October 15, 2024
Summary: In our most recent article on the CVITP’s coverage of the impoverished in Canada, we concluded that the CVITP remains a very effective program for helping those on low and modest incomes to file their income tax and benefit returns, thereby getting the benefits to which they are entitled. We also noted that the Canada Revenue Agency (CRA) should redouble its efforts to expand the CVITP given that most Canadian residents living in poverty still do not benefit from this free service.
Yet we noted that post-pandemic, the CRA appears to have scaled back its ambitions for the CVITP. The CRA no longer sets any targets for reaching more clients and, presently, it is unclear what its goals for and commitments are to this program.
Instead, the CRA seems to focus its efforts on reaching Canadian residents on low and modest incomes through three other initiatives: non-filers benefits letter initiative, SimpleFile by Phone and the piloting of automatic tax filing.
In a series of three articles, we show why these three initiatives presently show less promise than the CVITP in tackling the fundamental problem of helping a greater percentage of Canada’s impoverished residents access the benefits to which they are entitled.
In the first article, we looked at the CRA’s non-filers benefits letter initiative. We argued that the results are insignificant, even questionable and bear no comparison with those obtained by the CVITP when it comes to assisting those living in poverty.
In this second article, we look at what the CRA calls SimpleFile by Phone, an automated phone service previously called File My Return. It has operated since 2018 to help low-income residents with a simple tax situation which does not change from year to year to file their returns over the phone.
Since the service was launched in 2018, usage rates have been consistently low, hovering below 10% of the people invited to use this service. Eligible individuals are people with low or fixed incomes and a simple tax situation that remains unchanged from year to year. To identify who is eligible, the CRA must know, from the client’s record of filing previous returns, that they remain low income and that their simple tax situation remains unchanged from year to year.
In other words, through SimpleFile, the CRA is targeting previous filers, encouraging them to change the method they use for filing. The CRA is not targeting Canadians who have not filed in the past. This is because the CRA does not know their tax situation. The CRA also lacks a current mailing address through which it can contact them. Thus, SimpleFile by Phone will do nothing to help Canadians who have not filed in the past to start receiving their benefits.
Among others, the CRA is targeting past CVITP clients. The CRA is doing this for three reasons. CVITP clients have an up-to-date mailing address on file with the CRA. These clients’ incomes are low as this is an eligibility criterion for using the CVITP. Finally, the CRA can see from their filing records that these clients have a simple tax situation which remains unchanged from year to year.
Presently, SimpleFile by Phone is estimated to cost at least $2 million per year to operate. The CVITP may cost the CRA more, but it is much more effective, producing significantly larger results. And it is much more efficient than SimpleFile by Phone. Given historic usage rates, SimpleFile by Phone costs the CRA approximately $35 per return filed. In a pilot grant project, the CRA has been paying approximately $5 per return filed through the CVITP.
As many readers will already know, filing an income tax and benefit return is a necessary step toward getting and maintaining access to many federal and provincial income-tested benefits. The CVITP is a Canada Revenue Agency (CRA) administered service offered free to Canadian residents on low and modest incomes. Volunteers working within community-based organizations assist these residents in preparing and filing their income tax and benefit returns.
In our most recent article on the CVITP’s coverage of the impoverished in Canada, we noted that by 2023 the CVITP’s performance had largely rebounded from the large decline in service during COVID, that the CVTIP remains a very effective way of reaching those living in poverty at a relatively low cost and that there is no evidence to suggest the CVITP has reached the limits of its effectiveness. Given that most Canadian residents living in poverty still do not benefit from this free service, we concluded that the CRA should redouble its efforts to significantly expand the CVITP.
Yet we noted that post-pandemic, the CRA appears to have scaled back its ambitions for the CVITP. The CRA no longer sets any targets for reaching more clients. Presently, it is unclear what its goals for and commitments are to this program.
Instead, the CRA seems to focus its efforts on reaching Canadian residents on low and modest incomes through three other initiatives: non-filers benefits letter initiative, SimpleFile by Phone (formerly File My Return) and the piloting of automatic tax filing.
In a series of three articles, we show why these three initiatives presently show less promise than the CVITP in tackling the fundamental problem of helping a greater percentage of Canada’s impoverished residents access the benefits to which they are entitled.
In the first article, we looked at the CRA’s non-filers benefits letter initiative. We argued that the results are insignificant, even questionable and bear no comparison with those obtained by the CVITP when it comes to assisting those living in poverty.
In this second article, we turn our attention to the CRA’s automated phone service for filing returns. It is important to understand the limitations of SimpleFile by Phone because, as will be seen in the third article, this is also part of the CRA’s effort to launch automatic tax filing.
SimpleFile by Phone – the rebranding of File My Return
Since 2018, the CRA has been running a service called File My Return. We previously wrote about this service here.
File My Return allows individuals to file their income tax and benefit returns using an automated phone service.
Use is by CRA invitation only. The CRA sends out letters to eligible individuals early in the tax season. Eligible individuals are people with low or fixed incomes and a simple tax situation that remains unchanged from year to year.
The invitation letter provides all the information needed to use this service.
Results to date
At the beginning of the 2024 tax season, the CRA rebranded File My Return as SimpleFile by Phone. We will return to the reasons for this rebranding toward the conclusion of this article.
In early 2024, the CRA invited more than 1.5 million individuals to use SimpleFile by Phone. In a tax tip issued in July, the CRA indicated that more than 90% of the invitees had filed their tax returns using a variety of filing methods. At the same time, the CRA announced that 500,000 more eligible individuals were being invited to file their return using SimpleFile by Phone. But how many of those invited used SimpleFile by Phone to file their returns in 2024?
As of October 6, the CRA reported that 50,631 individuals had used SimpleFile by Phone to file their return. This is no different from previous years. Given that some 2 million people have been invited in 2024 to use this method, almost three times the number in 2023, this must be disconcerting.
Why such a poor performance?
The response rate has been consistently low. If this service was simple to use, we should have seen usage rates go steadily up over the years as more and more past users returned to use the service again. This has not happened. It improved marginally during COVID but has since moved back to pre-COVID levels of usage.
We have previously detailed most of the reasons for this poor performance here. In summary, these are:
- A general distrust of government
- Lengthy (6-7 pages) and complicated written instructions for using the service (requiring high school level reading skills in one of the official languages and a basic understanding of tax-related concepts e.g. net income)
- Lack of access to a phone
- Confusion over instructions given by phone when preparing the return
The rebranding
Budget 2023 announced that the CRA would expand the eligibility criteria, inviting up to 2 million people to use this service by 2025. At the same time, it rebranded this service, calling it “SimpleFile by Phone”. Budget 2024 reiterated this plan. Just as in Budget 2023, in Budget 2024 the government suggests that this will help more Canadians who have not filed a return in the past to access their benefits.[i]
Charitably put, this is misleading.
To identify who is eligible, the CRA must already know, from the client’s record of filing previous returns, that their income is low, their tax situation is simple, and it remains unchanged from year to year. In other words, through SimpleFile by Phone, the CRA is currently targeting individuals who have filed their returns in past years, encouraging them to change the method they use for filing.
The CRA is not targeting Canadians who have failed to file a return in the past. This is because the CRA does not know their tax situation. The CRA also lacks a current mailing address through which it can contact them. Thus, SimpleFile by Phone will do nothing to help Canadians who have not filed in the past to start receiving their benefits.
How do most letter recipients file their returns?
If the service is being used so little, what do individuals who are invited to use SimpleFile by Phone but decline to use it do instead? Most choose other methods. According to a report from the Office of the Parliamentary Budget Officer (PBO), 65% of letter recipients in 2023 filed their return using Efile. This means that they got someone else to do their return for them.
CVITP volunteers largely make use of the Efile service to file their clients’ returns. However, the PBO report did not say what proportion of the 65% of letter recipients got a CVITP volunteer to help them file their return.
Past CVITP clients are among the 2 million people the CRA is targeting to use this service. The CRA is doing this for three reasons. CVITP clients have an up-to-date mailing address on file with the CRA. These clients’ incomes are low as this is an eligibility criterion for using the CVITP. Finally, the CRA can see from their filing records that these clients have a simple tax situation which remains unchanged from year to year.
We also know past CVITP clients are being sent invitations to use SimpleFile by Phone because some of our CVITP clients show us the letter they have received from the CRA.
The CRA may be intending to shift many CVITP clients over to using SimpleFile by Phone. If the response to File My Return and now SimpleFile by Phone were significantly better, this would free up some CVITP capacity which seems to be increasingly stretched. (See Evolution of CVITP – 2023 Update.) But if that is the CRA’s intent, it is not working well as File My Return and SimpleFile by Phone usage rates have remained consistently low.
CVITP is more efficient and effective than SimpleFile by Phone
According to the PBO study cited above, SimpleFile by Phone is estimated to cost at least $2 million per year to operate. The CVITP may cost the CRA more, but it is much more effective, producing significantly larger results. And it is much more efficient than SimpleFile by Phone. Given historic usage rates, SimpleFile by Phone costs the CRA approximately $35 per return filed. In a pilot grant project, the CRA has been paying approximately $5 per return filed through the CVITP.
Why has the CRA rebranded File My Return as SimpleFile by Phone?
If SimpleFile by Phone is more expensive per return filed than the CVITP and does not help more Canadians who have not filed in the past to access their benefits, why does the CRA persist in promoting this service?
The CRA is trying to move forward with automatic tax filing. (We have commented on these efforts before here.) SimpleFile by Phone is part of this effort, which will also include SimpleFile Digital and SimpleFile by Paper. These will be the subject of the next article in this series which will focus on the CRA’s current effort to launch its version of automatic tax filing. As with the non-filers benefits letter initiative and File My Return, now rebranded as SimpleFile by Phone, the introduction of automatic tax filing is intended to help Canadians who have not filed their returns in the past to access their benefits.
[i] Budget 2024 illustrates this with the following narrative: “Johnny lives in Manitoba and has never filed a tax return, and as a result is missing out on benefits such as the GST Credit, Canada Carbon Rebate, provincial rent credits, and possibly others that help make life more affordable. Johnny’s primary source of income is social assistance, which means he may be invited to participate in the SimpleFile pilot. Johnny would not have to fill out complex forms. The CRA would use the information it has on hand for him and his responses to a series of short simple questions, including information on his rent payments which the CRA does not otherwise have, to complete and file his tax return, thereby unlocking the government support to which he is entitled.”