By law, every nickel earned in wages must be reported by your employer to Ottawa. Ditto income received in pension payments, interest on bank accounts, commissions, returns from investments and so on.
Anyone who has submitted a tax return and been immediately queried by the CRA on a tiny point of detail knows how comprehensive this data bank is. So why do we have to file a return in the first place? Why can’t Ottawa do the math for us?
Defenders of the status quo argue that no government computer could ever track all the deductions. And that’s true, up to a point.
However, some countries have found ways to get around this. In Britain, for example, working families hardly ever submit a tax return.
Whatever they owe is deducted by their employer — as in Canada — and that’s usually the end of the matter. Anyone who feels unfairly treated can ask for a review.
Britain offers fewer credits and entitlements — one consequence of a simplified system. And more weight is placed on employers to deduct correctly.
People who are self-employed, or whose income varies greatly from year to year, go through a lengthier process.
So why doesn’t Ottawa adopt this approach? Not everyone would benefit, but millions would.
No doubt some of us would still prefer the old routine, to make sure we’re not being cheated. That option should be retained.
But there is no excuse, in the computer era, for dragging half the country through an exercise in 19th-century bookkeeping.
There’s another factor to consider. Given the grim state of government finances these days, major tax relief is a distant hope, if ever.
So why not offer the next best thing — an end of the hated tax return?
