An Analysis of Tax Filing Behaviour in Canada

This report explores how Canadians interact with the country’s tax system and the extent to which they file their annual returns. It reviews compliance levels, highlights differences across income groups, age categories, and regions, and identifies the main barriers that prevent some from filing. The role of the Canada Revenue Agency (CRA) is explained, along with government initiatives designed to support taxpayers. Recommendations are provided to improve accessibility, simplify filing, and strengthen overall participation. For more details, visit: www.expatriatetax.ca

1. An Analysis of Tax Filing Behaviour in
Canada
1. Introduction
Taxes are the backbone of any country’s economy, and Canada is no exception. Through taxes,
the government funds health care, education, infrastructure, and a wide range of social services.
For the system to function smoothly, it is necessary that individuals and businesses follow the
rules and file their annual returns.
In Canada, the Canada Revenue Agency (CRA) oversees the collection of taxes and the
distribution of benefits that are tied to tax filings. Even individuals with very low or no income
are encouraged to file, as doing so allows them to access credits and support programs. This
report takes a closer look at how Canadians engage with the tax system, highlighting
participation levels, demographic patterns, barriers to filing, and possible solutions to improve
compliance.

2. 2. Canadian Tax System Overview
Canada uses a self-reporting model, which means that people are responsible for declaring their
income and calculating the tax they owe.
- Who should file?
- People earning income above the basic personal amount.
- Anyone who owes money to the government.
- Individuals applying for benefits such as the Canada Child Benefit or GST/HST credits.
- Deadlines:
- Most Canadians must file by April 30 each year.
- Self-employed individuals have until June 15, but payments are still due by April 30.
The CRA checks returns, ensures accuracy, and takes action when people do not comply.
3. Filing Rates and Compliance
Most Canadians participate in the tax system, though not everyone does.
- Participation Levels: Roughly 9 out of 10 Canadians file their taxes every year.
- Non-Filers: Between 6–12% of the population do not submit returns. These are often younger
people, those with very low earnings, or residents of remote regions.
- Recent Trends: The pandemic temporarily reduced filing rates among youth and low-income
groups due to disruptions in employment and uncertainty about new benefit programs.
4. Demographic Patterns
- By Age: Young adults (19–24) are least likely to file, with non-filing rates close to 15%. Older
adults are more consistent, especially retirees who rely on government benefits.
- By Income: People earning less than $13,000 a year are more likely not to file, while higher-
income Canadians have much higher compliance.
- By Region: Non-filing is more common in the northern territories and some provinces like
Nova Scotia and British Columbia. Quebec stands out with the lowest non-filing rate, partly
because it runs its own provincial tax system.
5. Why Some Canadians Do Not File
Several factors explain why certain groups fail to submit their returns:
1. Lack of knowledge – Some are unaware they must file even with low or no income.
2. Complexity – The tax system can be difficult to navigate without guidance.
3. Financial barriers – Filing software or professional services cost money.
4. Access issues – People in remote areas may struggle with online systems.

3. 5. Fear or misunderstanding – Concerns about penalties or confusion about eligibility
discourage filing.
6. CRA Efforts and Ongoing Challenges
The CRA has developed multiple initiatives to make tax filing easier:
- Free community tax clinics for low-income households.
- Online filing options such as NETFILE and Auto-Fill My Return.
- Pilot programs for automatic filing, where eligible people are pre-notified to confirm their
details.
Still, challenges remain. Many Canadians lose out on benefits simply because they don’t file. On
the other hand, the CRA spends considerable resources following up on late or missing returns.
7. Canada in a Global Context
Compared to other countries, Canada has relatively high compliance:
- In the United States, tax compliance is slightly lower, around 85–88%.
- In the United Kingdom, most people do not have to file annually because tax is deducted
directly by employers.
- Canada performs better than the U.S. but could simplify its system further to help vulnerable
groups.
8. Conclusion and Recommendations
Tax filing behaviour in Canada shows that while the majority of people comply, a consistent
minority does not. Youth, low-income earners, and northern residents face the biggest barriers.
Since tax returns are tied to benefit programs, not filing often means losing out on essential
support.
Recommendations:
1. Expand automatic filing to cover more low-income and benefit-dependent Canadians.
2. Introduce stronger tax literacy campaigns in schools and newcomer programs.
3. Simplify filing tools and make them more accessible on mobile devices.
4. Increase outreach in rural, Indigenous, and northern communities.
5. Explore hybrid systems, reducing reliance on self-reporting where possible.
This analysis highlights that Canada maintains strong overall compliance, but further reforms
can ensure that no group is left behind in accessing the benefits of the tax system.