In the controversy over how many Canadians benefit from the federal carbon tax, one group has been overlooked. The Canadians who don’t file their taxes.
In a statement to Canadian Affairs, the Office of the Parliamentary Budget Officer confirmed that their often cited analyses of the carbon tax’s impact excludes non-filers.
“The 2023 PBO distributional analysis did not take into account eligibility for the federal fuel charge rebate (Climate Action Incentive payment) based on individual tax filing,” Sylvain Fleury, the office’s chief financial officer and director of parliamentary relations and planning, said in an emailed statement.
The parliamentary budget office, which provides independent financial and economic analysis to Parliament, conducted a carbon tax analysis that looked at two scenarios.
The first scenario, which accounted only for the carbon tax and rebate and not its economic impact, showed about 80 per cent of households benefit from the tax. The Liberals have touted that result in the face of mounting opposition to the tax.
The office ran a second analysis that analyzed the carbon tax and its associated effect on the economy and income levels. This analysis showed only 40 per cent of households were better off from the tax. This analysis has been cited by the Conservative Party in its criticisms of the program.
However, neither scenario took into account the Canadians who don’t file their taxes.
“We have not assessed the impact of non-tax-filing low income individuals (or non-tax-filing households more broadly) on our estimates,” Fleury’s statement said.
According to a report co-authored by Jennifer Robson, associate professor and program director for political management at Carleton University, between 10 and 12 per cent of Canadians don’t file their taxes. These Canadians, who are disproportionately low income, miss out on a carbon tax rebate worth somewhere between $380 to $900 a year, depending on the province in which they live.
If the parliamentary budget office were to account for these non-filers, their analysis of how many households benefit from the carbon tax would change.
“But it’s not quite as simple a thing to say, ‘If it’s, say, 10 to 12 per cent of working age adults who don’t file a return … we can’t just sort of automatically subtract that from the PBO estimate,” said Robson.
Robson says it would be possible for the office to run a new analysis that takes account of non-filers.
“[T]he PBO could actually do this… Basically, what you would have to do is adopt their model and then impute a certain proportion by income and by household type and by geography of non-filers and then look at the estimate again. So it is the kind of thing that would be doable, but just unfortunately not on the back of an envelope.”
Reaching non-filers
Ottawa has been working to decrease the number of non-filers.
Most non-filers are low-income people, says Elizabeth Mulholland, chief executive officer of Prosper Canada, a charity aimed at expanding economic opportunities for Canadians in poverty. “They may be people who face barriers to tax filing or they’re afraid to tax file.”
In the 2024 federal budget, Ottawa announced funding for projects to help low-income Canadians file their taxes, including $60 million over five years to Prosper Canada. These projects are expected to increase the number of people who file and receive tax benefits, Mulholland says.
“Really hard-to-reach-populations often are not very responsive if CRA writes to them or tries to call them,” said Mulholland. It’s more effective to reach them through intermediaries like welfare caseworkers or food banks that they know and trust, she says.
Reaching Canadians through tax clinics in community centres is an approach that is “really for people who have very straightforward tax situations,” said Mulholland.
“About a third of Canadians have simple enough tax situations that that kind of approach would totally work for them,” said Robson.
Last year’s budget said the Canada Revenue Agency would also pilot an automatic tax filing initiative to make tax season easier for people who tend to not file, said Robson.
“If you’re low-income and you move frequently, or you’ve been evicted and you lost all your household goods … or you don’t have a secure place to keep your stuff or you don’t have a computer or someplace where you can file this information, it’s really hard to keep track of your life,” said Mulholland.
She says many low-income Canadians in urban areas are not as affected by the carbon tax, since they are more likely to use public transportation rather than own a car. But these low-income Canadians still pay the carbon tax indirectly as consumers on the goods that they buy.
“If they could connect [people with lower income] to their tax filing, then more people would benefit from the [carbon tax] rebate,” she said.
