OTTAWA – The Canada Revenue Agency is not treating all taxpayers equally when it comes to auditing or reviewing tax files, has found.
In order to make sure that all Canadians file their taxes properly, the CRA is responsible for auditing or reviewing submissions to ensure compliance with the Income Tax Act.
According to a new audit done by Auditor General Michael Ferguson's office, how your case is handled could depend on who you are, the CRA staff person conducting the review, or where you’re from.
For example, in some cases the CRA didn’t allow individuals to claim some expenses if they could not provide a receipt within 90 days, while some with offshore accounts were given months or even years to provide the information.
"We found that 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 audit states.
According to the Taxpayer Bill of Rights, all taxpayers in Canada are entitled to have the law applied consistently, have to only pay what's required, and must receive what they're entitled to.
Each year the CRA conducts these compliance activities to assess tax claims for their accuracy, to both make sure Canadians pay what they owe, or receive all applicable tax benefits. As the report states, these audits often result in adjustments to peoples' tax returns.
Among the reasons for the inconsistencies in these reviews:
- The judgment of agency staff differed in application;
- The type of taxpayer being dealt with such as a small business versus a large corporation; and
- The region where the tax file was being reassessed.
"Taxpayers in one region waited an average of seven months longer than those in another region for the Agency to complete an audit. In one region, it took the Agency more than 40 weeks to process taxpayers' requests for adjustments, while in another region, the Agency took 12 weeks," the audit states.
The audit also points out that not enforcing these rules uniformly is costing the public purse in potential lost revenue. As well, in the last five years, the CRA has waived $17 million in interest and penalties for some who were in the process of being audited.
In the 2016 and 2017 budgets the CRA received almost $1 billion to help crack down on tax evasion and enforce compliance.
The CRA says it agrees with the audit’s recommendations, which include setting a prescribed allowable timeframe for these compliance audits to be conducted; and consistently apply and enforce the Income Tax Act, by 2020.
In a statement, National Revenue Minister Diane Lebouthillier said she wants to remind Canadians that she is working on their behalf to make sure the tax system is fair.
"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," she said.
NDP MP David Christopherson expressed deep frustration with the auditor general's findings. Citing an audit released in November, 2017 that found that Canada's tax collectors often aren’t picking up the phone, and when they do, Canadians are being given incorrect information, he took issue with this latest revelation of unfair practices, specifically that "big corporations and wealthy people" could be getting special treatment.
Green Party Leader Elizabeth May said she found the CRA audit "troubling."
"The CRA needs to shift its Sheriff of Nottingham approach to tax-collection and have the rich pay their fair share rather than concentrate audits on hardworking Canadians because it’s easier to have them pay," May said.
Conservative deputy leader Lisa Raitt told CTV’s Power Play after the report was released that the Liberals need to “start managing things better.”
“In practical terms, when somebody who is just a regular Joe (or) regular Jane wants to call in to get some information from Revenue Canada, they can’t get them on the phone and they’re turning to their Members of Parliament,” Raitt said. “So the culture needs to be fixed.”