Overall, Canadians are satisfied with online tax filing, but privacy concerns and lack of digital skills mean that achieving a fully digital tax system will take time.
It is tax season once again and Canadians are busy preparing their tax returns. Most filers will submit a return online, either directly through NETFILE or by having an accounting firm or tax preparation company submit it online through EFILE. Electronic filing of taxes has quietly become the most-used electronic service provided by the government of Canada.
Online filing started on an experimental basis in 1999 and was expanded to a full service in 2000. Writing in 2006, Jeffrey Roy noted in E-Government in Canada: Transformation for the Digital Age that half of Canadian tax filers in 2004 submitted their returns online and described the program as “the most significant example of success” of e-government services. According to the Canada Revenue Agency (CRA), 84 percent of tax returns were submitted online in 2016. The number of returns filed electronically has increased every year for the last five years.
The rapid uptake of this technology by Canadians suggests that it is a success, but we wanted to hear more from Canadians. Who submits online and who still submits on paper? How do users of the e-service assess their experience? Why do some Canadians prefer to send a return through the mail? In May and June 2016, as part of our Online Citizenship Canada project, which is studying Canadians’ online political activities, we conducted an online survey of 1,000 people. Since the tax filing deadline for 2015 had just passed, we decided to ask them a few questions about their experience.
Who submits online?
To begin, we asked respondents whether they had submitted their 2015 federal tax returns through the CRA website. One out of three respondents hadn’t submitted a tax return either because someone else had submitted it for them (31 percent) or they hadn’t filled a tax return for 2015 (2 percent). Among those who submitted a tax return by themselves, 79 percent used the CRA website and 21 percent used the mail.
Most studies of online technologies find that young people are more likely to use them. Tax filing is an exception. We did not find any linear relationship between age and the method of filing: between those aged 18 to 29 and those aged 70 and over, the same proportion (three out of four) submitted their tax returns online. There’s no gender gap either. However, a digital divide clearly appeared once we factored in education and income. Citizens with a university degree and higher income were more likely to submit online. The proportion of respondents who sent their tax returns online was 68 percent among those who had not studied beyond high school but 83 percent among holders of a university degree, a gap of 15 percentage points. The gap was even more pronounced (20 percentage points) between those whose household income was below $60,000 (67 percent) and those with income higher than $90,000 (87 percent).
How do Canadians assess their experience?
Our second goal was to investigate how citizens assess online filing. The program appears to be a success. We asked filers who used the CRA website to select from four statements the one that best described their experience. Eighty-eight percent of respondents said “the process was smooth and efficient” and they were “sure that [they] will process [their] federal tax return online in forthcoming years.” Eleven percent “experienced some problems, but it is still very likely that [they] will process [their] federal tax return online in forthcoming years.” Only 1 percent said that they were unlikely to use this online option again, because they “experienced some problems” or because “the process was complicated and a loss of [their] time.” Our survey did not ask more specific questions that might highlight parts of the experience that need improvement. The overall assessment of these Canadians is that they found the process efficient and they are ready to do it again.
E-government: Why not use it?
We also asked an open-ended question to those who submitted returns by mail: “Why didn’t you process your 2015 federal tax return through the Canada Revenue Agency website?” A qualitative overview of the responses allowed us to identify issues that seem to limit the adoption of this e-government service.
First, many respondents indicated they simply preferred paper forms and the mail (“I like hard copy,” “I like working with paper,” “I like the paper and make a copy for myself…always keep proof of everything”), or found paper easier (“easier for me to mail,” “easier to fill out by hand”). Very few respondents explicitly declared a lack of digital skills, but the comments about preferring paper probably reflected such limitations. Indeed, we had previously interviewed some of our respondents in another wave of the survey and measured their digital skills through a six-item scale; not surprisingly, the relationship between digital skills and the likelihood of submitting online was statistically significant. Other technological concerns also prevented some citizens from submitting their tax returns online: not having Internet at home, issues with tax software or browsers and not remembering the password.
Second, many respondents expressed concern over the security of the process. Some didn’t trust the Internet in general (“I really don’t trust so much important information being used online,” “the Internet is too vulnerable”), while others had concerns related to software (“privacy protection, I don’t trust any software under third party”) or specific to the CRA website (“don’t trust the website”). One respondent wrote: “I still remember when their system crashed because too many people sent it on-line at the same time and the mailed ones were handled more promptly as a result. It feels much safer to me.”
A third reason is simply a lack of motivation related to old habits or a desire to keep tradition. “Always submitted a paper form of return and I guess I’m stuck with my ways of doing things,” wrote one respondent. “I’ve been doing it by hand and sending it by mail since the past 30 years,” indicated another taxpayer. “I like filling out my form with paper and pencil. Tradition,” answered a third one.
Finally, some respondents had specific grounds for their tax filing choices. “Because I have a paper trail of documents to put in,” wrote one person. “My return is complex & requires a paper return,” thought another one. A few others did not know it was possible to fill a tax return online, and one believed it costs money to file online.
An e-government success story
Overall, Canadians are satisfied with their experience submitting their taxes online. In the 2017 federal budget the government committed to expanding the range and quality of its digital services. The online tax filing system may serve as a model. However, it is important not to forget those who lack confidence either in their own digital skills or in the protection of the privacy of their personal information. A significant number of Canadians continue to have reservations about online filing; lowering this number will likely require investment to address privacy concerns and improve digital skills. Achieving a fully digital tax return system will take some time.
This online survey was conducted on our behalf by NRG Research Group between May 12 and June 9, 2016. The response rate was 40.6 percent. The data were weighted by the region, age and sex of the respondents. The Social Sciences and Humanities Research Council funded the research through an Insight Grant.
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