Canada Parliament Building and clock tower at night

The last-minute reprieve from the Canada Revenue Agency on bare trust filing is a hollow victory for common sense and undermines an already fragile trust between tax authorities and the public.

The bare trust legislation disproportionately affects ordinary Canadians, not the 1%. Bare trusts aren’t usually used for income tax planning — they’re used for convenience or privacy.

For a government that has espoused the virtues of equality, targeting an exhausted caregiver who holds property temporarily for her elderly mother seems off-brand. But the feds charged forward despite early and repeated warnings.

Investment Executive first sounded the alarm about the bare trust legislation more than two years ago, highlighting how many people could have these arrangements without being aware of them due to the proposal’s broad language. Tax experts asked Finance to narrow its focus to the structures it found problematic. Despite the warning and further entreaties from tax professionals, the legislation passed in late 2022 without substantial changes.

The CRA then had to implement the flawed rules, and they seem to be having trouble squaring the circle — and not for the first time. Mere hours before the Oct. 31, 2023 deadline for filing the underused housing tax return without penalty, the CRA granted taxpayers a second extension to April 30, 2024.

These last-minute changes make a mockery of law-abiding Canadians, their financial advisors who performed their fiduciary duty by warning of this filing requirement, and the long-suffering accountants who pulled extra hours to help their clients comply.

There are financial consequences too: wasted fees paid for what’s now an unlikely filing requirement, wage pressures on small accounting businesses, and the unquantifiable, but very real, stress placed on thousands of Canadians. Many accountants believe they will be unable to charge their clients for bare trust returns still in progress and even for returns already filed.

Finance has defended its legislation by saying it would help authorities to effectively counter aggressive tax avoidance and evasion, as well as criminal activities. (Never mind that the CRA already has information on any income or gains earned on property held in a bare trust.)

But what effectively counters tax avoidance and evasion is trust: trust that the government has our best interests in mind; trust that our tax dollars will be spent responsibly; trust that we are being good citizens when we file our taxes in a timely and compliant fashion.

Every ill-conceived piece of legislation, every last-minute deadline extension and every whiplash-inducing policy reversal chips away at the credibility of our societal institutions.

The next time the government wants to ram through new tax policy, it should consider what’s at stake.