By Dian Cohen
Local Journalism Initiative
Shortly after becoming prime minister in 2015, Justin Trudeau took Jean-Yves Duclos aside and told him to develop Canada’s first-ever national poverty reduction strategy. Thus began many months of roundtables and town halls, in person and online, via conversations and conferences, informing the then minister of Families, Children and Social Development on how to reduce poverty in this country.
Two and a half years later, “Opportunity for All – Canada’s First Poverty Reduction Strategy” was published. Its primary goal was to reduce poverty by 20 percent by 2020 and 50 percent by 2030 based on the official measure of poverty. (This article won’t deal with the secondary goals of reducing chronic homelessness by 50 percent, ending all long-term drinking water advisories on reserves by 2021 and reducing or eliminating housing need for 530,000.)
There are well over 100 benefit, credit, incentive and other programs offered up by federal, provincial and territorial governments, all designed to transfer cash to low-income Canadians to further the primary goal of reducing poverty. They are all administered, not by the department of Families, Children and Social Development but by the Canada Revenue Agency (CRA), the tax-collector-in-chief. In Canada almost all government cash benefit payments require recipients to file a tax return. Individuals who don’t participate in the tax system, often the most vulnerable in society, may forego these benefits or even entitlements to government services when such services are tied to tax return information.
For the 31 million of us who filed a personal income tax return this year, it’s a tedious but necessary pain in the ass. Tedious because the basic tax return has 172 lines and 15 different schedules to pore over before you get to “Refund or Balance Owing”. Necessary, because failing to file gets you the double whammy of draconian interest penalties to pay and missing out on possible cash transfers like the Guaranteed Income Supplement or the Canada Workers Benefit.
Do you know how many of us don’t file a return? Neither does the CRA. They think it’s between 4 and 5 million people. They also don’t know why these people don’t file, since the estimated value of cash benefits lost to working-age non-filers is at least $1.5 billion.
Leaving seniors’ benefits aside, the largest benefit is the Canada Child Benefit, which pays out over $24 billion/year to parents. As an example, a low-income family of four with two young children in Ontario is in line for about $19,000 in federal/provincial child and family benefits. Benefits are similar in other provinces. The growing financial importance of these benefits leaves eligible recipients who don’t file a tax return increasingly penalized. As important, it reduces the effectiveness of our poverty-reduction goals.
In the interests of getting potential cash benefits into the hands of low-income earners, the CRA has, for the past six years, offered an automated phone service that allows low-income Canadians to file their tax return over the phone by answering a short list of questions. The uptake has not been good, averaging only about 60,000/year. Close to half the people invited to file for free may have paid a professional to help them file. The CRA can’t say why people would choose more expensive filing methods, although to an outside observer it looks like people don’t know about file-by-phone or the benefits for which they may be eligible, or the system is just too complicated or there are other reasons.
Indeed, there’ve been sufficient academic studies that say there are lots of ‘other reasons’. Many low-income people are suspicious of government and unfavorably disposed to tax filing. Some concerns are based on ignorance, like, for example, that cash benefit entitlements administered through the tax system will be clawed back from their social assistance benefits. Or they don’t understand how tax refunds work. Or they’re scared, fearing that by filing they might invite the CRA to dig into past income sources and expose them to serious actions by government.
In Budget 2023, the government announced its intention to increase the number of Canadians eligible for “SimpleFile by Phone” to two million by 2025, as well as to introduce a new automatic income tax filing service. Budget 2024 says the CRA will pilot a digital and paper version of its SimpleFile by Phone service intended for individuals who have gaps in their filing history or have never filed a tax return. It doesn’t say how the CRA will do that, but it does say it will provide an update in the fall of 2024.
So we really can’t say how much all this will cost – either the administrative costs to develop and deliver the file-by-phone program, or costs related to cash benefits delivered to individuals who would have otherwise not filed a tax return and would have foregone the benefits to which they were entitled. And we can’t say whether the CRA’s renewed efforts will be any more successful at convincing non-filers to file than their past efforts over the past six years.
In spite of the many billions of dollars that have been devoted to this project since 2018, the poverty level has moved from 11.2 percent in 2018 to an estimated 11.2 percent in 2024.
No doubt a lot of bad luck and real time issues – Covid 19, inflation, etc. – have intruded. Nevertheless, there’s a serious question to be asked. Is there not a better way to reach non-filers, get cash benefits into their hands and improve our track record of reducing the number of Canadians living in poverty? Other countries don’t require everyone to file a tax return and they manage to transfer money to low-income earners. Canada’s record on poverty reduction compared to other countries is not good. Is this new CRA initiative that builds on a failed old initiative the best we have?
Cohendian560@gmail.com