“We’re from the government and we’re here to help!”Canadian Contractor
CRA tries to turn a punch line into a pitch line
A number of negative stories have been piling up against the Canada Revenue Agency’s door over the past couple of years. First there was the Panama Papers, revealing how wealthy Canadians hid millions in offshore tax havens. Recently, so-called charities and foundations set up for wealthy Canadians were allowed, among other things, to donate to each in a circular chain — effectively giving the individuals a generous tax credit when in some cases the money ultimately returned to the original donor or their own foundation. This trick was only recently shut down. (Read more).
CRA braces for a negative Auditor General’s report
Many feel the result of the shortfall of tax revenue coupled with the CRA’s embarrassment for being unable to collect billions of lost taxes has led the agency to overcompensate by being tough on the domestic scene, specifically average Canadians and small businesses. News that pension claw backs have netted over $1billion annually, much of it from those with the most difficulty repaying, are further examples of an apparent CRA focus on average Canadian taxpayers. Mounting pressure is leading to an anticipation that that the amped-up auditing techniques of the CRA will come out this month in the Auditor General’s report that might be scathing in its content. That’s not surprising considering the appearance of a two-tiered system when it comes to taxes and collections.
Small business under attack
More relevant to contractors and other smaller business operators are the CRA audits of small businesses that result in guilty assumptions right off the bat.
A tax audit at any level, whether provincial or federal, strikes fear into the heart of any small business owner. Not happy to leave empty handed, some investigators will evolve from being friendly at the door to being aggressive in their effort to find something, anything that might result in new tax assessments and even penalties.
It’s a feeling many small business owners harbor, and obviously not without merit or precedent. A recent Globe and Mail report outlines a court ruling back in 2011 that determined the lead investigator for a CRA audit of a restaurant in British Columbia had, “manufactured incriminating evidence, while concealing evidence that might have helped clear the restaurant owners.” Ultimately, the restaurant owners were successful in a lawsuit against the CRA for malicious prosecution, collecting $1.7-million in damages and legal fees. “Justice Robert Punnett said the prosecution of the family ‘violated fundamental rights and was highly reprehensible,’” the Globe and Mail says. What was ultimately exposed, the judge added, was a culture that runs through the entire CRA culture.
“We’re from the government and we’re here to help!”
Perhaps in response to ongoing criticism, the CRA is putting on a happy face. In it’s Report on the Canada Revenue Agency’s 2016 Serving You Better consultations with small and medium businesses, the CRA attempts to portray the agency as friendly, helpful and transparent when it comes to audits, collections and appeals. After all, they’re from the government and they’re here to help you, right?
In a statement published on the report’s website, The Honourable Diane Lebouthillier, Minister of National Revenue, speaks about the agency’s efforts to consult with small business interests to learn how the CRA can do more. “In response to the more than 1,500 comments and suggestions heard throughout the consultations, the CRA has developed a report and action plan that outlines clear and achievable deliverables to improve services for small and medium businesses from now through 2019,” Minister Lebouthillier says.
Want to invite the CRA into your business?
The CRA’s 2017-2019 Action plan contains over 50 action items to improve services for businesses. Included in the top ten are: CRA security codes via email, the ability to issues employee T4’s electronically, helpful how-to videos, and the ability to create filing and balancing confirmation letters online. Best of all, you can request a visit to your business by a ‘Liaison Officer’!
The consultation process has continued through 2018 in partnership with the Canadian Chamber of Commerce and the Chartered Professional Accountants of Canada (CPA Canada). There’s probably still time to get involved, if you are interested. “The Canada Revenue Agency (CRA) is inviting small and medium business owners and accountants to participate in face-to-face sessions with CRA senior officials in cities across Canada. Register for a Serving You Better session now! Or perhaps online participation is more to your liking. “If you can’t attend in person or want to give your feedback right away, you can share your feedback online.”
New CRA funding goes to more intensive auditing
Sounds friendly and inviting, doesn’t it! Yet the Globe and Mail claims that, “since the Liberals came to power, most new CRA funding has not gone to client services, employee training or dispute resolution but to auditing and enforcement. And the government expects a big return on that investment, putting pressure on investigators, auditors and collectors to hunt for hidden income and boost tax revenues,” an objective said to be five dollars in tax revenue for every one dollar of new auditing funding.
That’s a return on investment that should have business owners quaking in their boots.
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