CRA taking too long to resolve taxpayer disputes: auditor general

The Canada Revenue Agency takes too long to resolve taxpayers’ objections, according to a new report by the auditor general of Canada.

If a taxpayer believes the CRA has made a mistake in assessing their income tax, they can file a formal objection. Unfortunately for the taxpayer, resolving that complaint can take months or even years: an average of 143 days for “low-complexity” objections and up to an average of 896 days for “high-complexity” objections, according to the report.

Approximately 7,800 objections resolved over the last five fiscal years took more than 10 years to settle.

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Aside from the pain of filing a complaint, there can be real financial repercussions: taxpayers are charged interest on any outstanding amounts. If their objection is dismissed, then they owe whatever they didn’t already pay – plus any interest incurred while waiting for a decision.

Taxpayers also have the right to timely reviews of their objections, though legislation and the CRA itself don’t define “timely” anywhere, the report notes.

Fortunately, most objections are settled in the taxpayer’s favour, according to the report. Just over half of objections received were at least partly allowed. But if you take out all the objections that were immediately dismissed because they weren’t filed in time or for other such administrative reasons, taxpayers’ odds get even better: 65 per cent of cases were found in their favour.

System backlog

All these delays are leading to serious backlogs in the CRA’s case load, the auditor general found.

In the past 10 years, the number of outstanding income tax objections has risen by 171 per cent. As of March 31, 2016, there were 171,744 objections that had yet to be resolved, with amounts totalling over $18 billion.

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By comparison, the number of CRA staff dedicated to resolving objections only grew by 14 per cent.

Although the backlog has actually decreased very slightly in the last two years, the auditor general is concerned that it will soon rise again, with the CRA receiving more objections than usual.

The auditor general made several recommendations to the CRA, which the agency accepted. These include:

• Providing taxpayers with better estimates of how long it will take to resolve their complaint.
• Reviewing the objection process with an eye to making it quicker.
• Better sharing information within the agency.

The CRA said that estimated timelines for complaint resolution will be available on its website for the upcoming 2016-17 fiscal year. The CRA will also set a target of resolving 80 per cent of low-complexity objections within 180 days, in the 2017-18 fiscal year.