Why is income tax so complicated?

I was born and raised in England. I started paid work at the age of 14 and have paid my taxes as required ever since. However, in England we have the Pay As You Earn (PAYE) program which means that my taxes are automatically withheld by my employer at source and that I don’t have to do a tax return every year, unless I’m self-employed. The good news is that I don’t have to do that return and don’t end up with an income tax bill as the with-holding is worked out exactly all year-long. The bad news is that I never get a refund either!

In fact. if you have the same employer and the same rate of pay then you get exactly the same net income every month. There is none of this paying for some ‘taxes’ until you reach the maximum and then not paying for the rest of the year. It’s all aggregated out over the entire year. It makes budgeting much easier.

Here in Canada, we have to do a tax return. Theoretically it’s for the calendar year. However, just to make things more fun we can include some contributions that were made in the first 60 days of the next Calendar year. Such as contributions to certain types of pension plans (RRSPs).

This year, I was employed regularly, on Employment Insurance sickness benefit, paid medical leave and then long-term disability insurance as sources of income. As you can imagine, my tax return is complicated.

Thankfully, having immigrated to Canada in 2003 I learned years ago to hire an accountant and hand off the folder to him each year and pay for his services gracefully. Doing so has more than made up what got missed when I used to use one of the bigger tax return services.

For those of you that prepare, and submit, your own tax returns my hat is off to you!

However, my question is simply why on earth don’t more countries use PAYE? Australia and England have piloted it for years for you successfully. It works! It makes life much easier for the majority of employees who have just one employer. It even works when you have multiple employers either at the same time or sequentially. Believe me, as a student, I did hold multiple jobs and often at the same time.

So what am I missing? The number of jobs that would be lost if people didn’t have to do their own tax returns, and therefore often pay others to do it for them? Is it that big of an industry?

Is the income tax refund something that people actually rely on each year? If so, why should the government get to keep my money and earn interest on it instead of me?

It all seems unnecessarily complicated to me!

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