Can setting up a payment plan with CRA stop collections action while I pay off my tax debt over time?

Not automatically, as a guaranteed legal stay. Setting up a payment plan with CRA doesn't, by itself, guarantee that all collections enforcement action stops while you're paying. CRA may agree to hold more aggressive enforcement steps, like a requirement to pay, while you're honouring a payment arrangement, but this is a matter of CRA's discretion and the specific terms of that arrangement, not an automatic legal stay that applies the moment a plan is in place.

This distinction matters because it's easy to assume that once you've negotiated a payment plan, you're fully protected from any further collection action for as long as you keep paying. In practice, whether CRA holds off on other enforcement tools while you're on a plan is something to negotiate and confirm directly with CRA, rather than something you can simply assume applies. It's also worth understanding that failing to honour the terms of the payment arrangement can change CRA's approach quickly, so staying current on whatever was agreed is important for the arrangement to keep functioning the way you expect. If a payment plan is part of your strategy for dealing with a tax debt, getting CRA's position on collections enforcement in writing, rather than assuming it's implied, is the more reliable approach.