The interest rate charged by the Canada Revenue Agency (CRA) on late payments was raised in 2018 for the first time since April, 2009.
The rate was reduced to 5% in the early days of the financial crisis, and has remained there for 9 years. Effective April, 2018, the rate climbed to 6%.
Every three months the rate will be evaluated to determine if it will be changed. The next potential change to the interest rate would be April, 2019.
The determination of the rate is based on the average interest rate on Government of Canada 90-day Treasury Bills for the first month in the previous quarter.
At the end of October, the rate on those Treasury bills was 1.73%, up from 1.19% in January, 2018. CRA starts with that rate, rounds it down, and then adds 5% to it. The net result is the current interest rate of 6%.
If the average rate increases to over 2.00% in January, 2019, the interest rate charged by the CRA will rise to 7% starting in April, 2019.
Current interest rates on tax refunds have also increased. Corporate taxpayers will receive refund interest at 2%, whereas non-corporate taxpayers will receive 4% interest.