CLEMENT/EL-CHIDIAC: Be wary of the CRA autofiling for taxes

David Clement and Sabine El-Chidiac are the North American Affairs Manager and the Canadian Policy Associate at the Consumer Choice Center.Two complaints are most common among Canadians during tax time: taxes are too high, and filing taxes is too complicated. With every new kind of tax and deduction hitting Canadians every tax season, it’s no wonder something like autofiling might seem like an attractive prospect. The refrain is often that the government already knows what you owe, so why would they make you do the work to figure it out and, if you’re wrong, get you in trouble?Enter autofiling, a program that at first glance seems to solve this problem. The Canadian Revenue Service (CRA) is now enabling low-income Canadians, often the people with the most straigh-forward claims as well as those who tend not to file on time or sometimes at all. However, as one American president once put it, some of the most terrifying words in the English language are I’m from the government and I’m here to help.It should not come as a surprise that the government getting in the business of controlling your tax returns is not going to end well. This new system entails the CRA automatically filing your taxes based on all the relevant information they have on hand, plus what they receive from third parties. Or, at least, what they think they have received from third parties. One Quebec man received an “unreported income letter” from the CRA after using the CRA’s autofill feature to fill out his TurboTax return. The CRA claimed that he had not filed investment income on his tax return as a result of a third party tax slip not appearing on his CRA account. It was never submitted because the CRA simply did not receive it in time. As a result, the CRA, which had themselves made the mistake in the autofill, issued the man a Notice of Reassessment and a fine of $70,000 in arrears interestThe CRA encourages taxpayers to use their autofill system to fill out their tax returns, and then fines them because the CRA did not have a certain document. If the CRA wants to enact an autofile system for Canadians, how can taxpayers trust that the CRA isn’t going to make a mistake and then make the taxpayer pay for it? If there is a fight over a return, who would arbitrate this disagreement between the taxpayer and the CRA? Well, the CRA of course. This massive conflict of interest is akin to your boss adjudicating himself over whether he’s paid you your wages or not. You likely aren’t going to win that fight. The British experiment with autofiling has shown that the tax agency is not a reliable tax filer, since in 2010 six million taxpayers who used autofile received incorrect returns, and three-quarter of those returns overbilled taxpayers.In addition to the harrowing possibility that the CRA could simply fine you for their own mistakes, autofiling will have to contend with the fact that the CRA is going to need a lot of information about the filer in order to make the system work. However, the CRA’s abysmal track record of being able to protect taxpayers’ privacy should scare Canadians away from this system. How can Canadians trust the government to protect that information when the CRA has proven time and again they cannot protect themselves from getting hacked. In 2014, the CRA allowed hackers access to 900 social security numbers. In 2020, hackers were able to use usernames and passwords they had previously stolen from the CRA to access peoples’ accounts, a breach which affected approximately 48,500 users. More recently, in 2021 the CRA admitted that they had to lock approximately 800,000 online accounts because third parties might have been able to obtain usernames and passwords. This centralization of data into one bureaucratic behemoth that cannot seem to be able to stop itself from getting hacked does not just flirt with danger, it invites cyber attacks, identity theft, and the potential misuse of personal information. There is often an elitist notion that low-income individuals can’t do things for themselves, and simply need help from those who obviously know better. This smug and paternalistic argument continues to prevail in systems like tax autofiling. If low-income people seem to not be able to do their taxes, that might be because most people in Canada of all socio-economic backgrounds find filing their taxes challenging. Rather than build this leviathan-looking program that will put legality and privacy at risk for Canadians, the CRA should focus on making tax filing less complicated by simplifying the tax code. There are many redundant tax credits that could be grouped together, small tax credits that are filed for with very little money in return, and different tax rates for small businesses that could simply be unified rather than having them file for multiple deductions and credits. For low-income Canadians more specifically, the CRA could simplify things by increasing the tax-free basic personal tax threshold from $15,705 in income to a higher amount. The CRA could even reduce the fines they impose on low-income people who file late, or expand the Community Volunteer Income Tax Program that has people from their community help them file their taxes if they need it. Tax autofiling has clearly failed in places like the United Kingdom, and promotes a system where the CRA is the judge, jury, and executioner of filings that they often get wrong, in a database that is often hacked. This should not give low-income Canadians a sense of relief, rather they should be worried that they are being targeted in a misguided attempt to make life easier for them. What all taxpayers in Canada need is a more simplified tax code that makes the process more streamlined and straight-forward rather than relying on the government to do the work for them. Whenever the government steps up to help, Canadians of all income brackets should seriously worry. David Clement and Sabine El-Chidiac are the North American Affairs Manager and the Canadian Policy Associate at the Consumer Choice Center.

CLEMENT/EL-CHIDIAC: Be wary of the CRA autofiling for taxes

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