Interest Rate Challenges: Should CRA Give Taxpayers a Break? January Poll Results

High interest rates continue to squeeze borrowers and taxpayers. Last week, the Bank of Canada announced it’s eighth interest rate increase in 12 months to 4.5%.  The prescribed interest rate charged by CRA on overdue taxes also rose this month to 8%; not quite as high as the 9% rate that began in the fourth quarter of 2006 where it stayed until the second quarter of 2008.  In our January poll, KBR readers were asked: should CRA temporarily reduce this 8% rate to give taxpayers an inflation break?  The vote is in:  78% to 22% said yes, with a number of interesting comments:

Peter notes off the top: “To be fair, CRA should charge the same rate as the rate that CRA pays to Canadians on tax refunds.”

Martin says: “CRA should permanently lower the rate they charge on late returns to the rate they pay on late refunds. Why should taxpayers pay more if they are late, than what the government pays when they are late. And it should be paid from the deadline for submitting tax returns, just like it is charged from the deadline.”

Ann Laurin weighs in: “I do not agree with our Government charging 8% and feel this is another debt hack at the cost of the taxpayers. I feel tax payers pay out more than any other country in the world and sorry to say, it is not all roses in Canada anymore. It is not affordable to buy a home, or to rent, cost of groceries are climbing, there are talks on many people losing their homes in 2023 and 2024!  The big picture is, when I look at a young family with children now pay an additional $1300 a month in mortgage payments due to multiple interest rate increases, will you say now just file and pay your taxes on time. This is a very disappointing move on our government and their poor managing of our Canadian resources in prior years has resulted now in Peter paying the Piper.”

RoseMarie Cook has a different view: “I believe the rate is fair….certainly better than a loan or credit card rate.”

Sandra and Sergio both agree: “The interest rate charged by the Fed’s should coincide with the Bank of Canada rate.”

Denzil Feinberg has this advice:  “Lower fed tax just temporary for 2023 to encourage higher rate paydowns.” 

Randolph Edmead thinks: “Lowering the interest will encourage more people to delay paying promptly.”

Robert Litschel chimes in: “The rate on overdue tax payments should be in line with the rates offered by the banks.  Unfortunately, with this government causing inflation and the bank rates going up to try to hide their culpability, this increase is not and should not happen.  As well, the federal government is increasing the taxation of all Canadians and making it difficult to pay taxes and put food on their tables.  It should be reduced.

Bruce LaPorte sticks ups for taxpayers who pay on time: “The country although looking at a recession still needs to operate and that means staying on top of those that owe taxes. Our system will work fairly with those who reach out proactively and request consideration due to their personal economic situation, pay your taxes on time or pay late along with the additional 8%.”

Veronique Dewilde has empathy for those who can’t pay: “Most people can’t afford paying their taxes now, let alone the 8%!!”

Mitzi-Lynne Morgan agrees: “You have had a “loan” from the government and it carries an 8% interest rate. Credit cards go up to 20% (or 19.99!) so it could be worse. Pay your taxes on time and there will be no interest.”

Randolph Edmead: “I do not think the rate is too high.”

Last word goes to Gaetan Ladouceur: “Though I dislike the current inflationary period we are currently in, I understand the reasoning for the increase.  The taxpayer could always request the cancellation or waiver of penalties and/or interest (under the Taxpayer Relief provisions).  There needs to be an incentive to pay income taxes balances owing on time.  An 8% rate is still much better than most current loan rates and certainly better than credit card rates.”

Evelyn Jacks is Founder and President of Knowledge Bureau, holds the RWM™, MFA ™, MFA-P™ and DFA-Tax Services Specialist designations and is the best-selling author of 55 books on tax filing, planning and family wealth management.  Follow her on twitter @evelynjacks.

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