Why Automatic Tax Filing is Important to Reduce Poverty

In the recent Speech from the Throne, launching the new session of Parliament in Ottawa, a range of new initiatives were announced that could potentially help reduce poverty and food bank use. They included a commitment to a national childcare system, modernizing Employment Insurance, and creating the Canada Disability Benefit to increase the incomes of those with disabilities. They also made another commitment that may have a greater impact than many would think. The speech announced the introduction of free, automatic tax filing for simple returns to ensure citizens receive the benefits they need. Here is why that is important. 

For Canadians who live beneath the poverty threshold, every dollar counts. There are numerous federal and provincial financial supports available to them in the form of GST/HST credits, federal and provincial child benefits and more, that can significantly increase incomes  – especially for those on provincial social assistance. 

Problem is, those who don’t file taxes miss out on them. And the vulnerable populations these supports are supposed to help are often less likely to file them or have access to the support they need to file them to do what it takes to get them. This has created a structural barrier that takes a toll on people living in poverty. 

As front-line workers well know, many of these folks aren’t even aware these tax incentives exist. Even if they do, they must then have the time, resources and determination to navigate the many administrative barriers that come with the tax-filing process, something people in precarious situations find particularly challenging. 

People who are new to Canada, who live with physical or mental-health challenges, or who have lived their entire lives in the grip of poverty make up a significant portion of the Canadian population who are unlikely to file taxes, and as a result never benefit from the dollars that are waiting for them. 

This is about more than getting a cheque from the government. Social-assistance rates have not significantly increased since the 1990s and for many households they offer grossly inadequate support, in the face of today’s economic situation and COVID-19 crisis. This leaves many seeking the help of food banks, something we should strive to reduce. Unlocking tax-driven supports is key to this effort. 

Even before this announcement, the federal government was aware of this issue and took initial steps to help close the tax-filing gap and ensure vulnerable populations receive the benefits to which they are entitled. The Canada Revenue Agency works with local community organizations through the Community Volunteer Income Tax Program (CVITP), which provides support for volunteers to assist low income individuals prepare and submit their tax returns.

The potential for automatic tax filing to deliver money back in the hands of people who need it is immense. For example, the Saskatoon Food Bank & Learning Centre, through the CVITP, helped more than 8,400 people file nearly 5,700 tax returns in 2019, putting $25-million back into the hands of low-income individuals in Saskatoon. 

That’s just one organization. Automatic tax filing, in combination with outreach programs such as the one at the Saskatoon Food Bank and Learning Centre, could help permanently reduce the tax barrier facing those living in poverty. 

While we continue to strive for an improved income-security system that will better integrate with provincial social-assistance programs and build on the basic income model, automatic tax filing is an important win that will make a difference in the lives of people who need it most.