The Fraser Institute

The Fraser Institute

April 16, 2008 06:00 ET

The Fraser Institute: Flat Tax With Post Card-Size Return Would Reduce Time, Stress, and Cost of Tax Filing

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 16, 2008) - With the April 30th personal income tax filing deadline looming, many Canadians are hunkered down over their computers or meeting with accountants to ensure they accurately complete and file their income tax returns on time.

But all that time, stress, and cost could be reduced if the Canadian government adopted a flat tax and accompanying post card-size tax return recommended by the Fraser Institute, says Niels Veldhuis, the Institute's director of fiscal studies.

"With our proposed 15 per cent flat tax, Canadian taxpayers could complete a simple, post card-size tax form in about five minutes," Veldhuis said.

"Imagine not having to devote hours of your time or hire expensive accountants to complete your taxes. The cost savings to individuals, businesses, and government would be staggering."

Earlier this year, the Fraser Institute published The Impact and Cost of Taxation in Canada: The Case for Flat Tax Reform, a book that examined the rational for tax reform and laid out a road map towards an entirely new tax system.

The book includes a chapter by Professor Francois Vaillancourt of the University of Montreal showing that Canadians spend a significant amount of time, energy, and money complying with Canada's complicated tax system at an estimated cost of up to $30 billion annually. A large portion of these costs are due to the time and effort spent obtaining and providing receipts, preparing and submitting tax returns, and the services of professionals such as accountants and lawyers.

The book also points out the damaging impact that Canada's income tax system - in which tax rates increase as individuals earn more money through hard work and success - has on our decisions to work hard, save, invest and engage in entrepreneurial activities.

One of the key recommendations in the book comes from a chapter by internationally renowned tax expert, Dr. Alvin Rabushka of the Hoover Institution at Stanford University. Rabushka proposes a 15 per cent flat tax for Canada, a move that would collect the same amount of revenue as the federal government currently collects.

Rabushka's flat tax proposal would simplify the tax code through the elimination of nearly all deductions, exemptions, and credits that complicate the current tax system. This would allow most tax filers to use a post card-size form that could be filled out in about five minutes.

An example of the post card-size tax form is available at http://media3.marketwire.com/docs/416fi.JPG

The book also points out that the concept of a flat tax is not a theoretical idea; flat taxes have been implemented in more than 20 jurisdictions around the world, most notably Hong Kong and more recently a number of former Soviet republics as well as other Eastern European nations including Estonia, Latvia, Lithuania, Russia, Serbia, Slovakia, Ukraine, Romania, and Montenegro. In 2008 Bulgaria became the latest country to adopt a flat tax and the Czech Republic is expected to adopt a flat tax later this year.

"Hong Kong remains the preeminent example of what can be accomplished with a flat tax. The territory has built itself into an economic giant using the flat tax as a fiscal anchor. The system is so successful, it even survived Hong Kong's handover to China," Veldhuis said.

The list of benefits of a flat tax are lengthy and spelled out in detail in the book, The Impact and Cost of Taxation in Canada, The Case for Flat Tax Reform.

"At this time of year as many Canadians struggle to complete their tax returns on time, it becomes obvious just how unwieldy, complicated, and littered with exemptions for special interests our tax code has become," Veldhuis said.

"Our research in this book clearly shows that replacing Canada's personal and business income tax system with a flat tax will save money and make everyone's taxes easier to calculate."

The Impact and Cost of Taxation in Canada: The Case for Flat Tax Reform, can be ordered as a book or downloaded as individual free chapters from the Fraser Institute web site at www.fraserinstitute.org.

The Fraser Institute is an independent research and educational organization with offices in Calgary, Montreal, Tampa, Toronto, and Vancouver. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

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