One Comment About Taxation –Tax Complexity is a Killer…We Need to Make it Simpler.

Dr. Jack Mintz recently wrote an article on tax complexity and suggested that if the federal government wants to cut public spending, they should put some focus on tax simplification. He further stated that tax complexity is an economic growth killer that we could reverse if we put our minds to it.

 

I wholeheartedly agree.  I’d like to continue the discussion.

 

In my ideal tax world, with the tax law and related administration simplified, the following would be some of the results:

 

• Canadians’ knowledge about their tax affairs would greatly improve;

• Canadians could navigate the tax system with ease (without struggling with technology or waiting for days to get through to a tax agent by phone);

• Canadians with simple tax affairs could have their tax returns automatically completed by the government as part of a real effort to streamline administration.  And by this, I don’t mean the rudimentary Simple File services currently offered by the CRA; and

• Obvious political tax measures, like the prohibition of deductions on certain short-term rentals, would be eliminated from our tax statutes.

 

When I discuss tax simplicity, I often get rebuttals like “…but, Kim, wouldn’t people like you be out of a job?”.  My usual response is an emphatic “no”.  There’s plenty of work to go around but some of my tasks would certainly be different.  And that’s a good thing! Why? Well, the vast majority of Canadians’ tax affairs are simple. Unfortunately, the navigation of the tax system, and its related compliance is not. That group of Canadians should not be required to hire expensive professionals to be compliant with their tax affairs.

 

A recent Fraser Institute study found roughly half of Canadian individual tax filers, for 2022, prepared their own tax returns (with most of this group using a software product) while more than a third used a paid preparer. Considering the time and costs of soft ware, the average Canadian spent $130 to be compliant. The Fraser Institute then extrapolated that average and estimated that the total compliance costs associated with filing of personal taxes was $4.2 billion – equivalent to 0.15% of Canada’s GDP.  That’s gross. And it could easily change if a legitimate version of automatic filing was introduced. That would be a step in the right direction towards tax simplification.

 

To achieve tax simplification would require a big change in how tax policy is developed. Currently, it is the purview of the Department of Finance and is very much a closed system. While some consultation is done with external stakeholders, it is usually offered once the original proposals are already in the oven and often already baked.

 

The trust reporting rules are a good example.  Introduced in the 2018 federal budget (to become effective in 2021 but later delayed), the first version of the rules were problematic. The Department of Finance asked for comments from stakeholders. Most of the provided comments were ignored. Instead, revised and expanded draft legislation was introduced in 2022 that included reporting for “bare trusts” (a trust where the trustee holds legal title to property but has no discretion and must act solely on the beneficiary’s instructions).

 

Such an expansion shocked many in the tax community since bare trusts are generally ignored for tax purposes. Significant feedback was provided to the Department about why this was a bad idea and how the compliance would be problematic. It was ignored.

 

When the rules first became effective for the 2023 filing season, indeed it was a disaster leading to the Canada Revenue Agency (CRA) scrambling to provide feedback. Such a debacle led to the CRA announcing a last-minute filing reprieve for bare trusts and later are prieve for 2024. On August 15, 2025,the Department of Finance released revised rules for trust reporting. The revised rules are intended to be relieving by carving out some trusts from the reporting requirement. Unfortunately, the rules are quite complex and require careful analysis by practitioners and / or taxpayers to avoid nasty penalties for not complying. While carve-outs are good, the path to such a carve-out should be much simpler. My prediction: the upcoming trust filing season will, again, be challenging.

 

Another example is the CRA telephone call centres which are now the subject of a “100-day plan” to try to improve. Many, including the CRA employee union, have been crying the blues that CRA team members are over-worked and overwhelmed with the volume of calls. My immediate rebuttal is that CRA team members are not unlike many hardworking Canadians so the “overworked” and “overwhelmed” assertions need to be taken out of the equation. Second, the answer is not simply to add more employees, but the CRA was quick to announce – six days into the “100-day plan”- that they have hired more employees.

 

Instead, the CRA should be looking at what is causing the huge volume of calls. In my opinion, it’s tax complexity. Canadians are overwhelmed. When digital tools are not an option, they call. While 100 days won’t be long enough to reduce complexity, it is obvious that the system needs to be simplified to become more approachable to the average Canadian.

 

So, what’s a path towards an overall solution? Tax reform with a main objective to simplify the legislation and related administration. Tax reform should also tackle how policy is developed.  As mentioned, it needs to be much more open and transparent from the start of the policy development rather than simply asking external stakeholders for comments after it is almost fully developed.

 

Tax complexity serves no one well. It’s a dead weight on our economy and destroys confidence in our tax system. Sir Winston Churchill once said, “If you have ten thousand regulations you destroy all respect for the law.” Canada isn’t there yet, but our tax system is sure giving it a good run.

 

If we genuinely want a system that Canadians respect – and respects Canadians – then simplification must stop being a talking point and start becoming a political priority.

 

One Comment About Leadership – Leaders, Do You “Have a Guy / Gal For That”?

 

Over the years, I’ve made a point of getting to know all kinds of people.  And believe me, there’s a lot more to get to know.  As an example, I know:

 

–       Organizational culture experts;

–       Human resource experts;

–       Law firm and accounting firm experts who know the “ins and outs” of the profession;

–       Good trades people like plumbers, home builders, electricians, etc.

–       Politicians of all stripes;

–       Handymen who are handy at many different types of tasks;

–       Excellent investment and insurance experts;

–       Religious people;

–       Psychologists;

–       Doctors;

–       Mechanics and auto-body men;

–       Fitness trainers;

–       All kinds of accountants and lawyers with different specialties;

–       Nutritionists;

–       Pharmacists;

–       Etc.

 

Hopefully you get the point. By purposely getting to know different types of people, I “have a guy/ gal for that” when I need them.

 

If you need a tax expert or someone to fix your carburetor, I’ve got you covered – sometimes at the same dinner party.

 

My expanded network has been invaluable to me over the years. And if I don’t “have a guy /gal for that”, I can reach out to people who I think might have a better or expanded network that might. My good friend, Catherine Brownlee, is famous for that.  She has an incredible network.

 

Leaders don’t just build networks for themselves, they build them for their teams. Or friends or family members. Leaders, part of your obligations when mentoring team members is to bring your network to the table unselfishly. How good is your network? Do you have a guy / gal for that when your team members come calling?

 

If you don’t have a guy or gal for that, start today. Your team will thank you. And maybe even your plumber.

 

One Comment About Economics – The Blunt Comments of the Parliamentary Budget Officer

 

The Parliamentary Budget Officer released its Economic and Fiscal Outlook  late last month. While it didn’t come right out and scream “unsustainable” in the report, the press release did.  The message from the PBO was clear: our federal government’s finances are drifting into dangerous waters.

 

The reality is that the federal debt-to-GDP ratio is no longer projected to fall. Instead, thanks to persistent deficits of over 1% of GDP, the debt burden will rise in the years ahead. Translation: Ottawa is spending faster than the economy is growing. That’s the budgetary equivalent of eating more calories than you burn and expecting to lose weight.

 

The PBO chose polite language in its press release saying that the pause on the declining debt to GDP ratio “raises concerns about the long-term sustainability of current fiscal policy.” In other words, “this doesn’t add up.” When a fiscal watchdog stops projecting a declining debt ratio, it’s the financial equivalent of your doctor saying: “I’m not calling it a heart attack, but you might want to put down the cheeseburger.”

 

Instead of facing this head-on, we’re being sold gimmicks. Mark Carney’s proposal to separate “operating” and “capital” budgets is nothing more than an accounting shell game. Reclassify spending as “investment,” and voilà – the deficit looks smaller on paper, while the debt keeps piling up in reality. The PBO didn’t say it outright but reports like this expose just how dangerous that kind of political trickery is.

 

The bottom line? The PBO has handed us the diagnosis: our finances are off track. The question is whether our leaders will actually prescribe treatment – or keep peddling gimmicks until the bond market does it for them.

 

Bonus Comment – Quote Attributed to Reid Hoffman – Founder of LinkedIn

 

“No one builds a great business alone. You can’t do it without a network.”

 

Absolutely agree.  Leaders, expand your network.

 

Hope you enjoyed this edition of 1-1-1. If you’re not already part of the In the Mood Network, now’s the time. Please sign-up today.  Whether it’s through consulting, coaching, speaking, or writing, my work is about planting acorns: deliberate, principled actions that challenge the status quo and grow into something far bigger. The goal? Bold reform. Stronger foundations. And a country that values hard work and common sense.