Automated Tax System

http://politicallyuntenable.blogspot.com/2012/06/automated-tax-system.html

Alright, here's my idea. We automate the filing of taxes allowing accountants to spend their time growing businesses instead of doing taxes.

Businesses, if sufficiently computerised, simply send their data to the government (for countries like Canada this is easy since they already send sufficient information, for USA it may take a bit of changes in the tax forms). If not sufficiently computerised they will still have to do so the "old" paper way.

Government receives all the data and then performs a simple tax calculation. The information is kept for up to 5 years. Each time it does your taxes if it discovers that it could have used your tax credits/deductions better then you pay less taxes the next year (ie. you pay the lowest taxes possible in a 5-year window, with adjustments from year to year if you paid less taxes).

At the end of a fiscal year you get a receipt from the government, and if you set up automatic withdrawal, the taxes are also taken away then (or if you are on a monthly taxes withdrawal plan, the government can deposit money owed to you). The receipt has detailed information on what tax credits/deductions were applied, which surtaxes and special levies were placed on you and total taxes paid for the year. It can also give you your usual information like "contribution room" to various programs (such as retirement savings).

Anything that doesn't fit with an automated system (like America's itemized deductions) are eliminated and instead replaced with either a blanket tax exemption or reduction in the tax rate of the lowest tax bracket. For instance, instead of itemized deductions, the first 8000 dollars of income is simply not taxed in America (in comparison, Canada does not tax your first 10k in income as a minimum amount of taxable income reduction.).

edited 13th Jun '12 1:25:39 PM by breadloaf

Finland already has a system like that for private individuals, but I don't know if the same system also handles corporations.

I think Canada is exceptionally close to that kind of system (the idea that individuals have to privately purchase tax software year after year seems pointless if the government already has computer systems that do the same thing anyway).

Businesses is tough but the more automation, the more it would level out the playing field in the business environment between small and large businesses.