The Mess that is Canada Revenue Agency

[Argus]

One of the areas the Conservatives did a lousy job was in managing this agency. I've written before about some of the issues I encountered while working there, and now a report has come out which suggests my concerns are fairly widely shared among auditors and managers.

Auditors often go after the 'low hanging fruit' because it's easier. That is normally just small time Canadians who made a mistake, as opposed to going after some corporation which is hiding income. The corporation will have lawyers and accountants, you see, and will fight for years. So will the very rich.

I have been particularly concerned with CRA's lack of enforcement and investigation efforts, and lack of any coherent strategy to combat identify fraud/theft, which continues to grow by leaps and bounds. CRA has almost no ability to investigate tax fraud of this nature, virtually no one authorized to do so, and no money available to create such a group. Its cutbacks in customer service mean that even in off-tax season clients trying to reach them often reach a busy signal - something which never used to happen. The corporate culture is poisonous, with ass covering senior managers without leadership abilities, and a policy which encourages rotating managers and directors every couple of years - not allowing them enough time in place to actually learn their jobs before moving on.

“The picture that emerged was of an organization struggling to carry out its function in the face of government mismanagement. This includes major budget cuts, a poorly conceived restructuring effort, and targeting those who make tax filing mistakes rather than prioritizing big time tax cheats,” concluded the report.

http://news.nationalpost.com/news/canada/public-servants-blow-the-whistle-on-the-tax-system-shortfalls

Edited December 14, 2015 by Argus

[Smeelious]

I still to this day don't understand why taxes aren't an automatic thing, but that's a whole other discussion

To the CRA...They manage to reassess me every year, and not to my benefit. It's not like I do my own taxes either..I think they spend on the order or $15 or so in postage to milk me for an extra $20.

Good use of time there.

[overthere]

Auditors often go after the 'low hanging fruit' because it's easier. That is normally just small time Canadians who made a mistake, as opposed to going after some corporation which is hiding income. The corporation will have lawyers and accountants, you see, and will fight for years. So will the very rich.

I don't see the problem with going after low hanging fruit.

My good fiend, a former auditor, expalined the process she followed and it made sense to me.

She didn't bother with middle class salaried workers, they have few options to cheat. Higher earners, self employed, and small business have opportunity and the the risk/reward ratio is good for Revenue Canada. Big corporations have better accountants and lawyers than CRA, and it is far harder to make a profit from pursuing them . The auditors tend to do what is most profitable, they aren't assessed on what they might collect but what they do collect. I'm not sure that is so wrong.

The real culprit is the Byzantine labyrinth of contradictory tax law and regulation. If the govt wishes to up their take from corporations, they need to address that.

[Hydraboss]

Auditors often go after the 'low hanging fruit' because it's easier. That is normally just small time Canadians who made a mistake, as opposed to going after some corporation which is hiding income.

Low hanging or those they think they can intimidate. Since my wife passed away over three years ago, the CRA has forced me to supply them a notarized letter for each of my two under-18 kids stating that they live with me and I am responsible for them financially. EVERY YEAR. Two letters each year saying that my kids are my kids and I pay for them (they're trying to deny the child tax credit and any associated costs of the kids from my tax submission). I asked my accountant if this was common - the answer? He's never seen one of these demand letters sent to a female client (widow) but some of his male clients in my position receive them.

Yup. Quite the well run organization that one.

[eyeball]

Sounds like tin-foiled hat conspiracy stuff to me. Imagine engineering the appearance of government mismanagement by political interferers for the benefit of their wealthy powerful friends.

Bwahahahahaha!

What the hell are they smoking over at CRA anyway?

edited because I forgot to include: /sarcasm off

Edited December 14, 2015 by eyeball

[eyeball]

One of the areas the Conservatives did a lousy job was in managing this agency. I've written before about some of the issues I encountered while working there, and now a report has come out which suggests my concerns are fairly widely shared among auditors and managers.

You've also written pretty extensively about the expectation that other public servants like environmental scientists or intelligence experts should do as they're told instead of blowing whistles about the things they see their employer doing they know are wrong and need reporting.

This thread is a real departure from that.

[jacee]

And a welcome one, Argus.

Tell us more ... ! ☺

[kimmy]

One reason why the "low hanging fruit" are preferred targets might be that politicians tend to move in the same circles as the harder targets.

-k

[Argus]

You've also written pretty extensively about the expectation that other public servants like environmental scientists or intelligence experts should do as they're told instead of blowing whistles about the things they see their employer doing they know are wrong and need reporting.

This thread is a real departure from that.

What I've written is that if you directly oppose the government and you are a public servant you're liable to be suspended or fired. I haven't changed my mind on that. You'll note these people are well aware of it, so they saved the report until after the previous government left. They're banking on the new ones not minding because all the stuff they're referring to is the Tories responsibility, and are probably right. That does not mean they might not be punished by senior CRA leadership, who frown on any kind of public utterances of the agency's malfeasance.

[Argus]

And a welcome one, Argus.

Tell us more ... ! ☺

Sure. Do you know how ID tax fraud works? If you know someone else's SIN number, you just send in a fake tax return early next year and give yourself a $3,000 refund. Add an address or bank change to send the money to your bank account or apartment. CRA will find out about it when the other person files their taxes, but don't worry, they won't investigate. They won't even go to your bank and ask them which account the money went. They'll write it off and move on. They won't contact the mounties either because the mounties have made it clear they're too busy.

[Michael Hardner]

Cashing a cheque made out to someone else is fraud, though, and not 100% easy either.

[Big Guy]

I too have examples of how to make money by breaking the law but I do not think anonymous public access boards are the place to describe or encourage illegal activity.

[Argus]

Cashing a cheque made out to someone else is fraud, though, and not 100% easy either.

Of course it's fraud. But if no one investigates, some people are going to say 'so what'?

If you simply have it deposited into you bank account, tho, names don't matter. In the Toronto area people pay bums $50 to open bank accounts, then give them the cash cards.

[Argus]

I too have examples of how to make money by breaking the law but I do not think anonymous public access boards are the place to describe or encourage illegal activity.

Tax ID fraud is growing by leaps and bounds every year, especially among ethnic groups in TO and Vancouver who spread the word among their friends and families. The IRS has an entire group dedicated to combat it and says it's a $21 billion dollar problem. CRA doesn't even know how often it happens because it doesn't keep track. And it won't. Until it gets pressured by someone on the outside. The money it loses through tax fraud doesn't belong to their budget, after all, but to the government in general.

Just what do you imagine keeping quiet does to encourage them to improve?

[overthere]

Back to the OP subject, plucking low hanging fruit is an efficient way of getting a return on the money, our money. Pursuing easy pickings costs little in CRA overhead. Would you rather they expend huge sums for less return to the taxpayer?

What exactly is your objection? That they don't catch everybody?

[Argus]

Back to the OP subject, plucking low hanging fruit is an efficient way of getting a return on the money, our money. Pursuing easy pickings costs little in CRA overhead. Would you rather they expend huge sums for less return to the taxpayer?

What exactly is your objection? That they don't catch everybody?

That fraud is growing and being ignored. When I was there one of the few areas which policed fraud was downsized despite the fact it saved the government thirty dollars for every dollar of its budget. Why? Because the thirty bucks it saved was from the treasury. Its budget was paid by CRA.

[overthere]

So you favour not collecting giant lumps of easy cash, but spending more resources on investigations?

[Bob Macadoo]

... especially among ethnic groups in TO and Vancouver who spread the word among their friends and families.

There it is........

[Argus]

So you favour not collecting giant lumps of easy cash, but spending more resources on investigations?

Giant lumps? A few bucks here and there?

[Argus]

There it is........

I'm sorry if reality bothers you. It was mentioned often enough at the working group I was a member of.

[kimmy]

So you favour not collecting giant lumps of easy cash, but spending more resources on investigations?

"Giant lumps of easy cash" ... it might be "easy", but shaking down Joe Six Pack for an extra $50 in April is hardly "giant lumps".

On the other hand, wealthy Canadian individuals and businesses have vast sums of money in tax schemes of dubious legality. Give the CRA the the resources to pursue these crooks and you'd see "giant lumps of cash".

I screwed up a tax return several years ago and had to write them a big cheque, so every year since they go through my return with a fine tooth comb. I understand why they do it. I don't mind. But the extra scrutiny they've put into my returns since then hasn't yielded them any extra money. They probably spend a lot of time and energy scrutinizing other small fish to similarly minimal return.

Meanwhile you've got giant companies like Loblaws and Petro-Canada with alleged headquarters on tiny Caribbean islands, you've got Cameco shamelessly scamming CRA out of about $3 billion dollars by selling their own product to their own Dutch shell corporation at 5% of market value...

Do you really think the problem here is that Canada Revenue Agency isn't spending enough energy crapping on regular working slobs?

-k

[eyeball]

I'm sorry if reality bothers you. It was mentioned often enough at the working group I was a member of.

And you're maintaining these people are benefitting from having politicians tilting the playing field in their favour by leaning on CRA officials to leave them alone? How often was this political interference mentioned and how widespread do you think it is?

I mean, this should be really explosive stuff don't you think?

[Argus]

And you're maintaining these people are benefitting from having politicians tilting the playing field in their favour by leaning on CRA officials to leave them alone? How often was this political interference mentioned and how widespread do you think it is?

I mean, this should be really explosive stuff don't you think?

Political interference was never mentioned at that level. If it happened it would have been higher. No one over the director level was a member of the working group. I don't have any direct evidence of political interference as those in the article allege. I do have direct experience with what the budget cuts cost us in terms of policing and combating fraud, not to mention simple customer service.

Edited December 16, 2015 by Argus

[Big Guy]

A old colleague of mine used to teach how to complete tax forms as part of a senior school math program and had to be constantly up to the latest changes and loopholes. He taught the curriculum as dictated by the province but used a unique method for his own tax return.

He would gather all of the appropriate receipts and bills, figure out what he thought his return should be (what he was owed or would owe). He would then get an official blank form, fill in only his name and other required identification and sign the form. Basically he would send in a blank form but with all of the pertinent receipts and bills.

After somebody from Revenue Canada would complete the forms he would compare his calculations with that from the agency. If the agency calculations were more beneficial from him he would accept theirs. If it was less beneficial then he would appeal the calculations using his own figures.

He claimed that he saved a few dollars over the years.

[cannuck]

I agree that CRA really could care less about the big time tax scams, but I would not blame that on Harper. About 20 years ago, I did some work for a company owned by an FCA in Toronto. He was introduced to a friend of mine by a guy (who worked for government as a contractor) and bought a local business from my friend, to which I gave technical support. After a while, I began to realize that the accountant - and expert on forensics of cheating on partners - was...gee, what a surprise, CHEATING ON HIS PARTNERS. To make a long story short, true to form he put his company in a position where one of his suppliers petitioned it into bankruptcy (while skimming ALL of the cash from it to an offshore account). I was an unsecured creditor, and also had to testify as to the legitimacy of R&D tax claims. I thought we had him by the knackers, as I could prove to Revenue Canada that he had scammed them for big bux, but when push came to shove, they just thanked me for putting the record straight and saving the big payout, instead of doing the only just thing and prosecuting the attempt at fraud (claims were actually submitted). We went after him by filing a formal complaint with Jarvis Street guys (RCMP fraud squad) for tax and cold hard cash theft in the millions, but in the end, they replied that if we were prepared to do the forensic accounting, they might proceed - as to catch an expert forensic at this, one would need another expert forensic accountant and they just did not have the resources - ESPECIALLY since most of the victims were not Canadian citizens. Seems to me I was paying tax to Jean Chretien at that time.

Fast forward almost 10 years ago, when my best friend had made a rather large amount of money as a real estate developer. Now, he really doesn't like government very much (I don't blame him), but he really, REALLY does not like to deal with them (I am on the same page there as well), so he had hired a decent size accounting firm to make sure he paid no more, and no less tax than the law and regs allowed. As with most people who have gone from modest income to mega bux almost overnight, he was audited, and CRA found nothing in his returns that did not strictly comply with the law. Well, no offense meant to Argus, but I can imagine the talk around the table inside of tax palaces accross Canada. "We can't have one of these successful people getting away with not breaking the law, so let's show them who actually runs this country!!". He was assessed under the GAR for not filing tax returns that were in the "spirit" of the Act!!!!!!!! And it was for million$$. He was dragged through the knothole for several years with the standard CRA strategy of using their unlimited access to taxpayer's cash to grind down one of those same taxpayers who did nothing other than just obey the law, exactly as it was written. If I remember right, I think there was some guy named Harper in the PM's residence in that entire period.

Yes, the really, REALLY big tax scammers seem to get off Scott free (I would like to meet this very free "Scott" guy some day), and that IS in no uncertain terms very, very political. I would also submit that the highest level of genuine tax avoidance and tax cheating is totally non-partisan - as EVERY player will buy off any party that threatens that ride on easy street. But, to go after that, someone in Ottawa would have to have giant kahunas and actually know how the world of finance works - and that is simply not in the cards for anyone so devoid of ambition as to be work for government.

Edited December 16, 2015 by cannuck