Canadians may be knocking on the taxman’s door soon if a recent report by Canada’s Auditor General Michael Ferguson on inefficiencies within the Canada Revenue Agency is any indicator.
The CRA is sitting on over 161,000 objections – appeals filed by Canadian taxpayers disputing an element of their income taxes – 65 per cent of which are likely to rule wholly or partially in favour of the taxpayers.
“Our audit found that the Agency took too long to decide if a taxpayer’s objection was right,” the auditor general told the Standing Committee on Public Accounts. “For example, it took more than five years to resolve 79,000 cases worth almost four billion dollars.”
According to the report, over the past decade, income tax objections climbed 171 per cent from 63,384 to 171,744 while the number of employees tasked with sifting through the tax complaints only grew by 14 percent from 998 to 1,138.
“We found that the Agency’s timeframe for a decision on straightforward files was about five months,” Ferguson told the committee. “For medium complexity files, the Agency told taxpayers they could expect to wait up to a year before even hearing from an appeals officer.”
For some taxpayers, it’s a sticky spot to be in, says Jeff Glasner a taxation lawyer and shareholder with Boughton Law who says he often has 80 or 90 objections on behalf of clients on the go at any given time.
Interest on what you owe, he explains, begins from the day the taxes were due.
“When you file an objection, the CRA will hold off collecting it against you until it’s resolved but interest will continue to accrue,” he says. In other words, you need to make a gamble on the success of your objection and whether or not you’re going to owe money or get interest back from the CRA for the money they held onto.
GST, he notes, is a different story.
“For GST assessments, collections can start right away upon assessment and often will… so even if you’re totally correct and have a smoking piece of evidence (you) still have to wait for the appeal officer to be assigned,” he says. All the while, the CRA is collecting the amount against you and if you choose not to pay, they could be freezing your accounts or garnering your paycheques.
While the auditor general has laid out several recommendations to improve communication between the CRA and taxpayers tabling objections including providing more accurate estimates of the time it will take to receive a final response, there’s not much Canadians can do while they wait for their objection to be processed.
“(The system) is not operating at an acceptable level whether that’s because of internal processes which this report is focused on or whether it’s just a result of staffing levels that are too low,” says Glasner. “There’s nothing that the average taxpayer can do to resolve this, it’s just a process they are absolutely stuck in if they’re in the unfortunate position of receiving an unfair tax assessment.”