Contributors: Amy Black, Community Financial Counselling Services; Samantha Billingham, Regional Municipality of Durham; Collen Christopherson-Cote, Saskatoon Poverty Reduction Partnership; Michelle Chudd, United Way Winnipeg; Tammy Harvey, Prince Edward Learning Centre; Kathy Kennedy, Prince Edward Learning Centre; Molly Matheson, Town of Canmore; John Stapleton, Open Policy Ontario; Jill Umbach, Bruce Grey Poverty Task Force; Elle West, Town of Canmore
The impact of Community Volunteer Income Tax Program (CVITP) clinics is profound for individuals and their families who are not fluent in income tax filing. However, the changes proposed in this case study for how taxes are filed and the administration of benefit distribution could greatly reduce the burden on the charitable and public sectors who administer them – and who are facing a frontline crisis – as well as expand the number of people receiving income benefits for which they are eligible.
Introduction
When an innovation positively impacts a small number of individuals and families, we often ask how it can benefit more people. If we want to achieve these impacts at a larger scale, policy and systems change are the key. By making our innovations part of the broader system, we can extend their benefits beyond a small group of participants to reach entire populations.
A clear example is tax filing. Community Volunteer Income Tax Program (CVITP) clinics provide valuable support for low-income earners to access government benefits, and while they operate on relatively modest budgets compared to many other funded programs and services, they still require substantial time, energy, and resources from already stretched charitable and public sector organizations. With two policy changes – auto-filing income taxes and automatically enrolling individuals in eligible tax benefits – similar results could be achieved more efficiently and at scale.
Our three-year study with five communities on ending working poverty reinforced that government benefits are a readily available and high-impact tool for income security, yet many people miss out because they don’t file taxes. Through the Communities Ending Poverty (CEP) network, we see the potential for these changes to benefit not just the working poor but low-income earners and many struggling middle-income earners as well.
Automatic tax filing and benefit enrollment are universal solutions that would ensure everyone receives the support they qualify for, strengthening financial security across Canada.
Community Volunteer Income Tax Program Clinics
Community Volunteer Income Tax Clinics are a valuable resource for both urban cities and small rural communities across Canada. With relatively limited funding, these clinics help return thousands of dollars to individuals through government benefits. A part of the regular provincial/territorial and federal tax and transfer systems, the income benefits are already budgeted for by the government but often go unclaimed.
Many people do not file taxes for various reasons: the cost of hiring an accountant, the difficulty of filing on their own, or mistrust in the government, to name a few. Some believe they will owe money, especially if they haven’t filed in a while, but for low-income individuals, the opposite is almost always true. Canada’s tax system provides more financial support to low-income individuals than it takes, helping them gain at tax time, as long as employers or entrepreneurs themselves have been remitting funds for standard employment deductions. In addition, tax credits are paid regardless of how much someone might owe at the end of the tax year.
How Government Benefits Can Close the Working Poverty Gap
The following graph depicts an average low-wage earner in Saskatoon. The data shows how much government benefits can help close the gap between wages and the poverty line, as well as the value in reducing mandatory contributions for low-income earners.
A sample low-wage earner in Saskatoon earns $23,610 over the full year. Already well under the Low-Income Measure and the Market-Basket Measure poverty lines, mandatory contributions (Canada Pension Plan, Employment Insurance, federal and provincial taxes) reduce this person’s income even further to $20,555. However, with the tax benefits and credits available to this person, they gain nearly all of their employment contributions and taxes back, leaving them with an annual income of $23,325. This is still below the poverty line, but without the benefits and credits gained by filing their taxes, this person would be thousands of dollars worse off.
There are numerous benefits available to vulnerable groups, including parents, seniors, students, and low-wage workers, but accessing these benefits can be complicated. The charitable and public service sectors have stepped in to fill this gap. Since 1971, communities have been organizing volunteers and hosting Community Volunteer Income Tax Clinics to help low-income individuals file taxes for free and claim eligible benefits.
These clinics offer free services to anyone earning under $35,000 per year (adjusted for family size) with simple tax returns. This service not only saves individuals from costly tax preparation fees but also helps them secure financial returns. Volunteers are trained to assist a variety of unique client needs, including seniors, students, and newcomers, and guide them through the tax process, ensuring they receive their entitled credits and deductions.
Each year, communities seek to expand access to these services by increasing locations, hours, and volunteers and targeting underserved populations. Some innovative collaborations include bringing tax clinics to natural gathering places like hospitals and grocery stores. Others provide financial literacy training alongside tax filing, helping individuals manage their tax funds effectively. These efforts continue to evolve, aiming to reach more people and return more money to them, which can help with expenses such as housing, food, bills, debt, health care, and much more.
Impact
The impact of receiving a tax refund is significant for low-income individuals and their families. For almost all, it means a lump sum return and regular payments throughout the year. Below are stories from the Communities Ending Poverty network that demonstrate the impact of tax filing for low-income households in Canada. The names in the stories have been changed to protect the individuals’ identities.
Jean’s Story
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Impacts Across Canada
There are thousands of CVITP clinics and volunteers across Canada helping low-income people like Jean, Daniel, and Sarah file their taxes. The Canada Revenue Agency says 649,000 people used CVITP clinics in 2022 and returned $1.75 billion in tax credits, benefits, and refunds, with the help of 3,400 community organizations and 14,700 volunteers.
While different in each province or territory depending on the tax credits available and the supports offered in the community, Winnipeg’s For Every Family initiative, for instance, has calculated the financial return on investment at $17 returned to families for every $1 invested in CVITP.
Below is a small snapshot of the collective work and collective impact communities are having by running these clinics.
Shifting from Programmatic Intervention to Policy Change
While there is a substantial return on investment for each clinic, the time, funding, and energy that each community is expending to increase their client support is still reaching only a roughly estimated 5% of all eligible Canadians.
While public data is unavailable on the official total of eligible CVITP users, we can create a rough estimate by examining the data that is publicly visible.
By dividing the reported number of CVITP users in 2022 (649,000) by the total number of 2021 tax filers (the base eligibility year for 2022) who the Canadian Income Survey reported made $35,000 or less that year (the recommended eligibility cut-off for single individuals to access CVITP), we conclude that approximately 12.2 million tax filers may have been eligible for CVITP services in 2022. Which means only approximately 5% of eligible people are using the CVITP clinics.
Because this data only counts people who filed for the 2021 tax year, it is likely that even more people would’ve been eligible but did not file taxes at all. A Parliamentary Budget Officer (PBO) report in 2024 estimated that auto-filing could return an extra $1.6 billion in benefits to people across Canada who are currently not filing taxes.
Automatic Tax Filing
Rather than each community continually innovating, expanding services, filling gaps, and finding new clients, the more efficient way of reaching more people and returning desperately needed income is for people’s taxes to be filed automatically.
Through Social Insurance Numbers (SINs), the Canada Revenue Agency already knows how much employment income people earn (save for those paid in cash), their pensions, their investments, and their capital gains as reported by employers, government agencies, and financial institutions. This could save individuals across the country millions of dollars in tax filing consultancy or software and help the government open up more capacity by not processing mailed-in paper-based returns or answering questions for people with simple tax situations.
The concept of auto-filing isn’t new. Countries such as the United Kingdom, Germany, the Netherlands, Spain, Sweden, Ireland, Norway, Belgium, Denmark, and New Zealand already have tax returns at least semi-automatically filed for them, if not fully. The government simply asks people to confirm if there is anything incorrect with their information.
Automatic Benefits Enrollment
Further, automatic benefits enrollment is a complementary practice to support the potential impacts of auto-tax filing. With Canada’s fragmented social support system, there are many targeted benefits that people may not realize they’re eligible for, may not know how to apply for, and do not receive without applying or checking a box. One community reported local doctors charging as much as 30% of the Disability Tax Credit in fees to fill in the paperwork for clients needed to apply for the tax credit, as it is not considered a ‘standard’ service.
Government benefits that are automatically enrolled based on income tax information include:
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The Canada Child Benefit, for parents with children
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The Guaranteed Income Supplement, for low-income seniors
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The Canada Workers Benefit, for low-wage workers
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The GST/HST Credit to all low-income families and individuals
They have reached a wide number of people across Canada and have led to significant reductions in poverty. Data shows how the Guaranteed Income Supplement was sitting at an approximate 75% uptake rate of all eligible seniors in 1996 and a senior low-income rate (LICO-AT) of nearly 10% in 1993. After administration changes in 1994 to automatically enroll qualifying seniors in the GIS, the benefit reached approximately 90% uptake by 2015 and has remained relatively stable since then. By the mid-2000s, Canada had the third-lowest rate of senior poverty amongst peer OECD countries, and by 2014, only 9% of seniors lived in low-income households.
A similar case could be made for the Canada Child Benefit. In addition to shifting the criteria to target low-income families rather than being universally administered to all families, which made it possible to increase individual payments, in 2016, families became auto-enrolled into the program. This had a quick, sweeping impact: Canada’s poverty rate declined by 20% from 2015 to 2017, meaning 825,000 fewer people lived in poverty in the years after the improvements to the previous child tax benefits and credits.
A few sample benefits and credits that are not yet automatically enrolled are:
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Canada Pension Plan
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Worker’s Compensation
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Canada Dental Benefit
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Student Tax Credits
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Disability Tax Credit and the Registered Disability Savings Plan
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Child Care Expense Deduction
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Provincial and territorial social assistance programs and other credits, such as disability benefits, senior benefits, and energy, property, and housing credits.
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RESPs and the Canada Learning Bond
Policy Challenges
Each new policy is likely to introduce anticipated and unanticipated results. Some issues with automatic tax filing and enrollment of benefits that the government and communities would have to address could include:
Access to benefits and credits
The Canadian tax system is more complex, and provincial/territorial-federal benefit interactions are more fractured than in many countries that currently have auto-filing. To ensure that people truly gain access to the programs and services they are entitled to, the tax system needs significant simplification ahead of or at the same time as introducing auto-tax filing and auto-enrollment. Similarly, auto-filing without more auto-enrollment of benefits could mean many people miss out on applying for and receiving key programs they are eligible for. Many lower-income people don’t realize how complex their tax situation is or the amount of benefits/credits they could be eligible for.
Some people will still miss out
Those who are part of the cash/gig economy will still have to self-report to the government how much they make, and people without Social Insurance Numbers (SIN) would continue to miss out on tax benefits. In addition, many rural residents struggle with telephone and internet service, should they need to make updates.
Missing expertise
The Canada Revenue Agency (CRA) tax portal is cumbersome. People may not know how to adjust their return if the government’s information has errors. Those who choose not to access CVITP may miss important financial advice and support (e.g., how to avoid owing in the future).
Community capacity
Volunteers and community collaboration are the backbone of CVITP clinics. The energy of the community should not be lost, but redirected to other pressing issues such as housing, food, financial literacy, support for people with difficult tax situations, and more.
While there are considerations to grapple with to ensure that the results of any policy change have the intended impact for people on low incomes, there is a strong case that this policy is effective alongside the role of CVITPs in the community.
Conclusion
Poverty is about more than just income, but also always includes income. When people don’t receive the financial support they qualify for, they struggle to meet basic needs like housing, food, and health care. The frustrating reality is that many of these supports already exist, yet, too often, people miss out because of barriers to tax filing and difficulty knowing about and navigating which benefits and credits they can apply for.
Automatic tax filing and benefit enrollment offer a practical, cost-effective solution. Instead of requiring individuals to navigate complex applications, these measures would ensure that eligible taxpayers receive the benefits they are entitled to, without unnecessary delays or paperwork. This is not about creating new programs; it’s about ensuring that existing ones reach the people they were designed to help.
For decades, non-profits and volunteers have been working tirelessly through initiatives like the Community Volunteer Income Tax Program (CVITP) to help low-income Canadians file their taxes and access crucial benefits. Expanding automatic enrollment could complement these efforts, freeing up resources to focus on other urgent social issues, such as affordable housing and food security.
Implementing automatic tax filing and benefit enrollment would greatly reduce administrative burdens, help get more people in Canada the money they’re eligible for, and bring Canada in line with international best practices. The tools and infrastructure already exist – it is time to move from commitment to action.
