Feds promised to test a new ‘automatic’ tax filing service — but recycled an old program
The Canadian government’s plan to implement an automatic tax filing service in 2024 to assist low- and fixed-income Canadians has hit a roadblock. Instead of launching a new program as promised, the Canada Revenue Agency (CRA) decided to expand its existing SimpleFile program, which saw limited success in the previous year.
The Parliamentary Budget Officer (PBO) estimates that an automatic filing system could result in the government paying out billions of dollars to individuals who are currently missing out on benefits because they do not file tax returns. Many low-income Canadians do not file taxes as they do not expect to owe money to the government.
The SimpleFile program invites a select number of low-income Canadians to complete their tax returns by answering a short questionnaire over the phone. The CRA announced plans to introduce paper and digital options for SimpleFile in the summer of 2024.
However, when questioned about the usage of the new digital and paper options in 2024, the CRA revealed that they had not finalized the numbers yet. They pointed to the 2023 pilot program, where only a small percentage of invitees utilized the digital and paper options. Most individuals preferred traditional filing methods over the SimpleFile service.
Experts believe that the low uptake of the SimpleFile program is due to a lack of trust in government correspondence. Many low-income individuals fear that any communication from the CRA is bad news or a potential scam. To address this issue, some suggest making free electronic tax filing available to everyone on the CRA website, similar to the U.S. Internal Revenue Service.
Other countries, such as the United Kingdom, Germany, and New Zealand, have successfully implemented automatic filing systems for low-income earners. These systems automatically file returns for individuals with simple tax situations but allow for corrections if needed. Despite the expansion of the SimpleFile program, Canada still lags behind in implementing fully automated services for low-income taxpayers.
The PBO found that nearly half of the invitees to the SimpleFile program in 2023 sought help from the private sector to file their returns, indicating a missed opportunity for cost savings. Experts argue that leaving low-income individuals to pay for tax filing services undermines the purpose of the government program.
While the government has announced plans to develop legislation for an automatic filing system, experts believe that progress has been slow. They anticipate that the CRA will eventually implement a more efficient and user-friendly tax filing system, but it may take some time to achieve this goal.
