Q1. Does the Canada Revenue Agency (CRA) use efficient and timely processes to collect the unpaid personal tax, corporate tax, goods and services tax, and payroll deductions by employers?
A1. Canada relies on taxpayers to voluntarily remit the taxes they owe. The vast majority does so. Taxpayers who attempt to avoid their obligations can erode confidence in the integrity of the tax system. The CRA adopts a firm but fair approach with these individuals and businesses to ensure the timely payment of outstanding tax debts. The CRA has made significant investments to improve our tax collection processes over the past decade and there are comprehensive plans in place to continue those improvements.
Q2. Why is the CRA taking so long to address the 1994 Office of the Auditor General (OAG) recommendations?
A2. As noted by the OAG, the CRA has made significant changes to its collections systems and some of its practices since 1994. Although work was already underway to resolve the outstanding 1994 recommendations, some remained outstanding when the OAG tabled the May 2006 audit report. It is important to understand that while the CRA was committed to implementing the OAG's recommendations, other priorities also emerged during the ensuing years which prevented the CRA from fully addressing the OAG's recommendations as quickly as expected. For example, a significant amount of effort was deployed to amalgamate collection activities when the Government merged the Customs and Excise organization with Revenue Canada Taxation. The Government Response reflects the CRA's commitment to implement seven of the nine OAG 1994 recommendations by 2007; the remaining two recommendations will be completed in the longer term, as they are tied to the CRA's new debt management technology platform.
Q3. Will the actions described in the Government Response address the concerns raised by the OAG and the Standing Committee on Public Accounts?
A3. The CRA has made significant investments to improve tax collection processes over the past decade. For example, the CRA has developed an automated system to manage low-risk tax debts, opened a national collections call centre, established national inventories to better manage workload, and improved the procedures for collecting large tax debts. There are comprehensive plans in place to continue those improvements. Both the OAG and the Committee have acknowledged that the CRA's plan incorporates best practices used in other jurisdictions and the private sector.
Q4. Has the delay in implementing the 1994 OAG recommendations resulted in revenue loss for the Government of Canada?
A4. No evidence has been provided to suggest that the CRA's lack of progress in fully implementing the AG's 1994 recommendations has resulted in revenue loss for the Government of Canada. As noted by the OAG, the CRA has actually improved its productivity.
Q5. What is the CRA doing to stop the growth of the tax debt?
A5. The CRA shares the concern raised by the OAG and the Committee that the tax debt grew at a rate faster than the total taxes paid over a period of time, but notes that it has essentially contained this growth for both the 2004-2005 and 2005-2006 fiscal years.
Q6. Why is the amount outstanding ($18 billion) so large? Is it uncollectible?
A6. The existence of accounts receivable is a universal phenomenon for all businesses and tax administrations around the world. While $18 billion is a large amount, it is important to put it into proper context. The CRA receives and collects the vast amount of taxes and duties owed, approximately $1 billion per day. The $18 billion outstanding represents approximately five per cent (two and one-half weeks) of the CRA's annual gross revenues. It represents the amount outstanding on a particular date and is work in progress, not backlog. The majority of this amount will be collected (and has been collected) in the ordinary course of business.
