$175M in federal money for working poor goes unclaimed

About 240,000 low-income Canadians eligible for millions of dollars in federal support payments aren't getting the cash, partly because the Canada Revenue Agency paperwork is too complicated, an internal memo marked "secret" suggests.

Internal memo cites complicated tax forms behind shortfall in cash going to working poor

a close up of a pencil writing on a page
Are Canada's complicated tax forms depriving the poor of cash? An internal report suggests the answer is yes. (iStock)

About 240,000 low-income Canadians eligible for millions of dollars in federal support payments aren't getting the cash, partly because the Canada Revenue Agency paperwork is too complicated.

That's the tentative conclusion of a Finance Canada review of a vaunted poverty-reduction measure, the Working Income Tax Benefit (WITB), a program that is a decade old this year.

The report estimates that in 2014, the last year for which figures are available, the working poor lost out on more than $175 million in benefits they deserved but did not claim.

A young woman with long brown hair is wearing a dark sweater.
Jennifer Robson, an assistant professor at Carleton University, says CRA needs to do more to connect the eligible working poor with federal benefits. (Carleton University, Ottawa)

"There is little information available to fully explain why eligible individuals and families may not claim the WITB, but lack of awareness of the credit and complexity of the application process are likely prominent explanations," says an internal memo, dated June 19 this year.

Tax-return data suggests "that paper filing creates an increased barrier" to applying for the money, says the document, an apparent reference to the 42-step process on Schedule 6, part of Canada's main income-tax form.

CBC News obtained the heavily censored Finance Canada memo under the Access to Information Act.

The benefit was introduced in 2007 by the Conservative government to help the poor scale the so-called "welfare wall," the dilemma low-income Canadians face when taking on low-paid jobs but thereby losing government benefits, sometimes dollar for dollar.

Increase for 2019

The benefit, which tops up low incomes to a certain threshold, was enriched in 2009. Last month, the Liberal government promised a further enrichment of $500 million annually, beginning in 2019. An estimated 1.4 million working Canadians get the WITB each year, at a cost to the treasury of $1.2 billion.

But like other poverty-reduction measures, such as the Guaranteed Income Supplement (GIS) or the Canada Child Benefit (CCB), some poor Canadians don't claim the benefit — likely because they don't know it exists, don't file income-tax returns or find the paperwork daunting.

The estimated take-up rate for the WITB has been stuck at about 85 per cent of all those eligible since 2009, even with increased use of tax-filing software that alerts users to the benefit and helps fill in the blanks.

Only about half of eligible Canadians who file paper forms apply for the benefit. And federal officials acknowledge take-up estimates are difficult to make when considering Canadians who don't file income-tax forms at all, including Indigenous individuals.

"We have not identified a means of estimating take-up for this group," says the Finance memo, referring to members of First Nations who decline to file income-tax forms.

CRA can do a much better job in terms of simplification of the application process ...- Jennifer Robson, assistant professor, Carleton University

Take-up rates are also lower than average for eligible Canadians living in the Atlantic and Prairie regions, for reasons not explained.

The WITB program, modeled on a similar U.S. program dating from 1975, has received broad praise across the political spectrum as an effective support for the working poor, though some critics have said the maximum annual benefit of $1,028 is too low.

Advocates say the CRA, which is responsible for targeting the benefit, is not doing enough to get the cash to the working poor.

National Revenue Minister Diane Lebouthillier has been given the job of ensuring the poor are able to access federal benefits, but critics say the government isn't doing enough. ( Randall Mackenzie/CBC)

"CRA can do a much better job in terms of simplification of the application process, and proactively notifying people," Jennifer Robson, an assistant professor at Carleton University's Faculty of Public Affairs, said in an interview.

"Most people say, 'Oh, you know if you're using tax-preparation software …' – I'm sorry, but if I'm a low-income person, what makes you think I've got a computer at home with a secure internet connection that allows me to use tax-preparation software?"

Pledge repeated

The Liberal party's 2015 election platform promised to "proactively contact Canadians who are entitled to, but are not receiving, tax benefits" — a pledge repeated in the mandate letter for National Revenue Minister Diane Lebouthillier.

Family physician Dr. Gary Bloch, who has a clinic at St. Michael's Hospital in downtown Toronto, helps his low-income patients apply for government benefits in recognition that straitened living circumstances can have a huge impact on health.

Bloch says too many patients are unaware of benefits like the WITB, or don't know how to wade through a complicated application form.

"It takes a person with a fairly sophisticated level of initiative and/or support to go through that kind of process," he said in an interview. "Many people just do not access the benefits."

Dr. Gary Bloch is chair of the Ontario College of Family Physicians Poverty and Health Committee and a physician at St. Michael's Hospital, where doctors use a poverty-screening tool. (Submitted by Gary Bloch)

Bloch's clinic now employs two income-security specialists to help patients with some CRA application procedures that remain intimidating for some patients. Referring to CRA's new mandate to ease the application process, Bloch said: "I haven't seen a huge improvement."

Nevertheless, a spokesman for the tax agency says changes are in the pipeline.

Patrick Samson said CRA is expanding its support for free tax-preparation services, under the Community Volunteer Income Tax Program, and is targeting "vulnerable groups to inform them of benefits and credits that are designed to support them and to communicate the importance of filing annually to receive them."

Samson also said a pilot project in New Brunswick last year that highlighted to low-income working individuals the benefits of the WITB has had a "positive impact" and is being expanded across the country.

Follow @DeanBeeby on Twitter


Dean Beeby

Senior reporter, Parliamentary Bureau

Dean Beeby is a CBC journalist, author and specialist in freedom-of-information laws. Follow him on Twitter: @DeanBeeby

With files from Aaron Wherry and Kristin Nelson, CBC Ottawa