Itemized tax receipts a good idea?
Transparency in any tax system is fundamental, but especially in a system such as Canada's in which taxpayers are trusted to remit their fair share by way of self-assessment. So, should the federal government provide taxpayers with an itemized receipt of all their purchases?
Third Way, a think tank in the U.S., approached this issue in 2009 and provided the following snapshot of what a U.S. taxpayer got for his or her tax dollars:
* Canada Health Transfer 10˘
* Canada Revenue Agency 3˘
* Canada Social Transfer 4˘
* Children's benefits 5˘
* Crown corporations 4˘
* Defence 8˘
* Employment Insurance benefits 7˘
* Other major transfers to other levels of government 6˘
* Other operations 12˘
* Other transfer payments 14˘
* Public debt charges 11˘
* Public Safety 3˘
* Support to elderly 13˘
Some believe a more detailed accounting, similar to the U.S. one, should be implemented in Canada. It would result in greater political accountability and participation, they argue, thereby increasing our avenues of social discussion and policymaking. Of course, there are those who are opposed to the idea; they say that the cost of issuing and administering the receipts would outweigh the benefits. Who's right?
Our current regime of "tax expenditures,” however, makes an itemized tax receipt difficult. Many social benefits are supported by tax expenditures, that is, tax credits that are not accounted for in the government financial statements, although they have the same effect on the budget deficit as appropriations spending. So, an itemized tax receipt would help taxpayers see where their hard-earned money is going but, without factoring in these tax expenditures, the information would be out of context.
It must be remembered that the Income Tax Act is not only a tax-collecting statute, but also an immense tool for government spending. Vern Krishna, a leading academic in the field states: "This insight that the Act is comprised of two analytically distinct types of provisions is without question one of the most important for those who wish to understand, apply and interpret the Act.”
Perhaps, the first step toward greater accountability is greater scrutiny of the costs of these tax expenditures. The Department of Finance already publishes annually a document entitled Government of Canada: Tax Expenditures in which it lists, describes and estimates the cost of these expenditures to the federal government.
In the end, all the costs, both fiscal and social, of administering a system of itemized tax receipts should be weighed. It is difficult to argue against greater clarity if it encourages citizens to participate in meaningful democratic discussions, but unless the information shows exactly what has been "spent” where, the exercise might be of little use.
Greer Jacks is updating jurisprudence in the EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.