Nawaz: It’s long past time for a simplified tax-return system

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It’s the end of April. I can tell because my floor is covered with piles of receipts, the forecast is full of rain, and anyone who mentions already being done with their taxes is dead to me until May. All my browser tabs are opened to Canada Revenue Agency webpages and my Facebook feed is full of piteous appeals from desperate writer friends asking if anyone knows a good but affordable accountant who knows how to deal with self-employment income.

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Tax time brings a predictable misery for Canadians. In my case, it takes the form of staying up late for three or four nights in a row trying to locate and tally up dozens or hundreds of bits of paper as I attempt to reconstruct the past financial year while trying to come to terms with exactly how much money I spent on books I haven’t yet managed to read. And it all takes place against the backdrop of constant unease elicited by the prospect of form-filling … along with the anxiety of knowing that any mistake might cost me money, whether now or years later.

But imagine this: the government sends you a pre-filled tax return and all you have to do is click a box saying whether you accept it or would prefer to add a few more details. The whole process could take five minutes or less. Wouldn’t that be nice?

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Amazingly, this is not merely the late-April fantasy of a writer reluctant to prepare a tax return, but a system that is already the reality in dozens of countries around the world. In places like Sweden, Denmark, New Zealand, Japan and the United Kingdom, many citizens aren’t required to do anything more than this to file their taxes.

I was shocked to learn this. But the more I think about it, the more sense it makes. Why collect a bunch of government forms only to enter that same information into yet another government form? The government already has the forms! Not to mention a better understanding of the tax code. After all, the Canada Revenue Agency sends out notices when they think we might have made mistakes compared to their own calculations.

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Yet every year, millions of Canadians spend significant time, money, energy and stress doing something that the government could — and should — be doing for us.

As it stands now, 10-12 per cent of Canadians don’t even file their taxes — including many Canadians below the poverty line. They could be missing out on government benefits they can only claim if they file a return. People who rely on social assistance — for instance, seniors supported by the Old Age Security pension — must file their taxes every year or risk an interruption of benefits that might be their sole source of support. For such individuals, filing taxes is an urgent need that can cost them a great deal of stress and a disproportionate amount of their income if they are not able to do it themselves.

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The truth is that there are significant barriers to preparing a tax return — technology, language, education, cost — and it is the most vulnerable who may be missing out on the very benefits they need. Meanwhile, for the people in the highest tax brackets, spending money on an accountant is not a hardship but a matter of course.

In the US, which also has a complex taxation system, people have long called for a simplification of filing, but Companies like H&R Block and Intuit have spent millions lobbying to keep things the way they are and to prevent the government from developing their own online filing system.

Here in Canada, the move toward a simpler system was pledged in the 2020 Throne Speechbut so far nothing seems to have changed.

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Automated filing probably wouldn’t help me much. In most of the countries with return-free filing, self-employed individuals and people with more than one employer usually still have to fill out their own returns. But even in a situation like mine, where the taxpayer must add in additional information, a system preloaded with the relevant T4s and other government forms nevertheless makes sense.

And while the complexity of Canada’s tax system and its myriad credits and benefits might prove to be a barrier for simplified filing across the board, pre-filled returns could still save time and frustration for the millions of people with a single employer and straightforward deductions — it’s estimated that up to a third of Canadians could fall into this category.

Even more importantly, pre-filled returns could improve our social safety net by connecting low-income Canadians with the benefits that they need.