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Canada Revenue Agency takes too long to resolve tax objections, says audit

Last Updated Nov 29, 2016 at 10:05 am PDT

Auditor General of Canada Michael Ferguson holds a press conference at the National Press Theatre regarding the 2016 Fall Reports in Ottawa on Tuesday, Nov. 29, 2016. THE CANADIAN PRESS/Sean Kilpatrick

Report finds it takes the taxman an average of 263 days to process an objection from an individual or corporation

Auditors found that over the last 10 fiscal years, the inventory of outstanding cases grew by 171 per cent

OTTAWA, ON. (NEWS 1130) – The slow speed of government decisions, which can take months or years, costs Canadians time and money to resolve tax disputes and prevents Canadian cars from being as safe as they can be, the federal auditor general says.

In reviews of the Canada Revenue Agency and Transport Canada, auditor general Michael Ferguson said long delivery and decision times — especially in an era of technological advances and instant communications —fail to meet the public’s expectations.

Ferguson’s message in both cases was similar: Departments measure timely decisions against their internal processes, not what might be timely for the taxpayers they serve.

Both departments agreed with the recommendations in the audits, vowing to craft new policies, strategies, internal processes and reporting standards to show they have heeded Ferguson’s calls.

Ferguson’s auditors found that the revenue agency often leaves taxpayers in the dark about how long it will take to handle an income tax objection, people wait months to hear from the agency after formally objecting to tax assessments and appeals officers can wait more than a year when they request help from other areas of the agency.

The audit said it takes the taxman an average of 263 days to process an objection from an individual or corporation and 1,503 days for so-called group cases, that can include suspected tax evaders.

Auditors found that over the last 10 fiscal years, the inventory of outstanding cases grew by 171 per cent, while the number of employees dedicated to resolving them grew by only 14 per cent.

The report warned that the inventory of appeals will grow unless more resources are put towards handling cases. The backlog of cases that were yet to be resolved as of March 31 represented more than $18 billion in federal taxes, the audit said.

“It is critical for government departments to understand that their services need to be built around citizens, not process — or they can expect that those services will be disrupted,” Ferguson wrote in his message to parliamentarians.

Auditors also raised questions about the assessment process, calculating that tax filers were successful in their appeals 65 per cent of the time.

Of the 174,158 objections that were reviewed — excluding those the agency dismissed — $6.1 billion out of a total of $11.6 billion in dispute were allowed to taxpayers, with most of the amounts claimed allowed in full. During the five-year period ending March 31, the CRA cancelled almost $1.1 billion in penalties and interest related to the objections, the audit said.

In a separate review of Transport Canada, auditors concluded the department did an adequate job of oversight on recalls and safety defects, but took 10 years or more to make decisions on new regulations that meant people were not able to access new safety features that could keep them as safe as possible.

Departmental research over the last five years identified problems with the built-in seat anchors that hold car seats in place for children over 30 kilograms. Officials have shared their findings with car manufacturers, but have yet to propose new regulations or issue an advisory to parents about extra safety measures to prevent the anchors from failing.

“The department indicated to us that introducing a unique-to-Canada requirement for anchorage strength in passenger vehicles would be detrimental to trade,” the audit says.

In another part of the report, auditors write that Transport Canada generally failed to consult consumer associations, safety advocates, parts suppliers and police. The result is that car manufacturers “may have exercised disproportionate influence” over, or helped delay regulatory changes, auditors write.

Auditors found the department frequently made regulatory changes following decisions from its American counterpart. Auditors say this process is problematic, because American standards may not align with unique Canadian driving issues like the climate and more variable hours of daylight.

In other cases, Transport Canada announced new standards with little data to support them — for example, the Liberal decision to make back-up cameras mandatory on new cars. The audit cites department officials as saying there is “limited data and safety benefits” associated with the devices.