Juno News - October 17, 2020


＂Grumpy Accountant＂ wants to make taxes simpler


Episode Stats

Length

19 minutes

Words per Minute

197.89502

Word Count

3,936

Sentence Count

3


Summary


Transcript

00:00:00.000 I know it's not tax time just yet for most people but at the same time in Canada it's always tax
00:00:12.600 time in some form even if you're not filing them you're certainly paying them which is why a really
00:00:17.280 great new book came out was one that I wanted to spotlight here it is called the grumpy accountant
00:00:22.780 one fed up tax pros practical plan to fix Canada's senselessly complicated tax system it's part tax
00:00:29.260 advice part novel and part analysis on the state of taxation in Canada and the author is accountant
00:00:35.440 Neil Winokur who joins me on the line now Neil good to talk to you thanks for coming on today
00:00:39.900 thanks so much for having me it's funny I actually spoke about tax policy a few weeks ago on the show
00:00:44.940 and I was just like relentlessly mocking the fact that I was even having the discussion because I'm
00:00:49.440 like no one's going to care about this and then everyone did everyone actually found it as enjoyable
00:00:53.660 as I did so when I learned of this book and read through it myself I'm like I got to get Neil on
00:00:58.640 the show so I appreciate it you're a grumpy accountant I'm a grumpy taxpayer explain to me
00:01:04.180 why there is so much to be grumpy about in Canada and why you wrote this book
00:01:08.320 yeah so it's interesting the the reason why there's so much to be grumpy about it's most people think
00:01:14.780 it's because of the actual amount of tax that we all have to pay and of course that does make a lot
00:01:21.140 of people grumpy but what really gets me going and makes me grumpy is not the amount of tax that we're
00:01:26.920 paying but the complexity and the amount of bureaucracy that we have to deal with in order
00:01:33.640 to file our tax returns and even without thinking about how much tax we're paying it's the method and
00:01:42.620 and the way we have to file our tax returns that's what makes me grumpy I realized after a certain number
00:01:49.300 of years of doing my job that the job of a tax filing accountant should not even exist and that's
00:01:56.280 why I wrote the book I wanted to shed light on that particular aspect of our tax system it's too
00:02:01.480 complicated we need to simplify it we can simplify it other countries have much simpler systems and
00:02:07.840 that's why I wrote the book the book itself I mentioned earlier is part novel it follows a fictional
00:02:13.480 character named Jerry and I'll talk about that in a moment as he goes through all of these stages of
00:02:18.240 life from you know getting a job paying taxes getting a tax refund an audit marriage kids even death and
00:02:24.280 all of this and the one recurring theme is that at every stage of life government is there with its
00:02:30.080 handout yeah exactly what the way our tax system is designed is that um we have we seem to have this
00:02:37.620 philosophy in Canada of the idea that government is there to always lend a helping hand and it's not
00:02:46.140 only about help with actual money being transferred but it's with deductions and credits that have are
00:02:52.800 that are riddled into our tax system for every stage in life and every life event there's a tax deduction or
00:02:59.100 credit which when you really think about it it doesn't really make any sense and that's what really
00:03:04.020 bothers me so if you are in university or college there's tuition credits if you have children there's
00:03:10.220 childcare and if you're if you're trying to save money well there's RSPs and TFSAs and and if you have some
00:03:16.640 health problems there's medical expenses and they're all there to help us and to maybe make the tax system more
00:03:22.580 fair like each credit and deduction has a valid reason and rationale for it but the downside of it is that when you're
00:03:31.140 trying to target every single life event and every single special interest group then everyone wants
00:03:36.240 a tax credit so if you're a volunteer firefighter you have a tax credit look I love volunteer firefighters
00:03:41.160 they're heroes but do we need a tax credit like every single stage in life and every every little
00:03:47.020 thing you do there's going to be a tax credit or deduction and that just creates all this complexity
00:03:51.900 no one knows what credits or deductions there are um and no one can file their own tax returns because of
00:03:58.380 all of this and there is an inerrant unfairness in it as well and you touch on this I don't know if
00:04:03.500 it's intentionally or not in the book where one person with the same income as another has a vastly
00:04:09.140 superior tax return because of how many of these credits they avail themselves of and I don't fault
00:04:14.300 people for using whatever tools and tricks they can legally to reduce their tax burden but it means that
00:04:20.140 it's very unlikely that people are going to get a stack as low a tax amount as they're legally entitled to
00:04:26.480 because the system is so complex to navigate exactly and those with lower incomes more modest incomes
00:04:33.280 who might not be able to afford um the best professional tax devices they can they can obtain
00:04:39.500 each year might be missing out on certain deductions and credits in fact um in the throne speech that
00:04:45.440 happened uh in the end of September there was a one line thrown in thrown in there into the throne speech
00:04:51.520 about automatic tax return filing that the CRA actually might start filing the tax return for
00:04:57.860 the taxpayer those with very low incomes um because right now there's about a billion dollars
00:05:03.660 of tax credits that people are missing out on actual like GST credits and money that they're entitled to
00:05:10.120 but they're not filing their tax returns because it's too complicated so the CRA is saying oh we'll do it
00:05:14.800 for you but that's a perfect example of how the way our tax system is designed the more money you have
00:05:21.600 the more you're able to afford the higher professional fees um the more you can be assured that you're
00:05:29.120 actually getting all the deductions and credits you're entitled to and that's a big flaw in the system
00:05:33.040 the more deductions and credits you have then the more complicated it is and then the more money you
00:05:37.520 need to spend to file your tax returns so we're actually spending now seven billion dollars a year
00:05:42.480 that's just families 500 on average per household to get your tax returns filed that doesn't include
00:05:50.000 small businesses and corporations so it's a lot of money and the budget for the CRA is almost five
00:05:55.520 billion dollars a year now it wasn't like that 10 years ago so it's gotten out of hand and what my
00:06:02.000 idea is let's simplify it get rid of deductions and credits you lower the rate and most people agree
00:06:06.960 with this it's just a lack of political will and courage to actually get it done i want to talk
00:06:11.760 about the political aspect of this very shortly and the book is not political i i will say i think
00:06:16.480 it really does appeal or should appeal to people of broad ideological or political persuasion but when
00:06:23.040 you talk about the uh tax return idea i've always just as a lifelong canadian taken for granted that
00:06:30.400 this is how filing taxes is and i actually didn't realize until reading this that there are millions of
00:06:35.760 people in other developed western nations where a majority of the populations people with simple
00:06:41.520 employment situations actually don't have to file tax returns at all this is not a universal thing
00:06:46.400 evidently right for example in the uk in the united kingdom if you're an employee okay and you have
00:06:52.960 no other income so you don't have self-employment income you don't have capital gains or investment
00:06:57.200 income to report you have it well you know here we call it a t4 whatever they call it there and you
00:07:02.160 have no other income you don't have to file a tax return at the end of the year your employer
00:07:07.280 is filing the t4 to the government and that is the tax return and that's what we do here your employer
00:07:13.120 takes your t4 they file it to cra they give you a copy the cra has your t4 already in fact if you
00:07:19.280 file your tax return and you make a mistake in putting a number on your t4 the cra will automatically
00:07:25.600 correct it for you and send you the reassessment yeah because they already know the the correct number
00:07:29.840 yeah exactly so why do we have to file it it doesn't make any sense so and that's when you
00:07:34.720 start to get into like automatic filing by the government pre-filled tax returns and there's
00:07:39.520 pros and cons of that i'm not crazy about that idea because then we have to you know think about well
00:07:45.520 do we trust the cra to file our tax returns for us i don't know if that's such a good idea
00:07:50.720 but if we move to a really simple system employees so those who are have a t4 and nothing else should
00:07:57.440 not even have to file a tax return at the end of the year and those who are self-employed i talk
00:08:01.840 about this a lot in the book about maybe four or five chapters in the book deals with self-employed
00:08:06.240 and small business owners um they should have a much simpler time filing their tax returns and i
00:08:13.200 propose ideas on how to simplify things for them as well because the bureaucracy that they anyone who's
00:08:18.640 self-employed has their own small business has to go through is absolutely ridiculous it's very unfair
00:08:23.600 it's very burdensome it's costly it's complicated and it keeps people up at night and um it's the
00:08:30.800 the whole system is ripe for a major disruption for sure yeah and it actually disincentivizes people
00:08:38.480 creating businesses in some cases i remember for example when i started working for myself setting
00:08:43.600 it up was very daunting and i eventually you know worked my way through it and had some professional
00:08:48.160 help with that process but i know there are a lot of other people that would look at this and say
00:08:51.600 there's no way i'm going to be able to do this people that are terrified of the idea of making
00:08:56.480 a mistake and risking the penalties and and all of that and and that is not an environment for growth
00:09:02.160 for economic growth for growth of business in a country that i think desperately should be welcoming
00:09:07.440 growth absolutely yeah the the regime that small business owners have to comply with i mean think about
00:09:13.680 let's say you own your own small business it's just you okay so you're an owner manager and you
00:09:18.480 incorporate because a lawyer told you well you really should have it in a corporation so now you
00:09:22.640 have to follow your personal tax return your corporate tax return pro your gst return and
00:09:27.600 depending on your province hst some provinces you actually have to file a separate sales tax return
00:09:33.360 to your province so you have gst to cra and you have provincial sales tax return to your province
00:09:37.760 so your personal corporate sales tax and if you want to pay yourself a salary from your own corporation
00:09:42.480 a t4 your corporation has to deduct tax for you from your own salary you're and you're paying double
00:09:48.240 cpp nobody can figure this out on their own they're forced to hire people like me to help them and it just
00:09:55.760 like it really bothers me because they shouldn't have to do this so for example in the united states
00:10:01.120 our neighbors to the south if you have your own corporation legally you can have a corporation it's
00:10:07.120 separate from you for legal purposes but from a tax filing perspective it can actually just be one
00:10:12.720 i think they call it an s corp and and the way an s corp works you've one tax return filing it goes
00:10:18.800 right onto your personal tax return it's the same tax filing and the net income from that s corp is just
00:10:24.320 considered your personal income so it's much simpler and we need to look at ways to simplify this
00:10:30.560 for small business owners and those who are self-employed and i think that that would probably
00:10:34.880 encourage more people to try and venture out on their own because right now you try and venture
00:10:39.520 out on your own and you might not even know your obligations that if you hit thirty thousand dollars
00:10:44.960 of revenue and in a in within you know 12 months or four fiscal quarters uh you have to register for
00:10:52.320 gst and hst and start collecting sales tax and a lot of people don't even know that and they get into a
00:10:56.720 lot of trouble and self-employed people have to save their revenue to pay tax they're now tax collectors
00:11:04.160 for the government if you're self-employed you're a tax collector and they don't pay you for it so
00:11:09.040 it's um it's not easy it's not easy it discourages people and i think some of the ideas in the book to
00:11:16.720 simplify it on a massive scale it might put me out of a job and other people like me but i think it would
00:11:23.520 be so beneficial for millions of people i'll find something else to do i'm i'm not too worried about
00:11:29.280 that yeah and i was actually going to ask about that because you are in in a lot of ways trying
00:11:34.080 to create a tax system that would put you out of work and we know that you know in law for example
00:11:39.360 the industry gets more and more complex so that lawyers will always have a market share whereas
00:11:43.520 you're proposing something that for most canadians would actually make it quite easy and simple to
00:11:48.800 such an extent that they wouldn't need a tax professional every year right so look i'll have to
00:11:53.600 adapt my business model um accountants can do a lot of other things we could still advise business
00:11:59.280 owners and people who are self-employed about their business finances but we don't maybe that tax role
00:12:06.000 could disappear that that would be my goal and my dream for canada for the future um there are you
00:12:12.800 know thousands i think this the cra has 40 000 employees there's thousands of accountants across the
00:12:19.280 country and there's quite a few tax software companies that make a very nice profit off of
00:12:25.520 millions and millions of canadians who download turbo tax and ufile and these tax software that
00:12:31.200 they could download online and that and uh to in order to file their tax returns so yeah in my plan
00:12:39.040 all of the the above that i mentioned would have to adapt uh their business model and adapt to a
00:12:44.160 new reality but it's not fair that i should continue to earn a living at the expense of
00:12:50.400 the suffering of millions and millions of canadians in or in terms of just like why if we were designing
00:12:56.160 a tax system from scratch today imagine canada never had an income tax and we said you know it's
00:13:02.000 2020 we need an income tax there's no way in the world we would design the system that we have right
00:13:07.200 now right that would never happen we would design something much simpler and in 1917 when they first
00:13:12.800 established income tax it was supposed to be temporary just to fund the end of world war one
00:13:17.920 um and of course it's not temporary we have it over 100 years later but the income tax act in 1917
00:13:23.680 was only 11 pages long and today it's 3 000 pages nobody understands it nobody can read it and really
00:13:31.360 understand it account a lot of accountants don't understand it people at the cra don't understand it
00:13:35.280 people make mistakes all the time so i think there's something inherently wrong with it that we really
00:13:40.560 need to uh fix like in a real way and and i know that it's kind of meant to be a a sillier story to
00:13:47.600 illustrate the absurdities of the tax system but i mean you get dark you kill people off in this book
00:13:52.720 it's it's not like this is this is more of a thriller than i think i expected when i i started reading
00:13:57.760 but but you do reveal again the every stage of of life taxation and i i won't go through the whole thing
00:14:03.760 but you do kind of end it in in a way with sort of a manifesto of what you'd like to see and and a lot
00:14:08.880 of it comes down to really putting forward the simplicity learning from other countries we don't
00:14:14.720 need to reinvent the wheel to do this and i would ask you i guess what is the biggest most significant
00:14:22.800 change that would really make the most difference in your view something that a government could put
00:14:27.280 into effect almost immediately if it wanted to okay so you asked me what's the biggest one i'm
00:14:32.800 gonna give you my top three okay perfect so number one for employees like i said we need to eliminate
00:14:39.440 this sounds so crazy but it only sounds crazy because we're so used to what we have right now
00:14:44.080 so number one is eliminate and abolish every single tax deduction and credit and just lower the tax rate
00:14:50.720 to make up the difference and the t4 becomes a tax return so no more tax return filing t4 that's the
00:14:56.960 tax return that's it forget about it now self-employed people what i propose is very similar
00:15:03.600 they might have to report a tax return but i want to be one page that's it one page nothing else
00:15:09.360 revenue no expenses no deductions no CRA audits here's your revenue and you pay a lower rate of
00:15:15.040 tax because we're not claiming expenses for self-employed people who want to claim expenses give them the
00:15:20.160 option so you have option a filing option b filing and a self-employed person can choose which option
00:15:25.840 okay so that's number two and number three gst hst if you're self-employed you have to collect gst hst
00:15:32.160 as soon as you hit thirty thousand dollars of revenue thirty thousand dollars that number comes
00:15:36.480 from 1991 over 30 years that's or almost 30 years that's crazy we what we haven't had inflation since
00:15:44.000 1991 that 30 000 should be closer than maybe 60 000 or more so we need to increase that small supplier limit
00:15:50.880 and that would really help people who are in the income range they are earning 30 40 50 60 000 and
00:15:56.640 they have to deal with collecting hst gst dealing with this that we i think we need to relieve them
00:16:01.840 of that burden and increase that small supply limit so those are things that the government should really
00:16:06.560 start looking at as soon as possible it might take a few years to undergo this review but that's okay
00:16:12.720 even if it takes five or ten years it will be worth it in the long run and a lot of these things
00:16:17.760 may reduce government revenue modestly but at the same time you think of how many billions would
00:16:23.760 be saved by not having to bureaucratize everything regulate compliance audit investigations i mean for
00:16:30.640 example you would eliminate a lot of fraud potential if you take away expenses and filings you would
00:16:35.760 eliminate a lot of fraud potential on on both employer and employee sides of things and you would
00:16:40.960 simplify it in a lot of ways on the government side of things and on the taxpayer side of things
00:16:47.200 oh for sure and actually what i try to propose in the book is actually a revenue neutral plan for the
00:16:53.920 government and when i wrote the book like you were alluding to before it does it can and does appeal
00:17:00.320 to people across the political spectrum because i actually had a few people review the book as i was
00:17:05.600 writing it and giving me feedback and a couple of those people were people who are on the complete
00:17:10.400 opposite ends of the political spectrum that i am so i'm more of uh i don't know what you would call it
00:17:15.440 fiscal conservative libertarian type and i had people who are like what i see as extreme crazy
00:17:22.960 leftists and um people that i'm close with and i enjoy talking to and they reviewed the book and
00:17:28.560 gave me some great feedback and they really enjoyed it so if we abolish the deductions and credits
00:17:34.640 the flip side is you lower the tax rate and in theory and i show this in the book that can be revenue
00:17:41.120 neutral to the government um so it could be a plan that everyone could get behind and and yeah it
00:17:47.280 reduces that potential for fraud and also potentially if we have a lower tax rate with no deductions and
00:17:52.480 credits that could bring right now canada has a huge underground economy because the the personal tax
00:17:59.040 rates are so high and you have gst hst on top of that that self-employed people have to charge so many
00:18:05.680 people are doing cash transactions and not paying any tax at all on it if we had a lower actual rate
00:18:11.280 of tax that was advertised imagine if the government could say look everyone earns their first fifty
00:18:16.320 thousand dollars of income zero tax and then from 50 and up you play if you pay a flat rate 15 or 20
00:18:23.280 more people might actually come out of the underground economy and say you know what that's not so
00:18:27.360 unreasonable if i make eighty thousand a year i'm not paying any tax on the first 50 and i'm only paying
00:18:33.040 20 percent above 50 you know what i maybe i people will say you know what i'll pay that because we
00:18:39.760 know that the government does provide us services and and we do need a government in some respects
00:18:45.120 so people might accept that and that ironically could actually increase government revenues as more
00:18:50.320 people come out from the underground economy yeah very much so and and you do a really good job at
00:18:56.480 exposing a lot of the contradictions in these things too like for example if you work at an office
00:19:02.000 downtown and you have to pay for parking when you go to work you can't write that off but
00:19:05.920 if you were self-employed and a contractor you could and a lot of these things and i i think that
00:19:10.880 when people read through it a lot of these things are intuitive because you live them but at the same
00:19:16.000 time it really reinforces in simple terms why things are so ridiculous so hopefully a kick in the
00:19:20.880 pants to get people to push for some change the book is the grumpy accountant one fed up tax pros
00:19:26.160 practical plan to fix canada's senselessly complicated tax system the author neil winneker joins me on the
00:19:32.480 line now neil thanks very much great job in the book and appreciate you coming on today thank you so
00:19:37.200 much for having me i appreciate it thanks for listening to the andrew lawton show support the
00:19:41.360 program by donating to true north at www.tnc.news