Technical difficulties forced the Canada Revenue Agency to delay by roughly six months the resumption of key debt collection activities it had suspended early in the COVID-19 pandemic.
In an April, 2022, memo to then-revenue-minister Diane Lebouthillier, the agency said it was targeting the end of July that year to resume holding back benefit payments such as child benefits and the goods and services tax credit to taxpayers who owed the government money.
“Not reinstating the benefit offset program means debts from benefits programs will continue to accumulate, and make future collections more difficult,” reads the memo, which was signed by CRA Commissioner Bob Hamilton.
Yet, the agency didn’t actually resume some of those collections until at least February, 2023, according to a later CRA memo to the minister. The delay was owing to implementation challenges tied to the agency’s transition to a new information-technology system during the pandemic, CRA spokesperson Etienne Biram said via e-mail.
The Globe and Mail obtained the 2022 memo under the Access to Information Act. Another briefing to the revenue minister that detailed a modified rollout of the benefit offsets in February, 2023, was retrieved by journalist Dean Beeby under the act and shared with The Globe.
The CRA normally withholds benefit payments, tax-credit payouts and tax refunds to offset outstanding government debt owed by taxpayers. But the agency largely paused the practice in May, 2020, to provide financial relief for households during the pandemic.
The agency then gradually resumed its normal debt-collection practices between the fall of 2022 and early 2023. It also started applying future government payments against debt owed due to overpayments of COVID‑19 individual benefits such as the Canada Emergency Response Benefit. But the 2022 memo indicates the CRA had initially targeted a much earlier timeline for the resumption of some of those clawbacks, including offsets of the Canada Child Benefit.
The document suggests the CRA was worried about mounting taxpayer debt.
As of the end of 2021, more than two million Canadians had received $1.7-billion worth of federal, provincial and territorial benefit payments that would normally have been withheld and applied to their outstanding government debts, according to the briefing. The agency also estimated personal income tax debt had reached $17-billion.
Those amounts were in addition to overpayments of COVID-19 individual benefits, which Canada’s Auditor-General later estimated at at least $4.6-billion – with another $12.1-billion in payments worthy of further scrutiny – in a December, 2022, report.
Resuming offsets as the Canadian economy reopened and pandemic restrictions were lifted would ensure the CRA upheld “the integrity of the tax system,” the 2022 briefing reads. But while the agency was able to roll out some of the clawbacks last October, as planned, technical difficulties with the new IT system forced it to push back some of the offset measures.
“Reinstating offsets meant programming the new system and this is what added to the complexity of the change. It was not a simple turning on of the switch,” Mr. Biram said.
Despite the six-month delay, the agency waited until early 2023 to engage in a broad communication campaign to alert taxpayers of the clawbacks.
The resumption of the offsets caught many benefit recipients off guard. Some low-income families said unexpected reductions in their child-benefit payments and other income transfers left them short of cash to pay for basics such as food and rent.
Anti-poverty advocates have criticized the way in which the CRA ramped up collection activities, saying that a greater effort by the government to forewarn taxpayers would have allowed households to adapt financially to the coming benefit cuts. Such advance warning was especially important for low-income Canadians, who have little wiggle room in their budgets and need more time to adjust to significant income drops, they said.
