Automatic Tax Benefits May Miss Canada’s Most Vulnerable

April 30, 2026 – Roughly 1.2 million Canadians fail to file tax returns, placing many at risk of missing out on income-tested benefits. While Ottawa is moving to expand automatic tax filing, a new C.D. Howe Institute report suggests this approach may have limited impact on hard-to-reach non-filers.

In “Simple on Paper, Complex in Practice: The Limits of Automatic Tax Filing,” author Alexandre Laurin examines how Canada’s growing reliance on the tax system to deliver benefits is colliding with persistent gaps in tax filing. The report finds that recent initiatives, including Budget 2025’s “automatic federal benefits” initiative, largely target individuals already known to the Canada Revenue Agency (CRA), limiting their impact on those who remain outside the system.

“Automatic tax filing may make life easier for some Canadians, but it won’t reach those who are hardest to engage,” says Alexandre Laurin, Vice-President and Director of Research at the C.D. Howe Institute. “For many non-filers, the barriers go beyond paperwork and cost.”

The report estimates that about 3.6 percent of potential filers, or roughly 1.2 million individuals in 2023, are unlikely to file a return. While relatively narrow, this group faces complex challenges, including distrust of government, administrative hurdles, and concerns about informal income.

Many credits, deductions, and benefits depend on information the CRA does not have, including details about family circumstances and eligible expenses. As a result, only about one-third of tax returns could be fully automated under current conditions, and existing tools like SimpleFile have seen take-up rates as low as 3 to 11 percent. International experience, particularly in the United Kingdom, shows that automation is most effective in simpler systems and still requires ongoing taxpayer input. Simplifying federal and provincial taxes would make broad-based automatic tax filing more realistic in Canada.

But “trying to use one policy tool to both simplify filing and reach vulnerable non-filers is unlikely to succeed,” Laurin adds. “If the goal is to ensure benefits reach those in need, policymakers should consider more direct and targeted approaches.”

While automation may reduce compliance costs for some low-income filers, the report argues that improving benefit access for non-filers will require broader reforms. These include reconsidering the link between tax filing and benefit delivery. One option is to decouple benefits from tax filing and assign responsibility to a dedicated body better equipped to engage hard-to-reach populations.

According to Laurin, meaningful progress will depend on recognizing the limits of automation and adopting policies that directly address the barriers faced by non-filers.

Read the Full Report

For more information, contact: Alexandre Laurin, Vice-President & Director of Research, C.D. Howe Institute; and Raquel Schneider, Communications Officer, C.D. Howe Institute, 647-805-3918, rschneider@cdhowe.org.