Issue

In March of 2020, the Canada Revenue Agency (CRA) suspended most of its collections operations to minimize the financial impact on taxpayers. The resumption of collections activities has been phased in gradually since July 2020, re-engaging with taxpayers with a focus on empathy and service. Since February 2021, most programs have fully resumed operations; however, the CRA is operating with more flexible payment arrangements and allowing more attempts to work with taxpayers before moving to legal measures. As the economy gradually recovers, the CRA will increase audits creating a larger amount of reassessments and consequently a greater volume of new tax debt. Most taxpayers repay promptly but some will require collection efforts and thus add pressure on collections.

Things to consider

• Tax debt increased between October 2019 and October 2020. This increase was minimized by a vast reduction of reassessments resulting from the CRA's compliance work. It is expected that collections intake will increase as compliance and audit activities resume, resulting in a sharp rise in the tax debt with the upcoming filing season.
• In addition to collecting tax debt, the CRA is responsible for the collection of amounts on behalf of other government departments, such as certain Employment and Social Development Canada Employment Insurance debts. As partner departments fully resume their verification and compliance activities, intake to the collections program is expected to increase sharply in the coming months.

Next steps

Our focus is on:

• Balancing the priority of Government of Canada emergency measures and recovery benefits and the reactivation of core collections programs with a People First approach
• Prioritizing files to reduce the burden on taxpayers most impacted by the pandemic, while identifying those who had minimal or no impacts to their financial situations
• Remaining agile and adaptable, as financial impacts will continue to affect taxpayers through the 2021-22 fiscal year
• Continuing to focus on the health and well-being of CRA's employees

Key messages

• The health and safety of all CRA employees, taxpayers, and stakeholders must continue to be our primary concern as we progress through this pandemic
• The CRA recognizes that each taxpayer's circumstances are unique, and it will take that into account in its decision-making process
• In the context of the ongoing pandemic, payment arrangement parameters have been expanded to give Canadians more time and flexibility to repay based on their ability to pay
• Individuals who cannot make a payment in full are advised to contact the CRA to make a payment arrangement that's right for them
• The CRA will also apply targeted interest relief, announced on February 9, 2021 to eligible Canadians who received COVID-related income support benefits
• The CRA continues to crack down on repeated or high-dollar non-compliance activities

Background

COVID-19 has provided the CRA with an opportunity to improve its service-oriented approach related to debt collection. As the pandemic took hold, a People First philosophy helped guide the responses to COVID-19 impacts. The CRA took the following actions to reduce pressure on taxpayers as Canadians adapted to the impacts of the pandemic:

• Automated letters, outbound calls and legal actions were ceased
• Garnishments and statutory set-offs were released
• The CRA worked with the Superintendent of Bankruptcy to postpone payments for consumer proposals in order to avoid default and bankruptcy

A four-phased approach was introduced to resume collection activities, as the pandemic allowed.

1. Focus on service (June 26, 2020)
   • Responded to taxpayer initiated contact
   • Aligned debt resolution with the taxpayer's financial situation
2. Focus on service and encouraging compliance (September 21, 2020)
   • Implemented an incremental approach with taxpayers for both inbound and outbound collections communication
3. Transitioning towards reenacting enforcement activity (February 2021)
   • Restarted outbound calling for the majority of collections programs
   • Returned to negotiating payment arrangements that include verbal/written legal warnings
4. Full resumption of collections activities (planned for January 2022)
   • Removed remaining restrictions