NCPA - National Center for Policy Analysis

PREPARING, FILING PERSONAL INCOME TAX RETURNS COSTS CANADIANS UP TO $5.8 BILLION ANNUALLY

June 21, 2010

Preparing and filing personal income tax returns costs Canadians between $4 billion and $5.8 billion per year.  It costs the average Canadian tax filer approximately $215 just to comply with the personal income tax system, according to the study by the Fraser Institute. 

Researchers gathered data from 2,000 survey responses from Canadian personal income tax filers collected in April and May 2008.  The survey gathered information on whether Canadians completed their tax returns themselves, purchased tax-filing software programs, paid someone else to complete their tax return, or had their return completed by a family member, friend or nonprofit organization.   

The survey found: 

  • 51 percent of Canadian tax filers use a paid tax preparer (e.g., accountant or lawyer) to prepare and submit their tax returns.
  • 31 percent of Canadian tax filers prepare their returns themselves.
  • 18 percent rely on friends, family, or nonprofit organization. 

What is the compliance cost? 

  • Canadians spend an average of five hours gathering receipts and forms, preparing, meeting with tax paid preparers, and/or completing their tax returns.
  • When time spent on tax planning and appealing Canada Revenue Agency or Revenue Québec decisions is included, Canadians spend an average of seven hours complying with personal income taxes.
  • Compliance costs as a percent of income are significantly higher for those earning less than $40,000 per year.
  • Compliance costs are highest (above $300) for those receiving self-employment income, rental income, capital gains, or foreign investment income.
  • Married tax filers have higher compliance costs ($253) than single tax filers ($168). 

Using information on the time and resources Canadians spend completing and filing their personal income tax returns, the study measures the burden for all tax filers.  Total compliance costs of personal income taxes range from $4 billion to $5.8 billion, or between 2.2 percent and 3.2 percent of personal income tax revenue collected, says Fraser. 

Source: Source, "Preparing, filing personal income tax returns costs Canadians up to $5.8 billion annually," Fraser Institute, May 29, 2010. 

 

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