Four reasons our tax rules are a mess — via financialpost
Our tax act is riddled with special credits, deductions and transfers. The rules are so complex that more than half of Canadians pay a tax firm to prepare their income tax return. And when rules are complex, disputes are commonplace: at any given time, more than 170,000 tax disputes are underway in Canada, including more than 10,000 files sitting with the tax court awaiting trial. Ten thousand!Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.
First, politicians looking for votes have been only too happy to add special rules that favour one group of taxpayers or business sector over another. Finance Canadathere were over 260 special deals for taxpayers in 2021, including items such as tax deductions for union dues , tax credits for subscriptions to Canadian digital news media, and non-taxation of lottery winnings. What we really need is a level-playing field: one set of rules with as few exceptions and credits as possible.
Second, government initiatives are often misguided. For example, our tax act includes many significant breaks for small business. These special rules have so many conditions and exceptions that some are barely comprehensible. Why the distinction between small and large business? Because small business is the backbone of our economy, says the government, and accounts for 90 per cent of private-sector jobs. Except this isn’t true.
Third, we have the enablers: the major accounting and legal firms and their governing bodies. From time to time these groups make half-hearted pleas for tax simplification, but they don’t really mean it. Tax complexity is their bread and butter and brings in significant fees. When sensible ideas are raised — reducing small business tax breaks for example — their silence is deafening.
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