VANCOUVER, April 26 /CNW/ - Preparing, filing and submitting our tax
returns plus maintaining a government bureaucracy to manage and regulate our
tax system cost Canadians between $19 billion and $31 billion in 2005, says a
new study from The Fraser Institute, an independent research organization with
offices across Canada.
"When you add up all the costs - the time and effort spent obtaining or
providing receipts and other documents, preparing and submitting the actual
tax return, plus the cost of a government bureaucracy to manage the system -
they worked out to between $19 and $31 billion in 2005. That translates to a
cost of $585 to $955 for every man, woman and child in the country," said
Jason Clemens, Director of Fiscal Studies at The Fraser Institute and
co-author of the study.
The new study, Compliance and Administrative Costs of Taxation in Canada,
uses existing data to estimate the total cost to the Canadian public in 2005
of complying with tax laws and regulations and the costs to governments in
managing and maintaining the tax system. The study examines two types of costs
associated with taxation - compliance costs and administrative costs.
Compliance costs are expenses incurred by individuals, families, and
businesses to comply with tax regulations. These include the time and expenses
to maintain proper records, undertake tax planning, file necessary reports,
and calculate required remittances. They include both the costs incurred by
individuals and businesses as well as fees paid to tax professionals such as
accountants and lawyers. Costs incurred by businesses include collecting,
managing, and remitting taxes paid by employees to the government, the costs
of paying the businesses own taxes, and in providing tax-related information
Administrative costs are incurred by governments to collect taxes and
enforce tax regulations. These costs include collecting, administering, and
managing the tax collection system. They include the direct costs of the
Canada Revenue Agency, which is responsible for administering and managing the
Canadian tax system, and related overhead. They also include indirect costs
incurred by judicial bodies responsible for settling disputes between
taxpayers and the government.
"The myriad complexities and regulations of Canada's tax system are
increasing the costs of paying our taxes. We're essentially being forced to
pay more money in order to give our money to governments," Clemens said.
Clemens pointed to the recently created fitness tax credit as an example
of a regulation adding unforeseen additional costs to the tax system.
"People may like the idea of receiving a tax break for putting their kids
in sports," he said. "But to get that tax break, parents have to make sure
they obtain receipts for all their kids' sports. Volunteers from athletic
associations have to be sure they issue the receipts. Organizations have to
make sure they are eligible under CRA guidelines to provide receipts. When you
add up all the time and costs, it adds up to millions of dollars. And it
appears to be getting worse."
Compliance and Administrative Costs of Taxation in Canada calculates all
the costs within Canada's tax system and puts a dollar figure to them. The
study calculates that the total compliance costs of personal income taxes
alone ranged from $2.9 billion to $3.9 billion. That's the cost of the time
required to prepare, complete, and remit the tax return, the costs associated
with tax preparers, and the costs of tax preparation software.
Total business tax compliance costs, including direct and indirect costs
as well as overhead, were calculated at $13 billion. Compliance costs for both
personal and business property were also calculated, coming in at $224 million
to $448 million.
Administrative cost estimates were collected from a variety of sources
involved in tax collection in Canada, including the federal, provincial, and
local governments. The total calculation for administrative costs for taxation
in Canada was between $2.7 billion and $5.8 billion.
When it's all added up, the total cost for complying with and
administering Canada's tax system ranged between $18.9 billion and
$30.8 billion in 2005. This represents between 3.5 and 5.8 per cent of total
federal, provincial and local revenues and between 1.4 and 2.3 per cent of GDP
in that year.
"The goal of tax policy should be to raise sufficient funds for the
government to provide services demanded by citizens in the least costly manner
possible," Clemens concluded.
"Given the high cost of operating and maintaining Canada's tax system and
the burden it places on the average taxpayer, governments need to look at
measures to reduce these costs. The most obvious and most important measures
are ones that reduce or eliminate tax policies that add complexity to the tax
system, such as special preferences, multiple tax rates, and the number of
Compliance and Administrative Costs of Taxation in Canada is a chapter
from a forthcoming book on tax reform to be published later this year by The
The Fraser Institute is an independent research and educational
organization based in Canada. Its mission is to measure, study, and
communicate the impact of competitive markets and government intervention on
the welfare of individuals. To protect the Institute's independence, it does
not accept grants from governments or contracts for research. Visit
For further information:
For further information: Jason Clemens, Director of Fiscal Studies, The
Fraser Institute, Tel. (604) 714-4544, Email: email@example.com; Dean
Pelkey, Associate Director of Communications, The Fraser Institute, Tel: (604)
714-4582, Email firstname.lastname@example.org