THIS TAX-TIME ONE OF THE COMPUTERS COULD BE ON YOUR SIDE
THIS TAX-TIME ONE OF THE COMPUTERS COULD BE ON YOUR SIDE
A MODERN VARIATION on setting a thief to catch a thief is hiring a computer to beat a computer. There’s something satisfying in the picture of two hawkish computers engaged in a programmed battle of solid-state wits on behalf of puny man. The trouble is that computers are still largely the allies of the corporate power structure. Few folded, bent and mutilated private individuals can afford access to one. The unfairness of this situation never seemed more evident than when the Department of National Revenue introduced computerized personal income-tax returns a few years ago. After all, what chance has one rusty old-math mind got against the massed, lightning-quick memory banks of Ottawa?
This year, however, the ordinary taxpayer will be able to even the odds to some extent. For less than $10 in straightforward cases, he can employ a computer to do his tax calculations for him. Instead of spending hours or days lost in the arithmetic maze of the T-l short form, he’ll simply spend 15 minutes giving information to a trained computer programmer. This new service is being provided by H and M Taxsavers Limited, a firm based in Oakville, Ontario, that plans to set up data-collection centres in communities across the country.
Taxsavers is the electronic brainchild of the firm’s president, I. Paul Haynes, a 33-year-old business consultant, who got together with Toronto computer expert Michael Kaye. Last year, in a sort of pilot run, the pair processed several thousand individual returns from the Toronto-Oakville area through a computer and found the system worked perfectly.
“Our company now has equipment available to handle as many as two million returns even with the expected peaking late in the tax season,” says Haynes. “However, we are aiming for up to one million this year. Eventually, we expect to service four or five million returns every year.”
Such rosy figures are countered by quiet skepticism on the part of Taxsavers’ competitors in the field. They
point out that the market in Canada is somewhat limited. Although roughly 8.5 million people will be receiving T-4 slips this year, a fair percentage of them are students and part-time workers. The realistic potential of people needing help with their tax returns is only about 5.5 million.
“Taxsavers are being extremely optimistic,” says Douglas Bennett, advertising manager of H and R Block Limited. “I don’t see how they can reasonably expect to grab 15 or 20 percent of the potential market in their first year of national operations.”
Competitors question how deeply the computer firm will be able to delve into individual tax matters in view of the low fee being charged. (Taxsavers expects that only 25 percent of its clients will pay more than $10.) They also predict that the main hitch Taxsavers will run into will be Canada’s postal service. “The returns always start piling up as the April 30 deadline approaches,” says Block’s Bennett. “The point is, can Taxsavers rely on the mails to get the out-oftown returns to the central computer and back again to the individual for signing before the deadline?
“The computer may work splendidly, but the people themselves will goof things up. They may come back three or four times, saying they forgot to mention some item and the returns will have to be reprocessed. Our firm looked at the computer system and we’d have switched to it if we thought it would work.”
There’s reason for H and R Block to be critical of Taxsavers. It’s mainly their business that Haynes is out to get. Since the Block company was started by two Kansas City bookkeeping brothers 14 years ago, it hasn’t stopped growing. Last year the firm prepared 3.6 million tax returns in Canada and the United States, had a turnover of nearly $40 million and showed a profit of more than two million dollars.
Block’s Canadian business is conducted through more than 180 branches, some of them temporary offices that sprout like spring crocuses in February and March. The branches are manned by some permanent employees and a small army of part-time ones, most of them housewives, who have taken courses at an accredited income-tax school. “They’re not trained bookkeepers,” says Bennett, “but they do know income tax and each return is checked three times.”
Taxsavers also expects to use housewives as data collectors. The difference is, says Haynes, that his staff will be selected on the basis of aptitude tests and will learn the collection techniques by means of a sophisticated self-instruction program. “We can
start training our people on April 1 and have them handling returns two weeks later,” says Haynes.
Taxsavers’ second major breakthrough is in the marketing field. Apart from establishing branch offices like Block’s, the firm has signed contracts with several large groups — including the 257 Quebec lodges of the Knights of Columbus, the 340 offices of the Quebec Credit Union League and the 5,000 members of the plumbers’ union in Montreal. All told, Taxsavers will have some 2,000 outlets in Canada, compared with Block’s 180.
Haynes says his computer’s memory bank has been fully programmed to deal with the multitude of variables involved in tax returns. “In a split second the computer assesses the alternatives and proceeds along the most favorable avenue,” he explains. “The reason our service will be cheaper than other tax-accounting systems is because the computer fixes the overhead. It does its own checking. We don’t have to employ large numbers of people to doubleand triplecheck each return. For the first time, the individual can now match the calculating ability of the government in computing the taxes payable.”
Taxsavers plans to beat the lateApril logjam by setting a cutoff date (April 25) and using private couriers to fly returns in from Montreal, Vancouver and other centres. “As for people forgetting to mention some piece of information,” says Haynes, “we will ask them to sign a form saying all the data is complete and correct. But if the return still has to be reprocessed, we will do it, of course, and charge them extra. All accounting firms do that. The difference is that the computer makes corrections easier.”
Haynes argues that the Block brothers have never fully realized the potential of the consumer market they pioneered. There will come a time, he thinks, when nearly all taxpayers will be using accountants. And only a computer system will be able to handle that volume of business.
So far the large number of private accountants handling tax returns are not disturbed by the Taxsavers’ threat. “In fact, we are rather pleased,” says Toronto accountant Andrew Pell, who spends a lot of time working out returns for self-employed people with several sources of income. “Taxsavers will scoop off the people with relatively simple problems, the people who aren’t worth our while to help. Taxsavers is designed to rescue the growing number of taxpayers who panic at the sight of a form — and I wish the firm well.” □
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