Saturday 29 April 2023

Ottawa wants to automatically file taxes for low-income Canadians — and perhaps eventually for everyone

 

Ottawa wants to automatically file taxes for low-income Canadians — and perhaps eventually for everyone

Recent federal budget announced plans to automatically file taxes for millions of low-income earners

In the recent federal budget, the government announced the creation and expansion of a couple of pilot programs aimed at getting millions of low-income Canadians to file their taxes, and giving them access to benefit programs they are entitled to.

The government says as many as 12 per cent of Canadians don't file their taxes every year, most of whom are low-income Canadians. It's estimated that non-filers missed out on more than $1.7 billion worth of government rebates and programs they were entitled to in the 2015 tax year alone.

To fix that, Ottawa is beefing up an existing program called File My Return that allows Canadians to file their tax returns by answering a series of simple questions over the telephone. The goal is to triple the uptake on that program to 2 million people annually. 

The government will also pilot a new automatic filing service for even more low-income Canadians, including many who would be entitled to government benefit programs like GST rebates and the Canada Child Benefit were they to file.

Elizabeth Mulholland, CEO of Prosper Canada, which works with low-income Canadians, says it's an idea that's long overdue.

A hand is shown superimposed on a Canadian tax document. Monday is the deadline for anyone who owes money on their 2022 taxes to file without penalty. (Evan Mitsui/CBC)

"We're excited about it. We had asked for them to do it," she told CBC News. Not only will Ottawa's plans help millions of people directly impacted, but she says it's also good news for Prosper Canada and other agencies because it frees up their time and resources to do other things.

The automated system will allow her group to spend more time helping low-income earners with other issues, as "tax planning is often a gateway to other financial health services," Mulholland said. 

A better way

It may come as a surprise to many Canadians scrambling to file their taxes this weekend, but the Canadian system whereby the onus is on tax filers to assemble their documentation and submit it to the government for verification is the exception, not the rule.

Several dozen countries including Slovenia, Norway, Denmark, Finland, Chile, Portugal, New Zealand and Australia already have systems that are largely automated.

Though they're all a bit different, in those places filing taxes basically consists of governments filling out information on behalf of filers with what they know of their income and deductions, and then asking them about any other pertinent information that might reduce their tax burden. In some cases, the process takes minutes.

Antoine Genest-Gregoire, a tax policy researcher and PhD candidate at Carleton University, says other countries with more automated tax systems generally have fewer credits and deductions.

"Most people have very simple returns so if we created some kind of automated system, we're not going to reach 100 per cent of Canadians, but we're first going to reach those that have the lowest incomes, which have the most to gain," he told CBC News.

"And then we're probably going to reach a very large portion of ordinary middle-income Canadians who have fairly simple situations ... but right now need to go through filing the whole return, just because of those small steps of complexity in their return."

A person fills out an income tax return with a pen. The government is rolling out new programs aimed at automating the tax filing process, especially for low-income earners, including many who don't currently file and miss out on benefits. (Chris Young/The Canadian Press)

Filing taxes automatically for low-income Canadians is not the same thing as filing them automatically for everyone. But Genest-Gregoire says the new program targeting the first group is a slam dunk. "The CRA probably already has most of the information it needs to file for those people. And there's probably a lot to gain for them if we did so."

Jennifer Robson, an associate professor of political management at Carleton who authored the paper that came up with the 12 per cent figure noted above, said Canada's tax filing system hasn't evolved much since it was set up decades ago.

"We were actually one of the first countries to start doing a pay-as-you-earn model," she said in an interview. "We switched over to that during the middle of World War Two."

Taking deductions from paycheques instead of collecting them all at once helped the government stabilize revenue through the year, she said, and it was good for taxpayer "because they didn't have a big tax bill that they had to save up for and pay at the end of the year." 

Other countries soon copied the model, "but what those other countries did, as they move to pay as you earn, is they also updated their systems so that they could actually do tax returns where ... the vast majority of the work is actually done by the tax agency," Robson said.

As anyone currently riffling through a shoebox full of crinkled receipts can attest, in Canada the onus is on the taxpayer to do the heavy lifting, and pay for help if they need it.

"We've kind of inherited this decades-old system that we've just gotten used to [but] there's a big industry that kind of likes this current system," Robson said. "The CRA is basically the agency that verifies what you've told them ... but the for-profit tax filing firms are the ones that are there to help you maximize the size of your refund."

Moving the burden

Ottawa had launched previous initiatives aimed at automating more of the tax filing process, before backing down with little explanation.

Saul Schwartz, a professor of public policy at Carleton who co-authored the report with Robson, says they filed Access-to-Information requests to identify interactions between the tax preparation industry and the government, but those attempts didn't bear fruit.

"It took several years to find out that almost everything was blacked out," he said. "We tried to find out if there was intensive lobbying by that industry, with the federal government, but we don't have any direct evidence that there was."

WATCH | Accountant calls on the CRA to extend the tax filing deadline: 

This accountant is calling on the CRA to extend the tax filing deadline

Duration 0:56
Within three days of Eric Saumure, a chartered accountant with the firm Zenbooks, starting a petition to call for the Canada Revenue Agency to push back the tax filing deadline, more than 20,000 people had signed. (Photo: Elyse Skura/CBC)

Schwartz says any moves to automate the tax filing process should be welcomed. "Our research suggests that two thirds of social assistance recipients have returns that CRA could complete today," he said. "Why not just do that?"

That would be a great development for the people Mulholland at Prosper Canada works with every day. But she's not holding her breath for a largely automated tax filing process for everyone, any time soon.

"This pilot is a really good move and I'm hoping that it's something that they'll execute successfully so that we can try to expand over time to more people," she said.

"I think everybody would appreciate a break from the work of doing their taxes."

ABOUT THE AUTHOR


Pete Evans

Senior Business Writer

Pete Evans is the senior business writer for CBCNews.ca. Prior to coming to the CBC, his work has appeared in the Globe & Mail, the Financial Post, the Toronto Star, and Canadian Business Magazine. Twitter: @p_evans Email: pete.evans@cbc.ca

 
 
 
 
 
2964 Comments 
 
 
 
Loretta Willings 
Ottawa wants to automatically file taxes for low-income Canadians — and perhaps eventually for everyone.

Cattywumpus.

 
David Amos  
Reply to Loretta Willings 
You have the right attitude
 
 
 
  
Kenneth Hewer  
and the high-income Canadians are covering their mouths to stifle their snickering.  
 
 
David Amos  
Reply to Kenneth Hewer 
I am as poor as a church mouse yet I am snickering too  
 
 
 
 
 
dawn mills
Not a good idea, especially if they are self employed. Yet another reason, not to give them raises.  
 
 
mo bennett
Reply to dawn mills 
Given the quality of service that they provide, raises should never be considered. And never mind the working from home nonsense.  
 
 
David Amos  
Reply to mo bennett
Yo Mo Imagine you a I agreeing again  
 
 
 
 
 
A Fine 
If you want to make it easier to file taxes for everyone...simplify the tax code not the filing process...lol.  
 
 
Blair Morris 
Reply to A Fine 
Nah that will put government workers out of work
 
 
Raymond Ridler 
Reply to Blair Morris 
No, it will put a lot of tax accountants and firms out of work.
 
 
Kevin Leontowicz 
Reply to Raymond Ridler 
Bingo!  
 
 
Ivan Nano
Reply to A Fine 
For that vast majority, it's not that complicated.

Only when you get into your own business, investment incomes, depreciations, ... does it get complicated.

 
A Fine
Reply to Ivan Nano 
I have to disagree with you....even the simplest of returns for the average person is at best frustrating...at worst...seems complicated 
 
 
David Amos
Reply to A Fine 
I am not required to file 
 
 
David Amos
Reply to Raymond Ridler 
I bet a lot of beancounters regret the Feds canceling my SIN  
 
 
Aaron Morris 
Reply to Raymond Ridler   
Correct. The government workers will keep getting paid with less workload. Heck, they might even convince the Liberals to hire more of them. 
 
 
Ivan Nano
Reply to A Fine  
My point wasn't that the forms are/aren't complicated, but that what documents they need and what they can claim is not that complicated.

For the vast majority, you have one T4, a few charitable receipts, and a RRSP receipt and that's about it.

 
Ann Stephens 
Reply to A Fine
A good many don't have that. Lowest income won't have rrsp deductions, a charity receipt is just one line. These taxes could be filed in less than 5 minutes.  
 
 
Blair Morris 
Reply to Raymond Ridler
Read the original post again. Carefully. Simplifying the tax code would put an end to the tax police at CRA. 
 
 
A Fine 
Reply to David Amos
Relevance? 
 
 


 
Daniel Henwell 
Taxes is the one and only thing this government is laser-focused on!
 
 
David Amos  
Reply to Daniel Henwell  
I disagree 
 
 
 
 
 
mo bennett
That’s pretty funny, currently the staff is on strike, and even if they are working, the service that they provide is abysmal and they think introducing a new product is going to help? Give yer head a shake. 
 
 
David Amos  
Reply to mo bennett
Ditto
 
 
 
 
 
Greg Penner 
This is the same government that started using the Phoenix pay system before it was ready.....what could possibly go wrong?
 
 
Bill Rock 
Reply to Greg Penner 
I think the Conservatives created that one, the name of the man at the helm at the time was Harper, yes that's right Harper. 
 
 
Greg Penner
Reply to Bill Rock   
Yes the Conservative started Phoenix but it was the Liberal (Trudeau) who launched it against the advice of the designer, IBM, as it wasn't ready. 
 
 
Bill Rock 
Reply to Greg Penner 
So you're the kind of guy that would like to spend a billion dollars on something and then put it in mothballs because it might have a defect instead of starting it up and trying it out.  
 
 
David Amos  
Reply to Bill Rock  
Cui Bono?  
 
 
Greg Penner
Reply to Bill Rock  
No I'm the kind of guy who, when making a large investment, hires experts and follows their advice. The Liberals ignored IBM's advice.  
 
 
Bill Rock 
Reply to Greg Penner
Doesn't matter it still on Harper, Trudeau gets things done, example, Conservative Trucker Convoy a thing of the past.
 

Greg Penner

Reply to Bill Rock 
Enjoy your koolaid


Greg Penner
Reply to Bill Rock 
If ending the convoy protest is your go to of Justin's accomplishments you have very low expectations. 
 
 
Bill Rock 
Reply to Greg Penner 
I will.
 
 
Greg Penner
Reply to Bill Rock
Are Trudeaus repeated ethics violations on Harper too?  
 
 
 
 
 

Neil Gregory  
I think it would be a great idea, especially for those who receives government money as the government already has that information. 
 
 
David Amos  
Reply to Neil Gregory
Good point but what if they have other income? 
 
 
 
 
 
Tony Groothuizen   
An excuse to hire more 'public servants.'

There are free resources available on-line to file your taxes. They're easy to use.

  
G. Timothy Walton 
Reply to Tony Groothuizen   
So long as one has secure internet access and a reading level high enough to use the software.

That's not everyone.

 
David Amos  
Reply to G. Timothy Walton 
Amen 





Blair Morris 
How about automating government workers and politicians too? We already have exciting developments in artificial intelligence.
 
 
Tony Groothuizen 
Reply to Blair Morris 
There's the rub - they're not intelligent! 
 
 
Bill Rock 
Reply to Tony Groothuizen 
My nephew works for Revenue Canada, not intelligent you say, it took 4 years of University to become a chartered accountant. 
 
 
David Amos  
Reply to Bill Rock 
Tell your nephew to check my work
 
 
Bill Rock 
Reply to  David Amos
Nope... Can't do that.  
 
 
David Amos  
Reply to Bill Rock  
Anybody can
 
 
 
 
 
 
 
 

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