Tax-filing System Gives Governments Flexibility to Deliver Bespoke Benefits and Credits

  • National Newswatch

Canadians are nearing the close of a second tax season while coping with the health, social and economic challenges of the global pandemic. The final week of tax season is when the Canada Revenue Agency (CRA) typically receives the largest number of returns per day, and 2021 is likely no different.

Thankfully, the vast majority of Canadians have already moved away from paper filing in favour of digital filing. Approximately 90% of returns are now done electronically, so most Canadian tax filers are already equipped to file online from the safety of their homes using do-it-yourself tax software or even with the help of a virtual tax preparer.

Considerable collaboration between industry and the CRA has gone into ensuring that the tax-filing process is safe. When taxes are filed electronically, a secure portal is used between the filing platform and the CRA. Private sector tax-filing software, even the free versions available to Canadians at all income levels, are required to be certified by the CRA, which entails meeting high government software standards and rigorous and secure testing conducted by a specialized IT group within CRA.

As COVID-19 continues to push society to more digital platforms, members of the lead association representing the tax prep and tax software industry, Tax-Filer Empowerment Canada, want Canadians to know that that they safeguard your personal tax data as confidential and abide fully with federal and provincial privacy legislation. This is particularly important as new measures are rolled out allowing for tax preparation in a world of social distancing.

Last week's federal budget confirmed a permanent approval for electronic signature for key tax forms, allowing you to file your taxes without having to meet with a tax preparer in person. This is an important step to making sure that Canadians can continue to engage these services digitally. While critics of the current self-assessment tax-filing system advocate for taxes to be assessed and filed automatically by the government, there are some important lessons from the current COVID-19 crisis that indicate that our current system is nimble in reacting and providing benefits in a crisis.  Take, for example, the Ontario government's enhancement to the CARE Tax Credit, and Jobs Training Tax Credit which provide support in response to two particular needs that have surfaced during the pandemic.In Quebec, the revenue agency automatically provides a basic tax credit for home-support services for seniors, but upon filing their taxes, seniors can claim additional expenses.  This strikes a balance in ensuring that a basic credit is paid to those who need it, especially now in a pandemic, while still using the tax-filing system to provide benefits that match the unique needs some Quebecers may have.At the federal level, working from home expenses can either be claimed through a simplified process, or can be customized to the specific expenses undertaken by the filer.All three of these examples demonstrate how nimble our tax-filing system is when it comes to delivering bespoke benefits to Canadians that need them.Finally, we recognize that not everyone is comfortable with filing their taxes online, and that some face particular barriers.  Many Canadians will continue to seek in-person and now virtual assistance from tax preparers to navigate our tax system. Helping vulnerable Canadians to file their taxes is an area that would benefit from deepened collaboration between industry, government, and the not-for-profit sector.So far, this collaboration has brought forward projects that bring accessible tax preparation offerings including free do-it-yourself software and tax clinics to Canadians that need them.  These tailored approaches and outreach are needed to ensure that all Canadians receive the tax refunds and benefits to which they are entitled.  Meanwhile, Canadians benefit from a marketplace of secure and effective services to file their taxes themselves or with the help of a tax preparer.  This ensures a clear separation between the tax preparer and the tax collection agency, and allows governments to implement targeted tax credits that help Canadians get through this pandemic.Dan Pfeffer is Executive Director of Tax-Filer Empowerment Canada (TFEC).Based in the Ottawa area, Dan holds a Ph.D. in political science and has researched and published on various aspects of public policy and government decision making. He has also taught at Queen's University and l'Université du Québec à Montréal.