The federal government has recently taken steps to implement a long-awaited automatic tax filing system in Canada, first announced in 2020. People who owe taxes must file a tax return each year with the Canada Revenue Agency. However, many low-income Canadians rarely file their taxes because they do not owe the federal government anything and they face other barriers – e.g., living in poverty – that prevent them from filing.
Unfortunately, since most federal benefits require an individual to file a tax return to receive benefits, an estimated $1.7-1.9 billion in federal benefits go unclaimed each year. To ensure more people can access the federal benefits they are owed, Budget 2025 proposes to amend the Income Tax Act to grant the Canada Revenue Agency with the discretionary authority to file a tax return on an individual’s behalf (if the individual meets certain criteria). Automatic tax filing would apply to the 2025 and subsequent taxation years (i.e., filing could begin in 2026).
In response to this proposal, the Department of Finance Canada asked interested parties to submit their views by January 30, 2026. ISAC sent in a submission which sought to provide government decision makers with more context on the lived reality of low-income households. Our recommendations examined the current proposed legislation and then made three recommendations for improvement. First, we identified present access barriers for the target population. Second, we outlined future gaps in coverage that the legislation fails to protect against. Lastly, we explained the need to create a dispute resolution system that does not penalize low-income individuals for government administrative error.
You can read our full submission to the Department of Finance by clicking here.