The Parliamentary Budget Officer (PBO) has published a report suggesting that implementing an automatic tax filing system in Canada could result in Canadians receiving over a billion dollars annually in unclaimed benefits. This system, proposed in the Liberals’ 2023 federal budget, is set to target low-income individuals who have never filed taxes or have gaps in their filing history. It is estimated that between 7 to 12 percent of Canadians do not file their taxes, resulting in missed opportunities for major tax credits and government benefits.
The PBO’s report indicates that Canadians could receive over $1.6 billion in benefits in the first year of operation if the automated tax filing system is implemented, increasing to $1.9 billion by fiscal year 2028-29. These benefits include the Canada Child Benefit, Canada Workers Benefit, and GST/HST tax credits, which require individuals to file taxes to receive. The system would also expand access to the Canada Carbon Rebate in provinces outside of British Columbia and Quebec, without increasing net costs to the government.
It is estimated that the administrative costs for running the automatic tax filing system would be $57 million in the first year of operation. However, the PBO acknowledges limitations in its analysis, as the specifics of the program’s rollout are unclear, making it difficult to determine the number of Canadians who would benefit from the system. Additionally, the report is based on aggregates, making it challenging to gauge individual benefits from filing an automatic tax return.
In addition to the automatic tax filing system, the Canada Revenue Agency (CRA) is planning to expand its SimpleFile by Phone program, where CRA agents ask basic questions over the phone to provide a refund estimate. The agency issued 1.5 million invitations for this service in the current tax year, with plans to increase to two million invitations. The PBO estimates that expanding SimpleFile by Phone would cost $2 million over two years.
Overall, the implementation of an automatic tax filing system in Canada could have significant benefits for Canadians, including increased access to unclaimed benefits and tax credits. While there are administrative costs associated with the system, the potential payout to Canadians in unclaimed benefits outweighs these costs. The expansion of programs like SimpleFile by Phone also aims to simplify the tax filing process and increase access to refunds for more Canadians.
