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Tax debt is back as a factor in consumer insolvencies, according to a recent study from insolvency trustee Hoyes, Michalos & Associates Inc.

The annual data crunch of consumer debtors that filed with the firm last year indicate that 40 per cent owed taxes, up from 33 per cent in 2020 and 37 per cent in pre-pandemic 2019.

The average amount of taxes owed by those filers has also rebounded. In 2021, the average amount jumped to $19,776, up from $15,866 in 2020. But last year’s total was still short of the average 2019 tax debt of $20,0134.

In an interview, co-founder Douglas Hoyes said those results makes sense, given the lack of official pressure to repay debts. He said there has been less collections activity, including by the Canada Revenue Agency. In addition, backlogged courts and the inability to garnish the wages of someone out of work because of the pandemic have also helped to propel the increase in tax debt, he said.

And some tax debtors have received an official grace period. The federal government has waived interest charges for the 2020 tax year until April 30, 2022 for filers who had a taxable income of $75,000 or less, received one of several types of federal income supports, and filed their returns on time.

Taxing questions

Will rising carbon prices push Canadians to move away from fossil-fuel heating in their homes? That’s a question that comes up often in debate over the carbon price.

Nicholas Rivers, Canada Research Chair in climate and energy policy at the University of Ottawa, shed some light with some rough calculations. A typical single-family home in British Columbia would save $250 annually right now by switching to a heat pump from a natural-gas furnace, based on that province’s carbon price of $45 a tonne. Those savings come from reduced fossil-fuel usage and lower carbon costs.

However, by 2030, the price put on carbon will be much higher, at $170 a tonne. At that point, that typical home would save around $1,000 a year.

“Savings this large would likely make a heat pump a profitable option for most homes,” Prof. Rivers writes.

Of course, the cost of a heat pump can vary greatly, including the additional expense of models designed for cold climates. But consumption of fossil fuel would likely be higher in such cases as well, ramping up the potential savings. Plus, there are rebates in some jurisdictions that would reduce the initial outlay for a heat pump and make a switch more economically attractive.

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Freedom 75: Ottawa should redraft the rules on RRSPs and allow Canadians to delay converting those savings into a RIF until the age of 75, up from the current age limit of 71, writes Luc Godbout, professor at the Université de Sherbrooke’s school of administration in a recent post by the C.D. Howe Institute. He says that the age limit has not been increased past 71 since RRSPs were introduced in 1957, when average life expectancy was much lower. Such a move would mesh well with other recent policy moves, Prof. Godbout writes, as well as encouraging seniors to remain in the workforce.

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