According to Benjamin Franklin, taxation was an absolute certainty in this world. Taxation continues to be an inescapable fact of life in our modern global world. For CGA-Canada and our members – business and accounting leaders across the country – taxation has always been a key area of interest and concern.
On an international scale, Canada’s tax system is among the most complex in the world – this hurts our economy and adversely affects small and medium size enterprises (SMEs) as well as individual taxpayers. Canadians want governments to make taxes simpler, fairer and more efficient.
The Nature of Tax Complexity
Tax simplification has many dimensions. For some, tax simplification means easier to read and understand tax law. The focus of this view is on the Income Tax Act that has grown from its beginning in 1917, as the Income War Tax Act, an Act of 11 pages in length including regulations, to the ITA today, which contains some 2800 pages, including regulations and commentary. One significant reason for its growth is the simple fact that while a multitude of special measures have been introduced into the ITA since its inception, next to nothing has been removed from it.
Why is the ITA so complicated for even the seemingly sophisticated tax expert?
The quick answer is that these experts find the ITA complex because it is just that – complex.
The Reason for Tax Complexity
Complexity arises from the simple fact that we require the tax system to serve a number of conflicting purposes. First, we want the tax system to respond to changing financial and economic circumstances. Second, we want the tax system to ensure fairness for taxpayers. Third, we want the tax system to provide taxpayers with a reasonable degree of certainty. Finally, and perhaps most importantly, we want the tax system to preserve government tax revenues.
The Need for Fairness
The tax system is also committed to fairness. Given the wide variety and extreme complexity of economic and social situations which the tax system must accommodate, it is impossible for the tax system to be fair without being complex.
1. How many of you have completed your personal income taxes? What was your experience?
2. Why do you think the Income Tax Act is so complex?
3. How would you simplify the Income Tax Act?
The complete article may be read online: The need for Tax Simplification – Challenge and an Opportunity
Information obtained from the CGA website:
About the Authors
C. Scott Clark is currently President of C. S. Clark Consulting and previously served as Assistant Deputy Minister,
Associate Deputy Minister, and Deputy Minister of Finance.
Len Farber is currently a Senior Advisor at Norton Rose OR LLP and previously served as General Director
responsible for Tax Policy in the Department of Finance.