September 12, 2024
Summary: Statistics Canada estimates that 9.9% of Canadian residents, or 3,037,000 adults lived below the poverty line in 2022. If all CVITP clients assisted in the 2023 tax season had incomes below the poverty line, this means that at best 25% or 1 in 4 adults living in poverty was served by the CVITP. What of those living in poverty in 2022 who did not get this free service? Either they prepared and filed their return themselves, paid someone else to do it or else they simply did not file.
We assume that the Canada Revenue Agency (CRA) wants to both reduce the number of non-filers and eliminate the cost of filing a return for those who can least afford it. Why? Because filing a return is necessary if those living in poverty are to get and maintain their eligibility for the income-tested – and poverty reduction – benefits to which they are entitled.
Therefore, greater access to a free service is, in principle, desirable. One of the most obvious ways of doing this is to scale up the CVITP. Indeed, the CVITP is identified in the federal government’s 2018 Poverty Reduction Strategy as the CRA’s contribution to meeting the strategy’s goals.
Although the CVITP suffered during COVID, its numbers have largely rebounded. It remains a very effective way of reaching those living in poverty at a relatively low cost. Thus, the CRA could redouble its efforts to significantly expand the CVITP.
However, post-pandemic the CRA appears to have scaled back its ambitions for the CVITP. The CRA no longer sets targets for reaching more clients and, presently, it is unclear what its goals for and commitments to this program are. Instead, it seems to be focusing its efforts to reach low-income Canadians through several other initiatives which presently show less promise than the CVITP.
How effectively did the Canada Revenue Agency’s CVITP serve those living in poverty in Canada in 2023?
To answer this question, we first look at the most recent data on poverty in Canada.
At the end of April 2024, Statistics Canada released the Canadian Income Survey for 2022. This included the poverty statistics for 2022 based on the poverty income threshold that uses the market basket measure or MBM. (This is the methodology used by Statistics Canada for establishing Canada’s official poverty line.)
Statistics Canada estimates that the poverty rate rose to 9.9% in 2022.[i] This translates into 3,037,000 adults who were living below the poverty line in 2022.
The rise in the poverty rate from 7.4% in 2021 is not surprising.[ii] By 2022, the federal government ended all the large income support programs introduced in 2020 to offset the wage losses arising from the COVID lockdown. Inflation, which had started to rise in 2021, accelerated in 2022, further eroding purchasing power.
So, what were the implications for the CVITP?
Is the CVITP designed to serve only those living in poverty?
The CRA states that the CVITP is intended to serve those living on low and moderate incomes, not just those living in poverty. What does this mean in practical terms?
The CRA proposes income ceilings that host organizations can use as cutoff points for determining client eligibility. The CRA suggests that only individuals and families with incomes below these amounts should receive the free CVITP service. For the past five years, the CRA’s suggested income ceilings for an individual and a couple have been respectively $35,000 and $45,000. How do these income ceilings compare with the official poverty line?
The official poverty line has been rising especially fast over the last two years because of inflation. In general, as the poverty line has climbed, it has come closer to the CRA’s suggested income ceiling. However, the real story is a little more complicated than this.
There are now 66 MBM-based poverty lines reflecting the very different living costs in the diverse communities that make up Canada[iii]. The 2022 figures for the poverty line range from a low of $43,022 (in Quebec) to a high of $118,787 (in Nunavut) for a reference family of four (two adults with two children).
This translates into poverty income thresholds for an individual and a couple of as little as $21,511 and $30,115 respectively if they live in the least costly location in the country. If, on the other hand, they live in the costliest location in Canada, this translates into poverty income thresholds for an individual and a couple of as much as $59,393 and $83,151 respectively.
Therefore, the CRA’s suggested income ceilings may be above the poverty income thresholds for an individual and a couple in low-cost locations but below these in high-cost locations in Canada.[iv]
Although the CRA’s income ceilings for the CVITP are merely suggested, most host organizations seem to adhere to them in areas where they remain above the official poverty line. Where the poverty line approaches the CRA’s suggested income ceiling, host organizations have used their discretion to raise the income ceilings they apply for selecting clients.
Thus, a growing percentage of the individuals assisted by the CVITP should be in genuine need of this free service as they are living in poverty. But it remains possible for the CVITP to serve some low-income individuals and families who are not living in poverty.
Now we are ready to answer the question we posed at the outset…
How well did the CVITP do reaching those living in poverty in 2023?
The CRA does not provide any information on the CVITP’s coverage of those living in poverty. Nor does it provide any information on the income situation of the CVITP’s clients. Therefore, we cannot answer this question definitively.
But we can make a generous estimate that provides a useful answer.
We start with the total number of people assisted by the CVITP in the 2023 tax season. According to the CRA’s statistics, this was 758,540 people.
Next, we make a simplifying assumption: we suppose that all the CVITP’s clients people lived below the poverty line, even though we know that some of them probably did not.
Then we look at the total number of adults living below the poverty line in Canada in 2022. This number was 3,037,000.
Why 2022? The CVITP volunteers filed the 2022 income tax and benefit returns for the people assisted in the 2023 tax season. So, it was the income levels for 2022 that were relevant for selecting those served in the 2023 tax season.
Finally, we compare the two figures. These suggest that in the 2023 tax season, the CVITP served, at best, 25% of those living in poverty in 2022. Again, we say “at best” because we are generously assuming that all of the people receiving free CVITP services were living in poverty, even though we know that the CVITP serves some clients who have low incomes but who are not, strictly speaking, living in poverty.
This means only 1 in 4 of those living below the poverty line were served by the CVITP.
How does this compare with previous years?
The percentage has fluctuated over the years but what is striking is that it shows the CVITP has consistently served only a fraction of those living in poverty.
What should be done about those who do not receive the CVITP service?
What of those living in poverty in 2022 who did not get this free service? Either they prepared and filed their return themselves, paid someone else to do it or else they simply did not file.
Unfortunately, there is no data available on this group.
Those living in poverty often do not have the means to pay for their return to be prepared and filed. But the cost of filing a return through a commercial service provider is not the only problem. Lack of awareness about the CVITP or restricted access to CVITP services due to excessive demand – either of these may also be a reason why a significant portion of Canadians do not file a return.
We assume that the CRA wants to both reduce the number of non-filers and eliminate the cost of filing a return for those who can least afford it. Why? Because filing a return is necessary if those living in poverty are to get and maintain their eligibility for the income-tested – and poverty reduction – benefits to which they are entitled.
Therefore, greater access to a free service is, in principle, desirable. One of the most obvious ways of doing this is to scale up the CVITP. Indeed, the CVITP is identified in the federal government’s 2018 Poverty Reduction Strategy as the CRA’s contribution to meeting the strategy’s goals.
What is the CRA doing about this?
It is confusing to tell, given the mixed signals it is conveying, but the CRA appears to be doing little to significantly scale up the CVITP to meet this challenge.
The CVITP initially reached a peak in 2019, serving 741,400 people. Then it fell dramatically in 2020, due to the COVID related health restrictions that were imposed across the country.
Introduced in 2021, the CRA’s pilot grant project was intended to grow the CVITP after its poor performance in 2020. Instead, it has merely helped to raise the CVITP’s numbers back to where these stood just prior to the COVID pandemic. The three-year pilot was extended by one year to include part of the 2024 tax season (i.e. the first half of 2024). At this time, the CRA has given no indication of what will happen next to its grant program.[v]
Although the CVITP suffered during COVID, its numbers have largely rebounded. It remains a very effective way of reaching those living in poverty at a relatively low cost. There is no evidence to suggest that it has reached the limits of its effectiveness. Thus, the CRA could redouble its efforts to significantly expand the CVITP.
However, post-pandemic the CRA appears to have scaled back its ambitions for the CVITP. The CRA no longer sets targets for reaching more clients and, presently, it is unclear what its goals for and commitments to this program are.
Instead, the CRA seems to be focusing its efforts to reach low-income Canadians through three other initiatives: non-filers benefits letter campaign, SimpleFile by Phone and the piloting of automatic tax filing. In a series of forthcoming articles, we will show why these initiatives presently show less promise than the CVITP in tackling the fundamental problem of helping a greater percentage of Canada’s impoverished access the benefits to which they are entitled.
[i] The poverty rate for 2023 will only become available in early 2025.
[ii] We anticipated this rise when we last wrote about this issue in reviewing the poverty statistics for 2021.
[iii] See this article for a simple explanation of how Canada’s official poverty line is derived.
[iv] While the CVITP income ceilings use total income and the official poverty line uses disposable income, we explain here why the two can be compared in this context.
[v] For more information on the implementation of this grant program, see our article entitled What Has The CRA’s Pilot Grant Project Accomplished Between 2021 and 2023?