Complex tax system creates resentment, mistrust, and cynicism

By Andrew Rickard | April 29 2016 11:34AM

In the wake of the Panama Papers, a professor from the University of Calgary is calling on the federal government to simplify the income tax system.

In an essay posted to the university’s School of Public Policy web site earlier this week, professor Jean-Sébastien Rioux says that revelations about tax shelters for the ultra-wealthy have weakened trust in our government institutions, causing middle-class Canadians to wonder if the financial system is rigged against them.

Middle class footing most of the bill

The essay presents statistics which suggest that the middle class are, in fact, footing most of the collective tax bill. Rioux says those who make between $30,000 and $100,000 pay two-thirds of all income tax, and points to a 2011 study conducted by Canadian Business magazine which shows that people earning between $50,000 and $100,000 get the worst deal since they account for 20% of tax filers, made 34% of the total income, but pay 36% of the tax. "In other words, they make enough to pay all their taxes, but not enough to hire lawyers to set up shell companies in foreign tax havens," he writes.

Simplify the tax system

Rioux lays some of the blame at the feet of former Prime Minister Stephen Harper, who he says handed out boutique tax credits to specific groups or causes. Rioux argues that the Canada Revenue Agency needs eliminate these targeted tax breaks and introduce a simplified, two-page income tax return similar to the one the US Internal Revenue Service introduced in the 1980s.

"We must do something to simplify the tax system because the real issues at stake are the meaning of citizenship and the level of trust in one’s basic institutions. Citizenship entails a few fundamental responsibilities such as voting and paying taxes to support the State’s functions," concludes the essay. "When the vast majority of citizens can no longer understand the tax system, it’s a problem. And when a few rich people can laugh at the middle-class suckers paying taxes, then we are laying the groundwork for more resentment, mistrust and cynicism, which is a bigger problem."