To teach her students a valuable lesson, a friend of mine asks them to divide $20. Students get to keep the money only if they can agree on how to share it. The only rule is that they are not allowed to split it equally. As a result, most don’t get any money.
Lesson? Fairness is a very powerful and important principle for most people.
As a result of last week’s federal budget, dealing with the Canada Revenue Agency just got fairer.
Lack of fairness is at the heart of many of the complaints we hear about tax authorities. For example, it feels unfair to get a letter from the taxman using language that makes you feel guilty of a crime you didn’t commit. It certainly doesn’t seem fair that the language in many tax bulletins is beyond confusing.
And the ultimate in unfairness is not being able to rely on the government’s own tax compliance advice.
Several years ago, the Canadian Federation of Independent Business made 145 “secret shopper” calls to the CRA and found that 20 percent of the time agency staff gave incomplete or incorrect answers to standard questions from small business owners. More recently, it was reported that the CRA’s own study found its agents provided wrong advice even more often, 25 percent of the time.
Bad tax advice can be a big problem if you are audited. We know of businesses who have been assessed tens of thousands of dollars for the “mistake” of following bad government advice. The stress of these situations cannot be overstated. We dealt with one case where an owner was assessed $93,000 for following advice in a government tax bulletin for her industry. She told us that paying the tax bill would cost her house or her businesses. The obvious unfairness of cases like these led CFIB to advocate for changes to tax administration policies, both provincially and federally.
The B.C. government was an early leader in this area in 2005 when then-revenue minister Rick Thorpe introduced a Taxpayer Fairness and Service Code that committed to respect written tax advice—even if it was wrong. Previously, government had only been willing to provide interest and penalty relief in such situations. Thorpe championed the Code passionately with the bureaucracy, and his commitment greatly improved the relationship between small business and provincial government. Beyond that, his policy changes proved a model for Ottawa.
The CRA took its first step toward fairness when its agents stated identifying themselves with caller ID numbers a few years ago. Then it agreed to respect its own written information provided through CRA’s MyBusiness Account, which represented a huge fairness breakthrough for small business taxpayers.
Last week’s budget takes tax fairness to new levels. The CRA will now respect written advice in tax bulletins, letters and information on its website. Further, it will put its 100 most commonly used written communication pieces in plain language. It will help businesses better understand the CRA audit process, including rights and recourse with respect to auditors. Finally, CRA plans to make permanent a new program it was testing to visit businesses to help with compliance rather than just to audit.
CRA currently has a strong minister, Kerry-Lynne Findlay, who places a high premium on improving the agency’s culture. She is from B.C. and knew what she was doing when she appointed Thorpe to chair the CRA’s Board of Management in 2013.
Both understand the lesson my friend taught her students: Relationships work best when there is fairness. In this case, businesses pay their taxes and government provides reliable, understandable advice.