A recent investigation by Statistics Canada revealed that skilled workers display a lower likelihood of filing tax returns than refugees in the initial year following their arrival in Canada.
This study examined the tax-filing patterns of recently arrived immigrants within the working age range (25-64). Those who landed in Canada between 1993 and 2019. The analysis indicated an improvement in filing rates during the 1990s, with subsequent stability.
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Notably, between 2017 and 2019, 90% of newcomers filed an income tax return within the first year or two of arrival. However, the study also identified factors such as immigration class or educational attainment as influencing tax filing rates.
Refugees Lead in Tax Filing Rates
Recent arrivals to Canada, specifically those entering as refugees, exhibit the highest tax filing rates. Irrespective of whether they were privately or government-sponsored. A striking 95% of refugees filed income tax returns within the initial two years of landing.
In contrast, newcomers under the Express Entry Federal Skilled Worker Program (FSWP) demonstrated the lowest likelihood of filing. From 2017 to 2019, only 77% of FSWP participants filed taxes.
Approximately 16% of all newly landed immigrants in their prime working years (25-64) between 2017-2019, FSWP ranked as the third-largest immigration class, following provincial programs and family class.
Filing rates for arrivals from the Canadian Experience Class, provincial programs, and family classes stood at 89% or higher.
The Statistics Canada study attributes the higher likelihood of tax filing among refugees to increased access to settlement services upon arrival in Canada. This heightened awareness makes them more likely to recognize the financial benefits of filing a tax return.
Income Tax in Canada
Every individual employed in Canada experiences an automatic deduction of a portion of their income from their overall (gross) pay as income tax. This deducted money is directed towards the Canadian government to contribute to funding government-operated services. Such as healthcare, infrastructure, education, and publicly funded childcare.
Annually, residents and workers in Canada are required to submit their tax returns to the Canada Revenue Agency (CRA). This tax filing process gives the CRA a comprehensive view of an individual’s total income from all sources. Subsequently, the CRA assesses whether an excess amount of tax was paid. Leading to a potential refund, or if the filer still needs to meet their tax obligation, requiring them to pay to cover the shortfall.
Advantages of Filing Taxes for Newcomers in Canada
Filing an income tax return in Canada opens the door to various benefits the Government of Canada provides.
One notable benefit is the Canada Child Benefit, a monthly, tax-free payment designed to assist families with the expenses associated with raising children. Eligibility extends to permanent residents and temporary residents who have resided in Canada for a minimum of 18 months. Provided their permit does not stipulate “does not confer status” or “does not confer temporary resident status.”
Additional benefits encompass a quarterly rebate on the Generalized Sales Tax (GST) for low-income Canadian residents. And provincial/territorial benefits that vary based on the individual’s province of residence.
The specific amounts of these benefits always depend on income, marital status, and family size.
