Personal Income Tax Compliance for Canadians: How and at What Cost?

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Personal Income Tax Compliance for Canadians: How and at What Cost?
  • The key purpose of this study is to estimate the resources expended by individuals in complying with the Canadian personal income tax/payroll tax system in 2023.
  • Roughly half of tax filers (50%) prepared their 2022 income tax return themselves while more than a third (37%) used a paid tax preparer. Those preparing their own return tax report do so mainly (85% of self preparers) using some form of software.
  • On average, individual Canadian tax filers spent 1.5 hours on personal income tax compliance activities and spent $88 on out-of-pocket expenses.
  • Accounting or the value of time spent on compliance, the total cost of compliance amounts to $130 per Canadian tax filer.
  • The total compliance costs associated with filing 2022 personal income taxes are estimated at $4.2 billion, which is equivalent to 0.15% of national GDP. Furthermore, the total administrative and compliance costs of collecting taxes in Canada is equivalent to 0.6% of GDP.
  • One way to reduce these compliance costs is to produce prefilled income tax reports for Canadians. The study simulates the impact of prefilled tax returns and calculates a drop of one third in total compliance costs.

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