7 February 2017
If you have ever heard the Barenaked Ladies’ whimsical tune, “If I had a million dollars
,” it probably took you back to your childhood, when a million dollars was shorthand for a fortune that would let you buy everything that grown-ups wouldn’t.
While a million dollars may no longer suggest the same limitless possibilities, a billion dollars can still make most of us sit up and take notice.
Most Canadians would, therefore, be quite shocked to learn that every year over $1 billion of income benefits and tax credits that our parliament has legislated for the needs of the most vulnerable people in Canada never make it into their pockets. Instead, the funds are rolled back into federal coffers or repurposed for other ends.
Canadians who are missing out include Indigenous people, newcomers, people with disabilities, seniors, and other Canadians with low and modest incomes who don’t know they are eligible to receive benefits through Canada’s tax system, so don’t tax file, or are unable to tax file successfully on their own due to personal, institutional or systemic barriers. (For more information, please see our research brief
Guaranteed Income Supplement (GIS) payments of up to $864 a month are paid to Canadian seniors living on very low incomes (1). By international standards, Canada does a great job of getting GIS benefits into the hands of 87 per cent of eligible seniors (2). It is estimated that 49,100 to 61,900 of eligible seniors who don't receive their payments are non-tax filers (3). While not all seniors are eligible for the maximum amount, if we assume (for illustrative purposes) an average payment of just $432 per month, the lowest income seniors in Canada are collectively losing $254.5 to $320.9 million in income every year.
The situation of First Nations families is another good example. There are 236,000 First Nations children aged 0 to 17 years (4) living on and off reserve whose families are eligible for Canada Child Benefit payments of up to $6,400 per child under six and $5,400 for each older child. There is no definitive data on actual First Nations tax filing rates currently, on or off reserve, but best estimates suggest that 30-40 per cent of eligible families on reserve and fewer off reserve are not filing, so receive no child benefits at all. The federal government will have much better data on the actual size of this gap within the next year, but has confirmed that a significant gap does exist. Again, we don’t know the exact amount each family is eligible for but if we assume, for illustrative purposes, even $5,000 per child on average and that 30 per cent of First Nations families overall are not filing, this means First Nations communities may be missing out on as much as $354 million in income every year.
While the Barenaked Ladies contemplated spending their million dollars on the exotic and non-essential (emus, llamas and faux fur coats), our failure to ensure Canadians living in poverty are receiving their legislated benefits means they are forced to do without such essentials as food, heat, electricity, clean water, prescription medicines, warm clothing, transportation, and adequate housing.
In the 2015 election, the current federal government promised to “proactively contact Canadians who are entitled to, but are not receiving, tax benefits (5).” The 2016 federal Budget awarded CRA $4 million for this purpose, which it has put to good use – improving communications, expanding regional outreach (including to First Nations communities), and using technology to pre-fill some taxpayer forms.
These changes are very welcome and will help boost access to benefits for many Canadians. However, we don’t think CRA alone can succeed in reaching all those who are most vulnerable and need these benefits the most. This is due to inherent limitations in CRA’s mandate and the tools and channels at its disposal:
To reach and change behaviour in vulnerable populations, communications need to be highly tailored, delivered through people and organizations that are already known and trusted, and accompanied by other practical forms of help to overcome barriers to tax filing;
Organizations that can reach and assist the most excluded groups are needed to work with and complement CRA’s outreach efforts, but CRA currently lacks the networks to forge such partnerships, the machinery and resources to fund community and non-profit partners, and experience coordinating cross-sector partners to develop and test new community-based approaches.
Private sector partners can help fund innovation and provide critical expertise, technology and volunteers to expand tax filing assistance, but conflicts of interest can arise if CRA engages the private sector directly.
Pre-filling forms can help filers with a stable tax profile (e.g. seniors on fixed income), but many people with low incomes do not fit this profile and others still require help accessing other benefits;
CRA’s excellent Community Volunteer Income Tax Program helps 600,000 Canadians with low incomes to tax file annually, but is not available to everyone who needs assistance (e.g. people with mobility barriers, living in remote communities, with complex tax situations, or the self-employed). It is also not a workable tax clinic model for every community (e.g. First Nations lacking local non-profits and eligible volunteers).
This is a classic “last mile” problem where mainstream services and approaches that serve most populations very well, break down as they try to reach harder-to-serve customers at the margins. This problem is generally solved by linking into and leveraging other networks that already effectively reach these customers. Similarly, the federal government and CRA need partners that are familiar with and can tap into relevant networks, and that have the expertise to mobilize coordinated strategies, more private sector resources and volunteers, and innovative new approaches to reach the most vulnerable Canadians.
To this end, we have recommended that the Government of Canada invest $2 million annually over the next five years for targeted community outreach and support strategies to enable vulnerable Canadians to begin accessing the over $1 billion in benefits they are eligible for, but not receiving. These efforts would be undertaken in collaboration with, and complement those of, CRA. For more information, please see our summary 2017 Budget Proposal
Without this investment, hundreds of thousands of vulnerable Canadians will continue to struggle unnecessarily to meet their most basic needs and effectively be denied the financial assistance they are legally entitled to and that Canadians have already set aside for them.
If the federal government truly wants to build a more inclusive economy, then respecting the entitlements of the most vulnerable in our communities is a critical and effective first step.
Let’s not leave these Canadians behind. Let’s give them their billion dollars.
(1) The following are eligible to receive GIS in 2017, based on 2016 income:
Single persons with total income less than $17,544.
Married/common-law couple, both OAS pensioners, with combined total income less than $23,184
OAS pensioners whose spouse/common-law partner is not receiving OAS, with combined annual income less than $42,048
(2) HRSDC, Evaluation of the Guaranteed Income Supplement Take-up Measures and Outreach – Final Report, 2010. http://publications.gc.ca/collections/collection_2010/rhdcc-hrsdc/HS28-174-2010-eng.pdf
(4) Statistics Canada. 2011 National Household Survey.