Saturday, May 26, 2012

On Tax Code Simplicity/Complexity

Yesterday I posted - without comment - a list of countries ranked according to the simplicity of their tax codes, more specifically termed the "ease of payment of taxes" in those countries, according to a study by the IMF and Price Waterhouse Coopers. My thoughts:  Most of the countries with the top ten (simplest) tax codes are a) tiny, b) oil-rich, and/or c) not democracies - all of which make taxation simpler, if not unnecessary altogether.  Ireland stands out from the others in the "top ten", its streamlined tax system possibly due to the country's dire need for tax revenue after the global financial meltdown of 2008.  Frankly, I was surprised to see Canada ranked 11th.  Our tax code has never seemed that simple to me.  If the Canadian tax code is anywhere near "the gold standard" for simplicity, I can't imagine how baffling some of the lower-ranked schemes must be.  The U.S. tax code (at #69) is, by all commentary, an abomination in drastic need of an overhaul - so much so that I believe its complexity is actually stifling badly needed tax revenue.  The UK's system at #18 is understandably close to Canada's, and the Scandinavian countries - ex-Sweden (#44), plus Switzerland - are all ranked in the top twenty-one.  New Zealand (#27) and The Netherlands (#34) apparently need to pull up their socks a bit.  Australia, at #52, really surprises me, but their immense resource revenue of late must have made their tax code more complex.  The fact that France, Iraq, and Afghanistan have simpler tax codes than the U.S. is not encouraging for our friends south of the border, and just as telling is the American tax code's proximity to Greece (#79), a total disaster about which much has been written in this space.