OTTAWA – An automatic tax filing program the government is expanding got millions in benefits to people who were entitled to them, but an expert on automatic says the Canada Revenue Agency is offering only a poor substitution.
Last month, the CRA sent 500,000 invites to people, who either have never filed taxes or have a significant gap in their filing history, to the SimpleFile program which allows them to file returns over the phone, through a digital platform or on paper.
Benoit Sabourin, a spokesperson for the agency, said the goal is to get people who aren’t filing their taxes and are missing out on benefits as a result, to file a return.
“Many lower-income and vulnerable Canadians are missing out on valuable benefit and credit payments because they are not filing their income tax and benefit returns,” he said.
Sabourin said a smaller pilot program in summer 2023 saw the agency invite 118,000 people to use the service, which led to about 35,000 of those people filing a return.
Those people received $92 million in tax returns as well as benefits payments under programs like the Canada Child Benefit, the Canada Carbon Rebate and the Dental Care program.
The CRA invited 1.5 million people through SimpleFile at the start of this year and 90 per cent of those people filed a return. But the agency could not provide any data on the benefits those people received.
Jennifer Robson, an associate professor at Carleton university, has written extensively about the benefits of automatic tax filing. She said what the government is doing with SimpleFile falls well short of a real automatic tax filing program.
“This goes back to a commitment that was in budget 2023 which was actually about piloting what the budget referred to as automatic tax filing for low income and vulnerable Canadians,” she said. “This is not that. This is a sorry excuse for that.”
It’s really not going to move the needle in terms of addressing some of the barriers to tax filing
SimpleFile makes it easier for people to file, but doesn’t include what some countries do which is to have a pre-populated return, with information the CRA already has on hand.
Robson points to a report from the Parliamentary Budget Officer that looked at what happened after Canadians were contacted about SimpleFile by the CRA. The PBO found that while 90 per cent of people did file returns after being contacted, only seven per cent used SimpleFile to actually file their return.
“They actually broke down what people did after they got invited to use Simplefile and the vast majority, like the largest share, ended up going to a paid tax preparer,” she said.
Robson said people who are low-income are going to a tax preparer for simple returns or spending money they may not have for a service they likely don’t need.
“I’m not saying it’s wrong to do this. I’m just saying it’s really not going to move the needle in terms of addressing some of the barriers to tax filing for people,” she said.
Robson said with employer provided T4s and other documentation the CRA has a lot of the information it needs already to automatically file a tax return for many Canadians.
“It’s not necessarily that we could do universal automatic filing for every Canadian right away, but our analysis suggests it’s about a third of all Canadians who have a simple enough tax situation that the CRA has all the info they need now and could do a pre-populated return.”
Robson said the CRA has typically viewed it as a success to get Canadians to file a return and receive benefits regardless of how they do it, but she said that misses the costs of filing a return.
“That really overlooks the costs of filing in terms of software fees, tax preparation fees, time,” she said. “So, I think it actually does matter how people file, especially people who are low and modest income.”
The PBO’s report on the idea of a fully automatic tax return system estimated it would cost the government about $65 million by the end of this decade in administrative costs. The larger cost for the government would be paying out all of the benefits that currently go unclaimed, which the PBO estimated at $1.8 billion.
Robson said that could just be the beginning though of benefits that people do not receive because they fail to file a tax return.
“What is harder to estimate, and would increase that number significantly, is once you factor in all the people who aren’t getting, for example, subsidized daycare because they don’t have proof of income, all the people who can’t get the dental benefit because they didn’t file a return, when the disability benefit rolls out next year, if you don’t file a return, you don’t get the benefit.”
The CRA committed to having two million people invited to the SimpleFile system by 2025, which the agency says it is on track to meet. The government estimated about 12 per cent of Canadians don’t file a tax return.
National Post
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