February 20, 2023

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In our first article, we showed that the CRA’s main program for communicating with non-filers to encourage them to file not only misses the mark (it is not communicating with chronic non-filers), it is unambitious (it aims to have 10% of those it contacts file a return) and claims spurious results (it makes the misleading claim that for those recipients who subsequently file, it is because of the letter they received from the CRA).

Is there anything else the CRA may be doing to identify non-filers?  A February 2022 report from the Auditor General of Canada to Parliament (AG) entitled “Access to Benefits for Hard-to-Reach Populations” sheds further light on the CRA’s efforts.  The report looks at the work of Employment and Social Development Canada (ESDC) in administering the Guaranteed Income Supplement (GIS) and the Canada Learning Bond (CLB), and the work of the CRA in administering the Canada Child Benefit (CCB) and the Canada Workers Benefit (CWB).

The GIS is covered by the Old Age Security Act.  The Minister for ESDC is responsible for administering Old Age Security (OAS) and the GIS.  (At present, the work of ESDC is overseen by four ministers, including the Minister of Seniors who is responsible for overseeing the administration of OAS and the GIS.)  The CLB is covered by the Canada Education Savings Act.  The Minister of ESDC is traditionally responsible for administering the CLB.  (At present, the Minister of Families, Children and Social Development, one of ESDC’s four ministers, is responsible for overseeing the administration of the CLB.)

The CWB and the CCB are both covered by the Income Tax Act.  The Minister of National Revenue is responsible for administering both benefits and oversees the work of the CRA in carrying out these responsibilities.

The focus of the AG’s report is on whether ESDC and the CRA ensure that hard-to-reach populations are made aware of, and can access, these benefits.

CVITP volunteers who file returns will know that, to maintain CCB and GIS payments throughout the year and to obtain the CWB, a client must be current in filing their income tax and benefit return[i].  Most fundamentally, the CRA’s efforts to help hard-to-reach populations gain access to return preparation services are critical to ensuring broad benefit coverage within these populations.

Using the information from ESDC and the CRA, the AG defines hard-to-reach populations as people with modest incomes from one of the following groups:

• Indigenous peoples
• Housing insecure individuals
• Newcomers to Canada, including refugees
• People with disabilities
• Seniors
• Youth

This is identical to the target clientele for CVITP services.  Furthermore, the AG defines hard-to-reach populations as people from the aforementioned groups who face one or more of the following barriers to receiving benefits:

• Low literacy levels or inability to communicate in either official language
• Reluctance to disclose personal or financial information to the government
• Filing a tax return to access benefits
• Complex application processes for some benefits
• Providing additional documentation such as a social insurance number
• Limited access to financial services
• Geographic location/remoteness

While all of the above appear to be barriers, failing to file a tax return is not, strictly speaking, a barrier.  It is simply a failure to take certain action.  More to the point, if filing a tax return is a necessary condition for accessing or maintaining access to benefits, then the barriers to filing a return must be addressed if hard-to-reach populations are to access or maintain access to benefits.

CVITP host organizations know that one of the key barriers to filing a return is the lack of free return preparation services.  This is why these organizations offer CVITP services: they understand that, for the clients they serve (many of whom fall squarely within the populations identified by the AG), providing this free service is critical to obtaining federal and provincial or territorial benefits which contribute toward reducing income-based poverty.

Let’s step back for a moment and see how this is relevant to the issue of non-filers.

Non-filers, even if they have low or no income, are still eligible for some benefits.  They may be 65 years of age or older – in which case they are eligible for the GIS.  They may have children under 18 years of age – in which case they are eligible for the CCB and the CLB.  They may be working part-time – in which case they are eligible for the CWB.  But even if none of the foregoing applies to their situation, they will still be eligible for some federal and provincial or territorial benefits.

Here are some of the most common benefits: 

Many of these benefits are income-tested.  This means they are specifically designed to increase as the income of the household falls.  In other words, they contribute, to different degrees (depending on the benefit), in reducing the income-based poverty of the recipient. 

If the CRA succeeds in getting non-filers to file, it will increase the percentage of the eligible population which has benefit coverage.  In sum, benefit coverage is important for helping to reduce the income-based poverty of non-filers.

Benefit Coverage

So, what were the CRA’s (and ESDC’s) benefit coverage results for hard-to-reach populations?

Here is the AG’s key finding (with our own emphasis added):

“The government estimates that on the whole, a high proportion of low-income populations are receiving benefits intended to reduce poverty.  However, we found that the department and agency did not have a clear and complete picture of the people who were not receiving benefits for which they were potentially eligible.  Estimates overstated the take-up of benefits because they did not always account for people who had not filed tax returns, which are required to access most benefits.”

The AG found that the CRA (and ESDC) “did not have a complete estimate of the overall take-up rates of the selected benefits.  Nor did they know the take-up rates of specific hard-to-reach populations known to experience barriers to accessing benefits.”  In other words, the CRA did not know what percentage of the eligible population as a whole were actually collecting the benefits, nor did it know what percentages of the hard-to-reach populations eligible to collect the benefits were actually doing so.

The AG cited 2017 estimates from the CRA stating that the number of people who did not file tax returns was more than 10% of the total population of those eligible to file a return.  However, in the AG’s view, this underestimated the percentage of people who were eligible for but not receiving the CCB and the CWB.

The AG gave various reasons for this gap in total benefit coverage:

• Some individuals choose not to access benefits.
• The CRA (and ESDC) could not confirm the eligibility for benefits of individuals who did not regularly file tax returns or had not applied for benefits.
• Statistics Canada cannot share information on identifiable individuals with the CRA (and ESDC) because of provisions of the Privacy Act and Statistics Act. (While Statistics Canada can combine information about individuals it obtains from the CRA and ESDC with information it has about individuals – such as from surveys or the Census of Populations – it can only share the results as estimates for groups.)

In sum, the CRA does not know the percentage of the eligible population missing out on benefits.  But the AG thinks it is greater than what the CRA estimates.

To return to the issue of non-filers for a moment: if the CRA does not know the size of the gap in benefit take-up, it means it does not know the number of non-filers.  Without knowledge of the size and location of the number of non-filers, it will not know where to focus its efforts on getting non-filers to file in order to receive their benefits.

Improving Estimates of Benefit Take-up Gaps

What is the CRA doing to improve its understanding of the size of the gap between total and actual benefit coverage?  The AG found that:

“No tangible progress had yet been achieved in data collection, measurement, or analysis of benefit take-up.  We found that the Canada Revenue Agency had not clearly defined responsibilities for improving how benefit take-up was measured among its benefit program administrators, the departmental outreach function representatives, and its Chief Data Officer.”

This is very disappointing.

In our first article in this series, readers may have noted that in estimating the number of non-filers, we made use of the data provided to Statistics Canada by the CRA on the number of filers in a particular year and something called the “coverage” rate.  This is an estimate generated by Statistics Canada as to the percentage of the population eligible to file a return who go onto file a return for a specific tax year.  This coverage figure is highly debated as it is only an estimate; there is presently no way of knowing the exact number.

For example, for the 2015 tax year, Statistics Canada estimates the coverage rate to be 95% of the eligible population.  In other words, 5% of the eligible population or 1.427 million residents are estimated to be non-filers.  Most of these non-filers are likely to be people whose income is too low to be taxable.  However, in a frequently cited research article on this topic, Robson and Schwarz suggest that 10-12% of the eligible population in 2015 did not file a return.  This means at least another 1.427 million may have been non-filers for that tax year.

Collecting and analyzing data on the take-up of specific benefits could inform the larger question of the number of non-filers.  Similarly, developing a better understanding of the number of non-filers could inform estimations of rates of benefits coverage and their corresponding take-up gaps.

Conclusion

Through its 2018 Poverty Reduction Strategy, the government is committed to reducing income-based poverty in Canada.  It does this chiefly through providing income-tested benefits to low-income residents.  The chief method for low-income residents to gain and maintain access to these benefits, like the CWB and CCB, is through filing a return.  Because non-filers don’t file their returns, they don’t get the benefits.  If the government wants them to get the benefits, they must empower them to file.

But if the CRA does not even know the size of the non-filing problem and is doing little to inform itself, then it cannot measure how effective its efforts are to address the problem.

Clearly the CRA has got to get a better handle on the scope of the problem.  But there’s no reason why it need wait until it has better data before trying to tackle the problem of non-filers.  There’s much more that the CRA could be doing now to address the problem.  That’s the subject of the third and final article in this series.

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[i] ESDC also allows GIS recipients to submit a separate income statement, in lieu of filing a return, to maintain their GIS payments.  However, this is not widely known and most recipients rely on filing their returns.  Most GIS recipients discover when they stop filing their returns that their GIS payments get interrupted and it is only once they are current in filing returns that their GIS payments resume.