Tax compliance costs businesses, taxpayers $25 billion: Report

Cost of government tax administration in 2011 totals $6.6 billion
||Last Updated: 05/06/2013

It cost Canadians between $19.2 billion and $24.8 billion to prepare, file, and remit payment for personal income taxes, property taxes, and business taxes in 2011, according to a report from the Fraser Institute.

“By adding up taxpayers’ personal time and effort to file their returns and all expenses associated with accounting and professional fees and appeals, we find a high cost of up to $25 billion, or 1.4 per cent of GDP, for tax compliance in 2011,” said Jason Clemens, Fraser Institute executive vice-president.

The report calculates the 2011 cost to taxpayers for preparing and filing:

 personal income taxes — Between $4.6 billion and $6.7 billion
 business taxes — Between $14.5 billion and $17.8 billion
 property taxes — Between $138.6 million and $246.2 million

The report also estimates the government cost of tax administration (collecting taxes, maintaining records, and managing appeals at the federal, provincial and municipal levels) to be $6.6 billion in 2011.

An update to a Fraser Institute report published April 2010, The Compliance and Administrative Costs of Taxation in Canada is based on data gathered by the Canadian Federation of Independent Business (CFIB), the Canadian Chamber of Commerce, and a Leger Marketing survey of 2,000 taxpayers commissioned by the Fraser Institute.

The study also found the heaviest burden of complying with the tax code was imposed on those least able to carry it — lower-income Canadians. The report points out that while low-income Canadians incur a small cost for tax compliance in dollar terms, as a share of income it is higher than that of middle- and upper-income earners. A similar effect is observed for businesses as the dollar cost of complying with business taxes is lower for small and medium-sized businesses but as a share of revenues, it is actually higher than for larger businesses.

The Fraser Institute is an independent, non-partisan Canadian public policy think-tank.

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