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 pro‐ gram 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 hun‐ dreds of thousands of lowand 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 assis‐ tance - don't expect to owe the federal government any‐ thing, so they seldom file.

Under an automatic sys‐ tem, the CRA itself would draw up the paperwork for such simple returns each year - using data they already have on hand about individu‐ als' income - to eliminate a bureaucratic burden that stands in the way of low- and fixed-income claimants re‐ ceiving benefits.

The CRA announced earli‐ er this month that - instead of piloting a new automatic filing system - it would be ex‐ panding an existing phone tax filing system called Sim‐ pleFile.

Under that program, the CRA sends out written invita‐ tions for taxpayers to call a phone line and answer a se‐ ries of questions in order to file their tax returns. Simple‐ File has been in place since 2018.

In its press release, the CRA said it would start a digi‐ tal and paper version of the SimpleFile service this sum‐ mer.

WATCH | It's time to file your taxes. Here's what's changed:

But in a separate state‐ ment issued to CBC News, the tax agency confirmed that the expanded SimpleFile programs will still be invita‐ tion-based.

Jennifer Robson, an asso‐ ciate 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 Simple‐ File system still require the taxpayer to initiate the pro‐ cess.

"This is still going to re‐ quire that people … proac‐ tively decide to take a step on the basis of that invitation from the tax agency," she said.

Kim Moody, a Calgary ac‐ countant and former chair of the Canada Tax Foundation, agreed. He said that requir‐ ing 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 intimi‐ dated by the tax system?" Moody said.

"Any system that is de‐ signed to have people be the initiators of that process … good luck."

A number of other coun‐ tries, including the United Kingdom, Germany and New Zealand, have some form of automatic filing system for low- and fixed-income earn‐ ers.

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 later. any inaccuracies

CRA says it will hold fur‐ ther consultations

The CRA said that, as it stands, it doesn't have all the information it needs to intro‐ duce a system like the U.K.'s. The agency said in a media statement that the SimpleFile program only asks the tax‐ payer to confirm their iden‐ tity and answer a few followup 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 ad‐ minister it in a fashion that enables the people to auto‐ matically have their tax re‐ turns 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 expen‐ sive people like me to do rou‐ tine things."

Robson estimates that roughly a third of all Canadi‐ ans 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 in‐ formation, we're not pre‐ pared to take this as a state‐ ment of your income,'" she said.

The CRA said it plans to hold consultations going for‐ ward to find ways to "further automate" the tax filing sys‐ tem.

"The CRA will chart a path forward beyond 2025 that re‐ spects the needs of non-fil‐ ing, lower-income Canadians to ensure more individuals have access to the benefits and credits designed to sup‐ port them," the agency said in a media statement.