August 19, 2023

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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 success 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.  The changes we propose, while not costly, would represent a critical evolution in the CVITP if it is to survive other changes already afoot.

Dropping its reluctance to taking direct action to strengthen the CVITP

We have previously described in detail what we called the CRA’s ambivalent attitude toward the CVITP.  We are approaching an important crossroad in the life of the CVITP.   The CRA has recently scaled back its ambition for the CVITP.  If the pilot project for the automatic preparation and filing of income tax and benefit returns proves successful, the CRA could significantly reduce its efforts in support of the CVITP.  (Yet, we argue in the second article in this series that the CRA will likely improve the response rate in this pilot if it prepares the CVITP to support clients receiving pre-populated returns who have questions about this process.)

The three-year pilot grant project in support of CVITP host organizations could be interpreted as the beginning of a positive shift in the CRA’s attitude wherein it sheds its ambivalence toward the CVITP and provides strategic direction and strong managerial support for its key contribution to the federal government’s efforts to meet its poverty reduction goals (much as was called for in the CRA’s Ombudsman Review of the CVITP back in 2020).  Or again, the introduction of the grant program could simply have been based on a recognition that the only way to restore the CVITP to its pre-pandemic levels of performance was to offer modest financial incentives to entice reluctant host organizations to continue providing the service.

Lacking any means of communicating directly with chronic non-filers, the CRA’s is handicapped in that it does not have any local presence within and knowledge of the many communities within which these chronic non-filers live.  Yet it has an established network of partners which offers those very attributes: its CVITP host organizations and their volunteers.  We strongly believe that the only way for the CRA to reach more chronic non-filers is through working far more closely with its partners than is currently the case.   But for it to do this most effectively, the CRA needs to fulfill another important condition.

Changing its vision for the CVITP from a free tax service to one that also provides access to benefits

As we argued in this article, most low-income Canadians file their returns because they want to get or maintain access to many income-tested benefits and they know that they must be up to date in filing their returns for this to happen.  This is the main reason clients seek out this free return preparation service.  Despite the CVITP being marketed as “free tax clinics” by the CRA, the incomes of the overwhelming majority of clients using the CVITP service are too low to be paying any tax.

There’s a lot more to reaching chronic non-filers than just marketing the CVITP differently.  But marketing the CVITP differently would be a good place to start.  Instead of speaking about free tax clinics where taxpayers can get their tax returns prepared and filed for free by volunteer tax preparers, the CRA could refer to free tax and benefit (or just return) clinics where clients can get their returns prepared and filed for free by volunteers knowledgeable about taxes and benefits for low-income residents.

More fundamentally, the CRA needs to update its vision for the CVITP.  It is no longer just a free tax return 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.  The CRA’s Departmental Plan for the fiscal year 23-24 states that it “will continue to modernize its client service, to provide a seamless, empathetic and client-centric experience”.  This greater service orientation will need to be reflected in the way the CRA communicates with residents about the many benefits to which they are entitled.

This shift will prove very difficult for an agency that has traditionally focused its efforts on ensuring that residents comply with their tax obligations.  But such a shift is the second condition for making substantial inroads in reducing the number of chronic non-filers.

Investing in relationships with its partners

Assuming the two conditions above can be satisfied (and we acknowledge that this is a big assumption), here are some practical ways that the CRA could work with its partners to give more chronic non-filers access to the benefits to which they are entitled.

A. Host organizations

For the 2022 tax season, the CRA reported that 3,410 community-based organizations across Canada offered CVITP services.  (This represents a decline from the peak in 2020 when 3,810 organizations were registered.[i])

For too long, the CRA was taking advantage of the generosity of these organizations, offering modest administrative but no financial support.  Following the dramatic decline in the number of clients served in 2020 due to the public health restrictions introduced to limit the spread of COVID, the CRA launched a three-year pilot grant program in 2021 in which it finally offered financial support to its CVITP partners for the first time ever.  However, the amounts initially announced were only symbolic in that they did not offer any real incentive.  Recognizing this, the CRA announced changes in the funding formula in the fall of 2022.  While better than the funding formula used in the first year, the new funding formula will still fall far short of covering their partner organizations’ costs of hosting CVITP clinics.

Now the funding formula needs to:

1. become a regular feature of this program (presently, this pilot project terminates with the 2023 tax season);
2. provide more for the basic needs of running a CVITP clinic upfront before the season starts (presently this is only $500 which is provided long after the regular season is finished);
3. offer greater incentives for filing prior year returns (presently, it is $5 per return, regardless of the year [from 2020 onwards] it is being filed for);
4. offer a bonus when a host organization reaches a specified number of chronic non-filers; and
5. provide additional incentives linked to the infrastructure behind service delivery, including but not limited to the recruitment and retention of volunteers.

The CRA needs to share the data it currently collects to help CVITP host organizations improve client service delivery and impact.  The introduction of the CVITP Organization Identification Number or COIN makes this quite feasible.

Furthermore, the CRA’s regional CVITP coordinators could help to facilitate coordination at the local level between various host organizations.  This is because the CRA is best placed to overcome the initial barriers and shoulder the administrative costs of getting host organizations to coordinate the pooling of clients, volunteers and information.  The ultimate benefits of coordination can include: better client service, better support for volunteers, reduced staff time spent managing clients and volunteers, and greater donor support for CVITP clinics.

B. Volunteers

For the 2022 tax season, the CRA reported that 14,750 people were registered across Canada as CVITP volunteers.  (This represents a decline from the peak in 2019 when 19,240 volunteers were registered.)

Recruitment

The CRA needs to do its part in helping its host organizations to recruit new CVITP volunteers.  We suggest some of the ways it could do this in the following article.  These include but are not limited to developing and distributing appropriate promotional materials, launching an annual recruitment campaign and making use of diverse media.

Training

In recent years, the CRA has made modest improvements in its training of volunteers.  Yet there are a number of tensions within the field of training that it is not addressing well:

• Volunteers are a valuable resource, the linchpin in the CVITP operation.  Yet with an unstructured training program, reviewing lengthy (and repetitive) training modules can become an obstacle for some volunteers to completing the training and gaining the knowledge necessary to provide competent client service.
• With the possible exception of those working in community-based organizations with a financial empowerment mandate, many clinic coordinators are not themselves involved in or knowledgeable about the preparation of income tax and benefit returns.  Therefore, they rely heavily on the expertise of their volunteers.  Yet, in the absence of a formal training and certification program, volunteer competence will remain highly variable.
• The training needs of experienced, returning volunteers are different from those serving for the first time.  Yet the current training materials do not reflect these differences.
• The CRA is the source of knowledge on taxes, benefits and the preparation of the returns.  Yet its lack of training expertise is reflected in the materials and methods employed for delivering training.

At present, the CRA provides training materials but leaves it to host organizations to ensure their volunteers are adequately trained.  On the other hand, most host organizations (with the possible exception of those with a financial empowerment mandate) seem to assume that the CRA covers all of their volunteers’ technical training needs.  As neither party checks to confirm that volunteers have an adequate level of understanding of the technical issues involved in preparing and filing a return, there is a risk to a host organization’s reputation among its clients as some of its volunteers may provide very poor service. 

The CRA could address these challenges by contracting an experienced training institution to design and deliver a program which is better adapted to the needs of volunteers, both new and experienced, and provides a formal certification (confirming a minimum level of knowledge) which clinic coordinators can require and rely on.

Support and Supervision

Currently, the CRA does not supervise CVITP volunteers.  It leaves this responsibility to host organizations and their CVITP clinic coordinators.  Its support is limited to the very good CVITP helpline.  Yet host organizations generally limit their supervision of volunteers to the management of workflow issues and do not address quality control issues.  Again, community-based organizations with a financial empowerment mandate may be the exception in overseeing their volunteers’ technical work.

In addition to providing formal training certification to ensure a more consistent quality of client service, the CRA could also designate some experienced volunteers to be mentors and more generally sources of advice for less experienced volunteers.  It might also require that newly certified volunteers work under the supervision of a more experienced volunteer who must review a minimum number of their returns before being filed.

The tax and benefit situation of chronic non-filers can be complicated, given the number of years they have missed filing a return.   Good training, supervision and support will be especially important if volunteers are to help chronic non-filers get up to date filing their returns and accessing all of the benefits to which they are entitled through the income tax and benefit return process.

Recognition and Retention

Volunteer recognition and retention is also proving to be a big challenge for the CVITP.  In the following article, we suggest a number of measures the CRA could employ to encourage experienced CVITP volunteers to come back again the next year.

Tracking its progress using appropriate indicators

Currently, the CRA tracks and reports on the number of individuals assisted, returns filed, volunteers and host organizations and the amount of benefits generated.  Tracking the number of volunteers and host organizations is useful for understanding the evolution of what we call the CVITP infrastructure supporting service delivery.  Tracking the number of individuals assisted and returns filed and the amount of benefits generated is suggestive but do not really reflect the main purpose of the CVITP.  The CRA should track and report against more relevant results, which can help it to focus limited CVITP resources, especially its volunteers, on providing CVITP services to those like chronic non-filers who need these the most.

There are four questions which the CRA should be answering by monitoring and reporting on the relevant data in any given year:

Results from combinations of the answers to these questions can provide meaningful guidance on shaping targets and reforms that will improve national CVITP performance.  Results at the subnational level can also help guide strategic decisions about CVITP reform efforts at that level.

Conclusion

Our experience is that the income of non-filers tends to be below the median for all the CVITP clients we serve.  While programs like the Guaranteed Income Supplement, the Canada Workers Benefit and the Canada Child Benefit can help to reduce poverty in Canada, residents must file a return to gain or maintain access to a large number of these income-tested benefits.  Non-filers, especially chronic non-filers, are a much harder group to reach for this purpose.

To make substantial progress within this group, the CRA will need a concerted campaign that goes well beyond its current efforts to get a greater number of non-filers to file.  To this end, the CRA needs to make greater use of the CVITP, its key contribution toward meeting the poverty reduction goals identified in the federal government’s 2018 Poverty Reduction Strategy.

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[i] The number for 2022 is slightly different from that reported in this article.  This is because the CRA changed its methodology for the timeframe following publication of our original article.   This small difference does not alter the conclusion.