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Canada Revenue Agency loses argument over a salad :CRA SOTW
By dcayo@png.canwest.com The Vancouver Sun
Hyrise Produce shows how our tax system should not work!
If Stephen Chan and his partners at Hyrise Produce had paid professionals to fight their GST battle two years ago, he reckons, it would have cost about $300,000 to save $100,000.
If Stephen Chan and his partners at Hyrise Produce had paid professionals to fight their GST battle two years ago, he reckons, it would have cost about $300,000 to save $100,000.
Instead, they handled it mostly themselves. But the cost of winning a favourable ruling from the Canadian Revenue Agency was still frightfully high -- more than 1,000 hours of work, plus $15,000 in unavoidable legal fees.
So who better than Chan to ask now about the CRA's new Taxpayer Bill of Rights -- a just-posted policy that should, if it works, make it much cheaper and easier to argue with the taxman? Would any or all of the 15 provisions have made a difference?
As with any promise of performance, of course, the outcome will depend on how it's implemented. But, encouragingly, Chan's first reaction is positive.
His company's long tussle with CRA stands, in my mind, as a textbook example of how a tax system ought not to work. Their five Vancouver-based fruit-and-vegetable outlets had for years been selling cut fruit and veggies as a clever way to salvage the value in blemished products that would otherwise be thrown out. They simply discarded the bruised bit, and sold the good parts to be used as pre-cut ingredients, finger food or -- gasp! -- even a salad.
Then, because it could be a salad, the tax collectors ruled --years after Hyrise started selling the cut fruit and veggies -- that it was a salad. As a result, Chan and company were told to pay up $114,000 in uncollected GST.
Chan and his partners built a compelling case -- more than 70 letters and scads of other documents -- to prove their product was GST-exempt. Near as they could tell, no one at CRA even read most of it. And they certainly didn't reply in any detailed way.
Finally, the day after I wrote a column about the problem, an adjudicator dismissed the case against Hyrise. Chan is convinced to this day that it was only the publicity -- not the rightness of their case -- that won it for them.
How might it have gone differently -- or more quickly -- if the bill of rights had been there?
The right to "complete, accurate, clear and timely information" might have meant the 70 letters would have been answered, he says. The right to withhold payments on disputed taxes -- although it's not clear that it applies to anything but income tax disputes -- might have saved the Hyrise owners from having to take out personal loans to cover the tax assessment while their case was being argued. The right to consistent rulings might have meant the 13 precedents they cited would have been taken seriously. The right to expect the CRA to be accountable might have discouraged the off-the-cuff staff rulings, not backed by any research or documentation, that caused them so much trouble.
Even though such broadly stated rights are, almost by definition, pretty vague, a provincial precedent gives hope that they may carry some weight.
Back in early '05, just when Chan and his partners were in their final round with the CRA, the provincial revenue department came up with a Taxpayer Fairness Code that attempts to accomplish much the same thing. Up-to-date figures on the code's effectiveness are in the process of being compiled, but early figures published shortly after the code was established showed that it had some teeth and was actually providing relief to a significant number of taxpayers.
Laura Jones, the Western Canada vice-president for the Canadian Federation of Independent Business, notes that some provisions in the federal bill are a little stronger than in the provincial code, and vice versa.
In Ottawa's version, for example, she liked the right to an explanation when complaints are filed, and especially the plan to appoint an independent ombudsman to look into complaints. The latter provision will result in more consistency and continuity than the provincial equivalent, which is to have a neutral person with knowledge of the field that is in dispute. (The provincial ombudsman can be contacted, however, as a last resort.)
On the other hand, the provincial code requires revenue department personnel to provide advice in writing, and the department has to base its rulings on that advice -- even if it's wrong.
"That's huge," Jones said. "We have business owners who've almost lost their businesses because a government department gave them bad advice."
She notes that PST -- which has more exemptions, and thus more areas of potential confusion -- generates almost two-thirds of the sales-tax complaints she hears at CFIB, but the concerns about GST are usually more serious.
The Canada Revenue Agency clearly considers itself to be above the law. One needs only speak to anyone that has had anything to do with the Federal Agency. I know some lovely people who work there who go out of their way not to tell anyone where they work. Including my own daughter. She comes home at night and tells me they have regular meetings where management tells the staff of the Agency they are above the law. They cannot be sued, prosecuted or taken to court for anything they do or say, even if they give out wrong, incorrect or mistaken information. I was also shocked when my daughter told me that all Agency staff are to treat the public as guilty of something - even before anything is proven, and that the Agency can find something wrong with virtually anyone if they think and look hard enough into anyone's past. My daughter has been threatened over the phone by the public and I worry about her working there and some of the late nights she has to put in. I've asked her several times now to look for another job.
(Angela from Ontario)
Make no mistake, you are being legally hunted. If the Canada Revenue Agency cannot find you they will simply contact your family members. They will contact your parents at home or at the office. They will contact your brothers or sisters at home or wherever they happen to work. They will tell your family they have to get a message to you to call them ASAP and will imply that things can happen to your family if they do not get the message to you.
The staff at the Canada Revenue Agency will simply go through the phone book and contact everyone with the same last name as you. They will contact your cousins, your second cousins, your uncles and aunts, your nieces and nephews even your grandparents. And it is all cleverly designed to shame you and guilt you in front of your family members. The time, effort and the vast resources our federal government has spent studying the psychology of making us feeling guilty or shameful so that we will simply "pay-up" - regardless of weather or not we actually owe anything or not - is astounding.
I for one, am not convinced that it is the general public - who just happens to pay the bill for their wonderful salaries - that should feel ashamed or guilty of anything.
(Clair from Prince Edward Island)
Eli Humby is a dyed-in-the-wool Newfoundlander who started his own logging business in the early 1980's in Benton, outside Gander. Hard-working and proud, Humby isn't one to back down from a fight. So when the Canada Revenue Agency audited Humby's businesses in 2003, he rejected its findings. But Humby had no idea how far the tax department would go to assert its claims. In 2005, the Newfoundland Sheriff's Office and the RCMP, acting on behalf of the CRA, swooped in on Humby's businesses -- and seized almost all of his companies' assets."They took about $1.2 million worth of assets from me. They took (the jobs of) 12 full-time employees, professional employees, put them all out the door," recalled Humby.The CRA effectively closed Humby's businesses and seized his building and heavy machinery. But Humby claimed that he was never adequately notified of the impending seizure and even more importantly, Humby insisted that the CRA was wrong in its assessment of how he paid his employees.
Humby acknowledged that his logging operation, Humby Enterprises, was in arrears to the CRA due to financial distress. But the CRA audit alleged that Humby had transferred liabilities from Humby Enterprises to his two other companies, Central Springs and A&E. The tax auditors claimed that those two companies owed about $60,000, plus interest and penalties, and that triggered the seizure of the companies' assets. Humby's accountant, Don Farrell, believed the CRA's rationale was misguided. "It didn't make sense. And we appealed it on that basis -- that it didn't make sense -- and of course, the appeals were rejected," Farrell said. Even if Humby's tax appeals had been accepted, it was too late to reclaim his companies' lost assets. As he watched his life's work disintegrate, the personal impact on Humby was devastating. "(The CRA) destroyed (my life) completely. Completely. My life, I don't want to say it on national TV but I don't really care about it much anymore," Humby said. Nevertheless, Humby insisted on fighting his case. After the CRA seized his companies' assets, Humby turned to his lawyer, Robert Anstey. "They sent in a sledge hammer to kill a fly. Basically, the enforcement procedures that they took were totally drastic. Why would you go in and seize assets worth between one and two million dollars you know, to obtain $60,000?" said Anstey. When Humby's appeals to the CRA were rejected, he followed protocol and took his fight to Tax Court. And in October, 2010, after a seven-year battle, a federal Tax Court judge found that the CRA's "case was baseless" and that Humby's companies had followed correct accounting procedures.
As part of his judgment, Justice Patrick Boyle wrote that the CRA's seizure of Humby's companies' assets "appears to be a case of Collections' actions gone awry." The judge also called the actions of CRA Collections "unsuccessful, unauthorized and inappropriate."
Scott Simms, the Member of Parliament for Humby's riding of Bonavista-Gander-Grand Falls-Windsor was so concerned by the way his constituent was treated by the CRA that he added his support to Humby's cause. "If you only knew how much power that unelected people have in this country, you'd be scared," said Simms. Vindicated by the law and with the support of those around him, Humby is nevertheless still waiting to reclaim what he's lost. But he can't turn to the CRA or even to the recently instituted federal Taxpayers' Ombudsman for recompense. Paul Dubé, who was appointed as the Taxpayers' Ombudsman three years ago, cited privacy rights for not being able to talk to W5 about Humby's case. But Dubé did admit that the CRA makes "a lot of Canadians feel like it is a David and Goliath scenario".
Dubé told W5 that his office has some power to effect change but is limited by what it can tell the CRA to do. "We rely on moral suasion. We try and negotiate, we try to mediate," Dubé said.
So, Humby is going to take his case to the Federal Court in a last attempt to get back what he claims is rightfully his. But that will provide no emotional relief as he continues to live with his tax nightmare. "It's not a torment, it's a torture. I am sure there's a description of torture and different kinds. And CRA is nothing short of illegally torturing people."
(CTV News: W5)
I own and operate a small business that is a restaurant. I will admit that I am not perfect in filling out my GST reports to the Canada Revenue Agency every week. But in my defense my husband and I each work no less than than seventy-two hours a week - every week, I have three part time employees that depend on me and I try to give back to the communities that support our business as often and whenever I am able. It's a struggle. To balance work and home life. To make time for family. To pay the bills. To find the time sometimes to even sleep. But somehow, and with God's help, we manage. And occasionally we get to catch our breath.
But I ask you. . . Does the Canada Revenue Agency really need to send an auditor to our restaurant EVERY EIGHT MONTHS JUST LIKE CLOCK WORK? Almost twice a year, every year for the past five years I am required to stop what I am doing, open our business, our books and our entire lives to a representative of the federal government for a complete and through inspection. And every year for the past four years, just like clock work, the Canada Revenue Agency pours over our books, our business and our lives and finds exactly "nothing."
It seems to me that highly skilled specialists with many years of experience would come to the conclusion that after numerous audits finding nothing they could reasonably come to conclusion that I know what I'm doing and I'm not trying to cheat anyone. And even though I'm a day or two or three late in making my remittances I do always file them.
I suppose in the grand scheme of things I shouldn't be too circumspect. But earlier this year when our book keeper found a $299.52 error in our favour, it took the folks at the Canada Revenue Agency no less than twenty-six (26) weeks to process my return, notify me and send me a cheque for the balance. Can you imagine what would happen if our business took 26 weeks to respond to the Canada Revenue Agency? It really makes you think about things.
(Barbara - Saskatchewan)
When the Canada Revenue Agency went looking for tax cheats back in 2001, John Marsden was an unlikely target. For years, Marsden, 52, lived near the poverty line. His cramped, rundown bungalow in Guelph, Ont. is without many modern appliances. He chops wood to heat his home in the winter and in the summer hangs his laundry out to dry. Even the judge who eventually presided over his tax case agreed Marsden hardly fit the bill of a typical tax evader. "One would think that he would be the last person of interest to the ever vigilant gaze of Revenue Canada," said Justice Norman Douglas. But none of that mattered to the CRA. Instead, they pursued Marsden relentlessly. It would take him five years and tens of thousands of dollars before he was ultimately vindicated. Marsden's nightmare started in July 2001, when the CRA first came knocking, seeking to audit his business's books. "I had gone through 15 years of being self-employed and hadn't had an audit yet, so I thought, it's my turn and it shouldn't be a problem," said Marsden. He owned a small futon store and put whatever money he made back into the business. When the auditor started looking through Marsden's books, he felt he had nothing to hide. "I'm quite careful about tax. I think government is a good thing. I think tax is a reasonable thing and I pay my taxes," said Marsden. But the CRA auditor was suspicious about a memo written by one of Marsden's employees. The auditor thought there was evidence of undeclared business income. That set into motion an investigation and chain of events that would lead the CRA to exercise its substantial powers. In 2003, a team of CRA investigators, armed with a search warrant, swooped in on Marsden's home while he was away and seized documents, computers, even his daughter's homework and love letters from Marsden's girlfriend. A year later, Marsden was shocked when the Ontario Provincial Police came to his door and charged him with 28 criminal counts of tax evasion. By the time the case got to trial, the CRA alleged that Marsden owed about $120,000 in back taxes, penalties and interest.
The CRA investigator in Marsden's case later testified that she'd spent 3,000 hours reviewing his documents, but hadn't even bothered to interview Marsden for his side of the story. The Canada Revenue Agency randomly conducts about 300,000 small and medium-sized business audits every year. Normally, if the CRA finds a problem after an audit, it reassesses the taxpayer. If the taxpayer disagrees with the reassessment, they can appeal through a Notice of Objection. If an appeal is unsuccessful, the taxpayer can send the case to tax court. Even though this process can take years and may leave the taxpayer unsatisfied, criminal charges for tax evasion are much less common.
Off the rails So why did the Canada Revenue Agency pursue Marsden's case with such zeal? Some reasons may have emerged during Marsden's trial. "The auditor was asked about her career at the CRA. And she started as a teen working in the mail room, and she had taken a training course as an auditor and it was her very first audit," explained Marsden. The auditor was a rookie, but she wasn't the only one. It turned out that this was also the CRA investigator's very first case. "At the time they were looking at low-income taxpayers, people that were not reporting a lot of income and they were assuming that they were hiding funds," said David Bell, the accountant hired by Marsden's lawyer to review his documents before the trial. "Really, it seems they did not talk to John and proceeded on their merry way towards a criminal prosecution."
Prior to trial, the CRA did make several offers to settle with Marsden, always lowering the amount he would owe. But the offers always came with the condition of his admitting guilt to some of the charges. Even though that would have been cheaper than defending his innocence to the end, Marsden refused. "I wasn't (guilty). I couldn't," said Marsden. Eventually, the cost of defending himself reached $70,000. "Their goal is to break the taxpayer," said Geoff Perry, a former CRA auditor, in an interview with W5. "(CRA auditors) have the feeling that if the person has no resources, how are they going to defend? People go and they'll pay their assessments even though they know they're not true assessments because they can't afford the process."
W5 asked the CRA for an interview with its Commissioner, Linda Lizotte-MacPherson, and the tax agency refused. In an email the CRA claimed it "serves taxpayers with a high degree of accuracy, professionalism, courteousness and fairness when addressing service complaints and disagreements over tax assessments." Although Marsden had given permission to W5 to discuss his tax case with CRA, the agency refused. "Even where taxpayers give us permission to discuss their files in the public domain, it is standard CRA practice not to do so," wrote Noël Carisse, Assistant Director of Media Relations. "Discussing an individual's tax situation in the media, even where that taxpayer has given permission could erode taxpayers' confidence in the CRA's protection of their information." The email further detailed legal avenues available to taxpayers in dispute with the Agency. But there was one place where CRA did have to openly account for its handling of Marsden's return: in open court. John Marsden's trial eventually ended with the judge acquitting him of all 28 criminal charges. The judge also slapped the CRA, finding that the taxman had "jumped the gun" and accused the CRA investigator of "tunnel vision." The judge also listed several instances where the investigation breached the CRA's own guidelines. For Marsden it was an emotional end to a grueling ordeal. "I just stood in the parking lot and cried," said Marsden.
(CTV News: W5)
My advice to anyone reading this is, whenever you have any interaction (of any kind) with the Government of Canada in general and the Canada Revenue Agency in particular, is to have anything they tell you put in writing and signed by an official authorized to sign on behalf of the government - preferably on official stationary. If you are speaking with someone from the CRA on the phone, tell them up front you are going to put them on hold and you will continue the conversation when you come right back and are recording the call. My father always told us, "get it in writing, get it in writing, get it in writing." And this is especially true with any representatives of the tax department.
Whenever you interact with the CRA they are supposed to record the details of that interaction in a database that includes your Social Insurance Number (SIN), the date, time, place and nature of your conversation. UNFORTUNATELY the various departments of the CRA do NOT communicate with each other. The collections department does not communicate with frontline staff. Frontline staff have no access to files that are being negotiated. It is all too common to have the CRA simply say, "We're very sorry but we have no record of that agreement." And the CRA will laugh if you tell them that you have no recollection of a call they made to you or that you did not receive a letter from them in the mail. They consider their records to be infallible. So you need to get it in writing. Each time. Every time.
(Jean Guy - New Brunswick)
We didn't know what was going on with my younger brother until it was too late. When we were cleaning out his apartment we found stacks and stacks of letters from the Canada Revenue Agency. Enough to almost fill one banker box. They went back for years. As far as we can tell it started with an unemployment insurance overpayment in the 1980's. The CRA hounded and hounded my little brother. He kept notes and copies of the letters he sent to CRA, his MP, lawyers, his Rabbi and others. Clearly the CRA told him to go ahead and cash the cheques they sent him. He even tried to return them. But approximately 18 months later he got a letter in the mail saying he was over paid and he would have to pay it back, plus interest and penalties. It didn't seem to matter that Evelyn from CRA told him he could not even leave the cheques at her desk. Even though he pleaded with them to return the cheques!
After he graduated with a history degree from university he had trouble finding work and could not repay his Canada student loans. The loans were over $30,000 and he was making less than #12,00 a year. Every year an anonymous person would send him a one page letter every December telling him in advance they were going to seize his income tax refund. When he still couldn't pay they seized his bank account that had $112 dollars in it. Then they seized his RRSP that our grandparents had bequeathed to him in trust. Later when one of our parents passed away he inherited enough money to pay off his Canada student loans. He tried contacting CRA for 12 months. No one got back to him. He has letters to and from his Member of Parliament who told him their hands were tied. He has a letter from the federal finance minister saying they had contacted the CRA on his behalf. But nothing was ever done. Also in his file was a letter from an assistant in the Prime Minister's officer he had spoken with several times by phone. But still no help. He eventually contacted a lawyer who wrote to the lawyer representing CRA. No reply. His lawyer sent a total of 3 additional faxes to the lawyer's office contracted with CRA for collecting payments and suing people in default. Still no reply. It was not until my brothers lawyer threatened to call the Provincial Bar Association that she got a response. And their reply? It was, and I quote, "Oh well we get so many people trying to contact us claiming to be lawyers we've instructed our clerical to ignore them in accordance with CRA directives to reduce billable hours." To add insult to injury after the funds had been transferred from the lawyers trust account to the Receiver General, CRA notified him he had overpayed by $97 dollars. According to his letters, he tried for two years to get it refunded. CRA never did pay him back.
In the mid 1990's it seemed like he was finally settling down. He and his partner had started a business and they were making some headway doing what they loved best. But his partner got sick and they had to postpone all of their plans for the future. As his partner of nearly 11 years lingered for many months, a pneumonia finally compromised him and he passed away. Obviously as in the passing of any loved one there is a time for grieving. But that didn't matter to CRA and because they had not filed their GST returns the CRA seized their business account with all of $1200 dollars in it. It didn't matter that they never did more than $20,000 that first year. They registered for the GST because they knew they would do more than $30,000 eventually and thirty-thousand is the threshold for being required to register for GST with CRA.
For two more years my little brother struggled with CRA. Letters were sent to CRA but no one ever got back to him. Letters were received from CRA as well as an abundance of voice mails. All were threatening legal action. None made any sense.
I'll never be able to speak with my little brother again. He passed away on Thanksgiving Day 2010 from taking too many prescription medications. We didn't know he was in trouble. It was not his way to burden his family and the people at CRA were simply not willing to help him.
(Misha from Toronto)
My name is Tom to my friends and they call me Tommy-Boy on the street. My parents named me Thomas after my grand dad. I have been living on the streets of Calgary now since the fall of 2008. The Canada Revenue Agency took everything. After our office was "right sized" in Alberta i lost my job. I tried to set up a home based business and registered for GST. Unfortunately, our business did not do so well and I closed it within the first 16 months of operation. I notified the CRA of my intentions to stop operating. But they seized my bank accounts for non-payment of GST. We borrowed money from family and friends to make ends meet for several months, but that could only last for so long. When we couldn't make our mortgage payments the bank foreclosed on our home. When they sold it, the bank took the nearly $100,000 we had in equity and transferred it to the Government of Canada My wife and I fought constantly and eventually she left me and took our two children to live with her parents in Saskatchewan. I got hooked on prescription drugs and eventually that led to street drugs to help me forget my life. When my parents passed away and left me some money in their will, the lawyers transferred it to my bank account. Somehow the CRA was monitoring my banking and seized the money my parents had left me. I couldn't make my rent payments so I was on the street again. I haven't seen my kids in nearly two years. And I don't blame them. I have no place for them to sleep and I can't afford a bus ticket to see them. I seems to me that Joyce and David and Donna from CRA simply do not take into account the toll the government takes on its citizens. It does not matter to the CRA that you've lost your job. It does not matter to CRA that you and your wife are separating. It does not matter to CRA that you did not make any money and closed your home based business. It doesn't matter to CRA that you've lost your home and your family has no place to eat, sleep or feel safe. All that matters to CRA officials and the Government of Canada is that you have to pay what they say you owe them. Taxes, GST, interest and penalties are designed to break you into submission and crush your sole. Not to mention teaching you a lesson and the CRA being able to hold you out as an example to the public so you don't mess with them. They say over and over again that it is "all within the law." Well I say there is a difference between what is the law and what is right. It wasn't all that long ago that it was illegal for women to vote in elections in this country. But that didn't make it right. It's too bad the CRA can't learn from their own history and the history of their own country.
(Tom from Alberta)
Can anyone who reads this tell me what it takes to communicate with the Canada Revenue Agency - on any sort of meaningful level. Every time I get on the phone with them I wish I could record our conversations. All I get is the same litany from them. They ask me my name, my SIN number and then there's a lengthy pause while they read my file (and no one will tell me what they are actually reading!) After the long pause, I am told that I better "pay." It doesn't seem to matter that I don't owe anything.
(Chad from Halifax)
I would very much like to relate to your readers what happened to me and my husband throughout 2006-2009. After owning and operating our small family enterprise for 30 years we were all set to retire. Then one day an auditor from the federal government showed up at our door. After 4 months of "auditing" by the Agency we were sent a letter saying we owed the Canadian Government nearly $97 000 in back taxes, interests and penalties. Money we simply did not have. Our own accountants went through the paper work and said the Agency was not correct and pointed out that nearly 70% of the money they claimed we owed was in the form of penalties, interest and interest on the penalties. Our bank accounts were frozen. We had to rely on our children for support. And almost three years to the date of the auditor showing up at our door my husband passed away of a heart attack while going over yet another series of demand letters and threats from the Canada Revenue Agency.
(Allison from Ontario)
I find it very interesting that in 2010 almost all government departments were told to cut back on their spending and hiring of new staff or contract staff. Exceptions to this nation-wide directive included the offices of our federally elected officials, the office of the Prime Minister, one or two certain "secret" or spy like agencies and the Canada Revenue Agency. Right now, if you want a fairly good paying federal job and you are getting out of university in 2010 or 2011 and if you have any sort of accounting back ground the Canada Revenue Agency wants to hear from you. Don't try the military, don't go to the Department of Fisheries & Oceans don't bother to review or register at the federal civil service listings on the Service Canada web or their related pages. Those jobs are either gone or will be filled by political appointees or friends that make the hiring decisions.
(Helen is Saskatchewan)
I went to work for Canada's National Tax Department in 1992. Some friends were shy to speak around me and some friends stopped speaking to me altogether after they found out where I had started working. Sometimes it was pretty obvious. People just stopped returning phone calls to go to a movie or didn't have time for drinks any more. Of those friends that did stick around as well as the one or two that eventually came back around, the question was always the same. "I'm getting audited again for the (2nd - 3rd - 4th - 5th) time, etc How the heck to do I get off their "list ?"
I went back to my supervisor in 1995 and asked about "the list?" She laughed and said, "there is no such thing, We don't keep hit lists" But only a few months later in 1996 a very good friend came to me to ask for help as they were being audited for the fourth time in five years by the Canada Revenue Agency. I looked at the letter the local office had sent. It clearly stated that the person who had received the notice was being selected for an audit purely "at random." My friend said it felt like winning the lottery - only in reverse because now they have to pay money again. For accountants, book keepers and the eventual fines, penalties and back taxes that would surely be "Found." Later that same year, I was sent on a training course by my local CRA office to Ottawa. The hotel they put us in was just around the corner so we were given tours of Parliament, the Senate, the Supreme Court and the museum across the bridge.
Later that week during during the course, at one of the Q&A sessions a young lady from Whitehorse raised her hand and asked about "the list?" The presenter at the afternoon function was a senior bureaucrat and had been with the Canada Revenue Agency for 25 years. This senior went on to explain that CRA did in fact keep a regularly updated list of people, places, names and address of individuals, corporations and individuals who ran corporations. Eventually those "lists" were divided into three-inch binders and were divided into provinces for each binder. But it seems the Canada Revenue Agency got nervous about having the lists on paper and then distributed as necessary to the various regional offices across the country. They were nervous because the official policy at the time (and still is in 2010) was that CRA does not under any circumstances keep "lists" of targeted people or segments of the population according to our elected officials.
Then one day in 2000, a bright young man came to the government and Treasury Board and offered to put everything on a computer in an electronic "DATABASE" for the Canada Revenue Agency. It was proposed that with a computer, all a civil servant would have to do is punch in a name or even just a SIN (Social Insurance Number) or even a partial SIN and all the information for a particular person could be presented to the requesting officer in the blink of an eye. So after working at the Department of National Revenue I can honestly and categorically advise anyone who is reading this that "The List" does actually exist, It's not written on paper, so technically there is no list and therefore nothing they can share with you. And if you do speak with anyone, even your Member of Parliament about this "list" they will either tell you that "No! We don't have or keep lists of people." Or they will say something like. "Oh I wish I had a dime every time someone asks me if there is a list at CRA and how they can get off it...?" So they are not really answering your question.
In short, the point I am trying to make is there is no paper list, But there is an electronic database of tax cheaters, person's "suspected" of tax cheating, persons the CRA feels is getting to much back in refunds, people of "interest" that have been identified by anyone at the CRA for any reason they can think of as well as some others. Like people the Canada Revenue Agency believes are actually not dead or are somehow hiding in the underground economy and almost every veteran from Canadian Military Service. So go ahead the next time you are on the phone with your Canada Revenue Agency representative. Don't ask to see your file. Ask to see the information stored about you in the "CRA Database." That'll shake them up. From what I've been hearing from former CRA staffers I've worked with, supervisors and department heads have been directed to inform CRA front line personal in 2009-2010 the database they may receive questions about does not exist. Or if really pressed by the public or the media, the database is for internal use only and therefore not subject to information requests of any type.
(Jamie M. Ottawa)
I have been interacting with the men and women who work for the Canada Revenue Agency for the last four years. They say that I owe in excess of $76,000 in GST, interest and penalties. I keep telling them that my business closed within the first year and had no customers and did not generate any business revenue. I and my accountant at one of the big accounting firms has confirmed this three times for them. But apparently the large accounting firm - and the no less than six of their staff that has worked on my file and I are wrong. And the CRA produced an assessment to prove that we're wrong. Where does CRA get it's numbers? In any event, I have personally spoken with two different people working on my file at CRA - all to no avail. And my accountant has spoken with two other people at CRA working on my file. And finally, last fall I had enough. I called all four persons identified as working on my file at the CRA in Winnipeg, Calgary and Ottawa. None of them could give me a straight answer. None of them had any any interest whatsoever in speaking with me personally. And all of them took great pains to remind me that "They were just doing their jobs." I find it very interesting that the last time a large number of civil servants all claimed that they were just doing their jobs was in Nuremberg after the war.
(Tim from Alberta)
I worked for the Canada Revenue Agency in Western and Central Canada for almost 12 years, and what the average citizen needs to understand is that, like most financial institutions, the Canada Revenue Agency is numbers driven. The Agency has almost nothing to do with "helping" Canadians with their tax or related problems. Employee evaluations, promotions and your compensation while employed with the agency is not based on how may clients you can help, but it is based on how many dollars you bring into the Agency. I've personally had managers and directors tell me during one-to-one interviews that my performance assessment is primarily based on how many files I close in any particular quarter and how much money I bring back to the government. It has nothing to do with any sort of service guarantee.
(H. from Nova Scotia)
Anyone who is reading this comment that is working for or has ever worked for the Canada Revenue Agency or any of its predecessors should consider this to be a challenge. I challenge each and every one of you to tell me how your Agency arrives at the numbers in your Notice of Assessments? I had a business that generated a nominal amount of income that I closed after about 18 months. After speaking with you at length over a period of months, I received a Notice of Assessment from your office stating that I owed the Government of Canada over $50,000 in GST, interest and penalties. Now let me be clear and to the point. If my business had done that well that I owed CRA $50 000 in GST I would have gladly paid you. I mean honestly, if I generated $50 000 in GST that would mean I was making over $1 million dollars in revenue in the first year that you went through my books. So tell me CRA, what is your formula? What is the calculation that you or your computer performs that arrives at this number of $50 000? I've asked at my local CRA office, and I've called CRA in Ottawa and another place and no one associated with CRA or the Ministers office will tell me what the formula is. Or did you just make it up to frighten, scare and intimidate me? If there isn't a law against this there should be.
(Mike from Quebec)
My husband was a good man by all accounts and we had a great marriage for nearly 20 years. Don't get me wrong, we had arguments just like any other couple, but I need to stress that it was never anything physical and we usually apologized to one another before we went to bed. But then the Canada Revenue Agency came knocking on our door. Literally. We had some questions about our income tax in 2009 so we thought we'd go to the local Revenue Canada office in the federal building. We met with a representative of the Agency and spoke with them at length. We were even provided the necessary forms to file which we filled in and dropped off in person the very next day. And so started our nightmare. We received a brown envelop in the mail about a month later. The envelop contained an abundance of official looking printouts of our tax returns from 2000 - 2006. Every couple of pages in bold lettering it would say "Amount Owing." Then on the 19th page it gave a grand total of $61,285 and further noted the amount was payable now. We thought there had to be a mistake so we went back to the federal building and asked to speak to the same Agency rep we had spoken with only six week previously. They were busy so we asked to speak with a supervisor. After waiting for 75 minutes another member of the tax team showed us into a room. The first question out of their mouth was, "Now tell me, how did you want to pay this debt, did you bring your cheque book?" We stated we thought there had to be some sort of mistake and we thought we were going to have a refund of $1500 not owe over sixty-one thousand. So we asked for assistance in understanding all of the "corrections" to the paperwork we had sent in. Apparently it couldn't be done on the spot, so we went home to wait for someone to contact us. And a little over two weeks later another brown envelope come to our home with another multiple page print out. The amount was reduced, but now the Agency added interest and penalties making the amount owing even greater than before!
This went back and forth for a little over two years. My husband and I started to fight more. In fact, it was almost nightly. We sought counseling and saw a therapist together for almost two years. Our family doctor also proscribed Prozac for him during the day, and sleeping pills at night because he simply could not sleep at night and constantly worried at work during the day. And every day the phone calls came to our home, to his work and to his cell phone from the Agency. They just kept coming and almost every week more brown envelopes came in our mail. Then one Sunday night the soup was cold at supper time. And my husband flipped out. The soup along with a kitchen chair went crashing to the floor. Our children were terrified. They had never seen their daddy like this before. We locked ourselves in the bedroom and called the neighbours and then called the authorities. When help finally arrived he had managed to calm down but the damage had already been done. Along with his reputation at work being sullied from a garnishee notice, now the entire neighbourhood knew what was going on and he had police record.
The lawyers tell us that legally the Canada Revenue did not do anything wrong. The lawyers also told us that even though we were given advice by Agency representatives they cannot be held responsible. The lawyers also told us that if we tried to somehow blame the Agency for my husband's current state of mind it would probably not even make it to court. In short, there is nothing we can do and no one, from the federal minister to all of their many subordinates can be held accountable. Nice work if you can get it. Way to go folks.
(Name Withheld by request from Vancouver)
After nearly 8 years of trying to be reasonable with them, I went to my Member of Parliament for help regarding an on-going problem I've been having with the Canada Revenue Agency. I eventually was referred to an assistant in the constituency office who said they would be able to help me and they had also sent my file to the assistant for my MP in their Ottawa office and I should have a reply back in a day or two. After waiting for two full business weeks I called the local constituency office to check the status of my file. I was told I would hear back from someone in the next few days as the file was still being looked at. I waited two more working weeks and when I did not hear back from anyone I called the local constituency office again. I was told by a receptionist that the local assistant to the MP was not available so I asked to speak with the counterpart in Ottawa. I called the Ottawa number for two full days in November of 2010 only to be told there was nothing my elected official could do.
(Nathan from Ontario)
I filled out an official Access To Information Request for my file at the Canada Revenue Agency in 2009. After I paid the required fee and filed the paper work with the local CRA office I was informed that someone would contact me at the information provided on the forms. After waiting for nearly 4 months I called CRA but no one could tell me what was happening. So I filled out the paperwork again, paid the fees again and was told by the CRA representative at the front counter that someone will get back to me in due course. Well, here it is nearly Christmas 2010 and I still have not heard anything from CRA. Not a single peep. Not even an acknowledgement that I sent the request for my files twice!
(Sanjay from British Columbia)
I don't think a Federal employee should ever be allowed to speak so crudely to anyone. They represent the Crown and our elected politicians. But recently after a barrage of verbal abuse by one person at the CRA I called their supervisor. And do you know what the supervisor at CRA told me? They said that "maybe you should think about paying." They didn't offer to call their staff person who was irate with me on the phone. They didn't offer to apologize. They didn't even offer to follow up with me after a few weeks or a few months to see how things were going.
(Donald from Manitoba)
I have a family member that went to work for the CRA about a year ago. Last summer we had a family gathering and family members came from 5 different provinces. I have watched my children, grandchildren, nieces and nephews all grow up to become doctors, lawyers, nurses, engineers, teachers and other professionals. We even have local police and an RCMP member in our family. But it was hard watching a younger person in our family try to make polite conversation with people that they've known all their life and literally grew up with. It must be hard working for the CRA when your own family won't even speak with you.
(Dorothea L. Manitoba)
An interesting debate has emerged in the pages of the Financial Post over the last two weeks regarding the need for senior citizens to file bankruptcy in Canada. The debate started with an article by Jonathan Chevreau published on August 11, 2010 titled No Immunity to Bankruptcy. That day Mr. Chevreau also published a blog post titled Freedom 60? 33,516 Canadians 60 or older filed for bankruptcy from 2008 to 2010. I was interviewed for both the newspaper column and the blog post; here’s a quote from the newspaper:
Between 2006 and 2010, between 7% and 9% of the debtors handled by Toronto bankruptcy trustees Hoyes Michalos & Associates Inc. were 60 years of age or over, says principal Doug Hoyes. In the two and a half years between January 2008 and May 2010, 33,516 Canadians age 60 or over filed for bankruptcy, according to Industry Canada.
That quote is accurate. In fact, after holding steady in the 7% range between 2006 and 2009, in the first seven months of 2010 the percentage of people aged 60 or over who have filed a consumer proposal or a personal bankruptcy has increased to 9%. That statistic clearly indicates that more seniors are experiencing financial difficulty, and are making the decision to formally deal with their debt.
Here’s the key problem, as quoted in the Financial Post article: Of course, the problem with carrying debt into retirement is that it must be serviced with less income than when working full-time. Some adapt by making only the minimum monthly payments on credit cards, which leads to a downward debt spiral, a journey that often ends with a trip to offices like Hoyes.
In the past, most seniors were able to retire with no debt. The fortunate ones owned their own house with no mortgage, so when they retired they were able to live comfortably from their savings and pensions. Unfortunately today an increasing number of seniors are retiring with debt, so when their income drops at retirement it often becomes impossible to both service debt and pay normal day to day living expenses. I’ve met with a number of seniors who retired in good financial shape, but as the recession worsened they ended up helping their grown children deal with their money problems, and that often depletes their retirement nest egg, and can even lead to new debt.
But there’s more to the story than that; here’s another excerpt from the Financial Post article: Hoyes guesses half the seniors he sees choose bankruptcy, although he lays out four less extreme options. He points out that most retirees don’t need to file for bankruptcy because the main reason for considering it is to ward off creditors that threaten to garnishee wages or seize assets. Retirees have no full-time wages, so don’t have significant wages that can be seized. Also, “it is very difficult, if not impossible, for a creditor to garnishee a pension,” Mr. Hoyes says.
This is where it gets interesting. On the day the article was published, Mr. Chevreau was contacted by a reader who said that he was 70 years old, and he owed a significant amount of back taxes, and CRA was taking all of his Canada Pension Plan income each month. As any good journalist would do, Mr. Chevreau contacted me to ask for my side of the story, since Revenue Canada’s actions to seize pension plans would appear to contradict my statement that “it’s very difficult for a creditor to garnishee a pension.” My response to Mr. Chevreau was that yes, it is very difficult for a typical creditor, like a bank or credit card company, to garnishee a pension. However, Canada Revenue Agency is not a “typical” creditor. CRA has more power than your typical credit card company or other creditor. On August 18 Mr. Chevreau reported on this continuing story in an article in the Financial Post titled Government gives with one hand, garnishees with other, where he tells the story of “Sam” (not his real name), the 70 year old who is not getting any CPP or OAS benefits because CRA is taking all of it, and applying it against his tax debt. Here’s an excerpt from the story
Generally, if you owe money on credit cards or other unsecured debt, there’s no mechanism for creditors to garnishee a pension, says Doug Hoyes, a principal with Toronto based bankruptcy trustee Hoyes Michalos & Associates Inc. According to Hoyes, the Ontario Wages Act only permits creditors to garnishee up to 20% of a person’s wages or 50% for child support. However, he says, “standard garnishment rules don’t apply to the CRA. They can do whatever they want.” Hoyes regards the legal definition of garnisheeing wages as a court order to take some of your paycheque. But the rules are different when the government is itself the creditor. “It doesn’t go to court. They can just decide to take CPP and OAS until they get what they want.” He has seen cases similar to Sam’s in the past, but they were “rare circumstances, generally where the tax debt was large and often where the taxpayer was delinquent in filing tax returns on time.”
CRA spokeswoman Caitlin Workman confirms the tax agency can garnishee “all types of pensions,” both government and private. This is permitted under Section 224.1 of the Income Tax Act, with similar provisions in five other acts. However, she says it’s rare to garnishee more than 20% of such benefits. “It’s very much a last resort after the taxpayer’s ability to pay has been determined.” So there you have it. If you owe taxes to CRA, and if you get Canada Pension Plan or Old Age Security payments, Canada Revenue Agency can withhold some or all of your monthly pension payments in satisfaction of your tax debt.
As I said in the article, while I have seen cases like Sam’s, it is generally very rare that CRA would take all of someone’s pension. They will typically only take everything if you owe a significant amount in taxes, and if you were delinquent in filing your taxes on time. As the CRA spokeswoman stated, it is rare that they will garnishee more than 20% of pension benefits, but it is possible.
What Can You Do if CRA is Taking Your CPP Pension For Taxes Owing?
If you owe back taxes and CRA is taking your pension, you have a number of options. First, you can contact CRA and work out a re-payment plan. If you have other assets that you can sell to raise cash, you may be able to pay your taxes with that money, at which point CRA will stop taking your pension. You may also be able to negotiate a monthly payment plan to free up some of your pension. If you can’t make a plan directly with Canada Revenue Agency, you could try to get a debt consolidation loan; you borrow from a bank, and use the money to repay CRA. If you pay your taxes in full, CRA will release the flag on your pension payments.
If you don’t qualify for a loan, which is often the case once you retire because your income has dropped, your next option is a consumer proposal. In a consumer proposal a settlement is reached with all of your creditors, including CRA. In many cases you may end up paying less than the full amount owing. If your largest debt is taxes, CRA must agree to your proposal, so a consumer proposal is not always an option where tax debts are involved If a consumer proposal isn’t possible, your final option for dealing with tax debt is personal bankruptcy. Upon your discharge from bankruptcy in Canada your tax debts are discharged. Owing money to the tax man isn’t fun at any age, but it can be even more stressful if you are a senior citizen on a pension, so if you have tax debts, contact a licensed bankruptcy trustee for a no charge initial consultation to review your options. Finally, my thanks to Mr. Chevreau and the Financial Post for bringing this issue, and possible solutions, to the attention of senior Canadians.
(Financial Post Canada: http://www.bankruptcy-canada.ca/trustees-talk/bankruptcy-alternatives/20100823/bankruptcy-in-canada-for-seniors-with-tax-debt.html)
