Category Archives: Federal

Recent developments in federal benefits

Messaging Confusion: The CRA Has More Than Just A Marketing Challenge

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The CRA markets the CVITP clinics as a place for low-income residents to get their taxes prepared.  Yet this is increasingly at odds with the experience of most of the CVITP’s clients.  They do not come to CVITP clinics to get a year-end reconciliation of the income tax they owe as their incomes are too low to pay tax.  They come because they know, from prior experience, that they can only continue to get important federal and provincial/territorial benefits if they file a return.

In this article, we explore why it matters that the CRA misrepresents the CVITP clinics in its marketing.  We recommend an alternate way of marketing the CVITP which better aligns with the reality lived by its current and potential clients.

Changing the way the CRA markets the CVITP makes it sound like it’s an isolated problem with an easy fix.  But we believe the mismatch between the CRA’s current marketing messages and the reality on the ground is indicative of a larger challenge: the CRA needs to update its vision of the CVITP.

It is no longer just a free tax preparation service.  It has also become – and arguably more importantly – a community-based service which helps low-income residents maintain their access to important poverty reducing benefits.  The evolution of the income tax and benefit system and the return preparation process it employs have driven this change.

A realistic appreciation of the two functions currently carried out by the CVITP suggests the CRA needs to embrace a different approach to its administration of the CVITP.  This new approach should emphasize the dual function throughout four stages (i.e., recruitment, training, supervision and support, recognition and retention) in the administration of the CVITP’s service delivery.  We give two examples in our article to illustrate the kind of changes this might entail.  Future articles will offer many more examples.

PM’s December 2021 Mandate Letter for Minister of National Revenue – New Priorities But No Updates on Old Priorities

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Here we go again!  Following the federal election in September 2021 and the formation of a new Liberal government, Prime Minister Trudeau issued new mandate letters to members of his cabinet, including Minister Diane Lebouthillier, the Minister for National Revenue.

What is the purpose of these mandate letters?  They publicly highlight the government’s priorities for the minister’s work portfolio.  (In the words of the PM’s website: “Mandate letters outline the objectives that each minister will work to accomplish, as well as the pressing challenges they will address in their role.”)  Ever since the Liberal Party formed a succession of governments after the federal election in the fall of 2015, Minister Lebouthillier has consistently been appointed to Cabinet as the Minister of National Revenue, overseeing the Canada Revenue Agency.

During that time, she has received four mandate letters from the Prime Minister. This has led to a proliferation of priorities: there were six priorities listed in her first mandate letter, thirteen in her December 2019 mandate letter, a further seven in her January 2021 mandate letter and now nine more in her December 2021 mandate letter.   That brings the total to 35 priorities during her six-year stint in Cabinet.  (Admittedly, there is overlap between some of the priorities.)  When there are so many priorities, arguably there are no real priorities.

Perhaps some of these 35 priorities have been added as others have, with time, been achieved by Minister Lebouthillier.  However, it is impossible to tell what progress, if any, has been made.  (For example, what became of the September 2020 pledge to develop and implement automatic tax filing that was contained in the Minister’s January 2021 Supplementary Mandate Letter?)  Although an official website was created which allowed the public to track results on the delivery of the various mandate letter priorities, updates were discontinued in June 2019. 

These two shortcomings – the proliferation of priorities and the lack of any public reports on the assessment of their implementation – raise serious questions about the purpose these letters serve beyond their value to the government as a public relations tool.

With this important context in mind, let’s look briefly at the two priorities in Minister Lebouthillier’s December 2021 Mandate Letter which are relevant to the CVITP.

1The Minister shall “continue your work to modernize the CRA to provide a seamless, empathetic and client–centric experience, including by making information easier to find and understand, accelerating the use of digital tools, and enhancing the Community Volunteer Income Tax Program.”

This is an implicit reference to one of the priorities in her Supplementary Mandate letter of January 2021, in which she was instructed to “expand and enhance the Community Volunteer Income Tax Program”.   At that time, we commented extensively on this priority here.  Only 10 months elapsed between the two mandate letters so one should not expect there to have been substantial improvements in the intervening period.  It is nevertheless somewhat gratifying to see that enhancing the CVITP remains a priority for the government.

2Furthermore, the Minister shall “develop and implement a strategy to support people filing their first income tax and benefit return, with a focus on youth and newcomers to Canada.”

While this second priority does not specifically reference the CVITP, it is likely to play a part in such a strategy given that youth and newcomers to Canada are among the clientele served by the CVITP.  This is because these two groups include many low-income residents, especially in the first year that they file their income tax and benefit return.

Ambivalent Administrator: a Contradiction in the CRA’s Relationship with the CVITP

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Contradiction

Canadian residents with taxable income have a legal obligation to file a return.  But Canadian residents with no taxable income have no legal obligation to file a return.  What does the CRA do in the latter case, when a resident with no taxable income does not file a return and thus loses access to benefits that are contingent upon filing a return?

We believe the federal government has an expectation that the CRA will not be passive but will actively encourage residents to file.  This is because the federal government has identified so many of the benefits contingent upon filing a return as key to achieving the objectives identified in its Poverty Reduction Strategy.  And, as the federal government’s administrator of its system for filing returns, the CRA is the gatekeeper for gaining and retaining access to so many of these benefits.

The CRA’s current actions with respect to the CVITP suggest it has a highly ambivalent attitude toward the CVITP, its main program for assisting low-income residents to file their returns.  Why do we say this?

For two reasons.  First, we believe the CRA has adopted two approaches which, taken together, are contradictory.

On the one hand, the CRA has repeatedly stated the importance of maintain what it calls an arms-length relationship with CVITP host organizations (see 4 in diagram above) and their volunteers (see 5 in diagram).  For example, on page 41 of the 2020 report on the CVITP by the Taxpayers’ Ombudsman, the CRA states that it: “…strives to provide as much support as possible to the volunteers and partner organizations, while maintaining the arms-length relationship required to mitigate the liability risks that would be associated with any prescribed involvement in tax return preparation by the CRA.” 

Yet it is unclear what exactly the CRA means by an “arms-length relationship” in the CVITP context.  The CRA says it needs to maintain some distance from – or, to word it another way, not work too closely with – host organizations and their volunteers to mitigate any risks the CRA might run as a result of the returns these partners prepare for clients.

On the other hand, the CRA clearly states on its website that it is prepared to do the returns of those residents with a modest income and a simple tax situation who have used a free tax clinic before or are eligible to use one (see 1 in diagram). 

The CRA’s willingness to do the returns of low-income people and accept the risks this entails is puzzling.  It seems to contradict the CRA’s own argument about the need to mitigate for the liability risks associated with its involvement in the CVITP return preparation process by maintaining some distance from its partners.

Second, the main rationale for the CVITP is to help low-income people access benefits and credits to which they are entitled, not to pay income tax as most CVITP clients do not owe income tax.  Nevertheless, in the four years since the federal government’s publication of its Poverty Reduction Strategy (PRS), the CRA has never once publicly acknowledged the link the federal government has established between the CVITP and the PRS’s goals.

Events over the last three years should shake the CRA of its ambivalence.  Just as the CRA has seen its budget for the CVITP quadrupled with the aim of doubling its client numbers, it saw those numbers dip by a third from their peak.  If the CVITP is to be turned around, the CRA must get off the fence and take more initiative.

In the following article, we provide more details on all of this and options for the administration of the CVITP.

CRA Data and Analysis Suggestions for a More Effective CVITP Strategy

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As mentioned in a previous article, one priority in her Supplementary Mandate Letter from the Prime Minister (dated January 2021) instructs the Minister of National Revenue to “enhance and expand the Community Volunteer Income Tax Program”.  One thing the Canada Revenue Agency (CRA) can do to help achieve this is through placing greater emphasis on another priority mentioned in the same letter, instructing Minister Lebouthillier to “improve the collection and analysis of disaggregated data related to supports and services offered by the CRA.”

Data needs to be collected and analyzed for at least two reasons.  First, to confirm whether or not the CVITP is meeting its intended objective.  And second, where the CVITP is falling short of its intended objective, to help devise strategies to ensure the program can better meet its intended objective.

We think the Canada Revenue Agency (CRA) currently has two related problems with respect to CVITP data.  First, it collects the wrong data and publishes too little of what it does collect.  Second, this means the CRA focuses on doing the wrong things.

In this two-part series of articles, we look at data and its use in formulating strategy.

In the first article, entitled “First, the CRA Needs to Collect and Analyze the CORRECT Data”, we examine the data that is collected and analyzed on clients and their returns.  We begin with the uncontroversial observation that data needs to be collected and analysed to confirm whether or not the CVITP is meeting its intended objective.  We then refer to a previous article in which we argued that the CRA presently collects and reports CVITP results data which are not aligned with the purpose and in which we offered alternative performance indicators which we believe do a better job of this.  We also look at the data the CRA currently collects on CVITP host organizations and volunteers – what we call the delivery infrastructure – and make some modest suggestions for additional data to be collected through the annual registration process just prior to the tax season.

In the second article, entitled “Then, the CRA Needs to Build a Strategy With a Focus on Improving EFFICIENCY”, we look at how all this data can be used to devise strategies to ensure the CVITP can better meet its intended objective.  The combination of analyses of data on CVITP results and delivery infrastructure can help to inform the choice of actions to be taken.  The strategic priority we focus on is increasing the number of CVITP clients.  We argue that the CRA should place greater emphasis on increasing efficiencies within the existing delivery infrastructure over increasing the size of the delivery infrastructure.  A few examples are offered to illustrate how data on results and delivery infrastructure could be used to do this.

PM’s Mandate Letters for Minister of National Revenue: Does the CRA “Walk the Talk” on the CVITP?

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We already know that the federal government identified the CVITP as an initiative contributing to achieving the objectives of its 2018 Poverty Reduction Strategy.  But how can one tell just how important the CVITP is currently to the government?  One way is to consult the Mandate Letter that the Prime Minister sends to the Honourable Diane Lebouthillier, the Minister for National Revenue responsible for the Canada Revenue Agency.  This letter gets issued following the Speech from the Throne and highlights the current government’s priorities.  This article highlights a few of the priorities in the Minister’s December 2019 Mandate Letter and her January 2021 Supplementary Mandate Letter which are relevant to the CVITP.  And it briefly looks at how well the Canada Revenue Agency is doing at delivering on these priorities.  The results are not promising.

Notice of Assessment: Canada Revenue Agency’s New Grant Program

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The Canada Revenue Agency (CRA) recently announced that it will, for the first time, be providing financial support to host organizations that run CVITP clinics.  As the CRA has previously denied that it could provide such support, this is an important change.  And in principle, it is one that we support.

However, the current pilot project, which offers $3.3 million a year over the next three years, is poorly designed, with no targeting (not in line with the purpose of the program), insufficient financing (unlikely to provide the intended incentive effects), and an administrative process that is burdensome (not exploiting the flexibilities available with the use of grant funding).

Recognizing that this three-year pilot project has yet to begin its first year of implementation, we make some suggested changes that we believe will significantly improve its impact.  We propose that the CRA:

  • Target its grant funding to ensure host organizations are providing support to those who need it the most;
  • Make the client income level a criterion, using the poverty line as the threshold;
  • Set a minimum percentage for a host organization’s client returns that must meet or fall below the poverty line to qualify for any grant funding;
  • Offer a larger financial incentive for returns filed by clients who had previously not filed for a number of years;
  • Establish and publicize the minimum percentage and the size of the financial incentive at the outset of the grant funding period;
  • Significantly increase the funding level per eligible return to provide for something approaching a real incentive;
  • Use the annual registration process for the approval of host organizations to collect all of the information required to assess the host organization’s eligibility for grant funding; and
  • Use the annual registration process for the approval of host organizations to notify eligible host organizations of the funding formula it will use to determine the amount of grant funding they could receive at the end of the eligible activity period.

We conclude this four-part series of short articles offering some thoughts on the challenges the CRA will face in assessing the impact of this pilot project.  Given the difficulty in surmounting these challenges, there is a risk that any growth in the numbers will be claimed as demonstrating the success of the pilot and used to justify maintaining this project with poor targeting, insufficient financial resources and cumbersome administrative arrangements.

Supporting Host Organizations Better

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The federal government’s Poverty Reduction Strategy identifies the CVITP as one of its programs that contributes to achieving its goal of reducing poverty in Canada.  This is because the annual income tax and benefit return processed by the CVITP serves as the basis for establishing eligibility for and maintaining access to many federal and provincial/territorial benefits and credits, some of which are income-tested. 

Set up by the Canada Revenue Agency (CRA), the CVITP is a free return preparation and filing service offered, in 2019, by over 3,500 host organizations to some 741,000 low and modest-income individuals filing 835,216 returns with the assistance of over 19,000 volunteers.  Yet the CRA provides no financial support to assist host organizations with any of the costs they incur to make this possible.  Instead, it encourages host organizations to do their own independent fundraising.  This has not proven to be a successful nor sustainable solution.

To maintain and improve CVITP services, the CRA should be providing direct financial support to host organizations.  It should also spin off some of the CVITP related services it currently provides to an independent not-for-profit unit, financed through a service contract with the CRA.  This independent unit could provide these as well as other new CVITP related services not presently available to host organizations.

This proposed arrangement is in keeping with current federal government practice wherein federal services to the public delivered by independent parties receive some financial support.  In the absence of such a change, host organizations will continue to struggle to maintain the current level of service and will not be positioned to improve their CVITP services in line with CRA expectations.  Furthermore, the entire CVITP operation will remain at risk, as was evidenced this year when COVID related public health restrictions temporarily shut them down and willing host organizations moved to more labour intense “virtual clinics”.

Read here to learn more about the difficult conditions in which host organizations currently operate and why this severely limits the potential of the CVITP, one form that CRA financial support to host organizations could take, and why there is also the need for an independent unit as well as what it could be do to help fulfill the potential of the CVITP.

The Issue of Non-filers

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Conservative estimates suggest there are over 1 million eligible people in Canada who do not file annually.  A significant number, perhaps the majority, are individuals living on very low incomes.  Because they do not file, they are missing out on important federal and provincial/territorial benefits.

The Canada Revenue Agency (CRA) recently introduced an initiative to encourage low-income non-filers to file their income tax and benefit returns.  However, the success rate for this initiative is pitifully low.

This article suggests why the CRA should and how it could work with CVITP host organizations to significantly increase the number of low-income non-filers who decide to file returns.