CRA should file the taxes for lower-income and vulnerable communities to avoid disruption to benefits, researchers say

As the Canada Revenue Agency seeks ways to encourage more Indigenous Peoples to file federal income taxes, researchers argue the federal agency needs to go beyond half-measures like simplifying technical language and running public information campaigns.

“The full measure is for them just to do your taxes,” Saul Schwartz, a tax researcher at Carleton University's School of Public Policy & Administration.

Two-thirds of Indigenous Peoples have filed taxes in the past year, according to a recent report commissioned by the CRA. That number hardly changed throughout the 2010s, according to an access-to-information request obtained by Carleton researchers.

Filing taxes can have benefits for low-income filers in particular, as they may be eligible for child benefits, Indigenous tax exemptions, sales tax refunds and refundable tax credits that require them to file with the CRA annually.

A disproportionate number of Indigenous Peoples are considered low-income due to colonial injustices like land dispossession, residential schools and everyday discrimination.

Almost one in five (18.8 per cent) Indigenous people in Canada lives in low-income households, according to the 2021 census. That number was down 10 per cent from 2016, likely driven by pandemic benefits. In contrast, the low-income rate in Canada in 2020 was only 9.3 per cent.

The recent CRA report also found Indigenous Peoples distrust the federal agency and experienced discrimination when interacting with the CRA.

Some might think it’s a radical idea. But it has precedent in countries like Denmark, although only simple tax returns with few deductions or credits, Schwartz and his colleague Antoine Genest-Grégoire said in an interview.

Having the federal agency file some tax returns could encourage more people to file, the researchers argue. Based on the CRA’s definition, roughly two-thirds (66.5 per cent) of personal income tax returns filed in Canada are “simple returns,” according to a recently published research paper titled “What Proportion of Tax Returns Could the Canada Revenue Agency Complete?” by Genest-Grégoire, Schwartz, Jennifer Robson and Josh Dadjo. That means there is no complex tax information such as high self-employment income or multiple sources of revenue through rentals or capital gains.

Genest-Grégoire describes the process as the CRA sending you a prefilled return using the income information they have from your employer or previous benefits. Then the filer could add medical expenses or other tax information. The process would avoid the complexity of filing on your own and make tax season much simpler for vulnerable populations like lower-income Indigenous Peoples, he said.

Under current CRA rules, Indigenous filers who don’t file on their own can either pay someone or software to do their taxes, avoid filing taxes and risk losing benefits, or depend on a program subsidized by the federal government where volunteers prepare and file income taxes for people with a modest income and simple tax situations.

Tungasuvvingat Inuit, an urban Inuit service provider based out of Ottawa and Toronto, has collaborated with Ottawa’s Community Volunteer Income Tax Program for the past four years.

“Their approach involves encouraging agencies to meet with potential tax volunteers and assess their suitability personally … and provide education whenever feasible,” Karen Orser, Tungasuvvingat Inuit’s manager of employment services, said in an email.

Another program — an automatic filing system run by the CRA that received expansion funding in the recent budget for a pilot project — has the CRA filing people’s taxes, mostly for seniors and other simple tax clients, through a questionnaire phone call.

The program shows the CRA already has an infrastructure to assess who has a simple situation, and it can be expanded for lower-income people to avoid gaps in receiving benefits, Schwartz and Genest-Grégoire argue.

Part of the hesitation of the CRA serving clients is found in how the CRA sees itself.

Historically, the central function of the CRA has been revenue collection, Genest-Grégoire said. But problems arise when filers with lower levels of tax vocabulary, numeracy and literacy run up against the daunting task of filing, mainly when their benefits depend on them.

“They're really not trained to be helpful; they're trained to collect taxes,” Schwartz said.

The CRA didn’t return Canada’s National Observer questions in time for publication, citing disruptions due to the ongoing public service strike.

“We might yet see tax filing, perhaps one of the driest subjects in politics, become an object of lively debate in the coming years,” the research paper authors wrote.

Matteo Cimellaro / Canada’s National Observer / Local Journalism Initiative