From 1867 to 1999, tax services and programs were administered by the Department of National Revenue, otherwise known as Revenue Canada. In 1999, Revenue Canada was reorganized into the Canada Customs and Revenue Agency (CCRA). In 2003, the Canada Border Services Agency (CBSA) was created out of the CCRA, leading to customs being dropped from the agency's mandate and the agency's current name.
The CRA is the largest organization in the Canadian federal public service by number of personnel, employing 54,933 people and has an operating budget of $5.1 billion[7] as of the 2018–19 fiscal year. The agency's headquarters are based in Ottawa, itself divided into five program branches, which directly support the CRA's core responsibilities, and seven corporate branches, which deliver internal services within the organization. The CRA also has operations throughout the rest of Canada, including 4 Tax Centres (TCs), 3 National Verifications and Collections Centres (NVCCs), and 25 Tax Services Offices (TSOs), organized into four regions: Atlantic, Ontario, Quebec, and Western.
During the 2017 tax year, the CRA collected approximately $430 billion in revenue on behalf of federal and provincial governments, and administered nearly $34 billion in benefits to Canadians.[7]
Prior to Confederation, the collection of taxes and customs duties was the responsibility of the Department of Customs in each of the British North American colonies.[8] In 1867, Parliament enacted legislation which established two separate departments, Inland Revenue, and Customs.[9] Until end of World War I, the majority of federal revenue came from customs and excise duties, but as the war effort placed increasing pressure on government finances, the Borden government introduced a personal income tax in 1917.[10] While intended to be a temporary measure at first, the federal government has since continued to levy personal income taxes, and are now the largest source of revenue for the federal government.[11] Both Inland Revenue and Customs were eventually merged into a single department, Customs and Excise, between 1918 and 1927.
Department of National Revenue employees sorting through tax returns, 1945
In 1927, the Department of National Revenue Act was enacted by Parliament, which changed the name of the department from Customs and Excise to National Revenue, while retaining its earlier mandate.[12] The Department of National Revenue would gain increasing responsibility as new social programs, such as the Canada Pension Plan, and new streams of revenue, such as the Goods and Services Tax (GST) were gradually introduced over the latter half of the 20th century.[12] In 1993, EFILE was first made available to Canadian taxpayers wishing to submit their taxes electronically.
In 1999, the Chrétien government introduced legislation that would transform Revenue Canada from a department to a new agency, the Canada Customs and Revenue Agency. This change was intended to reduce duplication in tax administration, streamline services to Canadians, and provide the tax administration with more flexibility in corporate planning, and in forming relationships with provincial, territorial, and Indigenous governments.[13] The CCRA was given a broad mandate that covered taxation, customs, and border protection. This arrangement only lasted until December 2003, when the Canada Border Services Agency was spun off from the CCRA due to issues relating to interdepartmental collaboration between the CCRA, Citizenship and Immigration Canada and the Canadian Food Inspection Agency on border protection and immigration enforcement.[14]
Following the CBSA spin-off, the CCRA was rebranded as the Canada Revenue Agency, with its strategic direction pivoting towards enforcing compliance with Canada's tax laws and delivering benefits to Canadians.[15] Due to the COVID-19 pandemic, the CRA joined several other government departments in transitioning to temporary remote work arrangements.[16] The CRA also extended deadlines for filing returns and payments for the 2019 tax year. The agency was also tasked with delivering emergency financial benefits to Canadians on behalf of the federal government, processing millions of applications through its IT systems.
Structure
Leadership
The CRA is led by the minister of national revenue and the commissioner of revenue, who functions as the agency's chief executive officer (CEO).
Minister of National Revenue
The minister is accountable to Parliament and Cabinet for the CRA's operations, and in matters pertaining to tax and benefit administration in Canada. The current minister is Marie-Claude Bibeau, who was appointed on July 26, 2023.[17]
Commissioner and Chief Executive Officer
The commissioner is the CRA's CEO. The commissioner manages the day-to-day operations of the agency, and advises the minister on the duties and functions of the CRA as prescribed by legislation.[18] The current commissioner is Bob Hamilton, who was appointed to the position on August 1, 2016.[19]
The commissioner is supported by the deputy commissioner, who fulfils specific duties and assignments provided to them by the commissioner, and acts for the commissioner in the event of absence or incapacity. The current deputy commissioner is Brigitte Diogo, who was appointed to the position on April 11, 2022.[20]
The minister and commissioner are supported by the Board of Management. The Board of Management consists of 15 members appointed by the Governor in Council, of which 11 are appointed by the provinces and territories, 2 by the federal government, with the remaining seat filled by the commissioner of revenue, who is an ex-officio member of the board. Board members are typically appointed for a term of three years.[28] The board develops the CRA's Corporate Business Plan each year, which sets out objectives, performance expectations, and financial allocations within the agency.[28]
The Board of Management is divided into four committees, Audit, Governance and Social Responsibility, Human Resources, and Resources, and one subcommittee, Service Transformation.[29] These committees allow for a detailed review of items brought before the board, and establish work plans for their respective activities each year.
The Board of Management is not directly involved with the CRA's business operations. As such, it cannot enforce or interpret legislation on behalf of the agency, and does not have access to taxpayer information.[4]
Advisory committees
The CRA maintains four advisory committees to assist it in operational planning and decision-making as it relates to different sectors or issues. Advisory committees consist of tax professionals, lawyers, accountants, and community leaders that help the agency improve its service delivery within a specific area.[30] The current advisory committees are as follows:
The CRA's headquarters are located in Ottawa, and is responsible for several agency-wide functions, including ministerial reporting, corporate planning, human resources, information technology, communications, and interpreting tax legislation.[5] Headquarters is divided into five program branches, which help deliver the agency's core mandate around tax and benefits administration, and seven corporate branches, which deliver services that support the day-to-day operations of the CRA.[18]
Outside of its headquarters, the CRA's operations across Canada are divided into four regions, which help to carry out the agency's operations in different regions of the country. Each region is headed by an assistant commissioner, who oversees activities in their region, including that of tax centres (TCs) and tax services offices (TSOs) in their area of responsibility.[citation needed]
Tax centres are responsible for intaking and processing individual and business tax returns.[18] There are four tax centres located across Canada, each assigned their own geographic areas of responsibility, which may vary depending on the type of return:[31]
Tax services offices are field offices which handle more complex audit and collection files for the agency, generally those which involve direct interaction with taxpayers.[18] While TSOs are present in every province, the territories do not currently have active TSOs, and are instead under the jurisdiction of TSOs located in other parts of Canada. Tax services offices are sometimes divided into branch offices for organizational purposes.
There are twenty-five TSOs situated across Canada, and are organized as follows, with any branch offices indicated in indented bullets under the corresponding TSO where applicable:
List of CRA Tax services offices (TSOs) by province[32]
National Verifications and Collections Centres (NVCC)
National Verifications and Collections Centres are responsible for non-complex files related to collection, verification, and validation that do not involve in-person interaction.[18] These new facilities were introduced by the agency in 2016 as part of an effort to modernize the Agency's services.[33] There are three NVCCs located across Canada:
St. John's NVCC
Shawinigan NVCC
Surrey NVCC
Northern Service Centres
In 2019, the CRA opened introduced Northern Service Centres to access to tax services and assistance for residents in the Yukon, Northwest Territories, and Nunavut, co-located with existing Service Canada offices.[34] There are three NSCs located across the North:
Whitehorse NSC (Yukon)
Yellowknife NSC (Northwest Territories)
Iqaluit NSC (Nunavut)
Employees
As of the 2018-19 fiscal year, the CRA employed about 43,908 people,[7] making it the largest organization within the federal government by personnel. Despite being headquartered in Ottawa, only about 12,000 employees are based in the National Capital Region.[7] Of these employees, 32,598 (74.2%) were indeterminate or permanent employees, 1,251 (2.8%) were students, and 10,057 (22.9%) were contract employees.[35] The average age of a CRA employee is 45 years old.[36]
Under the Financial Administration Act, the CRA is designated under Schedule V as a separate agency outside of the core public administration, which allows the CRA to establish different job classifications, pay rates, and enter into labour negotiations differently from other government departments and agencies.[37] Consequently, the job classifications used by CRA may not align with those typically used in other parts of the public service.
The Canadian tax system is based on the principle of mandatory self-assessment. Taxpayers, comprising both businesses and individuals, must complete a tax return every year determine whether they owe taxes or will receive a refund.[38] For individual tax returns, returns are generally due on April 30 for the preceding tax year. For other entities, such as charities, corporations, sole proprietorships, partnerships, or self-employed individuals, the tax deadline may vary widely.
Penalties may be imposed if returns are received after the deadline, or any outstanding amounts owed are also subject to penalties and daily compounded interest. Additionally, taxpayers that repeatedly fail to report income over several tax years, or make false statements or omissions may be subject to penalties, which may vary depending on the severity of a taxpayer's actions.[citation needed]
The CRA processes most tax returns with very limited review and promptly issues a notice of assessment. The notice of assessment provides a summary of each entity's income, credits and deductions. If a taxpayer disagrees with an assessment, they may file an appeal which may lead to challenging the assessment in tax court. Once a tax return is assessed, it may be subject to review. In some cases, a tax return could be reviewed before being assessed.[citation needed]
After an objection is filed, the CRA is required to reassess a tax return "with all due dispatch" according to subsection 165(3) of the Income Tax Act. This may have different meanings depending on how busy the CRA is, the time of year, and other factors. Subsection 165(3) says:
On receipt of a notice of objection under this section, the Minister shall, with all due dispatch, reconsider the assessment and vacate, confirm or vary the assessment or reassess, and shall thereupon notify the taxpayer in writing of the Minister's action.
Income tax returns
Residents of Canada are required to file an individual income tax return every year. Non-residents may have to file a tax return under certain circumstances where they directly earn income in Canada, which can be rental payments, stock dividends, or royalties that a non-resident earns in Canada during a given tax year.[39]
Income is generally reported through the T-series forms, with the number corresponding with a specific type of income situation.[40] Individual taxpayers will report their income using the T1 return. Corporations and trusts respectively use the T2 and T3 forms. Employers use the T4 form to issue a statement of remuneration paid for individual employees, which is then submitted to employees for T1 filing purposes Lastly, any investment income or capital gains earned by a taxpayer is reported in a T5 form. Depending on the complexity of a taxpayer's income situation, supplementary forms outside of the T-series may need to be completed.
For income tax purposes, trusts are treated as a taxable entity by the Income Tax Act. A legal representative of an estate of a deceased person may have to file a T3 return for the estate if it has properties that has not been distributed. Unlike the United States, families cannot file joint returns. A partnership is not a taxable entity for income tax purposes and its income is taxed in the hands of its partners.[citation needed]
Individual taxpayers can file by paper, telephone, or electronically. Taxpayers have two methods for filing electronically: NETFILE, which is for individuals who file their own tax returns, and EFILE, used for professional tax preparers that file on behalf of their clients.[41] Taxpayers that prepare their own taxes through NETFILE generally need to obtain tax filing software from a third-party provider in order to use the system. As of the 2019 tax year, the vast majority of taxpayers file their taxes electronically (90.3%) while increasingly fewer taxpayers (9.7%) use the traditional paper method.[42] Most taxpayers (56.5%) rely on EFILE to submit their return, meaning that most Canadians generally seek out tax professionals when preparing their annual returns.[42]
Many benefits, such as Canada Child Benefit (CCB), are determined by the income reported on the T1 returns. If returns are not filed, taxpayers may not be able to obtain benefits they are entitled to. Registered Retirement Savings Plan (RRSP) contribution room also depends on the taxpayer's reported income.[citation needed]
Employees normally have income tax withheld on each paycheque by their employers, who remit the tax withheld together with payroll taxes to the CRA. Contractors (and most pensioners) are normally required to pay instalments for income tax to CRA during the year. Once a tax return is filed, a tax refund will be available if the tax withheld or the instalments are more than tax owing calculated on the tax return. If the tax return results in a balance due, it must be paid in full by the due date or interest will accrue daily.[citation needed]
GST/HST returns
The Goods and Services Tax (GST) or Harmonized Sales Tax (HST), collectively referred to as GST/HST, are governed by the Excise Tax Act, which requires many entities to register for a GST/HST account and remit GST/HST collected. These entities include sole-proprietors, partnerships, and corporations. Not-for profit organizations, are normally exempt for income tax purposes, but are required to register for GST/HST accounts under the current rules.[citation needed]
GST/HST returns are due monthly, quarterly, or annually depending on the volume of sales. If sales are less than $30,000 per year, a business may qualify as smaller suppliers, who are not required to register for GST/HST.[citation needed]
Payroll tax returns
An employer is required to withhold income tax and payroll taxes, such as CPP and EI, and to remit the withheld amount to the CRA monthly, quarterly, or annually depending on the amount of withholding. By the end of every February, an employer is required to file a T4 return, that is, a T4 summary for total wages paid by the business, and T4 slips for wages paid to each employees, to the CRA.[citation needed]
Tax collection
The CRA is responsible for collecting several taxes on behalf of the federal government, and most provincial and territorial governments (except Quebec), including personal income taxes,[43]corporate taxes, sales taxes, fuel charges, and certain excise taxes as defined under the Excise Tax Act.[44] As a separate agency, the CRA maintains partnerships and agreements with provincial, territorial, and other levels of government to administer non-harmonized sales tax programs on a cost-recovery basis.[4]
Income tax
Personal income taxes
The Canada Revenue Agency collects most individual income taxes in Canada. Canada uses tax brackets to determine an individual's tax obligations, the rates of which are set by the Department of Finance. Personal income taxes are levied by both the federal government and provincial governments, each with separate rates, but are collected together with the exception of Quebec.[citation needed]
Based on individual earnings, employers will typically deduct income tax, in addition to Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) and Employment Insurance (EI) deductions from an employee's paycheque.[45] However, taxpayers that rely on rental or investment income, or are self-employed generally do not have taxes automatically deducted from their pay, must remit tax payments to the CRA either as a lump-sum or in quarterly instalments.[46]
While most taxpayers file only through the CRA, Quebec residents file separately with the CRA and Revenu Québec each year.[citation needed]
Corporate income taxes
Taxes for provincial corporations in Canada are administered by the CRA, except for provinces of Alberta and Quebec. Ontario previously administered corporate taxes until 2008, after which the CRA took over responsibility collecting these taxes.[47] The provinces maintain dual tax rates, with a lower rate applicable to income that qualifies for the federal small business deduction, and the higher rate to all other forms of income. While some provinces adhere to the business limit for the lower rate set by the federal governments, other provinces choose to maintain their own rate.[48]
Goods and Services Tax (GST)
The Canada Revenue Agency collects the Goods and Services Tax (GST) (the Canadian federal value added tax) of 5 per cent in all provinces. In Quebec, under an agreement with the federal government, Revenu Québec administers the GST to businesses, and administers Quebec's own Quebec Sales Tax (QST). The Goods and Services Tax was introduced in 1991 at 7 per cent added to the value of most sales of goods and services. The GST was reduced to 6 per cent in 2006 and 5 per cent in 2008, the current rate.[citation needed]
In 2013, British Columbia removed HST after public protests against the newly taxed items under HST that were not taxed under the PST/GST system.[citation needed]
CRA administers social benefits and tax credits on behalf of the federal government and most provinces and territories. Notable benefits and credits at the federal level include the Canada Child Benefit (CCB), which aims to assist families with children, the Climate Action Incentive (CAI), which pays dividends directly to Canadians as part of Canada's carbon pricing scheme and the Disability Tax Credit (DTC), which helps eligible recipients with disabilities reduce the amount of income tax they owe.
Canada Child Benefit
The Canada Child Benefit (CCB) is a non-taxable benefit for Canadians with children under 17 to assist them with the cost of living. The amount that a taxpayer receives through the CCB is tied to household income, which could include the income for a taxpayer's spouse. As such, taxpayers are required to file their taxes, in order to be assessed for and receive the benefit. The CCB was implemented in July 2016, and builds upon existing benefit programs (UCCB and CCTB) in addition to other child-related credits.[citation needed]
The economic impact of COVID-19 pandemic resulted in the temporary and permanent closure of businesses throughout Canada, leading to the loss of several thousand jobs. This resulted in the creation of several economic measures targeting different sectors of Canadian society, which the CRA was tasked with administering.
The Canada Emergency Response Benefit (CERB) was introduced as a temporary benefit available to Canadians who stopped working involuntarily due to the pandemic. It provides $2,000 per month successful applicants during the eligible period. Income earned through CERB was taxable and those who applied without being eligible could have face penalties during future tax assessments. Eligible recipients were required to have also earned $5,000 in income during the 2019 tax year, and could not earn more than $1,000 per month when claiming CERB.[49] The benefit was administered jointly by the CRA and Service Canada, with nearly 8.5 million Canadians applying for the benefit. representing nearly 21.5 million unique applications.[50] The program was closed on December 2, 2020.[51]
Similarly, the Canada Emergency Student Benefit (CESB) was developed as a parallel benefit for high school graduates, post-secondary students, and recent post-secondary graduates who do not qualify for CERB, with a shorter eligibility period of four months.[52] CESB received about 2.1 million applicants, with over 675,000 unique applicants as of August 2020.[49]
The CRA performs audits with their 1700 auditors to ensure that taxpayers are meeting their tax obligations, are compliant with tax legislation, and receive the benefits they are entitled to.[53] Auditors have the right to examine the books and records of a taxpayer, examine the property in an inventory of a taxpayer, enter the taxpayer's premises or place of business, require the owner or manager of a property to give all reasonable assistance and to answer questions, and require a taxpayer or other person to provide information or documents.[54] Taxpayers must cooperate with auditors or may face obstruction charges under section 238 of the Income Tax Act.[54]
Income tax audits are done at a Tax Service Office (TSO)[clarification needed]. Examiners that work in the office audit program restrict their examination to business expenses reviews. They conduct their examination by correspondence and do not visit a business in the field. Auditors working the SME (Small and Medium Enterprises), Basic File, and Large File programs conduct their audits in the field, typically at the taxpayer's place of business. The audit conducted by field auditors are not restricted and could cover many and any issues in a tax return.[citation needed]
GST/HST audits are done by TSOs. The Refund Integrity program deals only with a credit return, that is, a GST/HST return that requests a refund. The prepayment examination is a restricted audit of input tax credits (ITCs). Post audit is a full audit of GST/HST returns and that covers not only ITC but also GST/HST collected.[citation needed]
When an auditor feels as though they cannot rely upon the books and records of the taxpayer being audited, they can avail themselves of the net worth methodology. In this method, rather than auditing the actual books and records of the taxpayer, the auditor calculates the difference between the taxpayer's net worth (assets less liabilities) at the beginning of the audit period and at the end of the audit period. The auditor then adds to the change in net worth (an increase or decrease), the cost of living for the taxpayer for the period in question. The sum of these two figures will be used by the auditor to determine the taxable income for the taxpayer over the audit period. This figure is in turn compared to the figure reported by the taxpayer. While this methodology is widely used, the CRA Auditor's manual indicates that it is a method of last resort, which should only be used in limited circumstances.[citation needed]
Investigations
CRA operates four investigation programs: Voluntary Disclosures Program, Informant Leads Program, Special Enforcement Program and Criminal Investigations Program.[55]
Voluntary Disclosures Program (VDP): A program that allows taxpayers to avoid penalty or prosecution if they choose to correct inaccurate or incomplete information, or to disclose information previously withheld to CRA. In order to be accepted into this program, the taxpayer's action or omission must involve the application, or potential application of a penalty by CRA and he/she is willing to make a complete disclosure.[56][57]
Informant Leads Program (ILP): This program allows for citizens to report individuals or businesses who may be committing tax evasion or other tax-related offences.[citation needed]
Special Enforcement Program (SEP): As proceeds of crime are taxable,[58] this program specifically conducts audits and undertake other civil enforcement actions on individuals known or suspected of deriving income from illegal activities.[59] Collections Officers are responsible for collecting taxes owed and to seize assets under the Income Tax Act.[58] The program was eliminated after the 2012 federal budget cut.[60]
Criminal Investigations Program (CIP): Investigators from this program are responsible for suspected cases of tax evasion, fraud and other serious violations of tax laws.[61] Criminal Investigators are given badges and can only exercise investigative power in compliance with the Canadian Charter of Rights and Freedoms.[54][62]
CPP/EI rulings
The CRA is responsible for making CPP/EI rulings, that is, to determine whether any wages or payments are insurable under Canadian Pension Program and/or Employment Insurance program. The substance of a ruling is to determine whether an individual is an employee or a self-employed contractor. An employee can get EI benefits and contractor cannot. Normally, CPP/EI rulings are requested by Service Canada when they try to determine whether EI benefits should be paid out.[citation needed]
Arbitrary assessments
If a taxpayer does not file a tax return on time, the CRA may first send a request, like a reminder, to the taxpayer asking them to file the outstanding return. This first letter is called TX11. If the taxpayer still does not file the return, the CRA may send a second letter demanding that the return be filed. This second letter is called TX14. After that, a third letter, TX14D, could be issued, normally by registered mail, or could be delivered personally by a non-filer officer.[citation needed]
If a return is not filed after the computer-generated letters, such as TX11 and TX14, a non-filer officer could arbitrarily prepare a tax return for the taxpayer, normally generating a larger tax bill than what the taxpayer would expect. A notice of assessment under subsection 152(7) of the Income Tax Act will be issued. This 152(7) assessment is commonly known as an arbitrary assessment. Collection actions may follow. The taxpayer could file an amended tax return to reduce the tax bill. Once amended returns are filed, an audit is normally triggered.[citation needed]
If a non-filer officer determines that insufficient info is available for issuing an arbitrary assessment, they may refer the file to Investigations, who would then take the taxpayer to court. The taxpayer may be ordered by court to file the outstanding return, normally being imposed a court fine. If the taxpayer ignore the court order, they will be subject to contempt of court charges.[citation needed]
Taxpayers who believe the CRA has not assessed the correct amount of tax may dispute the assessment by filing an objection. There are strict timelines for filing an objection. The objection will be reviewed by the appeals program of CRA. An appeal officer will make a decision independent of audit. The appeal officer could confirm, vary, or vacate an audit. The appeal officer has the discretion to negotiate a settlement, normally under the condition that the taxpayer will not appeal further to the tax court.
If after the objection has been assessed, the taxpayer is still dissatisfied, an appeal may be made to the Tax Court of Canada within the permitted time. The court examines the claim and evidence the taxpayer submits, then looks at the evidence and arguments made by the CRA before passing judgment. The CRA, acting on behalf of the Minister of National Revenue, is represented by a tax litigation lawyer from the Department of Justice Canada. The CRA auditor becomes a witness for the purpose of providing evidence in tax court. Like any other Canadian court, the Tax Court operates by treating each side of a dispute as equals while applying tax law, contract law, constitutional law and the laws of evidence. In addition, the taxpayer is generally not responsible for costs in relation to their opponent, but only for their costs related to their own defence. In the event the appeal is successful, a repayment of legal costs from the CRA may be sought.
Tax court deals with issues that arise from an assessment under the Income Tax Act, the Excise Tax Act, the Excise Tax, 2001, the Underused Housing Tax, the Select Luxury Items Act, and the Greenhouse Gas Pollution Pricing Act, amongst others. It also deals with issues that arise under the Canada Pension Plan and the Employment Insurance Act.
If a tax return has no tax payable, the Tax Court could not deal with it. If the assessment is an assessment of a provincial tax, Tax Court could not deal with it and it has to be resolved in the appropriate provincial court.
Tax Court has two procedures: informal and general. The informal procedure is less onerous and the delay is generally shorter before the case is heard. A taxpayer could represent themselves or get a friend or accountant in the informal procedure. Informal procedures only deal with assessments to certain threshold and a taxpayer has to elect to take this route. Decisions from informal procedures are not precedent-setting and the judge has more discretion than in general procedures. Informal procedures allow limited appeal rights to the Federal Court of Appeal. General procedures deal with all assessments and require a taxpayer either to represent themselves or get a lawyer. The timeline for a general procedure case from the notice of appeal to the decision could take years. The decisions are precedent-setting.
If a taxpayer believes the Tax Court of Canada was wrong in considering the facts or the interpretation of the law, they could appeal the Tax Court decision to the Federal Court of Appeal, or even further to the Supreme Court of Canada.
Service complaints
Taxpayers aggrieved by the conduct of the CRA may file a service-related complaint. This complaint must deal strictly with the service provided, not the legal aspect of the service (for example, a service level complaint may be raised for unprofessional language, but not for a request for payment under the law).
The complaint is first passed to the office that is the subject of the complaint. If the taxpayer is not satisfied with the way the first office handles it, they may escalate the complaint to the regional office, which investigates the complaint and contacts the taxpayer. If the taxpayer remains unsatisfied, a complaint may be made to the Taxpayer Ombudsman.
Remission order
Remission orders are not commonly known and rarely granted. If a taxpayer agree to a tax assessment but are unable to pay, they could request a remission order to the CRA, which will then make a recommendation to the minister, who will advise the governor-in-council to grant a remission order if the collection of tax is unjust.
Taxpayer relief
Taxpayer relief is governed by subsection 220(3.1) of the Income Tax Act and section 281.1 of the Excise Tax Act. It gives the CRA the discretion to cancel some penalties and interest, to pay a personal income tax refund after 3 years of the tax return being assessed, and to accept late-filed elections.[63]
The CRA will exercise their discretion when late filing is caused by extraordinary circumstances, such as flood or earthquake, by CRA delay or error, or by financial hardship.[63]
A taxpayer may request relief on a prescribed form or may elect use a letter instead provided the points raised on the form are all covered by the letter. If the request is denied, a taxpayer could request a second review, which will be done by a higher rank official. If the request is still denied, a taxpayer could request a judicial review of the decision in Federal Court (not the Tax Court). The federal court will determine whether CRA exercises its discretion reasonably. If not, the court will send the file back to the CRA for reconsideration. The court rarely will make a decision for CRA because the discretion is with CRA and not the court. If a taxpayer is not happy with the judicial decision, they can pursue an appeal at the Federal Court of Appeal.
The Office of the Taxpayers' Ombudsperson is an arm's-length office which reports directly to the Minister of National Revenue to improve accountability at the CRA. The Taxpayers' Ombudsperson is appointed by the Governor-in-Council with a mandate to assist, advise, and inform the Minister of National Revenue about any matter relating to services provided to a taxpayer by the CRA. The Taxpayer's Ombudsperson is currently François Boileau, who was appointed October 5 2020.[64]
In fulfilling this mandate, the Ombudsperson reviews complaints from taxpayers that report breaches of their service-related rights by the CRA. The Ombudsperson upholds the eight taxpayer service rights in the Taxpayer Bill of Rights that are directly related to the services delivered by the CRA.[65] To uphold these rights, the Office of the Taxpayers' Ombudsperson facilitates access to the available redress mechanisms for taxpayers and raises awareness of the role of the office and the Taxpayers' Ombudsperson.
In addition to individual examinations, the Ombudsperson may, on its own initiative, conduct an examination of systemic service-related issues. The Minister of National Revenue may also request the Ombudsperson conducts an examination.[66]
Examinations are reported to the Minister of National Revenue and made public Each year, the Ombudsperson releases an annual report that is presented to the Minister of National Revenue that is in turn tabled in Parliament.
Taxpayer Bill of Rights
In 2007, the Harper government introduced the Taxpayer Bill of Rights and the Commitment to Small Business to help improve the CRA's service to Canadians. The Taxpayer Bill of Rights is meant to enshrine the CRA's corporate values of professionalism, integrity, respect, and collaboration by setting clear standards for how taxpayers should be treated when interacting with the CRA.[67] These rights include the right to privacy and confidentiality, to expect clear service standards, and to lodge service complaints and request formal reviews without fear of reprisal.
Criticism and controversies
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Call centre operations
In 2015, the CBC reported that an internal survey determined that 1 in 4 calls asking for help from the CRA's business enquiries call centre received inaccurate information.[68]
Financial records to the U.S. government
In September 2019, the CRA was criticized for sending nearly 900,000 financial records of Canadian residents to the Internal Revenue Service in the United States.[69] This represents significant growth from 700,000 in 2017 [citation needed] and 150,000 in 2014. [citation needed]
Tax complaints
In 2016, the Financial Post reported that the auditor general criticized the CRA for taking too long to respond to tax complaints. The delays cost Canadian taxpayers large sums of money in interest on the amounts in dispute.[70]
Canada Emergency Response Benefit (CERB)
The CRA has been criticised for its handling of CERB. The CRA admitted in December 2020 that "unclear" instructions given to call centre agents relating to CERB led to confusion around eligibility.[71] Since then, it has asked certain recipients to repay their benefit in full.[72]
In 2023 the CRA began investigating its employees who had utilized the CERB benefit while being employed with the agency.[73] On October 16 2024, following an internal investigation it was announced over 330 employees that worked for the CRA no longer work for the agency. An additional 30 employees were subjected to disciplinary measures.[74]
Mismanagement of Taxpayer Funds
In 2023, the CRA admitted that it had paid out $100 million to scammers engaging in a "carousel scheme".[75]
Settlement Practices and Controversy
In March 2016, it was claimed that the CRA violated its own policy by offering to forego imposing gross negligence penalties or criminal investigation of wealthy clients of KPMG engaged in what the CRA alleged were sham transactions to hide offshore assets if those taxpayers agreed to pay tax and arrears interest without contesting amounts owing. This was considered by some experts as violating standard CRA policy, according to which such misconduct would only be eligible for the waiver of penalties if the taxpayer voluntarily disclosed the misconduct before CRA learned of the practice.[76] The incident sparked internal division. In May 2022, Federal Court filings revealed that the CRA granted tax deals to a major, unnamed corporation based in the United States and Netherlands relating to transfer pricing allocation of international goods and services..[77]
The goods and services tax is a value added tax introduced in Canada on January 1, 1991, by the government of Prime Minister Brian Mulroney. The GST, which is administered by Canada Revenue Agency (CRA), replaced a previous hidden 13.5% manufacturers' sales tax (MST).
In Canada, there are two types of sales taxes levied. These are :
The harmonized sales tax (HST) is a consumption tax in Canada. It is used in provinces where both the federal goods and services tax (GST) and the regional provincial sales tax (PST) have been combined into a single value-added tax.
Tax returns in Canada refer to the obligatory forms that must be submitted to the Canada Revenue Agency (CRA) each financial year for individuals or corporations earning an income in Canada. The return paperwork reports the sum of the previous year's taxable income, tax credits, and other information relating to those two items. The return is the method by which the Canadian government determines the appropriate amount of tax that should be paid by individuals and corporations. The result of filing a return with the federal government can result in either a refund, or an amount due to be paid. There is a penalty for not filing a tax return.
A registered retirement savings plan (RRSP), or retirement savings plan (RSP), is a type of financial account in Canada for holding savings and investment assets. RRSPs have various tax advantages compared to investing outside of tax-preferred accounts. They were introduced in 1957 to promote savings for retirement by employees and self-employed people.
The Australian Taxation Office (ATO) is an Australian statutory agency and the principal revenue collection body for the Australian Government. The ATO has responsibility for administering the Australian federal taxation system, superannuation legislation, and other associated matters. Responsibility for the operations of the ATO are within the portfolio of the Treasurer of Australia and the Treasury.
In Canada, taxation is a prerogative shared between the federal government and the various provincial and territorial legislatures.
The T1 General or T1 is the form used in Canada by individuals to file their personal income tax return. Individuals with tax payable during a calendar year must use the T1 to file their total income from all sources, including employment and self-employment income, interest, dividends, and capital gains, rental income, and so on. Foreign income must also be declared and included in the total income. After applicable deductions and adjustments, the net income and taxable income are determined, from which the federal tax and the provincial or territorial tax are calculated to give the total payable. Subtracting total credits, which include the tax withheld, the filer will either receive a refund or have balance owing, which may be zero.
Income taxes in Canada constitute the majority of the annual revenues of the Government of Canada, and of the governments of the Provinces of Canada. In the fiscal year ending March 31, 2018, the federal government collected just over three times more revenue from personal income taxes than it did from corporate income taxes.
Income taxes are the most significant form of taxation in Australia, and collected by the federal government through the Australian Taxation Office (ATO). Australian GST revenue is collected by the Federal government, and then paid to the states under a distribution formula determined by the Commonwealth Grants Commission.
The Canadian Scientific Research and Experimental Development Tax Incentive Program provides support in the form of tax credits and refunds to corporations, partnerships or individuals who conduct scientific research or experimental development in Canada.
Taxpayers in the United States may face various penalties for failures related to Federal, state, and local tax matters. The Internal Revenue Service (IRS) is primarily responsible for charging these penalties at the Federal level. The IRS can assert only those penalties specified imposed under Federal tax law. State and local rules vary widely, are administered by state and local authorities, and are not discussed herein.
In Canada, motor vehicles are primarily powered by gasoline or diesel fuel. Other energy sources include ethanol, biodiesel, propane, compressed natural gas (CNG), electric batteries charged from an external source, and hydrogen. Canada, like most countries, has excise taxes and other taxes on gasoline, diesel, and other liquid and gas motor fuels, and also taxes electricity at various administrative levels. Most provinces and territories in Canada also have taxes on these motor fuels, and some metropolitan areas such as Montreal, Greater Vancouver, and Victoria impose additional taxes.
Sales taxes in British Columbia come in the form of the Goods and Services Tax (GST) and Provincial Sales Tax (PST).
A charitable organization in Canada is regulated under the Canadian Income Tax Act through the Charities Directorate of the Canada Revenue Agency (CRA).
The Disability Tax Credit (DTC) is a non-refundable tax credit in Canada for individuals who have a severe and prolonged impairment in physical or mental function. An impairment qualifies as prolonged if it is expected to or has lasted at least 12 months. The DTC is required in order to qualify for the Registered Disability Savings Plan, the working income tax benefit, and the child disability benefit. Families using a Henson trust, the Canada Disability Child Benefit other estate planning methods for children with Disabilities are not excluded from the DTC. While the credit is valuable, many have found qualifying for it challenging.
The United Arab Emirates is a federation of seven Emirates, with autonomous federal and local governments. The UAE has historically been a low-tax jurisdiction. The federal government and local governments are entitled to levy taxes on citizens and companies. The federal government currently levies a value added tax, corporate income tax, and excise taxes. Some emirates levy property, transfer, excise and tourism taxes. Some emirates also charge corporate taxes on oil companies and foreign banks.
Under the federal law of the United States of America, tax evasion or tax fraud is the purposeful illegal attempt of a taxpayer to evade assessment or payment of a tax imposed by Federal law. Conviction of tax evasion may result in fines and imprisonment. Compared to other countries, Americans are more likely to pay their taxes on time and law-abidingly.
Charities Directorate of Canada is part of the Federal Ministry of National Revenue, and is responsible for reviewing the applications for charity registration, as well as auditing and maintaining accountability through education and responsible enforcement. They work to count and monitor the registered charities operating in Canada in the fairest way possible. As of December 2014, there were 86,193 charities registered in the directorate. The Directorate is located in Ottawa, in the Canadian Revenue Agency offices.
The Government of Canada introduced multiple temporary social security and financial aid programs in response to the economic impacts of the COVID-19 pandemic in Canada. The initial CA$82-billion aid package was announced on March 18, 2020 by Justin Trudeau.
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