Battling the CRA? Know your rights

Dorothy Dobbie Issues in the News
Dorothy Dobbie
Issues in the News

In the first budget of the new Liberal government, we learned that the Canada Revenue Agency has been given $444 million to raise something like $2.3 billion from recalcitrant taxpayers. The bulk of this money, trumpet sunny-side media acolytes, will come from off-shore billionaires hiding their assets in various other countries.

The Canadian Revenue Agency is on the move. Be aware of your rights when dealing with them.
The Canadian Revenue Agency is on the move. Be aware of your rights when dealing with them.

This is nonsense. Anyone with the wherewithal to hide large sums of money offshore will also have the intelligence or support to move that money instantly if it appears under threat.

Where that money will come from is you and me and our neighbours, already many of them under duress from an over-zealous agency.

Over the past few months, several reports of bullying and intimidation by CRA agents have been brought to my attention. The individual victims in most cases are very small business people, although there are a couple of exceptions.

These people have been intimidated, even terrorized, by sometimes under-qualified individuals employed by the CRA to “audit” certain taxpayers, some random and some apparently chosen by the class of business they are in or because of a change in their income or expenses. The bullying tactics employed by these agents are illegal, but they persist nonetheless.

This is not to say that all auditors and agents are tarred with the same brush, but in each of the cases I have encountered so far, the issue has revolved around arbitrary interpretations of revenue and expenses and a refusal to follow or understand the paper trail. They have also involved threats and rough treatment by agents who clearly understand their almost unfettered power in making determinations about not just the numbers they are dealing with, but the taxpayer’s way of life.

A case in point is one individual who had separated from a spouse, lived with someone else for a period of several months and was then reunited with the spouse. The agent deemed that there was no separation and disallowed all related expense claims. In another case, the taxpayer owned a small business that required travel to conventions. The agent refused at first to recognize the travel expense, questioning its necessity, then conceded that the airfare was allowable but that the meals and accommodation portion were not! In this case, a whole section of the taxpayer’s business was disallowed for no discernible reason.

In several cases, taxpayers were threatened with referrals to the provincial sales tax department and the GST section of the federal government. In none of these cases was the taxpayer advised about their rights to appeal these decisions.

Now I know you are already shaking your head and saying, “Oh yeah. Another bunch of whining tax cheats. Serves them right!” but hear me out. These folks are not tax cheats. They are genuinely bewildered by the assessments of the CRA agents and completely panicked by the rough fashion in which they are treated during and after the “audit”.

Demands to pay up within 90 days, followed by threatening phone calls within 45 days are all part of the package.

But that isn’t all. It is hard enough to be unfairly assessed a few thousand dollars for a real error on your tax return. You probably panic about where to find the money, especially when the notice points out that you can have your assets and bank account seized. It is much worse when, in addition to this unwarranted assessment, a draconian penalty is tacked on.

How draconian? Section 163(2) of the Tax Act is so convoluted that I can’t even tell you, but it assumes that if you “knowingly, or under circumstances amounting to gross negligence, (have) made or (have) participated in, assented to or acquiesced in the making of a false statement or omission in a return, form, certificate, statement or answer . . . filed or made in respect of a taxation year for the purposes of this Act” (and it is generally assumed that you did act in this manner) penalties starting at 50 per cent of the total amount are tacked on.

This penalty silently accrues if you lodge a protest of any kind, all of which take a tremendous amount of time, and this threat discourages taxpayers from fighting for their rights.

That this should happen in our free and honour-based system is wrong. It is not, I am sure what the prime minister would want in his eagerness to find money to quell his deficits. But it is something that will only get worse if we don’t deal with it now.

I will be following up on this issue. Stay tuned.

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