What is the connection between the CVITP and poverty reduction?

Before we can explore the connection between the two, we need to briefly answer two questions:  What is the Community Volunteer Income Tax Program or CVITP?  And, what do we mean by poverty reduction?

What is the CVITP?

(If you’re familiar with the Community Volunteer Income Tax Program or CVITP, you may wish to skip this and go to the next section.)

The CVITP is a program of the Canada Revenue Agency (CRA).  Every year, during the tax season (in March and April), the CRA authorizes community-based organizations across Canada to offer free clinics.  At these clinics, volunteers recruited by the community-based organizations and authorized by the CRA prepare the tax returns of individuals whose incomes are low enough to qualify for this free service.

The CRA provides no funding to the organizations hosting this service and the vast majority of these community-based organizations do not receive funding from any other sources for the provision of this service.  So why do these organizations offer this free service at their own expense?  Often, they are already providing other essential services to low-income individuals and they recognize the need to provide this service also to their clients and their clients may be demanding it.

What do we mean by poverty reduction?

Most people intuitively understand what is meant by reducing poverty.  But disagreements often arise over what is meant by poverty.  The purpose of this section is to give a workable definition for the concept of poverty.

We do not intend to do anything original here.  There are many different ways that poverty has been conceived and from which we could choose.  However, we have chosen to follow the lead of the Government of Canada.  Our reason for doing so will become evident shortly.

“Poverty is: The condition of a person who is deprived of the resources, means, choices and power necessary to acquire and maintain a basic level of living standards and to facilitate integration and participation in society.“

Canada’s First Poverty Reduction Strategy, Government of Canada, 2018

In 2018, the Government of Canada launched a national Poverty Reduction Strategy.  While the strategy recognizes there are many dimensions to poverty, it uses what it calls a market basket measure to establish Canada’s first Official Poverty Line.  This line is stated in terms of annual income.

The strategy reports that, in 2015, one in every eight Canadians (12.1% of the population) lived below the income-based Official Poverty Line.  The strategy then sets two time-bound targets for measuring the federal government’s progress in reducing poverty below the Official Poverty Line:

– By 2020, the poverty rate will be reduced by 20% from its 2015 level; in other words, it will drop from 12% to 9.6%.

– By 2030, the poverty rate will be reduced by 50% from its 2015 level; in other words, it will drop from 12% to 6%.

Finally, the strategy outlines in the annex over 100 federal government programs aimed at reducing poverty.  Income support programs listed include: Canada Child Benefit, Guaranteed Income Supplement, On Reserve Income Assistance, Canadian Forces Income Support, Caregiver Recognition Benefit, War Veterans Allowance, Canada Workers Benefit, Employment Insurance Special Benefits, and Employment Insurance Parental Sharing Benefit.

So here’s the connection…

One of the federal programs listed in the strategy is the CVITP.  To appreciate the connection between the CVITP and the federal government’s poverty reduction strategy and more particularly its goal of reducing the poverty rate below the Official Poverty Line, you need to understand what the government is doing with the income tax return process: increasingly, it is making citizens’ initial and ongoing access to many of the credits and benefits it offers conditional upon filing a tax return.

For example, in order to maintain the federal government’s payments of the Canada Child Benefit, parents must be current with their income tax returns.  Again, citizens can only get the Climate Action Incentive (more commonly known as the carbon tax credit) by filing an income tax return.

Moreover, a number of important federal credits and benefits are not only conditional upon filing a return but also income-tested.  This means that the citizen must demonstrate, through filing the return, that their income is low enough to qualify for and to continue to receive the credit or benefit.

This is true, for example, to qualify each year for the GST/HST Tax Credit (payable in four installments over a 12-month period).  Again, for those receiving Old Age Security (OAS), if their income is too low in any given year, they will also be entitled to receive the Guaranteed Income Supplement (GIS) but only if they file a tax return demonstrating this.

Many of the provinces take advantage of the CRA’s infrastructure to administer their credits and benefits efficiently.  For example, low-income Ontario residents must submit an income tax return to qualify for the income-tested Ontario Trillium Benefit.

Furthermore, eligibility for access to some social programs at the municipal and local level is tied to income and the CRA’s notice of assessment may be used as an independent, verifiable means of demonstrating that a citizen’s income is low enough to qualify.  For example, municipalities in Ontario which provide subsidized housing are increasingly using the notice to calculate rent geared to the tenant’s income.

If low-income individuals are to access and maintain the federal benefit and credits to which they are entitled, many of which are key to keeping them out of income-based poverty as defined by the Official Poverty Line, then they must file an income tax and benefit return.  Like other people, they may see the tax return process as being complicated.  But unlike other people, they may not have the computer and internet connection to submit their own returns and they cannot afford to pay someone else to prepare their return.

This is where the CVITP provides a solution: offering low-income individuals a free service which enables access to and maintenance of important federal and provincial credits and benefits, some of which are specifically designed to raise and keep people out of income-based poverty.