One Comment About Taxation – Canada’s Attempt at Automatic Tax Filing – Does it Make the Grade?

 

As a tax professional, I suppose I’m expected to defend the annual ritual of tax return filing. But I don’t.

 

The annual pilgrimage – especially with a shortage of accountants and increased complexity – has become a necessary evil that serves almost no one well. Most would rather visit the dentist than complete their tax return.

 

Adam Smith, the famous Scottish economist who espoused the four tenets of a good taxation system in his 1776 landmark book, The Wealth of Nations (fairness, certainty, convenience and efficiency) – would recognize that Canada has significant problems with all four maxims but convenience – that tax should be levied in the manner most convenient to the contributor – is the one our system most spectacularly fails.

 

For a taxpayer with simple affairs, there is little policy justification for forcing them to spend time and money on compliance by purchasing software or paying a tax preparer. Most practitioners I know would say the same. The cash benefits Canada delivers through the tax system like child benefits, GST credits and others flow only to those who file which means non-filing is self-inflicted hardship for the people least able to bear it. Sparing them the maze is a genuine good.

 

That’s one of the reasons why I’ve long been an advocate for automatic tax filing. Other countries, like the UK, have spared most taxpayers from filing for decades. Canada has not ever had a system other than its low pick-up “Simple File” and its predecessors – a far cry from automatic tax filing.

 

So, when the federal government announced in its November 4, 2025 budget that it was finally taking a real step towards automatic tax filing, I was pleased. But, of course, the devil would be in the details. Last month, the details arrived in Bill C-31. The Bill will add new subsections 150(1.5) and (1.6) to the Income Tax Act. For the first time, the Canada Revenue Agency (CRA) will be permitted to prepare and file a return on a person’s behalf – a “deemed filing,” in the jargon.

 

In order to be eligible, the individual must be living (deceased returns do not qualify), be a resident of Canada for the entire year, have no tax payable (thus not attracting any late filing penalties since the return will be filed after the normal filing deadline and penalties are computed as a percentage of tax payable), draw all income from sources already reported to the CRA on information slips, and have skipped filing in at least one of the three prior years. They get notice and 90 days to review or opt out. Silence means the CRA files for them.

 

There are flaws with the legislation. For example, the 90-day window to respond is far too short with a population that has historically been disengaged from filing. It should be longer – say 180 days.

 

Also, proposed subsection 150(1.6) deems any error the taxpayer fails to flag within the 90-day window to be “a misrepresentation made by the individual.” So, a disengaged, low-income non-filer who ignores a CRA letter – precisely the population targeted – can be deemed to have misrepresented a return they never prepared, potentially opening the year to reassessment indefinitely. And the openness runs one way: that same taxpayer, who may have been shortchanged on an automatically filed return, gets no equivalent window to recover – only a discretionary application to the Minister under subsection 152(4.2), capped at ten years and granted at the Minister’s discretion. The Crown’s clock never expires; the taxpayer’s does.

 

Then there is residency. The provision requires Canadian tax residence “throughout the year,” but residency is a question of fact the CRA cannot read off a slip. Consider someone who emigrates mid-year: the pre-departure slips still arrive but nothing flags the exit so the CRA automatically files a full-year resident return, triggering benefits the emigrant is no longer entitled to with recovery of those benefits likely not feasible.

 

The above problems are fixable but the deeper problem is not. The room to expand automatic filing in Canada is structurally tiny. The reason is complexity which undermines Adam Smith’s certainty maxim. Research cited in a recent C.D. Howe Institute study finds that only about one-third of returns are simple enough for the CRA to complete from the data it holds – a share that shrinks as income rises, because deductions, credits and family circumstances live in the taxpayer’s head, not on a slip. The only solution to this complexity problem is to undergo comprehensive tax reform that has long been advocated for by many parties.

 

The international comparison only sharpens the point. The countries that file for their citizens – the UK, Finland – first built simple tax systems worth automating. Britain’s PAYE withholding gets most employees to the right number without a return and delivers means-tested benefits through a separate agency rather than the tax form. We cannot copy the British model because we did not do the British work.

 

Which brings us to Smith’s other neglected maxim: economy. The Parliamentary Budget Officer has put the administrative cost of an automatic filing system at roughly $60 million a year. Spread across the returns it might reach, that is in the neighborhood of what a citizen would pay a preparer to file one – a striking figure for returns that raise no revenue and exist only to move benefits and bring non-filing taxpayers back into the system.

 

The new legislation is a decent start. I’d rate it a C-. It’s above a fail but certainly not an A+ performance. To get to that level, the above problems would need to be dealt with, and comprehensive tax reform completed with less complexity as one of its key results. Until then, we are automating the symptom.

 

Adam Smith would approve of the convenience – for the narrow few who qualify. For everyone else, it’s still the dentist’s chair.

 

One Comment About Leadership – Leadership is the Transfer of Purpose From One Person to a Group

 

“Living my best life!!!”

 

You have seen it. Someone on a beach, drink in hand, sunset behind, that caption underneath. It is one of the emptiest phrases going, and it bothers me more than it should. Why? Because it’s a lie. Or at best an exaggeration. Why?? Because it promotes that a “best life” is a feeling you can photograph at its peak. It isn’t. It never was.

 

A best life is built, not posed for, and almost none of the building is photogenic. The sunset is not the best life. It is the dessert someone is mistaking for the meal.

 

Chase a good feeling directly and it runs from you. Commit to a purpose and the good feeling shows up later, uninvited, as a by-product. The beach post sells the by-product and skips the work.

 

Leadership is the transfer of purpose from one person to a group. You cannot transfer what you do not have. A leader running on a highlight reel instead of a real “why” produces exactly what a highlight reel produces – motion with no direction. People busy looking like they are getting somewhere. Paper-thin veneer movements. Everyone moving, nobody building. The “best life” post and the strategy deck full of activity metrics are the same thing: the appearance of flourishing standing in for the work of it.

 

The people worth following have a purpose. It may evolve and be refined over time, but it is clear, intentional and deeply held. If you’re struggling to identify your own purpose, start with Viktor Frankl’s landmark book, Man’s Search for Meaning. It changed how I think about purpose and leadership.

 

Purpose, combined with aligned goals, is far more powerful than any vacuous slogan about “living your best life.”

 

Be the leader who transfers purpose. Not slogans.

 

One Comment About Economics / Politics  – Are We Heading Towards A Sovereign Debt Crisis?

 

Are government debt and annual deficits something to be concerned about? Of course they are. Unless you are a proponent of the modern monetary theory (“MMT”) of economics and / or a left leaning economist who is convinced that governments can grow themselves out of debt and / or take comfort from the International Monetary Fund’s recent comments that Canada’s fiscal position is the “cleanest dirty shirt in the G7”.  🙄

 

The reality is that, as the C.D. Howe Institute recently stated in one of its Editorials, the federal government’s fiscal “guardrails” are driving us dangerously close to a fiscal cliff. I agree. And the eminent Dr. Jack Mintz recently took it one step further. In his May 29, 2026 Financial Post article, he laid out the issues from rising Canadian debt.

 

From the article:

 

A potential sovereign debt crisis looms as governments continue to ramp up their spending and deficits. In 2024, the latest year for which data are available, global gross public debt hit 95 per cent of world GDP, 32 points higher than in 2001. The G7 countries, which make up 30 per cent of the world’s economy, are even worse, with gross public debt now at 124 per cent of GDP. And defence needs, demographic pressures and a desire to support the vulnerable will likely lead to even more debt.

 

…

 

Canada is by no means immune from excessive borrowing. Our general government gross debt has reached 111 per cent of GDP, up from 67 per cent in 2001. We are fourth highest in the G7 and seventh highest amongst advanced economies — though at least we are less leveraged than the United States, where general government debt is 126 per cent of GDP.

 

The Fraser Institute estimates that federal and provincial net debt (i.e., gross debt minus financial assets) totals almost $2.5 trillion, equal to three quarters of our GDP. Wisely, and unlike the federal budget, the Institute does not subtract almost a trillion dollars in CPP and QPP net assets to get to net debt. Those assets are spoken for. They have to fund our future pension liabilities, which the feds simply ignore in measuring net debt. In a crisis, net debt is meaningless anyway: the market value of financial assets plummets as interest rates rise. For this reason and because tangible government assets like roads and buildings are illiquid and therefore hard to dispose of, rating agencies focus on government gross debt in assessing stress risk. But these calculations omit hidden debt-drivers that we ignore at our peril.

 

Dr. Mintz goes on in the article to describe risks of weakening productivity, significant military needs, an aging population and falling tax revenues. He concludes his article by saying: If we think we have a sovereign debt problem now, just wait. My bet is voters will do what they always do — shift burdens to the future. Without deficit discipline, the effect this time may well be to trigger a sovereign debt crisis.

 

Sobering thoughts for sure. It’s my hope that Canadians will eventually wake up from their fiscal bliss and realize that our federal government needs to get its fiscal house in order.  Today. The risks of not doing so are great despite the reassurances from the disciples of MMT.

 

Bonus Comment – From Viktor  Frankl – Austrian Psychiatrist – About Building Success

 

“Success, like happiness, cannot be pursued; it must ensue.”

 

Exactly. A meaningful life is rarely found by chasing happiness directly. Instead, happiness often arrives as the by-product of living with purpose. Leaders understand that and help others discover it as well.

 

I hope today’s newsletter has been thought-provoking for you.

 

As many of you know, I’m passionate about helping people make better decisions – whether in tax, leadership, or business. If you’d like to go deeper on those topics, my recently released book, Making Life Less Taxing (Version 2), is now available and expands on many of the practical ideas I’ve written about over the years.

 

I’m also putting the finishing touches on my next book, Leadership Compounds: How Small Decisions Build Culture, Credibility, and Legacy. It explores a simple but powerful idea: leadership isn’t about grand gestures – it’s about the small, consistent decisions that compound over time.

 

For those interested in a more hands-on approach, I’ll soon be announcing a bespoke consulting initiative – The Acorn Growth Program – designed to help leaders and organizations grow intentionally, one small (but important) decision at a time. Feel free to reach out to me directly for more information.

 

And if you’re not already on my mailing list, feel free to sign up for my In the Mood Network newsletters to receive more content. No fluff – just practical insights on tax, leadership, and economic policy.

 

Thanks for reading. As always, I welcome your thoughts and feedback.

 

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