The federal government should scrap its plan to automatically file low-income Canadians’ taxes, the federal Taxpayers’ Ombudsman says.
In last year’s budget, Ottawa announced plans to begin a form of automatic tax filing known as “deemed filing” this coming tax season. The government calls this program “automatic tax filing.”
The Taxpayers’ Ombudsman, which investigates taxpayers’ complaints about Canada’s tax agency, says the deemed filing program is poorly designed and should not proceed.
“Only a small number of individuals will benefit from deemed filing,” the ombudsman wrote in a recent submission to the parliamentary finance committee.
It noted the program’s poor design may make it hard for people to access it.
However, tax policy analysts say the government should fix the program, rather than abandon it.
“Just because there seems to be some implementation issues right now … doesn’t mean we abandon the attempt,” said Gillian Petit, a tax policy researcher at the University of Calgary.
Receiving benefits
A key goal of automatic tax filings is to ensure low-income individuals receive benefits — such as the Canada Child Benefit and Canada Groceries and Essentials Benefit — that people must file taxes to collect.
In deemed filing, the Canada Revenue Agency would complete an individual’s tax return using information the agency already has on file. If an individual did not file the return themselves, or contact the agency about any needed changes, the tax return would be considered filed.
The CRA describes the deemed filing program as a “small pilot” on its website.
The federal government is also planning to roll out a much larger “pre-filling” program in March.
In that program, the CRA would automatically complete the tax forms of eligible, low-income individuals. But individuals would have to review and submit their tax returns themselves.
That program is expected to reach a million people in 2027, rising to 5.5 million people by 2029.
The deemed filing and pre-filled filing programs are in addition to the SimpleFile programs, which is a simplified tax filing program for eligible low-income individuals. Nearly 85,000 people used SimpleFile programs in 2026, CRA data show.
‘Really bad design’
The Taxpayers’ Ombudsman objects to deemed filing, and says the government should instead focus on its pre-filled program.
“Focusing on this service should make the CRA’s administration more straightforward, and having fewer options would be less confusing for taxpayers,” the ombudsman’s submission says.
“Further, it would encourage taxpayers’ participation in tax filing and allow them to correct errors and add information.”
The government’s proposal for deemed filing says participation in the program would be temporary. To be eligible, individuals would need to have not filed a tax return at least once in the previous three years.
But after three years on the program, an individual would become ineligible for one year.
Antoine Genest-Gregoire, a tax policy professor at the University of Sherbrooke, says this feature is a “really bad design.”
“It’s a safety net that works only once or twice, and at some point, you get kicked off the safety net,” he said.
“People should be able to get on the deemed filing train and just stay on the train as long as their situation does not change.”
Alexi White, a director at the Maytree anti-poverty foundation and co-author of an analysis of the deemed filing program, says the program’s limited nature suggests the government’s focus is still on having individuals file their own taxes.
“It’s sort of like [the government has] one foot in, one foot out,” said White.
“This is a dipping of the toe into a potential new space,” he added, noting it appears the government is “not super serious about this.”
In an email to Canadian Affairs, the finance ministry said that people who became ineligible for deemed filing in a fourth year would be invited to use SimpleFile. If they did not file taxes on their own that year, they might become eligible for deemed filing again the following year.
“The measure can also serve as a bridge to help non-filers and gap filers remain connected to the tax and benefit system, with a view to returning to regular tax filing over the longer term,” the ministry said.
Reaching non-filers
Petit, at the University of Calgary, says the government needs to “think really carefully” about implementation.
Deemed filing does not currently take into account that the CRA may not always know if someone has moved or had a change in marital status between tax filings. These changes can impact the benefits to which they are entitled.
However, these problems could be fixed easily, she says, particularly for people who receive social assistance. The CRA could mandate, for example, that provinces include addresses and marital status on tax forms that list the amount of social assistance individuals receive in a year, Petit says.
However, Alexandre Laurin, vice-president and director of research at C.D. Howe Institute, says deemed filing would not help the people who need it most — the nearly 1.2 million people who do not file taxes.
“The CRA is targeting people that have a record of income,” he said, noting under the proposed rules participants need to have a record of having previously filed taxes.
“The hardest part is to target people that don’t have a [tax] record or have a very incomplete [tax] record.”
In Laurin’s view, Canada should create a separate agency to administer poverty reduction benefits. That agency should be tasked with reaching out to non-tax filers, he says.
Tax-Filer Empowerment Canada, an association of tax preparation and software firms, agrees that automatic tax filing programs will not reach people who do not file taxes.
Instead of introducing its deemed filing or pre-filled programs, the government should work with tax clinics and tax-filing companies to reach people who do not file taxes, the association said in a submission to the finance committee.
“The hardest part of this work is reaching people who have never filed and making filing easier for them,” the association’s submission says. “That takes trust, personal help and good technology that industry provides Canadians.”
The House of Commons finance committee is currently studying legislation that would enable deemed filing. The legislation would need to pass before deemed filing could begin.
