CRA’s Automatic Tax Filing: Shortcomings of the SimpleFile Pilot
In a series of three articles, we look at three initiatives other than the CVITP that the Canada Revenue Agency (CRA) seems to be focusing its efforts on to reach low and modest-income Canadian residents. We 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 residents access the benefits to which they are entitled.
In the first article of this series, we looked at the CRA’s non-filers benefits letter initiative. We argued that the results are insignificant, even questionable and bear no comparison with those obtained by the CVITP when it comes to assisting those living in poverty.
In the second article, we looked at SimpleFile by Phone, the CRA’s automated phone service for filing returns which has operated since 2018 under a different name, File My Return. We concluded that the results are insignificant, especially when compared with those produced by the CVITP. It is also far less cost efficient in producing results than the CVITP. Furthermore, we showed why the service does not live up to its stated promise of helping Canadians who have not filed in the past to access their benefits.
In this third article, we look at the CRA’s long awaited pilot for automatic tax filing, SimpleFile, which was launched in July 2024. Learn here why we think that, unlike its billing, filing a return under this new method is not automatic, the process is not “simple” to complete, this new method will not reach non-filers as originally intended, and the launch of the pilot is not well timed so is likely to perform poorly.
Rebranding File My Return as SimpleFile by Phone Fails to Get Better Results
In a series of three articles, we look at three initiatives other than the CVITP that the Canada Revenue Agency (CRA) seems to be focusing its efforts on to reach low and modest-income Canadian residents. We 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 residents access the benefits to which they are entitled.
In the first article of this series, we looked at the CRA’s non-filers benefits letter initiative. We argued that the results are insignificant, even questionable and bear no comparison with those obtained by the CVITP when it comes to assisting those living in poverty.
In this second article, we look at SimpleFile by Phone, the CRA’s automated phone service for filing returns which has operated since 2018 under a different name, File My Return.
Learn here why the results are insignificant, especially when compared with those produced by the CVITP. It is also far less cost efficient in producing results than the CVITP. Furthermore, we show why the service does not live up to its stated promise of helping Canadians who have not filed in the past to access their benefits. It is important to recognize the limitations of SimpleFile by Phone because, as will be seen in the third article, this is also part of the CRA’s pilot aimed at launching automatic tax filing.
Why We Doubt The CRA’s Results From Its Non-filers Initiative
In our most recent article on the CVITP’s coverage of the impoverished in Canada, we concluded that the CVITP remains a very effective program for helping those on low and modest incomes to file their income tax and benefit returns, thereby getting the benefits to which they are entitled. We also noted that the Canada Revenue Agency (CRA) should redouble its efforts to expand the CVITP given that most Canadian residents living in poverty still do not benefit from this free service.
Yet we noted that post-pandemic, the CRA appears to have scaled back its ambitions for the CVITP. The CRA no longer sets any targets for reaching more clients and, presently, it is unclear what its goals for and commitments are to this program.
Instead, the CRA seems to be focusing its efforts on reaching Canadian residents on low and modest incomes through three other initiatives: non-filers benefits letter initiative, SimpleFile by Phone (formerly File My Return) and the piloting of automatic tax filing.
In a series of three articles, we show why these three initiatives presently show less promise than the CVITP in tackling the fundamental problem of helping a greater percentage of Canada’s impoverished residents access the benefits to which they are entitled.
In this first article, we look at what the CRA calls its “non-filers benefits letter initiative” which it has operated for the last seven years to encourage non-filers to submit a return.
Learn here why the results are insignificant, even questionable and bear no comparison with those obtained by the CVITP when it comes to assisting those living in poverty.
How to Reduce the Number of Chronic Non-filers by Using the CVITP Better
In the first article in this three-part series, we argued that while the number of current non-filers may not be as large as some popular estimates, the number is still very large and represents a serious drag on achieving the federal government’s poverty reduction objectives. In the second article, we focused on recent non-filers, those who forget to file, file late, or skip one or two tax years. Most importantly, these clients have a current mailing address on file with the CRA, enabling the CRA to communicate with them. We looked at the non-filers benefits letter campaign and the forthcoming automatic filing pilot project to see how the CVITP could help to enhance the performance of these two initiatives.
In this third and final article, we look at the situation of chronic non-filers, those who have not filed for many years and make up the majority of estimated non-filers. The CRA’s chief problem is that it does not have current mailing addresses for these clients. Therefore, it has no way of communicating directly with them. Yet this is the group the CRA should be trying to make progress in reaching if it is to substantially increase its coverage of poverty reducing benefits.
This article focuses on ways we think the CRA could also make use of the CVITP to target chronic non-filers. To do so successfully, it will have to meet two pre-conditions. First, it will have to become less reluctant to taking direct action in providing strategic direction and strong managerial support to the CVITP. Second, it will have to change its vision for the CVITP from a free tax return preparation service to one that also includes helping low-income residents maintain their access to important poverty reducing benefits.
Assuming the CRA can meet these two conditions (and we acknowledge this is a big assumption), the article looks at ways it can better invest in its two partners to reach and effectively serve chronic non-filers. With respect to community-based organizations that host CVITP clinics, we make suggestions to the CRA for changes to its funding formula, for providing data to improve client service and reporting on impact, and for assisting with coordination efforts. We also have suggestions for the CRA regarding its other CVITP partner, volunteers; these cover their recruitment, training, supervision and support, and recognition and retention.
Finally, we close the article looking at how the CRA can better track its progress in contributing to the reduction of poverty through the CVITP by using more appropriate indicators than those it currently reports against.
How to Reduce the Number of Recent Non-filers by Using the CVITP Better
In our first article in this series, we argued that while the number of current non-filers may not be as large as some popular estimates, the number is still very large and represents a serious drag on achieving the federal government’s poverty reduction objectives. In this second and the next article, we show how the Canada Revenue Agency (CRA) could make better use of the CVITP to reduce the number of non-filers more effectively than its current efforts.
This second article deals with recent non-filers, those who forget to file, file late, or skip one or two tax years. Most importantly, the CRA can still communicate with these clients as it has their current mailing addresses.
We focus on two initiatives. The non-filers benefit letter campaign has been operating since 2016. (We have previously reviewed this initiative here.) We suggest providing letter recipients with the name, address and phone number of the closest CVITP host organization where they can get their returns done for free, and informing these organizations of the names and addresses of letter recipients who have been referred to them. This may improve the rate at which letter recipients, most of whom are recent non-filers, respond.
The automatic filing of income tax and benefit returns will be experimented with starting next year. (We recently reviewed this new initiative here.) Some traditional CVITP clients may receive a pre-populated return from the CRA to review and send back, confirming the information contained in the return is complete and accurate. Should they have any questions about their return or the process, some clients receiving such a return may not own a phone with which to call the CRA. Others may not trust the CRA to provide clear answers to their questions. Yet again others may not understand what is being asked of them. To increase the success of this initiative, we recommend involving CVITP host organizations and their volunteers to help answer questions these clients may have. While these clients are unlikely to be non-filers, if this initiative is successful, it will reduce the number of traditional CVITP clients thereby freeing up CVITP capacity to take on new clients, some of whom may not have filed a return in many years.
Neither of these initiatives is likely to substantially reduce the number of what we call chronic non-filers who make up the majority of non-filers. The CRA’s chief problem is that it does not have current mailing addresses for these clients. Therefore, it has no way of communicating directly with them. Yet this is the group the CRA should be trying to make inroads with if it is to substantially increase its coverage of poverty reducing benefits. We believe the CRA could also make use of the CVITP to reduce the number of chronic non-filers. This will be the subject of the third and final article in this series.
How Many People Failed to File a 2021 Return?
This is the first article in a three-part series. This article argues that, while the number of current non-filers may not be as large as some popular estimates, the number is still very large and represents a serious drag on the federal government’s poverty reduction objectives.
Robson and Schwartz estimate 10-12% of Canadian residents eligible to file a return failed to do so in 2015. While this estimate continues to circulate in the media today, other estimates suggest the non-filer rate has fallen significantly since then. Using one of the more intuitive methods employed by Robson and Schwarz, we estimate that the non-filer rate had dropped to around 4.8% by 2021. However, this still means that approximately 1.5 million Canadian residents eligible to file a return failed to do so in 2021. As most of these were low-income residents, many missed claiming federal and provincial or territorial income-tested benefits designed to reduce poverty. Getting these residents to file a return will be key to meeting the federal government’s objectives laid out in its 2018 Poverty Reduction Strategy.
The next two articles will propose elements of a strategy whereby the CRA could make more effective use of the CVITP to reduce the number of non-filers, making an important contribution to poverty reduction.
Great CRA Innovations: Annual Data on CVITP Results
The CRA recently published a new feature on its CVITP website called “Free tax clinic statistics”. This feature includes annual data on individuals assisted, returns filed, volunteers and host organizations as well as the value of the entitlements generated by filing returns. It provides this data at the national level as well as by province and territory, something that was rarely seen before. This is a very welcome development!
While the website only gives data for 2021 and 2022, we hope the CRA will update this feature in future years without losing the historical data. Considering this new feature, we list four concerns below, in order of priority, from least to most important:
- A change in the timeframe for data collection, shifting from May 16 of the previous year to May 15 of the current year, over to January 1 to December 31 of the same year. The data for 2021 (January 1 to December 31) are remarkably similar to the data reported for what was previously 2022 (May 16, 2021, to May 15, 2022). The data for 2022 (January 1 to December 31) leads to only one change in our previous assessment of six trends revealed in CVITP data: the numbers of individuals assisted and returns completed rose by 13% and 15% respectively in 2022 whereas the old data suggested stagnating performance.
- Reporting on the value of the refund, benefit and credit entitlements generated each year for CVITP clients. The total is for the federal and provincial/territorial refund, credit, and benefits administered through the CRA. A further breakdown of what is included would provide for greater transparency and understanding. We give several reasons why we think the amount reported is a very conservative underestimation.
- While the subnational figures are of passing interest, host organizations are keen to get the information on the value of the refunds, credits and benefit entitlements for the clients they have served in their own CVITP clinics. This demonstrates the relevance of their work to senior management within their host organizations and to their local communities. It also helps to buttress their requests to donors for funding support. The introduction of the CVITP Organization Identification Number or COIN in 2021 (for 2020 and subsequent year returns) now makes this possible.
- While the CRA data are useful, the results do not really get at the main purpose of the CVITP. (We show why here.) The CRA should track and report against more relevant results, which will help it to focus limited CVITP resources, especially its volunteers, on providing CVITP services to those who need these the most.
This article provides the numbers and more detail on the concerns listed above.
Automatic Filing is No Magic Fix for Getting Benefits to More Low-income People
The federal government’s Budget 2023 has announced plans to help more low-income Canadians who are not currently filing their returns to get the benefits to which they are entitled. In this article, we explain why both of the proposed initiatives are unlikely to succeed. What follows is a summary of the article.
One of the initiatives aims to increase the number of eligible Canadians using the File My Return (FMR) service to two million by 2025. This service, introduced in 2018, allows eligible Canadians to file their income tax and benefit returns over the phone by answering a series of short questions using an automated function.
However, the use of this service has been consistently low, with less than 10% of eligible users taking advantage of this service annually over the past five years. Complicated instructions that require a high level of reading skills in one of the official languages and understanding of tax-related concepts, confusion over various automated options, and distrust in the government are some of the reasons which have contributed to the low take-up rates. Furthermore, usage depends on the Canada Revenue Agency (CRA) having the correct mailing address for the recipient, which it lacks for many current non-filers.
The other initiative proposes to pilot a new automatic filing service next year. However, the attention given to automatic filing is misplaced. Although the returns of some low-income residents could be automatically prepared by populating various parts, the CRA will still need to contact non-filers to obtain their approval of their returns. The CRA’s track record in contacting low-income non-filers and getting them to respond is extremely poor and there is no reason to believe the response to this new initiative will be any different.
In the next few years, if the CRA wants to reach more low-income people who are not filing their returns, it should focus on strengthening the CVITP. The CVITP is the main initiative the CRA relies on to help meet the objectives of the federal government’s 2018 Poverty Reduction Strategy. With over 50 years of direct person-to-person contact and the trust this engenders, the CVITP remains the CRA’s best option for increasing vulnerable people’s access to the benefits they are entitled to.
Helping Non-filers Access the CVITP to Increase Benefits Coverage
In the first article in this series, we argued that the CRA’s existing non-filer benefits letter campaign was not effective. In the second article, we reviewed a recent Auditor General (AG) of Canada report on the efforts of Employment and Social Development Canada (ESDC) and the CRA to help those in hard-to-reach populations who are non-filers to access benefits. We concluded that the CRA does not know the size of the non-filer problem and, worse still, has done little to better inform itself.
The focus of our third article is on outlining some solutions to this problem.
The CRA believes that a lack of awareness about the benefits of filing is a key obstacle and has a number of outreach activities designed to address this problem. Ironically, research commissioned by the CRA itself contradicts this; it identifies the main obstacles to be ones that the CVITP has already been designed to address.
In the AG’s report referred to above, the AG noted that the CRA and ESDC both have extensive outreach activities employing thousands of volunteer organizations across the country to target these same populations, but that the CRA and ESDC needed to adopt an integrated approach for people requiring extra help. Closer collaboration by the CRA with ESDC could prove beneficial as ESDC’s competencies in working with community-based organizations could help the CRA to introduce better practices within the CVITP.
But even in the absence of strong collaboration, the CRA could still be doing more to help hard-to-reach populations to file their returns, in particular by making better use of the CVITP. At present, the CRA seems to be counting principally on its three-year pilot grant program to build CVITP capacity by recruiting and retaining host organizations. We remain sceptical that this program will genuinely increase the number of host organizations providing CVITP services.
The CRA cannot simply bet on strengthening CVITP capacity by increasing the number of host organizations and volunteers. It also needs to make more efficient use of its existing CVITP host organizations and volunteers, ensuring that this infrastructure provides services to those who need it the most. In particular, we have highlighted the importance of undertaking data analysis to inform the CRA’s strategic choices and have given specific examples to illustrate how this could be done.
In our review of the three-year pilot grant program when it was first introduced, we also illustrated how data analysis could be used specifically to inform choices about funding, including offering a larger financial incentive for returns filed by clients who had previously not filed for a number of years. After the 2023 tax season, the CRA will be reviewing the implementation of its three-year pilot grant program. Assuming it retains a modified grant program thereafter, it could include more generous grant payments for each return a host organization files for the 2020, 2021 and 2022 tax years with the highest payments for the oldest returns.
We close our third article in this series admitting that CRA money alone will not solve the problem of non-filers. However, ESDC could play a larger role. We will return to this in a future article, examining some of the ways in which ESDC could collaborate with the CRA in supporting the CVITP.
Auditor General Critical of Another CRA Effort to Identify Non-filers
In our first article in this three-part series, we argued that the Canada Revenue Agency’s (CRA) Non-filer Benefits Letter Campaign was, at best, seriously underperforming on its intent, to get non-filers to file their outstanding returns.
In our second article, we look at what else the CRA may be doing to identify non-filers. A February 2022 report from the Auditor General of Canada to Parliament (AG) entitled “Access to Benefits for Hard-to-Reach Populations” sheds further light on this question. The report looks at the work of Employment and Social Development Canada (ESDC) in administering the Guaranteed Income Supplement (GIS) and the Canada Learning Bond (CLB), and the work of the CRA in administering the Canada Child Benefit (CCB) and the Canada Workers Benefit (CWB).
The AG focused on how well ESDC and the CRA are doing in getting these benefits to all residents who are eligible to receive them, what it calls the coverage rate. Since the filing of a return is a condition for obtaining (CWB) or maintaining (GIS and CCB) the benefit, or again for establishing eligibility for the benefit (CLB), the CRA’s and ESDC’s work on the take-up gap, or the percentage of eligible residents who are not benefit recipients can inform the discussion about non-filers.
The AG found that “[ESDC and CRA] estimates overstated the take-up of benefits because they did not always account for people who had not filed tax returns, which are required to access most benefits.” The AG also found that the CRA and ESDC “did not have a complete estimate of the overall take-up rates of the selected benefits. Nor did they know the take-up rates of specific hard-to-reach populations known to experience barriers to accessing benefits.” What was the CRA doing to improve its understanding of the size of the gap between eligible and actual benefit coverage? The AG found that “[n]o tangible progress had yet been achieved in data collection, measurement, or analysis of benefit take-up.”
Finally, this article examines the relevance of the AG’s report to the CVITP. CVITP host organizations know that one of the key barriers to filing a return is the lack of free return preparation services. This is why these organizations offer CVITP services: they understand that, for the clients they serve (many of whom fall squarely within the hard-to-reach populations identified by the AG), providing this free service is critical to obtaining federal and provincial or territorial benefits which contribute toward reducing income-based poverty.
The first two articles in this series set the stage for what more the CRA could be doing to reach non-filers, the subject of the third and final article.
Disappointing Distraction: The CRA’s Non-filers Benefits Letter Campaign
Two years ago, we posted an article on the issue of non-filers. We are now updating this with a series of three articles.
The first article in this series looks at the Canada Revenue Agency’s (CRA) non-filer benefit letter campaign which has been running for six years. This campaign entails the CRA sending letters to people who have not filed a return in the most recent tax season. These letters outline the benefits of filing a return. Then the CRA tracks whether or not the letter recipients file a return in the next tax season.
We argue that the performance of this campaign has been, at best, insufficient at dealing with the size of the non-filer problem. Less charitably, we argue that it represents a minimalist effort on the part of the CRA. Worse still, we believe the success of this effort, such as it is, is based on the faulty assumption that these letters actually motivate recipients. Research commissioned by the CRA and others shows that a lack of knowledge about the benefits of filing is not identified as one of the main barriers to filing a return. The CRA makes very little data available on this initiative but we strongly suspect that, even in the absence of this letter campaign, a similar number of non-filers from one tax season would likely file in the next.
This article lays the groundwork for a discussion in the next two articles of more effective approaches to addressing the issue. As we hope will become readily apparent to the reader, the CVITP has an important, but as of yet vastly underexploited, role to play in helping to tackle this issue.
Messaging Confusion: The CRA Has More Than Just A Marketing Challenge
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
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.
Implementation of CRA’s Pilot Grant Program in Year 1 of 3 – A Slow Start to Missing the Mark
In 2021, the Canada Revenue Agency (CRA) introduced a new pilot grant program that provides financial support to some CVITP host organizations. When it was introduced, we had a lot to say about it here.
The pilot program has completed the first of its three years. As is unfortunately typical of the CRA in its reporting on the CVITP, there is a dearth of information on the first year of this pilot. However, there is one important piece of information cited in the CRA’s Departmental Plan for the 2022-23 fiscal year: “In the first year alone, the CRA sent just under one million dollars to qualifying organizations across Canada to support their efforts to ensure that vulnerable people have the ability to file tax returns and access the benefits and credits designed to support them.”
Remember: the budget for this three-year pilot grant program is $10 million; this amounts to an average of $3.3 million being available each year to support host organizations. Disbursing less than $1 million in the first of the three years raises serious question about the ability of the pilot grant program to meet its stated objectives: defraying organizations’ costs of hosting CVITP clinics and encouraging more organizations to host CVITP clinics.
In the following article, we show that it has budgeted too much for this pilot or, on the basis of the current budget, it is simply too stingy with the current payments to meet its goals. We predict that the pilot program will complete its three years well under budget. There are two design elements we stated when the pilot program was first launched which are likely to contribute to this outcome: administrative arrangements that are burdensome, deterring some host organizations from applying for the grant, combined with grant amount limits that are too low to serve as an incentive for host organizations.
We note that the indicators the CRA has said it will use to determine the success of the pilot are likely to yield misleading conclusions. This is because the implementation of the pilot program coincides with the period immediately following COVID, when the numbers for the CVITP had plummeted and thus could be expected to rebound anyways.
We also believe that the indicators the CRA is using are the wrong ones as none of them gets at the real purpose of the CVITP. As noted in one of our articles assessing the pilot program when it was first launched, at its core the CVITP is about the income levels of the clients it serves. Therefore, the pilot program should aim to increase the number of returns filed by a host organization for clients whose incomes fall at or below the poverty line, not simply the number of returns filed nor, for that matter, host organizations and volunteers enlisted in the CVITP. Until the CRA draws a closer link between its CVITP and the objectives contained in the federal government’s Poverty Reduction Strategy, it will continue to miss the mark with opportunities like its pilot grant program.
Ambivalent Administrator: A Contradiction in the CRA’s Relationship with the CVITP
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 Analysis and Data Suggestions for a More Effective CVITP Strategy
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.
CRA’s Newly Minted COIN: A Welcome Innovation
This year, the Canada Revenue Agency (CRA) introduced an innovation into the CVITP. Every host organization will be issued with a unique CVITP Organization Identification Number or COIN for the duration of its participation in the CVITP (i.e. it will remain the same from year to year). In this article, we explain briefly why the CRA introduced the COIN and how it works. We also identify a function for the COIN which the CRA has not yet stated but which we believe will be really important for helping to make strategic decisions about the future shape of the CVITP.
Missing in Action: No Future CRA Reporting on CVITP Results
The Canada Revenue Agency (CRA) recently released its Departmental Plan for the forthcoming fiscal year. Since 2012, the CRA has reported to Parliament on the results obtained by the CVITP. With the introduction of results-based performance reporting across all federal departments and agencies in 2017, the CRA has included the CVITP results within its performance indicators.
However, the new Departmental Plan has dropped any formal reporting on the CVITP; this means no data will be included on CVITP performance targets or results achieved. Therefore, no information will be systematically made available to Parliamentarians, the public or even the CVITP host organizations and their volunteers.
In this article, we give four reasons why this is a problem:
- any evidence on the linkage between the CVITP and the federal government’s Poverty Reduction Strategy will be lost;
- Parliament will be unable to exercise any oversight over the CVITP budget increases it approved;
- it calls into doubt the Minister of National Revenue’s commitment to a priority identified only three months earlier by the Prime Minister; and
- CVITP host organizations and their volunteers who do the bulk of the CVITP work for the CRA using their own resources will now be kept in the dark as to the results of their efforts.
This is a strange way to mark the 50th anniversary of the CVITP.
CRA Ombudsman 2020 Report on CVITP
In case you missed it, back in May 2020 the Canada Revenue Agency’s (CRA) Ombudsman released a detailed report examining the CVITP. The report concluded with 15 recommendations for expanding and enhancing the CVITP. In this brief article, we give two reasons why we think anyone with a strong interest in the CVITP should look at this report.
PM’s Mandate Letters for Minister of National Revenue: Does the CRA “Walk the Talk” on the CVITP?
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.
2021 Federal Pre-budget Consultations
The federal government recently completed its 2021 pre-budget consultations. See our submission regarding the CVITP here.
Notice of Assessment: Canada Revenue Agency’s New Grant Program
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.
2021 Tax Season – a Letter to the Minister
The Minister of National Revenue, the Honorable Diane Lebouthillier, is responsible for the Canada Revenue Agency (CRA). We recently wrote to her to express our concern about the forthcoming tax season. Without significant changes from the procedures and practices adopted in 2020 for the 2019 tax year, we worry that the CVITP experience this year will not be materially different from that of last year when CVITP operations were severely disrupted by COVID and many fewer clients were served than in recent years.
CVITP clinics will be operating under the same COVID related public health restrictions as in 2020. Furthermore, as of now the CRA has given no indication that it will change the traditional filing deadline of April 30th to ensure the continuity beyond June 2021 of the many benefits which are conditional upon filing an up-to-date return.
In light of this, we make a number of suggestions. Read our letter to the Minister here.
Canada Revenue Agency Report Deserves a Failing Grade
Like all federal government departments and agencies, each year the Canada Revenue Agency (CRA) produces a report for Parliament after the end of the fiscal year. This report details what the CRA has done with the money Parliament has budgeted for its operations. This is the only report that parliamentarians and the Canadian public will see that shows what the CRA has done in the last fiscal year to meet its mandate.
This year is no different. On December 7, 2020, the CRA published online its Departmental Results Report for fiscal year 2019-2020. In this article, we review what the CRA has to say in the report about the results it is getting with the CVITP and its work on encouraging previous non-filers to file a return in order to access benefits to which they are entitled. We show that there is remarkably little information.
Although the CVITP was created in 1971, fifty years later it remains next to impossible to tell what the CVITP has achieved in relation to its objective of assisting individuals and families of low and modest incomes to submit their returns and thereby become eligible for a number of benefits and credits introduced by federal, provincial and territorial legislatures aimed at reducing poverty. The little information that is included suggests a massive failure this year; yet, there is no analysis showing the implications of this failure and how the CRA plans to avoid a similar result in the forthcoming tax season.
This is especially disappointing given that the federal government’s 2018 Poverty Reduction Strategy highlighted the role that the CVITP is supposed to be playing in contributing to reducing poverty across Canada. We conclude with an observation: if the rest of the information contained in the CRA’s report is anything like what the CRA has included for the CVITP and its non-filer initiative, then Canadians should be seriously concerned about the bases on which parliamentarians are making decisions allocating billions of dollars from the federal budget to finance the CRA’s annual operations.
Getting Good Results
In this series of articles, we begin by reviewing the purpose of the CVITP. While the Canada Revenue Agency publications do not give a formal purpose, we look through recent government references to the CVITP and suggest that its purpose is to help individuals on modest and low incomes, and especially vulnerable individuals, to file their income tax and benefit returns.
We then ask whether or not the CVITP is achieving this purpose. We conclude that the information provided in the Canada Revenue Agency’s current results framework for the CVITP is not useful because it does not tell us if the program is serving the intended population. Furthermore, the results the Canada Revenue Agency reports on, based on this framework, do not enable us to know if recent budget increases for the CVITP are helping it to reach a greater proportion of its intended population.
To address these weaknesses, we propose an alternate results framework for the CVITP. We believe it holds more promise for providing the Canada Revenue Agency with results data which will allow for more strategic decision-making, better ensuring the CVITP lives up to its stated intention.
Supporting Host Organizations Better
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
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.
Automatic Tax Filing: a Solution or a Problem?
The most recent Speech from the Throne contained a reference to the introduction of automatic tax filing of returns. We believe that the process of moving toward automatic filing will take some time as the federal government will first have to negotiate changes with the provinces and territories; many income tax and benefit returns will remain too complicated to be filed automatically; and automatic return preparation may be a more appropriate way to think of the change as people will still have to agree to the results before their returns can be filed. Consequently, even when automatic filing is eventually introduced, we think that CVITP clinics will remain an essential service for many clients with low or modest incomes.
Read more about why we think this here.
Federal Credits and Benefits
Learn here about the most important Federal Government credits and benefits likely to be used in preparing CVITP client income tax and benefit returns.