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

34 Pages Posted: 27 Apr 2023

See all articles by Antoine Genest-Grégoire

Antoine Genest-Grégoire

Carleton University

Josh Dadjo

Carleton University

Jennifer Robson

Political Management

Saul Schwartz

Carleton University - School of Public Policy and Administration

Date Written: April 2023

Abstract

Governments transfer resources to low-income families both directly, with social assistance payments, and indirectly, through the tax system. In Canada, several important benefits aimed at low-income families are delivered through the tax system, but only to those who file tax returns. Furthermore, the tax system is frequently used to verify eligibility for a wide range of income-tested public goods and services. As we pointed out in a previous article (Robson & Schwartz, 2020) up to 12 percent of Canadians do not complete tax returns. Those who do not file are disproportionately those with low incomes and many miss out on cash benefits and public programs for which they are eligible.

One way to get those benefits to their intended recipients would be for the Canada Revenue Agency (CRA) to absorb more of the administrative burden of initiating and completing tax returns on behalf of low-income individuals and families. To do so, however, given the current Canadian tax system, might require a wider range of third-party information or a set of administrative changes. In this paper, we estimate how many families have simple returns that the CRA could readily complete with information it already collects from third parties. Our calculations are based on the family-level variables constructed by Statistics Canada for the Longitudinal Administrative Databank (LAD), a 20% sample of all tax returns.

We conclude that the CRA, if so directed, could complete returns for two-thirds of the families with income from provincial social assistance programs. And we estimate that collecting third-party information from new sources or instituting alternative administrative procedures could substantially increase the number of returns that the CRA could complete. We conclude there is a reasonable pathway for the tax agency in Canada to do much more to reduce the administrative burden imposed by the current tax filing system and a strong case for it to do so.

Keywords: tax, automatic-filing, tax agency, administrative burden, Canada, low-income, welfare, transfers

JEL Classification: H24, D02, 139

Suggested Citation

Genest-Grégoire, Antoine and Dadjo, Josh and Robson, Jennifer and Schwartz, Saul, What Proportion of Tax Returns Could the Canada Revenue Agency Complete? (April 2023). Available at SSRN: https://ssrn.com/abstract=4428147 or http://dx.doi.org/10.2139/ssrn.4428147

Antoine Genest-Grégoire

Carleton University

1125 colonel By Drive
Ottawa, Ontario K1S 5B6
Canada

Josh Dadjo

Carleton University

Jennifer Robson (Contact Author)

Political Management ( email )

Ottawa, Ontario K1S 5B6
Canada

Saul Schwartz

Carleton University - School of Public Policy and Administration ( email )

Ottawa, Ontario
Canada

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