From: AlanBaggett@volcanomail.com   
      
   Canada Revenue Agency struggling to collect taxes as total uncollected debt   
   soars 110 per cent to $38 billion: CRA SOTW   
      
   Jason Fekete, Ottawa Citizen | April 17, 2016 5:41 PM ET   
      
      
   OTTAWA - The Canada Revenue Agency continues to struggle in collecting taxes   
   it's owed, with total uncollected tax debt soaring more than 110 per cent in   
   the last decade to $38 billion and the cost of "doubtful accounts" unlikely to   
   be recovered more    
   than doubling to $13 billion.   
      
      
   While the CRA announced a series of new measures last week designed to crack   
   down on tax evasion, an Ottawa Citizen analysis shows the problems the agency   
   faces in collecting tens of billions of dollars in assessed taxes and   
   penalties that could help    
   fund federal programs and services.   
      
      
   The federal auditor general has flagged the CRA's challenges twice over the   
   past decade, but it seems the problem is only getting worse.   
      
      
   The CRA's total undisputed tax debt -- which includes taxes, penalties and   
   other revenues assessed or estimated over several years by the agency, but not   
   yet collected -- increased to $38 billion in the 2014-15 fiscal year from $18   
   billion in 2004-05.   
      
      
   At the same time, the size of the "allowance for doubtful accounts" -- debts   
   viewed as having little potential for recovery -- has grown more than 125 per   
   cent to $13 billion from $5.7 billion a decade earlier. The CRA officially   
   wrote off more than $3.5    
   billion in 2014-15 as uncollectable debts.   
      
      
   The size of the uncollected tax debt was, for many years, reported in the   
   Canada Revenue Agency's annual report to Parliament. However, the CRA stopped   
   reporting the number a few years ago, at the same time the balance of the tax   
   debt grew significantly    
   larger. The Citizen requested and obtained the total undisputed tax debt from   
   the CRA.   
      
      
   As well, the increase in total undisputed tax debt owed continues to   
   significantly outpace the growth in revenues, which reveals the challenges the   
   agency is having. Total revenue has increased from $258 billion in 2005-06 to   
   about $376 billion in 2014-   
   15, an increase of around 46 per cent.   
      
      
   Revenues not paid to the government from the underground economy are not   
   included in the tax debt, nor are assessed amounts that taxpayers have   
   challenged before the CRA or in court. The total disputed taxes owed that were   
   being challenged by taxpayers    
   was $13.3 billion in 2014-15.   
      
      
   The CRA has, however, made improvements in other areas. The amount of   
   outstanding tax debt resolved increased to $52 billion in 2014-15 (although   
   more than $3 billion was from write-offs), up significantly from around $30   
   billion five years earlier.   
      
      
   Both the tax debt recovered in a fiscal year and debts uncollected can date   
   back several years, meaning both amounts can increase in any one particular   
   year.   
      
      
   The auditor general identified several problems in the CRA's tax debt   
   collection activities in 2006. A follow-up report from current Auditor General   
   Michael Ferguson in 2013 found the agency had improved the way it collects tax   
   debts, but also    
   highlighted the large growth in uncollected revenue.   
      
      
   "Timely collection of overdue accounts is important, because it is the final   
   element in taxpayer compliance. If taxpayers do not believe the government   
   will collect overdue taxes, they may be less motivated to pay," says the   
   auditor general's 2013 report.   
      
      
   The Income Tax Act generally gives the CRA 10 years to collect outstanding   
   taxes from Canadians, although there are factors that can suspend or restart   
   the limitation periods, including if a taxpayer makes a partial payment   
   towards their debt, filing an    
   objection/appeal, the CRA initiating legal action to collect a debt, and a   
   taxpayer acknowledging their tax debt in writing.     
      
      
   A spokeswoman for Revenue Minister Diane Lebouthillier noted that 90 per cent   
   of individuals pay their reported tax on time.   
      
      
   The minister's office says several external factors have increased pressure on   
   the CRA's collection program, including: individual and business tax bases   
   increasing due to a growing population; new CRA responsibilities including   
   provincial harmonization    
   of corporate and retail sales taxes, which has increased the amount of taxes   
   collected; and increasing investments in compliance activities for identifying   
   unpaid taxes.   
      
      
   The federal budget promised $351.6 million over five years for the CRA to   
   strengthen its ability to collect outstanding tax debt. The new funding is   
   expected to generate an additional $7.4 billion in tax debt over five years.   
      
      
   "Minister Lebouthillier is confident that the funding provided through Budget   
   2016 will enable the CRA to maintain the tax debt at manageable levels," the   
   minister's press secretary, Chloé Luciani-Girouard, said in an email.   
      
      
   Ian Lee, an assistant professor at Carleton University's Sprott School of   
   Business who previously worked on debt collections in the financial services   
   sector, said the 10-year time limit and problems collecting from bankrupt   
   companies and individuals are    
   making it difficult for the CRA to recover the money it's owed.   
      
      
   One of the best ways for the CRA to collect taxes owed is to ensure there are   
   withholding taxes on cheques issued by the Government of Canada, such as Old   
   Age Security, unemployment insurance, and Canada Pension Plan, he said.   
      
      
   "That's where they should be going. Trying to get money after the fact from a   
   company that is no longer viable because it's no longer able to generate   
   revenues, is no longer profitable, is really going to be very difficult," Lee   
   said.   
      
      
   "Likewise, a person who ends up on welfare, or ends up destitute. It's really   
   difficult to go after people like that."   
      
      
   Aaron Wudrick, federal director of the Canadian Taxpayers Federation, said the   
   huge growth in tax debt "is a problem." But he said there's a huge difference   
   between the CRA going after larger corporations or wealthy Canadians that   
   might owe millions of    
   dollars compared to a struggling individual or small business owner.   
      
      
   "There are serious consequences when you take the same behaviour but apply it   
   to a much smaller fish than a big one," he said.   
      
   jfekete@postmedia.com   
      
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