Canada Revenue Agency

The CRA is led by the Minister of National Revenue and the Commissioner of Revenue and Chief Executive Officer. The Minister of National Revenue 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 of National Revenue is the Hon. Diane Lebouthillier, who was appointed to the portfolio on November 4, 2015.[15]

The Commissioner and Chief Executive Officer oversees the day-to-day operations of the Agency, and advises the Minister on the duties and functions of the CRA as prescribed by legislation.[16] The current Commissioner and Chief Executive Officer is Bob Hamilton, who was appointed to the position on August 1, 2016.[17]

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 of incapacity. The current Deputy Commissioner is Christine Donoghue, who was appointed to the position on August 29, 2018. [18]

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.[26]The Board develops the CRA's Corporate Business Plan each year, which sets out objectives, performance expectations, and financial allocations within the Agency.[26]

The Board of Management is divided into four committees, Audit, Governance and Social Responsibility, Human Resources, and Resources, and one subcommittee, Service Transformation.[27] 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]

The CRA maintains four advisory committees to assist in the Agency 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.[28] The current advisory committees are as follows:

• Advisory Committee on the Charitable Sector
• Audit File Resolution Committee
• Disability Advisory Committee
• Offshore Compliance Advisory Committee

Connaught Building, headquarters of the Canada Revenue Agency

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.[29] 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.[16]

CRA office in Surrey, British Columbia

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.

CRA office in downtown Montreal, Quebec

• Atlantic
• Ontario
• Quebec
• Western

Tax centres are responsible for intaking and processing individual and business tax returns.[16] 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:[30]

• Jonquière Tax Centre (Quebec)
• Prince Edward Island Tax Centre (Atlantic)
• Sudbury Tax Centre (Ontario)
• Winnipeg Tax Centre (Prairie & Pacific)

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.[16] 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:

¹Also responsible for the Northwest Territories

³Also responsible for Nunavut

National Verifications and Collections Centres are responsible for non-complex files related to collection, verification, and validation that do not involve in-person interaction.[16] These new facilities were introduced by the Agency in 2016 as part of an effort to modernize the Agency's services.[32] There are three NVCCs located across Canada:

• St. John's NVCC
• Shawinigan NVCC
• Surrey NVCC

As of the 2018-19 fiscal year, the CRA employs about 43,908 people across Canada,[5] and is 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. [5] 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.[33] The average age of a CRA employee is 45 years old.[34]

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 form other government departments and agencies.[35] By consequence, the job classifications used by CRA do not align with those typically used in other parts of the public service.

Executives, management, and students are generally not represented by a union. However, the majority of CRA employees are represented by Union of Taxation Employees, which is a component of Public Service Alliance of Canada.

Auditors, investigators and computer systems employees are represented by Professional Institute of the Public Service of Canada.

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.[37]

Income is generally reported through the T-series forms, with the number corresponding with a specific type of income situation.[38] 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.

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.[39] 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.[40] 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.[40]

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.

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.

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.

GST/HST returns are due monthly, quarterly, or annually depending on the volume of sales. If sales are less than $30k per year, a business may qualify as smaller suppliers, who are not required to register for GST/HST.

An employer is required to withhold income tax and payroll taxes, such as CPP & EI, and to remit the withheld amount to 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 CRA.

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.

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.[43] 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.[44]

While most taxpayers file only through the CRA, Quebec residents file separately with the CRA and Revenu Québec each year.

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.[45] 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.[46]

The Canada Revenue Agency collects the Goods and Services Tax (GST) (the Canadian federal value added tax) of 5% 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% added to the value of most sales of goods and services. The GST was reduced to 6% in 2006 and 5% in 2008, the current rate.

In Prince Edward Island, New Brunswick, Newfoundland and Labrador, Nova Scotia and Ontario the Goods and Services Tax (GST) has been replaced by the Harmonized Sales Tax (HST). The Harmonized Sales Tax combines the national GST and the provincial sales tax into a single tax. The HST is administered by the CRA. Each province that has Harmonized Sales Tax receives its portion of the HST from the CRA.

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.

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.

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. However, income earned through CERB is taxable and those who applied without being eligible could face penalties during future tax assessments. Eligible recipients are 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.[47] The benefit is 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.[48]

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. [49] CESB received about 2.1 million applicants, with over 675,000 unique applicants as of August 2020.[47]

The CRA performs audits to ensure that taxpayers are meeting their tax obligations, are compliant with tax legislation, and receive the benefits they are entitled to.[50] 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.[51] Taxpayers must cooperate with auditors or face obstruction charges under S. 238 of the Income Tax Act.[51]

Income tax audits can be done by Tax Centres (TC) and Tax Service Offices (TSO). TC conducts some very limited reviews of the tax returns filed, such as pre-assessment review of donations and tuition fees, post-assessment review of medical expenses and moving expenses. Most audits are conducted by auditors working in TSO. Auditors working in office audit program normally restrict their audit to business expenses reviews. They conduct their audit 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.

GST/HST audits are generally done by TSOs. Prepayment program deals only with a credit return, that is, a GST/HST return that requests a refund. The prepayment audit 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.

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.

CRA operates four investigation programs: Voluntary Disclosures Program, Informant Leads Program, Special Enforcement Program and Criminal Investigations Program.[52]

• 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.[53][54]
• 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.
• Special Enforcement Program (SEP): As proceeds of crime are taxable,[55] this program specifically conducts audits and undertake other civil enforcement actions on individuals known or suspected of deriving income from illegal activities.[56] Collections Officers are responsible for collecting taxes owed and to seize assets under the Income Tax Act.[55] The program was eliminated after the 2012 federal budget cut.[57]
• Criminal Investigations Program (CIP): Investigators from this program are responsible for suspected cases of tax evasion, fraud and other serious violations of tax laws.[58] Criminal Investigators are given badges and can only exercise investigative power in compliance with the Canadian Charter of Rights and Freedoms.[51][59]

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.

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.

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.

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.

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 taxpayer's claim and evidence, then looks at the evidence and arguments made by the government before passing judgment. The CRA 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, administrative law, constitutional law and the laws of evidence. In addition, the taxpayer is not responsible for costs in relation to their opponent, but only for their costs related to their own defense. In the event the appeal is successful, however, a repayment of costs from the CRA may be sought.

Tax court deals with income tax, excise tax, and CPP/EI issues. If a tax return has no tax payable, tax court could not deal with it. If it is about a provincial tax, tax court could not deal with it and it has to be resolved in a provincial court.

Tax court has two procedures, informal and general. The informal procedure is cheap and fast. 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 a higher court. General procedures deal with all assessments and require a taxpayer either to represent themselves or get a lawyer. General procedures could drag on for years and the decisions are precedent-setting.

If a taxpayer is still not happy about the tax court decision, they could take it to the federal court of appeals, or even further to the Supreme Court of Canada.

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 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.

The Office of the Taxpayers' Ombudsman is an arm's-length office which reports directly to the Minister of National Revenue to improve accountability at the CRA. The Taxpayers' Ombudsman 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 Ombudsman is currently vacant, with an ongoing process underway to appoint a successor.

In fulfilling this mandate, the Ombudsman reviews complaints from taxpayers that report breaches of their service-related rights by the CRA. The Ombudsman upholds the eight taxpayer service rights in the Taxpayer Bill of Rights that are directly related to the services delivered by the CRA. To uphold these rights, the Office of the Taxpayers' Ombudsman facilitates access to the available redress mechanisms for taxpayers and raises awareness of the role of the office and the Taxpayers' Ombudsman.

In addition to individual examinations, the Ombudsman may, on its own initiative, conduct an examination of systemic service-related issues. The Minister of National Revenue may also request the Ombudsman conducts an examination.

Examinations are reported to the Minister of National Revenue and made public Each year, the Ombudsman releases an annual report that is presented to the Minister of National Revenue that is in turn tabled in Parliament.

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.[60] 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.

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.[61]

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. This represents significant growth from 700,000 in 2017 and 150,000 in 2014.

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.[62]