COVID-19 reveals major cracks in Canada's tax system for people on low incomes

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Image: KMR Photography/Flickr

Low-income Canadians who struggle to file their taxes without help recently received some good news. The Canada Revenue Agency announced it will continue to provide important supports, such as the Canada Child Benefit, the GST credit and the Guaranteed Income Supplement for seniors, for a few more months. Normally, individuals who don't file their taxes by the upcoming June 1 deadline will stop receiving benefits from the government from July onwards. 

For over a month, we at Canadians for Tax Fairness and others have strongly advocated for the Liberal government to continue to provide critical benefits, and we're glad they finally acted.

Extending benefits until September will help hundreds of thousands of vulnerable Canadians who depend on these payments, but it's a short-term fix for a longstanding problem. Lower-income individuals in greatest need of government supports have the hardest time navigating the tax system to access them.

More and more social benefits are delivered through the tax system. Over $50 billion annually in federal transfers go to low and middle-income Canadians, but only if they file their taxes, and dozens of provincial supports for lower incomes also require individuals to file their taxes each year.

COVID-19 has not only highlighted disparities in our healthcare and workplaces, but our tax system as well. Even in a pandemic, many fortunate Canadians will still be able to file their taxes with the virtual help of family, friends, accountants or commercial tax preparers. Low-income Canadians who don't have access to these resources will have a much harder time.  

Normally, these individuals can turn to volunteer-run tax clinics in their region. Clinics are often held at community centres, constituency offices, libraries and other accessible spaces for newcomers, seniors or people with disabilities. 

In 2018, thousands of volunteers helped over 830,000 low-income Canadians file their taxes. 

Due to COVID-19, these clinics have been cancelled across Canada. While volunteers are still working hard to provide virtual tax help to vulnerable Canadians, many of these individuals can't afford home computers and internet connections, and some don't even have telephones. With libraries, community services and Service Canada offices closed, they don't have public facilities to fall back on either.

Canadians who need this in-person support are also the most vulnerable to the virus -- seniors in residences and long-term care facilities, low-income seniors, families and individuals living in public housing, those with other health problems, and Indigenous Canadians. It would be reckless to expect them to meet until it is safe, but we don't know when that will be. 

If these individuals don't file, they won't continue to receive substantial payments, which could make the economic and health crisis worse. For many households, these monthly supports are their biggest source of income. They are the centrepiece of Canada's national anti-poverty plan, and individuals with no extra savings can't afford to get by without them.

They include the $13-billion Guaranteed Income Supplement (GIS) which provides up to $11,000 for low-income seniors, the $25-billion Canada Child Benefit which provides up to $6,939 per child, the $5-billion low-income GST credit, the $2-billion Canada Workers Benefit, and the $4.3-billion in Climate Action Incentive payment. 

Every province and territory also provides additional credits and benefits linked to these federal programs that won't flow to vulnerable Canadians unless they file their tax forms on time.

Community organizations, volunteers and Canadians for Tax Fairness had urged the federal government to extend the tax-filing deadline or to waive the requirement altogether for low-income Canadians. So has NDP revenue critic Matthew Green, whose office helps thousands of constituents complete their tax forms. The government's decision to extend benefits until September will help for a short while, but what happens after then? 

Waiving the tax-filing requirement for low-incomes would provide longer-term relief. The CRA could simply use 2018 tax information to continue providing benefits and make adjustments once 2019 taxes are filed. 

The CRA should also consider ways to improve how it processes taxes and delivers critical benefits. It doesn't make sense for governments to require low-income recipients to fill out complicated tax forms -- and to end their benefits if they don't -- when the CRA already has much of the information it needs to fill out these forms itself.  

For low-income seniors, the CRA already has most of the information needed to determine if these individuals continue to qualify for their benefits. For those on social assistance or workers' compensation, the CRA already has information from provinces reporting how much each individual has received. As Canadians for Tax Fairness and anti-poverty advocates have argued for years, the CRA should send out pre-filled preliminary tax forms for these groups and others, relieving them of the annual tax-filing burden as many other countries, such as Norway and Denmark, already do.

Moving to an automatic tax-assessment system would save Canadians the collective $5 billion plus we spend on filing our taxes each year -- and would enable community organizations to get even more people to file their tax forms and receive benefits. About one in 10 Canadians, and a much higher share of vulnerable people, don't file their taxes every year, and as a result, don't receive these benefits.

We need to look at longer-term reforms to our tax system so that it operates better for Canadians through both good and difficult times ahead.

Toby Sanger is director of Canadians for Tax Fairness and a past volunteer at community tax clinics.

Image: KMR Photography/Flickr

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