Automatic tax filing could see Canadians get billions in unclaimed benefits: PBO

Canadian non-filers could collectively get up to $1.6 billion this year in unclaimed tax benefits if an automatic filing system were to roll out, the federal fiscal watchdog says.

Rolling out an automatic tax filing system would mean Canadians receive more than a billion dollars each year in currently unclaimed benefits from not filing their tax returns, according to the federal fiscal watchdog.

The Parliamentary Budget Officer (PBO) published a report Thursday looking into the impact of automated tax filing from the Canada Revenue Agency.

First proposed in the Liberals’ 2023 federal budget, the CRA said last month it would start rolling out invitations to the service this summer. But the PBO notes that there has been no further indication about a timeline regarding when the agency would begin processing automatic tax returns.

The pilot program is expected to target low-income Canadians who have never filed a tax return before, or taxpayers who might have gaps in their filing histories. A 2020 report co-authored by Carleton University professors estimated that between 10 and 12 per cent of Canadians do not file their taxes. The CRA’s internal estimates peg that number closer to seven per cent.

The problem with not filing a tax return is that individuals may miss out on major tax credits and other benefits from the government.

The PBO said in its report released Thursday that Canadians would get more than $1.6 billion in benefits this fiscal year if the automated tax filing system were to roll out and include all eligible individuals. That rises to $1.9 billion at the end of the five-year horizon in fiscal 2028-29.

Those figures represent the total amounts paid to Canadians in benefits such as the Canada Child Benefit, the Canada Workers Benefit and GST/HST tax credits, which require an individual to file a tax return to receive. It also assumes the CRA’s system hits all eligible non-filers for which it has sufficient information.

Automatic tax filing would also increase the number of Canadian households receiving the Canada Carbon Rebate in provinces other than British Columbia and Quebec. But the PBO notes that this wouldn’t add any net costs to the government. Rather, it could reduce the amount individual households receive from the rebate because more Canadians would be sharing in the single pool of funds.