Refunds require returns

Posted on February 27, 2010 in Social Security Debates

Source: — Authors: – Opinion/Editorial
Published On Sat Feb 27 2010

Most Canadians think of the income tax system as a way for the government to raise revenues. But for a large number of low-income families it is also a way for the government to give them money.

A single mother earning $15,000 could see her income rise to $23,000 by filing a tax return and receiving all the tax credits and benefits to which she is entitled. In fact, a mother earning twice that amount would still come out ahead after paying income taxes.

Governments are increasingly turning to refundable tax credits as the best way to deliver benefits to low-income people. Unfortunately, many of them are unaware that these benefits exist and, therefore, do not file the necessary tax return to access them. No comprehensive numbers are available, but small studies have shown an overwhelming percentage of welfare recipients do not bother filing returns.

Potential recipients are either fearful that filing a return will result in a net loss, or they are intimated by the complicated forms. Furthermore, they do not know where to turn for help.

A spokesperson for Ontario’s revenue minister acknowledges that the “pickup for tax credits has not been as high as it could be.”

So let’s fix the problem. Simpler language tax forms would be a good start. So would a programs to help low-income Ontarians fill out a tax return. Finally, an ad campaign would help spread the message.

There is some urgency attached to this problem now, with the harmonized sales tax looming on July 1. To ease the pain of the tax, the Ontario government will distribute billions in transition payments and ongoing tax benefits, targeting low-income people. But individuals will need to file a tax return to access the money.

Governments expect credit when they introduce tax breaks and credits for low-income people. They ought to be doing more to ensure that those people will actually receive the intended benefits.

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