‘Very average’: New report finds CRA’s performance less than the ‘world class’ it all

The most surprising finding in the PBO report is how much more Canada pays for its tax collection than other countries

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OTTAWA – For years, the Canada Revenue Agency has raved about being a “world-class” tax organization. But the agency’s performance is really only “very average” when compared with its international counterparts, according to a new watchdog report.

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In a new study published on Tuesday comparing the CRA’s performance to 11 similar countries, the federal Parliamentary Budget Officer (PBO) found that the agency generally did slightly better on half of the performance indicators, and worse on the other half.

“In most cases Canada is never quite far from the average, usually performing marginally better or marginally worse than the comparable countries,” read the report.

In some cases where CRA ranked higher than the average, the PBO found that may not even be for the right reasons.

PBO Yves Giroux said in an interview with National Post that although CRA’s performance in some fields can be applauded, there needs to be some improvements before calling the agency “world class”. (The expression appears six times in CRA’s latest Summary of the Corporate Business Plan document.)

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“They’re aiming to be world class, but the indicators that we looked at do not suggest that,” Giroux said in an interview. “I’d say (CRA’s performance) is probably very average.”

Giroux’s office decided to assess the CRA on 21 performance indicators based on data from the 2020 edition of the International Survey on Revenue Administration (ISORA), which collects data from over 150 tax administrations across the world.

The PBO then compared CRA’s performance to that of 11 countries with tax administrations “similar” to Canada’s.

Overall, Giroux says he was most surprised to see how much more Canada pays for its tax collection than other countries.

In his report, the PBO found that Canada collected $100 in 2019 for every dollar spent on wages at the CRA. That amounts to nearly half the amount collected, on average, for the other 11 countries. Other countries collected $190 on average for every dollar spent.

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It’s a bit surprising that they’re not more efficient at that rate

Yves Giroux

“I thought they were doing a bit better than that when it came to the cost of collections, because of the powers they have and because of the fact that CRA collects on behalf of provinces,” Giroux said.

“It’s a bit surprising that they’re not more efficient at that rate.”

On the flip side, CRA “significantly” outperformed its international counterparts when finding taxpayers who weren’t paying their fair share of value added tax (VAT), such as the GST, as well as the number of audits conducted per auditor every year.

“This is expected since the CRA conducts a high volume of relatively less complex VAT audits,” the report noted.

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But that success may not be yielding as much additional revenue as expected, because the PBO also found that CRA has the second-highest proportion of tax arrears owing, with unpaid taxes worth nearly 14 per cent of the agency’s total revenue in 2019.

“You can’t just increase the number of audits or verifications and not put additional efforts on collections, because potentially, you’d expect those who are keen on evading taxes will also be keen on not paying once they get caught,” Giroux said .

One silver lining may be that the CRA has chosen not to aggressively pursue smaller individuals or corporations who haven’t paid their full tax bill, focusing instead on larger fish.

Giroux found that the government’s recent investments in the agency’s battle against large tax evaders may be paying off, as those taxpayers represent the lion’s share of additional revenue from audits.

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“This seems to be a good business practice from the tax administration’s perspective, since the return on investment still appears relatively high. At the same time, it improves perceptions of fairness of the tax system,” the report said.

The CRA has an audit “hit rate” — the proportion of audits that yield a change in taxes owing — of 60 per cent, which is above average and generally a good sign according to the PBO.

Giroux also noted that the hundreds of millions of dollars invested in the CRA by the Liberals in 2016 and 2017 have ultimately allowed the agency’s spending to keep up with annual inflation, and not much more.

He noted the agency had reallocated significant amounts of money to combating tax evasion within large corporations and high-net-worth individuals.

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“In real terms, there hasn’t been much of an increase in resources to the Agency, but rather a reallocation of these resources within programs and core responsibilities,” the report noted.

Grilled by the Bloc Quebecois on the “fiasco” highlighted by the PBO’s report Tuesday, National Revenue Minister Diane Lebouthilier applauded the “good news” in his findings.

“Our investments in the agency continue to bear fruit for the years to come,” she told MPs during question period.

“Contrary to the members opposite the room, we are doers, not complainers,” she then responded to Bloc MP Jean-Denis Garon, earning an ovation from other Liberals.

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