Report says that the complexity of the tax system means less than one third of tax returns could be correctly pre-filled
Filing a tax return is not most people’s idea of fun, so what if most of it was already completed by the Canada Revenue Agency?
The federal government wants to make automatic tax filing a reality for millions of Canadians, as detailed in the Throne Speech of September 2020.
But while the aim is that simple returns that are required to access benefits would be largely pre-filled by the CRA, a new analysis suggests that this would only help a minority of claimants.
CD Howe Institute researchers looked at international tax-filing practices and concluded that Canadians would face major tax-complexity challenges.
In “Automatic Tax Filing: A Challenging Idea for Canada,” authors Alexandre Laurin and Nicholas Dahir found that just 32% of potential tax filers would be able to have returns pre-filled by the CRA using third-party data to correctly assess their tax liability.
Better option
The authors believe that a more targeted solution to the narrower issue of getting cash benefits to vulnerable Canadians would be preferable to automatic tax-filing.
“Despite practical challenges, decoupling the requirement to file taxes from eligibility to claim benefits, facilitated by establishing a new body specifically tasked with delivering income-tested benefits to Canadians, would better serve the poverty-reduction objectives of government support programs that are now tied to tax filing,” Laurin and Dahir conclude.
The full report is at: https://www.cdhowe.org/public-policy-research/automatic-tax-filing-challenging-idea-canada.
