Spending by your favourite department

CRA isn’t a big spender in relation to its departmental siblings. While its roughly $4-billion annual budget amounts to less than 2% of total government spending, we’re always interested in what our friendly neighbourhood tax collector is doing with public dollars.

CRA’s total spending was $4.1 billion in 2015–16, down slightly from five years earlier. Personnel expenses (salaries, other allowances and benefits) represented 74% of total expenses, the agency says. The remaining 26% of spending came from other costs such as accommodation and information-technology related expenses.

Total spending and full-time equivalent employees

Boosting tax compliance

CRA expects to collect billions more for the government as the agency receives additional funding from Parliament for tax compliance efforts. That likely includes much more auditing.

The Trudeau government’s 2017 budget allocated an additional $523.9 million to CRA over the next five years to hire more auditors to work on tax evasion and tax compliance.

The new funding will be used to increase CRA’s verification activities; hire specialists to focus on the underground economy; develop business intelligence and risk assessment systems for high-risk, international tax cases; and step up investigations of criminal tax evasion. The previous year’s budget provided $444 million over five years to boost CRA’s tax evasion and avoidance efforts.

The 2016 federal budget estimated tax compliance improvements would reap additional federal revenues of $2.6 billion, while the 2017 budget measures account for another $2.5 billion over five years.

Initial steps were already being taken, the government said in March, “to prevent wealthy individuals from using private corporations to inappropriately reduce their tax payable.” As Advisor.ca has thoroughly reported, the Finance Department is also reviewing income sprinkling and passive investments for small business corporations.

Rest assured, the Finance Department says: CRA has a “proven track record of meeting expectations from targeted compliance interventions.” In other words, be afraid.

CRA budget summary for program and internal services (dollars)

Program 2013-14

actual spending

2014-15

actual spending

2015-16

actual spending

2016-17

planned spending

2017-18

planned spending

Taxpayer and
business assistance
350,801,699 292,809,925 418,438,658 412,286,804 280,544,765
Assessment of returns and payment processing 649,108,155 640,377,518 606,377,627 503,182,149 496,115,166
Benefit programs 374,414,324 351,409,527 449,400,252 434,832,503 441,578,904
Reporting compliance 1,084,562,230 1,108,667,741 1,076,656,765 1,067,140,214 1,062,160,684
Collections and returns compliance 496,787,602 519,837,234 495,342,255 632,051,666 618,542,264
Appeals 190,219,456 204,406,362 181,214,477 185,568,739 185,234,324
Taxpayers’ ombudsman 2,524,101 2,614,097 2,047,159 3,235,854 3,227,940
Internal services 914,441,789 940,711,586 917,510,101 847,420,254 843,948,992
Total all programs 4,062,859,356 4,060,833,990 4,146,987,294 4,085,718,183 3,931,353,039

Doubtful accounts

CRA, much as it tries, can’t collect everything owed to it.

The agency’s total allowance for “doubtful accounts”—or debts it doesn’t expect to collect—was $13.8 billion as of March 31, 2016. That’s risen from $5.7 billion at the end of fiscal 2004–05, according to an Ottawa Citizen report.

“In some cases, despite the CRA’s best efforts, some tax balances cannot be collected and need to be written off. This amount represents less than 1% of the $501 billion in tax and other revenues collected,” says David Walters, a CRA spokesperson.

He says that, in 2015–16, 93% of individuals and 86% of corporations filed and paid their tax returns on time, “without CRA intervention.” The same year, Walters says, the agency recovered more than $52 billion in outstanding tax debts.

What CRA collects

CRA collects a wide range of money owed to government, not just income tax, corporate tax and HST remittances. These include:

  • customs, excise and other levies,
  • benefit overpayments such as Canada child benefit or GST/HST credits,
  • defaulted Canada Student Loans,
  • Employment Insurance overpayments and penalties,
  • Training Allowances Payment System overpayments,
  • Canada Pension Plan overpayments,
  • grants and contributions overpayments,
  • operations and maintenance receivables,
  • other Employment and Social Development Canada program overpayments or penalties.

Uncollected receivables

Total uncollected receivables, including taxes, interest, penalties and other assessed revenues, were a net $105.2 billion at the end of 2015–16, after accounting for the $13.8 billion in doubtful accounts. Uncollected receivables, a significant portion of which relate to the current fiscal year but are not due to be paid by taxpayers until the next one, had risen from $96.9 billion owing at the end of 2014–15.

Net uncollected receivables

2015 2016
Individuals $48.5 billion $53.9 billion
Corporations $14.7 billion $15.7 billion
Employers $16.8 billion $18.9 billion
Non-residents $1.3 billion $1.4 billion
Miscellaneous $1.3 billion $1.1 billion

by Simon Doyle, an Ottawa-based financial writer.

Originally published in Advisor's Edge Report

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Mark Schneider

As a small business owner I see that the CRA Benefits program more or less equals Tax payer and Business assistance expenses. Since the Fed wants us to pay more tax than employees earning the same income we must eliminate paid benefits to levelize the playing field. That would be fair.

Friday, Nov 24, 2017 at 4:26 pm Reply