Thursday, September 28, 2017

Transparent, Fair and Effective - Is that too much to ask of a Tax System?

Our tax landscape is exceedingly complex. For anyone with more than simple T4 income, dealing with it usually brings not only a tax bill, but also a sizable bill from a tax professional. In the current environment, those tax professionals more than earn their keep and bring peace of mind that you've complied with Canada's tax laws and have paid the share of the tax bill that you are obligated to pay. Layer on top of that, the thousands of professionals employed by the Canada Revenue Agency (note, this is the largest department in the federal government to enforce the labyrinth tax law. In fact, the number of people employed by the CRA outnumber the next largest federal department, National Defense, by nearly two to one. We've got a system that is not only complex, but is also tremendously expensive - and not terribly fair, for anyone really.

However, rather than take on the issue of tax fairness and tax reform in a way that would meaningfully address the inequities, while making the system easier to navigate and comply with - the government has side swiped small businesses and professionals with tax reforms that make the system more complex, have the potential to negatively impact the economy in meaningful ways and has decided that debate on the changes should be limited. This approach, and the crass politics that have accompanied it, has put the best interests of the country in jeopardy.

If the government were truly interested in making the tax system more fair and better serving the public, it would start by looking at the whole of tax policy (income tax, corporate tax, sales and other taxes) and working to make it easier to comply with and much harder to game. It would work to make administering it less costly - and ensuring that the unintended consequences of policy changes are identified and mitigated. In short, it would take its time to do it right, rather than rushing headlong with policy changes that are likely to cause damages to those this government has said that it wants to help while protecting those that this government has declared are not paying their fair share. It would stop to identify the true problems and seek to solve those problems.

Perhaps one of the most shocking revelations of a meaningful examination of taxes and tax policy would be, that a person can have high-income and financially struggle and that a person can have low or no income and be financially secure. What this means is that access to publicly paid programs and services that are determined on level of income alone might be unfairly denied to those who are paying dearly for them or granted to those who do not need them and do not pay towards them. Further, there is something incredibly unfair about a system that taxes earned wealth, but leaves windfall gains and unearned wealth largely untouched.

Indeed, its time for a rethink, not just of the changes at hand, but of the whole system. However, such a rethink is not a 75 day project, rather it's something that should be given 5 years to do and do right. Why isn't this government "thinking big" and doing the right thing when it comes to tax reform?

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