Baby Steps: Best Way to Fix Our Tax System?

How seriously does the Minister of National Revenue take her responsibility to create a modern and fair tax system? The answer seems to be that she regards it as a series of piecemeal baby steps.

With an Income Tax Act that runs to more than 1.100 pages, at this pace, change will take a very long time.

On the good news side, Dianne LeBouthillier says that she will permanently waive a set of reporting requirements for labour organizations that tax experts had agreed were unnecessarily burdensome. The requirements were implemented under Stephen Harper. The minister says she made that decision while the old legislation (Bill C-377) undergoes repeal. The waiver sends a message to unions that they will will not be required to develop and submit detailed tracking of their activities to the Canada Revenue Agency for these fiscal periods.

Labour leaders met with the CRA to discuss how those regulations were cumbersome and ineffective. The law came into effect just before the last election and required labour organizations to file financial details as well as information on political, lobbying and other non-labour relations activities.

"It was a sad lesson in how tax law and policy can be used to harass citizens and the organizations they support," says Dennis Howlett, executive director of Canadians for Tax Fairness. "Getting rid of these rules is a good first step in cleaning up needless and burdensome aspects of the Income Tax Act to give us a system that is transparent and accessible."

A good second step would be to end the politically motivated audits of about a dozen charities that were critical of the former Conservative government. Even though the Minister has concluded a series of public consultations with charities and stakeholders to modernize the rules around tax credits for donations to charitable organizations, she has not stopped the audits of political activity that were already underway. That has come about after a two-year, $13 million audit blitz by the CRA, It targeted a range of national and local groups dealing with issues such as environment, energy policy, right to die.... and in one bizarre case, bird watching in Kitchener-Waterloo. Citizens groups and academics say it is an attempt to restrict the amount of political and outreach activity charities can undertake. Many of the charities that were swept up in the audits still face having their charitable status revoked. Some organizations report that they have spent hundreds of thousands of dollars trying to comply. All of them say the blitz diverted resources from their real work.

LeBouthillier says she is committed to “working in collaboration with charities to maintain a fair system that respects and encourages their essential contribution.” Except she doesn't appear to be in any rush to achieve that.

A report on the consultations for just that one area of the Income Tax Act isn't due until mid-2017 and if there are legislative changes, they won't appear until 2018. "The whole process has been arbitrary, ineffective and harmful to democracy," says Howlett. "A tax system should be none of those things. That's why Canadians for Tax Fairness has been calling for a public review of the Income Tax Act."


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