The Current Context
Canada’s Poverty Reduction Strategy identifies the CVITP as one of the federal government’s programs that contributes towards the achievement of the Strategy’s objectives. The CVITP is a free service, offered each year by community-based organizations all across Canada, wherein volunteers work with clients of low and modest incomes to complete and file their income tax and benefit returns with the Canada Revenue Agency (CRA). Individuals of low and modest incomes pay relatively little in the way of income tax but must submit an annual return to access and maintain eligibility for many federal and provincial/territorial benefits.
In 2019, over 3,500 of these community-based organizations working with over 19,000 volunteers hosted CVITP clinics in which they provided free return preparation to some 741,000 clients, enabling the filing of 835,216 returns. On average, each host organization employed roughly five volunteers to process 235 returns for 208 clients. (For more information on the history of the CVITP, see the following series of articles.)
While it is the volunteers who prepare the returns for clients, the host organizations provide the community-based infrastructure needed to connect the volunteers with their clients. Thus, host organizations are the lynchpin in the CVITP’s operation. They are the public face within the local community of a large federal program focused on delivering on a core government objective: poverty reduction.
Who currently pays the cost of providing free CVITP services?
The CRA would be incapable of delivering the CVITP were it not for these host organizations. Yet they receive no financial support from the CRA which has the responsibility for the CVITP. The CRA offers only modest in-kind support (in the form of used laptops and USB keys) to a very small number of organizations. This is highly unusual. We are unaware of any other instance where a federal program of such scale is delivered at the community level with no financial support from the federal government.
How then do these host organizations manage to provide this service in the absence of CRA funding? First and foremost, they make use of their own internal resources. Often, the responsibility for organizing the CVITP clinics within the host organization falls to staff who already have many other duties with which to contend. (One CVITP clinic organizer told us “I do this from the spare corner on my desk.”) Materials and equipment will only be purchased when funds can be found in other budgets of the organization. In essence, then, the delivery of this federal program is subsidized in large part by the resources of community-based organizations.
This leads to a number of limitations in CVITP service delivery. For example, many host organizations cannot afford to offer clinics outside of the March to April period traditionally associated with the tax season. Clinics may only be open during regular working hours, as many host organizations are unable to pay overtime for staff to work on weekends or in the evenings. Similarly, some host organizations are unable to provide clients with a paper copy of their returns because they cannot afford to provide computer printers. Very few host organizations collect any data on their clinics beyond counting returns filed and estimating volunteer hours worked.
While these organizations do an amazing job of managing CVITP clinics with very few resources, this represents an important constraint on investing to improve client access and quality of service. Many host organizations recognize this limitation.
Some have tried to raise funds from charitable donors to help support the costs of their CVITP operations. Some of the large ones have been successful in doing so but this is not an option to most host organizations. Many already do fundraising for their core functions, such as provision of health care or community development, and want to focus their fundraising efforts on these operations. Others, especially small organizations, lack the capacity even to contemplate a sustained program of fundraising.
Although it will not provide financial support to host organizations, the CRA is prepared to give them advice as to where to look for funds. The prospect of some 3,500 organizations all starting individual fundraising campaigns is not credible in our view.
Even where a host organization has managed to secure the funds from a donor, this funding has usually been provided only for the short-term since most donors want to see their contributions help put programs on the path to financial sustainability; they do not want to make long-term commitments to fund programs. This has led many host organizations either to invest efforts disproportionate to the amount of funds raised or to abandon the search for funds to support what is for some a non-core program.
This is not a sustainable solution for a host organization that wishes to put its CVITP service on a secure financial footing. It is an even less realistic solution for all of the 3,500 host organizations on which the CRA currently depends.
The CRA insists that host organizations provide CVITP services at no cost to the clients. Ironically, some host organizations that are strapped for resources charge their CVITP clients a modest fee for the service. The CRA does not like this as it claims that CVITP services should be offered free of charge to clients. In principle, this claim makes perfect sense, but it is blind to the reality on the ground. Even so, the CRA will not insist that these host organizations stop charging their clients a modest fee, at the risk of decertifying them if they were to fail to comply. This is because the CRA realizes that in the face of such a threat, many of these fee-charging organizations would shut down their operations as they could not afford to offer CVITP services. The upshot would be to deprive many existing clients of the service. Therefore, the CRA frowns on the practice but does not take any serious steps to stop it.
What are the implications of the current funding arrangement?
Given that many host organizations cannibalize their internal operations to offer free tax clinics, the CRA will struggle to maintain CVITP services at current levels. In the short term, service is likely to decline under the pressures of COVID-related public health restrictions which limit host organizations to offering CVITP “virtual clinics”, a decidedly more staff labour intense operation. In the medium term, the service remains highly vulnerable to a reduction in volunteer participation.
We believe that the CRA now needs to up its game to put this program on a sustainable financial footing and to improve access to and the quality of service. The CRA may argue that the current arrangement has served it well. In fact, the CRA’s Departmental Results Report for fiscal year 17/18 states that “the CVITP has been a true Agency success story.” As we demonstrate elsewhere, the CRA offers no evidence to support such a claim.
What has clearly changed are the functions of the main CRA tool – the return – processed by the program. When the CVITP was first started in 1971, the return was used almost exclusively to collect income tax. The clients of low and modest incomes served by the CVITP are not a large source of income tax revenue. However, as we note elsewhere, the return is now used also to establish eligibility and maintain access to a wide range of federal and provincial/territorial benefits; hence the CRA’s move to change the name from “income tax return” to “income tax and benefit return”. The low and modest-income clients now served by the CVITP represent an important recipient base of benefit payments.
The CRA needs to adopt a new approach, especially if it is to improve the CVITP’s focus on the poor and lowest-income individuals as its target clientele. Given the important role the federal government’s Poverty Reduction Strategy identifies for the CVITP in contributing to the Strategy’s objectives, the CRA cannot shy away from this responsibility. To sustain and improve the CVITP to better complement the Strategy’s objectives, the CRA must enhance its support to the host organizations which provide the infrastructure for the CVITP.
Read Part 2 in this series to learn the first of two ways we suggest the CRA can provide support.