The Canadian government had plans to introduce a new automatic tax filing service in 2024 to assist low- and fixed-income citizens. However, instead of rolling out a new program, they opted to expand the existing SimpleFile initiative, which saw limited participation in the previous year.
According to the parliamentary budget officer (PBO), many low-income Canadians are missing out on government benefits because they do not file tax returns annually. The implementation of an automatic filing system was estimated to potentially result in the government disbursing between $1.6 billion and $1.8 billion to individuals currently not receiving these benefits.
Typically, individuals are only required to file tax returns if they owe taxes to the Canada Revenue Agency (CRA) by law. Many individuals, especially those on government assistance, do not anticipate owing taxes and, therefore, do not file returns.
The CRA’s decision to expand the SimpleFile program includes sending invitations to a select group of low-income Canadians to contact the agency and complete a brief questionnaire to finalize their tax returns. The agency announced that both paper and digital options would be available starting in the summer of 2024.
In a response to inquiries from CBC News, the CRA indicated that in 2023, 118,000 individuals were invited to utilize the SimpleFile program. Out of those, only 260 used the digital option, and 350 opted for the paper option, constituting less than two percent of the invitees who filed.
Elizabeth Mulholland, CEO of Prosper Canada, expressed little surprise at the low uptake of the 2023 program, attributing it to the fear many low-income individuals have of corresponding with the CRA, assuming negative news or potential scams.
Jennifer Robson, an associate professor at Carleton University, suggested making free electronic tax filing available on the CRA website for all individuals, following the approach adopted by the U.S. Internal Revenue Service.
Several other countries, including the United Kingdom, Germany, and New Zealand, have automatic filing systems for low- and fixed-income earners. Despite the expansion of the SimpleFile program, Canada still lags behind in implementing similar automated services as those in other nations.
The PBO reported that 46 percent of invitees to the SimpleFile phone system in 2023 sought assistance from the private sector to file their returns, potentially paying for accounting services despite being eligible for the free government program. Robson criticized this practice, stating that it undermines the program’s intended objective for low-income earners.
In its fall economic statement, the government stated its intention to develop legislation for an automatic filing system. While experts believe the CRA will eventually achieve this goal, they anticipate that progress may be slow and gradual.
