Ottawa to Introduce Automatic Tax Filing: Here’s the Fine Print

The Canada Revenue Agency sign outside the National Headquarters at the Connaught Building in Ottawa is seen on March 1, 2021. The Canadian Press/Justin Tang

Ottawa is taking steps to implement automatic tax filing for more Canadians with an increased focus on the “middle class.”

The automatic tax filing services pilot program was made available early this year to some lower-income Canadians, allowing taxpayers to file returns in as little as 10 minutes. Now, the federal government plans to expand the program in 2025 to include an extended income bracket, Ottawa said in its Fall Economic Statement released on Dec. 16.

“It is time for Canada to accelerate modernization of how Canadians file their taxes and make needlessly complicated and costly tax filing services a thing of the past,” the government said in the statement.

“Many countries have already pursued full-scale automatic tax filing and the federal government is launching the second phase of its work to move Canada towards broad-based automatic tax filing.”

Low Income Program

Approximately 20 percent of Canadians who earn less than $20,000 do not file taxes, missing out on payments like the child tax benefit and GST credit, the government said.

Ottawa announced a program in February that would see some Canadians’ taxes filed automatically. Select participants were invited to contact the Canada Revenue Agency (CRA) by phone or online to answer questions and consent to automatically filing a tax return.

The program was originally expected to be rolled out to 700,000 Canadians, but that number was increased to 1.5 million in February and the program was expanded again in July to another 500,000 individuals.

The CRA said the program will be offered to another two million Canadians in 2025.

Ottawa said that 93 percent of those invited to participate filed a tax return through the program as of Nov. 3.

The government is now paying out $3 billion more in benefits and credit payments to taxpayers, according to the Fall Economic Statement. This includes more than $1.4 billion in child benefit payments, more than $115 million in workers benefit payments, roughly $490 million in GST credit payments, nearly $451 in carbon rebate payments and more than $535 million in provincial and territorial benefits by the CRA.

The Middle Class

Ottawa says it is now working on a second phase of the program to offer automatic tax filing to “middle class Canadians with simple tax solutions.”

The Liberal government said it was looking to pass legislation that would allow it to automatically file taxes for some low-income and middle class Canadians starting in 2025, according to the Fall Economic Statement.

“Eligible Canadians would receive a pre-filled tax return based on CRA data, and be invited to review and modify their information as necessary, or to opt-out of the automated filing process,” it said.

Ottawa said it is consulting with Canadians and indigenous communities to ensure implementation. The CRA has also established an advisory group to offer feedback on the changes.

‘Conflict of Interest’

The Canadian Taxpayers Federation (CTF) said it is concerned about the CRA automatic filing program, calling it “a serious conflict of interest,” and has started a petition against the government’s move.

“Trusting the CRA to do your tax return is like trusting your dog to protect your burger. It’s a bad idea,” CTF federal director Franco Terrazzano told The Epoch Times in an interview.  “You shouldn’t trust your dog to protect your burger, and you shouldn’t trust the CRA and the Trudeau Government to protect your wallet.”

Terrazzano also noted the federal government was heavily in debt and would be in need of more taxpayer dollars.

Additionally, he said that automating tax filings would require the CRA to add workers, and, in turn, add to how much money it needs from taxpayers to pay for the workers.

“The CRA has about 60,000 bureaucrats. For comparison, the IRS in the United States has 83,000 bureaucrats,” he said. “So in Canada, there’s one tax bureaucrat for every 700 citizens. In the US, there’s one for every 4,000 citizens.”

The CRA had 59,155 employees as of July 2024, up from about 42,000 in 2019, according to Canadian government stats.

Cost of Changes

Automating tax filings is a move that is expected to cost the government more than $8.5 billion over the next five years, according to a June analysis by Parliamentary Budget Officer (PBO) Yves Giroux.

Giroux said that the amount of additional government benefits paid to previous non-filers could range from $1.6 billion for 2024/25 to $1.8 billion in 2028/29.

Moreover, the administrative cost of having CRA automatically file tax returns would cost the government an estimated $57 million in 2024/25. That number is expected to increase to $65 million in 2028/29.

How Does Automatic Tax Filing Work?

Ottawa’s plan to automatically file taxes on behalf of some Canadians has yet to be fully implemented.

The CRA says in its SimpleFile Services website that Canadians invited to participate in the program must have income below a certain threshold. This measure is based on factors such as age, province of residence, and disability status.

Canadians must also have income from employment, some investment, or benefits, such as old age security.

The agency added that letters will be sent out to eligible Canadians with instructions on how to file taxes over the phone, online, or through the mail. Participants will need to verify their identity and answer some questions. Once completed, and consent given to automatically file taxes, the tax return will be filed on behalf of the individual.