Taxes without the filing headaches? It's already happening in some countries
Why do you have to tell the Canadian Revenue Agency what they already know?
In Finland, if you have a straightforward tax return, you don't have to fill out any forms at all. Using tax data beamed electronically to the government, each April, the Finnish tax department sends every taxpayer a completed, or in their language a "prepopulated," tax form.
"The Finnish tax authorities have printed a set of prepopulated facts on your income," says the Nordisk eTax website. "These facts include wages, pensions, receipts of dividend etc."
Under the Finnish system, you don't even have to respond unless there are "errors or omissions." Effectively, the government is admitting that it already knows all your secrets.
It may sound frighteningly like Big Brother, but the fact is that all modern governments, including those here in Canada, have access to similar information. While some parts of government continue to struggle with secure electronic data (notably, the health care sector), for the Canada Revenue Agency and tax collectors worldwide, computerization has been a perfect fit. And largely, the CRA has worked out the bugs.
Come tax time, T-slips from employers, pension plans, banks, investment income sources and other government departments are sent directly to you — many in a paper form. But according to University of Alberta tax expert Christopher Sprysak, you aren't the only one who gets this detailed information about your income and personal finances.
"The CRA gets the same copy that you do and, in fact, that's uploaded into their system," says Sprysak.
One of the great advantages of this system, according to Sprysak, is that unlike fallible humans transferring numbers from paper forms, computers just don't make transposition mistakes.
That's also the reason why the CRA is increasingly encouraging Canadians to file their returns electronically.
"Because the CRA doesn't re-key the information, there is less chance of errors," said CRA spokesman Philippe Brideau in an email.
From my first exposure to Basic and Fortran more than 40 years ago, it was obvious that besides pure math, the things computers did first and best was the kind of data processing that tax departments live for. And while the CBC has been chronicling a decade-long move to electronic filing, Brideau says the process is not yet finished.
"We are always improving our services to Canadians. When we introduce a new service, we always look to enhance and improve the experience to taxpayers," said Brideau.
A report on the increase in the use of online tax services from the OECD, the rich country government think-tank, agrees. "Revenue bodies' plans give primary emphasis to reducing taxpayers' compliance burden, with improved operational efficiency as a clear secondary goal," says the report.
Forms still too complex
"For anyone who is conversant with the technology and is able to use tax-preparation programs, a lot of that complexity is solved for them," says Michael Deturbide, a Dalhousie University professor who studies law and technology. "But if you're doing just a paper return, you can understand why the basic simple T1, people take it to H&R Block now because it's become so complicated."
"Pre-filling has evolved to become a significant strategy for 'transforming' service delivery in administering the personal income tax in quite a few countries," says the OECD report. "There are a number of revenue bodies that now offer a fully automated end-to-end process, thereby providing significant benefits to their taxpayers."
And according to Brideau, the CRA is already moving in that direction.
New system will auto-populate return
"The new Tax Data Delivery service marks the beginning of our effort to auto-populate certain tax return fields to ease Canadians' burden with filling out tax forms," said Brideau. "Tax preparers will be able to receive their client's information directly into their software."
Vern Krishna wrote the book on Canadian taxes, literally. "It's my favourite subject," said the author of The Fundamentals of Canadian Income Tax, which has been in print, with updates, for about 30 years.
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Krishna says there is no reason that the CRA could not follow Finland's lead and eliminate tax filing for millions, maybe even the majority, of Canadians. But he says the Canadian tax system is still catching up.
"The CRA and its system is frankly pretty backward and not as progressive as some countries," said Krishna.
"Of course, they have the data and they have the information," he says, "But they don't use that information in a particularly efficient manner that would make it easier for the taxpayer."
And Krishna is not optimistic that the Finnish system is coming to Canada any time soon.
"Let's put it this way, they're not taxpayer-sensitive," says Krishna of the CRA. "They're more attuned to their own needs and the needs of the bureaucracy."