Policy Forum: Re-Envisaging the Canada Revenue Agency - From Tax Collector to Benefit Delivery Agent

Abstract

In Canada, the tax system is not used just to raise revenue; it is also an important instrument for achieving various social policy objectives. As a result, the tax system has become closely intertwined with the income support system; it now serves as the delivery mechanism for many key income support benefits. As a benefit administration tool, the tax system has advantages, but it is also problematic. First, it relies on self-assessment, which means that the onus is on individual taxfilers to provide complete and accurate information to the government on the income taxes that they owe. However, persons who have no tax liability are not legally required to file tax returns, and therefore many may not do so. In the context of benefit delivery, the reliance on self-assessment risks missing many individuals who are eligible to receive income benefits. Second, individuals generally file a self-assessed tax return only once a year. As a result, the tax system could not respond to the dramatic in-year income shocks that occurred during the COVID-19 pandemic. We identify ways to modernize Canada's tax system and make it more responsive and streamlined for the purposes of benefit delivery. Reforms such as pre-filled tax forms and real-time reporting could greatly improve the ability of the Canada Revenue Agency to deliver income benefits, and the ability of the federal and provincial governments to meet social objectives, including those set out in Canada's and the provinces' poverty reduction strategies.

Keywords: Benefits, support, tax systems, social policy, Canada Revenue Agency