Many low income Canadians are missing out on benefits because they don’t file tax returns.
While most Canadians such as me think of what they owe at tax time, low income Canadians should be thinking about what they could receive. They pay virtually nothing in taxes and receive the greatest household income in terms of benefits from the Canada Revenue Agency.
So, why wouldn’t low income Canadians file returns? The reasons vary but when you don’t have much money, you can’t afford to pay for someone to prepare your taxes or to pay for a program like TurboTax that helps navigate the tortuous forms.
And this year could mean even fewer low income Kamloopsians file returns because the volunteers who usually help out with taxes are physically isolating themselves. That’s certainly the case for the society I belong to, CSI Kamloops. In normal times, we help thousands of people prepare returns at our North Hills Mall location. This year, we might be able to help at our Brock Activity Centre dependent on whether we can open.
For low income Canadians, the CRA is more like a social service than a tax collection agency. Since returns are used to determine eligibility for a abundance of other benefits, low income Canadians could be missing out on them as well. Professor Jennifer Robson of Carleton University explains:
“For many Canadians, the tax system can be more like a social service system. It delivers cash benefits such as the GST credit and Canada Workers’ Benefit, for example. Through a notice of assessment from CRA, the system also helps people prove their annual income so they can qualify for means-tested programs including housing and daycare subsidies, home heating rebates, and many others (Canadian Centre for Policy Alternatives Monitor November/December 2019).”
Working-age Canadians in the bottom 20 per cent of other income get the vast majority of their income from government transfers, “income that could be put at some risk if they can’t or don’t file a return,” adds Robson.
One way to ensure that low-income Canadians receive the benefits of filing a tax return is to have their returns automatically filed for them.
Almost everything is now in place for that to happen. You no longer have to apply for the Canada Workers’ Benefit because the CRA automatically assesses returns for eligibility for the tax credit. The same is true for the Guaranteed Income Supplement. Automatic enrolment is in place for the GIS so that seniors no longer have to apply for this benefit.
When I filled out my tax return using TurboTax, my forms were automatically filled out by accessing my CRA account. Except for political and charitable donations, CRA already had all my information.
Automatic tax filing doesn’t mean that the returns can’t be reviewed and corrected. In my case, I had the option of changing the CRA generated forms or not. Automatic tax filing probably wouldn’t work for those with complex returns such as business owners who could opt out the automatic return.
Not everyone thinks it’s a good idea. The tax preparation industry including Intuit, maker TurboTax, has spent $6.6 million in the U.S. lobbying against government tax filing. If taxes could be filed automatically, it would eat into their profits.
Norway, Denmark and Sweden already offer automatic tax filing. Other jurisdictions such Chile, Spain and California are coming on board. It’s all but done in Canada.