The complexity of the tax system in Canada is costly to many Canadians — particularly those with modest means — according to a recent report from the Montreal Economic Institute (MEI).
The Canadian tax system is full of credits, deductions and exemptions that many people are not aware of, the Montreal-based think tank stated in its report.
According to Prosper Canada, more than $1.4 billion in benefits are left unclaimed every year by people who are entitled to them.
For example, approximately 240,000 low-income Canadians eligible for the Canada Workers Benefit do not receive it, representing more than $175 million in 2014 alone, the MEI report said. Additionally, more than one million eligible adults are not claiming the Disability Tax Credit.
Luc Vallée, chief operating officer and chief economist at the MEI, said the tax system must be simplified.
“The complexity of the tax system is the main reason for this state of affairs,” Vallée said. “It would be much more beneficial for the entire population to abolish the multitude of exemptions and tax credits that exist, and replace them with a corresponding reduction in income tax rates, or a raising of exemption thresholds. This would be the best way to help everyone, especially the most vulnerable.”