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The Canadian Revenue Agency (CRA) states their goal is ‘to administer tax, benefits, and related programs and to ensure compliance on behalf of governments across Canada, thereby contributing to the ongoing economic and social well-being of Canadians’. All benefits paid in 2010-2011 made up only 10% of CRA expenditures, and 46% of those payments were for Child Tax Benefits (CCTB). Canada’s tax system is based on voluntary compliance, and CRA is the muscle making sure taxpayers comply. www.cra-arc.gc.ca/gncy/snpsht/2010-2011/snp-sht-eng.html
Mrs. X suggests her experience was nothing less than harassment. It started with a letter from Surrey CRA, telling her she had been randomly selected for a CCTB audit. Mrs. X suspects she was selected by a computer-generated list, but doesn’t understand why. Her total earnings for the taxation year 2010-2011 were $3,127, with a total family income of under $23,000.
She was confident that providing the information would be easy, and filled out the questionnaire that came with the original letter. She needed to prove she lived at her current address since 2007, and that her children lived there with her. CRA provided a list of acceptable documents.
First on the list were rent receipts. The X family own their home, so Mrs. X provided copies of property tax receipts. Next, CRA wanted Mrs. X’s mortgage and insurance papers, but the family bought the land privately. She had no mortgage or insurance papers. Utility bills were listed: gas, electricity, cable, and phone bills were all acceptable.
The Xs live on solar power, have no gas, cable or internet bills, so telephone bills were all she could provide. CRA wanted to see documents from the companies that held their medical or dental plans. The Xs had neither. Mrs. X has no RRSPs, nor any registered vehicles. She doesn’t have a valid drivers license either, all documents CRA requested.
Next, she needed to satisfy that her children live with her. The list requested was even more problematic. It included letters from school authorities, as well as one from their doctor or dentist. CRA wanted copies of report cards and school registrations.
The Xs homeschool their children. By some estimates, only 1% of Canadian families are registered homeschoolers. The Xs represent an even smaller percentage of Canadians who refuse to even register their children.That left letters from their doctor or dentist. Mrs X supplied receipts of the dental work done on the children. To prove her children lived at her address, she gave copies of time-stamped envelopes addressed to each child from relatives.
In December 2011, CRA replied to her thirteen-page package. She had not confirmed her eligibility for her CCTB or GST/HST credit. CRA asked her again to supply the documents she was unable to produce, so Mrs. X contacted MP for BC Southern Interior, Alex Atamanenko. She sent copies of all correspondence to him. Unfortunately his office was sympathetic but powerless against CRA policy.
In February 2012, Mrs. X received notice that CRA was stopping CCTB and GST/HST payments due to a change in eligible children. She would be required to repay benefits received since 2008. Thirty days later, she received a bill for GST/HST repayment $1,704.25. A second bill followed for CCTB: $17, 708.20 totaling $19, 412.45, Mrs. X now owed CRA.
She appealed the decision, submitting a notarized statement reaffirming her children had always lived with her. Her CCTB and GST/HST credits had been suspended for three months, and the family was struggling to keep up.
Another list of documents was requested for a third time. Mrs. X responded with a new round of reference letters and receipts, totaling eighteen submitted documents. She finally won her appeal. It took six weeks before she received her retroactive payment for five months of CCTB, and eight weeks for GST/HST.
Mrs. X believes this is a gross abuse of administrative power and a blatant contradiction to CRA’s stated goals. She says she will no longer comply with voluntary reporting, and receive no benefits as a result.
“If CRA can demand repayment, and want you to pay immediately to avoid interest, voluntary compliance is a risk I won’t take anymore.”
The X’s story is only one of four in her small BC community of fifteen hundred people. How many low-income Canadians are forced into economic distress due to ‘random’ audits and with only 10% of CRA expenditures going to benefit payments, how cost affective are these audits in the first place?