Study
| EST. READ TIME 2 MIN.Cost to Canadians of Complying with Personal Income Taxes, 2014
This study builds on previous Fraser Institute research estimating the total compliance costs associated with Canada's tax system. It aims to estimate the cost of complying with the personal income tax system in 2012. It updates past estimates for the average amount of time and financial resources that Canadians spend to comply with the system, and then calculates aggregate compliance costs in Canada.
The current study builds on previous Fraser Institute research estimating the total compliance costs associated with Canada?s tax system. This study aims to estimate the cost of complying with the personal income tax system in 2012. It updates past estimates for the average amount of time and financial resources that Canadians spend to comply with the system, and then calculates aggregate compliance costs in Canada.
The study estimates that Canadians spent between $5.84 billion and $6.96 billion complying with the personal income tax system in 2012. To put this in perspective: we estimate that personal tax compliance represents 0.5 percent of total household income in 2012. This is roughly $501 per year for each Canadian household, or more than what the average household spent on groceries per month in that same year, according to Statistics Canada data.
These costs fall disproportionately on lower-income taxfilers who spend a greater share of their income complying with the personal income tax system. We estimate that the ratio of tax compliance costs relative to income ranges from 3.3 percent for the lowest income group, to 0.9 percent for the second lowest, to 0.5 percent for the third lowest, and 0.3 percent for the highest income group.
The study also examines the extent to which tax credits, deductions, and other special tax provisions contribute to higher tax compliance costs. The study estimates that the aggregate compliance costs borne by Canadian taxfilers who used at least one of a sample of 10 federal tax expenditures was $730.4 million (2007 dollars), which provides an illustrative sense of the extent to which tax expenditures can contribute to overall compliance costs.
Although lowering tax compliance costs is a not a central goal of this analysis, a number of specific measures that could be taken to reduce them are available to Canadian governments. The most obvious would be to reduce tax policies that add complexity to the personal income tax system, such as tax expenditures.
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Sean Speer
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Milagros Palacios
Director, Addington Centre for Measurement, Fraser InstituteMilagros Palacios is the Director for the Addington Centre for Measurement at the Fraser Institute. She holds a B.S. in IndustrialEngineering from the Pontifical Catholic University of Peru and a M.Sc. in Economics from the University of Concepcion, Chile. Ms. Palacios has studied public policy involving taxation, government finances, investment, productivity, labour markets, and charitable giving, for nearly 10 years. Since joining the Institute, Ms. Palacios has authored or coauthored over 70 comprehensive research studies, 70 commentaries and four books. Her recent commentaries have appeared in major Canadian newspapers such as the National Post, Toronto Sun, Windsor Star, and Vancouver Sun.… Read more -
Marco Lugo
Marco Lugo is a Masters student in economics at Université de Montréal. He holds a Major in Economics from Universitéde Montréal and a Minor in Philosophy from Université du Québec à Trois-Rivières. He previously worked as a research assistant at CIRANO and HEC Montréal.… Read more -
François Vaillancourt
François Vaillancourt is an emeritus professor in the department of economic sciences at the University of Montreal where he taughtfrom 1976 to 2011. He completed his Ph.D. in economics at Queen’s University in 1978 and received a Doctorate honoris causa from the University of Geneva in 2021 for his pioneering work in the economics of language. Professor Vaillancourt was a Fulbright scholar in 2007 in Atlanta and was elected to the Royal Society of Canada in 2009. He was the Shastri lecturer in India has been a guest lecturer at the University of Toronto and Australian National University and a research scholar at the Institute for Research in Public Policy (1992-2000) and the C.D. Howe Institute (2000-2003). Professor Vaillancourt was also a research coordinator(Income distribution and Income security) for the MacDonald Commission (1983-1986). He has consulted for a number of international organizations such as the IMF, the World Bank, OECD, UNDP and national agencies such as Statistics Canada, Finance Canada, and the Seguin Commission. His fields of research include linguistic policies, intergovernmental financial relations, and tax compliance costs. He has published on a wide variety of issues including equalization in federal countries, education, minority language policies, federalism, and taxation. Professor Vaillancourt is widely acknowledged as one of the pre-eminent scholars on the issue of tax compliance and administrative costs.… Read more