The Tax System Needs an Overhaul: Pros Weigh In

Christine Steendam & Evelyn Jacks

The tax system is not getting any easier for Canadians to comply with and things may get worse in tax season 2020. With a complicated new 8-page T1 return on the horizon, Canadian taxpayers already dissatisfied with their tax department service levels* join ranks with KBR poll respondents: over 90% of tax, bookkeeping and financial services pros answered a resounding no when asked: “As we begin a new decade, do you feel the evolution of our tax system has been positive?” Still, there were a few happy campers.

First, let’s look at the reasoning behind the overwhelming "no" votes.

Joe Truscott brought up the complexity of the tax system: “Since my involvement with the income tax system (over 40 years) there has been a continued patchwork of changes, additions, new legislation, etc.This only makes our current system of taxation continue to be very complex and demanding upon those servicing their clients. CPA Canada has been proposing to CRA for many years that an organized and systematically review of the Income Tax Act is very much required. We hope that at some stage CRA and the Deptartment of Finance will be open to this.”

Robert Litschel had similar concerns: “Since the tax laws change yearly on the sometimes whims of whoever is in power at the time, they do little to inspire confidence. The easiest way for a government to bring in their programs is to add additional taxes and such.  This requires little in the way of thought and makes the tax system much more complicated and costly.  A thorough review of the whole system is long overdue.”

And Trevor Hitchman added: “No, the evolution of the tax system is negative, particularly over the past four years.  My view aligns well with Robert’s. The political rhetoric about helping families, students, and the middle class were not sincere. In fact, cutting various non-refundable tax credits for kids and students result in increased taxation. This favours CRA than families who complained of having to pay more taxes.”

Val said: “It’s harder to understand, basics keep changing - new deductions often only last one year, much slower service, tons of Reps who don’t know answers & act like they’re giving correct info. It’s extremely frustrating. Meanwhile, clients who have no knowledge think they are on the right track and end up waiting months for income like Child credits or GIS, that they need to survive!”

Mitzi-Lynne Morgan brought up the service experienced from CRA: “I did not realize that the tax system was evolving. It seems to me that it has been devolving for four years, and if you call our so-called tax services offices, the everlasting recording tells you that your wait is at least 45 minutes. And so it is, if you are lucky. The service, which used to be good, is now practically non-existent, rude, argumentative and not much use. . . . It is very disappointing. . .”

Robin added: “Years ago, it was reported that CRA was going to simplify the system. Well, it has evolved the opposite. It is far more complicated than before.  We are buried in Bureaucracy, rules and forms as well as agencies that do not know what the other is doing. You phone CRA for an answer to a question, and you discuss it with them and you know there answer is wrong so you talk to a supervisor and find out that your answer was correct, and their employee is wrong.  This has happened way too many times. The wait on the phone is longer and longer to get through so why even bother. I have had my office manager quit as she was so frustrated with CRA and their incompetence.  I am thinking of closing my doors as well. The stress/frustration is too great.  Amendments are processed incorrectly, numerous times and takes many months to get corrected and I have lost customers from this. I sound angry and frustrated so I am for a complete reform.”

And Gaetan Ladouceur brought insight from a long-career in tax preparation: “I have been preparing tax returns over the last 37 years and have watched the tax system evolve during these years. My opinion is that our tax system has changed ‘little’. It is still quite labour intensive to prepare a return, and still quite complicated in regards to what it actually can be. I have come to the conclusion that our governments are very nervous about simplifying the tax system, even though it would make a lot of “common’ sense to do so. I believe that many taxpayers are paying too much income taxes simply because they are not up-to-date on the multitude of yearly changes to the act, and simply do not use all of the available credits and deductions available to them in their particular situation. Tax accountants are more and more crucial today to prepare tax returns to ensure that taxpayers only pay their fair share of taxes by using all available tax deductions and credits.

Thank God for today’s tax preparation software.  If not for that, I am positive that a lot less tax returns would be filed every year.”

S Merten commented on specific areas where things have gotten more complicated: “CRA is making life more difficult for everyone. We used to get reviews regarding Line 256 for the German allowable pension deduction. We sent the German Tax Assessment “absteuerfreier Teil der Rente” we translated as tax-free pension portion Line 256 underline the amount and were accepted.

Now they are being denied and line 256 is assessed at $0.00 because they always now want an official Certified Copy of the German Tax Assessment,resulting in more work plus additional translation costs. That line and translation is the same (for every taxpayer) and one would think if CRA has one official translation of that line they could train their staff and wouldn’t need hundreds of more official translations from taxpayers. This is pure harassment and a waste of time & money for everyone involved!”

Bradley Samson was frustrated with the public pension system : “With very little increase in CPP or OAS, how is a low-income retiree going to survive with increase’s coming from everywhere?”

Robert simply stated that the system is “Going backwards.”

And Liza Wiley said: “The system is seriously corrupt. There needs to be a complete overhaul and I feel that each province should have its own office with trained professionals, not this patchwork system that’s in place right now.”

Kristal agreed that “The whole system needs an overhaul.”

And now to a few positive comments:

Virginia added that there have been some positive changes: “Harper’s changes were positive, especially income splitting. It is a shame Trudeau cancelled most of them.  But at least we still have pension income splitting.  I thought the regular income splitting was positive too, why should a family pay more tax just because their income was unequally earned?” 

Denzil Feinberg said: “Access to individuals accounts in My Accounts is for me the main improvement in empowering the tax system. Easier to change passwords like with usual IDs.”

And the last word goes to Malcolm Palmer, who pointed out that the answer to the question is not a simple one: “This a one-sided incomplete question. For example, if we use taxes to fund a universal Pharmacare program which would cost taxpayers about 1/2 what we already pay, saving 50% would be a good thing wouldn’t it?”

This comment speaks to the way we use the fruits of our complicated tax system.  Can income tax payers really fund every social cost we want to fund?  Government user fees and sales taxes are options, too, but can render important services unaffordable.  The Manitoba government, in fact, has just rolled back sales taxes on vital financial services (see article this issue).

But a formal tax system overhaul does not seem to be on this government’s agenda. Nonetheless, the tax system has seen significant personal and corporate tax reforms over the past several years.  Many come with great uncertainty and grey areas that even CRA has trouble deciphering for its clients; case in point, the Tax on Split Income or TOSI rules.   

Thank you to everyone who took the time to participate, vote, and share thoughts. Please weigh in on our first poll question of 2020: “In your opinion, is the new $931 enhancement to the federal Basic Personal Amount for those with incomes under $150,473 an improvement to our tax system?”  

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