What got missed from your federal budget 2015 wish list?

Budget 2015 produced a handful of proposals that would reduce red tape and simplify tax compliance. But the government could have set its sights much higher. What do you think are the biggest lost opportunities?

With its annual budgets, the federal government seeks to improve Canada’s competitiveness, productivity and economic growth. Tax reform and simplification would go a long way to achieving these ends. But with budget 2015, the government again passed up the chance to launch a comprehensive review of the country’s tax system to reduce its complexities and inefficiencies.

Meanwhile, there’s plenty of opportunity for the government to ease taxpayer and tax preparer frustration.  Here are some examples:

T3 DEADLINES

The current deadlines for T3 slips and returns remain unworkable, causing taxpayers to receive tax data near, or after, the deadline for the related return. This creates needless headaches for taxpayers and tax preparers, and huge costs for the CRA in processing late-filed and amended returns.

REPEATED FAILURE TO FILE PENALTY

The penalty often applies disproportionately to nominal lapses. Budget 2015 proposed to reduce the penalty amount and have it apply only if a taxpayer fails to report at least $500 of income in the year and in any of the three preceding ones. This is a step in the right direction, but more should be done. For example, Parliament could review the current penalties and whether the CRA applies the standard of “extraordinary circumstances” when granting taxpayer relief as Parliament intended. The CRA should also be given discretion to waive interest and penalties without the current, seemingly arbitrary, 10-year time limit.

FOREIGN ASSET REPORTING

Budget 2015 proposes to simplify Form T1135 reporting, for 2015 and after, where a taxpayer’s specified foreign property portfolio is between $100,000 and $250,000 throughout the year. But, as we’ve maintained in our numerous representations to government, the rules could be streamlined even more. The government could adopt our other recommendations, such as extending the current filing deadline and excluding the reporting of foreign securities held in accounts with registered Canadian securities dealers.

REGULATION 105 WAIVERS

The processes for obtaining waivers from withholdings for tax-exempt non-resident employees (Regulation 102) and non-residents providing services in Canada (Regulation 105) are a longstanding source of aggravation, as pointed out by Chartered Professional Accountants of Canada (CPA Canada) and others, including the Advisory Panel on Canada’s System of International Taxation, almost seven years ago. Budget 2015 proposes an exemption from the waiver requirement to provide welcome relief for non-resident employees who are exempt from tax. Similar relief should be extended to tax-exempt non-resident service providers.

TAX DEPRECIATION

With the current pace of technological change and shorter business life cycles, capital cost allowance (CCA) rates should be reviewed for all classes of equipment so that they match the asset’s true economic life. Reducing the expanding number of CCA classes would make the tax system much simpler.

We believe there is more that can and should be done. We will continue to advocate for positive changes to improve the tax system for all taxpayers.

I want to hear from you. What are your suggestions for tax system tweaks to simplify and ease administrative burden? You can keep the conversation going by posting a comment below.

Read more of our views on this year’s budget in CPA Canada’s Budget Brief 2015.

CPA Canada’s Tax Blog is designed to create an exchange of ideas on tax policy and practice issues, and their impact on those who practise tax. Your comments can provide helpful input into the public interest advocacy positions developed by CPA Canada.

About the Author

Gabe Hayos, FCPA, FCA, ICD.D

Vice-president, Taxation, CPA Canada

Highlights

Chartered Professional Accountants of Canada (CPA Canada) annually offers its views on priorities for the federal budget. Review past submissions of pre-budget briefs and consultations, and post-budget release opinions and commentary.

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