Canada’s costly tax bureaucracy

May 10, 2007

Free Market Foundation

Preparing, filing and submitting tax returns plus maintaining a government bureaucracy to manage and regulate the tax system cost Canadians between $19 billion (about U.S. $17 billion) and $31 billion (about U.S. $27.7 billion) in 2005, according a new study from The Fraser Institute.

Consider:

Total business tax compliance costs, including direct and indirect costs as well as overhead, were calculated at $13 billion (about U.S. $11.6 billion).

Compliance costs for both personal and business property were also calculated, coming in at $224 million (about U.S. $200.4 million) to $448 million (about U.S. $400.7 million).

The total calculation for administrative costs for taxation in Canada was between $2.7 billion (about U.S. $2.4 billion) and $5.8 billion (about U.S. $5.2 billion).

Further:

The total cost for complying with and administering Canada’s tax system ranged between $18.9 billion (about U.S. $16.9 billion) and $30.8 billion (about U.S. $27.5 billion) in 2005.

This represents between 3.5 and 5.8 per cent of total federal, provincial and local revenues and between 1.4 and 2.3 per cent of gross domestic product (GDP) in that year.

All of the various costs translate to $585 (about U.S. $523) to $955 (about U.S. $854) for every man, woman and child in the country, says Jason Clemens, Director of Fiscal Studies at the Fraser Institute and co-author of the study. The goal of tax policy should be to raise sufficient funds for the government to provide services demanded by citizens in the least costly manner possible.

Source: Paying taxes and maintaining tax bureaucracy cost Canadians $19 billion to $31 billion in 2005, Fraser Institute, April 26, 2007.

For text: http://www.fraserinstitute.ca/shared/readmore.asp?sNav=nr&id=803

For full study: http://www.fraserinstitute.ca/admin/books/files/TaxCompAdminCosts.pdf

For more on International Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=26

FMF Policy Bulletin/ 02 May 2007