Frank Stronach: The serious need for a simplified tax code

Our tax system is murky, convoluted, unnecessarily complicated and overly complex

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Canada needs a fully transparent, simple to administer and easy to understand tax system that dramatically reduces the time businesses and individuals spend filing their taxes. It should be in black and white, with no gray areas or gaps. And the tax forms should be simple to complete – something a high school student could complete in minutes.

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But the reality is that we are headed in the opposite direction: Canada’s personal income tax code has grown in size since its introduction over 100 years ago, from six pages to almost 3 000 pages today.

All Canadians know that our tax system is murky, convoluted, unnecessarily complicated and overly complex. I could give hundreds of examples, but let me give you just one.

Regulation 8406 reads: “Where a person who is required to file an information return under section 8401 needs information from another person in order to determine an amount to be reported or to otherwise complete statement and makes a written request to the other person for the information, the other person must provide the person with the information that is available to that other person.

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This wording is virtually unintelligible to most Canadians. But our laws are also inscrutable to many lawyers. When I was CEO of Magna International, we employed some of the best corporate lawyers in the country. I can’t count the number of times we’ve turned to our legal department with a tricky legal question, and they’ve been unable to come up with a direct answer or figure out what course of action we could take.

They often suggested that we consult with other legal experts at one of the major Bay Street law firms. After countless consultations, and after wasting weeks or months of time and thousands of dollars in legal fees, we were often still without a clear answer. Often the best answer I could get was, “Well, Frank, we’re not quite sure. Maybe we should consult another expert.

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No society can function properly if its laws become indecipherable. Many lawyers and tax professionals make their living trying to understand and unravel the knots of complex tax law that affects all areas of business. And yet, these experts are often the same people who helped draft the tax laws that keep adding to the books every year. This seems to me to be a pure conflict of interest.

Our complicated and cumbersome tax system has become a major impediment to economic growth, undermining economic productivity and imposing additional costs and burdens.

At the same time, the legion of bureaucrats needed to administer the tax system continues to grow, while public confidence in our tax system declines. A Abacus Data Poll commissioned last summer by the Broadbent Institute and the Professional Institute of the Public Service of Canada found that only 14% of Canadians believe our tax system is fair.

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When it comes to the health of our economy, the measure that has the most impact is the tax system. More than any other economic lever, the tax system determines whether the economy grows, shrinks or stagnates.

That’s why we need to free businesses from the increasing time spent complying with tax returns and preparing for audits – time that ultimately drives up costs, making their products and services more expensive and less competitive.

Over the years, every time I gave a talk at a local chamber of commerce dinner, I often said that we needed to create a tax system that was simple, direct and clear. No gray areas. No escape. No deductions, tax credits or exemptions. A few tax rates and a tax return no larger than a single sheet of paper. This part of my speech always drew the loudest applause from the audience, made up largely of frustrated taxpayers and small business owners.

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If we created a simplified tax system along these lines, we could significantly reduce government overhead and free up businesses from the time spent complying with tax returns and preparing for time-consuming tax audits. We would unclog the arteries of commerce and allow businesses to focus on making a profit instead of filling out endless tax forms.

In future articles, I will present more specific proposals on how we could create a simpler and fairer tax system.

national post
fstronachpost@gmail.com

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  1. The Income Tax Act's length, inaccessible language and numerous exceptions increase the cost of compliance for taxpayers, which averaged $501 per household in 2012, researchers found.

    Paying income taxes is bad enough. Canada’s brutally complicated system makes matters worse

  2. THE CANADIAN PRESS/Jason Franson

    Jesse Kline: Our whole tax code has become a design project for nerds

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