October 21, 2010

Ontario Sales Tax Credit -- Making Tax Time Pay

When the Ontario Government introduced the Harmonized Sales Tax it also made some changes to tax credits. It split up the Sales and Property Tax Credit into a new Ontario Sales Tax Credit and the Ontario Energy and Property Tax Credit. These new credits will be paid quarterly rather than in a lump sum at tax time. And they are refundable. That is important for low income households because it means that you can receive rebate cheques throughout the year. And because those payments will be paid in different months than the GST credit, it means that you can get a refund cheque each month of the year.

The catch is that you have to file your income tax return to get those rebates. For some people with low incomes, that can be a challenge -- due to lost ID or being homeless, for example. And for many others the only source of tax filing help is a for-profit tax business. But the fees charged to file a tax return eat into the value of the tax rebate you can expect.

There are many volunteers working through community agencies that hold free tax clinics to help people file their tax returns so that they can get their rebates. The Canada Revenue Agency provides some training for volunteers and lists some of the free community tax clinics on their website.

But what I have heard from people working on the ground, is that these volunteer tax clinics are far from being able to make sure everyone gets the credits they are eligible for. A higher proportion of families with children are getting their tax returns filed -- partly because child benefits are high enough that there is strong incentive to file a tax return. Social assistance offices in Ontario emphasize that families file their tax returns so they can receive child benefits. Tax clinics seem to reach more seniors as well. The groups that are being missed are low incomes single adults and newcomers.

One model for making sure people get the benefits for which they are eligible comes from Edmonton, Alberta. Vibrant Communities Edmonton launched a project called Making Tax Time Pay to coordinate community efforts at both helping people file their tax returns and getting them signed up for other benefits and programs.

What is needed in Ontario is a coordinated community outreach strategy like that to make sure there are enough free tax clinics that reach the people who are being missed. And this really requires resources from both the Provincial Government and the Federal Government. As a starter, the Provincial and Federal Governments could fund pilot projects in several communities to help coordinate and expand community tax clinics. Otherwise the move to a Harmonized Sales Tax in Ontario will really fall harder on people with low incomes because they won't get the refunds meant to offset the HST.

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