Should the Agency that collects your taxes also be responsible for preparing them?

Tax season is here, and, along with all the usual articles on RSP deadlines and deduction tips, March inevitably also brings a call for the government to file our taxes automatically. The most recent version of this comes in a column from the Globe and Mail's Rita Trichur, “Why the Canada Revenue Agency should do our taxes for us” (Globe and Mail, Report on Business, March 6, 2020).On the face of it, government-directed tax filing sounds attractive. Few Canadians enjoy the process of tax filing and most would prefer not having to bother, until they think about the alternative. Even the most trusting citizen wouldn't expect the government to prepare and file that person's tax return with the aim of minimizing the amount of tax they owe.Yet that is exactly the situation that Trichur recommends. She cites a report by the U.S. Tax Policy Centre noting that some countries allow return free filing, but does not mention that the organization also says: "implementing a return free system that most U.S. taxpayers could participate in would require sweeping changes to the tax code", including, for one example, "the paring of deductions, allowances and credits".The work needed for government to take over tax filing for Canadians would be a significant undertaking with no clear benefit to taxpayers. Except in Quebec, tax returns cover both federal and provincial taxes, and both levels of government have developed an effective system of deductions to address policy needs in their jurisdictions.Taxpayers benefit from having a range of free and competitively priced tax filing products that meet a variety of needs. This includes access to affordable software that can prompt users on the deductions and options they may be eligible for, or the services of professional tax preparers who can act as their taxpayer advocates with the Agency. Similarly, low-income and disadvantaged Canadians can choose between several no-cost options, including free tax clinics and complimentary software provided by the tax preparation and software industry.While Canada's system is a gold standard, it is not perfect. Everyone – including the CRA and Revenue Quebec – recognizes that the user experience for tax filers can always be improved. However, Trichur's column overlooks how much work has already been done to ease tax filing burden for many Canadians.In 2018, the CRA took a big step forward in this direction by establishing a collaboration agreement with Tax-Filer Empowerment Canada, the industry association for Canada's tax preparation and software industry. This agreement leverages industry and government expertise to help ensure all Canadians file their taxes to receive the benefits they are entitled to.Moreover, a database of federal government IT projects by Ottawa Civic Tech indicates the Agency plans to spend about $900 million over the next four years to modernize the IT required to maintain the existing system. It's worth noting that the cost and risk of throwing the system out and starting over with a new one would be exponentially higher for taxpayers.So, while nobody looks forward to doing their taxes, the system that has evolved in Canada is among the best by striking a balance between being responsive to individual taxpayer needs and providing enough different filing options so that everyone can find something that works well for them.Just as importantly, Canadians may want to consider the wisdom of giving the Agency that collects your taxes the responsibility for helping you file them. The jobs and motivations are different. For example, the CRA has no way of knowing the personal situation of each tax filer – such as what charities they support or if they have medical expenses – and can't tell them what deductions or credits to consider.Canada's current mixed system where many competing private sector tax preparation and software firms work cooperatively with the Canada Revenue Agency to provide taxpayers with filing options best suited to their needs works well for everyone. We all need to think carefully before we move to a system that limits choice and reduces flexibility.Dan Pfeffer is Executive Director of Tax-Filer Empowerment Canada (TFEC).Based in Ottawa, Dan holds a Ph.D. in political science and has researched and published on various aspects of public policy and government decision making. He also has taught at Queen's University and l'Université du Québec à Montréal.