Personal income tax returns should be automated
May 15, 2020
Using technology will save Canadians and the government time, energy, and money, writes Peter Watson
Canada should follow other countries and automate the current personal income tax filing system.
Filing personal income tax returns in Canada is embarrassing, a complete waste of time and energy. Plus, it’s expensive, both for the government and individuals.
Automate the tax collection process.
Currently, the taxpayer completes the income section but forgets to include the income from a part-time job. On the investment side, forgets to include interest income earned on their bank account.
The government already has this information because the employer and the bank are required to provide it to the Canada Revenue Agency. Now the CRA has to inform the taxpayer they have made a mistake.
If the tax department already receives information about employment and investment earnings directly, why ask the taxpayer?
It makes no sense.
According to the Tax Policy Center, 36 countries allow tax filings without requiring the taxpayer to produce their own tax return.
Here is a simple formula that could improve our system.
Step one. The government receives as much information as possible from banks, investment companies, and employers.
Step two. That information is summarized and sent to the taxpayer.
Step three. The taxpayer confirms the information and can provide additional information.
That’s it. It can be that simple.
Some situations are more complex such as running your own business. It is understandable that more information is needed. But most Canadians do not have a complex financial situation.
Automate as much of the tax filing process as possible. Make life a lot easier for both the taxpayer and tax collector.
The government has indicated it is trying to modernize the CRA. The Minister of National Revenue recently said, “Our government is committed to modernizing the CRA and making sure that it provides people first service to Canadians.”
I agree with the statement. I disagree with the implementation.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com