Contract Number: 46558-183798/001/CY
POR-082-16
Canada Revenue Agency
Contract Award Date: December 13, 2016
Report Date: March 30th, 2017
Produced by: Sage Research Corporation
Ce rapport est aussi disponible en français.
Table of contents
In 2009, the Canada Revenue Agency (CRA) conducted public opinion qualitative research with taxpayers that resulted in a report titled Attitudes Towards Payment of Debt and Compliance. The target groups for that research consisted of (a) taxpayers who had been late making a payment at the tax filing deadline, (b) taxpayers who paid tax by instalments and had paid instalment interest, and (c) late filers. The research identified a number of factors related to knowledge and attitudes about payment of debt and compliance. Subsequent research by the CRA on people who are noncompliant with income tax payment at the time of their initial assessment has shown that taxpayers with self-employment income are at higher risk of creating a debt on filing, as well as a higher risk of overall noncompliance.
To update the 2009 study the Canada Revenue Agency (CRA) has identified a need to understand the factors that influence specifically self-employed taxpayer’s payment and filing compliance and their impact on accounts receivable. Those self-employed people who have been late making a payment at the tax filing deadline or late filing their tax return are the focus of this study.
The research objectives included:
This research will help the CRA better understand the motivations of self-employed taxpayers regarding their tax debts, and the impact of the CRA’s collections-related information efforts on the awareness and impressions of self-employed taxpayers about these matters, thereby aiding the Agency in developing strategies and communications to help Canadians voluntarily comply with their tax obligations.
Eight focus groups were conducted between February 2 to 10, 2017, in Halifax, Montreal, Toronto and Calgary. All participants met the following qualifications: (a) identified themselves as self-employed, (b) owed a tax payment at tax return filing time more than once in the past five years, and (c) have been charged interest on overdue taxes. About half the participants had filed a tax return late and been charged a penalty as a result.
This research was qualitative in nature, not quantitative. As such, the results provide an indication of participants’ views about the topics explored, but cannot be statistically generalized to the full population. Qualitative research does, however, produce a richness and depth of response not readily available through other methods of research. It is the insight and direction provided by qualitative research that makes it an appropriate tool for exploring the factors that influence self-employed taxpayers’ payment and filing compliance.
Virtually all participants identified the most common reason self-employed people might be late paying income tax as being lack of money at the payment deadline. Other significant factors for some include lack of awareness of the payment deadline, waiting for the Notice of Assessment (NOA) before paying, and the availability of late payment options. Overall, the main factors were:
Lack of money: Participants indicated that the nature of self-employment is such that there is a risk that there is a lack of money at the payment deadline. The frequently mentioned reasons for this included:
When participants talked about lack of money as a reason for paying income tax late, they did not literally mean there was “no money.” Rather, what they meant is that there are other expenses that have higher priority for payment than income tax, and after covering those other expenses there is not enough money to pay the income tax bill.
The following are types of expenses that may be given higher priority than income tax, listed in rough order of priority based on comments from participants:
Virtually all participants ranked income tax below basic living expenses. Some participants ranked income tax just below basic living expenses, but the majority ranked keeping the business running ahead of paying income tax. Some also ranked income tax below either GST/HST remittances or debt that charges a higher rate of interest.
Not aware of the income tax payment deadline: A minority of participants were aware that, for self-employed people, the income tax payment deadline is April 30, and the tax filing deadline is June 15. Most participants were unsure about the exact dates. Compared to the actual April 30 deadline, participants were more likely to guess or believe that the payment deadline is sometime in or around June. It seems that people tended to assume that – as is the case with regular personal tax returns –tax filing and tax payment are linked. There was some awareness that self-employed people can file their tax return in June, and this appears to lead to an assumption that the payment deadline is also in June.
Don’t pay until receive the Notice of Assessment: Some participants mentioned they do not pay income tax owing until they receive their Notice of Assessment (NOA) from the CRA. However, if someone files close to April 30, or certainly if they file after April 30 – as self-employed people are allowed to do, the CRA would then treat it as late payment of income tax.
Availability of late payment options: The CRA allows people to set up a payment plan to pay taxes owing, together with any interest that accrues throughout the duration of the payment plan. Participant input indicated that late payment options can cause late payment in two different ways:
The fundamental value mentioned by participants for filing on time is that "paying your debts is the right thing to do." They perceived themselves to be law-abiding, responsible citizens, and paying one's debts is part of that.
In addition, participants cited both avoiding interest charges and future attention from the CRA as reasons for paying on time:
When asked if they were aware of the financial consequences of late payment the first time they were late, some participants knew, but the majority said they did not know the specific consequences. They were aware there would be financial consequences, but they did not know the actual interest rate and most did not attempt to find out. Generally, if a person was going to do something to deal with not paying income tax, they were unlikely to research this on their own, and more likely to call the CRA directly to work out how to handle the situation.
The main reasons participants gave for why a self-employed person might be late filing were:
Lack of money to pay the tax owing: This was a frequently cited reason for late filing. The person chooses not to file until they can pay the amount owing in order to avoid both internal stress ("out of sight, out of mind") and the external stress of potentially receiving follow-up contact from the CRA to pay the amount owing.
Lack of awareness of the late filing penalty: Many participants were either not aware there is a late filing penalty, or assumed there is a penalty of some sort but were unable to provide details. When subsequently informed of the penalties for late filing and repeated late filing, participants were surprised at how large the penalties are.
Amount of work involved/Procrastination: Some participants said that doing the tax return takes a lot of time, particularly for self-employed people who cannot afford to pay someone to do it. It is also not an enjoyable activity, and this combined with the level of work required can result in putting off tax return preparation until it is too late to meet the filing deadline.
Only a small number of participants went to the CRA website to get information related to late payment or late filing. Most had not looked for this information on the CRA website.
The reasons given for not going to the CRA website for this purpose included:
Written communications: Participants were asked for their recollection of the ease of understanding any written communications they received from the CRA associated with late payment. The specific letters cannot be identified with certainty, but mostly they appear to be reminder and/or statement of account letters that stated the amount owing.
Almost all participants said the letters were clear: it was clear that they were being told they had an amount owing, the amount they owed was clear, and often they said it showed the interest charges. Most had no suggestions for changes to these letters, and overall it appears the letters communicate the key intended information.
Telephone communications: The majority of participants called the CRA to work out a payment arrangement. These participants said this was a positive experience (with the exception of complaints about busy signals and wait time). They were able to work out an acceptable payment arrangement, and they said the CRA agent was helpful and neither accusatory or threatening.
In the 2009 study, it was found that a majority of participants calling to make payment arrangements were satisfied with the experience. However, as noted in the report there were also some "who said it was a bit of a struggle either to find an agent willing to discuss alternative payment arrangements or to convince an agent to accept an alternative arrangement." Our impression is that in this 2017 study participants' comments on the telephone service were more consistently and strongly positive than in 2009. Because both the 2009 study and the current study are qualitative studies, it is not possible to say with certainty whether there has been a change in the telephone experience. However, the results do suggest a hypothesis that callers' experiences have become even more positive since 2009.
Participants reviewed a handout that described the interest and penalties associated with late payment and late filing. There were strong reactions to the following components of the handout:
Difference between payment deadline and filing deadline: Quite a few participants were surprised to learn from the handout that the payment deadline is April 30, and comes before the filing deadline of June 15. This reaction confirms that lack of awareness of the payment deadline is a cause of late payment.
Many participants criticized the order of the two deadlines, basically saying that it made no sense to them that one has to pay before one even knows how much one owes. This resulted in two alternative suggested changes – either make the filing and payment date the same, or reverse the two dates such that the filing deadline is April 30 and the payment deadline is June 15. The latter was the more frequent suggestion.
Late filing penalties: Most participants perceived the late filing penalty, and especially the repeated late filing penalty, to be large. Some participants were not previously aware there is a late filing penalty, and virtually none were aware there is a higher penalty for repeated late filing. While some participants said they knew or assumed there is some sort of penalty for filing late, they did not expect the penalty to be this large. Many participants said the impact of reading the handout was that they would be more careful to file by the deadline even if they are still unable to pay the amount owing.
"5% compound daily interest": The perceived magnitude of this interest rate was polarized: either it was seen as a reasonable interest rate, or it was seen as a very high interest rate. The issue is a person's understanding of the impact of "compound daily interest": some had an accurate understanding, while others thought it meant an annual interest rate much higher than 5%.
It is important to note that this research was qualitative in nature, not quantitative. As such, the results provide an indication of participants' views about the topics explored, but cannot be statistically generalized to the full population.
Qualitative research does, however, produce a richness and depth of response not readily available through other methods of research. It is the insight and direction provided by qualitative research that makes it an appropriate tool for exploring the topics included in this research.
TOTAL CONTRACT VALUE: $59,999.61 (HST included)
I hereby certify as Senior Officer of Sage Research Corporation that the deliverables fully comply with the Government of Canada political neutrality requirements outlined in the Communications Policy of the Government of Canada and Procedures for Planning and Contracting Public Opinion Research. Specifically, the deliverables do not include information on electoral voting intentions, political party preferences, standings with the electorate or ratings of the performance of a political party or its leaders.
Rick Robson
As context for the discussion of reasons for late payment of income tax, participants were asked how common they guess late payment to be among self-employed people, with the response options being Not very common, Somewhat common, and Quite common. Only a few participants said Not very common, whereas the rest were about equally split between Quite common and Somewhat common.
This indicates that these participants – all of whom had been late with some tax payments in the past five years – do not see their own behavior as unusual. Rather, in their view, the nature of being self-employed is such that it is relatively common to sometimes not pay income tax owing at the deadline. They do not see themselves as "people who don't pay their taxes." Rather, they see themselves as legitimate small businesses which – because of nature of running a small business – can sometimes end up not paying tax by the deadline. In this context, and as evident in comments throughout the discussions, they feel the CRA should be aware of the difficulties self-employed people can face in making tax payments, and that the CRA should work with them to deal with late payment.
Virtually all participants identified the most common reason self-employed people might be late paying income tax as being lack of money at the payment deadline. Other significant factors for some include lack of awareness of the payment deadline, waiting for the Notice of Assessment (NOA) before paying, and the availability of late payment options. There are additional factors as well – the following lists all the factors discussed:
Lack of Money
The number one reason participants gave for late payment was lack of money at the payment deadline. Participants believed that this stems from the nature of self-employment and the challenges of running a small business.
Income fluctuates due to lack of steady work: Many participants mentioned that a self-employed person may not have regular earnings. Income can fluctuate based on the flow of work. There can be busy periods and slow periods, and it may not always be possible to predict when these will occur. If tax time comes during a slow time, there may not be enough money on hand to pay the tax bill.
Several participants highlighted that their business is seasonal, and for them the slow time hits around tax payment time.
Cash flow problems related to collecting receivables: Quite a few participants said this can be an issue: the businessperson may have sufficient income in their receivables to pay the tax bill, but late payment of those receivables can jeopardize being able to make a tax payment.
Maybe you've invoiced clients and you haven't gotten payment from them. So you've allocated money to go to income tax but you actually haven't received the money for it.
Your payments are due, you planned to make your payments, but a large customer…oh, he missed a cheque run. You didn't get that $30,000 cheque. How am I going to make that payment? You don't make that payment until that money does come in, and then you make it. So, a lot of it is beyond your control just for straight cash flow reasons.
Unplanned high priority expenses: For self-employed people these can include not only unplanned business expenses, but also unplanned large personal expenses (e.g. car repair, furnace repair, divorce, etc.). Several mentioned that medical problems can cause significant loss of income for a self-employed person, because if they cannot work the business may suffer.
Do not set aside enough money during the year to pay the tax bill: Some participants said that failure to keep close track of income can contribute to not setting aside enough money. In this regard, several suggested that financial management may not always be something a self-employed person is good at: they are good at what their business does, but they may not have the financial knowledge or motivation to ensure enough money is set aside for income tax.
A few participants suggested that if a self-employed person has a particularly good year, they may underestimate the tax owing because of lack of prior experience with how much tax would be owed on a higher amount.
A few participants stated that a person new to self-employment may not fully understand or appreciate how much their tax bill will be, particularly if they have previously worked as an employee with tax deducted at source:
I'll say especially young people or people who are new to being self-employed. I know a few guys who worked as hardwood installers, started their own hardwood business and were just like "sweet, free, so much money". They were just used to having their tax taken off their paycheque and you just keep the rest. And all of a sudden they were making twice as much money and spending it all at the bar on the weekend. And then the end of the year comes and now you owe $25,000 and you don't have it.
Difficult to borrow money to pay income taxes: Several participants said they did not believe banks would lend money for the purpose of paying an income tax bill.
Where income tax ranks in priority of payment
When participants talked about lack of money as a reason for paying income tax late, they did not literally mean there was "no money." Rather, what they meant is that there are other expenses that have higher priority for payment than income tax, and after covering those other expenses there is not enough money to pay the income tax bill.
The following are types of expenses that may be given higher priority than income tax, listed in rough order of priority based on comments from participants:
There were individual differences in the order of priorities, and individual differences in where income tax fits in this list of priorities. It appeared that virtually all participants ranked income tax below basic living expenses. Some participants ranked income tax just below basic living expenses, but the majority ranked keeping the business running ahead of paying income tax. Some also ranked income tax below either GST/HST remittances or debt that charges a higher rate of interest. The following comments on each of the above types of expenses.
Basic living expenses: Virtually all participants ranked covering basic living expenses ahead of paying income tax. As one participant put it, "food, family and shelter" come first.
Costs to keep the business running: The majority of participants ranked keeping their business running ahead of paying an income tax bill. The basic reason given is that if the business is not generating income, they will never be able to pay the tax bill.
I would always pay [the CRA], but they're not going to get first blood. I would be paying my line of credit. I've got 60 employees, and they have to get paid first and foremost. I mean, the business is a going concern. So, the oil supplier's got to get paid. The people first and foremost have to get paid. And then in the pecking order, I'd say [the CRA is] probably about fourth or fifth.
If you can't buy the product to provide to the customer, they can't pay you to pay the government. So you've got to make sure you can pay for your product, pay for the building that you're providing your service in, and the government's a couple notches down that ladder.
The types of business operation costs participants mentioned included:
If you don't have goods to buy from your suppliers because you're not paying them, you're not going to pay the government because you're not selling anything.
I think the CRA is more forgiving for late payment than a lot of your suppliers would be. If your suppliers cut you off, you've got no business. You get a bad rating out there and you're not going to be able to get anything unless you start paying cash, but at least with Revenue Canada if you're making some payment, you know, they're not going to come and close you down unless it's really severe.
In my case, I hire a lot of subcontractors, and they get paid before Revenue Canada does. I'm sorry, an individual who's working for me for a couple of days on a job gets their money before Revenue Canada. Revenue Canada can wait.
GST/HST remittances: Some participants commented that they give higher priority to making GST/HST remittances than to paying income tax. (Note that for a quarterly GST/HST filer, the payment deadline for the first quarter is April 30, which is the same as the income tax payment deadline.) These participants perceive the negative consequences of not remitting GST/HST on time as being more severe than not paying income tax on time:
HST is a trust, you must do it no question, but income tax is like having a big [credit card] bill.
The GST's not really your money, right, you're just collecting it for the government, so technically it's a very high penalty.
Because I'm collecting money for the federal government and then have to remit it, they can create a whole lot of problems for me if I don't follow the rules. On the income tax side, if I don't follow the rules, all I do is end up paying penalties.
I will not play around with HST. I'll play around with income tax.
Debt that charges a higher rate of interest: This was mentioned as a higher priority by some participants, and they particularly noted that they perceived credit card debt to have a much higher rate of interest than the interest the CRA charges on income tax arrears. To these participants, it was "simple math" to give higher priority to paying off the higher interest debt.
I think if I'm right the CRA charges like 5% interest on overdue accounts versus say if you have money on a credit card it's going to be like 22% or whatnot. So I'm thinking from a cash flow perspective if I only have enough to pay one of these two bills, well I'm for sure going to pay the one that's going to charge me 22%. 5% is not a bad rate on a loan, so I just think it's a loan from the CRA that I'm paying back.
To me, it's just a simple math thing because I'm only going to get X amount of dollars that are coming in, and if I owe [a credit card] 5,000 bucks, and they're charging me 18.5 or 22.5 percent, and I owe Revenue Canada 5,000 bucks, and they're going to charge me 2.5 or 5 percent, guess who's getting paid first?
Not Aware of the Income Tax Payment Deadline
A minority of participants were aware that, for self-employed people, the income tax payment deadline is April 30, and the tax filing deadline is June 15. Most participants were unsure about the exact dates. Compared to the actual April 30 deadline, participants were more likely to guess or believe that the payment deadline is sometime in or around June. With regard to the latter, the range of dates mentioned included: end of May, "June", June 1, June 15, June 30, and "July."
What appears to be going on is that people tended to assume that – as is the case with regular personal tax returns – tax filing and tax payment are linked. There was some awareness that self-employed people can file their tax return in June, and this appears to lead to an assumption that the payment deadline is also in June. This interpretation was confirmed by how quite a few participants reacted to the information about interest and penalties shown and discussed at the end of each focus group: they were surprised to see that the filing and payment deadlines are not the same, and even more surprised that the payment deadline comes before the filing deadline.
Another indication of this misunderstanding of dates is that some participants suggested that late filing can in turn result in late payment. However, for self-employed people, the payment deadline (April 30) will have passed before someone can be late filing their income tax return (June 15 deadline).
Don't Pay Until Receive the Notice of Assessment
Some participants mentioned they do not pay income tax owing until they receive their Notice of Assessment (NOA) from the CRA. However, if someone files close to April 30, or certainly if they file after April 30 – as self-employed people are allowed to do, the CRA would then treat it as late payment of income tax.
These participants want to know with certainty what the CRA says they owe, and only pay once they know that amount.
Because they may sit there and say well, your auto was off this year, or your phone was high or whatever. So I guess it is a confirmation for most people, okay, it's like a final bill, that's what I owe.
It's the peace of mind, once they go this is what you owe and you pay it, you go "phew, I'm done."
What if you end up paying too much money and then you get your statement and your assessment, it says oh, you didn't have to pay X amount. Who knows how long it will take to get a credit back? So it's better that you wait.
Some participants linked waiting for the NOA to not being fully confident in the tax return, basically because they're not fully confident in the expertise of who they can afford to hire to do their taxes.
I use [a tax preparer] but I wait for the assessment because I don't completely trust [that tax preparer], you know what I mean?
It's just something a little bit more official. You can pick up like any tax guy off the street, everybody's doing taxes. Like, you know, everybody will take a six-week tax course and do tax. He could be wrong, he could have messed up my taxes. I kind of feel like it's going to get reviewed by people with authority. I want to go by something that's coming from an authoritative figure as opposed to the tax guy that I don't know.
As self-employed small business people, if we're going to hire somebody, an accountant or whoever to do our books, we're not hiring [a big accounting firm]. We can't afford the pros. So in some respects the pro is the government. I don't trust them either, but if they say you owe this and you can just get them out of there by paying that and then you're done.
Availability of Late Payment Options
The CRA allows people to set up a payment plan to pay taxes owing, together with any interest that accrues throughout the duration of the payment plan. Late payment options can cause late payment in two ways: (1) the taxpayer is not aware that there are late payment options, and (2) the taxpayer is aware of the option to set up a payment plan and finds that preferable to paying all at once.
Not aware of late payment options: Some participants said that lack of awareness that a payment plan can be worked out with the CRA can result in late payment: the taxpayer is concerned that the CRA will require immediate payment in full, and so they avoid dealing with the situation until such time as they can pay in full. One way this manifests is in filing the tax return late: the taxpayer does not file their tax return because they do not have enough money to pay the tax bill at the tax filing deadline.
The majority of participants, however, either knew or assumed that one can work out a payment plan with the CRA. So, lack of awareness of late payment options can be a factor for some people who are late for the first time, but does not otherwise appear to be a major factor in late payment for those who have already experienced being late.
Prefer to pay over time rather than all at once: This relates directly to the earlier discussion that "lack of money" to pay income taxes does not mean "no money", but rather that income tax may not be the self-employed person's highest priority expense. The availability of the option to work out a schedule of payments enables dropping income tax to a lower priority over other, higher priority expenses. This is particularly the case if the taxpayer knows or assumes that the CRA will not charge a really high (e.g. credit card level) interest rate. This is illustrated in one of the participant verbatims given earlier, which is repeated here:
I think if I'm right the CRA charges like 5% interest on overdue accounts versus say if you have money on a credit card it's going to be like 22% or whatnot. So I'm thinking from a cash flow perspective if I only have enough to pay one of these two bills, well I'm for sure going to pay the one that's going to charge me 22%. 5% is not a bad rate on a loan, so I just think it's a loan from the CRA that I'm paying back.
Basically, the payment options can enable viewing tax debt as analogous to a loan, or to credit, and people are used to the concept of making payments that include principal and interest.
If the [tax owing] lump sum is $1,500 and the monthly payment is $250, I'll pay the $250 and a little bit of interest versus you want how much from me in one lump sum? I'm not saying it would make more sense because financially, if you pay it off first you're not paying the interest and that's always better. But we now live in a world where everything is a bi-weekly payment or a monthly payment or a weekly payment.
Casual Attitude Towards Paying on Time
A small number of participants had what could be called a casual attitude towards paying their tax bill, in that they did not appear to view this as particularly important or anything to worry about:
I've been at this for 25 years, and I still don't know when I'm supposed to pay my taxes, and I don't really care to be honest. If I'm going to pay a little penalty or whatever I'll get them done when I get them done.
I don't think about it. Like I'd go skiing before I paid the tax man this weekend if I owed them two hundred bucks, you know? Because they get their money no matter what, so, you know, you pay a couple hundred dollar fine or whatever and it's just you move on, right?
It should be emphasized this was not a common attitude, and most participants took tax debt seriously.
Negative Attitude Towards How Government Spends Tax Dollars
A few participants, but only a few, said a negative attitude towards how government spends tax dollars can contribute to paying late.
It's their attitude because they don't feel that government is efficient or they're wasting my money or whatever. So I'm going to keep the money as long as l possibly can so I get the interest because they're so inefficient. I'm not going to give them any money until I absolutely have to.
In addition to asking participants why self-employed people might sometimes be late paying income tax, participants were also asked why they would pay on time.
The fundamental value mentioned by participants for filing on time is that “paying your debts is the right thing to do.” They perceived themselves to be law-abiding, responsible citizens, and paying one’s debts is part of that. Note that a few participants went further and said that paying taxes specifically is the right thing to do because of the public services funded by taxes. The latter was not, however, voiced by most participants.
Participants also said that they “feel better” once that tax debt is paid – it reduces stress, and they do not have to worry about the matter.
Participants cited both avoiding interest charges and avoiding future attention from the CRA as reasons for paying on time:
You don’t fear being late, you fear them showing up.
I’m actually less afraid of the interest than I am of getting on the list.
Knowledge of the Financial Consequences of Late Payment
When asked if they knew the financial consequences of late payment the first time they were late, some participants knew, but the majority said they did not know the specific consequences. They knew there would be financial consequences, but they did not know the actual interest rate and most did not attempt to find out. Two different sorts of reasons were given for this apparent lack of curiosity:
I’ll just pay it. [Finding out consequences] will take more time out of everything I have to do. So I don’t know and I just pay it, and whenever it gets paid, it gets paid.
I didn’t know, but it doesn’t matter because whatever it is, I’ll just pay it.
I assumed the government wasn’t going to be like, oh, we’re charging you 48% interest, you know. You assume it’s going to be fairly reasonable.
Our impression was that if a person was going to do something to deal with not paying income tax, they were unlikely to research this on their own, and more likely to proceed directly to calling the CRA to work out how to handle the situation. This is consistent with the fact, as discussed later (CRA Website), that most participants did not go to the CRA website to research the consequences of late payment or late filing.
Participants were asked how the interest they were actually charged compared to their expectations.
I felt like I won a lottery. I paid a lot less than I expected.
I didn’t have a clue [what the consequences would be], but was relieved that it wasn’t as bad as I thought it was going to be.
I was late, but I was able to pay within the year. And for some reason, I just had it in my head…I think you hear horror stories. It’s like, “If you’re late with your income tax, they’re going to do this, that, the other thing, and oh, boy!” And then it was just like, “Really? Is that all I had to pay?” It wasn’t as bad.
I remember looking at that and thinking oh, okay, thank goodness it wasn’t that bad. You think maybe there’s a lot more people that don’t pay because they look at that and go, eh, right, like if I don’t pay this and I just take care of all the [other things I have to pay]... I started to think well maybe that’s why a lot of people don’t pay their taxes when they should.
About half the participants in the focus groups had filed an income tax return late in the past five years and paid a penalty as a result. The main reasons they gave for why a self-employed person might be late filing were:
Lack of Money to Pay the Tax Owing
Quite a few participants said that a reason why someone might file their tax return late is that they do not have enough money to pay the tax owing. In this sense, late payment can be said to cause late filing. In this scenario, they said person may wait until they have enough money to pay the tax owing in full, and then file the tax return at the same time.
Participants said that by not filing, the person can reduce the stress of not having enough money to pay the tax owing. There are both internal and external aspects to this stress reduction:
You know that you owe so you're stressing out over that, so you just kind of bury it for a while.
It’s kind of like an ostrich thing, just stick your head in the sand and not think about it.
If you don’t know what you owe, then it’s not preying on your mind.
If I don’t file, they’re not going to know what I owe.
A few participants took this further, and said they believed that to file and not pay is more of a problem with the CRA than to file late and pay at that time:
There’s a feeling that if I don’t file the tax return, it’s kind of like, okay, I might slip under there. And when I have the money, I’ll file it and pay it and pay the penalty. There’s a belief system, whether it’s right or not, that it’s probably better than filing it on time and not paying. Then [the latter] you get on a list. And when you’re on that famous list, it seems like you can’t get off that list.
As noted earlier, some participants said that lack of awareness that a payment plan can be worked out with the CRA can result in not paying a tax amount owing -- the taxpayer is concerned that the CRA will require immediate payment in full, and so they avoid dealing with the situation until such time as they can pay in full. One way this manifests is in filing the tax return late -- the taxpayer does not file their tax return because they do not have enough money to pay the tax bill at the tax filing deadline.
[Reason for filing late:] People don’t know if [the CRA] will work with us. Will they work with us? There’s just this black hole of fear and uncertainty.
Lack of Awareness of the Late Filing Penalty
In the final part of each focus group discussion, participants were given a handout that included a description of the penalties for late filing and for repeated late filing. As discussed later, these penalties got a lot of attention from the participants in the groups. For some, the existence of the penalties was new information, and for many the perceived large magnitude of the penalties (particularly for repeated late filing) was new information. Many said the impact of this information was that it is important to file the tax return even if one cannot pay the tax owing at that time.
The following is an example of a comment from a participant, made prior to seeing the handout, who was not aware there is late filing penalty:
Why file if I don’t have the money? I don’t think you get charged any differently. There’s no difference in penalty if you file it now or file it in a month or two months.
Amount of Work Involved/Procrastination
Some participants said that doing the tax return takes a lot of time, particularly for self-employed people who cannot afford to pay someone to do it. It is also not an enjoyable activity, and this combined with the level of work required can result in putting off tax return preparation until it is too late to meet the filing deadline.
You’re busy all day, the last thing you want to do is taxes. Do I want to go to bed or do I want to look at my taxes? I think I’ll go to bed.
Late Receipts
Several participants said one may not have all of the receipts and other supporting documentation ready in time for the filing deadline. Note that for self-employed people the tax filing deadline is June 15, so they actually have more time to get receipts together than do regular tax filers (deadline of April 30).
Participants were asked whether they had gone to the CRA website to get information related to late payment or late filing. Only a small number of participants had gone to the CRA website for this purpose. Most had not looked for this information on the CRA website.
Participants gave several reasons why they had not looked for information on the CRA website, with the two most common being that they preferred to call the CRA, and that they perceived the CRA website to be difficult to navigate and understand:
Prefer to Call the CRA
Quite a few participants had called the CRA to deal with their late payment situation and work out a payment plan. They did not think they could do this on the CRA website, and as a result did not see value in going to the CRA website. They thought that the website would not give them late payment options, or that the information would be too general and not useful for their particular circumstances. They believed that the best way to address their personal situation and come up with a definitive solution was to talk with a CRA agent.
Perceive the CRA Website to be Difficult to Navigate and Understand
Most participants had a rather negative perception of the ease of use of the CRA website. They perceived it as difficult to navigate, and as sometimes difficult to understand.
It’s a mess of a website. Everything’s just jammed all on one page. It’s hard to find your way around the website, even if you know it.
You click on one thing, and it brings you to another page, and then you click on that, and you’re just going pages and pages and pages just to find one little bit of information that you’re looking for.
I was looking something about GST and it was so confusing, like even trying to find a phone number they’re so confusing.
I just keep going round and round and I can’t get to the right page.
These comments on the usability and value of the website for getting information related to late payment or filing should be interpreted cautiously. Most participants did not actually try to get any such information from the website, so the negative attitude is based more on prior beliefs or some experience in the past than on specific experience with the current website on this topic. There were not enough participants who actually tried to use the website to draw any conclusions about usability or value.
One participant suggested the CRA provide an app for business owners that would facilitate easier access to information relevant to business owners.
Rely on Accountant/Bookkeeper for Information
Some participants said if they want information related to late payment or filing, they prefer to go to their accountant or bookkeeper rather than look for the information themselves.
Not Worth the Effort: “It is what it is”
Some participants said they would have to pay whatever interest and penalties the CRA might charge, and there is not anything they can do about this. Given this, they did not feel that it was worth the effort to research what these amounts might be. They prefer to wait and see what the amount is, and then pay it if they can.
Why didn’t I go check out the interest rate? Because it’s not important. I’m going to get the amount. I know it’s not like credit card charges. I don’t know the exact number, but whatever it is I’ve got to pay it. It is what it is.
Written Communications
Participants were asked for their recollection of the ease of understanding any written communications they received associated with late payment. The specific letters cannot be identified with certainty, but mostly they appear to be reminder and/or statement of account letters that stated the amount owing.
Almost all participants said the letters were clear: it was clear that they were being told they had an amount owing, the amount they owed was clear, and often they said it showed the interest charges. Most had no suggestions for changes to these letters, and overall there does not appear to be a need to make changes.
I find that when I owe them a balance that it’s very clear. When it comes in, I have a statement: “You owe this much; please pay us.” And then I send them a little bit more. And then the next month, I get another statement says, “You owe this much,” and then minus the payment. So, from that point of view, what I’m getting in the mail from them…I know exactly what’s going on.
A few participants said they had difficulty understanding the letters, but they were very much in the minority. The following is an example of a participant who said they had difficulty understanding the letters:
I got the robot letters. I didn’t understand them. They said how much I owed, and there’d be lines of the interest, interest, interest, interest, blah, blah, blah. Eventually I just got an accountant, and I started passing all the paper to him. You understand that I can’t even read this without crying. I literally didn’t understand what these things said. It might have been saying thanks for trying to pay. It might have been a nice letter, I don’t know.
There were some suggestions involving written communications, each typically made by one participant:
Telephone Communications
The majority of participants called the CRA to work out a payment arrangement. These participants said this was a positive experience (leaving aside complaints about busy signals and wait time). They were able to work out an acceptable payment arrangement, and they said the CRA agent was helpful and was not accusatory or threatening. A few who had called multiple times over the years said they had a few negative experiences, but emphasized that this was not the norm. Overall, participants were able to accomplish what they wanted to accomplish – i.e. arrange a payment plan – and they found it to be a positive and straightforward process.
They never say, oh, you’re in big trouble, nothing like that. They always give you alternatives.
If you want options to pay – I mean we all know the interest is there – but they’ll still say what can you do, okay, like they’re very friendly, very helpful.
Sometimes I get really not nice people, but most of the time they’re very helpful, no complaints about that.
The very first time I realized that I owed them money and several thousand dollars, I called them and said, “Look, I know I owe you the money. So, can we arrange something?” And they arranged the payment schedule with me. It worked out great.
I wanted to avoid them coming after me. So, I went to them, and I said, “Look, I know I’ve got this problem, and can we work something out.” Because I said, “I can’t pay this all at once.” It was like 6,000 dollars or something. “How much can you pay, and how…?” I said, “I can give you $2,000 now and 1,000 dollars a month for the rest.” “Okay, no problem.”
I find everyone there very helpful, actually.
In the 2009 study, it was found that a majority of participants calling to make payment arrangements were satisfied with the experience. However, as noted in the report there were also some “who said it was a bit of a struggle either to find an agent willing to discuss alternative payment arrangements or to convince an agent to accept an alternative arrangement”. Our impression is that in this 2017 study participants’ comments on the telephone service were more consistently and strongly positive than in 2009. Because both the 2009 study and the current study are qualitative studies, it is not possible to say with certainty whether there has been a change in the telephone experience. However, the results do suggest a hypothesis that callers’ experiences have become even more positive since 2009.
Some participants commented that while their experience was positive when they initiated the call to the CRA, they said their experience was more negative when the CRA initiated the call – negative presumably in the sense that the agents were more insistent upon getting payment.
If they call you, usually you have to fight to get that payment arrangement.
One participant suggested – to the agreement of others in the session – that it would be nice if the CRA assigned a case manager to self-employed taxpayers. The idea is that this person would come to know the taxpayer’s business and circumstances, which could further improve working out things such as payment schedules.
I deal with several federal government agencies. In every one of those other situations, I have an account manager that I go to. Why don’t I have an account manager at CRA? As a small business person, I should have an account manager who at least can work with me.
As the final component of each focus group discussion, participants were given a handout describing the interest and penalties associated with late payment and late filing, and asked for their reactions.
Information about interest and penalties for personal income tax
Interest
If you have a balance owing for income tax, the compound daily interest is 5% starting May 1, on any unpaid amounts owing. This includes any balance owing if your return is reassessed. In addition, there are also interest charges on the penalties starting the day after your return is due. The rate of interest charged can change every three months.
Late-filing penalty
If you owe tax for 2016 and do not file your return for 2016 on time, you will be charged a late-filing penalty. The penalty is 5% of your 2016 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
If you are charged a late-filing penalty on your return for 2013, 2014, or 2015 your late-filing penalty for 2016 may be 10% of your 2016 balance owing, plus 2% of your 2016 balance owing for each full month your return is late, to a maximum of 20 months.
Even if you cannot pay your full balance owing on or before April 30, 2017, you can avoid the late-filing penalty by filing your return on time.
Individual income tax (self-employment)
| Type of interest and penalty | When it applies | Amount charged |
|---|---|---|
| Failure to pay on time | Payment due date (April 30) | 5% compound daily interest |
| Failure to file | Filing due date (June 15) | 5% on balance plus 1% on amount for each full month late |
| Repeated failure to file on time | Filing due date (June 15) | 10% on balance owing, plus 2% on balance owing for each full month late |
Participants had strong reactions to the information in the handout. There were three components that attracted a lot of attention:
Difference between Payment Deadline and Filing Deadline
For self-employed people, the payment deadline is April 30, and the filing deadline is June 15. As discussed earlier in the Late Payment section (Not Aware of the Payment Deadline), only a minority of participants were aware the payment deadline is April 30. The rest were unsure of the date, but tended to think it was sometime in or around June – i.e. the payment deadline is connected to the filing deadline.
Quite a few participants were surprised to learn from the handout that the payment deadline is April 30. This confirms that lack of awareness of the payment deadline is one cause of late payment.
That’s where a lot of confusion happens. I think so many people think the filing date and the payment date are the same. Because when I first went out on my own, I was all worried about, hey, April 30th, and they’re saying, “Don’t worry about it: you’ve got until June because you’re self-employed.”
When I was an employee and was only doing personal income tax, it was you file them April 30th, and you paid on April 30th. And then suddenly, there was this delay [in the filing date], and I had just thought, well, you file and pay at the same time, right?
Many participants criticized the order of the two deadlines, basically saying that it made no sense to them that one has to pay before one even knows how much one owes. This resulted in two alternative suggested changes – either make the filing and payment date the same, or reverse the two dates such that the filing deadline is April 30 and the payment deadline is June 15. The latter was the more frequent suggestion.
Late Filing Penalties
Most participants perceived the late filing penalty, and especially the repeated late filing penalty, to be large. Some participants were not previously aware there is a late filing penalty, and virtually none were aware there is a higher penalty for repeated late filing. While some participants said they knew or assumed there is some sort of penalty for filing late, they did not expect the penalty to be this large.
Many participants said the impact of reading the handout was that they would be more careful to file by the deadline even if they are still unable to pay the amount owing.
I’ll never file late after looking at this. It’s just not worth it because then it does add up to being almost like a credit card interest rate.
"5% compound daily interest"
The handout states that the interest charged on a balance owing is “5% compound daily interest.” The perceived magnitude of this interest rate was polarized: either it was seen as a reasonable interest rate, or it was seen as a very high interest rate. The issue is a person’s understanding of the impact of “compound daily interest”:
I think I’d be more lax in paying it now that I know the interest is not that much and it doesn’t give any timeline or any other future penalties for being late, it’s just interest.
Just the words “compound daily interest” sound like a bad thing. It sounds like a lot of money to me.
It’s high, it’s enough to just go, you know what, I’m going to try and get this paid.
When you see this 5 percent compounded daily, that’s almost like what the loan shark charges you.
It scares you right away, saying, “Oh, five percent every day?”
5% daily interest. So 5% of what you owe is applied every single day? Like wouldn’t that quickly like double and triple and quadruple?
This would motivate these participants to be more diligent in paying on time, but the motivation would be based on a misunderstanding of the interest rate.
A Participant Suggestion: Give examples
Quite a few participants said the handout was rather difficult to understand. Our impression is that actually they did have a reasonably good understanding (leaving aside “compound daily interest”), but the problem was they could not translate these descriptions into concrete dollar amounts. Some participants suggested, to the agreement of others, that on a handout like this or on the website, it would be very helpful to give several examples of what the interest and/or penalty amounts would be. The examples would give some different amounts owing and some different time periods for payment. This would allow people to see concretely how the various percentages impact amount owing.
In two of the focus groups the moderator asked whether they would like an online calculator on the CRA website, and participants said they would like this. The problem, though, would be how to get people to the website, given as discussed earlier that few went to the website in connection with late payment or late filing.
A few participants commented that examples might make people less likely to pay on time if the interest amounts don’t look very high in the examples. This is something that should be considered should a decision be made to give examples.
Number and Locations of Focus Groups
Eight focus groups were conducted February 2 to 10, 2017, with two groups in each of Halifax, Montreal (French), Toronto and Calgary. Participant qualifications were the same for all of the focus groups.
There were six to nine participants in each focus group, for a total of 64 participants.
Participant Qualifications
All participants met the following key qualifications:
There was a quota that at least two recruits per focus group had filed a tax return late in the past five years and been charged a penalty as a result.
Additional qualifications included:
The target was to recruit a mix of participants on gender and age, but no quotas were set because of the low incidence of the target group.
With regard to the final composition of the focus groups:
Participant Honorarium
Participants were paid an honorarium of $150.
Screening Questionnaire
Hello, I'm ___________ of Research House, a marketing research company. We are organizing a research project on behalf of the Government of Canada, and specifically for the Canada Revenue Agency. I'd like to ask you some questions to see if you would be interested in possibly taking part in this study.
Would you prefer that I continue in English or in French? Préférez-vous continuer en français ou en anglais? [If prefers French, either switch to the French screener and continue, or say the following and then hang up and arrange French-language call-back] Nous vous rappellerons pour mener cette entrevue de recherche en français. Merci. Au revoir.
In this project, we would like to talk to people who are self-employed and invite them to participate in a focus group. This involves individuals sitting down with several others like themselves and giving ideas and opinions. We are having a few of these sessions, and would be interested in having you participate. The discussion will be on people's opinions about procedures and rules related to income tax payment.
Your participation is voluntary. All information collected, used and/or disclosed will be used for research purposes only and administered according to the requirements of the Privacy Act. The full name of participants will not be provided to the government or any third party. May I continue?
Are you currently self-employed?
I need to ask you a few questions to see if you fit the profile of the type of people we are looking for in this research. This will take about 4-5 minutes.
Note to recruiter: When terminating a call with someone, say: Thank you for your cooperation. We already have enough participants who have a similar profile to yours, so we are unable to invite you to participate.
0) Record gender:
1) First of all, do you, or does anyone in your household, work for..? (Read list, If “yes” to any, thank and end the interview.)
2) And generally speaking what is your occupation -- that is, the type of work you do and the industry you work in?
Type of work: _____________________ Type of industry____________________
(Check against exclusions in Q.1). Recruit a mix of different industries in each city.
3) We would like to talk to people in different age groups. Into which one of the following groups should I place you? (Read list. Recruit a mix for 2 to 5.)
4a) As I mentioned earlier, this research is on people’s opinions about procedures and rules related to income tax payment. Do you plan to report income from self-employment for the 2016 income tax year?
4b) And do you plan to report income from self-employment for the 2017 income tax year?
5) About how long have you been self-employed? (Read list)
6) I would now like to ask you some questions about what usually happens when you file your income tax return each year. When filing their income tax return, some people owe a tax payment at that time. This can happen, for example, if they receive income during the year from which little or no tax has been withheld. On your last income tax return, was it calculated that you owed a tax payment?
7) And have you owed tax payments at income tax return filing time more than once over the past (insert # of years from Q. 5; if “More than 5 years” then insert “5 years”), or not?
8) In the past (insert # of years from Q. 5; if “More than 5 years” then insert “5 years”), when you have owed a tax payment at tax return filing time, did you owe less than $50, or did you owe $50 or more?
9) In this research project on tax payment, we are interested in getting thoughts and opinions from tax payers who were not able or did not pay their tax balances for various reasons, including people who have sometimes been charged interest on the tax they owe the government. In the past (insert # of years from Q. 5; if “More than 5 years” then insert “5 years”), have you ever been charged interest on overdue taxes owing at tax filing time?
10) And in the past (insert # of years from Q. 5; if “More than 5 years” then insert “5 years”) have you ever been charged a penalty for filing your tax return after the deadline?
I have just a few more questions to ask you.
11) Have you ever participated in an in-depth research interview or a focus group involving a small group of people where people were asked to discuss different topics?
12a) What topics have you ever discussed? If tax-related, thank participant for their time and end the interview.
12b) And when was the last time you attended an interview or discussion group?
12c) In the past 5 years, how many in-depth research interviews or discussion groups have you attended? Would you say less than 5 in total, or would you say 5 or more?
Let me tell you some more about this study to see if you would like to take part.
13) As I mentioned earlier, the research involves taking part in a focus group discussion. In the group discussion, you may be asked to fill in some short questionnaires and to voice your opinions in front of others. Do you feel comfortable doing this?
Terminate if person gives a reason such as verbal ability, sight, hearing, or related to reading/writing ability, or if they think they may have difficulty expressing their thoughts.
Participants in the discussion group will be asked to turn off any electronic devices during the discussion. Would you be willing to do so?
There may be someone from the Canada Revenue Agency who has been involved in this project observing the session. However, they will not take part in the discussion in any way, and they will not be given your name. The observers are there to obtain first-hand information to assist the research. Is this acceptable to you?
The session will be audio-recorded. These recordings are used to help with analyzing the findings and writing the report. Your name will not appear in the research report. Is this acceptable to you?
The focus groups will be held on [insert date], either at [6:00 or 8:00]. Would you be available to attend?
Thank you. We would like to invite you to participate in one of our focus groups. The discussion will last 2 hours, and refreshments will be provided. Following your participation in the focus group, you will be paid $150.
Would you be willing to attend?
The discussion group will be held at:
| City / Date | Location | Time |
|---|---|---|
| Toronto Feb. 2 | 6:00 – 8:00 pm 8:00 – 10:00 pm |
|
| Halifax Feb. 7 | 6:00 – 8:00 pm 8:00 – 10:00 pm |
|
| Montreal Feb. 8 | 6:00 – 8:00 pm 8:00 – 10:00 pm |
|
| Calgary Feb. 9 | 6:00 pm – 8:00 pm 8:00 pm – 10:00 pm |
We ask that you arrive 15 minutes early, to make sure we can start on time. If you use glasses to read, please remember to bring them with you.
As we are only inviting a small number of people to attend, your participation is very important to us. If for some reason you are unable to attend, please call so that we can get someone to replace you. You can reach us at [Insert Research House phone #]. Please ask for [Insert Research House contact name]. Please note that you may not send someone else in your place if you are unable to attend.
Before coming to the group discussion, you might find it helpful to review any correspondence you have had with the Canada Revenue Agency with regard to tax payments. You don't have to do this, and you will not be asked for any personal detail in the discussion. But, you might find it helpful as there will be a general discussion of people's opinions about procedures and rules related to income tax payment.
Someone from our company will call you back within two or three days to confirm these arrangements. To do that, we need to have your contact information.
Name:___________________________
Evening phone: __________________ Day time phone: _________________
Email address: __________________
Thank you very much!
Recruited by: __________________
Confirmed by: __________________
Note to recruiter: Should a participant require more explanation of the purpose of the research, please use the following:
This is a research project on tax payment, and we are interested in getting thoughts and opinions from tax payers who were not able or did not pay their tax balances for various reasons. The Canada Revenue Agency would like to get a better understanding of all the different reasons why this can occur. The results will be used in developing strategies to help Canadians voluntarily comply with their tax obligations.
In the research discussion, you will not be asked any of the specifics of your own tax situation, nor will your personal identity be given to the Canada Revenue Agency. Rather, there will be a more general discussion of people’s opinions about the procedures and rules related to income tax payment.
Note to recruiter: Should a participant require validation that this is a legitimate research project, please refer them to:
Karl St-Pierre, Research Officer, Public Affairs Branch, Canada Revenue Agency 613-957-3513
Self-Employed Taxpayer Attitudes on Payment of Debt and Compliance
In general terms, the discussion will be on your thoughts and opinions about rules and procedures related to income tax payment. We are interested in people's attitudes towards owing money in general and towards owing income tax in particular. We are also interested in the situation in which someone is late in making an income tax payment, and perhaps also late in filing their income tax return. I'm interested in why this can occur, in how a person might feel about being late, and in what people know and think about what happens if they are late making an income tax payment or don't make the payment at all.
I want to be clear that we are not talking about tax cheating tonight. By tax cheating I mean deliberately hiding income so as to never pay any tax at all on that income. Rather, our focus tonight is on the situation of simply being late making an income tax payment, and perhaps also being late filing the associated income tax return.
One thing that all of you have in common is that at some point in the past 5 years or so you have been late for one reason or another with an income tax payment, so all of you have some understanding of how this can occur, and probably some opinions about how the CRA handles this situation. We are not going to ask you about the specifics of your situation, but rather will ask more general questions about what you know and what your opinions are. Another thing that you all have in common is that you are self-employed, so you’re all involved in a business.
(As circumstances/reasons are mentioned, probe for: Perception of how common it is, and any ideas for how the situation could be addressed by the CRA so that the person avoids late payment/filing or minimizes the degree of lateness)
If not mentioned, probe:
We have talked about why self-employed people sometimes might be late paying their income tax. Now let's look at the other side. What are the reasons why people pay or file on time?
If not mentioned, probe:
I would like you to think back to the actions of the CRA in connection with your being late in making a tax payment or filing a tax return.
Here is information from the CRA Web site on interest and penalty charges (pass out description).
Did you know this at the time you were late with paying or filing? If no, would you have done anything differently at the time had you known this?
Subjectively speaking, how significant do you think these charges will look to people? How significant do they appear relative to other financial obligations and debts people may have?
Do you have any other suggestions for things the CRA could do to reduce the likelihood of late payment? For decreasing the length of time that people owe the CRA money?
Do you have any other suggestions for things the CRA could do to reduce the likelihood of late filing of the income tax return?
Thank participants for their input.
1) Some people feel that the amount of federal income tax the public pays is appropriate given the services provided by the government. Other people feel the public pays too much federal income tax compared to the services provided by the government.
Which of these two points of view is closest to your own?
Why do you feel this way? What, if anything, have you seen or heard that contributes to this view?__________________________
2) Among self-employed people who still have tax owing at income tax filing time, how common do you guess it is that these people are late making the tax payment? (that is, they pay at some point after the due date)
3) With regard to self-employed people who are late making an income tax payment, what are all the different circumstances or reasons you can think of for why this might sometimes happen? __________________________
Information about interest and penalties for personal income tax
Interest
If you have a balance owing for income tax, the compound daily interest is 5% starting May 1, on any unpaid amounts owing. This includes any balance owing if your return is reassessed. In addition, there are also interest charges on the penalties starting the day after your return is due. The rate of interest charged can change every three months.
Late-filing penalty
If you owe tax for 2016 and do not file your return for 2016 on time, you will be charged a late-filing penalty. The penalty is 5% of your 2016 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
If you are charged a late-filing penalty on your return for 2013, 2014, or 2015 your late-filing penalty for 2016 may be 10% of your 2016 balance owing, plus 2% of your 2016 balance owing for each full month your return is late, to a maximum of 20 months.
Even if you cannot pay your full balance owing on or before April 30, 2017, you can avoid the late-filing penalty by filing your return on time.
Individual income tax (self-employment)
| Type of interest and penalty | When it applies | Amount charged |
|---|---|---|
| Failure to pay on time | Payment due date (April 30) | 5% compound daily interest |
| Failure to file | Filing due date (June 15) | 5% on balance plus 1% on amount for each full month late |
| Repeated failure to file on time | Filing due date (June 15) | 10% on balance owing, plus 2% on balance owing for each full month late |
Footnote 1: For reference, 5% compounded daily corresponds to a simple annual interest rate of about 5.1%. (Return to footnote 1 source paragraph)