I like many things
that are automatic
: automatic transmissions, automatic doors, automatic bill payments, automatic software updates. In each case, the automatic feature makes my life easier by handling routine functions or frictions that I’d otherwise have to spend time on or endure.
Automation is often a clear improvement when things work as intended. But there is an important caveat. Automatic systems are efficient until judgment is required. Much like artificial intelligence and large language models, they can be powerful tools, but they cannot replace wisdom, experience and judgment.
That distinction matters when discussing tax administration and the introduction of automatic tax filing, something
I’ve long been an advocate of
.
Variations of automatic tax filing
exist around the world, but at its core, it involves the government using information already at its disposal to prepare and file a tax return for low-complexity taxpayers. After an opportunity to review and amend the return,
it can be filed automatically
if no action is taken.
Some people and organizations are vehemently opposed to this idea, often arguing that automatic tax filing represents
government overreach
and that governments should simply stay out of the way.
But the simple fact is that most Canadians’ tax affairs are straightforward. The
Canada Revenue Agency
(CRA) has virtually all the relevant taxpayer income information at its fingertips. Having the government take the additional step of preparing a pre-filled tax return — one that can be reviewed, confirmed or amended by the taxpayer — is not government overreach. It is a basic convenience, especially when judgment is not involved.
The
case for automatic filing
becomes clearer when you consider how many Canadians currently outsource tax compliance and how large the supporting industry has become.
Businesses in the accounting, tax preparation, bookkeeping and payroll services industry earned $30.3 billion in operating revenue in 2024, with tax preparation and representation being 27.7 per cent of that revenue, or about $8.4 billion. Not all of that figure would represent personal tax preparation, but a material amount of it would.
Roughly one-third of Canadians
to prepare their taxes, but according to CRA data, more than 60 per cent of returns are filed by someone
, including paid preparers, volunteers or family members. In other words, a majority of Canadians don’t file their own return, even if they don’t always pay for help.
The overarching message here is that preparing your tax return is not easy and can be expensive for the average low-complexity taxpayer.
This matters because one of the foundational objectives of a good tax system — articulated centuries ago by Scottish economist Adam Smith in his book The Wealth of Nations — is convenience. Taxes should be levied and collected in a way that is easy to comply with and minimizes unnecessary burdens.
A system that requires millions of Canadians with simple tax situations to spend money, time and emotional energy to meet a basic filing obligation fails that test. Automatic tax filing is not about eliminating choice or judgment; it is about recognizing that routine compliance should not impose disproportionate costs.
Over the years, the CRA has introduced various tools designed to ease the filing burden. “
” allows income and benefit data already held by the CRA to populate certified tax software. The agency has also experimented with simplified filing initiatives, such as
, aimed primarily at low-income Canadians with very basic tax situations.
Despite good intentions, uptake of these programs has historically been low. Participation depended on
taxpayers being invited
and then choosing to act. As a result, these initiatives never meaningfully changed the overall filing experience for most Canadians.
The federal 2025 budget finally marked a notable shift. It announced the government’s intention to move forward with
, starting with low-income and low-complexity taxpayers who meet certain criteria.
However, the budget was light on implementation detail. Key design questions, such as reassessment rights and safeguards, were largely left unanswered, but the government is currently consulting on some of those design matters with Canadians until Jan. 30.
If automatic tax filing is to deliver real benefits, it cannot depend on traditional opt-in consent. A system that requires affirmative action before anything happens simply recreates the friction automation is meant to eliminate.
The 2025 budget announcement seems to give credence to that concern since it proposed that prior to the CRA automatically filing a return, eligible individuals would have 90 days to review the information and submit changes. I generally like the proposal, but fairness must be embedded into the system’s design.
Many Canadians are intimidated by the CRA, are uncomfortable with technology or lack confidence reviewing even simple tax returns. Automatic filing should simplify compliance, not create anxiety or silence taxpayers through inaction.
One way to address this concern would be to extend the normal reassessment period for automatically filed returns. Currently, most individuals are subject to a three-year normal reassessment period.
For auto-filed returns
, extending that period to something more reasonable — say, six years — would provide taxpayers with additional time to revisit their filings, obtain advice and correct issues without penalty.
In addition, the 90-day period should be longer — perhaps 180 days — while accommodating an extended filing due date beyond April 30 (so as to avoid late filing penalties).
These are sensible trade-offs. The system gains efficiency and reduced compliance costs upfront, while taxpayers gain comfort and flexibility on the back end. Again, like many automatic systems, automatic tax filing will work best where judgment is minimal and complexity is low.
Automatic transmissions do not eliminate driving. They do, however, make it easier. The same for automatic tax filing: it should simply remove unnecessary friction from routine compliance. For millions of Canadians with simple tax affairs, that would be a long-overdue improvement.
When judgment isn’t required, friction isn’t a virtue, but automation is.
Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.
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