News Column

Minister Shea Highlights Harper Government's Improvements to Tax Debt Collections

Apr 30 2013 12:00AM

Marketwire

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OTTAWA, ONTARIO -- (Marketwired) -- 04/30/13 -- The Honourable Gail Shea, Minister of National Revenue and Minister for the Atlantic Canada Opportunities Agency, today highlighted that the Canada Revenue Agency (CRA) has made satisfactory progress on improvements to tax debt collections, according to the latest report from the Auditor General of Canada.

"Our Government is committed to ensuring the tax system is administered fairly for the vast majority of Canadians who work hard and pay their taxes," said Minister Shea. "I am pleased that the Auditor General has recognized the progress made since the previous report. Our Government is already taking steps to address all of the latest recommendations, and will continue to ensure tax debts are well managed."

The Harper Government has focused on continuously improving the CRA's tax collection program through the introduction of better strategies to prevent the debt from occurring, and supporting measures to resolve debt before legal action is required. That has resulted in increased productivity through earlier intervention at a lower cost.

As a result, the amount recovered has grown by 87% between 2005-2006 and 2011-2012. In fiscal year 2011-12 alone, the CRA recovered $40 billion in tax debts. Over the last five years, over 90% of individuals and corporations paid their taxes on time and without any intervention.

In addition, an international tax benchmarking study in 2011 confirmed that the CRA's collection approach includes many best practices employed by tax administrations around the world.

"We expect CRA to aggressively pursue any debts from those that may be seeking to avoid paying their fair share," said Minister Shea. "At the same time, our Government understands that some Canadians can face difficulties in meeting their tax obligations. That is why the CRA uses a fair and balanced approach when collecting tax payments from individuals and business owners."

The tax debt is an inventory of amounts owed that are known and actively managed by the CRA. New amounts are continually added, while others are collected or addressed through other measures. The CRA has strategies in place to resolve all debts.

The Harper Government remains focused on four priorities, as outlined by the Prime Minister, that Canadians care most about: their families, the safety of our streets and communities, their pride in being a citizen of this country, and their personal financial security.

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The Honourable Gail Shea, Minister of National Revenue and Minister for the Atlantic Canada Opportunities Agency, today highlighted that the Canada Revenue Agency has made satisfactory progress on improvements to tax debt collections, according to the latest report from the Auditor General of Canada. "I am pleased that the Auditor General has recognized the progress made since the previous report. Our Government is already taking steps to address the latest recommendations, and will continue to ensure the tax debts are well managed," said Minister Shea.

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Fact Sheet

Tax Debt in Canada

The spring 2013 Auditor General's (AG) report provides the results of a follow-up review to determine the Canada Revenue Agency's (CRA) progress against action plan commitments made in response to a 2006 audit of its tax collection program. Overall, the AG concluded that the CRA has made satisfactory progress against its commitments, and makes four additional recommendations to further strengthen the administration of the program. The CRA accepts all recommendations and has already taken action to respond to them.

The following provides information on the tax debt in Canada, and what the CRA is doing to address it.

What is the tax debt?

If an individual or business fails to pay their taxes on time, those amounts become a tax debt owed to the Government. The CRA works to collect all debts through the collections process. The outstanding tax debt is an inventory of amounts owed that are known and actively managed by the CRA. New amounts are continually added, while others are collected or addressed through other measures.

Why is the tax debt increasing?

A number of factors influence the amount of the tax debt at any given time. In recent years, the reasons for the increase in tax debt include:

-- An increase in overall revenue due to higher population and more businesses as well as the harmonization of federal and provincial taxes;-- More effective targeting of measures to combat aggressive tax planning and transfer pricing, leading to additional amounts to be collected; and-- Interest charges on outstanding debts which are themselves added to the debt.



How does the CRA collect the tax debt?

The majority of Canadian taxpayers pay amounts owing on time. Over the last five years, over 90% of individuals and corporations paid their taxes on time and without any intervention.

Taxes owing that are not paid are resolved through different means, depending on complexity, the taxpayer's previous compliance history, and ability to pay. Low complexity accounts are resolved through reminder phone calls or letters to taxpayers.

How successful is the CRA at collecting tax debt?

The CRA has focused on continuously improving its tax collection program through the introduction of better strategies to prevent the debt from occurring, or resolving it before legal action is required. That has resulted in increased productivity through earlier intervention at a lower cost. As a result, the amount recovered has grown by 87% between 2005-2006 and 2011-2012. In the 2011-12 fiscal year alone, the CRA recovered $40 billion in tax debts.

An international tax benchmarking study in 2011 highlighted Canada's strength in collecting tax debt and ranked Canada in the top 2 among 10 countries reviewed in the study, for:

-- The lowest cost of collecting a dollar of debt; and-- Collecting the most debt as a percentage of total tax revenues.



Canada also has one of the lowest levels of new debt per taxpayer - an indication that the CRA's approach is effective at ensuring that a higher proportion of taxes owed is paid in full and on time.

How is the CRA managing the tax debt?

The total amount of the tax debt, currently $29 billion, represents numerous types of debt, and most amounts owing are secured or under active collection. The CRA is working to recover all debts, either through automated strategies led by the Debt Management Call Centre, payment arrangements, or active collections by the CRA's Tax Service Offices.



Contacts:
Clarke Olsen
Director of Communications
Office of the Minister of National Revenue
613-995-2960

Noel Carisse
Canada Revenue Agency
Media Relations
613-952-9184





Source: Marketwire