Canada Revenue Agency falling behind as uncollected taxes owed rise to $44 billion

Copyright CBC

https://www.cbc.ca/news/politics/tax-debt-liberal-budget-collections-1.4715967

The amount of tax that Canadians admit to owing Ottawa but haven’t paid rose to a record $43.8 billion this year, despite a Liberal government promise to “stabilize” that sum.

And an internal Canada Revenue Agency (CRA) projection obtained by CBC News says the amount of unpaid tax owed is set to hit more than $47 billion by 2020.

The steady increase in the tax debt — up by about $2 billion annually since the Liberals came to power — comes despite a major investment in the 2016 federal budget to wrestle down fast-rising levels of uncollected tax debt.

A $351 million tax-collection program started in 2016 under National Revenue Minister Diane Lebouthillier has not stopped increases in the amount of uncollected taxes.

The rise in the tax debt level over the last decade or so appears to be linked to major staff reductions at CRA under the former Conservative government’s deficit-cutting program.

The 2016 Liberal budget gave the CRA $351.6 million over five years “to improve its ability to collect outstanding tax debts.”

And the agency says it’s on track to meet its target of collecting $7.4 billion in additional tax debt over those five years.

But that effort hasn’t stopped the total from growing — by 5.6 per cent in 2017-2018 alone, far faster than inflation or the economy itself.

Undisputed amounts

The agency currently does not collect about $8.40 for every $100 in taxes that are due.

‘Tax debt’ refers to undisputed amounts of income tax, GST and other taxes owed by Canadians – as well as penalties and interest – but does not include taxes due that Canadians have challenged and not paid.

Unlike the fast-rising tax debt, that ‘disputed’ tax sum has stabilized at about $14 billion over the last three years.

Tax debt is also distinct from undeclared taxes owed in the underground economy, which Statistics Canada says hid some $45.6 billion in economic activity in 2013. It is also separate from the unknown amount of tax evaded through the use of offshore tax havens and other tax dodges — something which other CRA programs are pursuing.

“Intake has been higher than our capacity to assign accounts to officers.”

– October 2017 internal CRA document indicating a lack of staff to collect tax debts

Indeed, the agency says its success in rooting out some underground activity and tax-avoidance has contributed in part to the growth in the tax debt.

But an internal document suggests the CRA still lacks the staff to keep up with the growth in the uncollected tax amount.

“During the first four months of the 2017/18 [fiscal year], intake has been higher than our capacity to assign accounts to officers,” said an October 2017 update on ‘Managing the Tax Debt.’

“The number of unassigned accounts increased YOY [year over year] (July) by approximately 23%” — or about 350,000 unassigned accounts.

CBC News obtained the update through the Access to Information Act.

Half owed by individuals

Close to half of the unpaid tax debt is owed by individual Canadians. Corporations and businesses account for the remainder, which includes unpaid GST and payroll deductions not turned over to Ottawa.

The internal document indicates that more Canadians are filing their income tax returns each year without paying the tax they owe. Last year, there was a 10 per cent rise in these so-called ‘debit returns’ — up by about 600,000 returns — which added $1.2 billion to the tax debt total.

Jeremy Ghio, press secretary for National Revenue Minister Diane Lebouthillier, said the agency “continues to develop and implement collection strategies to improve its capacity to manage tax debt and avoid new debt from accumulating.”

Ghio noted that, until Budget 2016, the tax debt had grown by an average of 7.8 per cent annually. CRA’s new resources helped reduce the growth rate to 5.6 per cent in 2017-2018, he said.

A CRA watchdog group said the rapid rise in the tax debt over the last decade or so is a direct result of public service downsizing – a problem the Liberals have still not resolved.

“It coincides directly with dramatic cuts to staff and office closures,” Diana Gibson of Canadians For Tax Fairness said in an interview from Victoria.

“We do not have adequate staffing levels to actually tackle the debt.”

Brigitte DioGuardi

B.A., LL.B

Brigitte obtained her Law Degree from the University of Sheffield in the United Kingdom. Upon her return, she qualified for the Bar and was called to the Law Society of Ontario (formerly the Law Society of Upper Canada) in 2002. She was also a member of the Bar of British Columbia and headed up the Vancouver office of DioGuardi Tax Law.  Fluently bilingual in English and French, Brigitte has broad experience in the areas of:

  • Tax Law, Civil Assessment Negotiation and Litigation, Criminal Prosecution Defense, Unpayable Tax Debt Solutions, Audits, Tax Amnesty.
  • Corporate and Commercial Law
  • Real Estate
  • Wills and Estates
  • Insolvency and Bankruptcy

Tax Law

​If you are one of thousands of Canadians who have failed to file taxes for several years the answer maybe to seek amnesty. Be aware that failure to file for more than one year if you owe taxes is a criminal offence and you may be criminally prosecuted.

The CRA Voluntary Disclosure Program allows taxpayers to come forward and obtain immunity from prosecution and most civil penalties, provided certain conditions are met.

We specialize in lawyer-negotiated tax debt settlements and tax amnesties with federal and provincial tax authorities, offering taxpayers a much-needed resource for the resolution of situations that all too often put personal and financial lives at risk. We stand as your protector, defender, and advocate to ensure that you the taxpayer, receive the best treatment possible. 

We offer solutions for tax problems such as:

  • Unreported income
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  • Criminal tax defense

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​We offer the following will, estate and trust services for individuals and business-owners:

  • Wills
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We can assist you with all your real estate needs including:

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With the coronavirus pandemic leaving many in a precarious and dire financial situation, it is essential that you protect yourself financially. If you have a large, unpayable tax bill, we can help. We act in the best interest of the tax debtor. Unlike us, insolvency trustees represent not only you but your creditors (ie- the tax collector). The more tax you pay, the more trustees earn. Our goal through leveraged negotiations, is to reduce your tax debt.

Please consult our blog post Protecting Your Assets from Creditors for more information.

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If you do not already have a certified financial planner, we can provide one or more highly qualified people who can work closely with us to assist you with such matters as:

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Corporate & Commercial Law

We have represented business clients for the last 50 plus years and have supported their legal requirements on an on-going basis by offering the following services:

  • Incorporations and corporate governance
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  • Negotiation and drafting of agreements, professional corporations, minute book maintenance

Brigitte DioGuardi

B.A., LL.B

Brigitte obtained her Law Degree from the University of Sheffield in the United Kingdom. Upon her return, she qualified for the Bar and was called to the Law Society of Ontario (formerly the Law Society of Upper Canada) in 2002. She was also a member of the Bar of British Columbia and headed up the Vancouver office of DioGuardi Tax Law.  Fluently bilingual in English and French, Brigitte has broad experience in the areas of:

  • Tax Law, Civil Assessment Negotiation and Litigation, Criminal Prosecution Defense, Unpayable Tax Debt Solutions, Audits, Tax Amnesty.
  • Corporate and Commercial Law
  • Real Estate
  • Wills and Estates
  • Insolvency and Bankruptcy

Joyce Bruno

EXECUTIVE LEGAL ASSISTANT

Joyce Bruno has worked as executive legal assistant to Paul Dioguardi for 35 years and continues to offer her expertise and experience to the Dioguardi Law firm. Joyce’s role has evolved over the years and has acquired and developed many skills. She is an invaluable asset in case management and ensures the smooth running of our office.

Paul DioGuardi

B.A., LL.B, Queen’s Counsel

Paul obtained his Law Degree from Queen’s University in 1964.  He is a member of the Bars of Ontario, British Columbia and the Turks and Caicos Islands, a British tax free territory in the West Indies. He has over 50 years of experience and was trained at the Ottawa head offices of Revenue Canada and the Tax Litigation Section at the Department of Justice. Paul has had and continues with an extensive career in various areas of law such as:

  • Tax Law, Civil Assessment Negotiation and Litigation, Criminal Prosecution Defense, Unpayable Tax Debt Solutions, Audits, Tax Amnesty.
  • Corporate and Commercial Law
  • Real Estate
  • Wills and Estates
  • Insolvency and Bankruptcy