Written on behalf of Feigenbaum Consulting
According to a new report by the federal Auditor General, the Canada Revenue Agency (CRA) is not treating all taxpayers equally when it comes to auditing or reviewing tax files.
Taxpayer Bill of Rights
The Canada Revenue Agency has a Taxpayer Bill of Rights which is intended to build on the CRA’s corporate values of professionalism, respect, integrity, and collaboration and further, is intended to protect taxpayers from inappropriate treatment and to protect the integrity of the tax system.
The Bill outlines the treatment that taxpayers are entitled to when they interact with the CRA, and outlines and defines 16 taxpayer rights.
Under the Bill, all taxpayers in Canada are entitled to, among other things:
- Have the law applied consistently;
- Only pay what is required; and
- Receive all amounts (i.e. benefits, credits, and refunds) they are entitled to.
The Auditor General’s report concluded that, overall:
the Canada Revenue Agency did not consistently apply tax rules when it audited or reviewed taxpayers’ files, even though the Taxpayer Bill of Rights includes the right to have the law applied consistently.
The report gave a number of reasons for these inconsistencies, including:
- The judgment of CRA staff conducting audits and other compliance activities;
- The region where the file was reassessed; and
- The type of taxpayer (i.e. a small business versus a large corporation).
Examples of Discrepancies
As an example, the report noted that in some cases individuals were prohibited from claiming certain expenses if they could not provide a receipt for those expenses within 90 days, whereas some individuals with offshore accounts were given a longer period of time to provide the same documentation (some were given months or even years).
In another example, the report stated that taxpayers in one region waited an average of 7 months longer for the CRA to complete an audit than taxpayers in another region.
The report also noted that not enforcing CRA rules and practices uniformly has resulted in potential lost revenue. In addition, over the last five years, the CRA has waived approximately $17 million in interest and penalties for some taxpayers who had been in the process of being audited.
The report recommends that the CRA should, among other things:
- Ensure consistency through clarifying CRA guidance and procedures to determine whether the Agency or the taxpayer is responsible for delays in completing compliance activities;
- Ensure consistency through certifying that eligibility criteria are fully met before approving applications for all relief programs;
- Determine the reasons for regional variations in the time to complete compliance activities and implement a plan to reduce those differences;
- Develop a formal tracking process to monitor the time to process assessments;
- Take necessary steps to improve timeliness and complete files;
- Have a plan to follow up with taxpayers who have used the Voluntary Disclosures Program to verify their future compliance.
The CRA’s Response
The CRA has said that is agrees with the audit’s recommendation. In a statement, National Revenue Minister Diane Lebouthillier said she wants to confirm to taxpayers that she is working on their behalf to make sure the tax system is fair, noting:
With regards to our processes, through education, outreach and enforcement, the CRA continuously strives to apply the law consistently while taking taxpayers’ individual circumstances into account.
NDP MP David Christopherson expressed deep frustration with the auditor general’s findings as did Green Party Leader Elizabeth May who called the report “troubling.”
Conservative deputy leader Lisa Raitt sad that the Liberals need to “start managing things better”.
If you have questions about personal tax planning or corporate tax planning contact Feigenbaum Law. Our practice is based on offering personal, confidential service to individuals and corporations with all manner of cross-border tax and legal issues. We routinely provide services to business owners as well as those in the sports and entertainment industry including professional athletes, singers, actors, directors, producers and writers. Contact us to learn more about how we can help or call us at (905) 695-1269.