Canada’s tax system is overly complex and costs businesses
, consumers and the economy a significant amount of money to comply, according to a new study commissioned by the Certified General Accountants Association of Canada (CGA-Canada).
The study, The Need for Tax Simplification – A Challenge and an Opportunity, says there have been few attempts to simplify the tax system since its creation in 1917.
“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 as well as individual taxpayers,” said Anthony Ariganello, president and CEO, CGA-Canada. "We believe tax simplification is good for taxpayers, businesses, governments and our economy.”
Businesses in Canada pay $12.6 billion a year to meet compliance requirements in addition to taxes remitted, according to the Canadian Federation of Independent Business.
Complexity in the system arises from the fact Canada requires the tax system to serve a number of conflicting purposes. It’s required to respond to changing financial and economic circumstances, ensure fairness for taxpayers, provide taxpayers with a reasonable degree of certainty and preserve government tax revenues, according to the study.
There is a need for a personal income tax review, the study said.
“While the (personal income tax system) has incrementally evolved over the years, its key structural elements and core underlying assumptions have not been reconsidered for at least 20 years and, in some cases, for almost 40 years,” the study said.
“It is our view that modernizing the personal income tax system is long overdue and necessary, and it would lead to significant simplification.”
There is also a need to reform the corporate income tax system on a selective basis. Areas like corporate reorganization, loss consolidation and other select areas could be modernized to facilitate an ease of compliance with certainty and fairness and greater administrative efficiencies, the study said.
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