Policy Connections

Using Municipal Poverty Data to Better Target CVITP Service

In a previous article, we argued that the CVITP is not serving enough of Canada’s poor. In that article, we looked only at the national picture. Under the most generous assumptions, we determined that the CVITP served at best only one in every five poor people in Canada.

In this article, we look briefly at 2020 provincial and territorial level data (the most recent year available) to establish CVITP coverage (again, using a very generous assumption). Our estimates reconfirm that CVITP service to the poor remains surprisingly low across Canada (with the lower populated regions doing a comparatively better job).

Given the CVITP’s very limited delivery capacity, we believe that the best way to serve more of the poor is with better targeting. But to do this effectively, host organizations need poverty data at the local level. By this we mean both reaching out to specific groups to encourage them to use the service and greater selectivity in whom the service is provided to.

A new Statistics Canada website where poverty data for most Canadian municipalities can be found offers the CRA and host organizations the information needed to devise strategies to improve access to CVITP services for those who need it the most. But we argue it is unclear whether either group has the will to make this happen.

With Poverty Rising, How Well is the CVITP Reaching the Poor?

At the beginning of May, Statistics Canada released the Canada Income Survey for 2021 which shows that the poverty rate rose to 7.4% in 2021. Statistics Canada estimates that 2.3 million Canadian residents 18 years of age or older were living in poverty that year.

Although the CVITP is not designed to serve exclusively the poor, we believe that should be its prime focus as the federal government’s 2018 Poverty Reduction Strategy identifies the CVITP as a key initiative contributing to its poverty reduction objectives.

This article explores how well the CVITP does in serving the poor. We find that, based on the most generous assumption possible, the CVITP served 25% of the poor in 2021. Using a more realistic assumption, the CVITP clearly serves less than this figure. We provide recent historical data to show that the CVITP has not performed any better than this.

For the CVITP to reach a greater percentage of Canada’s poor, the Canada Revenue Agency (CRA) needs to do two things simultaneously. First, it needs to increase the CVITP capacity to serve more people. (This will prove difficult especially given recent trends within the CVITP.) The article briefly touches on a number of low or no cost things the CRA could be doing to facilitate this.

However, even if the CRA is successful in increasing the delivery capacity of the CVITP, there is no guarantee that new clients will be mostly drawn from the poor. This is why the CVITP also needs to better target its services to the poor. The article also suggests a simple, no cost way the CRA could do this. Both elements must be part of the CRA’s strategy if the CRA wants to serve more of Canada’s poor through the CVITP. However, indications are that the CRA is going in the other direction, scaling back its ambitions for the CVITP.

CRA Scales Back Its Ambition For The CVITP

In this series of five short articles, we show how the CRA has publicly scaled back its growth ambitions for the CVITP. We cover four distinct periods in the evolution of the CVITP over the last 10 years:

During the 2013-2017 period, the CVITP saw steady growth but this does not appear to be because of any explicit strategy.
In the 2018-2019 period, aided by the quadrupling of the budget to support its administration of this program, the CRA established its first performance targets for the CVITP. These targets would cover the 2018 to 2021 tax seasons. The CRA planned to achieve these targets without providing the community-based organizations and their volunteers who delivered this service any financial support.
The 2020-2021 period saw a collapse in CVITP services followed by a modest rebound. This was due to the introduction of COVID-related public health restrictions which restricted in-person clinics, the main delivery model which had been used up to that point in time.
Given that the CVITP’s performance was well short of the targets established by the CRA, the Agency eliminated any further targeting or performance reporting to Parliament on the CVITP for the 2022-2024 period. It also introduced a pilot grant program to provide modest support to community-based organizations hosting the CVITP during the 2021, 2022 and 2023 tax seasons. The intent of the program is to provide a financial incentive for existing host organizations to take on more clients and new community-based programs to host CVITP services. However, this period also coincides with the return to normalcy in public life. Thus, we should expect the CVITP to recover some of the ground it lost in 2020 even in the absence of financial incentives.

Given the history of CRA’s changing ambitions for the CVITP, we draw three conclusions:

The CRA’s track record in performance targeting with the CVITP illustrates how meaningless it is for federal departments and agencies to set, monitor and report on their own results. When performance falls short of targets, these can be changed or dropped entirely to avoid the inconvenience of having to explain awkward results. The elimination of any further performance indicator for the CVITP suggests the CRA no longer considers that the CVITP is part of its key responsibilities.
CRA data for the 2022 tax season, the most recent available, show the CVITP’s numbers of returns completed and of individuals assisted represent about three quarters of the results achieved in the 2019 tax season. Worse still, the number of returns completed is only a 13% increase over the number produced for the 2013 tax season (the earliest figure reported by the CRA). And the number of individuals assisted is only about 80% of the number for the 2016 tax season (the earliest figure reported by the CRA). Yet, over the same period, the Canadian population has grown and the federal government has increasingly resorted to using the return filing process as its principal tool for allocating a growing number of income-tested benefits. It is unclear how, despite a quadrupling of its CVITP budget, the CRA has managed to produce such poor results.
The fact that the CRA has quietly abandoned its growth ambitions for the CVITP calls into question the federal government’s statement in its 2018 Poverty Reduction Strategy (PRS) that the CVITP is a key program for helping to deliver on the PRS objectives. If the PRS is genuinely a strategy and not just a communications tool, the federal government needs to follow up and ensure that the relevant departments and agencies it depends on to achieve the PRS objectives are implementing their initiatives effectively. Someone senior inside the federal government needs to be calling the CRA to account for its poor implementation of the CVITP.

Trends in Poverty Reduction With Implications for the CVITP

Our website is focused on the link between the CVITP and poverty reduction. The federal government’s first ever Poverty Reduction Strategy, introduced in 2018, set a target for reducing the poverty rate by 2020 by 20% from its 2015 level. In March 2022, the Official Poverty Dashboard of Indicators maintained by Statistics Canada indicated that the poverty rate, which was 14.5% in 2014, had declined to 6.4% in 2020. This is well in excess of a 20% reduction!

However, Statistics Canada recently released a paper which revised the poverty rate for 2020 to 8.1%. This revision took into account the 2021 Census of Population figures. While not as impressive as 6.4%, it still exceeds the target the government set for reducing poverty by 2020.

But this accomplishment is likely to be short-lived for two reasons.

First, 2020 saw the introduction of a large number of benefits to help people who had suffered loss of income due to COVID related lockdowns. While not the intended objective, these benefits lowered income inequality as well as the proportion of the population living on low incomes. While many of these supports were maintained in 2021, these income supports were largely withdrawn in 2022 as the economy opened back up.

Second, 2022 has also seen rising price inflation. Price inflation disproportionately impacts those on low incomes, reducing their purchasing power, as people in this group live on fixed incomes or low wages which do not rise as fast as inflation.

Whether or not these two factors have led to an increase in the poverty rate will only be known in March 2024 when Statistics Canada releases its poverty data for 2022. The implications for the CVITP will be evident more immediately as an increasing number of residents fall into poverty, becoming eligible to receive federal and provincial or territorial government benefits which are income tested. Since the filing of a current income tax and benefit return is a condition for receiving many of these benefits, the federal government will be keen to facilitate filing.

But will the CVITP be ready to provide this service in the 2023 season to an expanding clientele? The most recent figures for the CVITP show, at the very least, that the CRA will struggle to do this. Consequently, many low-income people who are eligible for this service in 2023 will likely have to turn to commercial return preparers to file in a timely manner. Others will file late, risking interruptions in the flow of their benefits.

For more details, see our full article on this topic here.

The Evolution of the CVITP – 2022 Update

Canada Revenue Agency’s (CRA) recently released Departmental Results Report for fiscal year 21/22 allows us to complete the 2022 update for the evolution of the CVITP. We have divided this subject into three short articles. The first focuses on the results from delivering CVITP service to clients. It includes all the data with accompanying commentary on individuals assisted, returns filed and value generated. The second focuses on the CVITP infrastructure needed to provide this service. It also provides all the data with accompanying commentary on host organizations and volunteers. The third is a new feature which provides some simple measures of CVITP productivity.

Short on time? Here are the key developments:

NO INCREASE IN CVITP SERVICE IN 2022

While the CRA calls the number for individuals assisted in the 2022 tax season an approximation, it is roughly the same as in the 2021 tax season; in other words, there has been no increase in service. The 2021 tax season saw a partial rebound in numbers after the sharp decline in 2020 but it was still well below the numbers reached in 2016 and far from the peak in 2019.
The trend for returns filed largely mirrors that of individuals assisted.
While the CVITP was making progress in filing more of its clients’ prior year returns up until and including the 2020 tax season, its performance in this area declined in 2022.
For the first time, the CRA has reported in its Departmental Result Report on value of the refund and benefits generated through the CVITP. This is a very welcome development, and we hope that the CRA continues this practice in the future. As the main rationale for offering a CVITP clinic is not to help individuals pay income tax but to help them maintain access to many poverty-reducing benefits, this figure provides tangible evidence of the real value generated for CVITP clients.

NUMBER OF HOST ORGANIZATIONS REBOUNDS BUT NUMBER OF VOLUNTEERS CONTINUES TO DECLINE

The number of host organizations offering CVITP service has largely rebounded in the 2022 tax season following the precipitous decline due to COVID health restrictions.
The trend in volunteers has been in decline since it peaked in the 2019 tax season. The small rebound in the CRA count for 2022 is, we believe, misleading. This is due to an unusual interpretation which the CRA makes in whom it classifies as a volunteer. In partially correcting for this with an adjusted estimate, we show that the small rebound in 2022 is illusory and that the number of volunteers continues to decline.

PRODUCTIVITY REBOUNDS FOR VOLUNTEERS BUT NOT FOR HOST ORGANIZATIONS

Averages of individuals assisted and returns filed per volunteer fully rebound to the peaks achieved in the 2017 tax season.
Averages of individuals assisted and returns filed per host organization are only 70% and 71% respectively of the peaks achieved in the 2017 tax season.

For further analysis, charts with trends, tables with data and their sources, see:

The Evolution of the CVITP – 2021 Final Edition

This is a follow up to our early edition on the evolution of the CVITP in 2021. We consider the CRA’s annual Departmental Results Report the gold standard for CRA reporting because the report is submitted to Parliament. Even then, data on all four elements – clients, returns, volunteers and host organizations – is hard to come by. It is growing increasingly difficult for Parliament, the public and the host organizations and volunteers directly involved in making the CVITP a reality to know what’s happening.

In our article, we briefly discuss the numbers and their sources. We show that the number of clients served rebounded by 43% from the spectacular low of the 2020 tax season. (Remember: that was the season when host organizations had to stop offering in-person CVITP clinics due to the COVID health restrictions.) Nevertheless, the number of clients served was still well below the peak achieved during the 2019 tax season. As the CRA did not report consistently on the number of returns filed, we can only assume that it was greater than the number of clients served. But we don’t know by how much.

Although the CRA did not report formally on the number of volunteers, we find a number in a statement by the Minister of National Revenue which suggests it declined substantially from the number reported for the 2020 tax season. The number reported for host organizations represents a spectacular decline from the 2020 tax season. We note that the numbers provided by the CRA for volunteers and host organizations in the 2020 tax season are misleading in that they likely included those registered with the CRA at the beginning of the season rather than those who were able to adapt to CVITP virtual clinics. Furthermore, the 2021 figure for volunteers is simply too high to be credible. In any event, the declines in the number of volunteers and of host organizations over the 2020 and 2021 tax seasons is deeply troubling.

A Model for Thinking About Relationships Within the CVITP

In a series of forthcoming articles, we will make use of the following model as the basis for discussing different relationships within the CVITP. We believe this simple model summarizes the most important relationships which make up the CVITP.

To learn more about the details, see this short explanation.

The Evolution of the CVITP – 2021 Early Edition

CVITP figures for the number of people assisted this year and the number of volunteers registered show a second year of poor performance, well below its peak for the 2018 tax year (2019 tax season). The poor performance last year was not surprising given the sudden imposition of public health restrictions due to COVID.

In the lead up to the 2021 tax season (2020 tax year), the Canada Revenue Agency (CRA) had ample time to plan for the operation of the CVITP under public health restrictions. However, the CVITP’s performance this year was only marginally better than last year. This is despite the CRA having been allocated in recent years a large administrative budget increase for the CVITP that was intended to double the number of people assisted.

What’s going on here? We may never know the full story. Earlier this year, the CRA indicated it will not be providing any information on the CVITP in its future reports to Parliament. The timing of this decision may be purely coincidental. But one can be forgiven for thinking that the CRA’s recent poor performance on managing the CVITP might have had something to do with it.

For further analysis with numbers and our sources, see our short article here.

The Evolution of the CVITP – 2020 Update

We find two sources of 2020 data from Canada Revenue Agency (CRA) publications that allow us to update CVITP trends on the numbers of individuals assisted, returns filed, volunteers employed and host organizations offering free tax clinics.

In this article, we show and briefly discuss: (1) the dramatic decline in individuals assisted; (2) the continuing modest upward trend in the average number of returns filed per client; (3) a modest decline in the number of volunteers registered, which may mask a collapse in the number of volunteers who were actually employed in providing services in virtual clinics; (4) a modest increase in the number of host organizations registered which may similarly mask a collapse in the number of host organizations which actually offered services through virtual clinics; and (5) a continued decline in the average number of volunteers employed per host organization. This last trend may be an early sign of future capacity constraints within the CVITP.

A Primer on Canada’s Official Poverty Line and Why It Matters to the CVITP

Canada’s Poverty Reduction Strategy gives time-bound targets for making progress in reducing poverty linked to one indicator. This suggests that the federal government can be held accountable for its efforts in achieving these time-bound targets. The indicator it uses is an official poverty line. The official poverty line is a uniquely income-based concept. The targets are as follows:

– By 2020, the poverty rate will be reduced by 20% from its 2015 level, and

– By 2030, the poverty rate will be reduced by 50% from its 2015 level (aligned with the United Nations Sustainable Development Goals)

In other words, the official poverty line can be used to calculate the poverty rate: the percentage of the population with an annual income lying below this line at a particular point in time forms the poverty rate.

In an article entitled A Primer on Canada’s Official Poverty Line and Why It Matters to the CVITP, we explore what the official poverty line is and how it is used to determine poverty rates. In the conclusion, we draw the CVITP’s connection with this official poverty line. As you will see, the income tax and benefit returns processed by the CVITP play a crucial role in helping to raise clients’ incomes relative to the official poverty line.

The Evolution of the CVITP

In a series of articles, we trace the evolution of the CVITP, using information from Canada Revenue Agency (CRA) reports and plans for Parliament. Our articles tell you about the clients served by the CVITP tax clinics, the returns that have been filed at the these clinics, the CVITP volunteers who have helped clients to file their returns and the organizations which have hosted CVITP tax clinics.

Learn why we reach the conclusion that “the CRA’s reporting on the CVITP has been weak to date and gives Parliament too little information.”

Interested? Start with the introduction to “The Evolution of the CVITP”.

Connecting CVITP and Poverty Reduction

To learn more about the connection between the Community Volunteer Income Tax Program (CVITP) and poverty reduction, visit this page.

The Evolution of the CVITP – 2022 Update

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