By Karen Kelly
Each year, $1.7 billion dollars in social benefits go unclaimed in Canada, sitting in programs such as the GST tax rebate, the Canada Workers Benefit and the Canada Child Benefit.
Most are meant for people who are struggling financially. As researchers who study social policy and income support for low-income Canadians, Jennifer Robson and Saul Schwartz wanted to know why people who need this financial help aren’t receiving it.
The answer? They don’t file taxes.
“When people don’t file, they are shut out from all of the cash benefits delivered through the tax system and that leaves them measurably worse off. Some families are leaving thousands of dollars on the table,” says Robson, a professor in the Master of Political Management program.
She notes that not having a tax return makes it harder for lower income Canadians to access a range of income-tested programs, from childcare subsidies, to legal aid, to pharmacare because provincial and local governments rely on tax information to check eligibility.
She and Schwartz, a professor in the School of Public Policy and Administration, used Statistics Canada data to analyze the economic situations of working aged adults who did not file. They published their findings in an article entitled “Who Doesn’t File a Tax Return? A Portrait of Non-Filers”. The article won the Canadian Economics Association’s Vanderkamp Prize in 2020 for the best paper published in Canadian Public Policy.
“We estimate that about 12 percent of working-age Canadians did not file a return and, as a result, were unlikely to have received the benefits for which they were eligible,” explains Schwartz. “We think the federal government should make serious efforts to reach those people and get them the benefits to which they are entitled.”
Robson agrees, citing the effect that would have on measurement of poverty rates in Canada.
“It’s a particularly large difference for families with children: it adds up to approximately 30,000 more kids in low-income circumstances,” says Robson. “If you are a government looking to reduce poverty, you should consider this.”
Calling on the CRA
Robson and Schwartz identify at least two barriers to the success of these so-called cash transfer programs. One is that filing taxes is just too complicated for some people. The second is that the Canada Revenue Agency may not be the best delivery vehicle for these benefits.
“We believe that the CRA has important weaknesses. It is not well-equipped to provide ‘soft services’ to help with complex needs or to provide transparent benefit review,” they stated in an article entitled “Should the Canada Revenue Agency Also Be a Social Benefits Agency?” published in the Canadian Tax Journal.
Instead, the researchers argue the Canada Revenue Agency should start doing everyone’s taxes—or at least those who need it most, such as social assistance recipients who aren’t likely to be claiming complex deductions or reporting foreign or investment income.
“They know almost everything about your income. They can say, ‘Here’s what we think you owe. Sign here if you agree.’ For many people, they could start that immediately,” says Schwartz.
However, there is strong opposition to the idea from the for-profit tax preparation companies. The researchers state that “having tax agencies prepare citizens’ tax returns is a serious threat to the for-profit industry and that may shoot it down entirely.”
Regardless, Schwartz and Robson are continuing to explore the idea of an expanded role for CRA with graduate students Antoine Genest-Gregoire and Josh Dadjo. The team is gathering information on countries that prepare citizens’ tax returns for them.
They are also interviewing low-income adults about their tax filing experiences and conducting a longitudinal survey to track patterns in non-filing.
“It seems like there’s actually some interest in the stuff we are doing here,” says Schwartz, sounding almost surprised. “It can be a good thing when high quality academic research can inform public policy.”
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