September 7, 2025
Summary: The circumstances that led to the announcement of the fifth year extension suggest the CRA had been hoping to secure permanent funding but that the December 2024 Fall Economic Statement cast doubt on that possibility.
Instead, the CRA announced the second extension of the pilot project out to 2025. As the federal government was prioritizing advancing automatic tax filing for low-income Canadians, the evolution in the CRA’s messages about the CVITP around the same time hints that, in the minds of some policymakers, this meant the CVITP could be scaled back in parallel. Thus, there would be little need to support the CVITP with a permanent source of generous funding. Instead, all that was needed was some funding to tide the CVITP over until automatic tax filing was a reality. A further extension to a fifth year was an expeditious way to do this.
However, the financing formula is less generous than in the two previous years and was announced just before the 2025 season began. Therefore, the growth in the number of CVITP participating organizations is once again unlikely to exceed the 5% performance target.
The pilot project is unlikely to be extended yet again, for a sixth year. This is because its disappointing performance and cost will make it difficult to survive the budget cutting exercise the current government has recently launched. Instead, automatic tax filing for low-income Canadians will likely remain the government’s priority.
This third article in this three-part series builds on the first two articles which looked at the pilot project for providing grant funding to CVITP host organizations after four years of implementation.
At the close of the second article, I suggested that the CRA could seek a more permanent source of funding in 2024, well in advance of the 2025 season. However, this did not happen. Instead, the CRA announced the second extension of the pilot project out to 2025.
Why did the CRA extend the pilot project for a fifth year?
I have already reported on the announcement of the fifth-year extension of the pilot project. The circumstances that led to the announcement suggest the CRA had been hoping to secure permanent funding but that the December 2024 Fall Economic Statement cast doubt on that possibility. This is probably because the federal government’s priority was on furthering the implementation of automatic tax filing for low-income people.
For many policymakers, the futures of automatic tax filing and the CVITP are inextricably linked: as automatic tax filing becomes the norm for low-income Canadian residents, the CVITP could be substantially scaled back. And if this is possible, then there may be little need to secure permanent funding for the CVITP.
The evolution in the CRA’s messages on the CVITP website over the November 2024 to January 2025 period hinted at this shifting position within the bureaucracy.
However, surmounting the legislative hurdles to genuinely automatic tax filing means that such a system will not be operational, at the very least, before the 2026 tax season. Therefore, the CRA may have concluded that the most expeditious way to provide financing to the CVITP in the interim was to once again extend the pilot project for another year.
The financing formula for the fifth year is much less generous than it was for the third and fourth year. The funding decision was also announced too late in the lead up to the 2025 tax season to incentivize new community-based organizations to host CVITP clinics.
For these reasons, I expect that the number of host organizations will increase, if at all, by less than 5% in 2025 over 2024. If I am right, this would mean that, by the most important measure determining its performance, the pilot project will continue to fail to meet its target.
What does this mean beyond the fifth year?
I believe it is unlikely that the pilot will be extended for a sixth year. There are four reasons for this.
1Advancing automatic tax filing for low-income residents will continue to remain the priority for the government. It may not become operational by the 2026 tax season. In that case, the CRA might try to find some temporary funding for another year. But the remaining three reasons make this especially hard to do.
2In the first four years of implementation, the pilot project has consistently failed to meet its most important objective. Thus, it is increasingly unclear why the CRA continues to provide funding. Perhaps the CRA wishes to avoid any risk of political fallout and CVITP service reduction that might accompany the termination of funding.
3The pilot project has proven more expensive than originally planned. The first three years cost well over $10 million and as much as $14 million. The fourth year’s budget is up to $5.9 million. While the fifth year’s financing formula is less generous, it may still cost over $4 million.[i] This would bring the total expenditure for the five years to well over $20 million.
4The new Liberal government is tasking its cabinet members to find budget savings ahead of a fall budget. Given the pilot project’s cost to date and its failure to achieve its most important objective, a further extension of the pilot project will be difficult to justify and thus is unlikely to survive this exercise.
There will be two pivotal events this fall that will likely address the uncertainty around future funding.
First, in October grants will be disbursed under the fifth-year extension for the eligible activity period running from June 1, 2024, to May 31, 2025. Around that time, the CRA could provide an accounting of the fifth year. It could follow this up with the publication of its own assessment of the pilot project and by giving a clear indication of what comes next. This would represent a break from the CRA’s past habit of sharing little information publicly about this project beyond ill-timed but glowing press releases.
Second, the federal government will publish a fall economic statement and quite possibly a budget for 2026. If there is to be any permanent funding for the CVITP, this will be the opportunity for the federal government to announce it.
As you can gather from what I have written in this three-part series, I am doubtful that any of this will happen.
But what do you think? And why?
[i] The numbers for the 2025 tax season are not yet known, but the 2024 tax season can be used here as a proxy. We know that 857,540 people were assisted through the CVITP in filing returns in the 2024 tax season. If they all filed their 2023 returns and $5 is paid per return, this would amount to a grant expenditure of $4,287,700. Including the 2023 returns of host organizations that did not file for a CVITP grant overestimates the amount. Excluding prior year returns that were filed underestimates the amount. The eligible activity period runs from June 1 to May 31 of the next year. Excluding returns filed between June 1 and December 31, 2023, is offset by including returns filed between June 1 and December 31, 2024. As the number of returns is likely to be higher in the 2025 than in the 2024 eligible activity period and the number of host organizations applying for grants may continue to rise, I consider this estimate to be on the conservative side.