Government falling short on promise to roll out automatic tax filing pilot, experts say
The government is falling short on a 2023 budget commitment to pilot a new automatic tax filing program this year, experts say.
Last year’s federal budget said that in 2024, the Canada Revenue Agency (CRA) would “pilot a new automatic filing service” that would help hundreds of thousands of low- and fixed-income Canadians access benefits that are paid only to people who file tax returns.
By law, and in most cases, only people who owe taxes are required to file a return each year with the CRA.
Many people — notably those on government assistance — don’t expect to owe the federal government anything, so they seldom file.
Under an automatic system, the CRA itself would draw up the paperwork for such simple returns each year — using data they already have on hand about individuals’ income — to eliminate a bureaucratic burden that stands in the way of low- and fixed-income claimants receiving benefits.
The CRA announced earlier this month that — instead of piloting a new automatic filing system — it would be expanding an existing phone tax filing system called SimpleFile.
Under that program, the CRA sends out written invitations for taxpayers to call a phone line and answer a series of questions in order to file their tax returns. SimpleFile has been in place since 2018.
In its press release, the CRA said it would start a digital and paper version of the SimpleFile service this summer.
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But in a separate statement issued to CBC News, the tax agency confirmed that the expanded SimpleFile programs will still be invitation-based.
Jennifer Robson, an associate professor in political management at Carleton University, said that isn’t the same as an automatic filing system.
“They’re moving ahead with this very, very limited initiative, which was kind of part of what was promised in [the budget]. It’s definitely not the full meal deal,” she said.
Robson said the problem is that both the digital and paper versions of the SimpleFile system still require the taxpayer to initiate the process.
“This is still going to require that people … proactively decide to take a step on the basis of that invitation from the tax agency,” she said.
Kim Moody, a Calgary accountant and former chair of the Canada Tax Foundation, agreed. He said that requiring taxpayers to initiate the process is a “fatal flaw.”
“What’s your plan to get that money into the hands of those people that are not very good [with] or intimidated by the tax system?” Moody said.
“Any system that is designed to have people be the initiators of that process … good luck.”
A number of other countries, including the United Kingdom, Germany and New Zealand, have some form of automatic filing system for low- and fixed-income earners.
Moody said he thinks Canada should move toward the U.K. model. Under that model, those with simple tax situations have their returns filed automatically but can correct any inaccuracies later.
CRA says it will hold further consultations
The CRA said that, as it stands, it doesn’t have all the information it needs to introduce a system like the U.K.’s. The agency said in a media statement that the SimpleFile program only asks the taxpayer to confirm their identity and answer a few follow-up questions to complete the process.
“All SimpleFile services use information the CRA has on file for the individual, and the responses they provide, to complete and file their tax returns,” the agency said.
But Moody argues that the CRA should already have all the information it needs for simple tax situations.
“All they need to do is administer it in a fashion that enables the people to automatically have their tax returns filed, automatically have eligibility credits and have a system that, if it’s in error, they have the ability to correct it,” he said.
“There’s a whole segment of society here who … shouldn’t have to pay expensive people like me to do routine things.”
Robson estimates that roughly a third of all Canadians have tax situations that are simple enough to permit the CRA to automatically file their returns.
“I think it’s a question of ‘What’s the default?’ And right now the system … is that if you do nothing, the tax agency says, ‘Well, even though we’ve got all your information, we’re not prepared to take this as a statement of your income,'” she said.
The CRA said it plans to hold consultations going forward to find ways to “further automate” the tax filing system.
“The CRA will chart a path forward beyond 2025 that respects the needs of non-filing, lower-income Canadians to ensure more individuals have access to the benefits and credits designed to support them,” the agency said in a media statement.
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