Declining Tax Filings Raise Questions on Long-Term Residency of New Immigrants in Canada

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Canada’s recent trend of declining tax filing among new immigrants is raising questions about their continued residence in the country. According to Statistics Canada, a significant portion of immigrants who arrived in 2019 ceased filing taxes shortly thereafter. This trend, while not new, appears to be accelerating, leading to speculations about the potential departure of these immigrants from Canada.

The tax filing retention rate for new immigrants has shown a notable decrease. For instance, immigrants who arrived in 2019 had a 91% tax filing rate in their year of arrival, but this dropped to 85.5% by the 2021 tax year. This reduction in tax filing retention is even more pronounced compared to earlier cohorts, such as those who arrived in 2017, indicating an accelerated trend.

While initially, this might be perceived as a pandemic-related issue, a look back at immigrants who arrived in 2011 reveals a similar pattern, albeit over a longer period. Interestingly, during this period, no pandemic was present, but major immigrant hubs like Toronto and Vancouver experienced significant increases in housing costs.

Historically, Canada has seen higher tax filer retention rates among immigrants. Data available up to 2007 showed that the rate was significantly higher, even a decade after arrival, compared to the 2019 cohort after just three years.

This declining trend in tax filing could suggest that a number of recent immigrants may no longer be residing in Canada. Factors contributing to this include rising shelter costs in key Canadian cities and the complexity of tax regulations, including the departure tax implications.

The implications of this trend for the Canadian housing market are significant. If a considerable number of these immigrants have indeed left Canada, their impact on housing demand would be negligible. Additionally, if they remain in Canada but outside the credit system, their ability to influence the housing market through significant capital investment or mortgage acquisition is limited.

The evolving dynamics of immigration, residency, and tax filing have crucial implications for understanding housing demand and market trends in Canada. This situation underscores the need for a more nuanced approach to analyzing housing market drivers, especially in the context of immigration and residency patterns.

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