RESEARCH ON THE DUTY AND CARE OF CRA TO THE PUBLIC TAXPAYERS OF CANADA.
By Dan White, from personal observations of the real world of Canada Revenue Agency conduct on a daily basis. These are not isolated cases, my experience is from the run of the mill, bump and grind in the daily life of dealing with tax problems.
This article is not about avoiding paying taxes. On the contrary we believe that everyone should pay their accurate share of taxes… no more and no less. This article is about bringing some clarity as to how the CRA operates and to what degree it is accountable for its actions. This article is also about understanding what our options are in dealing with an agency that does not appear to care about the harm they do to every day Canadians and their businesses.
The masses of evidence to confirm that the Canada Revenue Agency (CRA) does harm to Canadians is beyond dispute. We often hear the term “conspiracy theory.” The term should not be used because it carries with it a connotation that the party bringing up the subject is some kind of flake. The term that is more appropriate and does not give rise to a credibility issue, is “Government Planning.” No one can dispute that the government ‘plans,’ the only question is to what extent. What we need to see is the evidence, the results… the “what is, is what it is.” Whatever the government is and does is what it is and does. It is just “What is, no more and no less.”
What we can see “is,” that we have a high degree of government complexity and obscured accountability. Here’s the principle at play: the best way to reduce the threat of government abuse of power is make the government simpler and smaller. We don’t see any effort at simplifying taxes or the organizations that are responsible for the administration of our laws and the behaviour of public servants.
An area of needless complexity is in record keeping and how it relates to audits. It is no secret that businesses need to keep records. It is equally no secret that businesses do not keep audit ready books. We hear lots of buzz about the various software packages out there and now accountants are using the term “Audit Ready.”
Very few accountants keep books and records ready for CRA at all times. When the brown envelopes arrive, there is the mad scramble to get the books and records together to conform with the requests from CRA.
One would ask a simple question; “Does CRA train their staff on how to do audits?” The answer is an obvious ‘yes.’ The second question is; “Does CRA train each auditor differently?” This time the answer is ‘no.’ So one can begin to conclude that auditors all pretty much conduct audits in the same way, especially for complex cases. That being the case if business is always prepared for a complex audit, then they are truly “Audit Ready.”
So if you consider that CRA’s mandate is to educate and ensure compliance and they play the role of judge and jury… Why are they not teaching businesses how to be audit ready and stay out of trouble?
By accident or design, CRA avoids that part of the business of collecting revenue. In reality if everyone knew how to keep audit ready books, and did so, CRA’s Revenue would shrink drastically. There is no vested interest in simplifying the business of accounting.
Audits gone bad are not a problem, so much as they are a symptom of a greater problem. That problem being that our tax laws and system is so convoluted that very few business people are able to handle the complexity. We need simplification of the entire process.
I am not going to hold my breath for the Minister of Revenue to announce that they have figured out how much money they want and are going to take a simple approach to getting it. An approach that would have a big objective of having the business survive financially and not require a trip to the local trustee would be nice.
A necessary change to the law is that Canadians should not owe taxes due to a technicality, they should owe tax because they financially benefited from income … in some way or another.
A necessary change is to stop eroding the public’s confidence in the CRA, as a credible and ethical arm of the Government of Canada. CRA’s stature is on a down hill slide at an unprecedented speed. I don’t write this because of all the bad press in the news, I write it from my personal experience of dealing with Canadians in various states of ruination and living in terror of CRA. (Craphobia) These people feel victimized, out of control and shamed. So long as the agency operates without being seen as empathetic, fair, reasonable or ethical, the time of public reckoning gets closer.
When the public sees evidence of no accountability by CRA for their actions, they will continue to lesson their respect for what is clearly a government agency accountable to the prime minister. Even the police and army are held accountable as public servants. Being that CRA has a duty of care and a duty of loyalty to the public, it is high time that that the government takes action to avoid the destruction of confidence in the government.
The hundred monkey cometh. We are reaching the tipping point of public awareness that something is drastically wrong with world wide governments. Generation M knows it is wrong, they just don’t understand why. They want it fixed, but they don’t know what needs to be fixed. It is up to the government of the day to bring change. They have huge power and need to bring it to bear to fix a broken tax system.
The underground economy is not a problem, it is a symptom of the real problem. The real problem is that Canadians no longer believe the tax system is fair and are willing to deal with people under ground. If Canadians bought into a belief that we had a fair tax system, we would not deal with anyone who did not carry their load.
The underground economy is huge, so much so that if we did not have an underground economy, we may not even have an economy at all. Let’s get the government dealing with problems instead of symptoms.
As a result of decades of dealing with tax problems created by CRA and dealing with an attitude by CRA staff that they are above the law, I decided to dig into just how does this machine called Canada Revenue Agency operates and what is their accountability to the citizens of Canada. Specifically we need to know to what extent does the CRA owe a duty of care and loyalty to the public. We also need to know who holds the smoking gun.
In this journey we need to look at what is the framework that contains an agency that states (As in the Irwin Leroux case) that it does not have a duty of care to Canadian Taxpayers when it comes to the economic harm they create. In other words they do not feel that causing financial harm to taxpayers even when CRA gets it wrong, makes them accountable. This position by the agency is very troubling to anyone who runs a business in Canada.
The end result of this analysis is that those who work for CRA are technically and legally “Public Servants.” As such there is a huge responsibility and accountability to the public. They have a duty of care and a duty of loyalty.
Public Servants are accountable to The Treasury Board which is a Cabinet committee of the Queen’s Privy Council of Canada. It was established in 1867 and given statutory powers in 1869.Tony Clement is the current President.
The Treasury Board is responsible for accountability and ethics, financial, personnel and administrative management, comptroller-ship, approving regulations and most Orders-in-Council.
The formal role of the President is to chair the Treasury Board. He carries out his responsibility for the management of the government by translating the policies and programs approved by Cabinet into operational reality and by providing departments with the resources and the administrative environment they need to do their work.
The Treasury Board has an administrative arm, the Secretariat, which was part of the Department of Finance until it was proclaimed a department in 1966.
Federal public servants have a fundamental role to play in serving Canadians, their communities and the public interest under the direction of the elected government and in accordance with the law. What we are observing is that many public servants have lost sight of the fact that they are servants of the public more so than servants of the government. A government that is supposed to be there to serve the public and not the other way around.
Public Servants work, done properly, is essential to Canada’s well-being and the enduring strength of the Canadian democracy, public servants are supposed to uphold the public trust. “Supposed to” being the operative words.
Today things have changed in Canada when it comes to public servants of the Government of Canada’s Canada Revenue Agency. A rapidly changing belief of “I have done nothing wrong, so I have no reason to fear CRA,” is changing to “I have heard the CRA horror stories and I fear that I am about to become a victim.” We are seeing a new order where businesses in Canada are learning to have extreme fear of CRA audits and especially CRA Collections.
CRA collections operates on fear and the fact that tax debtors feel a sense of shame when they can not pay their taxes, and therefore do not normally make it public that they feel abused. However that is changing and there is growing resentment to the Collections Agency that strikes terror in the hearts of those with tax debts. The fear of CRA collections is in some cases greater than the fear of the Mob… Mob debtors know the deal of owing them money and the consequences of not paying the debt. The mob wants to keep the debtor alive so they can continue paying the debt, and unless there is no willingness to pay, they work with the debtor. CRA Collections on the other hand, does not appear to care if they put someone out of business and routinely threaten to put someone out of business and or take their homes. The Tax Debtors don’t know the game, so live in greater fear of the unknown than they would of the Mob. When it comes to CRA Collections, it is not a kinder gentler Canada. It is a mean machine that appears to only be interested in getting as much money as they can.
The mantra would appear to be that it is better to bankrupt Canadians than it is to cut government spending. CRA knows no boundaries, whether it is demanding child tax benefits back from a single mother, bankrupting a senior on a technicality or collecting tax on phantom income, they want the money and they are not willing to wait for it over a reasonable period of time, based on what is possible for the tax debtor to accommodate.
Today we hear the term “Swat Team” as appointed by the Minister of Revenue to catch offshore tax cheats. Think about that term and why is it used. One can only conclude that it is a scare tactic of politics and propaganda. And yes, it will scare tax cheats, but it will also scare those who only hope that they really have their financial affairs in order.
It is hard to feel good about CRA’s noise about offshore tax cheats when they don’t follow up on the leads they were given regarding the Lichtenstein Bank Accounts affair. Why was the signed treaty not made retroactive? Senator Downes continues to bring attention to this matter.
It is no secret that CRA uses intimidation in dealing with the public, in their letters they frequently state that failure to comply with their desires will result in legal action. The fear of the unknown is greater than the fear of the known, and CRA uses the fear of the unknown against Canadians on a daily basis. There is absolutely no reason that CRA can not write factual letters that explain the matter without making obscure threats. Their letters should be specific to what legal actions they may take.
CRA uses public shaming to get their way…. By placing terms such as… “sometimes known as… sometimes doing business as.” in the address bar of taxpayer’s brown envelopes. They know that the postman is local to the addressee, that it is embarrassing, and it’s only probable purpose is a form of public shaming. CRA will also indiscriminately approach taxpayer’s clients, banks and other third parties not even having a realizable objective in sight. They do not appear to care if they needlessly put a taxpayer out of business or his family out of their home. Auditors drop in to places of business and make it known to whoever is there, who they are and create negative repercussions for the business that sometimes has workers feel so insecure that they seek employment elsewhere. Apparently privacy is not all that important to auditors.
CRA Requirements to Pay (RTP) are so frequent that banks have set up special departments just to deal with them. CRA puts requirements to pay on bank accounts that have small amounts of money in them. We can understand that they want to grab funds that may be owed. But there is no need to have an account frozen that the taxpayer was hoping to use to pay for groceries for their families with. Causing children to go without food, seems like an unreasonable approach to collect revenue.
Often CRA has it wrong, or they have the taxpayer on a technicality where they should not actually owe the money, but due to a technical point that they missed a deadline or be phantom income, now the debt is collectible. CRA does not appear to care if a taxpayer is caught in a trap created by them not understanding the highly complex income tax act, they want the money they can collect regardless of the reasons the debt was created.
Freezing bank accounts simply causes harm to families and brings an end to the life of a business. The end often does not justify the means. If a reasonable payment plan could be arranged, the business could be saved and the taxpayer base would receive more money than could be taken from the bank account in the one raid.
It is not our experience that CRA shares our opinion of what is a reasonable payment plan. If CRA insists on an impossible payment term, then it usually ends up in an insolvency situation, where CRA ends up getting nothing much in the end. It seems that about once a week, we prepare clients for their visit to a trustee in bankruptcy.
We have an endless supply of tax audit horror stories. Tax payers go through emotional hell during CRA audits. When a client sends us a photo of themselves on a hospital gurney, there because of stress induced heart pain, resulting from an aggressive audit with unreasonable time demands, one starts to look at is this a form of terrorism.
Terror is a strong word, of which few scholars have been able to come to agreement on its meaning. So let’s look at the word “terror” and ask; What is terror? It is a noun, Extreme fear: “people fled in terror”; “a terror of darkness.” Synonyms: horror – dread – fright – fear – panic – dismay – scare.
Terrorism is an act of creating fear for the purpose of intimidating people, especially for political reasons.
The word “Terrorism,” which comes from the French word terrorisme, and originally referred specifically to state terrorism as practiced by the French government during the Reign of terror. The French word terrorisme in turn derives from the Latin verb terreō meaning “I frighten
The earliest use of the word terrorism identified by the Oxford English Dictionary is a 1795 reference to tyrannical state behavior.
Terrorism is the systematic use of terror, as a means of coercion.
Terrorism is usually designed to have far-reaching psychological repercussions beyond the immediate victim or target, such as the victim’s family.
A frequent use of terrorism is to exploit the media in order to achieve maximum attainable publicity by doing frequent press releases of who has been punished by CRA to create greater fear of the agency. The acts of terrorism can leverage human fear to help achieve the goal of tax compliance.
Repeated behavior made public by CRA strikes fear in the heart of anyone who runs afoul of CRA. The fall out from CRA enforcement action, is families put out of their homes, marriage breakups, the ruination of a business and salaried staff with families put out of work and death by stress. Children watch as their parents life is flushed down into the cesspool of family ruin.
It is difficulty to dispute that CRA is a state organization that illicits a high degree of fear for coercive purposes, with the end result of greater compliance with CRA wishes and as such we conclude that CRA commits acts of terror under the guise of tax audit and compliance.
The public reads press releases, watches the W-5 Tax Man documentaries, and reads the news develops an unhealthy fear of the Tax Man. The simple arrival of a brown envelope from CRA often so immobilizes the recipient that they can not even open the letter.
When CRA does a search and seizure of a premises, they often arrive with armed constabulary, flashing police car lights in a public light that would compare to a drug bust. The results of a raid on a taxpayers private home in front of the neigbours, spouse and children, would seem a flagrant abuse of power in a civil issue. The thought that such an event might happen, strikes terror in the mind and heart of any taxpayer, who under the charter of rights is innocent until proven guilty.
The stated purpose of CRA audits to ensure compliance, education and to maintain public confidence in the fairness and integrity of Canada’s tax system. To ensure that tax returns and claims are prepared properly, and that taxpayers receive all the amounts to which they are entitled.
Having handled countless audits in the last few decades, it is not our opinion that what transpires in an audit reflects what CRA purports it to be. The evidence supports that audits are purely for the purpose of generating revenue for the government. A.K.A. As a transference of wealth to the government.
One must keep in mind, that no one ever comes to us to complain about a fairly conducted audit, so our opinions are very likely jaded and that there are many good auditors out there is audit-ville. What we do know that there are more than enough bad audits to keep an industry of accountants and lawyers busy. Not to mention the over 5,000 annual complaints to the ombudsman who has no legal teeth, and the fact that the Minister’s office is very busy addressing Minister’s letters … which are letters of complaints about CRA.
Audits are about assumptions, the assumption that the taxpayer is a tax cheat, that there is unreported income, unreported taxable benefits and that not all expenses claimed were legitimate expenses. The auditor sets out to confirm their assumptions.
CRA consistently makes assumptions even in the face of hard evidence, forcing taxpayers to take the matter to court. This is in spite of the fact that the Courts have shown little patience for assumptions that are based on no evidence or that are clearly contradicted by evidence within the knowledge of the CRA.
The auditors now routinely conduct net worth assessments which are simply a process of guessing that the taxpayer’s wealth has magically increased and they receive a corresponding assessment for often crippling amounts of tax.
The days of Canadian businesses thinking that they have nothing to worry about in a tax audit are over. It has been replaced with the fear of an audit gone bad. Audits are not about compliance it is all about collecting revenue with no worries from CRA about consequences to the taxpayer.
Don’t just take my word for it, in reading and watching the media, it is no secret that the Tax Man often gets it wrong. From my perspective, that happens when auditors do not exercise their duty of care.
A duty of care, analogy would be, as in, a doctor conducting a heart transplant has a duty of care to keep the client alive … and not to just do the transplant. An auditor should attempt to keep a business alive so it can survive and pay their going forward taxes.
So as we ask the question, what can we do about this situation. It is indeed a good question where the answer lies in understanding where the responsibilities lie and who is in charge of what.
Let’s start with Canada, the legal structure and background:
Canada remains a Monarchy. Per the Canadian constitution, the responsibilities of the sovereign and/or governor general include summoning and dismissing parliament, calling elections, and appointing governments.
The Canada Act 1982 (1982 c. 11) is an Act of the Parliament of the United Kingdom that was passed at the request of the Canadian federal government to “patriate” Canada’s constitution, ending the necessity for the country to request certain types of amendment to the Constitution of Canada to be made by the British parliament. The Act also formally ended the “request and consent” provisions of the Statute of Westminster 1931 in relation to Canada, whereby the British parliament had a general power to pass laws extending to Canada at its own request.
The British North America (No. 2) Act 1949 was passed by the British Parliament, giving the Parliament of Canada significant constitutional amending powers. However, an Act of the British Parliament was still required to make some amendments in the Canadian constitution.
The Constitution Act, 1982 was signed into law by Elizabeth II as Queen of Canada on April 17, 1982 on Parliament Hill in Ottawa. Queen Elizabeth’s constitutional powers over Canada were not affected by the Act, and she remains Queen and Head of State of Canada. Canada has complete sovereignty as an independent country and the Queen’s role as monarch of Canada is separate from her role as the British monarch or the monarch of any of the other Commonwealth realms.
Canada Revenue Agency Act ( 1999, c. 17)
In the Canada Revenue Agency Act 1991, the Canada Revenue Agency (CRA) is noted as a “Body Corporate operating under the name of the Canada Revenue Agency.” The CRA was created by order of the Governor in Council and is binding on Her Majesty in right of Canada or a province.
According to the Department of Justice web site; the terms “body corporate” and “corporation” mean exactly the same thing. However, “body corporate” is an archaic term.
The Canada Customs and Revenue Agency is continued as a body corporate under the name of the Canada Revenue Agency. The Agency is for all purposes an agent of Her Majesty in right of Canada.
On April 29, 1999, Parliament passed the Canada Customs and Revenue Agency Act, (1999, c. 17) which established the Canada Customs and Revenue Agency (now the Canada Revenue Agency). The change in status from department to agency, which took place on November 1, 1999.
An agency is a permanent or semi-permanent organization in the machinery of government that is responsible for the oversight and administration of specific functions, such as collecting revenue.
Agencies can be established by legislation or by executive powers. The autonomy, independence and accountability of government agencies also vary widely.
Being that corporations are normally “persons.” versus live persons, then then CRA is a person under the laws and one would assume that except were specifically excluded, are subject to the Canada Corporations Act (1970, c. C-32)
Corporations Canada regulates federal incorporation under the Canadian Business Corporations Act 1985. All of the Canadian provinces also have laws permitting (and governing) the incorporation of provincial corporations. Often, the choice of whether to incorporate federally or provincially will be based on many business considerations, such as scope of business and the desire for application of particular rules which may be available under one corporate statute but not another.
The Canada Business Corporations Act, also known as Bill C-44, is a Canadian act in respect to Canadian business corporations.
Corporations Canada is the government agency of Industry Canada responsible for incorporation of Canadian businesses and “corporate laws governing federal companies, except for financial intermediaries”.
The CRA is responsible for the administration of tax programs, as well as the delivery of economic and social benefits. It also administers certain provincial and territorial tax programs. In addition, the CRA has the authority to enter into new partnerships with the provinces, territories, and other government bodies to administer non-harmonized taxes and other services, at their request and on a cost-recovery basis.
The CRA enforces compliance with Canada’s tax legislation and regulations and is supposed to play a role in the economic and social well-being of Canadians. The CRA is supposed to committed to providing excellent service to clients, (The public) and ensuring responsible enforcement of legislation.
CRA is a federal agency (Corporation) that administers tax laws for the Government of Canada and for most provinces and territories, international trade legislation, and various social and economic benefit and incentive programs delivered through the tax system. It also oversees the registration of charities in Canada, and tax credit programs such as the Scientific Research and Experimental Development Tax Credit Program.
The headquarters of the Agency must be at such place in Canada as may be designated by the Governor in Council.
The Minister of National Revenue is accountable to Parliament for all the CRA’s activities, including the administration and enforcement of the Income Tax Act and the Excise Tax Act.
The Minister must ensure that the CRA operates within the overall government framework and consistently treats its clients with fairness and integrity. This begs the question; “how is it fair to collect tax on a technicality?”
The CRA’s Board of Management is not involved in all the CRA’s business activities. It does not have the authority to administer and enforce legislation or to access confidential client information.
The Board of Management consists of 15 members appointed by the Governor in Council. Eleven of these members are nominated by the provinces and territories. The Board has the responsibility of overseeing the organization and management of the CRA, including the development of the Corporate Business Plan, and the management of policies related to resources, services, property and personnel.
The governor in council is the Governor General of Canada and is the federal viceregal representative of the Canadian Monarch, Queen Elizabeth II., acting on the advice of the federal cabinet. Orders in council and minutes of council are signed by the governor general giving legal force to cabinet decisions relating to a statutory authority or the Royal Prerogative.
The Queen, on the advice of her Canadian Prime Minister only, appoints the Governor General to carry out most of her constitutional and ceremonial duties for an unfixed period of time, known as serving at Her Majesty’s pleasure. Once in office, the governor general maintains direct contact with the Queen, wherever she may be at the time.
Role of the Commissioner for CRA, Chief Executive Officer. As the CRA’s chief executive officer, the Commissioner is responsible for the day-to-day administration and enforcement of program legislation that falls under the Minister’s delegated authority.
The Commissioner is accountable to the Board of Management for the daily management of the CRA, supervision of employees, and implementation of policies and budgets. Moreover, the Commissioner must assist and advise the Minister with respect to legislated authorities, duties, functions, and Cabinet responsibilities.
The Role of the Chair : As the presiding director of the Board of Management, the Chair manages the affairs and functioning of the Board and guides the Board to ensure it meets its responsibilities.
Mission, vision, promise, and values of CRA. The following information is taken directly from the current CRA web site.
CRA Mission – What we do: 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.
CRA vision – Our future: The CRA is the model for trusted tax and benefit administration, providing unparalleled service and value to its clients, and offering its employees outstanding career opportunities.
CRA promise – Our commitment : Contributing to the well-being of Canadians and the efficiency of government by delivering world-class tax and benefit administration that is responsive, effective, and trusted.
CRA values – Our guiding principles: Integrity is the foundation of our administration. It means treating people fairly and applying the law fairly.
Professionalism is the key to success in achieving our mission. It means being committed to the highest standards of achievement.
Respect is the basis for our dealings with employees, colleagues, and clients. It means being sensitive and responsive to the rights of individuals.
Co-operation is the foundation for meeting the challenges of the future. It means building partnerships and working together toward common goals.
CRA and HER MAJESTY. The Canada Revenue Agency Act as Binding on Her Majesty in right of Canada or a province.
William V. Baker the then Commissioner and Chief Executive Officer of Canada Revenue Agency wrote; “I am convinced that the professionalism, integrity, knowledge, and dedication of our employees will continue to be the foundation of the CRA’s ability to deliver results that matter to Canadians. As we move forward, we will continue to further strengthen our core business, to reduce the compliance burden by leveraging our business and systems expertise, and to provide quality service to Canadians. ”
Whatever happened to that concept. A lot of what we are seeing makes the aforementioned statements seem to have come from a distant planet. For CRA to claim they are not accountable for causing harm boggles the mind. CRA employees are clearly public servants and as such have a duty of care to the public.
The Commissioners Board of Management has a fiduciary oversight responsibility by ensuring that the Canada Revenue Agency is well-managed. I would think the term “well managed” goes beyond the collections of revenue.
Role of Commissioner: The Commissioner is the chief executive officer of the Agency and is responsible for the day-to-day management and direction of the Agency.
The Commissioner may authorize any person, subject to any terms and conditions that the Commissioner may specify, to exercise or perform on behalf of the Commissioner any power, duty or function of the Commissioner under this Act or any other Act.
Has the Canada Revenue Agency that has lost its moral compass?
The Irwin and Jill Leroux case is one that every Canadian should follow because it is really a case of “can a Government Agency operate without a duty of care to the public?”
I find it extremely upsetting for the Canada Revenue Agency should take the position that they can do what they want to taxpayers and not be held financially responsible for their negligence.
I have been watching this case and appreciating the Canadian Constitutional Foundation for coming to Leroux’s assistance. Without their support, the cost of justice might have been prohibitive for the Leroux’s as it has been with countless Canadian Taxpayers. In this case, it will be a milestone in establishing that CRA does indeed have a duty of care when it comes to them being negligent in how they conduct their audits and their collection of tax debts..
In order for CRA to act in a high handed manner there needs to be an overriding need. So by what ‘need’ does CRA neglect the duty of care, in ensuring that they not cause unnecessary collateral damage to the tax payer’s business, life and family.
In order for CRA to be held accountable there must be a duty of care. Our research shows that there is a duty of care. As such CRA can be held accountable. That being the case; one would think that tort law would apply and CRA could be forced to pay restitution up to the amount of the previous financial status prior to the CRA actions. The Leroux case has the potential to answer this question once and for all.
We see that an Alberta Court of Appeal ruled in a circumstance where CRA did not have a duty of care. (783783 Alberta Ltd v Canada (Attorney General) (2010), 322 DLR (4th) 56 (Alta CA) ). This was in a case where it was argued that the way CRA treated one tax payer, should entitle other tax payers to the same treatment. So my conclusion here is, one tax payer can win the argument, but another taxpayer can not benefit from that decision. The court; recognizing a duty of care would expose Canada, via the CRA, to liability to an identifiable group for an indeterminate amount, diverting significant resources from the ordinary administration of the taxation regime. The court confirmed that the claim was thus properly struck out on a summary basis. The translation here is, that if the issue is insignificant in the harm to CRA, there is a duty of care, however if the amount would be unmanageable to deal with, then the duty of care would be overridden by the ‘Need’ to protect the agency from unmanageable harm. That is not to say, that it could not be challenged.
If Leroux wins the day, he could well be in for a financial windfall from CRA. In tort law, a duty of care is a legal obligation which is imposed on an individual requiring that they adhere to a standard of reasonable care while performing any acts that could foreseeably harm others.
CRA routinely causes needless financial harm in audits, not only do they waste taxpayers time in audits, (in business, time is money) but they make mistakes that involve large amounts of time to dispute. When one considers holding CRA responsible, it requires a duty of care by the auditor.
Under the current system for handling disputes and complaints with CRA it all operates under the Income and Excise Tax Act. By accident or design this system has perpetuated a system of ineffective ways of addressing the problem.
The system has very little accountability on CRA under the ITA and ETA. The system only handles principles and issues of tax law and accounting.
There is a system of complaints, and Minister’s Letters and then complaining to the Ombudsman. Minister’s letters are often not effective because; What ever the explanations from the rank and file that go up to the minister are accepted as truth. Not to mention it can take up to a year to get a response from the Minister. The Ombudsman has no power so can only make recommendations.
However when you step out of the arena of the ITA and ETA, there are all kinds of legal remedies and method of meaningful complaints.
The biggest weapon we have in dealing with inappropriate CRA behaviour is the fact that for many reasons, CRA can not cause the agency to lose the respect of the public at large.
It seems to me that the best place to start is in establishing that CRA has a duty of loyalty and a duty of care to the public.
We believe that where CRA fails in their duties and there is evidents that a reasonable person can not deny that there is the existence of negligence, then we can take action to hold the agency accountable.
In order to prove negligence, a person must have had a duty of care, which means a responsibility to act in the best interest of another. There must also have been a breach of this duty.
This breach is the cause of the harm, resulting in actual physical, financial, or emotional damages. In most countries, negligence is a civil wrong, so a plaintiff or person bringing a lawsuit must show it was more likely than not that these things occurred.
A duty of care requires someone to act in the best interest of another. In most jurisdictions, this means behaving in a manner expected of a reasonable person under the circumstances.
A written contract is normally not necessary in order to prove an individual had a responsibility to carry out this duty.
If it can be shown a duty of care existed, this duty must have been breached. This means that the person who was under the obligation to act responsibly failed to do so. The breach of duty does not have to be intentional in order to prove negligence.
The onus of proof is on the plaintiff who must on the balance of probabilities, be able to prove that the breach of duty was what actually caused him harm. Many attorneys refer to this as the “but-for clause,” which means the harm would not have happened “but for” the defendant’s failure to act appropriately. Negligence cases can be dismissed if it cannot be proven that the breach of duty was the actual cause of an incident.
There must be some form of damage in order to prove negligence. Damages may include physical harm, financial hardships, pain and suffering, or a combination of these. If an individual is unable to establish that he did indeed suffer, he can be barred from filing a negligence lawsuit in many countries.
In most jurisdictions, the burden of proof is normally on the person bringing the lawsuit. This is, however, typically a civil action, and therefore the burden of proof requirement is less than that in a criminal case.
Most judges require attorneys to prove negligence by a preponderance of the evidence, which means “more likely than not.”
Duty of care is the first element that must be established to proceed with an action in negligence. The claimant must be able to show a duty of care imposed by law which the defendant has breached. In turn, breaching a duty may subject an individual to liability. The duty of care may be imposed by operation of law between individuals with no current direct relationship (familial or contractual or otherwise), but eventually become related in some manner, as defined by case law.
Where a duty of care is breached, liability for negligence may arise. Negligence is part of a branch of law called tort derived from the Latin verb ‘tortere’=to hurt. The idea of hurt is an important consideration in establishing negligence, as the majority of tortuous claims for negligence that do not succeed, fail because they cannot establish that harm has occurred as a direct result of an act or a failure to act.
Negligence must be proven.
To determine negligence, a three-stage test must be satisfied.
1. A person is owed a duty of care.
2. A breach if that duty of care is established.
3. As a direct result of that breach, legally recognized harm has been caused.
The procedure therefore relies on establishing fault on the part of the defendant.
The claimant must establish on the balance of probabilities that negligence has occurred by the defendant, that they failed to do anything that was their duty to do.
Compensation is paid in order to return the claimant to the position they would theoretically have been if the harm had not occurred.
In certain cases, if a standard of care is violated, could result in a criminal act. While this is not the issue for this article, I would think that public servants need to worry if someone commits suicide or dies of a heart attack, there could be an argument that a criminal action was taken. I know of cases where CRA was aware of serious heart problems but proceeded with collections harassments.
CRA often proceeds with actions where the taxpayer did not even owe taxes. As in the Leroux case, that the Canada Revenue Agency could ruin the financial life of a citizen that actually owed no tax and CRA not to be held accountable is reprehensible.
In the Leroux case, the CRA does not acknowledge that it has any legal “duty” to taxpayers, and therefore cannot be held negligent. Such an attitude in the face of the public servants act leaves one feeling a sense of outrage. Not to mention complete disrespect of our government for condoning by way of allowing such behavior.
Not just Mr. Leroux’s fate, but the fate of all Canadian taxpayers may be affected by the upcoming case, according to Laurence Armstrong, Mr. Leroux’s tax lawyer. Currently, he says, the CRA does not acknowledge that it has any legal “duty” to taxpayers, and thus cannot be held negligent.
This case will establish whether the CRA has a duty to taxpayers, whose lives they can potentially destroyed by neglect of their duty of care.
The CRA disputes Mr. Leroux’s charges, and have persistently filed applications and appeals seeking to have the case dismissed. One would wonder about the ethics of such behaviour and one would wonder that when this case is in the news, why CRA does not come clean and do the right thing.
The next step in the Leroux case comes up in September., in a Prince George courtroom, where Mr. Leroux will advance his case that the tax agency is guilty of “misfeasance in public office” and seek restitution.
We wonder if the government, who holds the smoking gun even cares about what happens to the public. B.C. Conservative MP Dick Harris wrote in his letter to then minister of national revenue Carol Skelton; “I am livid. This whole episode is the most inhumane treatment I have ever witnessed in my life. And I cannot believe that our own government would treat Canadians in this manner,” – According to a 2009 CBC report.
Section 241 of the Income Tax Act directs CRA to be absolutely scrupulous with respect to the protection and security of taxpayer information. Yet, CRA won’t admit responsibility for shredding Mr. Leroux’s tax documents.
So let’s take a look at what is out there is the world of government as it applies and is related to the agency that devastates the lives of many Canadian families. What we see published and in government documents seem to be more about propaganda than substance.
CRA writes to there employees; The Code of Ethics and Conduct was designed to guide and support you in your work. It sets out the conduct that is expected of you when you carry out compliance activities, provide client services, respond to appeals, provide service to other employees, manage programs and resources, or carry out other important aspects of the CRA’s Mission.
TheCode reinforces our collective commitment to serve the public according to our corporate values-integrity, professionalism, respect and cooperation-and to support a work environment in which people are respected.
If you are new to the CRA, you must certify that you agree to abide by the standards set out in the Code. All employees are also asked to review their obligations under the Code on an annual basis.
We would also like to draw your attention to the Values and Ethics Code for the Public Sector (VECPS), in force since April 2, 2012. As a CRA employee, you are an integral part of the broader public service and, as such, are governed by the values and expected behaviours contained in the VECPS.
The VECPS highlights the following values: Respect for Democracy, Respect for People, Integrity, Stewardship and Excellence.
We ask that you read both Codes carefully and be guided by the values and standards of conduct that have made the Canadian public service and the CRA institutions of which we can all be proud.
Values and Ethics Code for the Public Sector (VECPS)
The Role of Federal Public Servants
Federal public servants have a fundamental role to play in serving Canadians, their communities and the public interest under the direction of the elected government and in accordance with the law.
As professionals whose work is essential to Canada’s well-being and the enduring strength of the Canadian democracy, public servants uphold the public trust.
The Constitution of Canada and the principles of responsible government provide the foundation for the role, responsibilities and values of the federal public sector.
Constitutional conventions of ministerial responsibility prescribe the appropriate relationships among ministers, parliamentarians, public servants and the public.
A professional and non-partisan federal public sector is integral to our democracy.
The Government Ministers are also responsible for preserving public trust and confidence in the integrity of public sector organizations and for upholding the tradition and practice of a professional non-partisan federal public sector. Furthermore, ministers play a critical role in supporting public servants’ responsibility to provide professional and frank advice.
The Code outlines the values and expected behaviors that guide public servants in all activities related to their professional duties.
By committing to these values and adhering to the expected behaviors, public servants strengthen the ethical culture of the public sector and contribute to public confidence in the integrity of all public institutions.
As established by the Treasury Board, this Code fulfills the requirement of section 5 of the Public Servants Disclosure Protection Act (PSDPA). It was developed in consultation with public servants, public sector organizations and bargaining agents. This Code should be read in conjunction with organizational codes of conduct.
The stated values are supposed to be a compass to guide public servants in everything they do. They cannot be considered in isolation from each other as they will often overlap. This Code and respective organizational codes of conduct are important sources of guidance for public servants.
Organizations are expected to take steps to integrate these values into their decisions, actions, policies, processes, and systems. Similarly, public servants can expect to be treated in accordance with these values by their organization.
There needs to be Respect for Democracy. The system of Canadian parliamentary democracy and its institutions are fundamental to serving the public interest.
Public servants should recognize that elected officials are accountable to Parliament, and ultimately to the Canadian people.
“There is a duty to Respect People. Treating all people with respect, dignity and fairness is fundamental to CRA’s relationship with the Canadian public and to not do so, leads to disrespect by the public and is contrary to the mandate of the agency.” Empathies done by me for the purpose of identifying a critical point of attack for dealing with disrespectful CRA behavior.
Integrity is the cornerstone of good governance and democracy. By not upholding the highest ethical standards, public servants do not conserve or enhance public confidence in the honesty, fairness and impartiality of the federal public sector.
Federal public servants are entrusted to use and care for public resources responsibly, for both the short term and long term.
Federal public servants are expected to conduct themselves in accordance with the values of the public sector and these expected behaviors, as follows;
1. Respect For Democracy
Public servants shall uphold the Canadian parliamentary democracy and its institutions by:
1. Respecting the rule of law and carrying out their duties in accordance with legislation, policies and directives in a non-partisan and impartial manner.
2. Loyally carrying out the lawful decisions of their leaders and supporting ministers in their accountability to Parliament and Canadians. (A duty of loyalty to Canadians.)
3. Providing decision makers with all the information, analysis and advice they need, always striving to be open, candid and impartial. (not to prejudge Canadians as tax cheats.)
Public servants shall respect human dignity and the value of every person by:
1. Treating every person with respect and fairness.
2. Valuing diversity and the benefit of combining the unique qualities and strengths inherent in a diverse workforce.
3. Helping to create and maintain safe and healthy workplaces that are free from harassment and discrimination.
4. Working together in a spirit of openness, honesty and transparency that encourages engagement, collaboration and respectful communication.
Public servants shall serve the public interest by:
1. Acting at all times with integrity and in a manner that will bear the closest public scrutiny, an obligation that may not be fully satisfied by simply acting within the law.
2. Never using their official roles to inappropriately obtain an advantage for themselves or to advantage or disadvantage others.
3. Taking all possible steps to prevent and resolve any real, apparent or potential conflicts of interest between their official responsibilities and their private affairs in favour of the public interest.
4. Acting in such a way as to maintain their employer’s trust.
Public servants shall use resources responsibly by:
1. Effectively and efficiently using the public money, property and resources managed by them.
2. Considering the present and long-term effects that their actions have on people and the environment.
3. Acquiring, preserving and sharing knowledge and information as appropriate.
Public servants shall demonstrate professional excellence by:
1. Providing fair, timely, efficient and effective services that respect Canada’s official languages.
2. Continually improving the quality of policies, programs and services they provide.
3. Fostering a work environment that promotes teamwork, learning and innovation.
CRA writes to its new employees;
Acceptance of these values and adherence to the expected behaviors is a condition of employment for every public servant in the federal public sector, regardless of their level or position. A breach of these values or behaviors may result in disciplinary measures being taken, up to and including termination of employment.
Public Servants Disclosure Protection Act:
Overview of the Public Servants Disclosure Protection Act (the Act)
The Act, which came into force on April 15, 2007, applies to most of the federal public sector, approximately 400,000 public servants. This includes government departments and agencies, parent Crown corporations, the Royal Canadian Mounted Police and other federal public sector bodies.
The Office of the Public Sector Integrity Commissioner of Canada provides a safe and confidential mechanism enabling public servants and the general public to disclose wrongdoings committed in the public sector. The Office’s goal is to enhance public confidence in Canada’s public institutions and in the integrity of public servants.
The Values and Ethics Code for the Public Sector came into force on April 2, 2012.
Public servants are expected to abide by this Code and demonstrate the values of the public sector in their actions and behavior. Furthermore, public servants must also adhere to the behavioural expectations set out in their respective organizational codes of conduct. If a public servant does not abide by these values and expectations, he or she may be subject to administrative or disciplinary measures up to and including termination of employment.
Public servants who are also managers are in a position of influence and authority that gives them a particular responsibility to exemplify the values of the public sector.
The Public Servants Disclosure Protection Act (PSDPA) defines the “public sector” as: (a) the departments named in Schedule I to the Financial Administration Act and the other portions of the federal public administration named in Schedules I.1 to V to that Act; and (b) the Crown corporations and other public bodies set out in Schedule I of the PSDPA. However, “the public sector” does not include the Canadian Forces, the Canadian Security Intelligence Service or the Communications Security Establishment, which are subject to separate requirements under the Act.
Chief executives of public sector organizations have specific responsibilities under the PSDPA, including establishing a code of conduct for their organization and an overall responsibility for fostering a positive culture of values and ethics in their organization.
They ensure that employees are aware of their obligations under this Code and their specific organizational code of conduct.
Chief executives ensure that this Code, their organizational code of conduct, and their internal disclosure procedures are implemented effectively in their organization, and that they are regularly monitored and evaluated.
Chief executives are responsible for ensuring the non-partisan provision of programs and services by their organizations.
Chief executives are subject to this Code and to the Conflict of Interest Act.
Treasury Board of Canada Secretariat-Office of the Chief Human Resources Officer
In support of the Treasury Board President’s responsibilities under section 4 of the PSDPA, the Office of the Chief Human Resources Officer (OCHRO) is responsible for promoting ethical practices in the public sector.
The OCHRO will work with all relevant partner organizations to implement and promote this Code, and will provide advice to chief executives and designated departmental officials with respect to its interpretation.
The Chief Human Resources Officer may issue directives, standards and guidelines related to this Code. OCHRO will monitor the implementation of this Code in organizations with a view to assessing whether the stated objectives have been achieved.
Public Service Commission
The Public Service Commission is responsible for conducting staffing investigations and audits to safeguard the integrity of the public service staffing system and administering certain provisions related to political activities to maintain the non-partisanship of the public service in accordance with the Public Service Employment Act.
1. This Code is intended to clarify the role and expectations of public servants within the framework of Canadian parliamentary democracy as laid out in the Constitution Act and the basic principle of responsible government, which holds that the powers of the Crown are exercised by ministers who are in turn accountable to Parliament.
2. The Public Servants Disclosure Protection Act (PSDPA) defines “public servant” as every person employed in the public sector.. Every member of the Royal Canadian Mounted Police and every chief executive (including deputy ministers and chief executive officers) are also included in the definition of public servant for the purpose of the PSDPA and this Code.
3. This text reflects the duties and responsibilities set out in Accountable Government: A Guide for Ministers and Ministers of State, the Conflict of Interest Act, the Lobbying Act and the PSDPA.
4. “Chief executive” means the deputy head or chief executive officer of any portion of the public sector, or the person who occupies any other similar position, however called, in the public sector (PSDPA, 2005).
5. Section 4 of the PSDPA assigns this responsibility to the Minister responsible for the Public Service Human Resources Management Agency of Canada (subsequently the Canada Public Service Agency (CPSA)). With the creation of the Office of the Chief Human Resources Officer within Treasury Board of Canada Secretariat on February 6, 2009, the functions of the CPSA were transferred to the OCHRO.
Overview of the Public Servants Disclosure Protection Act:
The Public Servants Disclosure Protection Act (PSDPA) gives federal public sector employees and others a secure and confidential process for disclosing serious wrongdoing in the workplace, as well as protection from acts of reprisal. It is part of the Government of Canada’s ongoing commitment to promoting ethical practices in the public sector.
Wrongdoing under the law, relates to serious violations that go against the public interest, such as: violating any Act of Parliament or any Act of the legislatures of the provinces;
misusing public funds or public assets; gross mismanagement; doing something or failing to do something, that creates a substantial and specific danger to the health, safety or life of persons or to the environment; or seriously breaching the Treasury Board or your organization’s code of conduct.
Who is covered by the PSDPA?
The PSDPA covers all employees in federal departments and agencies, most Crown corporations and the RCMP.
The PSDPA also provides protection for people outside the public sector (such as external contractors) when they provide information about wrongdoing in, or related to, the federal public sector.
I think the key thing as Canadians is to focus on is attacking CRA’s position of them not having a duty of care. This needs to be pushed in more than Irwin and Jill Leroux’s case. This is a fundamental priniciple of the rule of law.
To allow the government to operate as above the law brings is down to the level of governments in dictatorships that we have such disdain for.
It is not rational to take the position that the income tax overrides the rights of the citizens of this land. The argument that there is no duty of care under the income tax act or the excise tax act, is a red herring to divert public attention away from the area of CRA vulnerability. They are public servants and that is where their Achilles Heel is located. This is not about the income tax act or the excise tax act, this is about the Public Servants Act, the Constitution of Canada, The Role of Ministers, Respect for Democracy, Respect for People, Integrity, and Stewardship.
In respect to respect for Democracy; public servants are expected to treat every person with respect and fairness. To act at all times with integrity and in a manner that will bear the closest public scrutiny an obligation that may not be fully satisfied by simply acting within the law.
Somewhere down the line CRA has lost sight, that they not only have a duty of loyalty and care to parliament and Canadians, but they have a responsibility to the agency and the public at large that they represent to not bring CRA and the government into disrepute.
Public servants are expected to conduct themselves in accordance with the values of the public sector. This expectation does not include being willfully blind, biased, unfair, or to use their power to bully taxpayers.
Having a tax debt that a Canadian taxpayer is unable to pay, does not give just cause for anything that falls within the description of bullying or terrorism. Taking reasonable action is necessary to prevent abuse of the system. An unmanageable tax debt it is not a justification to take food and shelter away from children, single mothers and senior citizens.
We have reached a point in this land where CRA knowingly collects tax that is owed on a legal technicality rather than actually owed. For one instance out of many; missing a deadline to object to an arbitrary assessment, can convert a a fictitious amount into a real debt. They tax Canadians on phantom income. CRA simply keeps the money wherever and whenever, because they can. That the taxpayer can be financially ruined and employees lose their job does not seem to make a difference to an overly aggressive tax bully.
There is a duty of care under the law of the land. CRA is part of the public sector that became subject to the Values and Code for the Public Sector that came into force on April 2, 2012.
Public servants at all levels are expected to resolve issues in a fair and respectful manner and consider informal process such as dialog or mediation.
Chief Executives of the public sector organizations have specific responsibilities including establishing a code of conduct. To me it all looks like lip service, politics and probaganda.
CRA has a code of ethics and conduct that is not in alignment much of the CRA staff. It is fair to say that there are excellent people who work for CRA but no one ever complains about that. It is the results of an agency out of alignment with the values of Canadians that is the issue here. So long as the agency does not believe it is accountable to what it does, there will be little interest in bringing any changes that could possibly have a negative effect on agency revenues.
This is not what we are experiencing in our business of dealing nationally with tax problems. We are seeing lives being ruined where there is a negative effect on the tax base. Often aggressive behaviour works counter productive to the benefit of the tax base. It appears to us that CRA does not understand accounting at a higher level. It makes no sense for CRA to recklessly destroy a business that is currently paying source deductions greater than the tax debt that may or may not be real.
Even when the debt is real and the taxpayer is at fault, it is not a reason to terrorise the taxpayer with non specif threats of legal action. The letters are harsh and uncaring with the results that there is real and profound psychological harm. The definition of terrorism includes an agency causing psychological harm. Such a statement sounds wild, even to me, but when you deal with this ever day and you get photos of a taxpayer lying on a hospital gurney suffering from major stress overload brought on by relentless auditors. This business may go under and $500,000 dollars of tax revenue from it’s employees will be lost to the tax base. In this case CRA does not care if the expenses are deductible or not, it just becomes another client for a trustee and the tax file can be closed.
We are having some small successes in dealing with CRA. The W-5 tax man documentaries are helping, and journalists are starting to notice that CRA bullying is becoming more of the norm.
When CRA took the position with us that there were no restrictions to what collections could do under the Excise Tax Act… I addressed this issue with a CRA director and they stopped using the expression … I have not seen that now in a few years.
We have been addressing the bullying behavior to CRA management and it seems that CRA is getting sensitive to having it pointed out and are now creating some slack with their unreasonable audit demands.
Where CRA is really wrong is that they don’t understand that they have not only a duty of care to Canadians, they have a duty of loyalty to who pays the bill. It is the tax payer who should be the client, contrary to CRA taking the position that the government is the client and taxpayers are to do what they are told.
The fundamental problem lies with us Canadians ourselves, Canadians put up with this crap because the vast majority of Canadians are afraid to stand up and speak up.
All it would take is for a mass rally of business owners across this land to bring change…. but that would need to be lead by someone with deep pockets who had no need to fear the dark forces of the evil empire.
So instead, we wage our war on CRA terrorism on a daily basis…. small steps .. making progress …. one client at a time..
I know from experience, that no politicians will take up the torch…. I have tried countless time to get the ear of prominent politicians…. I have all the facts to prove irresponsible behavior and obstruction of justice… political leaders won’t even return my communications. The fact that I speak out about CRA aggressive behavior, brands me as someone to avoid.
CRA behavior is a symptom of a huge problem. The entire accounting and tax system needs an over haul and the CRA needs to be held accountable to their actions. We begin with a simple question; “Why is it that current accounting is not “audit ready?” yet CRA has a standard approach to auditing. Audits are not rocket science. It needs to be made public what audit ready accounting really is and the role of the Tax Man should be to ensure that all business keeps their books audit ready at all time. That would eliminate the current process of arduous auditing and penalizing the plethora of mistakes that are made in small business.
The new rule of the day to defeat the process is keep audit ready books and don’t do any primarily tax motivated dealings.
Just my thoughts of the day…..
For further reading, read the letter of accountability from Steven Harper to his Ministers. The letter is in the this library and called “Government of Canada Accountibility.”