March 2, 2023
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 this article is on outlining possible solutions to this problem.
Our starting point is the same report from the AG, entitled Access to Benefits for Hard-to-Reach Populations. There are two additional areas the report covers which we need to touch on.
Which problems need to be addressed?
Solutions need to be tailored to the causes of the non-filer problem. There are many reasons that people do not file their returns. In a section entitled “Why people don’t file” in the first article we wrote two years ago on the issue of non-filers, we reviewed the main reasons identified in research undertaken by Prosper Canada.
Although somewhat older, the CRA commissioned research back in 2017 entitled Barriers associated with tax filing in vulnerable populations. Two statements in this research are especially noteworthy in the context of the AG’s report.
“Despite a strong awareness of various government benefits and financial services available, there appears to be only a moderate understanding that receipt of some benefits is dependent upon filing a tax return.”
This suggests the need to raise awareness in hard-to-reach populations about the need to file to access benefits. The CRA has a number of outreach activities designed to address this problem. These include its non-filer benefits letter campaign (which we commented on in the first article in this series), in-person visits to targeted communities, encouragement letters to those likely eligible for the Canada Child Benefit, and communication with volunteer and community organizations that serve hard-to-reach populations.
While the CRA was tracking the number of outreach activities conducted, the AG found it “did not know whether most of their targeted outreach activities had helped to increase the benefit take-up rates for specific hard-to-reach populations.” This is because the CRA did not measure the results of these outreach activities. Consequently, the AG recommended the development and implementation of consistent results-based performance measures for targeted outreach to hard-to-reach populations.
But is a lack of awareness about the importance of filing a return to access benefits the most important problem? Here’s the second statement in the CRA commissioned research on barriers to filing that is also noteworthy:
“The perceived complexity of the process and low literacy (both general and financial) were by far [our emphasis] the most common challenges faced by people who do not file their income tax return regularly… A lack of support, aptitude, language and confidence present key barriers to completing a tax return.”
These are exactly the kinds of problem that the CVITP is well designed to address.
What does the Auditor General see as a partial solution to the problem?
Note that the AG’s focus is on getting benefits to hard-to-reach populations. The AG does not focus specifically on the issue of helping non-filers to file their returns. However, as we have repeatedly stated, providing help with filing returns plays a critical role in ensuring the maintenance of many federal (to say nothing of provincial and territorial) benefits.
We should also note that while we have focused on the AG’s comments regarding the CRA’s work on facilitating access to benefits, ESDC also comes in for similar criticism. On the one hand, the AG noted that the CRA and ESDC “also coordinate outreach through thousands of volunteer organizations across the country that provide support to hard-to-reach individuals and help them connect with government benefits.” On the other hand, the AG concluded that the CRA and the ESDC “did not have a sufficiently integrated approach for people requiring extra help.”
Consequently, the AG recommended that:
“[t]o improve the integration and effectiveness of targeted outreach, the Canada Revenue Agency and Employment and Social Development Canada should collaborate to establish a seamless service experience to address the needs of those requiring a high level of support to access benefits.”
The CRA and ESDC agreed to this recommendation. In its response to this recommendation, the CRA indicated that:
“[t]his collaboration will include defining the extent of the support that both entities will provide, determining any service gaps, and developing specific approaches for certain populations, while adhering to the entities’ respective roles and responsibilities within their mandates and authorities under the Privacy Act and Income Tax Act.”
This is a very welcome development! Closer collaboration by the CRA with ESDC should prove advantageous to the CRA and the CVITP in particular. Why?
In one of our previous articles entitled “Ambivalent Administrator: A Contradiction in the CRA’s Relationship with the CVITP”, we gave four reasons why we think ESDC is a good fit (possibly better than the CRA) for working with the CVITP. Even if ESDC does not take over management of the CVITP from the CRA, its competencies should help the CRA to introduce better practices within the CVITP, some of which we have outlined in other articles on this website (see for example, here and here).
Time will tell whether the CRA and ESDC manage to collaborate productively here. As departments and agencies are required to report annually on the progress they have made in addressing the recommendations they agree with in the AG’s various reports, we will revisit this issue again when more information is available on the nature of this enhanced collaboration.
While closer collaboration between ESDC and the CRA on this issue is welcome, it is not a foregone conclusion. Collaboration between federal departments and agencies can be difficult as each partner has to respond to internal pressures which are not always well aligned across the collaborating entities.
ESDC and the CRA are not exempt from this risk. The AG highlighted ESDC and CRA pilot projects – in the latter case, the CRA’s three-year CVITP pilot grant program is specifically cited as an example – recently undertaken to work with community groups but where integrated service delivery is lacking for addressing the needs of those requiring individualized support. So even when collaboration would seem like a good way to address an issue, it doesn’t always happen.
Another part of the solution? Use the CVITP!
In the absence of strong collaboration, the CRA could still be doing more to help hard-to-reach populations to file their returns. The obvious one is to make better use of the CVITP.
In reading about the CRA’s non-filer benefits letter campaign in its Departmental Plans and Results Reports, it is striking that the CRA makes no connection with the CVITP. (Judging from the CRA’s key performance indicators, one reason is that the CRA considers the non-filer benefits letter campaign an initiative of its benefits program and the CVITP a service of its income tax program.) The CRA does not even report on the percentage of letter recipients filing a return who made use of the CVITP service. Recall from the first article in this series that researchers noted recipients found the non-filer benefit letters to be promotional and not personalized. This suggests the letters did not, for example, provide information on a CVITP host organization in the recipient’s neighbourhood where they could get free assistance to prepare and file their returns.
But even if the CRA wakes up to the importance of drawing closer connections between the issue of non-filers and the CVITP, it will still run into operational challenges. The most important one is the very limited capacity of the CVITP. As shown in our 2022 Update on the Evolution of the CVITP, in the 2022 tax season the CVITP assisted only 77.6% of the clients served in 2019 (peak year) and 83% of the clients served in 2016 (the earliest year that data is available). This poor performance is partially due to the number of host organizations participating in the CVITP: in the 2022 tax season, the number of host organizations represented 88.7% of the number registered for the 2020 tax season (peak year).
The CRA is counting 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. But it is important to remember that it is the host organizations’ volunteers who actually deliver CVITP services. We worry that this is where the core capacity constraint lies as we estimate that the number of volunteers has been declining every year since it peaked in the 2019 tax season.
Anecdotally, when we speak to clinic coordinators, the message we keep hearing is that they are running at full capacity right now. (Many do not want to publicize their services as they say they have enough trouble meeting existing demand.)
Using the CVITP in smarter ways
We have previously argued that the CRA cannot simply bet on strengthening CVITP capacity by increasing the number of host organizations and volunteers. This is because it depends entirely on the goodwill of new organizations and volunteers, something over which the CRA has no control. We believe it needs to make more efficient use of its existing CVITP host organizations and volunteers to ensure that this infrastructure provides services to those who need it the most. And there is no doubt that chronic non-filers are among those who need it the most. 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 illustrated how data analysis could be used specifically to inform choices about funding. One example is especially pertinent for increasing the number of non-filers: offering a larger financial incentive for returns filed by clients who had previously not filed for a number of years.
The CVITP Organization Identification Number or COIN offers a simple way to operationalize this idea. The COIN allows the CRA to track the number of returns filed by each host organization. Grant payments per return could be provided on a sliding scale, with higher amounts being paid to host organizations for the filing of clients’ prior year returns. This would give a clear signal to host organizations that the CRA wants them to prioritize the returns of those who have not filed for previous years. At present, many host organizations, especially those which only offer CVITP services during the months of March and April, limit their CVITP service to filing current year returns. If the amounts paid per return were significant, this could provide an incentive to host organizations. They might be more inclined to file prior year returns of existing clients and, if the payments per return were generous enough, to seek out non-filers.
The COIN was introduced in 2021 to track the filing of returns by each host organization starting with the 2020 tax year. The three-year pilot program will end with the current tax season and the filing of 2022 tax year returns. While it is probably too late to implement this idea for the current tax season, the timing is nevertheless propitious.
After the 2023 tax season, the CRA will be reviewing the implementation of this pilot program. If the CRA decides to retain some form of grant funding program after 2023, the future design could include a sliding scale of grant payments per return. But these payments would have to be more generous than what is currently on offer for filing any returns if there is to be a real incentive for host organizations to seek out non-filers, particularly chronic non-filers, to help them file their returns.
Starting with the 2024 tax season, this could include more generous grant payments for each return a host organization files for the prior 2020, 2021 and 2022 tax years with the highest payments for the oldest returns.
Conclusion
In commenting on the issue of non-filers in its most recent annual report, the CRA’s Ombudsman takes note of the CVITP and the CRA’s three-year pilot grant program and observes that “It is not yet perfect, but this initiative is more than welcome.” The Ombudsman then adds:
“Over the 2022-2023 fiscal year, we will increase our engagement with organizations who serve vulnerable populations, get their feedback on the steps the CRA has taken to make filing easier and more accessible, find out how they may have impacted the clients they serve, and solicit their ideas for service improvement.”
We hope that the CRA’s Ombudsman hears a consistent message from CVITP host organizations: if the CRA is to tackle the non-filer issue in a more effective manner, it needs to provide much greater support to CVITP host organizations, including – but not limited to – introducing stronger financial incentives for the filing of prior year returns.
That said, we do not believe that CRA money alone will solve the problem of non-filers. As suggested above, 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.
In the coming months, we will be checking to see what the CRA has to say in response to the recommendations from the AG’s report on Access to Benefits for Hard-to-Reach Populations. We will also look to see the results of the CRA’s Ombudsman’s engagement with CVITP host organizations. Finally, with the conclusion of the CRA’s pilot grant program this year, an assessment should be done in the fall. We will report back on what the CRA is doing in support of its CVITP infrastructure – hopefully in closer collaboration with ESDC – to better address the issue on non-filers.