Open access
Research Article
23 August 2024

What Proportion of Tax Returns Could the Canada Revenue Agency Complete?

Publication: Canadian Public Policy
Volume 50, Number 3

Résumé

Résumé

Les personnes à faible revenu qui ne produisent pas de déclaration de revenus au Canada passent à côté de plusieurs avantages importants versés dans le cadre du régime fiscal et peuvent éprouver de la difficulté à vérifier leur admissibilité à d'autres produits et services publics affectés en fonction du revenu. L'Agence du revenu du Canada (ARC) pourrait produire des déclarations simplifiées pour de nombreuses familles à faible revenu, que les déclarants pourraient corriger. D'après la Banque de données administratives longitudinales, les auteurs estiment que cette approche pourrait être utile pour plus de la moitié des familles faisant partie du cinquième le plus bas de la répartition du revenu et de 60 % à 88 des familles qui se prévalent de programmes provinciaux d'aide au revenu. Ils estiment également que jusqu’à 4,6 millions de déclarations des personnes ayant un revenu inférieur à 25 000 $, que l'ARC considère comme simplifiées, ont été produites par un préparateur commercial ou un logiciel, ce qui fait ressortir les avantages potentiels de la production de déclarations déjà remplies par l'ARC dans de telles situations.

Abstract

Low-income individuals who do not file Canadian personal income tax returns miss out on several important benefits delivered through the tax system and may have challenges in verifying eligibility for other income-tested public goods and services. The Canada Revenue Agency (CRA) could complete simple returns for many low-income families, subject to filer correction. Using the Longitudinal Administrative Databank, we estimate that this approach could be successful for more than half of families in the lowest four ventiles of the population and between 60 and 88 percent of families who rely on provincial income assistance programs. We also estimate that as many as 4.6 million returns for those with income less than $25,000 and that are classified by the CRA as simple have likely involved a commercial tax preparer or software, emphasizing the potential advantage of the CRA providing completed returns in such cases.

Introduction and Background

Every person liable to taxation under this Act shall, on or before the twenty-eighth day of February in each year, without any notice or demand, deliver to the Minister a return, in such form as the Minister may prescribe, of his total income during the last preceding calendar year. (Canada 1917, § 7.[1])
Section 7.(1) of the Income War Tax Act (Canada 1917) established Canada's first personal income tax and enshrined self-assessment as the method by which taxpayers would inform the government of their tax liability.1 At the time, all personal income taxes were due as lump-sum amounts payable with an annual information return.
From the outset, the burden of having citizens file tax returns was noted, even though fewer than 10 percent of Canadians completed tax returns (di Matteo 2017). Over time, the number of Canadians who were required to pay taxes grew, as did the complexity of the tax code, increasing the burden placed on tax filers or leading them to enlist professional help.
Estimates of the costs of compliance in Canada date back to Vaillancourt (1989), who included detailed estimates of the time spent in the various activities involved in compiling a return. Later work by Vaillancourt updated and elaborated on his earlier work (Grine & Vaillancourt 2023; Vaillancourt et al. 2013, 2015). Until the vast improvement in digitization in recent years, efforts to reduce compliance costs had centred on simplification of the tax code. Given significant advances in digitization and information sharing for tax administration,2 our primary interest in this study is in the potential to make use of existing information flows to reduce the administrative burden and out-of-pocket costs to taxpayers with simple tax returns and limited ability to pay for professional tax products or services. We do not assume any changes to current tax measures.
Another important feature of Canada's tax policy is that several important social benefits are available only to eligible Canadians who file a tax return. Those benefits are either administered directly by CRA or by other government agencies using information provided by the CRA. This means that not filing a return can cost non-filers a significant amount in foregone income-tested transfers, public subsidies, or access to public services.3 Our primary interest in this study is the capacity of the CRA to derive accurate estimates of income for the purposes of program and cash transfer administration, separate from the function of tax collection. In fact, many Canadians with low income who rely most on income-tested benefits may not owe any income taxes at all.

Having the Tax Agency Complete Tax Returns

The prospect of having a tax administration agency initiate and complete tax returns has been studied in the past. In referring to this idea, we use the term tax agency reconciliation (TAR).4 Not only would TAR reduce the compliance costs borne by taxpayers, but it would also increase the likelihood that the social benefits delivered through the tax system reach eligible Canadians who currently do not file a return (Robson & Schwartz 2020). Where returns could be completed under a TAR system using existing sources of information available to the tax agency, the administrative burden would also not increase for the tax agency or third parties.
In the United States, starting in the late 1980s and extending through the 2000s, the possibility of “return-free” filing led the US federal government to commission several reports on its feasibility (US Department of the Treasury 2003; US Government Accountability Office 1996). Academic studies also appeared (Gale 2001; Gale & Holtzblatt 1997; Goolsbee 2006). Indeed, one US state, California, introduced return-free filing for an invited sample whose state tax returns were thought to be simple (Bankman 2005, 2008), as did Quebec (Vaillancourt et al. 2011, 63–72). The California and Quebec programs were maintained for only a few years, despite positive reviews from their users. Other US states experimented with various forms of return-free filing (Holtzblatt 2007, 334–346).
We now turn to two recent studies, one from the United States and one from Canada, that are directly relevant to our work. The first is a study by Laurin and Dahir (2022); the second is by Goodman et al. (2023).

Laurin and Dahir

Laurin and Dahir (2022) begin, as do we, with the presumption that the goal of TAR is to ensure that as many eligible Canadians as possible receive the social benefits that are available only to those who file a tax return. That presumption is supported by the 2020 Speech from the Throne that “committed the federal government to ‘work to introduce free automatic tax filing for simple returns to ensure citizens receive the benefits they need’” (Payette 2020, as cited in Laurin and Dahir 2022, 1).
Laurin and Dahir (2022) estimate the proportion of tax returns that are basic—receiving income only from sources that report directly to the CRA, claiming only those federal deductions for which the required information is already available to the CRA from third parties and only those tax credits whose eligibility requirements are knowable to the CRA. They estimate that 32 percent of all filers have basic tax returns.5
On the basis of this result, Laurin and Dahir (2022) write that
without fundamental tax policy reforms aimed at tax simplification, a broad-based automatic tax-filing system is unlikely to reduce compliance costs compared to the current auto-fill system: the majority of preliminary tax assessments prepared by the tax agency still would require further modification and optimization by tax filers. (13)

Goodman et al.

In an important advance, Goodman et al. (2023) augment actual returns with the associated information returns provided by third parties to the American tax agency, the Internal Revenue Service (IRS).
Goodman et al. (2023) use two methods of estimating whether the IRS could successfully calculate the tax liability for each tax filer. In their item-based approach, Goodman et al. define success as the absence of any features of the tax return that would cause the IRS to miscalculate tax liability. They identify 22 failure situations, including, for example, the tax filer claiming a tax credit or a tax deduction that could not be known to the IRS on the basis of the information available to it. This item-based approach is similar to that which we use in our own analysis of the Longitudinal Administrative Database.
Because they have the information returns, Goodman et al. (2023) can also simulate the tax liability of each taxpayer and compare it with the actual tax liability reported by the taxpayer. That is, they can replicate the outcome of a TAR process, simulating what the IRS might do if TAR were instituted for all US taxpayers. By doing so, they are “the first to simulate pre-populated returns in the U.S. context” (806).6 Success using this tax liability approach is defined as a simulated tax liability that is within a predefined dollar amount of the tax liability actually reported by the taxpayer.
Using the tax liability and the item-based approaches, Goodman et al. (2023) estimate that 42 percent and 48 percent, respectively, of US tax returns could be successfully pre-populated and processed by the tax agency. They also note that the success rate declines with income, that most of those for whom pre-population is unsuccessful have only one failure situation, and that success is more common among taxpayers who are single and young and have no dependents. Among those for whom pre-population is a success, “43 to 44 percent used a paid preparer when filing” (Goodman et al. 2023, 806).

Barriers to Successful TAR

The extant literature highlights several key barriers to a successful transition from a system of self-assessment to TAR. Here, we briefly note these and return to them later, in the “Conclusion” section, to discuss them in the current Canadian context.

Can TAR Be Offered to All Tax Filers?

Laurin and Dahir (2022) observe that TAR would work for only a minority of tax filers in Canada. They conclude, therefore, that “fully automatic tax filing for all appears to be a very blunt instrument to get to the narrower problem of non-filing eligible benefit recipients” (20). Instead, they argue for delivering the relevant benefits outside the tax system.7 Goodman et al. (2023) estimate that pre-population would also be successful for just fewer than half of US tax filers but note that their “analyses can inform policymakers considering more limited approaches to implementing pre-population” (818).

Missing Personal Information

Accurate TAR of returns and ensuring that tax filers receive the pre-populated returns (to allow them to correct or dispute information if they so wish) requires that the tax agency have accurate information about the taxpayers’ family composition as well as accurate contact information. Laurin and Dahir (2022, 13) note that to complete even basic returns, the CRA would need accurate information on the age of taxpayers, their marital status, and the ages and number of their dependents. This may be more challenging in cases in which a person has never filed a return in the past.

Mismatches between Third-Party Information and Taxpayer-Reported Information

Table 2 in Goodman et al. (2023, 815) lists the proportion of their sample with each of their 22 failure situations. Three of the five most common failure situations are mismatches between the information provided on the information returns and the information reported by the taxpayer. These mismatches involve (1) self-employment income, (2) wage income, and (3) family composition between 2018 and 2019.

Tax Filer Concerns

Tax filers who expect to receive tax refunds or to receive benefits delivered through the tax system might not be willing to wait for the pre-populated returns. In Canada, most third parties must currently provide information to the CRA and to tax filers by the end of February following the year to which the information applies. This timing issue was a central barrier cited in the US reports of the 1990s and 2000s when it seemed that pre-populated returns might not be available until after the April tax deadline.
Tax filers might also worry about the motivations of the tax administration. On the basis of the two previous government reports and their own survey of taxpayers, the US Department of the Treasury (2003) lists a number of reasons why taxpayers might not favour pre-populated returns, beyond the desire to get refunds as soon as possible. Summarizing the concerns of their survey respondents, they write, “The primary barriers to a return-free system were concerns about giving the government too much control over taxpayers’ lives and questions regarding how problems would be resolved with the IRS” (37).

Resistance from the Tax Preparation Industry

There is little doubt that TAR threatens businesses involved in tax preparation, including firms that prepare tax returns and those that sell tax preparation software. Ventry (2010) details the efforts of Intuit, the owner of TurboTax software, to undermine the California ReadyReturn system. Elliot and Kiel (2019), writing for ProPublica, document the lengthy efforts of Intuit to forestall efforts to use technology across the United States, whether in the form of TAR or by creating its own free software. The tax preparation industry has itself identified government policy to provide free services or to automate filing as a risk to its business model (Intuit 2023, 16).

Synthesis of the Literature and the Present Study

The main conclusion we draw from the past literature on TAR is that, even without any changes to the tax code, TAR should be possible for an important share of low- and modest-income tax filers. We begin our empirical work by discussing our analysis using de-identified tax return data in the Longitudinal Administrative Databank (LAD). We then briefly discuss supplemental findings from the CRA's published administrative data. We conclude with some observations and suggestions as governments in Canada proceed with commitments to simplify or automate tax filing for lower-income Canadians.

Data and Methods for the Longitudinal Administrative Databank Study

Our goal in this study is (1) to estimate the share of Canadian families with simple returns that could be initiated and completed by CRA and (2) to describe the sources of complexity that appear on the tax returns of the Canadian families whose returns could not currently be successfully completed by the CRA.

Data from the Longitudinal Administrative Databank

The analysis in this article is based on the LAD,8 which is a 20 percent sample drawn from the Statistics Canada (STC) database known as the T1 Family File (T1FF). The T1FF is constructed by STC, primarily using three administrative databases provided by the CRA. STC combines (1) individual tax returns (i.e., T1 returns), (2) employers’ statements of remuneration paid (i.e., T4 slips), and (3) a file documenting the receipt of federal child benefits. Together, these files allow STC to impute the existence of family units, “matching by social insurance number, family name, and postal code while accounting for age, sex, and marital status” (STC 2023b). Each imputed family unit consists of the individual tax filer; their spouse or partner, if any; and any unpartnered children of any age, all living in the same dwelling.9 Unattached individuals with no dependent children are counted as a family of one person. The T4 records allow some working but non-filing spouses or partners of tax filers to be identified in the LAD using third-party records, and the federal child benefits file allows any children in the family to be identified if both parents have filed a return (which is a condition of benefit payment). STC (2023b) writes that “when complete, the [T1FF] data is approximately 96 percent of the population.”10 The information for each individual tax filer is then augmented by information about their family, if any, allowing STC to impute family-level variables, such as the receipt of various forms of income by family members and the use of various provisions of the tax system by family members.
The LAD has been created specifically for the purpose of enabling research that requires large volumes of administrative data (STC 2021). The first LAD was created in the 1980s, based on tax returns for 1982. Once a person is selected for the LAD, the individual remains in the sample and is picked up each year from the T1FF as long as they appear in the T1 file in that year. Individuals selected for the LAD are linked across years by a unique LAD identification number, thus creating a longitudinal profile of each individual in the sample. It is possible to link about 95 percent of the individual tax filers in each year's LAD to their previous tax returns. The LAD is augmented each year with a sample of new tax filers so that it still consists of approximately 20 percent of tax filers every year. Reflecting increases in the Canadian population and changes in the incidence of tax filing, the 20 percent sample has grown over the years, starting with 3.2 million individuals and reaching 5.8 million in 2019. In our analysis, we use only tax information pertaining to the 2019 tax year and variables describing 2019 characteristics. This was the most recent year available at the time of writing.11
The information in the LAD is organized into four levels of aggregation: individual, couple, child, and family. Because many tax credits and tax deductions take the income or characteristics of an individual's partner (and, less frequently, other family members) into account, we believe that sources of complexity are best measured at the family level. Our analysis, therefore, uses only family-level data.12 To avoid double counting the family information, we retain only one record per family. We also apply family weights provided by STC, which allow its 20 percent sample to be representative of the whole set of families found in the T1FF.

Measuring Simple versus Complex Returns

The LAD enables us to observe, for each imputed family, the types of income that the family received in 2019. From their T1 information, we can also observe the use of any of the various federal tax credits and tax deductions. Depending on the elements that are included in the family's returns, we can therefore estimate which returns could have been completed by the CRA using third-party information. The CRA receives information from employers on wages, taxable benefits, union dues, registered pension plan contributions, Canada or Quebec Pension Plan contributions, and Employment Insurance contributions. This means that the CRA, using only the T4 information slip provided by employers, could complete the return of an individual whose only source of income was wages and who did not claim any credit or deduction. We would classify such an individual as having a simple return.
However, the CRA also gets information about a wider range of income sources.13 For example, it receives slips about public benefits from provincial and federal governments (T5007, T4E, and T4EQ slips). It also receives information from financial institutions that report savings and income in registered accounts, dividends, and interest income above $50 in any given year (T4A and T4RSP slips). The CRA does not have third-party information about whether individuals make charitable donations or whether they have moving expenses, which can be claimed as tax credits and deductions, respectively. We presume, however, that the CRA can automatically apply a series of characteristics-based credits for individuals. These include the basic amount, the spousal or equivalent-to-spouse amount; the Canada employment amount; and the amounts for age, dividends, pension income, employment insurance premiums paid, and provincial parental insurance plan premiums. These credits are all based on information the CRA can derive from information slips or the date of birth of the filer where a previously completed return exists in their records.14
We thus assume that an individual whose sources of income are all covered by these information slips and who claims only the simple credits listed has a simple return that could be completed by CRA. This is equivalent to the item-based approach used by Goodman et al. (2023) to assess the potential for successful creation of pre-populated returns.15
Given that our unit of analysis is the imputed T1FF–LAD family, we assess simplicity at the family level. A family's tax situation is considered simple only if all members have simple returns (or no returns, in the case of children). Our estimates of the simplicity of families’ tax returns are thus conservative because one individual with a complex tax situation raises the tax return complexity for other family members who might, individually, have simple returns.
Because the LAD is based on information from actual tax records, it shows what families included in their tax returns, including elements for which the CRA does not get information slips. Using the information on this extensive set of possible credits, deductions, and sources of income, we can also study families with complex tax returns in depth. We call these credits, deductions, and sources of income for which the CRA does not have third-party information “sources of complexity” and divide them into three groups: (1) income sources, such as self-employment or capital gains; (2) deductions, such as moving or childcare expenses; and (3) credits, such as those for medical expenses or charitable donations.
We take each of our LAD records and calculate the number of sources of complexity that are present in the returns of that specific family, overall and in any one of the three groups of sources of complexity. This provides us with a measure of the depth of complexity by looking at the share of families that have different numbers of sources of complexity in their returns. We also list the sources of complexity per family, which gives us a measure of the concentration of complexity in any given source or group of sources. We can thus go beyond estimating only whether families have simple or complex returns; we can also find out how close to being simple most complex returns are and identify the main sources of that complexity.
The LAD also provides us with information about age, gender, income level, and main income sources of families. This allows us to study how tax return simplicity varies across different types of families. In our analysis, we define total income as the sum of all income, from all sources, before taxes and before refundable tax credits (such as the Canada Child Benefit).

Results from the Longitudinal Administrative Databank

Defining the Sources of Complexity

Consistent with Goodman et al. (2023), we begin with the assumption that the tax agency has access to administrative and third-party information to pre-populate returns. Where a particular line on the personal income tax return cannot be completed using those sources, we consider it to be a source of complexity in the return.16 Table 1 shows the personal income tax items that trigger complexity in a return, organized into the three groups of tax items mentioned earlier—income sources, tax deductions, and tax credits. We have adopted the same classifications used in Laurin and Dahir (2022), omitting only the sources that are missing from the LAD and cannot be observed.17 Where a family does not report any of these items, we classify them as having simple returns.
Table 1: Personal Income Tax Items that Result in Complexity of Tax Returns
Complex Income Sources and DeductionsComplex Tax Credits
Income sources 
 Self-employment of any kindEligible medical expenses
 Net rental incomeDisability amount for self
 Capital gains or lossesDisability amount for a dependent other than a spouse
 Alimony or support incomeHome buyers’ amount
 Net foreign business income receivedVolunteer firefighter tax credit
 Net foreign non-business income receivedDonations and gifts tax credit, federal non-refundable
Complex deductionsPolitical contribution tax credit, federal
 Childcare expense deductionCanada Caregiver Credit amount for spouse or common-law partner or eligible dependent aged 18 and older
 Alimony deduction (claimed)Investment tax credit
 Moving expenses deductionLabour-sponsored funds tax credit
 Clergy residence deductionForeign taxes paid on foreign income, total amount
 Capital gains exemptions, calculatedTuition and education tax credit
 Expenses, other allowable 
 Carrying charges and interest expenses 
Note: Although this is not an exhaustive list of all credits, deductions, and sources of income that can appear in a tax return, it includes the most common sources of complexity available in the LAD and on standard T1 forms. See Statistics Canada's (2021) Longitudinal Administrative Dictionary for definitions as well as the list of inclusions and exclusions from this dataset.
Source: Adapted from Laurin and Dahir (2022).
Given our classification of all returns as either simple or complex, we compare, in Table 2, the characteristics of families with simple returns with the full sample of families in the LAD. Overall, we estimate that 28.8 percent of families have simple tax returns. We find that families with simple tax returns are slightly younger, are less likely to have pension income, have slightly fewer children, and are slightly more likely to be immigrants to Canada. We also find, however, that families with simple returns, compared with the full sample, have a much lower mean total income ($41,200 vs. $88,100) and are more than twice as likely to have income from a provincial social assistance program.
Table 2: Characteristics of Families with Simple Returns
Taxpayer CharacteristicsFamilies with Simple ReturnsAll Families
Mean family size1.72.0
Mean age of the sampled person and partner, if any (y)47.650.3
Presence of minor children (%)19.123.6
Lives in an urban areaª (%)71.071.8
Immigrant, landed after 1980ª (%)8.27.0
Femaleª (%) 51.753.0
Mean total family income ($) 41,20088,100
Main family income source is employment wages (%)55.557.5
Main family income source is social assistance (%)13.05.2
Main family income source is pension income (%) 17.521.7
No. of families4,944,86517,197,430
Share of all families (%)28.8100.0
ª Characteristic refers to the first sampled person in the Longitudinal Administrative Databank, even when there are multiple family members. Total income refers to total income before taxes and refundable credits. Main source of income is defined as the source of income that represents more than 50 percent of family income. Families for which no single source of income meets that threshold do not have a main source of income.
Source: Authors’ calculations using the Longitudinal Administrative Databank, 2019.
Given the notable difference in the mean total income of families with simple tax returns, our next series of figures present our analysis by income level.

Relationship between Income and the Sources of Complexity

We divide families according to the ventile of their equivalized family total income.18 For ease of interpretation by readers, our figures report the mean total income in the ventile, rather than the ventile number.
The first panel of Figure 1 shows the percentage of families without complexity at each ventile and illustrates the strong negative relationship between income and complexity in tax returns. Among families with income in the lowest four ventiles (i.e., in the bottom 20 percent of the income distribution), more than 50 percent submit tax returns with no source of complexity. The percentage without complexity then drops until fewer than 10 percent of families in the highest ventile have returns without complexity that would require a tax return to be proactively sent to the CRA for complete information. Figure 1 of Goodman et al. (2023) shows a similar pattern for the estimated proportion of US returns that could be accurately pre-populated by the IRS.
Figure 1: Share of Families with No Sources of Complexity by Ventile of Equivalized Total Income and by Main Source of Income
Note: N = 16,709,670 families. Number labels indicate the position of the 1st, 5th, 10th, 15th, and 20th ventiles. Equivalized family income is total family income divided by the square root of family size. We display mean equivalized income on a logarithmic x-axis for family income in each ventile, which explains that the scale does not start at 0, for which there is no logarithm. Families with negative income are dropped from this figure. We use total income, defined as the sum of all income, from all sources, before taxes and before refundable tax credits. We also exclude families with social assistance income above $15,000, for confidentiality reasons. The main source of income is defined as that which represents more than 50 percent of family income. Families whose main source of income is not pensions, social assistance, or T4 earnings either have no main source of income or a source other than pensions, social assistance, or T4 earnings. Subsample sizes are as follows: 364,340 families with no income; 3,520,620 families with pensions as their main source of income; 527,445 families with social assistance as their main source; 9,643,005 families with T4 earnings as their main source; and 2,654,260 families with another main source of income or no main source of income.
Source: Authors’ calculations using the Longitudinal Administrative Databank, 2019.
The second panel of Figure 1 shows the same percentages of families without complexity by income ventile, but with separate distributions for the three main sources of income reported in Table 2, as well as for those with no income or another main source of income besides those three or mixed sources of income. The major finding illustrated in this panel is that the majority of families with social assistance as their main source of income have no complexity in their tax returns. The patterns for families whose main source of income is either T4 employment income or pensions are similar to the overall pattern shown in the first panel. Regardless of their main source of income, high-income families are unlikely to have simple returns.
Higher-income families are not only more likely to have complex returns than are lower-income families, but they are also more likely to have multiple sources of complexity (Figure 2). These are the families most likely to continue to be required to proactively complete annual income tax returns. For families in the middle ventiles, the majority of whom have, on average, one or two sources of complexity in their return, efforts to improve third-party reporting to the tax agency or to otherwise simplify the processing of tax credits might expand return-free filing, but only if those sources of complexity are concentrated in a few types. In Figure 3, we describe the concentration of sources of complexity in tax returns.
Figure 2: Mean Number of Sources of Complexity by Ventile of Equivalized Total Income
Note: N = 16,709,670 families. Number labels indicate the position of the 1st, 5th, 10th, 15th, and 20th ventiles. Equivalized family income is total family income divided by the square root of family size. We display mean equivalized income on a logarithmic x-axis for family income in each ventile, which explains that the scale does not start at 0, for which there is no logarithm. Families with negative income are dropped from this figure. We use total income, the sum of all income, from all sources, before taxes and before refundable tax credits. We also exclude families with social assistance income above $15,000, for confidentiality reasons.
Source: Authors’ calculations using the Longitudinal Administrative Databank, 2019.

More Detailed Look at the Sources of Complexity in the Longitudinal Administrative Databank

Figures 1 and 2 establish the important point that most families with low and modest incomes, and especially those whose main source of income is social assistance, have tax returns that are not complex and could very likely be successfully completed by the CRA. We now use the LAD to examine the types of complexity in tax returns among families. We also report on the most common sources of complexity, if any, and the most common combinations of sources.

Sources of Complexity

Consistent with Figure 2, the upper left panel of Figure 3 shows that the vast majority of families (75 percent) have two or fewer sources of complexity in their tax returns, and 29 percent have no complexity at all. Figure 2 suggests that families with more than two sources of complexity will predominantly be higher-income families.
Figure 3: Distribution of the Number of Sources of Complexity for All Families
Note: All 17,197,430 families in the LAD are included. Following Laurin and Dahir (2022), we define complexities arising from three categories of sources: type of income, use of tax credits, and use of tax deductions (see Table 1). For each type of income for which the CRA lacks administrative or third-party information, we measure whether at least one member of a family has an amount different from 0 in their tax return. We present the sum of these sources overall and for each of the categories of income reported on the return, for tax credits claimed and for tax deductions claimed among all members of the family.
Source: Authors’ calculations using the Longitudinal Administrative Databank, 2019.
The bottom panels of Figure 3 make it clear that, compared with tax credit complexity, tax deductions (such as capital gains deductions) and income sources (such as having self-employment income) are less frequently sources of complexity in tax returns. Instead, non-refundable tax credits (illustrated in the upper right panel) appear to be the most common sources of income tax complexity. Even there, however, more than one-third (38 percent) of all families do not claim credits that could not be calculated by the CRA using existing information sources. It is also important to note that across the analyses in Figure 3, a plurality of families with any complexity have only one such source on their income tax returns.

Most Common Sources of Complexity

Noting that 75 percent of families have two or fewer sources of complexity in their tax returns that would prevent TAR and that credits are the primary drivers of complexity in personal income tax returns, we now report on the most frequently claimed individual tax items (credits, deductions, or sources of income) that trigger complexity in tax returns.
Figure 4 shows the proportion of families claiming tax items that trigger complexity in their returns, ordered from the most to the least frequent. Recall, from Figures 2 and 3, that most families have only one or two items that drive complexity in their tax returns. The most frequent source of complexity is a claim for the credit for eligible medical expenses (42 percent of families).19 Charitable donations are claimed by 29 percent of families. The key income items that create complexity in a personal return—self-employment and capital gains—are the third and fourth most common sources, respectively. All other sources of complexity are claimed by 10 percent or fewer families filing returns.
Figure 4: Share of Families with a Given Source of Complexity Present (%)
Note: N = 17,197,430 families.
*Shortened from “Canada Caregiver Credit amount for spouse or common-law partner or eligible dependent age 18 and older.”
Source: Authors’ calculations using the Longitudinal Administrative Databank, 2019.

Sources of Tax Complexity by Family Income

Consistent with the trend in the overall complexity of returns, families in the upper half of the income distribution are more likely to claim the more common tax measures that trigger complexity in a return. Figure 5 plots, by income ventile, the share of families using some of the key tax items that create complexity in a personal return. The use of both the medical expenses tax credit and the charitable donations tax credit rises rapidly after the fourth ventile. Claims for the disability tax credit (for the filer, not a dependent) show less variation by family income, which is noteworthy considering the overrepresentation of persons with disabilities among those in poverty.20 Claims of self-employment income trigger complexity and rise slightly with family income before declining in the middle ventiles and rising again in the highest income ventiles. These likely represent very different patterns of incorporation and professionalization in self-employment. Finally, tuition tax credits are claimed by a relatively small share of families across the income distribution, but the frequency does increase when family income exceeds the second ventile.
Figure 5: Share of Families with a Given Source of Complexity, by Ventile of Equivalized Total Income
Note: N = 16,709,670 families. Number labels indicate the position of the 1st, 5th, 10th, 15th, and 20th ventiles. Equivalized family income is total family income divided by the square root of family size. We use a logarithmic x-axis to display mean equivalized family income in each ventile, which explains that the scale does not start at 0, for which there is no logarithm. Families with negative income are dropped from this figure, following Goodman et al. (2023). We use total income, the sum of all income, from all sources, before taxes and before refundable tax credits, which corresponds to line 150000 of a given tax return. We also exclude families with social assistance income above $15,000, for confidentiality reasons.
Source: Authors’ calculations using the Longitudinal Administrative Databank, 2019.

Most Common Combinations of Complexity

Finally, we consider the clusters or patterns of tax measures that result in complexity in a family's tax return. Recall, from Figure 3, that those families with any complexity tend to have one or two tax items that trigger tax complexity and, from Figure 2, that the count of items generating complexity in the return rises with family income, especially from the fifth ventile onward. Table 3 reports the 16 most common combinations of sources of complexity. Four of the five most common patterns involve only one source of complexity. However, the second most common pattern is the two-source combination of charitable donations and medical expenses. This clustering analysis helps to clarify those tax measures for which improvements in third-party reporting or other adjustments might be expected to yield the best returns for expanding TAR and reducing the filing burden on individual Canadians.
Table 3: Most Frequently Occurring Patterns of Sources of Complexity in T1 Returns
Source of ComplexityNo. of FamiliesShare of Families (%)
No sources of complexity4,944,86528.8
Medical expenses only1,879,47010.9
Charitable donations and gifts + medical expenses849,1954.9
Charitable donations and gifts only655,6603.8
Self-employment income only565,4753.3
Tuition and education tax credit only441,2152.6
Medical expenses + self-employment income318,0951.8
Childcare expense deduction + medical expenses200,7801.2
Childcare expense deduction only195,7351.1
Disability Tax Credit for self191,3201.1
Charitable donations and gifts + medical expenses + self-employment income184,8901.1
Medical expenses + tuition and education tax credit158,9050.9
Disability Tax Credit for self + medical expenses137,2500.8
Charitable donations and gifts + self-employment income128,5100.7
Net rental income126,0650.7
Charitable donations and gifts + tuition and education tax credit108,8050.6
Other allowable expenses (deduction)104,2150.6
Charitable donations and gifts + medical expenses + tuition and education tax credit103,9250.6
Medical expenses + net rental income101,0700.6
Capital gains (or losses)98,1100.6
Childcare expense deduction + charitable donations and gifts + medical expenses95,2000.6
Note: All 17,197,430 families in the Longitudinal Administrative Databank are included. The 16 most commonly occurring patterns represent 67.3 percent of families (n = 11,588,755). The remaining 32.6 percent of families have one of the many other combinations of sources of complexity. For readability, we have shortened the names of certain tax measures: charitable donations and gifts = donations and gifts tax credit, federal non-refundable; Disability Tax Credit for self = disability amount for self; medical expenses = eligible medical expenses; other allowable expenses (deduction) = expenses, other allowable; self-employment income = self-employment of any kind.
Source: Authors’ calculations using the Longitudinal Administrative Databank, 2019.
Although capital gains are the fourth most common source of complexity in Figure 2, this source appears only near the bottom of Table 2. This implies that although capital gains are relatively common, those who claim them tend to also have many other sources of complexity.

Percentage of Simple Returns Prepared by Paid Third Parties

Goodman et al. (2023) had access to data that enabled them to directly observe the share of US tax filers who paid a fee to a tax preparer when TAR might have allowed the IRS to prepopulate their returns. They report (Goodman et al. 2023, 806) that 43 to 44 percent of those with a US return simple enough to be accurately processed by the IRS instead relied on paid preparers. Using the LAD, we are not able to directly observe the filing method or whether any fee was paid by Canadian families to a tax preparer.21
Nonetheless, we can instead use data published by the CRA itself. The CRA publishes annual data on the volume of returns received, by income level (at the individual, not the family, level) and by the agency's own classification of the complexity of the return. Beginning with the 2015 tax year, the CRA has published data on the method of tax filing and the agency's own assessment of the complexity of the returns. Here the CRA applies the same list of tax measures (income sources, credits, and deductions) used to determine eligibility for assistance through the Community Volunteer Income Tax Program (CVITP).22 CRA defines a simple T1 tax return as one that does not include any of the following sources of complexity (CRA 2021b):
gross self-employment income
net partnership income
taxable dividend income
employment expenses for deduction
capital gains or losses
taxable amounts of interest income of $1,000 or more
rental income and expenses
foreign property and most sources of foreign income
an insolvency filing by the taxpayer in the tax year
a final return for a deceased taxpayer.
Eligibility for CVITP services follows the same definition of simplicity but also imposes an income test of $35,000 for singles, with amounts rising as family size increases. This definition is far less restrictive than the definition of simplicity in our analysis using the LAD; for example, returns claiming credits for medical expenses or charitable deductions might be considered simple by the CRA.
We analyze the tax agency's published personal income tax return data for the four available tax years 2015 through 2018 (CRA 2018a, 2019a, 2020, 2021) that were not disrupted by the COVID-19 pandemic. We also use data from the agency's annual reports on the count of returns prepared in CVITP clinics (CRA 2016b, 35; 2017, 23; 2018b, 41; 2019b, 1). We combine these two data sources to calculate the overall share of simple returns (as defined by the CRA), those with personal income below $25,000,23 and to estimate the share of returns filed using a fee-based tax preparation service. Returns filed electronically by tax preparers use the EFILE licensing system (see Appendix A) for both free CVITP and fee-for-service returns. Because the agency reports the volume of returns received using EFILE by simplicity and income level, we can estimate the share of those filing returns with modest income and simple tax situations who likely paid to have their taxes completed by subtracting the volume of CVITP returns from the overall EFILE total.

Results of the Analysis of the Canada Revenue Agency Data

In Table 4, we present four-year means for the 2015 to 2018 tax years. Percentages calculated from other lines in the table are in bold for ease of reference.
Table 4: Canada Revenue Agency Administrative Data on Return Simplicity and Filing Method
All ReturnsMean (2015–2018)
A. Count of all returns26,872,605
B. Count of all simple returns17,865,735
Percentage of all returns that are simple (B / A)66.48
C. Count of all returns filed via EFILE15,651,803
D. Count of all returns filed by free CVITP clinics785,034
E. Count of all EFILE returns filed outside CVITP (C − D)14,866,769
F. Count of simple returns filed using EFILE9,612,088
G. Count of all simple returns filed using EFILE outside CVITP (F − D)8,827,054
Percentage of returns filed using EFILE outside of CVITP that are also simple (G / E)59.37
Percentage of all simple returns filed also using EFILE outside of CVITP (G / B)49.40
Returns with income below $25K 
H. Count of returns under $25K10,470,750
I. Count of returns under $25K that are simple8,149,198
Percentage of returns under $25K that are simple (I / H)77.83
J. Count of all returns that are simple and under $25K using EFILE outside CVITP4,579,665
Percentage of all returns that are simple, have income under $25K, and are filed using EFILE outside of CVITP clinics (J / A)17.05
Note: Annual data are remarkably stable across the four-year period and so are excluded from the table for brevity but are available on request. The count of CVITP returns for 2018 is an estimate based on the Canada Revenue Agency's report that the volume of returns increased by 5 percent over the previous year. Percentages calculated from other lines in the table are in bold for ease of reference. CVITP = Community Volunteer Income Tax Program.
Source: Authors’ calculations using data reported by the Canada Revenue Agency on T1 returns and in the annual agency annual report.
Using the CRA's administrative data, we find that two-thirds of all personal income tax returns filed by Canadians are simple according to the agency. Among the 10.5 million taxpayers with a total personal income below $25,000, the share of simple returns was even higher at 77.8 percent. Note that these results are for individual income rather than the family income we use in our main study and so are not directly comparable with our main results.
The CVITP program completes an important but relatively small number of returns each year (fewer than 800,000 per year, on average), representing just 2.9 percent of the 27 million annual tax returns received by the CRA. Among the 27 million personal tax returns filed, 15 million are EFILEd by a tax preparer outside the CVITP system. Although some of these might be prepared for free by friends and family who are tax professionals or through no-charge services provided by some commercial preparers (see Appendix C in the online supplement), we expect that the majority will have been filed by a professional in exchange for a fee paid by the tax filer. Among these 15 million returns, we find that a majority, 9.6 million (or 59 percent), are categorized as simple by the tax agency. When looking only at the 17.8 million simple returns received by the agency, up to 49.4 percent are prepared by a commercial tax preparer and likely incur a fee. This is similar to, but somewhat higher than, the results for the United States reported by Goodman et al. (2023).
Finally, we calculate that there are up to 4.6 million returns where the tax filer has a simple tax situation (a low personal income below $25,000) and has perhaps paid a fee to a commercial tax preparer to file a return that could likely have been accurately completed by the CRA. These represent 17 percent of all 27 million tax returns filed with the CRA. Eliminating these tax compliance costs, particularly if these filers are submitting a return primarily to ensure eligibility for income-tested benefits and services, could represent a major cost savings to households.24

Conclusion

Like Laurin and Dahir (2022), we estimate that the CRA could, if so directed, initiate and complete tax returns for a minority of all Canadian tax filers. Providing TAR to that minority would reduce administrative burdens and improve access to the important benefits that tax filing confers.
Our results make clear that the CRA could likely implement TAR for nearly one-third (29 percent) of Canadian families, most of whom would be concentrated in the lower end of the income distribution and would include between 60 and 88 percent of families relying on provincial social assistance. This is not equivalent to a universal system of TAR for all tax filers. In fact, even in countries with return-free taxation, some individuals are still required to complete annual returns (Laurin & Dahir 2022). We do not believe that an inability to offer TAR to middle- and upper-income Canadians with more complex tax situations should be reason to deny it to those who would benefit most. Tax filers with simple tax situations are most likely to be lower- and modest-income Canadians who have the least ability to pay a tax preparer and the most to gain from the many income-tested benefits and services that require a T1 return. We would argue that the government and its tax agency should not let the perfect be the enemy of the good. The CRA could, and should, move toward completing tax returns for as many Canadians as it can.
With the agreement and participation of provinces (that administer social assistance), the CRA could make use of T5 information slips and other information already collected by social assistance programs to complete the returns of persons in receipt of provincial social assistance.25 Provinces should be responsible for getting the consent of social assistance clients to share their data and use it in this way. These kinds of information-sharing consents are already a common aspect of provincial social assistance systems.
The literature review in this article identified several potential barriers to the adoption of TAR, even for a subset of all taxpayers. Some of these barriers have become less salient with advances in digital technology. Other barriers remain important. We discuss them here in the current Canadian context.
Potential delays in processing returns in a TAR system (while the tax agency waits for third party information and then populates simple returns) have been raised as a concern. Taxpayers awaiting a refund might object to waiting for the CRA to prepare their return. In Canada, individual tax filers must already wait for their third-party information slips to initiate a return. If one assumes that the CRA has resources that enable it to use the most advanced data processing technologies, delays due to processing of simple TAR returns are unlikely to be a concern.26
Mismatches between third-party information on file with the CRA and a taxpayer's own records have been raised as a concern with TAR (Goodman et al. 2023). We note, however, that the tax agency already has the power to assess taxes owed with or without an information return and that mechanisms exist for individual taxpayers to review and, if necessary, challenge third-party information on file with the CRA.27
Tax filer trust in the CRA to correctly apply tax measures may also be a concern regarding TAR. When choice or discretion is used in applying certain credits (such as pension income splitting or transfers of claims for medical expenses), we recognize there is potential for taxpayers to mistrust the discretion of the tax agency. When returns require little or no choice to be accurately completed, however, this concern may be harder to justify. It is also important to note that the CRA already retains the right to reject claims for certain tax measures, and, in the current system, some adjudicated credits see as many as one in five claims subjected to back-and-forth communication between a tax filer and the CRA before being decided in the tax filer's favour (Tedds & Robson 2023). To be fair and accountable, a TAR system must permit tax filers to review, correct, and dispute the assessment of the CRA, consistent with the rights of tax filers in the current system.
Industry objections to the introduction of TAR include the argument that the industry already provides eligible tax filers with free options to complete their returns with limited administrative burden, potentially reducing demand for TAR.28 Those objections will no doubt persist. In Canada, Tax-Filer Empowerment Canada (2023a), the lobbying arm of the Canadian tax preparation industry, argues that
Canadian tax filers are best served by a system that keeps the role of the tax collector, investigator, auditor and enforcer, separate. The separation of these roles enshrines the right of Canadians to independently prepare and file their income taxes with impartial and client-focused services provided by our members, while enabling the CRA to focus its efforts on assessing tax returns and taking enforcement action when necessary.
Despite industry concerns, we note that the IRS is piloting a web application called Direct File that permits truly free filing options (IRS 2023). This could serve as a pathway to resurrect the Canadian Digital Services’ aborted efforts to create a similar service for the CRA (Robson and Schwartz 2021). Given that the Government of Canada has now committed to “pilot a new automatic filing service that will help vulnerable Canadians who currently do not file their taxes receive the benefits to which they are entitled” (Canada 2023, 38–39), we anticipate that industry objections will accelerate.
Others have considered the effects of complex tax measures for the prospects of TAR and have concluded that general tax simplification is a necessary pre-condition for success. This can be taken to mean cancelling tax measures and raising effective tax rates. However, our results have identified the specific tax measures that most frequently present obstacles to TAR for most Canadians. These are claims for medical expenses, charitable donations, education credits, and self-employment income. Furthermore, our results suggest that the majority of tax filers in Canada make use of just one or two of these tax measures. We therefore reject the suggestion that these tax measures would need to be eliminated to enable TAR for an important share of Canadians. Indeed, countries that have return-free taxation have found administrative mechanisms to enable taxpayers to benefit from similar credits or deductions without the requirement of a complete tax return (HM Revenue and Customs 2023; Inland Revenue 2021; Revenue 2023; Skat 2023; Saktterverket 2023). A critical review of those administrative mechanisms (such as enhanced third-party reporting, digital reporting for specific credits, and integrating more credits into payroll withholding rates) is outside of the scope of this study but could yield useful options for consideration. Still, we recognize that some Canadians will continue to be required, or may prefer, to submit a personal income tax return.
The 2020 Speech from the Throne committed the federal government to work toward automatic filing for Canadians with simple returns (Canada, Parliament 2020).29 More recently, the 2023 federal budget has promised a pilot project to offer an automatic filing service, beginning with vulnerable Canadians. The government of Quebec announced an almost identical pilot project as part of its 2023 budget. Quebec operates its own income tax system and administration in parallel with the federal income tax system. We welcome these developments with cautious optimism. The results presented in this article will be relevant to discussions about the direction, scope, and details of potential pilot initiatives and policy changes thereafter.

Acknowledgements

Inquiries regarding this article should be directed to Antoine Genest-Grégoire ([email protected]). The analysis presented in this article was conducted at the Quebec Interuniversity Centre for Social Statistics (QICSS), which is part of the Canadian Research Data Centre Network (CRDCN). The services and activities provided by the QICSS are made possible by the financial and in-kind support of the Social Sciences and Humanities Research Council (SSHRC), Canadian Institutes of Health Research, Canada Foundation for Innovation, Statistics Canada, Fonds de recherche du Québec, and the Quebec universities. The views expressed in this article are those of the authors and not necessarily those of the CRDCN, the QICSS, or their partners. We acknowledge the financial support of SSHRC grant award 506510-Sub5. Antoine Genest-Grégoire also acknowledges the support of his doctoral studies by the Fonds de recherche du Québec–Société et Culture and the Government of Canada's Vanier-Banting Secretariat. The authors declare that they have no competing interests, either financial or community in nature.

Footnotes

1
The Income War Tax Act (Canada 1917) and amendments. The current Income Tax Act (Canada 1985a) continues to provide the minister with the power to require personal income tax returns, but it also provides, in Part 1, Division 1, Subsection 150(1.1), that many individuals will be exempt from this requirement unless they have special tax circumstances. Several other sections (e.g., subsection 152[7]) of the act also empower the minister to assess or reassess individual taxes owed. The minister is not bound in making an assessment by the information provided in an individual tax return, and the minister may waive requirements to file forms, documents, or receipts (Part XV, subsection 220[2.1]).
2
In the current system, some 92 percent of personal income tax returns are filed electronically, either using tax agency–approved software products or fee-based professional services from the private sector (CRA 2023c). Furthermore, electronically filed returns (whether completed by a tax filer or a tax preparer) benefit from pre-completion for many lines of the tax return, using information already on file with the tax agency (CRA 2016a). In Appendix A, we describe the current flow of information and options for completing a personal income return electronically.
3
In Appendix B, we provide illustrative examples of the range of provincial and federal benefits and service programs that require a personal income tax return to verify eligibility.
4
Tax agency reconciliation has also been called “automatic filing” and “return-free filing.” For us, TAR means that the tax agency sends the taxpayer a completed tax return, which the taxpayer can either (1) accept, sign, and send back to the agency or (2) modify as appropriate and then sign and send it back. If the tax agency's return is not sent back in a timely fashion, the return would be deemed to have been accepted.
5
Laurin and Dahir's (2022) empirical work was done with the Social Policy Simulation Database and Model.
6
Goodman et al. (2023) use a simulation model called NBER TAXSIM. They note (Goodman et al. 2023, 812) that TAXSIM imperfectly reflects the US tax code so that using a richer simulation model might calculate more returns successfully.
7
Even if the relevant benefits were administered by a different government agency, however, the CRA would still be counted on to use tax returns to verify personal or family income.
8
The LAD team at STC helped us to understand the LAD data. We thank them for their help and absolve them of any responsibility for any remaining errors.
9
This is not the definition of family used by the CRA when it evaluates whether an individual is eligible for most credits, deductions, or benefits. To calculate the value of many cash benefits, such as the Canada Child Benefit, the CRA uses a definition of adjusted net family income that includes the incomes of the individual, their partner, but generally not that of their children, minus a set of specified deductions. In other cases, such as the Tuition Tax Credit and Caregiver Amount, the CRA recognizes family relationships beyond the census family. For more discussion of the different ways in which families are defined and family income is calculated, see Milligan (2022).
10
In 2020, 29.3 million individual tax returns were filed. Using the T4 file and the Federal Child Benefits files, STC identified 7.7 million non-filing spouses, partners, and children. Each record is included in the database whether they filed taxes or not, and there could be more than one tax filer in each family (STC 2023c).
11
It is worth noting that the filing deadline and resources such as community tax clinics and in-person tax preparation for the 2019 tax year were significantly disrupted by the COVID-19 pandemic. However, our interest, in this study, is the analysis of completed returns and the impacts of complexity of tax situations for tax agency reconciliation, not the method or timing of returns.
12
The LAD, the T1FF, and our results are based on census families, plus single individuals without dependents. Statistics Canada defines a census family as a married or common-law couple with their children, if any, or a lone parent with their children, all living together (STC 2015).
13
The CRA (2016a) publishes a complete list of the third-party information slips it receives and uses to auto-complete returns in licensed tax preparation software.
14
TAR may not be possible for those who have not previously filed a return.
15
We did not attempt to reproduce the tax liability approach of Goodman et al. (2023). To calculate taxes and credits, that approach uses data provided to the IRS by third parties in information slips. The calculated taxes and benefits are then compared with what the actual tax record shows for the taxpayer. First, our primary interest is in the ability of the CRA to estimate income for the purposes of benefit administration. Second, our data sources do not permit this type of analysis. The LAD contains only the actual tax record for each individual (and for their family), not the data from information slips. Put otherwise, Goodman et al. have access to pre– and post–tax-filing administrative records, whereas we have only the post-filing record.
16
We do not classify all persons with income below the basic personal exemption as having simple returns. Additional credits or deductions may not matter in practice for the assessment of unpaid taxes owed by individuals with total income below the basic exemption, although these could matter for an accurate estimate of any refund owing. However, we also consider complexity arising from sources of income. When a taxable income source is not directly reported to the CRA by a third party (such as self-employment income), the tax agency cannot independently determine whether each person in a family has income above or below the basic personal amount. Because our primary interest is in the use of the tax filing system for the administration of income-tested programs and benefits, the CRA still requires an accurate estimate of income, even when it is below the basic personal amount. Many filers make use of credits and deductions to lower their taxable income below the basic personal amount. Using recent data published by the CRA (2023b), we find that 30 million returns were filed for 2021, of which 8.4 million (28 percent) had no taxes owing. Among the 8.4 million non-taxable returns, just 3.3 million had income definitively below the basic personal amount. In short, we caution against considering income level below the basic personal amount, or non-taxable returns, as a proxy for simple returns. They are simply two different concepts.
17
Allowable business losses, occupational training, and the credit for eligible school supplies for teachers are used by Laurin and Dahir (2022) but are not available in the LAD.
18
Equivalized family income is total family income divided by the square root of family size. We use equivalized family income because families with the same equivalized income but different sizes will likely have different ways of using the various deductions and credits. Families with negative income are dropped from this analysis, following Goodman et al. (2023). We also exclude the handful of families with social assistance income above $15,000, for confidentiality reasons.
19
For simplicity, we use the amount claimed on line 33099 of the T1 return that includes eligible expenses for self, a spouse or partner, or dependent children aged younger than 18 years but before adjustments for net income and amounts for the other dependents to determine the net allowable credit for medical expenses (reported on line 33200).
20
The Disability Tax Credit also imposes certain administrative and financial burdens outside the return itself that appear to discourage lower-income Canadians with disabilities from applying (Tedds and Robson 2023).
21
In the 2021 LAD, the variable return method (RTNMT_) was added to the database and made retroactive to the 2003 tax year (STC 2023b). However, the level of detail provided in the LAD does not permit us to differentiate between those who used a paid service versus, for example, a free community volunteer income tax clinic supported by the CRA. It may also be skewed by any bias or change to filing patterns as a result of COVID-19 pandemic changes to policy and service delivery. In 2020, the deadline to file a return for the 2019 tax year was extended, and many services, both voluntary and fee based, were disrupted to comply with public health orders.
22
The CVITP facilitates access to free tax preparation for qualifying tax filers through a network of volunteer clinics often hosted by community organizations with training and software provided by the CRA.
23
The CRA data on return complexity and filing method categorizes returns into only four personal income groups: below $25,000, between $25,000 and $49,999, between $50,000 and $99,999, and $100,000 or more.
24
Tax preparers who allow clients to pay for services using a tax refund are subject to a legislated fee schedule (reported in Appendix C). Appendix C also reports on our scan of fees for software by leading providers that makes use of the NETFILE system.
25
Provincial social assistance systems commonly collect and regularly update information about household composition, other sources of income, participation in work, training or other active measures, disability status, and access to extended health insurance benefits.
26
The CRA maintains a service standard of two weeks for processing personal income tax returns filed electronically and before the deadline (CRA 2022b). The agency has also introduced an Express Notice of Assessment that allows eligible tax filers using digital services to receive their Notice of Assessment right after filing a return (CRA 2022a). The tax agency retains the right to conduct a reassessment and issue a Notice of Reassessment later in the year. Taken together, this information suggests that the CRA is able to process returns swiftly once it has the relevant information.
27
See the discussion in Note 1 and Appendix A.
28
See Table C.2 in Appendix C for a description of leading free tax-filing software products, including eligibility criteria for users and the price of the next available product.
29
See Appendix D for the text of this and other recent federal policy commitments related to tax filing and access to benefits.

Supplemental Material

cpp.2023-016_supplement1.pdf

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Information & Authors

Information

Published In

Go to Canadian Public Policy
Canadian Public Policy
Volume 50Number 3September / septembre 2024
Pages: 292 - 310

History

Published ahead of print: 23 August 2024
Published in print: September / septembre 2024
Published online: 13 September 2024

Keywords:

  1. automatic tax filing
  2. Canada Revenue Agency
  3. personal income tax
  4. tax administration
  5. tax preparation

Mots clés :

  1. administration de l'impôt
  2. Agence du revenu du Canada
  3. déclarations automatisées
  4. impôt sur le revenu
  5. service de préparation de déclarations de revenus

Authors

Affiliations

Antoine Genest-Grégoire
Department of Taxation, Université de Sherbrooke, Sherbrooke, Quebec, Canada
Jennifer Robson
Arthur Kroeger College, Carleton University, Ottawa, Ontario, Canada
Saul Schwartz
School of Public Policy and Administration, Carleton University, Ottawa, Ontario, Canada
Josh Dadjo
School of Public Policy and Administration, Carleton University, Ottawa, Ontario, Canada

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Antoine Genest-Grégoire, Jennifer Robson, Saul Schwartz, and Josh Dadjo
Canadian Public Policy 2024 50:3, 292-310

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