Saskatchewan’s provincial auditor Tara Clemett made six recommendations with regard to the Ministry of Finance’s processes for enforcing compliance with the Provincial Sales Tax (PST).
Audits found that $10 million in PST was collected by vendors and not reported and paid to the ministry in 2021-22, compared with $3 million in 2020-21.
The ministry doesn’t look at why this amount changed, and Clemett recommended that key trends be analyzed in non-compliance with PST legislation to prioritize enforcement activities.
Over $2 billion is collected annually for PST, which is about 30 per cent of the total provincial tax revenue.
The auditor’s report says the ministry uses enforcement, like audits, education and outreach, and collection activities to promote PST legislation and to collect taxes, but adds that unpaid taxes get more difficult and expensive to collect the longer amounts are left outstanding.
The report outlined that $77 million in PST was collected in 2021-22 through collection activities, and more than 1,200 audits in the same time span generated $47 million in PST revenue.
Clemett said the other recommendations included enhancing reporting to senior management to better analyze PST enforcement results, documenting the key judgements when selecting taxpayers for PST audits, setting out timeframes for reviewing audits and enforcement activities, communicating the results to taxpayers, and assigning the appropriate amount of risk to collection cases.
“Understanding where and how tax is potentially lost is key to making sure the government collects the PST it is owed,” said Clemett. “Also, timely communication of tax enforcement results can help promote improved compliance by taxpayers and earlier payment of amounts owing.”
The report showed that the gross unpaid PST more than doubled since 2017, increasing to over $283 million in 2021-22 from over $119 million in 2016-17.
Clemett said the Revenue Division in the ministry has limited resources and needs to be looking at areas where its enforcement activities should be focused.
“As these things evolve, always thinking about what are those vendors that maybe don’t have a good understanding of what are those PST rules, what do they have to pay, how often do they pay it.
“It’s sometimes about education and outreach, in other instances it is about that tax avoidance.”
The report noted that more could be done for public reporting on tax enforcement.
The Ministry of Finance reports some information to the public, with performance measures like the benefit-cost ratio of taxation audit and compliance activities, as well as the client satisfaction of businesses that collect taxes on behalf of the government, being highlighted in the 2020-21 reports.
The auditor’s report noted that there was no clear rationale for the publicly reported performance measures, adding that guidance should be given on determining which measures to report, as well as a recommendation to consider additional reporting.
Comments