All Rights Reserved

Copyright © 2001, 2002, 2003, 2004, 2006, 2008, 2009, 2011

By Alan Baggett

Copyright

No part of this book may be reproduced or transmitted in any form or

by any means electronic or mechanical, including photocopying,
recording, or by any information storage and retrieval system, without
permission in writing from the publisher and author.

Please note…

The contents of this book are presented for purposes of information

only. While many already use the methods about to be described herein
to avoid payment of tax neither the author nor the publisher intends to
suggest or recommend that you do so.
Please consult your lawyer, financial adviser or competent other
before considering any changes to your current personal, financial and/or
tax situation(s).
The Tax Collec†or’s Bible
Tax Tips Tax Tales Tax Tru†hs

Alan Baggett
allan@taxcollectorsbible.com

For the first time ever discover, chapter

and verse, how the CRA works!

Visit the Tax Collector’s Bible website at http://taxcollectorsbible.com/

National Library of Canada Cataloguing in Publication Data

Baggett, Alan, 1969 -

Tax Collector’s Bible, The: Tax Tips Tax Tales Tax Truths

Internal examination of the Policies and Procedures used by the

Canada Revenue Agency (CRA), Verifications and Collections
Division. Includes Index, Bibliographical
References and Glossary
ISBN 0-9730059-0-4

1. Canada - - Income Tax - - Law and Legislation 2. Canada

- - Government Administrative 3. Business
I. Title 2001 352.44`33
 “To Penitence: That those whose deviltry is exposed within these pages may
see in a true light the wrongs they have wrought – and repent.”
Thomas W. Lawson

The following employees of the CRA went out of their way to inspire and/or encourage me
in the researching and the writing of this book. If not for people like these the Tax
Collector’s Bible would never have been put to print.

Anna Maria Ananiadas (Toronto North) Martin Leigh (Ottawa)

Franklin Artuso (Toronto West) John Lucyk (Toronto North - Security)
Carlos Balestreri (Toronto West) Mhairi Macintosh (Toronto North)
Gerda Beamish (Toronto North) Scott McKerron (Toronto North)
Cindy Brereton (Toronto North) Sally McLaughlin (Toronto North)
Janet Brusch (Toronto North) Brian McMahon (Hamilton)
Howard Bryce Sr. (Toronto North) Cindy Manser(Toronto North)
Barbie Carter (Ottawa) Robert Mauro (Toronto West)
Carol Chiu (Toronto North) Amir Merchant (Toronto West)
Gregory Currie (Ottawa) Colin Montgomery (North York)
Dino D’aguanno (Toronto North) Renzo Moras (Toronto North)
Deborah Danis (Toronto West) Pierre Mulvihill (Ottawa)
Donald Dewar (Ottawa) Lisa Murray (Toronto North)
Carol Ann Dixon (Toronto North) Tiia Owens (Toronto West)
Tony Dunn (Hamilton) Frank Pagnotta (Toronto North)
Glenn Dunphy (Toronto North) Mohammad Patel (Toronto North)
Cyril Dynin (Toronto North) Brian Patterson (Toronto)
Greg W. Evans (Ottawa) Anjum Qureshi (Toronto North)
Dave Falcon (Toronto North) Michael Regan-Bogen (Toronto Core)
Sheila Froude (Toronto West) Kathleen Reid (Toronto West)
Frank Gallucio (Toronto West) Noel Robinson (Toronto East)
Bernice Gorner (Ottawa) Steve Sherifovski (Toronto North - Security)
Thirza Gonsalves (Toronto West) Douglas Smith (Toronto North)
Aristotle Gribilas (Toronto North) Jenny Steele (Toronto North)
Terrance Hale (Toronto West) Gladstone Sue (Toronto West)
Terry Hartwick (Ottawa) Robert Swastek (Toronto North)
Charles Hardiman (Toronto North) Massimo Testa (Toronto North)
Gordon Hawkins (Toronto Core) Arthur Thiverge (Ottawa)
Judith Hopper (Hamilton) Astrid Tidd (Toronto West)
John Jackson (Toronto West) Gary Trinh (Toronto West - Security)
Todd Jafray (Toronto West) Goran Vragovic (Hamilton)
Jill Kenchington (Toronto North) Jamie Walker (Toronto North - Security)
Richie Kerr (Toronto West) Gary Wakayama (Toronto North)
Ferenaz Lalji (Toronto West) Laurie Wallace (Toronto West)
Alex Lane (Toronto North) Kerry Young (Toronto North)

“A lie does not become truth by reason of multiplied propagation,

nor does truth become a lie because nobody sees it.”
-Mahatma Gandhi
 The Tax Collector’s Bargain

In a time not so long ago the tax collector would make his yearly round of the King’s
villages, staying a while in each. During every visit he promised the villagers’ riches and
happiness if they would but pay their taxes. And the people, well, the people hoped that he
would make their lives better. But, sadly, he always made trouble. The villagers made money
but then the tax collector would arrive and take more than his due.
“There’s no outwitting him,” the people complained again during his latest visit. “He
always takes more than we can afford to pay.”
“I can outwit the tax collector,” a clever farmer replied one day, tired of hearing such talk.
“No one can do the impossible,” some villagers cautioned him.
But others laughed behind his back.
“He’ll learn his lesson,” they said.
Though many wished that someone would do just that and outwit the tax collector.

The next year the tax collector arrived in the little village, as usual, and, on one very cold
spring day, finally made his way to the boastful farmer’s door, demanding loudly, “This year
I must have half of your fields production, after all the king needs to feed his soldiers.”
“Fair enough,” the farmer answered confidently, “Half of my fields’ production shall be
yours. Everything that grows above the ground will be reserved for you while all that lies
beneath will remain mine.”
“Agreed,” said the tax collector quickly and with a smirk. “I will return come harvest time
to collect the king’s levy,” and, after writing down their pact, the two shook on their bargain.
Come harvest time the tax collector returned to the village and began to collect levies in
the name of the crown. In good time his collection wagons were filled to overflowing but he
kept on and, eventually, he ended up once again at the home of the clever farmer.
Rapping loudly on the door he exclaimed, “Come, come my dear man it is time to
complete our agreement. All that you have grown is taxed in the name of the king.”
“Yes, yes good sir,” the clever farmer agreed as he opened his door and led the tax
collector to the barn where he stored his crops.
Pulling open the heavy barn doors the two marched inside and the tax collector began to
salivate for the barn was fulled to overflowing with turnips.
“Here you go,” the clever farmer said walking through to the back of his barn and
pointing towards stacks and bales of turnip leaves. “What has been grown above ground is
yours to the penny.”
“Unfair,” screamed the tax collector.
“We made a bargain,” the clever farmer said producing their written agreement.
And the tax collector was forced to accept the withering turnip leaves as payment in full.
“I won’t be fooled again,” the tax collector cried, “Next year I demand everything that
grows beneath the ground of your fields.”
And with that final threat he marched angrily away.
“That will be fine by me,” the farmer said after the tax collector fell out of earshot, “For
next year I plan to grow wheat.”

“You see,” the clever farmer told the villagers, “You can outwit the tax collector if you
are wise, if you are patient and if you think ahead.”
 TABLE OF CONTENTS

Part I – Behind Closed Doors – The Secrets of the Tax Collector

Page

Chapter 1 Introduction 11
Chapter 2 My Life as a Tax Collector 16
Chapter 3 Your Right of Confidentiality 21
Discover what the CRA database hold about you 28
Chapter 4 Just how many tax debtors are there? 33
What is the effect of such great numbers on tax collection? 40
Chapter 5 From A to C: Assessing to Collections 51
Voluntarily filed tax returns 51
Arbitrarily assessed tax assessments 57
After your tax assessment is completed 63
Chapter 6 Collection Restrictions and Legal Warnings 72
Provincially imposed debt collection restrictions 72
Federally imposed tax collection restrictions 76
Chapter 7 Interest Charges: When to make a payment and when not to 86
Chapter 8 Minor Balance Tax Debts 90

Part II – Tricks of the Trade – How Collectors Collect and Debtors Frustrate

Chapter 9 Major Balance Tax Debts 97

The internal investigations of the tax collector 99
The external investigations of the tax collector 119
Chapter 10 The Garnishment 132
The statutory set-off notice 133
The requirement to pay 135
Non-compliance with a garnishment 145
Chapter 11 Executions, Writs and Certificates 153
The Execution 153
How the tax collector uses an Execution 155
Chapter 12 The Memorandum Assessment 163
Types of memorandum assessments 163
The Section 160 165
The Director’s Liability Tax Assessment 167
Chapter 13 The Requirement for Information 178
How does it work? 182
Chapter 14 Jeopardy Assessments 194
How does it work? 194

4 ©Alan Baggett
 Table of Contents - ctd
Page

Chapter 15 Bankruptcy and the Tax Collector 201

Visiting a trustee 202
“It is my experience that Revenue Canada …” 206
Chapter 16 Sundry Tax Debts 208
Individual sundry tax accounts 209
Corporate sundry tax accounts 211
Miscellaneous sundry tax accounts 212
Chapter 17 Write-offs, Write Downs and Deferrals 216
The deferral 217
The write down 218
The write-off 219
The deletion process 222
Last words 233

Part III – Fighting Fire with Fire – Your Rights

Chapter 18 Appealing Your Tax Assessment 238

Chapter 19 Taxpayer Relief Provisions 257
Fairness Provisions 257
Cancellations of penalty and interest 258
Late filing 262
Extending time limits to file a Notice of Objection 263
Streamlining of the objection process 265
Chapter 20 Bill of Rights, Service Complaints & the Taxpayers’ Ombudsman 269
Canadian Taxpayer’s Service Bill of Rights 271
CRA – Service Complaints 272
The Office of the Taxpayers’ Ombudsman 276
Chapter 21 Filing a Ministerial Complaint 283
Chapter 22 Auditing the Auditor 290
What You Need to Do 292
Chapter 23 The Tax Exile 295
Departing Canada 295
Remaining in Canada 299
Coming to Canada? 305

Part IV – The Big Picture – Filling in the Blanks

Chapter 24 The Tax Collector’s Perks 311

5 ©Alan Baggett
 Table of Contents
Page

Chapter 25 Professional Advancement CRA Style 319

The promotion process 319
The effects of the promotion process 328
My competition experiences 329
Chapter 26 Revenue Canada College 332
Chapter 27 The Badge 337
Chapter 28 CRA Psychology 346
Chapter 29 Tales from the Cubicle 351
Goods and Services Tax Tales 351
Sad Sundry Tax Stories 353
T4 Horror Stories 354
T2 Travails 355
T1 Misdeeds 356
Chapter 30 Criminally Speaking 359

Part V – In Conclusion – The Way Things Are and Just Might Be

Chapter 31 The Present 367

Behind Closed Doors 368
Tricks of the Trade 369
Fighting Fire with Fire 372
The Big Picture 373
Chapter 32 The Future 378
Legislative Alterations 378
Procedural Changes 380
Modernization 381
Staffing Policies 382
Innovations 383
The Future 384

Appendices
A: The Structure and Organization of Tax Collection 388
B: Pacific Region Memorandum/PSAC Detax Agenda 401
C: Martin Cauchon Ministerial Response Letter 416
D: Complete CRA Taxation Operations Manual List 419
E: Canadian Taxpayer Bill of Rights 425

Glossary
Tax Talk 437

6 ©Alan Baggett
 Forms, Handbills, Tables, Charts and Letters
Page

Garth Turner Letter 11

Dave Flinn Union of Taxation Employees Letter 13
Taxpayer Handbill 15
K. M. Burpee Memorandum 20
Information Commissioner Letter 27-28
Table: Nationwide Number of Delinquent Tax Debtors and Filers by TSO 34
Corporate (T2) Aging Table: Total Number of Corporate Tax Debtors 45
Corporate (T2) Aging Table: Total Dollar Value of all Corporate Tax Debts 46
Personal (T1) Aging Table: Total Number of Personal Tax Debtors 47
Personal (T1) Aging Table: Total Dollar Value of all Personal Tax Debts 48
All Revenues Aging Table: Total Number of Tax Debtors 49
All Revenues Aging Table: Total Dollar Value of all Tax Debts 50
Taxation Centres and their Affiliate TSO’s 51
Example of a Requirement to File Tax Return(s) Letter 56
Example of a Demand to File Tax Return Letter 58
Table of Provincial and Territorial Collection Guidelines 73-74
Example of Revenue Canada Legal Warning Letters 80-81
RCMP Request for Assistance Letter 122
Statutory Set-Off Notice 134
Requirement to Pay (Garnishment) 136
John Jackson Authority to Issue Garnishment Memorandum 139-140
Requirement to Pay Non-Compliance Letter 143
Sheriff’s Direction Letter 158
Section 160 Memorandum Assessment Proposal Letter 167
Director’s Liability Pre-Assessment Proposal Letter 172
Director’s Liability Due Diligence Rejection Form Letter 174
Requirement for Information Cover Letter 178
Example of a ‘Requirement for Information’ Letter: Bank 180-181
TSO Director’s Concurrence Requested Letter for a Requirement for Information 183
Example of a ‘Request for Information’ Letter 187
Employee Questionnaire 190
Example of a ‘Requirement for Information’ Letter: Lawyer 192-193
Example of Jeopardy Correspondence 200
Form T1520A: Recommendation for Deletion of Uncollectible Amount 225
Examples of Completed and Approved Form T1520A’s 227-231
CRA Appeal Confirmation Letter 239-240
CRA Appeal Response Letter 242-244
CRA Services Related Complaint Form 274-275
Taxpayers’ Ombudsman Complaint Form 277
Herb Dhaliwal Ministerial Complaint Letter 284
Terry Hale Travel Authority Letter 315

7 ©Alan Baggett
 Forms, Handbills, Tables, Charts and Letters ctd.

Page

Competition Poster 321-322

Deborah Danis Competition Eligibility List 324
Official Hiring/Promotion Letter 326,327
Audit Pass Letter(s) 344-345
TSO Alpha-Split Organization Chart 390
Typical Collections Section Floor Plan: Toronto North TSO 391
CRA Regional Structure Chart 397
CRA Internal Structure Chart 398
CRA Policy and Systems Structure Chart (Emphasis on Tax Collections) 399
Structure Chart of a Typical TSO 400
Pacific Region Memorandum and Security Flowchart 402-404
PSAC President Nycole Turmel’s Letter on Detax/Untax 406-407
Rob Wright Memo – PSAC Against Tax Protesters (Detax) 408
Rob Wright Letter to Nycole Turmel 409
National Memorandum on Tax Protesters/Detaxx 410
Nycole Turmel Legal Meeting Letter 411
PSAC Lawyer Jacquie de Aguayo’s Legal Overview on Tax Protesters 412-415
Martin Cauchon Ministerial Response Letter 417-418
Resignation Letter 446-447

8 ©Alan Baggett
 Court Cases

Page

Her Majesty the Queen and Dial Drug Stores Limited and Ronald Cowell 31
Her Majesty the Queen v. Linas Saplys and Axiom Designs Incorporated 59
Rex vs. Batters, December 22, 1924 (1 DTC 60) 60
the Queen V Hart Electronics (59 DTC 1192): 60
Revenue Canada v. Pacey 61
C. P. Fullerton vs. the Minister of National Revenue 67
William Harold Malkin vs. the Minister of National Revenue 67
Morch vs. the Minister of National Revenue 77,248
Robins vs. Forbes 82
McCullough vs. Minister of National Revenue 82,248
Markevich v. Canada 83
Maritime Life Assurance Company vs. Her Majesty the Queen 143
Gardner vs. the Minister of National Revenue 165
Gamache vs. Her Majesty the Queen 169
Her Majesty the Queen and Dial Drug Stores Limited and Ronald Cowell, 188
Soviak case decided in the Ontario Court of Justice (Provincial Division) 188
the Minister of National Revenue vs. Rudyk 196
Irwin (1992)’ 16 C.B.R. (3d) 93 (B.C.S.C.) 201
Joe Markevich v. Her Majesty the Queen in Right of Canada 233,235
Pioneer Laundry and Dry Cleaners vs. the Minister of National Revenue 249
Her Majesty the Queen v. John R. Singleton (FC) 250
Ludco Enterprises Ltd., et al. v. Her Majesty the Queen (FC) 250
Merchant v. R., [1998] 3 CTC 2505 at 2511 251
Stewart v. Canada 251
Williams v. the Queen 255
Nissim v. the Queen 256
Edison V. Canada 2001 FCT 734, Blanchard J 262
Blair T. Longley and Her Majesty the Queen 288
Don J Wilkinson and Her Majesty the Queen 1999-4687 (IT) I 316
Attorney General of Canada in the Exchequer Court of Canada 356
Cecil R. Smith vs. The Minister of Finance (1 DTC 78) 356
Minister of Finance vs. Cecil R Smith (1 DTC 92) 356
R v. Roberts & Viccars 437
Norway Insulation 439

Visit the CRA SOTW Story of the Week Library at:

http://taxcollectorsbible.com/

9 ©Alan Baggett
 The Tax Collector’s Bible

Part I

Behind Closed Doors

“The Secrets of the Tax Collector”
 Introduction

Minister Ministre
of National Revenue du Revenu national

August 17, 1993

Dear Revenue Canada Employee:

Since my appointment as your Minister in June, I have been both impressed and concerned.

Impressed by the continued improvements in our service and by the way Revenue Canada
employees adjust to ever-changing times. Working for the "tax collector" is a difficult task that is
not always appreciated by the public. You deserve, and have, my praise and encouragement.

My concern is for those honest Canadians suffering through tough personal times who want to
obey the law but are afraid to come forward. I am also concerned that there are Canadians who
believe they can get away with cheating the system.

We must all ask ourselves: Is it fair that the majority of honest taxpayers have to make up the
difference that these cheats cost us? In these tough economic times, does it not make sense that
the government try to help others by being more flexible?

It is for these reasons that today I am calling for increased fairness in our tax system. This
fairness demands "zero tolerance" for tax cheaters and maximum penalties where applicable.

At the same time, Canadians need to be confident that Revenue Canada employees will always
use compassion and common sense in dealing with those taxpayers who come forward. All
Canadians have the right to be treated fairly by us and by everyone else in their government. But,
all Canadians also have the responsibility to comply with our laws and support our system.

Thank you for your efforts. Your ability to see that this happens is appreciated.

Sincerely,

Garth Turner

House of Commons Chambre des communes

Ottawa, Canada K1A 0A6

11 ©Alan Baggett
 Introduction

Each and every day Canadians are faced with taxes. Whenever we make a purchase,
whenever we make a sale, whenever we earn one thin dime. Buying, selling, earning,
spending, we are taxed.
Naturally we assume that all levied taxes are collected taxes but this is just not so. Just
because a tax is levied does not mean that it is paid. Or collected. And this failure to
voluntarily pay tax is what makes the Verification and Collection Section of the Canada
Revenue Agency (CRA) necessary. The tax collector. Their job is to monitor for payment
of taxes and to enforce collection when situations warrant such measures.
But while Revenue Canada, and I will continue to use the old name as this is the one
we are most familiar with, would continue to have us believe that every tax assessment
levied is a tax assessment collected this is just not so.
More and more Canadian businesses and individuals are finding the means and
methods to avoid payment of tax. More and more they are escaping unpunished; and,
sometimes, even remaining undetected. No longer is tax evasion restricted to just the hard
core resister. Today it is also the mom and pop operation down the street, your neighbor
secretly letting out his basement room, the contractor accepting payment in cash and you
dear reader.
And while the tax collector would like to hush up such embarrassing stories and is
content to live off their image of the neighborhood bully who lifts his victims up by the
feet and shakes them down for every last penny, such incidents are no longer the norm.
Today Canadians are increasingly turning the tables; some are even bold enough to kick
sand in the face of the bully, the tax collector, before sauntering confidently away,
pennies intact.
But how are they doing this?
What is their secret?
This is where I come in. I have the inside knowledge that will bridge the gap between
what we all think about the tax collector and what the realities are. The truth about how
some Canadians evade payment of tax while others of us in the same financial situation,
and oftentimes worse, are forced to cough up every last plugged nickel with interest. And
the truth about how Revenue Canada collects some tax debts while writing off others.

12 ©Alan Baggett
 Introduction

UNION OF TAXATION EMPLOYEES PSAC

SYNDICAT DES EMPLOYE-E-S DE L’IMPOT AFPC
Dave Flinn, President
233 Gilmour St. Suite 602
Ottawa, Ontario K2P 0P2
Tel.: (613) 235-6704
Tel.: (613) 830-3536

September 24, 1993

Globe & Mail

Cancel our subscription immediately and refund to us the balance of the money we
paid.

I can’t believe your support for the Reform Party and the statement in the editorial on
September 23, 1993 that the Reform’s plan to cut the deficit “would entail no genuine
hardship to anyone, nor would it harm essential services”. Your editors obviously don’t
live on this planet. Further cuts in government spending will prolong the recession, which
would already be a depression were it not for the very social programs the Reform would
cut which you applaud.

Hopefully some day soon editors, economists, reformers, torys and other fools are going
to wake up and realize that globalization rationalization, downsizing, getting lean and
mean and so on costs jobs. The deficit will never be eliminated if we continue to lay
workers off and forget that it is we who buy cars, T.V.’s stoves, etc. In other words we,
the ordinary citizens, are the engine that drives the economy. If we do not have spending
power, the economy will not work.

Dave Flinn
National President
512033 05-05492-265
UNION OF TAX EMPLOYEE
233 GILMOUR ST
OTTAWA SUITE 602
UNION OF TAX EMPLOYEE
0108525

13 ©Alan Baggett
 Introduction

No longer is a tax levied always a tax collected.

And I will document for you how and why this is.
How some Canadians escape paying their fair share and why the tax collector and
Revenue Canada allow this to happen.
You dear reader are about to embark on a guided tour of the Canada Revenue Agency
that has never before been made available to the Canadian public. A trip never intended
to be made available.
Departmental correspondence, court decisions, write-offs, charts, diagrams, facts,
figures, tax tips and tax tales are all publicly revealed.
Learn for the first time ever how the tax collector really works.
Policies. Procedures. Loopholes. Errors. Gaffes and Frauds perpetrated by tax debtors,
taxpayers and tax collectors alike are all brought into the light.
Tutelage illustrating how some Canadians manipulate tax collectors and the agency’s
rules and regulations to their advantage is provided.
Some lesser-known tax tips are also brought to the table.
Previously such an education has only been available to hardcore tax avoiders and
their expensive advisors. And they have gained their knowledge only through costly trial
and error. Your only investment is time, so keep a pen and paper handy in order that you
can jot down notes and page numbers for your future reference.
Will Rogers was once overheard to remark that, “Income tax has made more liars out
of people than golf has. Even when you make a tax form out on the level, you don’t know
when it’s through if you are a crook or a martyr”.
This statement was as true when first spoken as it is today so now would be the perfect
time to note that tax evasion, purposefully declaring and/or paying less than your ‘fair
share’ of tax, is a crime and any offender, if identified, could be subjected to prosecution.
Tax avoidance, the right to pay the minimum tax allowed by law, is perfectly legal and
should be practiced by all.
Throughout this text it will be clearly illustrated how many Canadians have avoided
declaration and/or payment of taxes but in no way is this examination of the practices,
policies and procedures of the tax collector, of the former Revenue Canada and of the
current Canada Revenue Agency intended to direct you or your business to avoid
payment of any past, current or pending tax assessment(s).
Finally you will have noticed, interspersed throughout this brief introduction, a series
of letters. Garth Turner’s memo on page 11 illustrates the rose-coloured glasses with
which the Agency often views Canadians and their civil servants. The petty mindset
guiding many tax collectors in their day to day grind is captured in the Union of Taxation
Employee’s letter on page 13. And how do many Canadians view the Canada Revenue
Agency and the tax collector? Examine the handbill following on page 15. This is a
word-for-word reproduction of an actual handbill distributed by one irate Canadian while
standing in front of the Toronto Core Taxation Office.
By books end contrast what has been documented against the contents of these letters
and you should see that Revenue Canada is not quite the fearsome entity it once was. Or
that some of us still make it out to be.

14 ©Alan Baggett
 Introduction

(EXAMPLE OF A HANDBILL DISTRIBUTED BY AN IRATE TAX DEBTOR)

REVENUE CANADA DEATH

SQUADS ARE STALKING YOU.

65-70 PERCENT OF THE PEOPLE that tangle with them either

commit suicide, die of stroke, heart attack, or go insane. Members of the Special
Investigation Units are no different then Hired Guns or Assassins. Their assessments of
Taxpayers are unconstitutional and against the Charter of Rights, as they do not contain a
list of items that you owe this money for. Their activities are no different than that of
Organized Crime and are deliberately designed so you cannot defend yourself against
them. Further, the toll taken by 100% of the Families and Friends is enormous which
results in breaking up of families where Brother is set up against Brother, Sister against
Sister, Friend against Friend, by threats and vicious and vindictive attacks by this scum
when they try to extract information about the fellow member by threats of new audits
intimidation outright lies and psychological treachery last used in Nazi Death Camps
such as Auchswitz, Treblinka and others. Yes, my friends! This is going on right
under
your noses right here in Canada, even your accountant is not immune and any honest
lawyer you retain that is not a rip-off artist is forced to drop your case through threats of an
Audit which would include the seizure and removal of all his files for up to a year or
more effectively putting him out of business and none have been strong enough to take
this chance, only the rip-off artists will take it who are only interested in grabbing the
$5,000.00 to $10,000.00 retainer fee and drop the case before the case gets too hot.

No nation has the right to murder its own citizens for money according to U.N. Charter on
Human Rights.

For further information, call

488-2573
or your M.P.
or Mr. Cesare Chiarotto and Mr. Jim Davies, both at 973-3579 or Mr. George Mesiak at 973-
2160 or the Director, J.R. Giles at 973-9101, the commander of these Death Squads, Deputy
Commander of the Death Squad is Mr. John Beach at 973-9457, the last five (5)
anonymously.

We must act now!! As the MP’s are on the Campaign Trail, fervently working and conning
you for another rip-off of higher taxes and other skullduggery!!

15 ©Alan Baggett
 My Life as a Tax Collector

I never had dreams of being a tax collector when I was kid. There was no doubt in my
mind that I would be some sort of athlete, an Olympic competitor perhaps or at the very
least something much more competitive than chasing down delinquent tax debtors. And
truth be told I had never given much thought to taxes. So little thought that I never filed
an income tax return. In fact Revenue Canada had never even bothered to ask me to file a
personal report of my income. So it was a bit of shock after graduating from university to
find the tax collector offering me a job.
Strangely enough, my total lack of tax knowledge was not a hindrance. From Day One
I was a top-notch tax collector in terms of the number of tax accounts solved as well as
the total dollars collected. Years later, as a Team Coordinator, I supervised top producing
collection teams in just about every revenue stream. I guess, judging by my own situation
before being hired on, I should not have been surprised by some of the things I was about
to learn. Yet some of the things I did learn during my tenure as a tax collector still
somehow managed to shock me.
For instance many Canadians and Canadian businesses fail to file their income tax
returns and/or pay their outstanding tax arrears. As you will soon see present estimates
put this number of delinquents in excess of two million.
2,000,000.
Others of us regularly ‘fudge’ their tax returns hoping to be one of the lucky ones that
fall through the cracks. Never to be reassessed or, worse, audited.
No one knows for sure just how often such events occur because these paper swindles,
as often as not, remain undetected. But even when finally found out it does not mean that
the perpetrator is forced to pay. Quite often so much time has passed between crime and
discovery that the debtor is no longer able to pay. Or else upon finally being discovered
they may suddenly decide to declare bankruptcy. Or, if they are exceptionally fortunate,
maybe the tax collector will delete their tax assessment(s) as uncollectible.
A Write-off.
But fudging on an income tax return is just the tip of the iceberg when it comes to
ripping off Revenue Canada and the CRA.
Consider the following true tales:
A tax collector who became so overzealous in his pursuit of a tax debt owed to
Revenue Canada that they inflicted financial and psychological distress upon the tax
debtor. The department was successfully sued.

16 © Alan Baggett
 My Life as a Tax Collector

The customs officer who pilfered on the job and then passed some of the spoils to a
tax collector. Some of the ill-gotten goods were and are still being sold to co-workers.
Similarly (but in an unrelated story), there was a customs officer charged as an ‘inside
man’ in a scheme involving the diversion to domestic use of liquor bound for export (and
therefore free of excise tax).
Another tax collector devised a scheme for claiming fraudulent refunds of Goods and
Services Tax. And then did so. Repeatedly.
Many Canadians will choose to make tax-free purchases when such an opportunity
presents itself. Particularly memorable to me was a video store where, after they failed to
charge me tax on my purchase, and followed by some quick questioning on my part,
divulged that neither were statutory deductions from employee wages made. Tax, CPP,
EI etc. Nor had they ever been.
And then there was the Revenue Canada manager who tried to convince several
contractors to make fraudulent claims for the work they were undertaking for the
department and then to pay him kickbacks. Afraid it was some sort of ‘sting’ they turned
him in.
But another Revenue Canada manager accepted a bribe from a taxpayer suspected of
tax evasion in exchange for dropping the investigation.
When shopping for a computer the saleslady advised me that a cash purchase could
result in a tax-free purchase if I so desired. I did desire.
The Royal Canadian Mounted Police were asked to investigate numerous Ottawa-
based department employees who were found to have submitted fraudulent timesheets.
And in addition to this a Revenue Canada manager colluded with a number of employees
to make fraudulent claims for overtime pay and then received kickbacks from the
employees.
A seller of computer software bragged to me that he could sell cheaper than his
competition because he smuggled his wares over the border. I made the purchase and this
book, the Tax Collector’s Bible, was composed using that very tax-free and duty-free
purchase.
Then there was the store with two cash registers. The second register was being used
to rerecord the day’s sales with omissions. Why? Because lowering sales means less
income to report resulting in less tax to pay. (As an example the proprietor will purchase
an item for $45 and then retail it for $100 plus tax. If the sale is not reported the seller
will pocket the $55 gain tax-free and, in Ontario, ‘earn’ an extra 13% (PST + GST). He
can also record the sold item as pilferage and may even try to deduct the original $45
expenditure as a business loss further lowering his taxable income.)
Large and small these are but a few examples of what the tax collector faces daily.
No doubt some readers will refuse to believe these tales but the Auditor general
comments on some these stories and makes a case for reforming tax collector frauds at
http://www.oag-bvg.gc.ca/internet/English/parl_lpf_e_932.html
(If you have an Internet connection you can click on the above link as well the many
blue links that follow (or cut and paste them into your browser) in order to visit various
websites for extremely in-depth and detailed information).
But stories such as these are becoming all too ordinary. Cheating the tax man and tax
woman has become commonplace. Many Canadians do it without a second thought,
convinced that ‘politicians only waste our taxed dollars anyway’. Nor do they see their

17 © Alan Baggett
 My Life as a Tax Collector

actions as wrong. And I know this for a fact for I have paid taxes, I have collected taxes
and maybe, just maybe, I too have beaten the tax collector a time or two myself. But not
quite in the way you would expect. And I am only one person. There are more than
thirty-five million of us Canadians and we own hundreds of thousands of businesses.
And just who am I?
I was the quiet Civil Servant sitting in the corner who put in an uncomplaining and
honest day’s work no matter how distasteful the job. But the waste, mismanagement and
lack of concern for my tax dollars turned my stomach more often than I would care to
admit. These weren’t my tax dollars at work these were my tax dollars on some
obscenely expensive vacation.
As a result of my ‘work first’ mentality I never fit in. In this particular environment,
the Canadian civil service, working above the call (or even just to the call) is seen as
stealing a job from other potential union brothers and sisters. In fact I was very bluntly
told that if I did less work I would be perceived better by my fellow employees. Likely it
would even help advance my career. But if it takes laziness and skulking to gain approval
and advancement then the day must come when Atlas will be forced to shrug. Until then I
continued to work hard. I listened and I learned.
And the very first thing I learned, as a novice tax collector, was that Canadians hate
paying taxes. Any taxes.
The second thing I learned was that most tax collectors hate having to collect taxes.
They hate the confrontation. In fact many damn well hate their job.
As a result of the two many of us avoid payment of our taxes and many tax collectors
are lax when enforcing payment of tax assessments.
But as a tax collector I approached my job logically. Since I had recently begun to file
my personal tax returns and pay my duly assessed taxes there was no reason why others,
often Canadians that were much better off then I was, should not pay their taxes as well.
And I kind of enjoyed the challenge of the job. My competitive sports nature I guess. But
when I was told by a Team Coordinator, “Don’t worry if they owe it, just collect it,” this
bothered me. But I said nothing and continued to enforce collection because I needed the
paycheque. Luckily for the department I did not know at the time that, whether I
collected a tax debt or wrote it off, that I would still have a job to report to.
Another thing that set me apart from tax collectors and civil servants in general was
the fact that I can be brutally honest. Telling the truth instead of what I think people want
to hear. I guess I’m dumb that way. I put the facts first instead of parroting the words and
sentiments of others in hopes of gaining favour. In fact on my second month on the job
the Assistant Director of Collections asked me what I thought about the work. Instead of
taking the opportunity to kiss ass and brown nose I said, “I find the job boring,” and
continued speaking before looking up to see the Assistant Director had long turned and
walked away. If he had stayed to hear what I had to say he would have heard me state
that the job wasn’t challenging me because I could do a weeks worth of work in a day
and that I did not have nearly enough work to do.
Strange isn’t it how we listen when it’s what we want to hear and tune out when it
conflicts with what we want to be true.
However, over time, I was able to amass a huge store of knowledge about Revenue
Canada. I had unmonitored and unfettered access to all the tax collector has to offer. I
worked in Toronto (2 offices), North York (2), Mississauga, Barrie (2) and Ottawa (3).

18 © Alan Baggett
 My Life as a Tax Collector

I gained experience while working in just about every area of taxation including
Personal Taxes (T1), Corporate Taxes (T2), Goods and Services Tax (GST), Estate Taxes
(T3), Miscellaneous and Sub-ledger Taxes (Sundry), Non-Resident tax debts and I have
investigated many personal and business bankruptcies.
My job titles include Collection Contact Officer, Collection Enforcement Officer,
Collection Investigation Officer, Project Officer, and Team Coordinator.
I helped to pioneer the simultaneous collection of GST, T1, T2 and T4 taxation debts.
I served as a liaison between the Department of Justice and Collections. I researched
standardized accounting procedures, served as a go-between for Collections and
Computer Functions, helped implement Revenue Canada’s first National Collections Call
Centre and assisted in implementing the Revenue Enforcement Management Information
and Tracking System (REMITS). I also authored first drafts of policies and procedures
for the National Collections Call Centre.
As a result of these experiences I received notices for my tax work in the form of
citations, commendations and letters. At the end of this chapter you will find one example
of such in the form of a letter of commendation. I submit this only as proof of my ability
to legitimately discuss tax collection and the Canada Revenue Agency, not just to make
me look important (or self-important).
But, suffice to say, I can report on Revenue Canada’s actions from a manager’s point
of view, from a tax collectors point of view and, most importantly, from your point of
view, a Canadian taxpayer.
By book’s end you will have everyone’s story. Tax Agency, tax collector and
taxpayer. In so doing, the myths that depict this particular government department as an
indomitable fortress of tax enforcement will be dispelled forever. The Canada Revenue
Agency is no longer the fearsome and unbeatable dragon from the days of yore.

19 © Alan Baggett
 My Life as a Tax Collector

Revenue Canada Revenu Canada

Customs, Excise and Taxation Accise, Douanes et Impot

Assistant Deputy Minister Sous-ministre adjoint

Ottawa, Canada
K1A 0L5

MEMORANDUM FOR ALAN BAGGETT

SUBJECT: COLLECTIONS RE-ENGINEERING

Thank you for the excellent contribution you have made to the
Accounts Receivable re-engineering initiatives. You and your colleagues are to
be congratulated for the success that has been achieved to this point and can
take satisfaction in the fact that you have influenced the future direction of the
program.

The challenge we now face is to “make it happen” during the

implementation period. I know you will apply the same initiative, rigor and
precision in the months to come as you have in the past. It is only through this
effort that we will achieve the ultimate success.

Thank you once again.

K.M. Burpee
Assistant Deputy Minister
Assessment and Collections Branch

20 © Alan Baggett
 Your Right of Confidentiality

Think about all the different kinds and types of information needed in order to open up a
bank account, to obtain a passport or even to receive a credit card, among other things.
Full name and address. Date of birth and social insurance number, maybe information
about your spouse or children. Sometimes even financial information is requested. Who
employs you? How much do you earn?
Your personal and confidential information is your means of purchasing such
accouterments so whomever you entrust your most personal and intimate details with
holds something of yours that is very valuable. Something that even money can not buy.
And something they must protect. If they were to compromise the security you have
provided, information personal to you, then they compromise both you and the service
they are providing.
Strangely enough just about every Canadian quickly volunteers this same valuable
personal information to Revenue Canada. Receiving nothing in return. And does the tax
collector protect your valuables? Your personal information?
You be the judge.
A British Columbia tax collector used CRA computers to comb through tax returns
and data searching for single women he hoped to date. He was looking for love. An audit
initiated after a Manager saw an on-line dating questionnaire on the employee’s desk
showed the employee had accessed at least sixty files that he had absolutely no reason to
review. More than twenty of those searches involved single Vancouver area women
sharing his approximate age. Further investigation determined that he dated at least three
of those women and lived with a fourth for a short period of time. Women whose privacy
he had violated. It was the CRA’s opinion that the employee had violated the Agency’s
ethics code by using its computers for personal use.
I personally watched a tax collector walk out of the Toronto West Tax Services Office
(TSO) with a computer printout containing the full name, home address, date of birth and
social insurance number of every individual of the surname S**** in Canada. He was
planning a family reunion and had been given permission by the Manager to remove the
personal information of every Canadian sharing his surname. Hundreds of names, social
insurance numbers, home addresses and dates of birth were nonchalantly carried out of
the office that day folded carelessly with no more protection then the human hand. This
valuable information that is the only currency for opening bank accounts and obtaining
credit cards and passports. And one tax collector was given full permission by
management to do so. For a party.
21 ©Alan Baggett
 Your Right of Confidentiality

Now the rule of thumb is that any information Revenue Canada collects about you is
to be used for purposes of tax administration only; distributed on a ‘Need to know basis’.
As this and following stories reveal this is just not the case.
One of the most repeated stories within Revenue Canada is that of a journalist who
was alleged to have been subjected to a garnishment for failure to pay several tax
assessments and reassessments. The debt originated from maintenance payments, divorce
and child support so I was told. Embarrassed the debtor used their published position to
childishly attack Revenue Canada publicly and repeatedly.
(Author’s Note: On January 22nd, 2001 the CRA approached me and specifically
asked that I remove the name of this tax-debting reporter from the Tax Collector’s Bible.
She was threatening to sue the department over the release of her personal and tax
information. I agreed solely because if she won, which she would have, any settlement
monies would have come from the public purse, your taxed dollars.)
Now I never worked this case yet I was made privy to all sorts of details about this tax
debtor’s life. Name, employer, how much tax was owing, marital status and more. I had
no right or need to know the most personal details of this Canadian yet I know them. And
it is not likely that I will forget them.
To Revenue Canada confidentiality is supposed to be the act of protecting the
unauthorized disclosure of information available to its employees, your personal and
confidential information, to an individual who has no right to have access to that
knowledge. In fact ‘Your Rights’ (formerly the Declaration of Taxpayer’s Rights found
on the back of your T1 Income Tax Guide) states that:

“You [Canadians] are entitled to expect that we [Revenue Canada] will

use the personal and financial information you provide us only for the
purposes the law allows”.

The links: http://www.cra-arc.gc.ca/gncy/frnss/rights-eng.html and

http://www.cra-arc.gc.ca/gncy/frnss/pldg-eng.html should be further investigated to learn
your rights as a Canadian and a taxpayer.
Unfortunately your expectations seem to be the depth of the tax collector’s
commitment to your ‘Rights’, as you will soon witness.
Why?
Because while the CRA works to protect your personal and confidential information
from those outside the Agency, including yourself, little is done to protect you from those
that work inside. In fact an Agency employee caught breaching your confidentiality has
more rights then you do. In fact if your confidentiality is violated by an employee the
CRA will go to great lengths to avoid letting you know. They would rather sweep the
sorry affair under the rug. As a result security breaches are occurring with increasing
regularity. And with tens of thousands of employees there is neither the time nor the will
it seems to monitor the protection of your most personal and confidential information.
Yet you wouldn’t think that the issue of protecting your confidentiality would be a
problem. Heck, when you phone Revenue Canada the tax collector will ask for your
social insurance number and your name before they will even access your tax account.

22 ©Alan Baggett
 Your Right of Confidentiality

Then, to further confirm your identity, they may ask for your birth date, home address,
and postal code. Often times the diligent employee will also ask you to quote numbers
from previous year’s income tax returns. Information that only you would know or would
have access to. All before discussing your tax account with you.
It can be a time-consuming process for you but if its tough for you then it must be
even tougher for someone who’s not you. And you would be both right and wrong when
assuming this.
One clever spouse was able to obtain all of her husband’s financial information from
Revenue Canada because she knew her husband’s social insurance number among other
necessary information. Why was this disclosure a breach of confidentiality? After all they
were married.
Were married.
She was in the midst of becoming his ex-wife and so used what the tax collector told
her to prove to the Court that her husband could provide a more generous alimony and
child support payments. When asked where she got such detailed information, including
copies of tax returns, she confirmed that the Tax Collector had jumped to answer her
every question.
This story is unusual in that more often than not your personal information is
protected from those outside Revenue Canada. But who protects you from the tax
collector?
The most famous breach of confidentiality to have ever occurred within Revenue
Canada happened at the now Toronto Core TSO in the 1980’s. At the time the tax
collector was still using microfiche to store your most confidential information.
One Friday afternoon a tax collector on his day off walked into the office, scooped up
all the microfiche along with a microfiche reader, deposited them into a green garbage
bag and walked unchallenged straight past security and right out the front door.
Now these particular microfiche records were very special because they held the
names, current addresses, birth dates and social insurance numbers of every person,
living or dead, in Canada.
Why did he do this?
He wanted to start a business of connecting Canadians with forgotten or lost bank
accounts and would charge a fee for doing so. The microfiche provided all the data
necessary to finding these missing claimants.
He was caught because it was thought suspicious that he had been in the office on his
day off. Otherwise he might never have been caught.
Now the tax collector no longer uses microfiche to store sensitive information. But
because of the large number of employees, the lack of security and the ease by which
they can access your confidential details today it is much easier to walk away from
Revenue Canada with your personal information than at any time previously. Consider
the S**** story if you doubt this.
And the tax collector knows much more about you than just your tombstone data.
They know where you work and how much you earn. They can easily learn how much
your house cost, what you pay for rent/mortgage and the age and make of any vehicle
you drive. They know where you bank and where you invest. How much you give to your
favourite charity, political party, church, mosque or synagogue. They can learn about
boats and cottages, divorces and deaths, assets and liabilities. There is nothing they

23 ©Alan Baggett
 Your Right of Confidentiality

cannot learn. And everything they learn is stored for all eternity on their computer
database.
Their knowledge of you is gleaned from income tax returns, conversations, field
investigation and through the use of specialized collection tools such as the Requirement
for Information. Your personal information is then entered into their computer database.
Now, in theory, the CRA’s computer’s database is to be used solely for the collection of
tax arrears. But as you may now just be realizing this is not always the case.
There have been countless incidents where tax collectors have used the confidential
information supplied by Canadians for their personal gain or the gain of friends and
family.
A former Toronto North tax collector nattily claimed that her boyfriend was the,
“dean of consultants.” But just to make sure he remained so she helped him out by using
the Revenue Canada database to research his prospective clients and competitors.
Why?
Because when armed with foreknowledge of his client’s financial information he
knew what he could risk charging for services rendered or what fee to charge to attract
new clientele.
When Revenue Canada begged the collector to, “Please stop,” she refused and
continued handing out many Canadians personal and confidential information to her
boyfriend. After more than a year of warnings she was finally let go.
After more than a year.
In a similar case (this time in Toronto West) a tax collector allowed a fellow employee
to borrow his computer access name and password to access the department’s database.
The ‘borrower’ was operating an outside consulting business and wanted to research his
competitors. He was caught breaching security only when he revealed to a potential client
private information about a competitor. Information he stated that he had received from
Revenue Canada sources. The potential client informed the business rival who filed a
complaint. At first it was thought that the employee lending out his computer access had
breached security but the offender confessed when his friend was called out on the carpet.
Both were reprimanded. But they both kept their jobs.
Two very similar stories with two startlingly different conclusions. And in each case
the offenders were caught only because they refused to keep their mouths closed. Scary
isn’t it?
How does Revenue Canada know when a tax collector has accessed your tax account
and your personal information?
The user identification (USERID) of the tax collector is electronically ‘stamped’ onto
a tax account immediately upon being accessed. This creates an audit trail that can be
used to determine which accounts a tax collector accesses and which tax collectors have
accessed any given account.
But yes, the tax collector can access your personal data at their whim and fancy.
Whether they have a right to. Or not. They can gain access to every detail of your life, no
matter how sordid or innocuous, and without your prior consent or even your knowledge.
All the tax collector needs is your name, a social insurance number, a street address, even
a license plate. Any one of these tiny bits of information can be used unlock everything a
tax collector needs to know about you. Or wants to know. They can access your personal

24 ©Alan Baggett
 Your Right of Confidentiality

information easier than you can and often know more about you than your significant
other as the “Divorce Case” noted earlier attests to.
But what if the tax collector was also the tax debtor? Surely they would be tempted to
investigate themselves and learn what’s in store for them? Though this too is a breach of
confidentiality it usually fails to stop them.
A Kitchener-Waterloo tax collector with a tax debt told a tax collector that he could
not afford pay his arrears. The debtor tax collector then proceeded to make several diary
entries on his tax account pretending to be a neutral third party who had verified the
debtor’s claims.
A diary entry is just what it sounds to be, an electronic record stating what measures
have been taken in attempting to investigate an individual in order to collect any
outstanding tax arrears.
The debtor tax collector was easily fingered as breaching security when the assigned
collector of the tax account grew suspicious of the diary entries. The debtor tax collector
was suspended three days. With pay.
A Toronto West tax collector who was also a tax debtor had a story similar to the
Kitchener-Waterloo collector-debtor. The only difference being that he did not make any
diary entries on his account. First he just monitored events as the unfolded then he asked
a fellow tax collector to monitor his tax account and to advise him when the tax collector
was hemming him in. Unfortunately for these two the tax collector assigned to the
account noticed the unauthorized account accesses and reported the suspected breach of
confidentiality to security. When the truth was learned this debtor-tax collector was
released from further employ. And to make matters worse the department withheld his
pay until a garnishment could be issued and his final paycheque intercepted.
In this instance of a security breach the tax collector was fired just for browsing his
account while his friend was suspended for one afternoon. With pay. What a d’am brazen
act.
But these two sets of stories, the two tax collector’s who used the personal information
of others for their own gain and the two debtor-tax collector’s who accessed their own tax
accounts are similar. Yet in each instance one collector was fired and one was not. The
most serious transgressors kept their jobs. Why? Because Revenue Canada has no hard
and fast policy on how to handle internal confidentiality violations. Any punishment is a
knee-jerk reaction. But while some employees meddle with their tax account and are
arbitrarily dealt with others step in to lend assistance to friends and suffer no adverse
consequences at all. Consider this next story.
In the now Toronto Core TSO a close friend of a Deputy Minister (DM) refused to
pay his tax arrears. When the tax collector threatened legal action the debtor called on the
DM to intervene on his behalf. Which he did. The DM demanded that collection of the
tax debt cease immediately. Until his say-so no future action was to be taken. Further
notice was never supplied and collection action was delayed for years or so it was alleged
to me.
If the Managers of Revenue Canada abuse their position is there any wonder when tax
collectors dare to do the same.
The Agency’s computer advises any user that, ‘Access is permitted on a need-to-know
base only,’ and that, ‘All access is audited’. This may be true but clearly any auditing of
accesses is completed on a statistical basis only and not on a need-to know basis. As I

25 ©Alan Baggett
 Your Right of Confidentiality

said, if the employees in the previous stories had remained silent they would never have
been caught. One can only imagine how many security breaches occur that go undetected
and unpunished.
A Toronto West collector in a fender-bender told me, as I looked over her shoulder,
that she was accessing the tax database to reid up on the owner of the other vehicle. She
wanted to confirm the individual’s personal information was accurate as well as his
ability to pay for the damage caused.
He was.
Another Toronto West tax collector was frank with me when he brought to my
attention that he was using the tax database to obtain repayment of a personal loan he had
fronted. The individual in question had disappeared without repaying the debt and he
wanted to locate him and extract payment.
I watched a Manager remove his father’s name from the Minor Balance collection list.
This list is hard printed on paper so if a name is removed from the list the debtor can not
be contacted and so will not be requested to pay his arrears until the next list is printed a
year or two down the road.
And these are only a selection of the many stories that confirm that the tax collector
does not think twice about using your personal information and the department’s
privileged position for their benefit. Because even with warnings, suspensions and the
rare dismissal many tax collectors still insist on abusing their privileges. When
infractions are detected managers and employees are as like as not to turn their heads and
look the other way.
By now some of you are likely wondering if I have ever breached Revenue Canada’s
confidentiality rules.
I have.
At the time I was working the account of a long deceased tax debtor, Violet R. She
had a large estate that the Province was managing. The Province refused to pay her tax
assessment until the Estate’s three heirs had been located. Several years had passed since
her death and to me it seemed they were not looking very hard so I obtained the heir’s
names and searched for them. Within twenty minutes I found a match for one of the heirs
and a suspected match for another so I advised the Province accordingly.
Later I advised my Team Coordinator of my actions and I was rebuked. I understood
why. I had breached an individual’s confidentiality. But I hoped that my wrong would
benefit the heirs and Revenue Canada who would receive payment of the $10,000 plus
tax liability. I was transferred soon after my faux pas but I kept my eye on the case
hoping my breach had resolved the impasse. It did not. The Province of Ontario did not
put any effort into locating the heirs and the last time I reviewed the account the collector
was recommending the debt be written-off as uncollectible even though eventually there
would be monies made available to pay the tax arrears.
However some tax collectors will spend their day looking up details about famous
Canadians. They want to see what they earn. Others look for investment tips from the
wealthy. Some will even search for Canadians with funny, unusual or even anatomically
inspired names. All makes for good gossip in and out of the office.
One story brought to my attention involved a well known Toronto athlete who had
never filed an income tax return. One day he suddenly showed up in the office with his
overdue tax returns. As soon as he departed the tax returns were passed around the office

26 ©Alan Baggett
 Your Right of Confidentiality

out of ‘professional courtesy’, or maybe it was ‘professional curiosity’, for all to view.
By the end of the day the tax returns had disappeared. For good. Before they even had
had a chance to be assessed. And those tax returns were never seen again so the player
had to be asked to provide duplicate copies. Which he did. But one lucky tax collector
certainly got a nice addition to their sports memorabilia collection I assume.
Through my position as a tax collector I have been told personal details about people
as well known or as ordinary as: Brian Adams, Pamela Denise Anderson, Joseph Axler,
Harold Ballard, Salome Bey, James Bond, the Bronfman Trust, Pat Burns, the Estate of
John Candy, Diahann Carroll, Horn Chen, Brian Costello, Celine Dion, Ken Dryden,
Damaso Garcia, Brent Gretzky, Dick Head, Jermaine Jackson (of Jackson Five fame),
Ben Johnson, Michael Landsberg, Linda Leatherdale, Sally McLaughlin, Dennis Mills,
Henry Morgentaler, John Munro, Frank Nigro, Elvis Presley, Anthony Robbins, the
Ottawa Rough Riders, Borje Salming, Darrin Shannon, Sonja Smits, John Snobolen,
Steve Stavro, Elvis Stojko, Tony Tanti, Arthur Vaile, Pamela Wallin, Stan Weir, Jerry
White, Nancy Xynos, Gema Zamprogna and Richie Zappacosta.
I want to be clear that in no way am I implying that those I have just named have ever
been tax debtors, currently are tax debtors or ever will be tax debtors. Yet I have been
told and/or shown intimate details about each and every one of them.
This may not bother you but now imagine if it was you whose most personal details
were being openly discussed by strangers and it you found your name included on this
list. How would you feel knowing that your privacy was being violated for purposes of
curiosity, gossip and amusement?
In the next tax collector’s book it just might be.
Just how lax is the tax collector when it comes to protecting your valuable personal
and confidential information? After I resigned my job I never returned my Revenue
Canada building pass or the agency’s Audit Pass.
The building pass gives the holder full access to every facet of Revenue Canada while
the Audit Pass is a very powerful tool similar to a search warrant.
I sent Revenue Canada a double registered letter (c/o Carlos Balestreri – Toronto West
TSO) asking how and when I could return my departmental identification. Neither he nor
the Department bothered to respond. Ever.
Several months later I planned to be in Ottawa so I made a point of bringing my
department identification with me in order to perform my own security test. I was curious
to see if my identification would allow an ex-tax collector access to restricted areas.
Suitably attired and without a second glance I was immediately given unquestioned and
unhindered admittance.
No doubt I could also use these departmental identifications to extort personal,
confidential and/or financial information from private employers or individual Canadians
by posing as an employee of the Agency.
But I proceeded to walk in and around two different Revenue Canada buildings in
Ottawa. No employee took a second glance at me or showed the slightest interest. It
would have been easy for me to walk away with anything I desired. But my trespass was
committed out of curiosity not to line my pockets.
But the lack of security and lack of enforcement of security is mind-boggling.
On average over the last several years the CRA has “misplaced” over $120,000
annually in computer equipment. Primarily laptop computers that hold your confidential

27 ©Alan Baggett
 Your Right of Confidentiality

information. In my mind there is no longer a question as to how some of these thefts take
place, my only question is why they are permitted to continue?
Note: Photocopies of selected Revenue Canada badges and passes can be found in the
chapter titled “The Badge”.

Discover what the CRA database holds about you

Isn’t their some Act of Parliament that allows Canadians to request information about
our government, bureaucracy or about any personal information they have collected
about us?
Yes, there is. In fact there are two such Acts, the Privacy Act and the Access to
Information Act.
The Privacy Act can be used to learn what personal information any government
department or agency has collected about you.
The Access to Information Act is used when the requestor wishes to learn about some
aspect of our government or bureaucracy such as policies, regulations or statistics.
In theory these two Acts give Canadians the right to see it all but in actual practice
they often are of little use other than as a means to employ some more civil servants.
At least that is my personal experience.
When making your request under either of these acts you must supply your full name,
address, date of birth, and social insurance number.
But to be perfectly honest Revenue Canada makes a concerted effort not to comply
with any request made under these Access Acts.
If you were to ask for copies of your personal information collected by Revenue
Canada the tax collector will black out (with an ordinary black marker) much of the data
leaving you with as little information as possible. Imagine that, your very own personal
information can be read by the tax collector but is held sacrosanct from little old you.
To request personal tax information about yourself you can contact your local TSO
however, more often than not, the tax collector will refuse your request. When he or she
does for the cost of five dollars you can make a written inquiry to Revenue Canada under
the Access to Information Act or the Privacy Act at:

Canada Revenue Agency

14th Floor
Albion Executive Tower
25 Nicholas Street
Ottawa, Ontario
K1A 0L5

28 ©Alan Baggett
 Your Right of Confidentiality

Information Commissaire
Commissioner a l’information
of Canada du Canada

112 Kent Street 112 rue Kent,

Ottawa, Ontario Ottawa (Ontario) November 19, 1997
K1A 1H3 K1A 1H3
(613) 995-2410 (613) 995-2410
1-800-267-0441 1-800-267-0441

Our file: 3100-9761/001

Institution’s file: A-97-00041

Mr. Alan Baggett

367 North York Road
Oakville, Ontario
L7R 2R7

Dear Mr. Baggett:

I write to report the results of our investigation of your complaint

against Revenue Canada (RC) of delay in the matter of your request made
under the Access to Information Act.

Your request for a copy of the TOM 22 manual, policies and procedures
governing complaints to the Minister as well as various statistics on accounts
and bankruptcies was received at RC on April 23, 1997, making May 23 the
statutory date for a response.

Our review of RC’s administrative file shows that little action was taken
to advance the processing of your request until you complained to my office.
There is no doubt that the department is in a deemed refusal situation as
described in subsection 10(3) of the Act. I will make my concerns known to
departmental officials in the hope that you will receive better service in the
future.

With our intervention, RC has now committed itself to fully respond to

your request no later than November 30, 1997. Although I would have liked
more favourable results, this is at this stage the best the department can
reasonably be expected to do to complete the processing of your request. My
investigator, Alain Dumas, will closely monitor the progress of this request to
ensure that RC abides by its commitment. That said, I consider this complaint
to be resolved.

29 ©Alan Baggett
 Your Right of Confidentiality

Page 2

Should you disagree with this resolution, having now received the report
of my investigation, you have the right to apply to the Federal Court of
Canada for a review of Revenue Canada’s deemed decision to deny you
access to requested records. Such an application should name the Minister of
Revenue as respondent and it must be filed with the Court within 45 days of
receiving this letter.

Yours sincerely,

John W. Grace

30 ©Alan Baggett
 Your Right of Confidentiality

When you make your request it might be best to send the letter registered or the tax
collector may ‘lose’ it as they did one of my two request letters even though both were
sent registered. Even stranger though is the fact that the money order attached to my ‘lost
request’ and made out in the name of the Receiver General was still cashed.
The Information Commissioner’s letter addressing the first of my challenges to
Revenue Canada can be found on the previous two pages. The Commissioner refused to
take up my second challenge.
The Information Commissioner’s response to my complaint is a telling indictment of
how much regard Revenue Canada gives for the law of the land and how much they
respect Canadians in general. No doubt many will scoff at this statement. But in the court
case of Her Majesty the Queen and Dial Drug Stores Limited and Ronald Cowell,
January 18, 2001 in the Ontario Court of Justice the judge concluded, among other
things, the following:

i. Revenue Canada’s privacy policy is a ruse to prevent disclosure. Their attitude is to

prevent, deny and delay access.
ii. The department modifies any disclosures not for the purposes of protecting
Canadian taxpayers but to suit their own ends. They have no authority to do this.
iii. The court was startled by Revenue Canada’s lack of compliance with subpoenas
issued by the court. The department acted as if they were above the law.
iv. Revenue Canada has a complete disregard for the rights of Canadian taxpayers and
the department’s own policies.

Now, in theory you may request from Revenue Canada anything you wish about your
personal tax matters, including the tax collector’s diary entries about you, and you may if
you are quite lucky receive copies and a response. With one notable exception. That
being any auditor’s notes stored in your tax return.
The auditor’s notes are the notes an auditor makes when examining and altering your
tax return. If you have ever been subjected to an audit, reassessment or arbitrary
assessment the auditor’s written notes, the basis for the assessment or reassessment are
stored in your tax return.
If you were to request a copy of your tax return the auditor’s notes will be removed. If
you specifically ask for the auditor’s notes you will be told they were misplaced or
destroyed. The tax collector refuses all requests to release these notes. It’s startling when
you think about it. Revenue Canada will protect your information from you but does little
to protect you from those that use your personal and confidential information for their
own gain.
And should you request CRA statistics, be prepared to obtain nothing at all.
I requested Revenue Canada to supply me with numbers about how many write-offs
they prepare each year, how many garnishments they send in a year, how many writs they
issue in a year, how many jeopardy assessments they invoke in a year, how many
Requirements for Information they request in a year. I also asked for the dollar amounts
collected via these means where applicable.
I was told that the tax collector does not keep these types of statistics. I was also told
that if I wanted to obtain them they would write a computer program for me at my cost (I

31 ©Alan Baggett
 Your Right of Confidentiality

was quoted a cost of several thousands of dollars) but also that they could not guarantee
that I would receive any answers to the questions I had posed.
Strangely enough however the Justice Department does keep statistics in one of these
areas, Jeopardy Assessments, which was a help to me. But imagine, having to go to one
federal department in order to obtain information on another. Is it any wonder that
Revenue Canada is, annually, one of the most complained about institutions in respect of
compliance under the two Acts as confirmed by the Information Commissioner? Maybe
that’s why they keep changing their name.

What you need to know

In conclusion there is really nothing in this chapter here that will help you to pay less
tax but it does provide further insight into the mindset of the tax collector and the agency.
What you do need to know is how to apply to Revenue Canada under the Privacy Act
to obtain your personal information or, under the Access to Information Act, to obtain
information on policies, procedures and statistics.
For up to date information on Canada’s Information Commissioner including telling
reports on Revenue Canada’s or other government departments and agencies failure to
comply with the legal requests of Canadians (like yourself) visit their Internet site at:
http://www.oic-ci.gc.ca/eng/Search.aspx. Type in the name of the government
department you wish to research in the 'keywords box' and you will get a list of annual
reports to review.
When making your request under either of these Acts, although this should not be
necessary, make sure you carbon copy (CC) your legal representative on your request.
Why should you do this?
Many government departments and agencies, including Revenue Canada, attempt to
subvert the Act’s and law’s intent by responding in a formulaic way. They will
acknowledge that they have received your request without ever actually acting upon it.
As my letter from the Information Commissioner confirms. This is most often done when
the letter writers are ordinary Canadians who are unknown for their litigiousness.
However, if the department or agency feels that there is a threat that you will go to
Court then you will receive a proper answer. Most journalists and media organizations
use this method, CC’ing their legal counsel, to ensure that they receive a response to their
query, responses that us ordinary folk are unlikely to receive. That is why I advise you to
use this method as well. Even if you do not intend to use your lawyer the tax collector
does not know this so they must take your request seriously.
And don’t forget to ask for the diary entries on your tax account or try to obtain your
Audit Notes if applicable.
You should also consider asking for any dockets that might be in existence. A docket
is a large file folder that contains hand written notes, copies of correspondence and any
other intrigues that relate to your tax matters. Each section compiles its own docket on
your affairs so you will have to specifically ask for the contents of your Collections
docket, your Appeals docket, you Special Investigations docket and so on.
I would also suggest asking for a copy of Taxation Operations Manual Twenty-two or
TOM 22.

32 ©Alan Baggett
 Your Right of Confidentiality

Specifically you should ask for TOM 2250 – Legal Collection Activities, TOM 2260 –
Acts Affecting Collections, TOM 2270 – Uncollectible Debts and TOM 22(11)0
Automated Collections and Source Deductions Enforcement System (ACSES).
If the Goods and Services Tax is your thing you should request the GST Policies and
Procedures Manual for Tax Collectors.
For the complete list of all the Taxation Operation Manuals of the Canada Revenue
Agency (166 in all at the time of this writing) reference Appendix D at the end of this
book.
Now you will never need them all as some deal with very mundane topics such as
Keying Instructions, Data Entry and Staffing but depending on your area of concern I
would also recommend attempting to obtain all the TOM’s from the Appeals Branch,
Audit Techniques, Special Investigations and Tax Avoidance TOM’s from the Audit
Branch as well as all TOM’s from the Policy and Legislation Branch. Again though it
depends on where your area of concern lies so, for instance, if you have a problem
obtaining information under the Privacy or the Access to Information Acts you would
want the ‘Release of Information’ TOM or, if you have an ongoing appeal, you might
select the Appeals Officer – Taxation TOM.
Select the TOM specific to your problem.
Although more than a touch dry these manuals will tell you much about the policies
and procedures that guide tax collection. By learning how the CRA and the tax collector
operate you can better arrange your affairs. Forewarned is forearmed.
The tax collector has full access to all of your most personal and confidential
information and sure, some tax collectors respect their position of trust and treat your
personal information as gold. But just as many tax collectors treat your most personal and
confidential information as a stepping stone towards obtaining some of that gold for
themselves.
The time has come when the CRA must not only obey the laws in respect of answering
Canadian’s queries but must also protect your personal information and confidentialities
with more then just lip service.

33 ©Alan Baggett
 Just how many tax debtors are there?

Just how many tax debtors are there? It’s a fair question is it not? But if the tax collector
knows they’re not telling. They don’t want to embolden others to join this growing class
of Canadians so it’s up to you and I to try figure out this number.
All Canadians, whether an individual or a business, whether a tax debtor or taxpayer,
have a tax account with Revenue Canada. A tax account is CRA slang for your
electronically stored tax file. Your tax account holds all of your most personal and
confidential information with particular emphasis on all your tax-related matters.
There are two workloads that the tax collector is responsible for Tax Collections and
Tax Compliance.
On the page immediately following you will find a table listing all the Taxation
Services Offices (TSO) across Canada, the Taxation Centres (TC), and the miscellaneous
offices along with their internal identification numbers. TC’s usually handle assessment
related matters and do not collect tax debts.
But this table is special because it reveals the total number of tax debtor accounts that
were in a particular TSO or TC Collection inventory or Compliance inventory as of
January 29th, 1997 and again as of August 29th 1997. Numbers like this are never made
available to the general public but because I was a tax collector I was able to obtain them.
If I had made a request for them under the Access to Information Act no doubt they
would not have been made available.
These figures in this table do not include sub-ledger tax debts, minor balance tax debts
or debts not yet legally collectible. Also omitted from the above table is the Southern
Ontario Regional Office (1293), Headquarters (2414), the Trust Accounts Division
(2542) and Headquarters Accounts Receivable (5041) as none of these have any
inventories of accounts.
For a tax account to be in a Collections inventory it must be legally collectible
meaning that ninety days must have passed since the date of assessment and the tax debt
must be in excess of the current minor balance limit.
For your tax account to be in a Compliance inventory it must be a trust fund account
that is delinquent in its filing of tax returns. Trust funds represent monies that are
collected and held by a third party on your behalf for remittance to Revenue Canada.

34 ©Alan Baggett
 Just how many tax debtors are there?

ID Tax Office Location Cat. Collections Compliance

Jan 29 Aug 29 Jan 29 Aug 29
1201 Newfoundland-Labrador TSO 17,523 17,941 3,850 3,815
1202 Charlottetown TSO 4,712 4,334 1,250 1,112
1203 Halifax TSO 22,092 21,860 5,220 4,341
1204 Sydney TSO 4,682 4,391 1,178 1,338
1205 Saint John TSO 10,242 9,485 10,550 10,755
1206 Quebec City TSO 11,857 11,708 4,076 3,476
1207 Sherbrooke TSO 4,623 4,698 2,060 1,904
1208 Montreal TSO 18,074 18,992 4,499 4,434
1209 Rouyn-Noranda TSO 1,761 1,941 591 454
1210 Ottawa TSO 32,044 34,090 8,584 8,000
1211 Kingston TSO 6,471 7,488 953 768
1212 Belleville TSO 4,631 5,303 724 703
1213 Toronto Core TSO 30,217 36,342 25,322 28,365
1214 Hamilton TSO 30,626 34,267 13,796 16,552
1215 Kitchener-Waterloo TSO 14,269 18,099 14,891 12,946
1216 St. Catherines TSO 7,898 9,776 3,992 4,761
1217 London TSO 15,688 19,553 9,510 9,148
1218 Windsor TSO 5,952 8,724 5,204 5,733
1219 Sudbury TSO 9,597 10,737 2,351 4,213
1220 Thunder Bay TSO 5,928 6,468 3.824 4,000
1221 Winnipeg TSO 17,417 19,412 4,216 2,996
1222 Regina TSO 10,047 11,586 2,361 1,768
1223 Saskatoon TSO 11,445 14,478 3,465 2,735
1224 Calgary TSO 37,411 41,435 10,870 8,276
1225 Edmonton TSO 42,518 45,525 13,960 12,150
1226 Southern Interior BC TSO 16,553 19.365 11,409 12,175
1227 Vancouver TSO 38,443 29,180 28,292 24,193
1228 Vancouver Island TSO 19,257 20,768 15,310 17,117
1230 Ottawa TC - - 24,972 33,758
1231 Winnipeg TC - - 46,944 55,106
1232 Shawinigan South TC - - 198 1,190
1233 Surrey TC - - 451 2,500
1234 St. Johns TC - - 144 1,031
1235 Jonquiere TC - - 200 595
1236 Sudbury TC 48 40 - -
1237 Summerside TC - - - -
1241 Burnaby-Fraser TSO 31,223 33,236 25,341 26,857
1242 Northern BC and Yukon TSO 2,763 13,161 4,925 7,453
1244 Moncton TSO 4,821 5,204 1,046 656
1245 Outaouais TSO 5,222 5,385 1,459 1,252
1246 Laval TSO 20,322 22,868 4,396 4,100
1247 Monteregie River South TSO 11,849 10,135 3,044 2,331
1257 Chicoutimi TSO 2,927 3,352 1,259 963
1258 Rimouski TSO 231 8 329 27
1259 Trois-Rivieres TSO 2,466 3,234 865 712
1260 Bathurst TSO 3,508 3,382 843 549
1261 Toronto East TSO 26,579 28,808 16,229 21,786
1262 Toronto West TSO 60,852 38,876 36,782 24,927
1263 Toronto North TSO 42,499 45,897 22,641 27,343
1266 Peterborough TSO 5,122 5,721 872 772

35 ©Alan Baggett
 Just how many tax debtors are there?

Examples of a non-compliant Trust account include an employer source deduction tax

account that has not filed its return and made their remittance of Unemployment
Insurance, Canada Pension Plan, Federal Taxes and Provincial Taxes and, a Goods and
Services Tax account that hasn’t filed their GST returns up to date and remitted the
monies they have collected.
Strangely a T1 (individual personal) or T2 (business) income tax filer who is non-
compliant but has no tax debt outstanding will not be found in any tax collector’s
Compliance inventory.
At the time of this writing a debtor tax account in collections status or major balance
will be an individual account (T1) in excess of $999.99, a corporation account (T2) in
excess of $799.99, a source deductions account in excess of $499.99 or a Goods and
Services Tax account in excess of $499.99.
If a tax account is in excess of one of these thresholds, as well as non-compliant with
its filing it is only recorded in one workload, Collections, with the collector being
responsible for both collecting the arrears and obtaining filing compliance.
This avoids an account being tallied twice, once in the collection’s workload and once
again in the non-compliance workload.
The table above is an actual case of the numbers speaking for themselves. In almost
every instance you can see a gradual upward trend in the number of accounts entering
both collections and compliance inventories.
The total dollar outstanding for these figures was not available but it is safe to assume
that there was an increase here as well. The corresponding totals for each of the columns
from the previous table can be found in the table found immediately below. The totals
were separated from the above table to give you a sense of each individual Taxation
Services Office’s workload before being stunned by the total number of tax debtors and
non-compliant businesses.

Collections and Compliance Totals

ID Office Cat. Collections Compliance
Jan 29 Aug 29 Jan 29 Aug 29

49 TSO’s and TC’s 672,410 707,253 405,248 422,136

These are the totals for the above table and once again I should point out that the
numbers for Collections only represents T1 tax debts over $999.99, T2 tax debts over
$799.99 and GST and Employer Source Deduction tax debts over $499.99.
The table and totals do not include any tax debt that is not legally collectible.
The totals do not include any tax debt that is classed as a minor balance tax debt.
The totals do not include any subledger tax debts.
Nor do the totals above include expected tax debts from delinquent (have not filed
their tax return(s)) T1 and T2 filers. If such totals were considered it is estimated that the
grand total for the number of delinquent (non-filing) Canadians would be in excess of one
million six hundred thousand.
That’s 1,600,000 Canadians with a tax debt yet to be assessed.

36 ©Alan Baggett
 Just how many tax debtors are there?

The compliance statistics from the table are accurate for trust accounts but do not
include tallies for delinquent (non-filing) T1, T2, T3 tax filers or for subledger taxes.
At the present time the CRA keeps no statistics for the number of non-compliant
individual (T1) accounts, corporate (T2) accounts or the corresponding number of
delinquent returns.
And one should also keep in mind that a non-compliant tax account likely has more
than just one overdue return so 400,000+ non-compliant trust accounts (total above)
could easily represent a million or even several million tax returns that have yet to be
filed.
In the Agency’s favour I will say that the non-compliance totals are quite likely very
accurate for those businesses that are properly registered but then again it does not reflect
those taking part in the underground economy.
Clearly the number of tax debtors is increasing as Canadians become more willing to
attempt to evade the tax man and woman. Similarly, the numbers in terms of total
outstanding tax dollars must also be increasing, a natural consequence of an increased
number of Canadians with tax debts. Every time there is an increase of just one account,
that one account represents thousands, tens of thousands of dollars and maybe more being
added to Revenue Canada’s national total of outstanding tax dollars.
Now its time to start crunching these numbers and totals into figures and ratios that
can be better understood. First, the assumption that Canada has exactly thirty million
people was used. Second, let us decide that there are approximately two million tax
accounts that need some kind of enforcement action, either Collections or Compliance
measures.
I feel that two million is a very conservative estimate as the 1994 Auditor General’s
report clearly states at that time there were 1.6 million taxpayers who owed income tax
debts at the end of 1993 and this figure does not include the numbers of non-compliant
Canadians many of whom, no doubt, would be debtors which is why the do not file.
The figure of two million includes the Aug 29, 1997 collection and compliance totals
(1,129,389) from above as well as the estimated number of accounts that can be found in
the automated sub-ledger, an estimate of the number of accounts currently in minor
balance and an estimate of the number of debts not yet legally collectible. This translates
into a ratio of 2,000,000 tax debtors to 30,000,000 Canadians or 1 to 15.
Simply stated 1 in every 15 Canadians is currently dealing with the tax collector for
tax arrears or for failure to file tax returns. An astonishing figure but extremely
conservative when you take into account the fact that more than seven years have passed
since the Auditor General published his numbers.
This ratio can be further reduced when the number of individual and businesses that
do not file T1 and T2 Income Tax returns but should is factored in. Filing delinquents are
most often tax debtors so they too would eventually end up in collections.
Furthermore, if Canadians that do not need to file T1 returns like children or
individuals with no income are also considered this lowers the thirty million people to
twenty to twenty-two million people.
These additional considerations put the number of Canadians that are currently dealing
with or should be dealt with by the tax collector to a low 1 in 10. Even more astonishing
isn’t it?

37 ©Alan Baggett
 Just how many tax debtors are there?

And I know what you’re thinking, ‘Yeah but some of those numbers are the result of
businesses that have multiple tax debts; corporate tax, source deductions and/or GST,’
and you’re right. Absolutely right. Some of us do deal with the CRA for more then one
tax account. But the purpose of these numbers is to bring to light the severity of the
situation. When you hear two million people you think, ‘That’s a lot of people but it’s no
one I know,’ but when you hear one person in ten. Or twelve. Or even fifteen. You
suddenly realize it could be someone you know. If you live on a street with a dozen
working adults and you don’t owe any back taxes chances are one of your neighbors
does.
And in terms of dollars how much money are we talking about?
I was unable to obtain the total number of account receivable as of October 31st, 1997
but the chart below illustrates what Revenue Canada’s account receivable situation was
for March 31st, 2001 as well as October 31, 1996, 1995, 1994 and 1993 respectively in
terms of dollars. This tally is only for major balance debts for the revenue streams noted.

Revenue Type Oct.31, 05 Mar 31, 01** Oct. 31, 97* Oct. 31, 96 Oct. 31, 95 Oct. 31, 94
T1 (Personal) $8,412 $6,700 $5,552 $5,023 $4,534 $4,121
T2 (Corp) $2,511 $2,000 $1,849 $1,790 $1,692 $1,681
Payroll $2323 $1,850 $1,439 $1,180 $959 $906
Taxation Total
All streams $13,246 $10,550 $8,840 $7,993 $7,185 $6,708
** Confirmed from a CRA source, * estimate

The numbers are presented in thousands of millions so you would read the table like
this: On Oct. 31st, 1995 there were 4,534 millions of dollars, $4,534,000,000 outstanding
from individual T1 tax debtors. On October 31st, 1996 there were 7,993 millions of
dollars or $7,993,000,000 outstanding from all three revenue types that were legally
collectible and above the minor balance limits.
What about the total dollars outstanding from customs duties, excise taxes and value
added taxes such as the Goods and Services Taxes?
Consider the following table:

Revenue Type Oct.31, 05 Mar 31, 01** Oct. 31, 97* Oct. 31, 96 Oct. 31, 95 Oct. 31, 94
Goods and Services Tax $4,018 $3,200 $2,128 $1,810 $1,523 $1,311
Excise Taxes $179 $144 $113 $151 $272 $291
Customs Duties $757 $603 $375 $312 $285 $220

Other Total
$4954
All other revenue streams $3,947 $2,616 $2,273 $2,080 $1,722
** Confirmed from CRA, * author’s estimate

This table is read in the same manner as the previous so on Oct. 31st, 2005 there were
$4,018 millions of dollars, $4,018,000,000, outstanding from businesses failing to remit
their GST.

38 ©Alan Baggett
 Just how many tax debtors are there?

On October 31st, 1996 there were 2,273 millions of dollars or $2,273,000,000

outstanding from all three revenue types that were legally collectible and above the minor
balance limits.
The reason the Excise Tax figures (above table) had a slight decrease is because the
GST superceded this tax.
Our final table (following) confirms that the Canada Revenue Agency’s tax related
receivables from all six revenue streams are growing at an increasing rate.
While some of the tax debts will be collected an increase in arrears likely represents
an increase in the total number of debtors. This conclusion is borne out by the very first
table of this chapter.

Date Combined total of all

outstanding tax receivables
? 1989 $ 4,200
st
October 31 , 1993 $ 6,600
October 31st, 1994 $ 8,430
October 31st, 1995 $ 9,265
October 31st, 1996 $10,266
October 31st, 1997* $11,456
March 31st, 2001** $14,547
October 31st, 2002** $16,000
October31st, 2005** $18,200

? - unknown date, (taken from AG’s reports), * - author’s estimate, ** - CRA confirmed

This table tells us that as of October 31st, 1996 the total receivables for all uncollected
tax related liabilities was $10,266,000,000. In excess of ten billion dollars! An
extrapolation on this total would indicate that for October 31st, 1997 this figure would
likely be close to eleven and a half billion dollars. And on October 31st, 2005 the figure
of overdue tax dollars was thought to be better than eighteen billion dollars. Only
Revenue Canada knows what’s owing now that it is the year 2007.
Clearly, since 1988-89, the number of unpaid income tax debts has increased
substantially. Increasingly Canadians are becoming a nation of tax delinquents and tax
debtors.
Once again this table and figures do not include minor balance debts, tax debts not yet
legally collectible or sub-ledger tax arrears. Furthermore, the numbers do not take into
account those who are late or non-compliant in their filing habits. As a rule, non-filers are
overwhelmingly debtors or else they would file. When these additional considerations are
factored in the total receivable figure may currently be as high as twenty billion dollars
for October of the 2000. And steadily growing.
And just how many tax returns does Revenue Canada assess in a given year to reach
such numbers of delinquency and indebtedness?
Again it’s difficult to put an exact number on this figure but present estimates put the
number of tax assessments at a little over 23,500,000 for 1997 the most current year for
which figures were made available.

39 ©Alan Baggett
 Just how many tax debtors are there?

This 23,500,000 is made up of over 14,000,000 T1 Income Tax returns, the processing
of 1,155,000 T2 tax returns, 60,000 Special Elective returns for corporations and over
7,300,000 Goods and Services tax returns.
Also included are 1,200,000 Visitor Rebate Claims filed by visitors to Canada to
obtain reimbursement for GST paid while travelling in Canada.
The Excise Commercial Program, which deals with commodity tax law, handled about
3200 license requests to round out this number.
Revenue Canada also processes information slips necessary to taxation including T4
slips of which there were over 28,500,000 and T5 slips, used to report interest and
investment income, which numbered in excess of 35,500,000. Again all numbers are
from the 1997 calendar year.
In all the department dealt with over 88,000,000 filing transactions in 1997. But
remember that not all of us file their required income returns so this number would be
much larger if all Canadians were compliant in their filing requirements.
As the number of filing transactions increases so does the number of delinquent filers
increase. No statistics are kept as to how many of us are delinquent in our filing
requirements. Nor are their recorded statistics on how many Canadians are currently in
arrears with their taxes. But the thing about being a tax debtor is that you always assume
that you’re the only one in debt. And those of us not in debt always think it’s some
stranger with a criminal bent who owes back taxes. A group of people that are very much
in the minority. But the harsh truth of the reality is is that if you’re not in arrears or a
delinquent filer than it’s your neighbor or someone on your street.
If you live in an average size apartment building chances are there is at least one
person on each floor evading the tax collector.

What is the effect of such great numbers on tax collection?

What are the effects of a steady increase in the number of tax debtors and the total tax
dollars to collect?
When I was working at Headquarters in Ottawa, I was given a study on the timeliness
of the actioning of a tax debtor account. This study was conducted at two western
Canadian TSO’s and determined the following:
In respect of the timeliness in which officers action their accounts, two studies were
conducted. In study “A” an average of 228 days elapsed between when an officer is
assigned a case and when the officer first actions the case. In study “B” the average was
81 days. How were the cases worked?

Age of Case When First Worked Study A Study B

Up to 30 days old 24% 28%

31-60 days old 7% 25%
61-90 days old 11% 16%
91 days+/ or unactioned 58% 31%
100% 100%

40 ©Alan Baggett
 Just how many tax debtors are there?

Read this study as, in study A 58% of tax debtor accounts were ninety-one days or
older when worked for the very first time and 25% of the tax debtor accounts in study B
were worked for the first time when between thirty-one to sixty days after first being
assigned to a tax collector. But wait, there’s more.
This study also investigated when the debtor tax account was actioned for the second
time after a first action had been completed. Those results are found following.

Age of Case When Next Worked Study A Study B

Up to 30 days old 28% 44%

31-60 days old 6% 6%
61-90 days old 8% 11%
91 days+/ or unactioned 58% 39%
100% 100%

The second study is read as the first chart but it is for second time the debtor tax account
was actioned.
A combination of both studies showed 44% of the cases were solved within one year,
15% were solved between one and two years. The remaining 41% remained unsolved
after two years.
It should also be noted that a tax debt written off within these first two years is
considered an account that has been solved.
From this study and from my personal experiences as a tax collector I can confidently
say that it is not uncommon for collection action to be neglected or sometimes never
initiated. If a debtor does not voluntarily pay his or her liability the debt will, more than
likely, never be collected.
There are those who are going to take offense to what I have just stated that,
‘department inaction,’ creates write-offs. Some might ask for more proof. Since Revenue
Canada refused to release most requested statistics I did some research and was able to
turn up some inventory aging statistics in respect of total Numbers and Dollars
outstanding from the Toronto North TSO.
The result of this research? At the end of this chapter (pages 45 through 50) you will
find six pages of these statistics. These statistics cover the calendar months ranging from
April 1993 to May 1996 for Toronto North.
These tables represent the total tax dollars outstanding (where in the upper right hand
corner the table states Dollars $(000)) and the total number of tax debtors (Numbers) for
the Toronto North TSO for selected revenue streams.
Those revenue streams are the Personal or T1 stream (individuals) and Corporations
or T2 stream (corporations).
In addition, there is one set of charts named All Revenues. All Revenues includes T1,
T2 and Employer Source Deductions. There were no statistics available for subledger
collections or GST.
Each page of statistics is broken down by month, found on the left side, and account
age found across the top of the page. A table may be read like this, as an example: for
Personal total number of tax debtors (page 45) in May of 1996 there were 17,918
outstanding T1 tax accounts in the Toronto North TSO. 3461 of this number or 19.32

41 ©Alan Baggett
 Just how many tax debtors are there?

percent were between one and two years old. Personal represents T1 or personal income
tax.
For Corporations total dollars (page 46) in February of 1996 in the Toronto North
TSO there were $182,877,000 corporate tax dollars owed. Of this amount $45,312,000 or
24.78 percent of this amount has been outstanding for at least two years but no longer
than three years. Corporations represent T2 or business/corporate income tax.
Now take a look at the last two tables titled All Revenues. You should be able to note
seasonal highs and lows for the number of debtor accounts but if you compare the April
1993 row to the May 1996 row for each of the All Revenues tables the following
conclusions can be drawn:

1) the total number of tax debtors is slowly but steadily increasing, and
2) as the under one year accounts increase, the number of aged accounts also increases

By examining at the Dollars table for All Revenues (page 50) you will note that
although there are more tax debtor accounts in the “under 1 year” column their
percentage as a representation of the total amount outstanding has actually decreased
from April of 1993 to May of 1996. This decrease is a result of many more debtor tax
assessments being assessed and remaining unpaid than ever before.
Additionally older uncollected tax debts are not just growing in size, with interest
charges and subsequent tax assessments, but are also growing in number, slowly skewing
the table. Old tax debts are uncollectible tax debts.
Once again I can guess what you’re thinking but I can prove you’re wrong.
If you take a diagonal cross-section of both the Numbers and the Dollars table (pages
47 and 48) from the Personal statistics you will end up with a table that looks like this:

Date Account Age Number of Accts Total Dollar Value Avg. Dollar Value
April 1993 Under 1 yr 7799 $180,559,000 $23,151.55
April 1994 1-2 years 3484 $82,442,000 $23,663.03
April 1995 2-3 years 2076 $58,118,000 $27,995.18
April 1996 3-4 years 1675 $44,168,000 $23,368.95

This table shows the April 1993 T1 tax debtor accounts as they age. The initial
reaction is that the number of accounts and total dollars are going down so this is good.
Sure, some of the accounts are being collected but it also reflects that many more tax
debts are being written off as uncollectible.
The average dollar value reflects the fact that higher dollar accounts are the first to be
deleted and that lower dollar accounts are allowed to age into high dollar tax debts.
Interest charges and subsequent tax assessments do this.
The table also indicates that when a debtor account is two to three years old the push
for the write-off is greatest as noted by the substantial drop in average dollar value for the
following year.

42 ©Alan Baggett
 Just how many tax debtors are there?

A table constructed for the month of May (not shown) further confirms these findings.
These months were chosen solely because I was able to obtain four years of data for each.
A second key point is that the aging of a tax debt is understated and here’s why. The
age of the debt by departmental standards starts when the debt is assessed but clearly an
assessed tax debt is much older than this.
For example your 2001 taxes are owing as of midnight on December 31st, 2001 but are
not due and payable until April 30th, 2002. Four months later.
If your tax return is surface mailed on April 30th it likely will not be assessed until
mid-July at the earliest. Another two and a half months pass.
From the date of your notice of assessment and for the next ninety days your account
is not legally collectible and not part of a TSO inventory.
As the tables confirm, October is usually the month with the highest calendar year
inventory level so this is the month that most tax debtor accounts arrive at the TSO
although some trickle in a month or two later.
Almost ten months pass before any concerted collection action begins.
The under one year column should actually be titled 10-22 months, the one to two
year tax debts are then 22-34 months old and so forth.
The policies and procedures age your tax debt before a tax collector can get a chance
to actively collect the arrears. Therefore if the tax collector is not aggressive from the
start and aggressively actions the debtor tax account the first day possible the chances of
collection quickly decreases.
Why is the aging of a debt, any debt and not just a tax debt, so important?
Studies conducted by private sector companies have shown that age is the most
important criteria when it comes to determining the collectability of any debt. The older
the debt is the less likely it is to be collected. Such studies have determined that once an
account receivable is over ninety days old it is all but uncollectible. Naturally some debts
older than ninety days are collected but many more are written off then collected.
This is a double whammy for the tax collector because they work their oldest debtor
accounts first. Why? Because the oldest debts are not only the largest but also the ones
most in jeopardy of not being collected. This means that more recently assessed tax debts,
debts that would be more easily collected, are ignored. Ignored until they are old enough
to be collected but by then they are closer to being a write off than being an account
receivable.
As accounts receivable increase and age how much will really be collected?
Every astute businesswoman and businessman realize that as any debt ages, the
likelihood of payment in full decreases exponentially to the point that debts not collected
after ninety days are often considered uncollectible.
This is why, from time to time, we hear horror stories of how aggressive the tax
collector can be when attempting tax collection. But stories such as these are becoming
rarer and rarer. Revenue Canada likes to chase after soft targets, those who have ready
avenues of payment available, and make examples of them. If the debtor is a hard case
they tend to sweep it under the rug and pretend it never happened, wanting Canadians to
believe that every tax debt assessed is a tax debt paid. In full. But just because a debt is
assessed it does not mean it is paid. Ever.

43 ©Alan Baggett
 Just how many tax debtors are there?

What you need to know

The number of Canadians who are tax evaders and delinquents, once a small minority,
are now part of a rising social phenomena. Some of us join these ranks because we are
dissatisfied with how our tax dollars are taken and recklessly spent. Others just because
they are just plain old-fashioned tightwads. Not that there is anything wrong with that.
Whatever the reason Canadians are dropping out of our system of income reporting and
income taxing in record numbers.
The older a debt gets, any kind of debt not just a tax debt, the more likely that debt
will go uncollected. Ninety days is considered the threshold between collection and likely
write-off by the private sector. But because tax debts are much older than ninety days
before they are first looked at some are already good candidates for a write-off before an
attempt at collection is made. But one must also consider that the tax collector has more
information and power than a private debt collector does so the ninety-day figure,
although important, could reasonably be extended.
Also to be considered is the increasing numbers of debtor and delinquent tax account
flowing into TSO’s. As this flow increases the time the tax collector has to spend on each
individual tax account decreases. So if you present a ‘soft target’, someone easy to collect
from, the tax collector will spend more time working your tax account than they would of
someone who presents a ‘hard target’, a tax account that is seen as complicated and work
intensive.
Visit http://www.oag-bvg.gc.ca/internet/English/parl_oag_200605_08_e_14965.html
to learn more about the Auditor General’s researches and thoughts on the subject of tax
debtors and tax debt aging.
So if you think you are the only one who is a tax debtor or that such people were part
of a class facing extinction then think again. Their numbers are growing by leaps and
bounds. And their first rule of survival? Don’t present a soft collection target. Use the tax
collector’s own rules to delay, delay, delay. Every day of delay increases the chance that
your tax debt will not be paid/collected. Every additional debtor account added to the tax
collector’s inventory means there is less time to spend collecting your tax debt. The
numbers don’t lie.
And what happens when the debtor does present a difficult or impossible target to
collect from?
Their tax debt is written off. In the private sector enough uncollected accounts
receivable will close down a business permanently so the private sector employee and
business must be timely and fiscally responsible or they risk putting themselves out of
work. But Revenue Canada and the tax collector are in a monopoly position when it
comes to their work. Tax collection. They are never going to have any competition so
they can afford to be lax; after all there will always be more tax debtors.

44 ©Alan Baggett
 Just how many tax debtors are there?

CORPORATIONS AGING – ALL DOR TOTAL NUMBER OF DEBTORS

All Ages Under 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years
Date # # % # % # % # % # % # %
May-96 1,304 700 53.68 250 19.17 107 8.21 101 7.75 58 4.45 88 6.75
Apr-96 1.305 711 54.48 237 18.17 114 8.74 93 7.13 59 4.52 91 6.98
Mar-96 1,306 731 55.97 223 17.10 114 8.74 94 7.21 58 4.45 86 6.60
Feb-96 1,274 729 57.22 197 15.11 111 8.51 100 7.67 60 4.60 77 5.90
Jan-96 1,285 721 56.11 181 13.88 124 9.51 111 8.51 67 5.14 81 6.21
Dec-95 1,239 695 56.09 170 13.04 118 9.05 112 8.59 65 4.98 79 6.06
Nov-95 1,244 710 57.07 170 13.04 123 9.43 104 7.98 60 4.60 77 5.90
Oct-95 1,273 718 56.40 179 13.73 133 10.20 102 7.82 60 4.60 81 6.21
Sep-95 1,272 723 56.84 182 13.96 132 10.12 94 7.21 64 4.91 77 5.90
Aug-95 1,209 668 55.25 181 13.88 129 9.89 89 6.83 67 5.14 75 5.75
Jul-95 1,165 639 54.85 175 13.42 131 10.05 85 6.52 68 5.21 67 5.14
Jun-95 1,117 597 53.45 171 13.11 127 9.74 91 6.98 63 4.83 68 5.21
May-95 1,094 573 52.38 174 13.34 136 10.43 88 6.75 62 4.75 61 4.68
Apr-95 1,039 514 49.47 182 13.96 136 10.43 91 6.98 62 4.75 54 4.14
Mar-95 1,020 497 48.73 190 14.57 138 10.58 86 6.60 61 4.68 48 3.68
Feb-95 1,086 500 46.04 189 14.49 162 12.42 108 8.28 73 5.60 54 4.14
Jan-95 1,065 486 45.63 191 14.65 161 12.35 111 8.51 67 5.14 49 3.76
Dec-94 1,072 488 45.52 201 15.41 159 12.19 115 8.82 61 4.68 48 3.68
Nov-94 1,152 512 44.44 224 17.18 169 12.96 116 8.90 74 5.67 57 4.37
Oct-94 1,181 537 45.47 232 17.79 170 13.04 107 8.21 77 5.90 58 4.45
Sep-94 1,154 532 46.10 224 17.18 169 12.96 100 7.67 75 5.75 54 4.14
Aug-94 1,158 544 46.98 227 17.41 155 11.89 107 8.21 74 5.67 51 3.91
Jul-94 1,105 511 46.24 224 17.18 148 11.35 105 8.05 68 5.21 49 3.76
Jun-94 1,091 530 48.58 200 15.34 151 11.58 101 7.75 65 4.98 44 3.37
May-94 1,092 527 48.26 204 15.64 149 11.43 106 8.13 61 4.68 45 3.45
Apr-94 1,203 549 45.64 237 18.17 173 13.27 126 9.66 61 4.68 57 4.37
Mar-94 1,199 564 47.04 230 17.64 170 13.04 124 9.51 57 4.37 54 4.14
Feb-94 1,208 564 46.69 254 19.48 174 13.34 113 8.67 50 3.83 53 4.06
Jan-94 1,206 568 47.10 265 20.32 178 13.65 103 7.90 44 3.37 48 3.68
Dec-93 1,248 625 50.08 258 19.79 182 13.96 96 7.36 41 3.14 46 3.53
Nov-93 1,236 628 50.81 257 19.71 172 13.19 99 7.59 38 2.91 42 3.22
Oct-93 1,322 651 49.24 266 20.40 187 14.34 114 8.74 57 4.37 47 3.60
Sep-93 1,316 636 48.33 268 20.55 190 14.57 121 9.28 50 3.83 51 3.91
Aug-93 1,309 615 46.98 274 21.01 205 15.72 113 8.67 51 3.91 51 3.91
Jul-93 1,309 635 48.51 269 20.63 202 15.49 105 8.05 48 3.68 50 3.83
Jun-93 1,232 571 46.35 279 21.40 188 14.42 105 8.05 41 3.14 48 3.68
May-93 1,295 611 47.18 296 22.70 191 14.65 108 8.28 43 3.30 46 3.53
Apr-93 1,329 640 48.16 307 23.54 196 15.03 99 7.59 44 3.37 43 3.30

45 ©Alan Baggett
 Just how many tax debtors are there?

CORPORATIONS AGING – ALL DOR TOTAL DOLLARS $(000) OWED

All Ages Under 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years
Date $ $ % $ % $ % $ % $ % $ %
May-96 87,148 32,075 36.81 30,908 35.47 6,665 7.65 10,806 12.40 1,970 2.26 4,724 5.42
Apr-96 86,735 46,704 53.85 15,964 18.32 6,597 7.61 10,761 12.41 1,994 3.20 4,715 5.44
Mar-96 108,710 45,281 41.65 16,080 18.45 30,171 27.75 10,504 9.66 2,001 1.84 4,673 4.30
Feb-96 182,877 103,326 56.50 17,531 20.12 45,312 24.78 10,290 5.63 1,923 1.05 4,495 2.46
Jan-96 198,788 120,835 60.79 54,323 62.33 4,120 2.07 10,268 5.17 4,606 2.32 4,636 2.33
Dec-95 203,696 106,656 52.07 52,551 60.30 4,307 2.11 9,941 4.88 26,230 12.88 4,611 2.26
Nov-95 186,414 88,849 47.66 52,582 60.34 4,257 2.28 10,291 5.52 25,968 13.93 4,467 2.40
Oct-95 158,076 123,428 78.08 11,586 13.29 4,394 2.78 10,269 6.50 3,977 2.52 4,422 2.80
Sep-95 199,924 124,134 62.09 50,818 58.31 11,337 5.67 3,329 1.67 4,016 2.01 6,290 3.15
Aug-95 141,843 34,259 24.15 86,050 98.74 10,036 7.08 2,839 2.00 4,032 2.84 4,627 3.26
Jul-95 166,446 21,450 12.89 124,072 142.37 9,731 5.85 3,070 1.85 3,629 2.18 4,491 2.70
Jun-95 174,933 35,630 20.37 117,215 134.50 10,949 6.26 3,047 1.74 3,733 2.13 4,359 2.49
May-95 82,779 40,638 49.09 7,664 8.79 21,513 25.99 2,746 3.32 5,958 7.20 4,260 5.15
Apr-95 65,833 24,095 36.60 9,707 11.14 19,876 30.19 4,460 6.77 3,479 5.28 4,216 6.40
Mar-95 65,875 21,996 33.39 12,048 13.82 19,827 30.10 4,438 6.74 3,640 5.53 3,926 5.96
Feb-95 77,875 32,680 41.96 12,444 14.28 20,089 25.80 4,664 5.99 4,030 5.17 3,968 5.10
Jan-95 71,640 27,603 38.53 8,658 9.93 20,035 27.97 10,149 14.17 1,317 1.84 3,878 5.41
Dec-94 77,453 24,231 31.28 15,981 18.34 20,121 25.98 11,791 15.22 1,481 1.91 3,848 4.97
Nov-94 84,204 28,841 34.25 18,681 21.44 20,536 24.39 10,719 12.73 1,559 1.85 3,868 4.59
Oct-94 200,713 155,378 77.41 8,904 10.22 20,675 10.30 10,614 5.29 1,455 0.72 3,687 1.84
Sep-94 161,384 99,421 61.61 25,783 29.59 8,002 4.96 22,929 14.21 1,457 0.90 3,792 2.35
Aug-94 198,575 117,086 58.96 22,559 25.89 7,659 3.86 23,464 11.82 1,358 0.68 26,449 13.32
Jul-94 135,020 82,340 60.98 20,583 23.62 7,577 5.61 19,407 14.37 1,443 1.07 3,670 2.72
Jun-94 103,898 50,265 48.38 21,010 24.11 7,324 7.05 20,290 19.53 1,365 1.31 3,644 3.51
May-94 108,792 56,321 51.77 20,363 23.37 7,203 6.62 20,306 18.66 1,320 1.21 3,279 3.01
Apr-94 115,508 57,957 50.18 22,136 25.40 9,862 8.54 20,534 17.78 1,559 1.35 3,460 3.00
Mar-94 111,786 53,397 47.77 21,797 25.01 9,901 8.86 21,948 19.63 1,388 1.24 3,355 3.00
Feb-94 181,391 140,238 77.31 21,597 24.78 10,232 5.64 4,855 2.68 1,120 0.62 3,349 1.85
Jan-94 108,027 48,540 44.93 25,130 28.84 26,559 24.59 1,598 1.48 1,053 0.97 5,147 4.76
Dec-93 67,829 27,445 40.46 24,662 28.30 9,701 14.30 1,789 2.64 994 1.47 3,238 4.77
Nov-93 58,923 22,477 38.15 20,628 23.67 9,646 16.37 1,792 3.04 893 1.52 3,487 5.92
Oct-93 136,338 31,247 22.92 87,255 100.12 10,205 7.49 2,133 1.56 1,925 1.41 3,573 2.62
Sep-93 159,559 83,818 52.53 42,175 48.39 6,491 4.07 22,231 13.93 1,741 1.09 3,103 1.94
Aug-93 155,800 83,901 53.85 40,009 45.91 24,449 15.69 2,374 1.52 1,801 1.16 3,266 2.10
Jul-93 151,762 92,114 60.70 28,305 32.48 24,295 16.01 2,471 1.63 1,829 1.21 2,748 1.81
Jun-93 134,402 95,045 70.72 8,547 9.81 24,513 18.24 1,931 1.44 1,657 1.23 2,709 2.02
May-93 123,623 97,536 78.90 11,580 13.29 8,045 6.51 2,017 1.63 1,647 1.33 2,798 2.26
Apr-93 131,505 94,572 71.92 10,706 12.28 19,955 15.17 2,420 1.84 1,098 0.83 2,754 2.09

46 ©Alan Baggett
 Just how many tax debtors are there?

PERSONAL AGING – ALL DOR TOTAL NUMBER OF DEBTORS

All Ages Under 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years
Date # # % # % # % # % # % # %
May-96 17,918 8,986 50.15 3,461 19.32 2,043 11.40 1,187 6.62 1,093 6.10 1,148 6.41
Apr-96 18,159 9,435 51.96 3,219 17.97 2,083 11.63 1,265 7.06 1,003 5.60 1,154 6.44
Mar-96 18,120 9,151 50.50 3,385 18.89 2,173 12.13 1,233 6.88 1,050 5.86 1,128 6.30
Feb-96 18,743 9,847 52.54 3,181 17.75 2,316 12.93 1,175 6.56 1,136 6.34 1,088 6.07
Jan-96 19,594 10,533 53.76 3,222 17.98 2,378 13.27 1,220 6.81 1,138 6.35 1,103 6.16
Dec-95 18.571 10,377 55.88 3,302 18.43 1,858 10.37 1,282 7.15 792 4.42 960 5.36
Nov-95 20,638 11,887 57.60 3,433 19.16 1,947 10.87 1,498 8.36 838 4.68 1,035 5.78
Oct-95 22,026 13,348 60.60 3,429 19.14 2,250 12.56 1,335 7.45 665 3.71 999 5.58
Sep-95 22,735 14,350 63.12 3,611 20.15 1,853 10.34 1,451 8.10 622 3.47 848 4.73
Aug-95 23,628 15,927 67.41 2,938 16.40 1,746 9.74 1,486 8.29 696 3.88 835 4.66
Jul-95 19,771 12,208 61.75 2,858 15.95 1,683 9.39 1,513 8.44 721 4.02 788 4.40
Jun-95 13,540 6,181 45.65 2,717 15.16 1,650 9.21 1,513 8.44 692 3.86 787 4.39
May-95 13,244 5,905 44.59 2,801 15.63 1,590 8.87 1,514 8.45 673 3.76 761 4.25
Apr-95 13,740 6,160 44.83 3,042 16.98 1,528 8.53 1,576 8.80 677 3.78 757 4.22
Mar-95 13,398 5,731 42.78 3,107 17.34 1,727 9.64 1,436 8.01 646 3.61 751 4.19
Feb-95 14,807 6,483 43.78 3,536 19.73 1,667 9.30 1,575 8.79 635 3.54 911 5.08
Jan-95 14,998 6,662 44.42 3,636 20.29 1,722 9.61 1,578 8.81 638 3.56 762 4.25
Dec-94 16,237 7,765 47.82 3,413 19.05 2,258 12.60 1,277 7.13 740 4.19 774 4.32
Nov-94 16,793 8,383 49.92 3,355 18.72 2,290 12.78 1,300 7.26 697 3.89 768 4.29
Oct-94 16,944 8,501 50.17 3,878 21.64 2,126 11.87 1,003 5.60 712 3.97 724 4.04
Sep-94 16,392 8,821 53.81 3,128 17.46 2,323 12.96 913 5.10 567 3.16 640 3.57
Aug-94 13,278 6,089 45.86 2,798 15.62 2,246 12.53 1,030 5.75 502 2.80 613 3.42
Jul-94 12,683 5,603 44.18 2,688 15.00 2,308 12.88 1,032 5.76 440 2.46 612 3.42
Jun-94 12,373 5,286 42.72 2,667 14.88 2,333 13.02 1,037 5.79 439 2.45 611 3.41
May-94 12,888 5,815 45.12 2,608 14.56 2,394 13.36 1,028 5.74 431 2.41 612 3.42
Apr-94 13,868 6,744 48.63 2,550 14.23 2,521 14.07 1,002 5.59 434 2.42 617 3.44
Mar-94 14,516 7,376 50.81 2,907 16.22 2,247 12.54 954 5.32 427 2.38 605 3.38
Feb-94 17,011 9,403 55.28 3,096 17.28 2,539 14.17 925 5.16 441 2.46 607 3.39
Jan-94 17,106 9,530 55.71 3,112 17.37 2,503 13.97 912 5.09 440 2.46 609 3.40
Dec-93 15,437 8,036 52.06 3,606 20.13 1,857 10.36 975 5.44 365 2.04 598 3.34
Nov-93 15,855 8,099 51.08 3,887 21.69 1884 10.51 974 5.44 385 2.15 626 3.49
Oct-93 15,823 8,766 55.40 3,691 20.60 1,442 8.05 940 5.25 356 1.99 628 3.50
Sep-93 12,856 6,513 50.66 3,606 20.13 1,334 7.45 566 3.16 299 1.67 538 3.00
Aug-93 12,102 5,735 47.39 3,617 20.19 1,328 7.41 569 3.18 309 1.72 544 3.04
Jul-93 12,209 5,459 44.71 3,862 21.55 1,402 7.82 589 3.29 329 1.84 568 3.17
Jun-93 12,470 5,537 44.40 4,004 22.35 1,435 8.01 606 3.38 219 1.78 569 3.18
May-93 12,525 5,489 43.82 4,174 23.30 1,384 7.72 616 3.44 314 1.75 548 3.06
Apr-93 12,779 5,552 43.35 4,407 24.60 1,392 7.77 570 3.18 315 1.76 543 3.03

47 ©Alan Baggett
 Just how many tax debtors are there?

PERSONAL AGING – ALL DOR TOTAL DOLLARS $(000) OWED

All Ages Under 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years
Date $ $ % $ % $ % $ % $ % $ %
May-96 241,495 84,752 35.09 49,304 20.42 36,529 15.13 20,070 8.31 19,831 8.21 31,009 12.84
Apr-96 245,734 92,131 37.49 48,357 20.02 34,928 14.21 20,099 8.18 19,716 8.02 30,503 12.41
Mar-96 244,882 94,786 38.71 49,661 20.56 31,384 12.82 19,820 8.09 19,940 8.14 29,291 11.96
Feb-96 245,378 99,951 40.73 49,201 20.37 30,091 12.26 18,666 7.61 19,741 8.05 27,728 11.30
Jan-96 253,065 104,136 41.15 52,246 21.63 30,666 12.12 19,909 7.87 19,083 7.54 27,025 10.68
Dec-95 221,719 92,522 41.73 46,487 19.25 27,390 12.35 19,145 8.63 14,601 6.59 21,574 9.73
Nov-95 234,714 98,414 41.93 46,976 19.45 29,450 12.55 19,725 8.40 15,203 6.48 24,946 10.63
Oct-95 238,075 101,495 42.63 50,093 20.74 29,059 12.21 18,135 7.62 14,532 6.10 24,761 10.40
Sep-95 241,526 105,733 43.78 49,120 20.34 29,115 12.05 18,817 7.79 14,570 6.03 24,171 10.01
Aug-95 249,444 112,010 44.90 49,451 20.48 30,550 12.25 18,570 7.44 14,896 5.97 23,967 9.61
Jul-95 227,881 90,562 39.74 50,621 20.96 30,543 13.40 18,695 8.20 15,128 6.64 22,332 9.80
Jun-95 193,461 58,488 30.23 52,831 21.88 33,002 17.06 14,665 7.58 12,987 6.71 21,498 11.11
May-95 189,104 62,412 33.00 50,360 20.85 28,310 14.97 18,150 9.60 11,420 6.04 18,452 9.76
Apr-95 179,367 67,129 37.43 43,562 18.04 21,792 12.15 17,573 9.80 11,214 6.25 18,097 10.09
Mar-95 176,175 67,852 38.51 40,330 16.70 21,294 12.09 17,174 9.75 11,600 6.58 17,925 10.17
Feb-95 180,037 73,205 40.66 39,981 16.56 20,987 11.66 17,034 9.46 11,132 6.18 17,698 9.83
Jan-95 181,374 72,458 39.95 40,108 16.61 22,710 12.52 16,284 8.98 12,281 6.77 17,533 9.67
Dec-94 199,571 79,233 39.70 43,378 17.96 27,445 13.75 17,678 8.86 13,265 6.65 18,572 9.31
Nov-94 207,336 81,218 39.17 44,784 18.54 28,212 13.61 17,799 8.58 14,277 6.89 21,046 10.15
Oct-94 205,198 78,743 38.37 44,821 18.56 28,965 14.12 18,072 8.81 13,201 6.43 21,396 10.43
Sep-94 203,175 76,718 37.76 44,636 18.48 30,092 14.81 18,523 9.12 12,486 6.15 20,720 10.20
Aug-94 198,471 59,047 29.75 56,822 23.53 30,088 15.16 19,715 9.93 13,172 6.64 19,627 9.89
Jul-94 198,765 59,399 29.88 57,972 24.01 29,119 14.65 20,292 10.21 13,497 6.79 18,486 9.30
Jun-94 199,789 63,763 31.92 65,091 26.95 24,474 12.25 18,208 9.11 11,766 5.89 16,487 8.25
May-94 184,974 64,970 35.12 47,556 19.69 27,700 14.98 17,871 9.66 9,735 5.26 17,142 9.27
Apr-94 179,342 70,400 39.25 37,545 15.55 27,234 15.19 18,234 10.22 9,761 5.44 16,078 8.96
Mar-94 180,446 73,512 40.74 35,863 14.85 27,450 15.21 18,854 10.45 9,078 5.03 15,689 8.69
Feb-94 194,333 83,305 42.87 38,080 15.77 28,498 14.66 19,139 9.85 9,342 4.81 15,969 8.22
Jan-94 193,661 83,706 42.90 40,946 16.96 26,211 13.53 18,794 9.70 8,635 4.46 15,999 8.26
Dec-93 181,411 72,197 39.80 40,017 16.57 25,938 14.30 18,858 10.40 8,732 4.61 19,029 8.84
Nov-93 180,246 69,269 38.43 40,013 16.57 25,792 14.31 18,689 10.37 8,917 4.95 17,566 9.75
Oct-93 178,875 64,636 36.13 42,028 17.40 26,381 14.75 17,056 9.54 8,605 4.81 20,169 11.28
Sep-93 172,050 67,314 39.12 38,408 15.90 24,902 14.47 16,692 9.70 5,940 3.45 18,794 10.92
Aug-93 167,353 62,868 37.57 36,214 15.00 26,352 15.75 17,076 10.20 5,283 3.16 19,560 11.69
Jul-93 171,192 67,010 39.14 31,700 13.13 31,756 18.55 16,107 9.41 5,185 3.03 19,434 11.35
Jun-93 164,667 59,866 36.36 35,273 14.61 31,083 18.88 13,906 8.44 5,528 3.36 19,011 11.55
May-93 156,425 53,563 34.24 40,362 16.71 28,761 18.39 10,771 6.89 5,660 3.62 17,038 11.06
Apr-93 153,914 52,107 33.85 39,285 16.27 28,713 18.66 10,951 7.12 6,113 3.97 16,745 10.88

48 ©Alan Baggett
 Just how many tax debtors are there?

ALL REVENUES AGING – ALL DOR TOTAL NUMBER OF DEBTORS

All Ages Under 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years
Date # # % # % # % # % # % # %
May-96 24,518 12,033 49.08 4,712 19.22 2,830 11.54 1,599 6.52 1,312 5.35 2,032 8.29
Apr-96 26,843 12,467 46.44 4,463 18.20 2,880 11.75 1,675 6.83 1,221 4.98 2,046 8.34
Mar-96 26,260 12,026 45.80 4,513 18.41 2,907 11.86 1,587 6.47 1,257 5.13 1,937 7.90
Feb-96 26,658 12,696 47.63 4,260 17.37 3,042 12.41 1,506 6.14 1,343 5.48 1,881 7.67
Jan-96 27,650 13,429 48.57 4,314 17.60 3,144 12.82 1,563 6.37 1,353 5.52 1,958 7.99
Dec-95 26,670 13,293 49.84 4,399 17.94 2,627 10.71 1,626 6.63 1,572 6.41 1,297 5.29
Nov-95 28,692 14,902 51.94 4,515 18.42 2,672 10.90 1,833 7.48 1,603 6.54 1,367 5.58
Oct-95 30,110 16,407 54.49 4,521 18.44 2,980 12.15 1,696 6.92 1,468 5.99 1,346 5.49
Sep-95 30,720 17,464 56.85 4,708 19.20 2,587 10.55 1,764 7.19 1,432 5.84 1,188 4.85
Aug-95 31,582 18,919 59.90 4,035 16.46 2,443 9.96 1,778 7.25 1,518 6.19 1,165 4.75
Jul-95 27,369 14,852 54.27 3,903 15.92 2,373 9.68 1,782 7.27 1,553 6.33 1,092 4.45
Jun-95 20,689 8,617 41.29 3,746 15.28 2,277 9.29 1,796 7.33 1,517 6.19 1,074 4.38
May-95 20,445 8,185 40.03 3,871 15.79 2,186 8.92 1,828 7.46 1,572 6.41 1,060 4.32
Apr-95 20,755 8,397 40.46 4,114 16.78 2,076 8.47 1,890 7.71 1,579 6.44 1,044 4.26
Mar-95 20,337 7,956 39.12 4,184 17.07 2,257 9.21 1,737 7.08 1,552 6.33 1,029 4.20
Feb-95 21,632 8,727 40.34 4,624 18.86 2,180 8.89 1,906 7.77 1,560 6.36 1,193 4.87
Jan-95 22,002 8,958 40.71 4,769 19.45 2,240 9.14 1,927 7.86 1,645 6.71 1,065 4.34
Dec-94 23,202 10,113 43.59 4,551 18.56 2,756 11.24 2,437 9.94 963 3.93 1,073 4.38
Nov-94 24,028 10,827 45.06 4,494 18.33 2,843 11.60 2,532 10.33 968 3.95 1,076 4.39
Oct-94 24,289 11,045 45.47 4,969 20.27 2696 11.00 2,235 9.12 984 4.01 1,027 4.19
Sep-94 23,819 11,451 48.08 4,234 17.27 2,857 11.65 2,131 8.69 838 3.42 927 3.78
Aug-94 20,652 8,796 42.59 3,884 15.84 2,737 11.16 2,285 9.32 762 3.11 889 3.63
Jul-94 19,706 8,138 41.30 3,756 15.32 2,766 11.28 2,325 9.48 674 2.75 877 3.58
Jun-94 19,215 7,666 39.90 3,614 14.74 2,820 11.50 2,312 9.43 645 2.63 869 3.54
May-94 19,284 8,171 42.37 3,491 14.24 2,888 11.78 2,300 9.38 624 2.55 865 3.53
Apr-94 20,783 9,172 44.13 3,484 14.21 3,098 12.64 2,498 10.19 654 2.67 904 3.69
Mar-94 21,416 9,863 46.05 3,789 15.45 2,820 11.50 2,463 10.05 643 2.62 882 3.60
Feb-94 23,956 11,945 49.86 3,939 16.06 3,118 12.72 2,448 9.98 651 2.66 875 3.57
Jan-94 24,195 12,098 50.00 3,951 16.11 3,076 12.55 2,436 9.94 652 2.66 862 3.52
Dec-93 22,765 10,635 46.72 4,407 17.97 2,439 9.95 2,506 10.22 573 2.34 844 3.44
Nov-93 23,627 10,676 45.88 4,723 19.26 3,661 14.93 1,346 5.49 562 2.29 861 3.51
Oct-93 23,728 11,389 48.00 4,626 18.87 3,411 13.91 1,358 5.54 574 2.34 890 3.63
Sep-93 20,928 9,247 44.18 4,505 18.37 3,402 13.88 1,015 4.14 497 2.03 814 3.32
Aug-93 20,189 8,493 42.07 4,492 18.32 3,470 14.15 1,002 4.09 507 2.07 814 3.32
Jul-93 20,275 8,196 40.42 4,709 19.21 3,597 14.67 996 4.06 523 2.13 825 3.36
Jun-93 20,114 7,958 39.56 4,890 19.94 3,616 14.75 964 3.93 505 2.06 813 3.32
May-93 20,728 7,832 38.62 5,118 20.87 3,684 15.03 986 4.02 515 2.10 793 3.23
Apr-93 20,554 7,799 37.94 5,363 21.87 3,734 15.23 912 3.72 516 2.10 781 3.19

49 ©Alan Baggett
 Just how many tax debtors are there?

ALL REVENUES AGING – ALL DOR TOTAL DOLLARS $(000) OWED

All Ages Under 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years
Date $ $ % $ % $ % $ % $ % $ %
May-96 450,242 153,221 34.03 104,458 23.20 61,918 13.75 43,750 9.72 29,357 6.52 57,538 12.78
Apr-96 524,564 175,844 33.51 88,720 19.70 59,759 11.39 44,168 8.42 29,251 5.58 56,836 10.83
Mar-96 534,407 174,025 32.56 89,709 19.92 77,681 14.54 42,119 7.88 28,799 5.39 53,466 10.00
Feb-96 604,218 237,692 39.34 89,561 19.89 91,473 15.14 39,809 6.59 29,196 4.83 49,853 8.25
Jan-96 630,054 259,376 41.17 130,087 28.89 51,245 8.13 41,324 6.56 31,925 5.07 50,058 7.95
Dec-95 605,996 232,745 38.41 122,675 27.25 48,869 8.06 40,219 6.64 60,969 10.06 33,407 5.51
Nov-95 598,161 222,695 37.23 122,302 27.16 50,839 8.50 40,911 6.84 60,876 10.18 36,408 6.09
Oct-95 571,418 260,804 45.64 84,713 18.81 50,337 8.82 39,793 6.96 38,396 6.72 36,538 6.39
Sep-95 610,236 265,976 43.58 122,069 27.11 57,291 9.39 33,147 5.43 37,940 6.22 37,600 6.16
Aug-95 557,551 181,567 32.57 157,199 34.91 57,712 10.35 30,977 5.56 37,832 6.79 35,594 6.38
Jul-95 556,533 146,098 26.25 196,047 43.54 56,891 10.22 31,184 5.60 37,535 6.74 33,540 6.03
Jun-95 529,098 127,950 24.18 191,425 42.52 60,112 11.36 26,992 5.10 35,060 6.63 32,251 6.10
May-95 433,705 137,406 31.68 79,580 17.67 66,992 15.45 31,483 7.34 36,742 8.47 29,579 6.82
Apr-95 401,832 125,975 31.35 73,794 16.39 58,118 14.46 33,187 8.26 33,119 8.24 29,989 7.21
Mar-95 396,465 125,863 31.75 71,780 15.94 57,378 14.47 32,664 8.23 33,162 8.36 28,444 7.17
Feb-95 407,463 140,788 34.55 72,172 16.03 56,641 13.90 33,626 8.25 31,018 7.61 28,176 6.91
Jan-95 407,493 136,263 33.44 69,117 15.35 59,791 14.67 38,794 9.56 30,575 7.50 28,252 6.93
Dec-94 429,298 139,159 32.42 80,530 17.89 64,238 14.96 55,641 12.96 17,399 4.05 29,051 6.77
Nov-94 445,521 144,832 32.51 85,805 19.06 66,135 14.84 55,754 12.51 19,390 4.35 31,526 7.08
Oct-94 564,706 269,102 47.65 75,620 16.80 66,935 11.85 55,347 9.80 17,998 3.19 31,588 5.59
Sep-94 528,515 211,114 39.94 93,031 20.66 54,619 10.33 67,258 12.73 17,365 3.29 30,634 5.80
Aug-94 554,945 212,438 38.28 102,334 22.73 52,682 9.49 68,294 12.21 17,856 3.22 52,038 9.38
Jul-94 490,854 177,823 36.23 101,455 22.53 51,204 10.43 64,766 13.19 18,014 3.67 27,918 5.69
Jun-94 461,885 149,617 32.39 108,150 24.02 46,665 10.10 61,886 13.40 15,866 3.44 25,755 5.58
May-94 436,095 155,753 35.72 89,941 19.98 49,221 11.29 60,639 13.90 13,626 3.12 25,874 5.93
Apr-94 443,849 161,934 36.48 82,442 18.31 53,410 12.03 62,334 14.04 14,247 3.21 26,224 5.91
Mar-94 438,955 159,751 36.39 80,942 17.88 53,684 12.23 63,611 14.49 13,460 3.07 25,456 5.80
Feb-94 521,441 257,319 49.35 81,918 18.19 55,979 10.74 44,289 8.49 13,554 2.60 25,284 4.85
Jan-94 441,451 164,875 37.33 88,205 19.59 70,165 15.89 39,631 8.98 12,720 2.88 26,916 6.10
Dec-93 389,462 132,974 34.14 86,419 19.19 52,538 13.49 39,303 10.09 12,305 3.16 24,936 6.40
Nov-93 379,571 125,981 33.19 82,467 18.32 66,540 17.53 24,452 6.44 12,077 3.18 26,510 6.98
Oct-93 471,396 130,561 27.70 152,075 33.78 72,871 15.46 24,245 5.14 13,451 2.85 29,889 6.34
Sep-93 488,870 186,549 38.16 103,212 22.92 68,560 14.02 44,425 9.09 10,586 2.17 28,555 5.84
Aug-93 472,669 183,265 38.77 97,428 21.64 89,601 19.96 24,902 5.27 10,297 2.18 29,174 6.17
Jul-93 469,647 195,353 41.60 80,872 17.96 94,686 20.16 23,805 5.07 10,030 2.14 28,348 6.04
Jun-93 441,760 190,088 43.03 65,160 14.47 92,214 20.87 20,647 4.67 10,126 2.29 27,616 6.25
May-93 423,454 186,761 44.10 73,726 16.37 73,768 17.42 17,722 4.19 10,396 2.46 25,996 6.14
Apr-93 426,493 180,559 42.34 72,822 16.17 83,694 19.62 18,017 4.22 10,729 2.52 24,823 5.82

50 ©Alan Baggett
 From A to C: Assessing to Collections

Unlike in the United Kingdom where a yearly tax bill is mailed to each and every
individual, there is no filing required, in Canada we operate on the honour system. Each
individual, business or other entity, as required, is trusted to voluntarily file their return of
income on time, to file the return correctly and then to pay any tax amount outstanding in
good order. And those Canadians who do comply with these standards, completing and
mailing of the annual tax return, soon erase the unpleasant experience from their minds.
Forgetting all about it until they receive their tax assessment notice many months later.
But what really happens to your tax return once it is sent off?
Once you send your tax return on its journey its final destination is a Taxation Centre
(TC), and it will arrive at this stopping point in one of two ways. There is the paper copy
delivered by the mail carrier and there is the digital delivery. Now mail carrying is self
explanatory but a digital delivery means that the tax return was electronically filed or E-
filed, sent via a touch-tone phone or filed from the Internet using NETFILE.

Voluntarily Filed Tax Returns

Upon arriving at a TC your paper tax return is opened and date stamped as of the day
received. Any cheque(s) are removed and sent to the Cash Section for crediting to your
account. And yes, there are times when Revenue Canada misplaces our cheques. I have
been told stories of missed cheques suddenly turning up months and even years after the
taxpayer has submitted them suddenly ‘found’ attached to their tax return.
Often times it is not until the department threatens legal action and the tax collector
obtains your tax return during the course of their investigation that these ‘lost’ cheques
are found. Sometimes it is not until after legal action has been initiated that your missing
payment turns up. And by then the damage has been done. In some instances, I have been
told, our old and expired cheques that suddenly appear are discretely disposed of to save
Revenue Canada from any embarrassment.
Once any cheque(s) have been removed your tax return is sent for a quick review.
This review is usually completed by a contract or seasonal worker, very often a high
school or college student, and is unlikely to last more than a minute. The purpose is to
check your math and to identify any unusual or unsupported deductions from income that
you might have claimed.

51 ©Alan Baggett
 From A to C: Assessing to Collections

CRA Taxation Centers and their feeder Taxation Services Offices

Taxation Center Code Taxation Services Office Code

Ottawa 93 Toronto Core 13
Toronto East (Scarborough) 61
Toronto West (Mississauga) 62
Toronto North (North York) 63
Peterborough 66
Winnipeg 94 Winnipeg 21
Regina 22
Saskatoon 23
Calgary 24
Edmonton 25
Surrey 95 S. Interior BC (Penticton) 26
Vancouver 27
Vancouver Island (Victoria) 28
Burnaby-Fraser 41
N. BC and Yukon 42
Shawinigan South 96 Montreal 8
Outaouais 45
Laval 46
Monteregie River South/St. Hubert 47
Jonquiere 97 Quebec City 6
Sherbrooke 7
Rouyn-Noranda 9
Chicoutimi 57
Rimouski 58
Trois-Rivieres 59
St. John’s 98 Newfoundland-Labrador (St.John’s) 1
Charlottetown 2
Halifax 3
Sydney 4
Saint John 5
Moncton 44
Bathurst 60
Sudbury 99 Kingston 11
Belleville 12
Hamilton 14
Kitchener-Waterloo 15
St. Catherines 16
London 17
Windsor 18
Sudbury 19
Thunder Bay 20
Summerside N/A
52 ©Alan Baggett
 From A to C: Assessing to Collections

After this cursory review is completed your tax return is keypunched or entered into
the Agency’s computer database. Once your tax return is in the database your tax
assessment is considered to have been completed and your Notice of Assessment is
generated (though your tax return can be called up for review, an audit, at any time in the
future).
When a tax return making suspect income deduction claims is accepted as filed the
return will be ‘flagged’. After the return is flagged it will still be keypunched and filed
away. The filer of a flagged tax return will still receive their tax assessment as filed, but
the tax return is now easily identified so it may be pulled from the archives some years
down the road for an audit in order to verify the claims.
However there is also a third option, when the reviewer decides that more information
is immediately necessary your tax return will not be immediately assessed. Instead it is
passed to a follow-up unit who will contact the filer and ask them to further substantiate
the deductions claimed or to provide any missing information. If you fail to provide the
requested information your claim(s) will be disallowed and your tax return is assessed on
what is assumed to be accurate.
Which brings us to digitally filed tax returns.
The digital filing of T1 income tax returns has become extremely common whether it
be by E-filing, NETFILE or touch-tone phone filing. As a result of digital filing
Canadians can file a tax return faster than ever and immediately receive confirmation of
its delivery. No extra manpower is needed by the CRA to assess your tax return and
assessment notices are mailed almost immediately. If current banking information is
supplied you often receive any refund due by week’s end. Currently only T1 tax returns
may be digitally filed.
Touch-tone phone filing or TELEFILE of income tax returns is available for those
filing with simple returns such as a T1 Special, T1S-A, or T1S-C and have received the
TELEFILE tax package from the CRA. More in-depth detail can be found at
http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/tlfl/bt-eng.html.
NETFILE found at http://www.netfile.gc.ca/ is now open to all Canadians but you
may have to purchase preparation software or web applications to make use of it.
E-filing was introduced to Canadians in 1992 and is available only to CRA authorized
tax preparation firms though individuals may prepare their own return and have a tax
preparer electronically submit it on their behalf. The tax preparer can charge anywhere
from twenty to sixty dollars and sometime even more so shop around. Among others,
current bankrupts and non-resident Canadians are barred from filing electronically. For
the complete list of exclusions visit http://www.efile.cra.gc.ca/l-xclsns-eng.html. At one
time tax collectors, their friends and families were allowed to E-file for free but this perk
was discontinued and Revenue Canadians were switched to NETFILE but with the
agency continuing to bear all costs.
Revenue Canada has realized a significant saving with the advent of the digital tax
filing. Among other things it reduces the amount of paperwork, the number of employees
needed, wages, cheque costs (cashing and copying), supplies, storage, space and
equipment costs. But the biggest benefit is that the digitally filed return cannot be
submitted with mathematical errors. Because there can be no math errors the digitally
filed income tax return is automatically assessed as truthful and any refund is sent

53 ©Alan Baggett
 From A to C: Assessing to Collections

immediately. However, as usual, Revenue Canada does reserve the right to audit any tax
return but any review is at least two years into the future and could be much longer.
Digital filing is a model of efficiency for filers and a cash saving on paper but there
are also negatives the tax collector must deal with.
Those who digitally file their tax return are much more likely to be audited than the
filer who submits their tax return through the mail. Why? Because the digital filer
includes no receipts with their tax return. The paper filer usually includes all necessary
documentation. So the only way the tax collector can verify the claims a digital filer
makes is to view their receipts and records first hand. To conduct this verification the E-
filer and his/her accountant must be audited. The resulting audit is an expense to Revenue
Canada that negates the cost savings that are the benefit of digital filing. But there are
also more serious problems associated with digitally filed tax returns.
Some digital filers may supply false numbers when submitting their tax return. This is
done to increase the size of their refund or to decrease the amount owing. If such an
individual gets caught, some are and some are not, they are reassessed along with interest
and maybe a penalty to correct the erroneous original assessment. Nothing more.
Whether the filer intentionally filed a misleading tax return or not is irrelevant. There is
rarely further punishment. But by the time any ‘error’ is detected usually two or more
years have passed.
And the one most likely to commit such an infraction is the one with the least to lose,
one who is already in dire financial straits and does not have the means to repay their
electronic or e-fraud.
When a tax debt resulting from numbers manipulation is sent to the tax collector for
collection it is given a low priority for working. Why? Tax collectors know from
experience that most tax debts that arise in this manner are write-offs just waiting to
happen. You may find this hard to believe but after hearing about Revenue Canada’s
problems with the sales force of Amway you will reconsider this thought.
Now Amway itself, the corporation, did nothing wrong (as far as I know). But a large
number of those who currently sell or previously sold products under the Amway banner
were audited for making ‘erroneous’ claims on their income tax returns.
Someone incorrectly advised these salespeople what expenses they could deduct from
their business income. Who advised them has never been determined. But as a result
thousands in the Amway sales force received tax refunds that they were not entitled too.
After noticing that an abnormal number of high dollar refunds were being issued
Revenue Canada investigated. When it was determined that the majority of these refunds
were going to Amway salespeople the department began to audit just about every
Canadian with ties to the Amway corporation. This resulted in the reassessment of
thousands of Amway salespeople for, cumulatively, tens of millions of dollars of tax
debt.
The reassessments ranged anywhere from a couple of thousand dollars to the six-
figure neighborhood. But even though these people were caught not all ended up paying
their tax debt. Some paid and some did not.
I dealt with several Amway debtors and can recall two unrelated couples whose tax
debts resulted from their Amway business deduction claims. In each instance the sole
asset was the equity in their matrimonial residence. The first couple, owing $36,000,
mortgaged their home and promptly paid off their tax debt. The second couple, owing

54 ©Alan Baggett
 From A to C: Assessing to Collections

$7500, refused to remortgage their home and pay. Eventually their tax debt was written
off as uncollectible.
None of the Amway related tax debts originated from digitally filed tax returns yet
still the filers were able to obtain monies they were not entitled too and many were never
forced to repay them.
And before you think only individuals commit these kinds of frauds consider the case
of Cinar Corp.
For a number of years they illegally claimed tax credits by alleging that Canadians had
written scripts that in fact had been written by Americans. This may not sound like a big
deal but the end result was an agreement to repay the federal government $5.1 million,
repay the province of Quebec $7.9 million, to drop federal and provincial tax credit
claims totalling almost $9.7 million dollars and to accept a further corporate (T2) tax
liability of $4.8 million.
Not all individuals or businesses that commit these kinds of tax infractions are caught
but many that are find themselves unable to pay their reassessment(s).
And with the lack of supporting documentation included when filing a digital tax
return, the speed in which the digital filer receives their refund and the length of time in
which it takes to decide to audit the digital filer, two years or longer, imagine how easy it
is for those with the inclination to profit from making false claims on their tax return.
And for the tax collector digital returns can be the biggest obstacle faced when it
comes to collecting tax arrears. Often an insurmountable obstacle. Why?
Digital filers supply no hard documentation at all when they file. Just numbers. When
a tax debtor digitally files their tax return there are fewer investigation leads because no
supporting receipts are attached to the return. At the best of times those with tax debts are
uncooperative. With no receipts it makes a collections investigation close to impossible.
And unless the tax debt is substantial, a Requirement for Information (discussed in the
chapter of the same name) will not be considered. When the tax debtor remains
uncooperative and no collection avenues are located their tax debt is deleted as
uncollectible. End of story.
The advent of digital filing, while a day to day cost saving, may actually cost Revenue
Canada more as the number of tax debts arising from improperly filed digital returns
rises.
What Revenue Canada should consider is a ban on digital filing for those Canadians
with current tax liabilities or who have a history of payment problems. Digital filing
should be a privilege extended to those who are currently compliant with their tax
obligations. Why make it easier for a tax debtor to avoid payment by allowing them to
file tax returns that are just numbers. Tax returns that lack the exact information needed
to assist resolution of the debt it created.
An accountant by the name of Jack P., an annual tax debtor, applied to Revenue
Canada for the right for his business to digitally file his client’s tax returns. Any business
that wants to E-file must have departmental approval. He was turned down because he
had a personal tax debt. Because he had a personal income tax debt his business wasn’t
allowed to digitally file the returns of its clients yet the debtor himself could digitally file
and continue to remain a tax debtor.

55 ©Alan Baggett
 From A to C: Assessing to Collections

Canada Customs Agence des douanes

And Revenue Agency et du revenu du Canada

Your file Votre reference

Our file Notre reference

Alan S Baggett (905)570-7295

389 Ward Rd Non-Filer/Non-
Burlington, Ontario Registrant Section
L7R 3H8 Carol Pakulak
June 25, 2002

Dear Mr. Baggett:

1998, 1999 and 2000 T1 Income Tax Returns

Our records indicate that you have not filed Income Tax Returns for the above-mentioned
years.

It is important that you contact this office without delay regarding the filing of your
outstanding T1 Income Tax Returns.

Please contact the writer at 905-570-7295.

Yours sincerely,

Non-Filer/Non-Registrant Section
Carol Pakulak

Facs: (905) 572-4682 Telecopieur: (905) 572-4682

Hamilton Tax Services Office Bureau des services fiscaux de Hamilton
PO Box 2220 CP 2220
150 Main Street West 150 ru Main Ouest
Hamilton, Ontario L8N Hamilton, Ontario L8N 3G1

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Unless Revenue Canada bans current tax debtors from the use of digital filing while
getting more aggressive with those who abuse the privilege, digital filing will
increasingly cost the department in audit expenses, false refunds and written-off tax debts
more than the implementation of digital filing saves.

Arbitrarily assessed tax assessments

Now we’ve discussed how those who voluntarily file their tax returns file, lets talk about
those Canadians who forget that the tax return filing deadline has come and gone?
Sometimes for several years in succession. How does the tax collector deal with a
delinquent filer and when will they assess them?
When the tax collector files a tax return on your behalf this is known as an Arbitrary
Assessment. And if you do not file a tax return for one or more years and the tax collector
is aware that you have earned income that has not been taxed or fully taxed then you will
become a candidate for an arbitrary assessment. Subsection 152(7) of the Income Tax Act
gives the CRA this right.
But first, to encourage a non-filer to become compliant the tax collector will first send
a Requirement to File letter. This type of Requirement is used to politely ask that you file
your overdue Income Tax returns.
An example of such a letter can be found as the lead-in to this section (page previous).
And what if the non-filer still refuses to file? After this polite letter?
Subsection 150(2) of the Income Tax Act allows the Minister to demand that you file
your income tax return. So the department will now send you a slightly more severely
worded letter, registered of course, demanding that your income tax return(s) be filed.
An example of just such a letter can be found on the page immediately following.
A separate registered letter must be sent for each tax year that a return is outstanding.
Now don’t expect to receive such personalized summons to file each and every year.
Most often the CRA employee will wait until the delinquent filer has not filed for three or
more consecutive years before asking the non-filer to file up to date. Why? Cost
effectiveness. It’s cheaper to go after a delinquent once every three years as opposed to
every year. Which is silly when you think about it because who is least likely to file
(besides the person trying to make a point – like me) the person who owes. The tax
debtor. Of course the person receiving a refund is going to file. So ninety-nine times out
of one hundred the non-filer is going to be a tax debtor. And if the debtor was not willing
to pay three or more years ago will they want to pay today? With all the extra penalties
and interest added on?
No.
But the issue of debt collectibility does not deter the CRA.
Why?
Because it is not always about finding and settling tax arrears but a question of
productivity. As noted earlier the department sets productivity goals in many different
areas including how many tax returns to arbitrarily assess and how many dollars to
assess.

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Canada Customs Agence des douanes DEMAND FOR INCOME TAX RETURN
And Revenue Agency et du revenu du Canada 00008

SUMMERSIDE PE C1N 5Z7

Account Number Date

123 456 789 June 26, 2002

If you need more information, call the toll-free number listed below

Local Calls and

Long Distance Calls:
ALAN S BAGGETT Dial 1-866-224-9917
389 WARD RD
BURLINGTON ON L7R 3H8

Year and type of return Hamilton Tax Services Office

P.O. Box 2220
1998 T1 Return 150 Main St. West
Hamilton, Ont.
L8N 3E1

We have not received the income tax return for the taxation year indicated above.

In accordance with subsection 150(2) of the Income Tax Act, you are required to file the return within
30 days of this demand. Complete a return and mail it to:

Summerside Tax Centre

275 Pope Road
Summerside PE
C1N 5Z7

You can also drop off the return at the tax services office indicated in the upper right-hand
corner of this notice.

If you do not file a return within the 30-day period, we may issue an assessment under
Subsection 152(7) of the Income Tax Act, and/or further legal action may be taken.

In addition you are liable to a penalty under section 162 of the Income Tax Act.

If you need a blank return, you can request one by caling our Forms and Publications section at
1-800-959-2221 or visit our Web site at: www.ccra-ardc.gc.ca

TX14D E (01/11) Form authorized by the Minister of National Revenue

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Unfortunately it does not matter if the work needed to attain such goals is productive
only that the statistical goal is reached. So the department is quite happy to assign
unproductive work – to arbitrarily assess and then try to collect tax debts that have no
hope of being collected. Simply because it contributes to reaching stated production
goals. And when production goals are reached it indicates to those who read the bottom-
line, the statistics, that the CRA is being productive because they are meeting their
targeted goals. Meaning the budget will be increased for the upcoming fiscal year.
These are your tax dollars at work.
I hope that as you were reading that you carefully examined the two letters, ‘Request
to File’ and ‘Demand to File’, closely because they serve not only as examples of what
you may see but also are examples of departmental misconduct.
How so?
The first letter, the Request to File, was sent on June 25, 2002. And the letter simply
requests that the recipient contact the writer, in this case one Carol Pakulak, without
delay, about the delinquent tax returns. Remember it was not received on June 25th only
sent. Of course it took the normal three days to be received.
Now note that the second letter, sent registered, is dated June 26, 2002. The very next
day! Not only before the recipient could respond to the first letter but before the letter
could even have been received. And three such registered letters were sent. One for each
of the outstanding tax years mentioned in the first letter.
I point this out because this is an excellent example of the many things I have spoken
of and have yet to speak of: How some of the more unscrupulous tax employees operate.
They try to intimidate Canadians into immediately obeying their summons and so
boosting their personal statistics in the process. Without any regard for proper procedure
or the law. Harming the Agency’s already poor public image in the process. Shame on
Ms. Pakulak for her actions.
As well, these two letters are a perfect example of how poorly trained some tax
employees are. Just sending out correspondence. Without regard to the taxpayer. Solely
to look productive. And if they get lucky and you file, well, all the better.
Thirdly, it is also an example of the many tax employees who are not a fit for the job.
They are actually afraid to talk to their clients, the average Canadian, and so only
communicate via letter and phone tag but never personally. Confrontation avoidance I
think it’s called. They’re afraid to deal with upset taxpayers. And who wouldn’t be upset
when you’re treated like this. Not even given a chance.
Which of these Carol Pakulak is, if any, I do not know. But I guess you could always
phone her at (905) 570-7295 and find out.
And if you should ever find yourself harassed by the tax man or woman? Consider the
case of: Her Majesty the Queen v. Linas Saplys and Axiom Designs Incorporated –
Ontario Court decision (court file no. 1150/97).
In 2001, an Ontario judge assessed the CRA for $230,000 for unfairly harassing a
taxpayer by audit. The judge found the CRA's actions to be “utterly unworthy of any
serious consideration” and that by using its Auditing Department to search for evidence
that the CRA had committed a “repugnant” act.
The result of these and similar cases is a growing body of case law that condemns
some of the questionable investigative techniques employed by the CRA, and its
employees. So, as a consequence, the Courts are now expressing their displeasure with

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the CRA's ‘harassment’ tactics. The message is clear, that courts will provide remedies if
a taxpayer's rights are infringed upon.
Now, returning to subsection 150(2) of the Income Tax Act, the Requirement to File a
Tax Return, the original wording of the subsection left a loophole giving taxpayers a
legal defense when not providing a return of income.
In the court case Rex vs. Batters, December 22, 1924 (1 DTC 60) the department
demanded an individual file a return of income for the specified year, 1920. However this
person held that he had already filed the return and swore under oath that this was true.
The judge ruled against the department stating that the demand to file a return only
applies to those who have not already filed the tax return regardless of whether the return
was miscarried or lost.
Attempting such a maneuver today is not recommended but it does serve to prove a
point, that there is no love lost between the judiciary and the tax collector. When there is
any doubt as to how income tax legislation is to be applied decisions tend to be in the tax
debtor’s favour.
Following this decision the Income Tax Act was altered to allow Revenue Canada the
right to request a return that had previously been filed whether or not it had been
received.
But still some Canadians will go to great lengths to frustrate the tax collector.
Consider Hart Electronics of Winnipeg http://www.ownlife.com/tax/hrte591.htm. This
company submitted T2 tax returns providing no extra documents (balance sheet etc.),
showing no tax was payable and with certain remarks and comments. Nor did they bother
to sign the T2 returns. They did however include a letter of explanation.
Revenue Canada quickly reacted to this slap at their authority by charging Hart with
the failure to file tax returns. Why? Because although Hart had filed the returns with
some information the department deemed the tax returns to be defective. Therefore they
did not count as being filed.
A magistrate dismissed the charge and the department appealed to the Manitoba Court
of Appeal. The appeal was dismissed with the court stating in the Queen V Hart
Electronics (59 DTC 1192):

“…form T2 was returned which gave 'certain information'. The fact that
'no documents were attached thereto' means nothing by itself. It is not
stated or found as a fact that there were documents which should have
been attached. The form was not signed but was enclosed with a letter.
The omission to sign the form does not render the return a nullity. If a
cheque had been enclosed it could not be argued that there was no return.
If it appears that no tax is payable it also is a return though the form was
not signed. In my opinion a form T2, which gives certain information sent
by letter though the form is not signed, does constitute an income tax
return.”

Clearly, as long as an attempt is made to file your tax return, even with the barest
amounts of information, the tax return does count as being filed.

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If you choose not to file a tax return you can be charged with penalties under section
150(2) of the Income Tax Act or fined and imprisoned under section 238(1).
For most the penalties imposed under 150(2) are imposed but if the non-filer is proved
to be a tax evader than section 238(1) will be considered. However, sometimes the
department will try to scare a non-filer into filing even if not a known tax evader by
invoking section 238(1).
In Revenue Canada v. Pacey, April 11, 1995, New Brunswick Provincial Court
([1995] N.B.J. No. 612 DRS 96-19072) the defendants were charged with failing to
comply with a demand to file a tax return issued under the Income Tax Act. The
department filed charges under section 238(1) of the Income Tax Act. The defense held
that the Minister could have proceeded under section 150(2), which provided for lesser
penalties for failure to file a return. The Crown gave no evidence with respect to the
extent of the defendants' tax liability.
The Court ruled that the intent of section 238 was to punish willful tax evaders and not
delinquent tax filers. As the Crown gave no evidence of the defendants' tax liability it
was assumed no tax owed. There was no suggestion that the defendants had committed
fraud or that the department had undertaken a serious investigation of the defendants. The
demands were sent only to get the defendants to file their returns. In such circumstances
proceeding under section 238 resulted in a draconian penalty for a minor infraction of the
Act, bringing the administration of justice into disrepute.
However, if you should fail to respond and/or file your delinquent tax returns an
arbitrary estimate of your income may be made based on what the tax collector can prove
you have earned. If they can find no income the Agency should not assess the non-filer.
An arbitrary assessment is always as high an income estimate as possible with few or no
deductions considered.
How does the tax collector find your undeclared income?
If you are a T4 employee (you have an employer that pays you at regular intervals)
your employer supplies not only you with a copy of your T4 they also send Revenue
Canada a copy.
If you earn investment income such as interest or dividends and receive a T5
information slip your financial institution also makes sure that the tax collector receives a
copy.
The department enters your T4’s and T5’s onto their computer database. At selected
intervals they will run what is called a ‘match’ to see who has income for a particular tax
year but hasn’t filed their T1 or who has filed a T1 and claimed less income than their T4
or T5 slips indicate they earned. The match will pick out these individuals and place them
on a follow up list for investigation.
For a self-employed individual whose income is not reported on a T4, Revenue
Canada gets clues from auditing businesses that contract work out, from suppliers and
from GST claims. They may also investigate advertisements in newspapers, the yellow
pages or even signs on cars or trucks advertising a service. But there are also times when
Revenue Canada will not assess a non-filing individual.
When won’t the tax collector arbitrarily assess a non-filing Canadian?
There are two scenarios. Revenue Canada will not assess the T4 employee/debtor if it
is assumed their tax debt when assessed would be $500 or less. A self-employed person

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will not be arbitrarily assessed if is thought that the assessment would result in an amount
owing of less than $1000.
Why do these thresholds exist? Primarily because the tax collector artificially inflates
arbitrary assessments by maliciously assessing. They do not consider any deductions the
delinquent filer might have other than the tax amounts found on the T4 slip. For the self-
employed Revenue Canada will not consider any expenses incurred to earn the income. A
court might call this vexatious behavior.
Furthermore, it is not worth the time or money invested in raising an arbitrary
assessment to attempt collection and to have the assessment lowered, reversed or written
off. When a debtor files a proper tax return in response to an arbitrary assessment the tax
collector’s assessment is always lowered, nilled or results in a refund.
Why then does the tax collector artificially inflate arbitrary assessments? Solely to
increase production statistics. The department has a program, a goal, for how many
dollars to arbitrarily assess in a given fiscal year. By assessing maliciously it is far easier
to reach this goal.
In turn this also raises the question of why does the department arbitrarily assess
some tax debts under $1000, Minor Balance Debts, and then not actively pursue
collection of them? T1 tax debts under $1000 are rarely pursued for collection. The same
can be said for T2 tax debts under $800. It does not make sense.
Minor Balance tax debts are discussed in full in their own chapter.
One method the tax collector will use to catch tax evaders is to conduct a personal Net
Worth Test on the suspected evader. They tax collector will use the wealth and trappings
accumulated by you over a set period of time to determine how much income you may
not have reported.
One of the first indicators that a person has income that they are not declaring is their
postal code. Sounds strange right. The tax collector will complete a lifestyle assessment
by comparing your earned income to the cost of the average home in your postal code. If
you live in a postal code where your income would not be enough to purchase and
maintain a home you will immediately become a candidate for investigation and the
application of a Net Worth Test.
The Net Worth Test is used primarily as a measurement tool to catch those earning all
or part of their income from self-employment sources and following is an example of
how it can be used.
Assume that your net worth has increased by $1.5 million over the previous six years.
During this time your living expenses amounted to $300,000. If you had reported your
income as $35,000 a year for a total of $210,000 over the six years the tax collector will
ask you how you financed living expenses of $300,000 over that time as well as for an
explanation of the giant leap in your personal net worth.
By calculation they will assume that you failed to report $1,590,000 in income or
$265,000 a year during the six years. This amount is reached by determining the increase
in your net worth plus your total living expenses minus the total income you reported
over the time span. Your new tax bill will be approximately $130,000 for each year or
$780,000 plus penalties, interest and the possibility of incarceration. The debtor would
have been better off to truthfully report their income and then avoiding payment. At least
then one could avoid the penalties and possibility of imprisonment.

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How do some of us and how could you avoid detection of unreported income? By
practicing a modicum of self-restraint. Yes you can have your cake and eat it too. But you
just can’t eat it right now.
Stash that extra income in a mattress or store it securely in a safe deposit box. Or
purchase assets that you can easily hide or safely forget and thereby escape detection via
the Net Worth Test. Assets such as silver coins or gold bars. Some will splurge on
vacations or fine dining. Most move their income somewhere offshore for their
retirement fund. Although this action is not considered proper under current Canadian
law many practice this method of deceit. After all, Revenue Canada can not tax what
remains unknown to them. The secret to not getting caught? Don’t be greedy.
Another manner used to pinpoint potential tax evaders is by looking at their income as
compared to others in the same line of work. If the income you declare falls below the
average of those similarly employed you will become a candidate for further
investigation and/or an audit.
Of course there are also other methods. Brought to my attention was an unorthodox
ploy that was spectacularly successful when answering the department’s questions.
In this story the tax collector wanted an explanation for a sudden accumulation of
capital. After Revenue Canada fingered one gentleman for unreported income he claimed
that the source was a windfall resulting from an overseas inheritance. Czechoslovakia to
be specific. In time he was able to supply the necessary documentation to support his
claim and the tax collector backed off. They had no claim. End of story right? Wrong.
Several years after the fact, and as a result of an unrelated court case, it was revealed
that the supposed inheritance was not an inheritance at all. The monies were earned here
in Canada. The individual in question had simply forged some official looking documents
presented them to Revenue Canada and his case had been quickly closed. What did the
department do when updated of the true facts? Nothing. They claimed that too much time
had passed by to do anything about it. They refused to reassess the tax evader for the
unclaimed income or to press criminal charges for tax evasion and for making false
statements.
But normally when a tax debt has been arbitrarily assessed and the tax debtor indicates
they are going to file properly, the tax collector will not actively pursue collection
because they realize that arbitrary assessments, more often than not, are complete fiction.
But there are also those that pay these artificially inflated debts without questioning
the amount assessed. Maybe they don’t contest the assessment because they don’t know
better or maybe they figure the department’s numbers are preferable to their own
calculations.
I worked a case where the taxpayer, a Dennis R., was arbitrarily assessed for a two
year period with a total owing of over $42,000. When he finally agreed to file properly he
received a refund of almost $1600. There is another story about Mr. R in the chapter
titled ‘The Garnishment’.

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After your tax assessment is completed

After your tax assessment is completed, whether voluntarily or arbitrarily filed, your
Notice of Assessment is printed and sent. Each assessed individual will fall into one of
ten categories (shown below) numbered 0 to 9.
The reason for this categorization is because the tax collector gathers statistical
information about you both for their use and for the use of other government
departments. Our federal government wishes to know how you are earning your income
so they can identify trends for policies and new tax initiatives.
The Assessment Category Codes are of use to the tax collector because they identify
the filer’s main source of income. Knowing this can assist in any legal actions needed to
enforce payment of tax arrears.

Tax Assessment Category Codes

0. Salary and/or gross income of less than $3000 from investments and capital
transactions with total proceeds less than $25,000 gain or a loss of less than $1000.
1. Rental income (Up to $125,000. earned in gross rentals)
2. Investment income (gross income $3000 or more)
3. Farmers
4. Professionals
5. Business income
6. Fisherman
7. Salary and/or gross income of less than $3000 from investments and capital
transactions with total proceeds greater than $25,000 gain or a loss of less than
$1000.
8. Rental income (over $125,000 earned in gross rentals)
9. Salesman on commission

Once the keypunching, assessing, coding, and Notice of Assessment are completed
and the results are securely locked in the Revenue Canada database the real journey for a
tax debtor’s tax account begins.
When your tax account has a debt the computer management program known as the
Revenue Enforcement Management and Information Tracking System (REMITS) will
initially manage all computer actions taken on the account. The purpose behind REMITS
is to ensure the timely collection of income tax debts as well as ensure that Canadians
meet their installment and compliance obligations such as filing of information returns or
remitting trust funds.
REMITS will take no action on a tax account with a nil balance or an account with a
credit balance after the initial Notice of Assessment is mailed. Only when a tax return is
filed with a debit and no payment is made by April 30th of that year will your debtor tax
account start its run through the gauntlet.

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In instances where you are assessed with a tax debt and have not supplied payment in
full or a post dated cheque (PDC) arrangement you are given thirty days to pay your tax
debt and all penalty and interest charges. If no payment arrangement is made REMITS
will score your account for risk. Risk is determined by considering the size of your tax
debt, concurrent assessments outstanding and your past with collections. On day thirty-
one and dependent on the risk score your debtor account is assigned to a low, medium or
high-risk strategy.
However, if your personal tax debt is less than $1000, a Minor Balance debt, it is not
scored for risk and no aggressive collection action is taken to collect the debt outside of
assorted computer generated letters. REMITS will handle the account until it is paid, until
the balance exceeds $1000 or until the account is written off.
Write-offs are a fact of life in the world of Revenue Canada but this is another subject
that will be discussed in more detail in a later chapter.
There are three different risk strategies. Low, medium and high. If your account is
assigned to a low risk strategy it means that human intervention should not be needed to
collect the tax debt and you will be issued a polite collection letter. On day sixty-one, if
your tax liability is still unpaid or unarranged, a legal collection letter is issued. Finally,
on day ninety-one and if circumstances are still the same your tax account is forwarded to
a TSO.
An account entering the medium risk strategy is also issued a polite collection letter on
day thirty-one. On day forty-six the account enters the National Collections Call Center
where a clerk, a Call Center Agent will attempt to contact the debtor at home or at work
to obtain payment in full or a post-dated cheque arrangement of the arrears.

Now it should be noted that:

1. If your home phone number is unlisted the tax collector has no way of obtaining the
number. Phone companies have refused to supply unlisted numbers.

2. Most provinces have provincial restrictions on debt collection. They do not allow
calls to your place of employment without your permission.

The final route a debtor account may travel is that of the high risk strategy where the
debtor is sent a legal warning letter on day thirty-one. If payment or a payment
arrangement is not made, the account is immediately sent to the TSO on day forty-six.
Exceptions to these rules are tax debts in excess of $100,000. Any $100,000 debt
remaining unpaid or unarranged thirty-one days after the date of the Notice of
Assessment is mailed is sent immediately to a TSO. At the TSO a tax collector will
review the account and determine if immediate collection action is warranted, meaning a
danger of loss or a jeopardy situation exists. Revenue Canada can not take legal action to
collect a tax debt in the first ninety days following the date of the Notice of Assessment
or Reassessment without judicial approval. This type of approval is rarely granted.
Following are some helpful hints that will help you avoid immediate payment in full
of tax arrears and avoid harassment from a tax collector as well. It can also buy you some
time to do other things as well.

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To avoid phone contact or letters you can send in eight equal payments that cover
ninety percent or more of your debt, a PDC arrangement. Alternately, you can send in
one payment each month equal to one eighth of your current tax debt, an Ordinary
Arrangement. In both instances there can be no more than thirty-one days between each
payment and the last payment must reduce the debt to below $1000, the upper minor
balance limit. Revenue Canada will always accept such an arrangement and will never
call or send a letter.
But what happens if one of your cheques isn’t going to clear the bank?
Just call your local TSO, tell them your sob story, and your arrangement will still be
valid. The tax collector will put a bank charge back (BCB) inhibit on your account which
will keep the arrangement valid and away from a collections inventory. At the present
time there does not appear to be a maximum to the number of times that a BCB inhibit
can be invoked. But as long as the computer is managing the tax debt the debtor will have
no contact from a live collector.
Another odd point is the fact that Revenue Canada has no administrative charge for
dishonoured items. When a cheque is not honoured by the bank they return it to the
department who debits your tax account but they do not charge you with an extra fee for
the BCB. Although recently the Financial Administration Act was revised to allow a
charge for administrative fees necessary to the handling of dishonoured cheques as of this
writing Revenue Canada has not changed their no charge policy.
One disturbing trend on the increase among tax debtors is the filing of their income
tax return without their social insurance number (SIN). I have seen an increasing number
of tax debtors with two or more social insurance numbers. This may not sound serious
but it is.
If a current tax debtor sends their income tax return without their SIN the department
will attempt to contact them in order to obtain that precious number. When the individual
fails to respond Revenue Canada will assign them a temporary SIN, starting with the
number nine, and assess their tax return. If the assessment results in a credit return the
debtor is mailed a refund cheque even though they have an outstanding tax debt. Some
individuals who are debtors use this trick whenever they are about to receive a refund to
ensure that they do get it and that the tax collector does not. This results in Canadians
with multiple tax accounts, multiple SIN’s and sometimes even differing home addresses
on their ‘different’ tax accounts.
Consider the Canadian entertainer Elvis P. Maybe this one is only an impersonator
maybe not but he had a SIN for his Las Vegas address and another for his prairie home.
The vital data for the two accounts, birth date and the like, were mirrors and the filing
history was like a puzzle, when one filed the other was delinquent and vice versa.
Finally when the debtor tax account has not been paid in full or has not been
successfully arranged it is channeled into one of two reservoirs. The first reservoir is for
Minor Balance Accounts and the second is for Major Balance Accounts. And Major
Balance is where the real collection action begins. But first …

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What you need to know

What is ‘income’ and what is reported to the tax collector?

Only a very few forms of income can be declared without being taxed. This list
includes inheritances, lottery winnings, the proceeds of gambling, lawsuit settlements and
gifts of money from parents or relatives if the recipient is not living at home and is over
the age of eighteen.
Income is exactly what the Income Tax Act says it is and Revenue Canada can not
immediately change that. Only legislation can. And legislation takes time.
When considering what is and is not income the case of C. P. Fullerton vs. the
Minister of National Revenue in the Exchequer Court of Canada on November 2, 1938 (1
DTC 484) should be considered.
Fullerton received a payment of $30,000 upon retiring from his office. This payment
was taxed as income by his employer. Naturally the tax collector assessed Fullerton on
the $30,000. But Fullerton did not agree with his employer’s decision or the departments
ruling and challenged them. The Court decided that: “the substance of the transaction was
that this payment was made to the appellant because of the cessation of his office.
Therefore the payment was not a payment in respect of an office, and therefore it was not
income. It was a gratuity, personal to the appellant…”
The court ruled that if the earnings are not defined as income under the Income Tax
Act than the payment is not subject to taxation. Regardless of what the tax collector rules.
If an individual or business does not agree with a tax collector’s decision they should
challenge it. Fullerton challenged and won, as did Malkin in the case immediately
following.
In William Harold Malkin vs. the Minister of National Revenue, Exchequer Court of
Canada, June 29, 1942 (2 DTC 587) the appellant was assessed as being in receipt of
income from a trust. The trust was paying certain expenses of the taxpayer and his family
including a rent-free family residence and premiums on life insurance policies on the life
of Mr. Malkin.
The department contended that these payments were taxable benefits. The court
however differed by concluding that, “They [the payments] did not constitute any part of
the income of the taxpayer since they did not constitute part of any gain, benefit or
advantage accruing to the taxpayer under any estate, trust, contract as required … of the
Act.”
If you can arrange your financial affairs so that your income falls outside the Income
Tax Act’s definition of income then those earnings and benefits can not be taxed.
Is all the income we earn reported to the tax collector?
No, it is not.
Many capital gains that we accrue are never reported. Gains on objects d’art like
jewelry or paintings, or on collectibles like coins or stamps because there is no paper trail
when bought and sold privately. The only tip off to the CRA is if you make a large
deposit into to your bank account – a deposit in excess of $4,999.99 – then a paper trail is
created as the bank reports it as required under the Large Cash Transaction and Electronic
Funds Transfer Reporting Requirements.
When it comes to the sale of equities like stocks and mutual funds the tax collector is
informed of the sale but not the purchase. Specifically they learn how much the sale was

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for and how many shares or units were disposed of but they have no idea what price the
original purchase was unless the seller informs them. Many tax collectors wonder how
some investors continually claim large losses yet still have the money to keep investing
year after year.
One of the Canada Revenue Agency’s biggest secrets, a secret used to identify
potential tax cheats and audit targets is called Benford’s Law. Benford’s Law is a little-
known statistical phenomenon (named after an American physicist) that holds that in any
series of naturally occurring numbers, the number one will appear as the first digit more
often than any other number.
In fact studies have shown that the Number ‘1’ indeed does lead off random numbers
about thirty per cent of the time. By comparison, the Number ‘2’ leads off only eighteen
percent of the time. And the number ‘9’ leads off a scant five percent of the time.
So how does this help to identify potential tax cheats?
Well, someone who is making up numbers (say on a tax return for instance) will tend
to distribute numbers equally. I.e. they will lead off a fabricated number using the
number 1 just as often as they will use a 1 or a 3 or any other single digit. However, when
the tax return’s numbers are keyed into the computer and then analyzed the tax return’s
numbers won’t significantly conform to Benford’s Law leading-digit pattern (i.e. most
numbers start with the digit 1) are identified as being ‘at risk’ and so are pulled for closer
inspection.
So if you feel that you’ve been repeatedly targeted for audits, maybe its because you
don’t have enough of the ‘Number 1’ in your tax return and not because the Canada
Revenue Agency does not trust you.
Probably the most common method of cheating on an income tax return is the failure
to claim interest income. Your bank only reports interest income in excess of $50.00. If
the interest is less than $50 the bank doesn’t report it and the tax collector remains
unaware of it. Most Canadians will not claim interest income when there is no T5
reporting slip issued to them. The result, depending on their tax bracket, is a small
reduction in the amount of tax to pay. Enough for a tank of gas or a night on the town.
Some individuals will have more than one bank account where the interest gained is less
than $50 so they multiply their savings.
The subject of deductions from income brings up an interesting point. If Revenue
Canada does not deduct anything other than the standard deductions from your income
when completing an arbitrary assessment what sort of deductions are you allowed to
make? In short, any expense that is considered wholly, exclusively and necessary in the
earning of income is reasonably considered to be deductible.
If you can argue a deduction and properly justify it than it is an expense that can be
deducted from your earned income. No ifs ands or buts. But please remember to keep all
of your receipts. The chapter on Appeals gives the full details on how to bargain your
deductions from income with the tax collector.
Contrary to popular belief installment payments are not the same thing as making an
arrears payment. Sometimes tax collectors hear sentences similar to; “I would like to pay
my $10,000 tax debt in monthly installments of $300 a month.” Wouldn’t we all.
In actual fact installment payments are used to pay tax liabilities that are owing but yet
to be assessed. Future arrears. Anticipated tax debts. Some Canadians are required to pay

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their taxes in installments during the year because they are not having tax or enough tax
deducted at the source of their income or incomes.
Most income earners in Canada have tax deducted and remitted by their employer.
These earners are known as X-remitters, at least ¾’s of their total income is subject to tax
deductions before they receive their earnings. Any remaining tax owing must be paid by
April 30th.
Those who should make installment payments are those that do not have enough tax
deducted from their income, usually self-employed individuals, or those who have more
than one source of income with not enough tax being deducted from the combination.
Installment payments are to be made only if the total tax liability in the current year
and one of the two previous years is greater than the amount of tax withheld at the
income’s source by $2,000. There are three situations where installments are required to
be made. The F-remitter, farmers or fisherman, who have to pay 2/3rds of their estimated
tax owing by Dec 31st and any balance by April 30th. The Q-remitter, the most common
type of installment payer and/or tax delinquent makes are to pay their installments on
March 15, June 15, September 15 and December 15 with any excess to be paid on April
30th.
All registered businesses are installment remitters. They remit 1/12th of their estimated
yearly tax at the end of each month with any remainder due two to three months after the
end of their fiscal year.
Also of note is the fact that the tax collector only has the previous year’s data and does
not know your current financial situation. It is possible for your personal situation to
change to an extent that you are not required to make installment payments for the
current year.
Legally many Canadians are required to make installment payments but legally these
payments are unenforceable because the tax collector cannot enforce collection of a debt
that has yet to be assessed. This makes the requirement to make installment payments the
most useless legislation in effect because it is not enforceable. This is the upside. The
downside is that those who are required to make installment payments but do not are
charged with interest as of the date the payment should have been made and huge
penalties can be tacked on to boot.
The sad thing is that I have spoken to scores of individuals and accountants who,
when I have advised them to make installment payments and save some money, always
repeat a similar mantra: “My accountant says I don’t have to,” or, “My client can make
more investing the money than the interest that is charged.” Tax collectors laugh when
hearing this because it’s just not true. The chapter on Interest Charges only confirms this.
Case in point. A couple years back a big time business and sport magnate paid almost
$30,000 in penalty and interest for his failure to make installment payments. In fact he
paid similar large amounts of penalty and interest just about every year. To me there is no
reason to pay such a hefty fee unless your financial advisors are giving you bad advice. I
always wondered how he could manage to stay in business and of course the final answer
was that he could not. Something had to give and his business did.
From assessing to collections there are many ways in which Canadian tax debtors
frustrate the tax collector and tax collection sometimes with the assistance of the tax
collector themselves though they are often unaware their complicity.

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False claims on tax returns, failure to provide a social insurance number, digital filing,
reporting requirements that are full of holes, manipulating payment arrangements to
avoid contact or even sending in a sob story and invoking the BCB inhibit are just some
of the ways in which we frustrate the tax collector. Ways in which some Canadians delay
collection permanently. Sometimes it’s just as easy as delisting your phone number. All
are relatively simple, easy and inexpensive. Some more knowledgeable Canadians
already use these methods to their advantage and have been using them for years.
But what happens when the debtor account is finally brought to the attention of the tax
collector? Well there are still a couple of things you need to know before discussing how
a tax account is collected.

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Summary of Revenue Types

GST Tax Collection - PM1 and PM2 designation. Responsible for the administration and
enforcement of GST accounts, providing information and options on financial matters,
bankruptcies, etc. to registrants, monitoring and persuading compliance with the Excise
Tax Act to aid in the resolution of their accounts.

GST Account Maintenance - PM1 designation. Responsible for compliance duties,

including account reconciliation’s, refund cheque requests and tracing, amending returns,
work in progress corrections, payment applications and various other administrative
duties within the scope of the Excise Tax Act.

T1 Collections - PM1, PM2, PM3 designation. Responsible for the administration and
enforcement of personal accounts, providing information and options on financial
matters, persuading debtors to comply with the Income Tax Act and related regulations
regarding T1 filing, installments, and refunds to aid in the resolution of their accounts.

CPP/UI Rulings - PM2 designation. Responsible for determining the pensionability and
insurability of employment payments and benefits for Employment & Immigration
Canada, Health & Welfare Canada, workers, payors and internal clients.

Payroll Audit - PM2 designation. Responsible for the administration and enforcement of
employer and non-resident accounts based on source deductions provisions found in the
Income Tax Act, Canada Pension Plan and Unemployment Insurance Act. Includes
raising assessments and correcting T4 problems.

Review and Control - PM1 designation. Responsible for the administration and
enforcement of employer and non-resident accounts based on source deductions
provisions found in the Income Tax Act, Canada Pension Plan, and Unemployment
Insurance Act. Includes raising assessments and correcting T4 problems.

Source Deduction Collections - PM1, PM2 and PM3 designation. Responsible for the
administration and enforcement of employer accounts, providing information and options
on financial matters, persuading clients to comply with Income Tax regulations regarding
remitting payroll deductions and filing returns to aid in the resolution of their accounts.

T2 Collections - PM1, PM2 and PM3 designation. Responsible for the administration and
enforcement of corporate accounts, providing information and options on financial
matters, persuading debtors to comply with Income Tax Regulations regarding T2 filing
and installments to aid in the resolution of their accounts.

Sundry - CR, PM1 and PM2 designations. Responsible for the administration and
enforcement of various specific areas such as memo assessments, subledger debts and
bankruptcies, as well as all other support functions and material management within
Revenue Collections.

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 Collection Restrictions and Legal Warnings

Unbeknownst to most Canadians the tax collector is encumbered by a number of

collection restrictions when it comes to collecting tax arrears. And, in theory at least, they
face collection restrictions at the federal level as well as, like private sector debt
collectors, at most provincial and territorial levels of government.
Federal tax collection restrictions deal exclusively with when a tax debt may or may
not be collected. With no other regard being given to the debtor.
Provincial and territorial laws, where they exist, are much more personal in nature.
They concentrate on the debtor’s rights as opposed to the rights of the debt collector.
Provincial and territorial collection restrictions will vary depending on the debtor’s
province or territory of residence.
First we will touch on the provincial and territorial statutes that define the rights of
any debtor, not just a tax debtor and the limitations placed on the debt collector.
Following this federal legislation dealing with the collection restrictions placed on tax
debts will be discussed.

Provincially imposed debt collection restrictions

In theory the CRA’s tax collectors are supposed to abide by whichever laws have been
enacted in the jurisdiction they are pursuing repayment of a debt. But to be quite honest
the tax collector gives little regard to such local safeguards.
Why?
Because the Canada Revenue Agency does not teach its tax collectors local collection
law. And if the tax collector is not taught the correct local legislation then they are unable
to give it its proper due. So of course all other debt collection restrictions except for those
that are federally imposed, are routinely ignored.

The table found on the following two pages outlines the basic and the most important
Provincial and Territorial Collection Guidelines for each province and territory in
Canada. These are your rights, which all debt collectors, including the CRA’s tax
collectors, are expected to respect and uphold.

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 Collection Restrictions and Legal Warnings

Provincial and Territorial Collection Guidelines

Province Hours of Operation Provincial Legislation Restrictions

Alberta 7:00 AM to 10:00 PM Collections Agents Act None Stated

British Columbia 7:30 AM to 8:00 PM Debt Collections Act (Section 14) - cannot call debtor at work once the
debtor objects
- cannot demand payment when sole
income is social assistance
- cannot call debtor if they refuse to
discuss debt or ask you not to call
back
- if claim is disputed, all collection
action save for legal action must
cease
- prohibits unconscionable and
unreasonable acts
Manitoba 7:00 AM to 9:00 PM Consumer Protections Act (Section 98) - No calls on Sundays or Holidays
New Brunswick 9:00 AM to 9:00 PM Collection Agencies Act - Cannot call debtor at work without
the debtors consent
Newfoundland 8:00 AM to 10:00 PM Collection Agencies Act - Cannot call the debtor at work
without the debtors consent
- No calls to debtor without first
having sent a notice of payment
Northwest Territories Consumer Protection Act
and Nunavut

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 Collection Restrictions and Legal Warnings

Provincial Collection Guidelines

Nova Scotia 8:00 AM to 9:00 PM Collection Agencies Act - no contact with debtor at place of
employment
- no calls to employer except to locate
debtor
- cannot communicate with debtor if
advised in writing to communicate
with counsel
- no calls to debtor without first
sending of notice of payment
Ontario 7:00 AM to 9:00 PM Collection Agencies Act - no calling debtor at employer once
they object
- no calls Sundays/Statutory Holidays
- no calls to debtor before sending a
notice of payment
Prince Edward Island 9:00 AM to 9:00 PM Consumer Protection Act - no calls to employer except to locate
Conduct of Creditors Regulations debtor
- no calls to debtor at work without
their consent
Quebec 8:00 AM to 8:00 PM Loi sur le Recouvrement de Certaine - no calls to employer except to locate
Crances (Regulation 34) the debtor
- no calls to debtor without first
sending a notice of payment
Saskatchewan 8:00 AM to 9:00 PM Collections Agents Act No calls on Sundays/Statutory Holidays
Yukon Territory 7:00 AM to 9:00 PM Consumer Protection Act No calls on Sundays/Statutory Holidays

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 Collection Restrictions and Legal Warnings

The Hours of Operation column refers to the time of day when any debt collector may
contact you.
The Provincial Legislation column lists the debt collection laws and statutes of the
related province or territory.
The Restrictions column briefly outlines any moratoriums on contacting you and/or
collecting your debt in that province.
Surprise every Canadian Province and Territory has their own ‘set’ of rules that
governs everything from when debt collector’s can contact you to the maximum amount
(percentage) a garnishee can be set at and so much more. They can differ substantially so
depending on your Province or Territory of residence so be sure to review your local
laws, rules and regulations in order to learn your rights.
Check out these links to learn get informed on your local rights. It is VERY important
that Canadians do so because where the Canada Revenue Agency has no written rule or
law then written local (provincial/territorial) rules or laws apply. This was confirmed in
the Markevich v. Canada court case (which you will read about later on in this chapter).

Alberta – Collection Agencies Regulation / Fair Trading Act

http://www.slsedmonton.com/criminal/unpaid-fines-and-debt/#Limitations_On_Collection_Agencies

British Columbia - Dealing With Debt Collectors and Collection Agencies

http://consumerprotectionbc.ca/consumers-alias/help-for-consumer-rights

Manitoba - The Consumer Protection Act

http://web2.gov.mb.ca/laws/statutes/ccsm/c200e.php

New Brunswick - Collection Agencies Act

http://www.gnb.ca/0062/acts/acts/c-08.htm

Newfoundland and Labrador - Collection Agency Restrictions

http://www.gs.gov.nl.ca/consumer/collection/collection_agencies.pdf

Northwest Territories - Consumer Protection Act

http://www.maca.gov.nt.ca/operations/consumer_affairs/index.html

Nova Scotia - Summary of Legislated Consumer Rights

http://www.gov.ns.ca/snsmr/consumer/collect.asp
- Collection Agencies Act
http://nslegislature.ca/legc/statutes/collecta.htm

Nunavut - Consumer Protection Act

http://cgs.gov.nu.ca/en/consumer-affairs
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Ontario - A Consumer's Guide to Collection Agencies

http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90c14_e.htm
and
http://www.canlaw.com/credit/collect.htm

Prince Edward Island - Collection Agencies Act

http://www.gov.pe.ca/law/statutes/pdf/c-11.pdf
- Rights and Responsibilities of Consumers
http://www.gov.pe.ca/infopei/onelisting.php3?number=53408

Quebec – An Act respecting the collection of certain debts

http://www2.publicationsduquebec.gouv.qc.ca/dynamicSearch/telecharge.php?type=2&file=/R_2_2/R2_2_A.html

Saskatchewan - Collection Agents Act

http://www.justice.gov.sk.ca/Collection-Agents-Act

Yukon - Consumers Protection Act

http://www.community.gov.yk.ca/pdf/CSSTips-CollectionAgencies.pdf
http://www.gov.yk.ca/legislation/acts/copr.pdf

Please, make note of your local rules, laws and regulations and be prepared to cite
them chapter and verse to the tax collector should you feel that they ever step out of line
with you.
And, again, because federally employed debt collectors are rarely aware of these
‘local restrictions’, e.g. when you complain and ask not to be called at work or state that
you are unemployed the tax collector will continue calling again and again. In fact most
tax collectors do not believe that there are any other restrictions on their power to collect
a tax debt other than those stated in the Income Tax Act. And those that are informed
often choose to ignore local laws without fear of reprimand or punishment.
Yet it was because of situations exactly like this, the disregard for the rights of the
indebted, that local guidelines and laws were enacted. In order to protect Canadians from
being subjected to such harassment from overzealous debt collectors.

Federally imposed tax collection restrictions

Turning to federal imposed tax collection restrictions these limitations are a body of
legislation that can be found within the Income Tax Act. And this mammoth legislation
imposes just one restriction on the collection of income tax debts. That sole restriction
being that the tax collector can not normally legally collect a tax debt within the first
ninety days following the date of Notice of Assessment or when you have appealed your
tax assessment except in certain rare instances.
This restriction tempers the tax collector’s ability to collect tax liabilities without first
giving the tax debtor a chance to examine your Notice of Assessment and allowing them
the time to choose whether to pay or to appeal their tax assessment.
76 ©Alan Baggett
 Collection Restrictions and Legal Warnings

However, when collection of the tax debt is considered to be in danger the CRA may
apply for judicial approval to forgo their federally legislated collection restrictions. Doing
this is known as obtaining a Jeopardy Assessment on which there is a separate chapter.
The restrictions outlined in the Income Tax Act are not as broad or encompassing as
the provincial and territorial recommendations. They are very specific and very limited as
to what they apply to. They do not note when you can or can not be contacted nor do they
limit the place of contact. In fact outside of your right to appeal an assessment tax debtors
have almost no rights if the Income Tax Act is taken as the tax collector’s bible.
The only real constant between all the differing levels of collection restraints, federal
and local, is the necessity that a legal warning be given to the debtor before any legal
collection action is initiated.
Now some of you may feel that the tax collector still has too much free reign when it
comes to enforcing the collection of tax debts. But if you consider the collection
restrictions now in place and the restrictions that previously existed you will note that a
marked transformation has taken place.
In 1927 the Income War Tax Act, a forerunner of our modern Income Tax Act,
allowed legal collection action of a tax debt to begin sixty days after the mailing of a
Notice of Assessment. Regardless of whether the amount outstanding was disputed or
not.
Today, in the year 2002, ninety days must first pass before a personal income tax debt
becomes legally collectible. Moreover, a disputed tax debt can not be collected until the
department renders a verdict on the appeal.
Why did the tax collector once have the power to collect appealed tax debts?
A power they no longer possess.
It all goes back to the court case, Morch vs. the Minister of National Revenue (49
DTC 649) in the Exchequer Court of Canada.
In this case the presiding judge decided that, in respect of the fact that the department
had no collections restrictions when a tax debt was under appeal,

“An appeal against an assessment would operate automatically as a stay of

proceedings under Section 71 as long as the same is pending. If that were
so, a taxpayer could, by his own act in appealing against his assessment,
postpone proceedings against him under the Section and thereby, in
certain circumstances, delay and possibly defeat the collection of income
tax payable by him”.

Although a harsh verdict it did make a certain kind of sense.

And if this decision wasn’t tough enough, in 1948 the Tax Act was again revised. This
time to require that Canadians pay their tax debt in full within thirty days of their Notice
of Assessment and, regardless of an appeal, collection action was allowed immediately
thereafter.
With the subsequent passing of Subsection 158(2) there were virtually no collection
restrictions left. And this Subsection’s introduction now permitted payment to be
enforced immediately and regardless of the thirty-day restriction where, in the opinion of

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 Collection Restrictions and Legal Warnings

the Minister, a taxpayer was attempting to avoid payment of taxes. With these draconian
measures it became clear that Canadians had no rights. That we were always guilty of the
crime of avoiding payment, in the opinion of the Minister, whether or not the facts
confirmed such.
And these collection policies stayed on the books until 1984.
It was not until after the Canadian Charter of Rights was introduced that the
Government declared in the throne speech of November 5, 1984 that,

“The rights of the taxpayer must be protected. In particular, legislation

will be presented to ensure that no taxpayer has to pay taxes in dispute
before an impartial hearing has been included”.

In response to this promise, Section 225.1 of the Income Tax Act was enacted. Its
passing restricted collection action for the first ninety days after the date of the mailing of
for any tax amounts appealed at a level below the Tax Court.
Section 225.2 was also introduced at this time. It allows for immediate payment when
collection of the assessed tax amount would be jeopardized with a delay in collection
action. But only with judicial approval.
But what do these changes mean?
For the first ninety days after your tax debt is assessed, confirmed or varied the tax
collector may undertake no legal action unless it is felt that payment of the tax debt is in
doubt. If payment is in doubt they can only proceed with legal action with the leave of the
courts.
Revenue Canada can still mail collection letters or make a phone call during this
ninety day period but that is the full extent of any collection action. But because they can
not legally collect during this period they will do little more than mail you computer-
generated letters voicing their threats.
After the ninety-day restriction period has passed and before any legal action can be
taken you must be given a warning that legal action is impending.
Now when the tax collector states verbally or in writing, “If you [the tax debtor] fail to
comply the Department may take legal action without further notice,” it does not mean
that the CRA is going to take you to court. It means that the tax collector may decide to
scour your life in search of a way to enforce payment.
The collector may consider a garnishment. The tax collector may file an Execution
against your name in the region you reside or one where you are known to have assets.
But it is very unlikely that you will ever see the inside of a courtroom.
But under no circumstances can the tax collector take legal action without first
warning you that the potential for legal action exists.
To take legal action Revenue Canada must have first provided a verbal or a written
warning of impending legal action.
A verbal legal warning is straightforward; the tax collector will tell you in the first
person or over the phone. They will then record that the warning was given in your tax
account log of action or diary. If there is a question as to whether the legal warning was
given and/or received the tax collector would swear that such was done in an affidavit
and the collector’s word and the diary entry are taken as sufficient proof.

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 Collection Restrictions and Legal Warnings

Leaving a verbal legal warning on an answering machine, voice mail or with whoever
answers the phone invalidates the warning. It must be first person.
A written legal warning, the most common manner in which the legal warning is
delivered, is entirely different. Not as to the content but as to the proof that it was actually
received. Canadian’s move, letters get lost, are misdirected or remain undelivered. Even
in instances the client does receive the legal warning letter, the department does not have
proof that that the event occurred because it is extremely rare for a legal warning to be
sent via registered mail.
On the following two pages you will see two examples of how the tax collector may
choose to deliver a written legal warning to you.
Now, what happens to the tax collector’s legal warning letters when the tax debtor
states, “I never received such a warning or letter”?
In some instances the warning letter may actually have gone astray. In other cases the
letter may have been received but was forgotten. However a third scenario also exists.
There are also occasions when the Post Office returns the letter marked as
“undeliverable”.
When this happens some tax collectors will simply dispose of the returned legal
warning letter and ‘forget’ to make a note in the debtor’s tax account diary that the legal
warning letter was returned.
Why?
In order that legal action can be initiated immediately instead of waiting to track the
tax debtor down and warning them of an impending legal action.
On my very first week on the job as a tax collector my Team Coordinator told me to
do just this.
So this is exactly what I did.
Because I needed a paycheque, I wanted a chance for advancement and I was afraid
of being fired. When I moved to a new collection team under a new Team Coordinator I
was told to follow the correct procedure but not after many had been subjected to what
was illegal legal action.
Another startling story I learned early on in my tax career was this one: A Toronto
North (North York) tax collector would note in selected tax account diaries that a legal
warning letter had been sent to the debtor when in fact one had not been sent.
This was done whenever he had found the means to immediately collect the tax debt.
Allowing his inventory of tax accounts to be resolved quicker and his collection statistics
to look better. But because he bragged about his ways he was dismissed. But not after
many of Canadians had been subjected to and embarrassed by unjustified and maybe
illegal legal action.

79 ©Alan Baggett
 Collection Restrictions and Legal Warnings

Canada Revenue Agence de Revenue

Agency du Canada

March 15, 2011

Claude Raymond Account Number

77 City Centre Drive 123456789
Ste 200
Mississauga, Ontario L5B 2N5

Dear Sir or Madam:

Re: Income Tax Arrears – 1991, 1992, 1993, 1994, 1995

Balance: $155,083.62

According to our records, you still owe $155,083.62, even though

we have previously drawn this debt to your attention.

We would appreciate it if you would pay this amount right away.

If you fail to pay this amount within thirty days, we may

have to take appropriate legal action without further notice.

If you have already paid your account, please accept our thanks
and disregard this letter. However, if you paid it more than 15
days ago, please give us further details so that we can credit the
payment to your account.

Yours truly,

Bill Melater
Collection Officer

Toronto West Tax Services Office

P.O. Box 6000
77 City Centre Drive Local: (905) 566-6617
Mississauga ON L5A 4E9 Fax: (905) 615-2702

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 Collection Restrictions and Legal Warnings

Canada Revenue Agence de Revenue

Agency du Canada

February 28, 2011

William Tell Account Number

XX Riverspray Crescent 87643210
Mississauga, Ontario XXX XXX

Dear Sir or Madam:

Re: Income Tax Arrears – 1995

Balance: $72,696.00

According to our records, you still owe $72,696.00, even though

we have previously drawn this debt to your attention.

One of our officers has attempted to contact you personally to discuss payment of this
account, but has not been able to get in touch with you.

We urge you to contact us at the number(s) below within 15 days. If you fail to pay your
account or respond to this letter, the department may proceed with the appropriate legal
action, without further notice.

If you have already paid your account, please accept our thanks and disregard this letter.
However, if you paid it more than 15 days ago, please give us further details so that we
can credit the payment to your account.

Revenue Canada
Collections Call Centre

Hamilton Office: (905 area) 1-800-263-9202 North York Office: 1-800-387-0703

(519 area) 1-800-263-9213 Scarborough Office: 416-973-2541
1-800-387-5229
Mississauga Office: 905-566-6000 Toronto Office 416-954-8121

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 Collection Restrictions and Legal Warnings

When the tax collector takes legal action without warning you and you protest the tax
collector will always ignore your complaint and state, “That’s a shame,” which is just a
pleasant way of saying, “We don’t believe you! ”.
However, should you obtain counsel and mount a legal challenge against the
department you likely would win your case quite easily.
Why?
Because although there is proof that a legal warning letter was sent, there is no proof
that the intended, you, received it. Whether it actually was delivered or not is a moot
point. The court will always decide in your favour.
Consider this court case involving the tax collector and a tax debtor who successfully
denied the receipt of a registered letter.
On January 26, 1921 in Robins vs. Forbes before the Saskatchewan’s King’s Bench it
was held that the proof of mailing of a registered letter is prima facie evidence of its
receipt but this evidence can be rebutted by evidence of the addressee denying receipt of
the letter.
In this instance there was evidence that the registered letter had actually gone astray. It
had been delivered to a neighbor.
So if a registered letter is received at your residence it is always assumed that you
received the letter. Whether you have actually seen the letter or not is irrelevant unless
there is significant proof to the contrary. Such as your house burns down.
Clearly, while the receipt of a regularly mailed legal warning can be denied it is
almost though not completely impossible to deny the receipt of a registered legal warning
letter.
But the problem for the tax collector is that they never send their legal warnings
registered. It’s just to darn expensive with the number of them that must be sent out.
Should the tax collector illegally collect your tax debt via legal means and you decide
to challenge on the basis of ‘no receipt of a legal warning’ and win, the following will
happen. You will have any monies legally collected refunded. With interest. And most
likely you will also be eligible for any damages to the extent you or your business was
harmed by the illegal action, and, best of all, the tax collector will not be able to use that
particular legal method of collection to collect the repaid amounts. So, for example, if
you were subjected to a garnishment to collect the outstanding monies then a garnishment
could not be used to collect that debt a second time.
Why is this?
In the court case of McCullough vs. Minister of National Revenue (89 DTC 446
T.C.C.) the judge held that an action to collect a debt can only be invoked once to collect
once only. Once the purpose of the section of the Income Tax Act has been served it can
not be used again to justify the subsequent collection proceedings against a tax debtor.
And what follows is yet another important piece of information that has never been
allowed to leave the hallowed halls of Revenue Canada.
Until now that is.
The department has a rule that a legal warning, whether verbal or written, is only good
for 120 days from the date of issue. Then it must be renewed. It does not matter if the
legal warning is written or verbal. And I am aware of numerous instances where legal
actions were rejected by CRA management because they were past their self-imposed
120-day time limit, sometimes by just a single day. But of course there are many

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 Collection Restrictions and Legal Warnings

instances where the last legal warning given was more than 120 days ago and legal
action, garnishment, writ etc. was still approved.
But after 120 days passes after the legal warning is issued the collection process is
supposed to start anew. This is confirmed by the Taxation Operation Manual for CRA
Collections. TOM 2253.4 (2)(B) states:

“Where there has been no contact with the taxpayer within 120 days from
the date of the last contact, garnishment [legal] action will not be taken
until such time as the taxpayer is contacted again by telephone or letter
and given an opportunity to pay voluntarily. Exceptions can be made
where further delays could jeopardize the prompt recovery of the arrears
or history of the account indicates that additional attempts at contact
would prove unsuccessful.”

So the tax collector is forced to issue another legal warning letter and wait thirty days or
longer to see if the taxpayer responds before trying to initiate legal action for the second
time. Some collectors will give a client sixty days or more to respond to a legal warning
before considering legal action. And some even longer.
And remember that this is all on top of the initial ninety-day collection restriction
period that follows the Notice of Assessment.
But this then raises the question of “how long is a legal warning good for before it
must be renewed?”
Few have made this challenge but legal minds are of the opinion that any legal action
must be timely with the legal warning given.
This means that the tax collector cannot issue a legal warning and then take legal
action some length of time down the road without a subsequent warning first being
issued. It is likely because of this reasoning that the department instituted the generally
adhered to 120-day legal warning rule.

What you need to know

There was a time when, once assessed with a tax debt that that debt existed forever. Until
it was paid off. And that there were no limitations for the government to enforce
collection. But no longer is this true.
In February of 2003 the Supreme Court of Canada, in Markevich v. Canada, ruled that
indeed there are limitations for the Canada Revenue Agency to collect on their debts.
However, those limits are defined provincially and territorially – the time limit for the
CRA to collect on their debt depends on where you live. And to this effect the Court
ruled:

“Since the federal government is, by virtue of its agreement with all of the
provinces (except Quebec), responsible for collecting all provincial income

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 Collection Restrictions and Legal Warnings

taxes, it is sensible to bind its federal tax claim to the limits available on the
provincial one. Efficiency is thus preserved by invoking one limitation for
both the federal and provincial income tax debts arising in each province,
other than Quebec.”

In British Columbia, where the Markevich case was heard, the time limit for debt
collection is six years. But in Alberta that number may be two years and in Ontario it
might be twenty years. So before taking any steps check and determine what your
province’s/territory’s debt collection restrictions are or have your lawyer check for you.
(Author’s Note: in Quebec this case may or may not be relevant as the tax collection
agency their operates independently of the CRA.)
But now if the CRA cannot collect your tax debt in your province’s/territory’s
specified time limitation, with certain conditions, then the debt is no longer valid i.e. it
must be written off (unless you want to pay anyway).
Now the CRA complained about this but the court responded by ruling:

“The appellant [THE CCRA] submits that applying laws of prescription to

tax collection would unfairly alleviate the tax burden of individuals who
experience fluctuations in income at the expense of those who enjoy a
steady stream of income. This apparent problem can be averted, however,
by the Minister's reasonably diligent exercise of debt collection. If a
taxpayer does not have the ability to satisfy a tax debt prior to the
expiration of the limitation period, the Minister can choose from a variety
of means to extend the limitation period. In Ross v. Canada, [2002] 2
C.T.C. 222, the Federal Court, Trial Division, held that the registration of
a certificate with the Federal Court in accordance with s. 223(3) of the ITA
gives rise to a renewal of the limitation period. See also MacKinnon v.
Canada, [2002] 4 C.T.C. 48 (T.D.), where the court found that the
taxpayer's acknowledgement of indebtedness by way of a hypothecation
agreement with the Minister, and his partial payment of the tax debt, each
served to renew the limitation period. There is no need to exhaustively set
out the ways in which the Minister can extend the limitation period; other
than to note that there are numerous avenues open to the Minister by
which renewals may be effected. There is no credible basis to support the
submission that the laws of prescription will undermine the equitable
collection of taxes when minimum diligence would have the opposite
effect.”

What this means is that your local ‘time limitation’ for tax debt collection can be
extended past the legally accepted time limitations if the CRA is actively attempting to
collect on their debt. I.e. the tax collector is garnisheeing your wages or bank or they
have filed a writ. Maybe you have entered into some sort of agreement such as a

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 Collection Restrictions and Legal Warnings

guarantee, a hypothecation or are currently making payments. In these and similar such
instances then the provincial time limits are extended past your local time limitations.
However, the one thing that still must be determined is what is an active attempt to
collect a debt? Is it legal actions like writs or garnishments and payments or is it simply a
letter to your last known address? This still must be determined and no doubt will be rise
for further dispute but my best guess is that it must be simply more than sending a
‘payment request’ letter to the debtor.
As a result if the Markevich case in March of 2004 the Canada Revenue Agency
revealed that a nationwide ten year limit on the collection of tax debts would be imposed
– regardless of provincial and territorial minimums - if they can not collect within ten
years the debt will be unenforceable. The ten years was not be retroactive meaning that if
you had a tax debt that was assessed before the proposal passed, the ten year clock started
ticking the date the change was enacted and not the date your tax debt became
outstanding or was assessed.
I believe that these changes will, eventually, be challenged in Court.
Why?
There are also unanswered questions most importantly as to when the ten-year clock
begins ticking – will it be the date the debt should have been paid or the date it was
assessed? If it is the latter then there will be even further challenges I believe.
Now that you know your rights don’t let the tax collector take advantage of you. Sure,
you may still have to pay tax but now you do have a degree of control over the situation
depending on your province or territory of residence.
And never be afraid to let the tax collector know that you know what your rights are
and what rules they must abide by. If they don’t know these rules and regulations then
remind them nicely but remind them firmly.
Canadians should regularly check with their province or territory and find out if their
local government have altered, updated or loosened any of the laws, rules or regulations
that apply to your particular situation.
But there are some Canadians who are already aware of these loopholes that surround
CRA issued legal warnings and collection restrictions. And they use this knowledge
when the time is right. They use these loopholes to delay payment to a time they find
more suitable or to avoid payment altogether when they have no intention to pay. But as
you will soon learn there are other devious methods that help the tax debtor and tax
evader to avoid payment of tax.

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 Interest Charges: When to make a payment and when not too

You might think that the subject of interest rates is hardly deserving of its own chapter
and ordinarily you would be correct. However, when it comes to the tax collector, interest
is not charged to tax arrears like a bank charges interest on your loan or mortgage. So in
this particular instance yes, CRA interest charges are indeed worth a closer look. And in
this short chapter I will illustrate why there are times when you can actually save money
by not making a payment against your tax arrears.
Like a bank, when you are indebted to Revenue Canada you will be charged interest
on any amount due and payable. The tax collector charges you a high rate of interest and
then compounds the amount charged to encourage you to both file on time and to pay
your tax arrears in a timely manner. The high rate and compounding of interest serve as a
disincentive to file late or to be a non-filer by acting as a penalty to those that choose to
be delinquent or late. The interest rate charged by a bank is always much lower than what
the tax collector charges. Always.
How does Revenue Canada determine their rate of interest?
Prior to January 1st 1987 the department was allowed to charge only a simple interest.
But as of December 31st, 1986 the tax collector was given the authority to compound all
interest charges on a daily basis as a result of the newly implemented Subsection 248(11)
of the Income Tax Act. At this time the department also was given permission to charge
interest on penalties as allowed by the new Subsection 161(11).
Today, as a result of these changes, all arrears, installment and refund interest charges
are calculated on a compound interest basis at a standard rate. The rate is calculated on a
quarterly basis by first establishing the average rate on ninety day Treasury Bills sold
during the first month of the preceding quarter, these figures are then rounded up to the
nearest percentage point. Four percentage points is added to this average and this
becomes the quarterly interest rate for your overdue taxes, deficient installment
payments, interest, penalty, unpaid employee deductions, Canada Pension Plan
contributions, Quebec Pension Plan contributions and Employment Insurance premiums.
For example if the average rate for the Treasury Bills was 4.6% the tax collector
would round this up to 5% and then add an additional 4% to bring the interest charged on
your tax debt to 9%. But remember that this 9% is compounded daily meaning you will
be paying in the neighborhood of 12% a year on your tax debt. And if the average rate
was 6.9%? Well, I’ll let you do the math on that one.

Link to http://www.cra-arc.gc.ca/tx/fq/ntrst_rts/menu-eng.html for a historical quarterly

list of Revenue Canada/CCRA/CRA interest rate changes.

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 Interest Charges: When to make a payment and when not too

If the tax collector is indebted to you for a refund or an overpayment they add only
two percentage points to the Treasury Bill average.
Now the tax collector will calculate and charge interest on your tax arrears in one of
two manners. The straight-line interest calculation or the revised interest calculation.
Using the straight-line method, interest is calculated on debits from the last interest
date of the account to the date of the payment or newly applied credit.
Using a revised interest calculation, interest has been calculated to a future date or, a
credit is retroactive to a date prior to the last interest calculation.
In such instances the interest has to be recalculated in light of the out of sequence
credit. Once the balance is calculated a revised interest calculation is performed based on
this new balance.
One reason the tax collector may calculate interest charges to a future date is because
you are about to receive a computer-generated letter. Your interest charges will be
calculated a week or two into the future, the letter is printed with this future calculation
and mailed on that future date. This is why you may receive a letter from Revenue
Canada that does not reflect a recent payment, because the letter was printed well in
advance of its mailing.
Revenue Canada employs what is commonly known as double entry bookkeeping.
This ensures that an account is kept in balance by making sure that each credit has a debit
and each debit has a credit. When a debit or credit transaction does not have a balance
showing the entry is usually found on a related General Ledger account.
Each taxation year is considered as a distinct and separate entity and when a
transaction occurs only the affected tax year(s) is/are recalculated. The tax collector uses
past value calculation which first allocates a credit transaction to the oldest undisputed
tax year balance outstanding so as to bring the balance “today” to zero. If any credit
remains then the transaction is repeated with the remaining credit and tax years
outstanding until either the debt or the credit has been retired. When there is an excess of
credit it is refunded or kept on your account.
All this talk of interest charges and accounting principles may be boring so lets
employ these concepts in a hypothetical scenario. This example demonstrates what effect
a payment may have on an outstanding liability as well as the interest applied and
charged.
As an example, we will use a Canadian with a tax debt as shown below:

1996 Income Tax Arrears $1000.00

1996 Penalty and Interest $350.00
1997 Income Tax Arrears $500.00
1997 Penalty and Interest $150.00
Total Tax Arrears $2000.00
Arrears Interest $500.00
Total Arrears $2500.00

This particular tax debtor has not made a payment against their tax arrears in some
time as $500.00 in Arrears Interest has accrued on the $2000.00 for a total debt of

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 Interest Charges: When to make a payment and when not too

$2500.00. Arrears interest is charged only on the Total Tax Arrears and not on the Total
Arrears. This is important to note, as you will see as this tax debtor currently is only
paying interest on the $2000.00.
Now let us assume that today the debtor has just made a payment of $100.00 against
their tax arrears.
The tax liability on their account will now look like this:

1996 Income Tax Arrears $900.00

1996 Penalty and Interest $687.50
1997 Income Tax Arrears $500.00
1997 Penalty and Interest $312.50
Total Tax Arrears $2400.00
Arrears Interest $0.00
Total Arrears $2400.00

The taxpayer has Total Arrears of $2400.00. $2500.00 - $100.00 = $2400.00. The
$100.00 payment has been credited to the oldest debt outstanding, the 1996 Income Tax
Arrears and the previous Arrears Interest figure of $500.00 has been allocated to the 1996
and 1997 penalty and interest totals.
But now this Canadian’s Total Tax Arrears is $2400.00 instead of the previous total of
$2000.00 so interest is now charged on $2400.00 instead of $2000.00. The tax debtor has
put him or herself further in the hole by making the $100.00 payment.
What happened? When a payment is made, it is credited against the oldest tax debt,
penalty and/or interest outstanding. Any Arrears Interest is then reallocated. Any interest
charged now accrues on this new balance for the Total Tax Arrears: $2400.00.
Interest is charged on unpaid tax debts as well as any allocated penalty and interest.
No interest is charged on the Accrued Interest until it is allocated to a taxation year. The
day your payment is made any accrued interest is reallocated to a tax year and interest
accrues on the new total. Because your Total Tax Arrears are now $2400.00 instead of
$2000.00 you will be paying interest on $2400.00 instead of $2000.00.
Your tax debt has slightly decreased but the amount of debt that interest is charged on
has increased. You have put yourself in a worse position by making a payment. This is
the effect of compounding the interest charged.
As a result of high interest charges and compounding interest many Canadians are
unable to come to terms with their income tax arrears. Ever. Such a usurious manner of
charging interest influences Canadians not to pay, to enter bankruptcy or even worse to
become a member of the ever-growing underground economy.
Think if every time you make a payment against your tax debt it increased how could
you ever pay it off?
The wisest way for the tax collector to apply interest charges would be to charge it
only on the outstanding tax. If this were the case the $100.00 payment on the tax account
would be reflected like this:

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 Interest Charges: When to make a payment and when not too

1996 Income Tax Arrears $1000.00

1996 Penalty and Interest $350.00
1997 Income Tax Arrears $500.00
1997 Penalty and Interest $150.00
Total Tax Arrears $2000.00
Arrears Interest $400.00
Total Arrears $2400.00

Your $100.00 payment has been applied against the Arrears Interest instead of the
Total Tax Arrears. You would still have a $2400.00 tax debt but interest would be
charged only on $2000.00 of that debt. Interest would not be charged on interest. If your
payment were to pay the Arrears Interest off any remaining balance would be used to
reduce the oldest tax debt.
In this manner the tax collector will still receive the punishing benefit of high interest
charges but repayment of your tax debt is still possible because the compounding effect
of charging interest on interest has been eliminated.

What you need to know

I’ll keep this short and sweet.

Until a change is made in the manner Revenue Canada charges interest I would advise
you, before making any payment towards your tax debt, to ask the tax collector what the
current total for your Arrears Interest is. If you can not pay that amount and then some
then you are much better off making no payment at all. Sure, your tax debt will
momentarily decrease but the amount you are paying interest on the Total Tax Arrears,
will actually increase as a result of your payment. This means that you will be paying
more in interest although interest rates have not changed. Why put yourself deeper in the
hole?

89 ©Alan Baggett
 Minor Balance Tax Debts

Does the tax collector collect every single tax debt assessed?
No, they do not.
Does the tax collector attempt to collect every single tax debt assessed?
Once again, no, they do not.
“What,” you’re thinking, “that can’t be!”
But it is.
All tax debts, regardless of the type of revenue, falls into one of two categories, Major
Balance tax debt or Minor Balance tax debt. If your tax debt happens to be a major
balance tax debt the tax collector will almost always make an attempt at collection. But if
your tax debt should happen to be at or fall below the current Minor Balance threshold
then the tax collector rarely attempts collection.
Every revenue stream whether it is Corporate Tax, Goods and Services Tax, Estate
Taxes (or whichever your preference) has a dollar threshold that is used to determine
whether or not the tax collector will actively pursue collection of a tax debt. Or, to make
it crystal clear, it is standard procedure for the tax collector to completely ignore
collection of your tax debt when it falls below the Upper Minor Balance Limit.
Aggressive collection action, which includes legal actions such as a garnishment and
Executions, are rarely considered. And in most instances the minor balance debtor will
receive nothing harsher than a strongly worded letter.
What are these magic thresholds?
The table below provides a list of the different revenue streams and their “Upper
Minor Balance” level, the minimum level where collection of your tax liability begins.

Revenue Stream Upper Minor Balance

Individuals (T1) $1000.00
Corporations (T2) $800.00
Source Deductions $500.00
Non-Resident $500.00
T4 $500.00
Estates/Trusts $500.00
Goods and Services Tax $25.00
Child Tax Benefit $1000.00

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 Minor Balance Tax Debts

Tax amounts below these dollar values are rarely actively pursued for payment.
This table confirms that if your business (T2) has tax arrears of $725 or if you are an
individual with a Child Tax Benefit debt of $930 the tax collector will rarely do anything
more aggressive than send you the occasional request for payment letter.
But once your tax debt is in excess of the Upper Minor Balance level, lets say you
have an individual (T1) debt of $1020, the tax collector will consider attempting to obtain
payment as long as your tax debt is legally collectible.
For the sake of example let us pretend that you have a $1020 T1 debt and have just
made a payment of $125. Your tax debt is now $895. The tax collector will immediately
cease active collection attempts on the remainder of your tax liability. However if a
garnishment is already in place the garnishment will be allowed to run its course.
And what if you have two or more tax debts that individually do not exceed any Upper
Minor Balance Limit but collectively total a thousand or even a couple of thousand
dollars? The tax collector will not pursue collection of any of them. And when one of the
individual debts does cross the Upper Minor Balance limit the tax collector may attempt
collection of just that one tax debt.
So, if you have a T1 debt of $924 and a Child Tax Benefit debt of $900, $1824 in
total, the tax collector will not attempt to collect either. But if your T1 tax debt was to
suddenly cross that magic $1000 barrier while your Child Tax Benefit remained
unchanged then the tax collector may attempt collection of your T1 debt.
What is meant by “may attempt collection”?
Tax collectors are taught to ignore debtor accounts below $2000. In fact some TSO’s
stretch this figure to as high as $5000. Why? Because the CRA prefers that collection
emphasis be placed on higher dollar tax liabilities. It is the department’s unpublished
position that the older a tax debt is or the higher the dollar value the more effort that
should be put into collection efforts. So both low dollar and newer tax assessments are
ignored until such time as they age sufficiently or interest charges raise the debt to a level
where collection can now be considered.
Yet most of us know that private sector studies have confirmed just the opposite. That
collection emphasis should be on the most recently incurred debt regardless of its size
because the collectibility of an account receivable decreases in relation to its age. The
older a debt is the lesser the likelihood it will be collected.
Now from this point on the main focus will be on the individual or T1 Upper Minor
Balance threshold.
The following list is Revenue Canada’s secret procedure for handling all unpaid T1
minor balance tax accounts.
If after the last transaction on your account:

i. the account balance is between $0.00 and $5.01, the debt is written off by the
computer after the thirty-first day of being unpaid.
ii. the account balance is between $5.00 and $50,the debt is deleted after the sixty first
day of being unpaid.
iii. the account balance is between $50.00 and $250.01 you will be sent a computer-
generated letter on day thirty-one and on day two hundred and eleven. Your tax debt
will be deleted on day five hundred and seventy six of being unpaid.

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 Minor Balance Tax Debts

iv. the account balance is between $250.00 and $1000.00, you will receive a letter on
days thirty-one, one hundred and twenty one and three hundred and one. Your tax
debt is written off on day six hundred and sixty six.

If interest does not raise the overdue tax amount to above the minor balance limit and
there are no transactions within the set time period the tax debt will be written off by the
computer.
A transaction is considered to be any credit, payment, assessment or reassessment
occurring on your tax account.
Written off by the computer means that the computer management system, REMITS,
has been programmed to delete your tax debt without the tax collector’s intervention or
concurrence. The write-off capability has been built right into the system.
If a financial transaction was to occur on your account the ‘clock’ on your account is
reset to day one of whichever threshold it now lies or remains in and the countdown to
deletion begins anew.
When interest brings your T1 tax debt over the $1000 mark your tax account is
forwarded to a TSO and tax collector for actioning.
When your minor balance account is written off for amounts between $50 - $1000 a
keep code is placed on your tax account meaning that no credits can be received by you
for 365 days, this includes personal GST credits, before first offsetting the written off
debt. If no credit transactions occur within a year the keep code is released and all
subsequent credits are returned to you. A written off minor balance debt is never
reinstated for collection even if your tax account again becomes active following the
write-off.
You’re probably thinking Minor Balance tax debts are small potatoes. How big of a
deal could they really be? The size of the debt may be small but it’s the huge number of
Minor Balance debtors which is a cause for concern. Why?
A minor balance debtor today will be a major balance debtor tomorrow.
Take Southern Ontario for example and view the following table for the 1996 taxation
year. Please remember this table is just for T1 individual tax debtor accounts between
$500.00 and $1000.00. Nothing else. Tax debts under $500 or over $999.99 have not
been included nor are tax debts from any other revenue stream.
The total number of accounts and the total dollars involved are tremendous:

Taxation Services Office Minor Balance Debts Total Dollar Value

Toronto (Toronto Core) 7121 $5,146,860
Hamilton 6158 $4,453,996
Kitchener 4350 $3,129,683
St Catherines 2499 $1,808,029
London 4187 $3,032,551
Windsor 2405 $1,724,261
Scarborough (Toronto East) 7523 $5,436,294
Mississauga (Toronto West) 7927 $5,663,689
North York (Toronto North) 7579 $5,482,718
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 Minor Balance Tax Debts

The table is read like this: In Scarborough there were 7523 debtors with an
outstanding tax balance between $499.99-$1000.00. Combined, the total they owe is
$5,436,294.
The totals, found below are for 1994, 1995 and 1996 taxation years for the nine
Southern Ontario TSO’s listed in the previous table. The numbers are mind boggling. In
each instance the numbers provided were taken in April of the year in question.

Total Number of Accounts (1994) Total Uncollected Dollars Average Minor Balance Debt
38,464 $27,717,266 $720.60

Total Number of Accounts (1995) Total Uncollected Dollars Average Minor Balance Debt
48,022 $34,544,307 $719.34

Total Number of Accounts (1996) Total Uncollected Dollars Average Minor Balance Debt
46,046 $33,276,433 $722.68

Southern Ontario minor balance statistics for the 1997 taxation year and beyond were
unavailable.
Based on just these three years a disturbing trend can be noted. There has been a large
increase in the number of debtor tax accounts between $500 and $1000 in terms of the
total numbers of debtors as well as the total tax dollars owed. Even worse, the average
dollar value of a Minor Balance tax debt is slowly rising.
As most TSO inventories of T1 tax debtor accounts are also increasing it is doubtful
that the increase in Minor Balance tax debts is wholly a result of TSO collectors
resolving their accounts to below the $1000 level and having them drop from an
inventory and into minor balance status. In fact the decrease in the total number of minor
balance debtor accounts in 1996 from 1995 may be attributed to the fact that many debtor
minor balance accounts accrued sufficient interest that enabled them to be removed from
Minor Balance status by entering into Major Balance status.
Of course some of this large increase can also be attributed to tax debts below $499.99
accruing interest to the extent that they are crossing the $500.00 barrier.
But the best guess is that more Canadians are accumulating small tax liabilities and
not paying them because the tax collector rarely requests payment. If they did they would
not employ REMITS to automatically write these debts off.
But with this new deletion policy (as outlined previously) it is possible that the tax
collector may finally be able to achieve a decrease in the numbers/dollars for minor
balance debts between $500-$1000 as well as for accounts under $500. Is this the fiscally
responsible way to dispose of an account receivable? By writing the debt off without
even attempting collection?
Let’s now consider the 1997 or 1998 taxation year and perform a little extrapolation
based on the figures supplied above. My projections are based on the fact that Southern
Ontario has a little less than a third of Canada’s population and that Revenue Canada has
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 Minor Balance Tax Debts

less than twenty-five percent of the total number of their offices in Southern Ontario.
Furthermore I am guesstimating that there are many more outstanding tax debts between
$2 and $500 then there are between $499 and $1000.
Based on this assumption it was conservatively assumed that the $2-$500 debts in
Southern Ontario equal seventy percent of Southern Ontario’s outstanding total of $499-
$1000 debts. This gives us a total of $22.3 million dollars. This number was reached by
adding the Minor Balance dollars legally collectible in the nine Southern Ontario TSO’s
as of April of 1994, 1995 and 1996, obtaining the three year average, and then
multiplying this figure by point seven. Added to this figure was the $36 million plus
already confirmed as outstanding. If these figures bear out that would mean there is sixty
million dollars in outstanding T1 tax debts between $2 and $1000 for Southern Ontario
If Southern Ontario has eight million people and Canada has thirty million total
population the total for T1 tax debts under $1000 would be $225 million.
If the TSO’s in Southern Ontario represent only twenty-five percent of the total
number of Revenue Canada offices this total is about $240 million. $240,000,000 that the
tax collector makes no effort to collect.
Next, consider there are seven more revenue types, Goods and Services tax, sub-
ledger taxes, corporate taxes, source deductions, custom and excise duties each with their
own minor balance threshold and debts outstanding. If we conservatively an average of
$100 million in uncollected and unpursued liabilities for each of these revenue streams,
the figure of one billion dollars would be the current dollar value total of all outstanding
tax debts falling below the upper minor balance level. That is one billion tax dollars that
the tax collector is rarely making any attempt to collect. And this figure is growing every
year.
On several occasions and in relation to T1 minor balance debts you will have noticed
the term “rarely aggressively collected” is used rather than “never aggressively
collected”. When Revenue Canada does decide to attempt collection of T1 minor balance
tax liabilities, they will hire college and university students to do so.
In selected years the department will run a ”Minor Balance Project” where college
students work for two or three months during the summer to try and collect T1 Minor
Balance tax debts. But by the time a student learns tax legislation, understands how to
navigate the computer system and overcome their fear of talking to adults about private
money matters the summer is over and they’re back in school. Working with your
confidential information, these students will take one of four actions on the debtor
account:

i. decide the account is uncollectible and not take any action.

ii. phone the debtor at home or at work for payment in full or a payment arrangement.
iii. send a letter to the last known home address requesting payment.
iv. take legal action in the form of a garnishment.

These are the same actions that full-time collectors take on higher dollar accounts. The
difference being that students earn $4.00 - $8.00 less an hour than the full time tax
collector.

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 Minor Balance Tax Debts

What you need to know

If your tax debt falls below the upper minor balance limit than it is very unlikely that
the tax collector is going to make any real effort to collect your tax arrears other than the
occasional computer generated letter.
If you have a Minor Balance tax debt as can be determined by the table on the first
page of this chapter you can receive a break on payment of tax. A break as little as a
couple of dollars to as much as $1000.00. You have to look at your own personal
situation to determine if this makes sense and that you have the patience to wait for your
debt to be written off.
At the very least, for T1 personal tax debtors, you know that you can always owe
Revenue Canada $1000 or less. Sure, there are times when they might try to collect this
minor sum but who knows just exactly when that will be?
Revenue Canada puts very little effort in attempting collection of a significant number
if not always a large dollar value of its account receivables. A concerted plan needs to be
set up to collect these delinquent tax dollars. They should be collected off the books not
written off the books. These small debts represent hundreds of millions to potentially
billions of tax dollars. Every day an account receivable of any size goes uncollected it
increases the likelihood that it will never be collected.
Even worse, if a tax debtor is taught that they can owe a small amount of money and
not have to pay, the day will come when they owe a larger debt and will refuse to pay,
drawing on their past experiences. Teaching Canadians to be debtors is irresponsible but
this is exactly what the tax collector commonly does.
It’s a shame to write off a debt without ever making a concerted attempt to collect it
and it’s even worse to have to pay someone to do so but this is exactly what your tax
collector does.
Until the CRA does change its practices in respect of minor balance tax debts tax
debtors will continue to use the rules to their advantage and let the department write off
collectible tax debts.

95 ©Alan Baggett
 The Tax Collector’s Bible

Part II

Tricks of the Trade

“How Collectors Collect and Debtors Frustrate”
 Major Balance Tax Debts

Like the chapter titled ‘Minor Balance’ this chapter begins where ‘From A to C:
Assessing to Collections’ left off, with an unpaid tax assessment knocking on the
doorstep of the collector. The difference being that this time the tax debt is a Major
Balance tax debt so we get to see how a tax collector might actually work towards
collecting the arrears.
T1 Minor Balance and T1 Major Balance tax debts differ in two respects. One,
obviously, is the balance. A Minor Balance T1 tax debt is always less than $1000 while a
Major Balance T1 tax debt is always greater than $999.99. The second difference
however is not obvious to the tax debtor, that difference rests in how the two types of tax
debts are worked. As you have just learned, with a Minor Balance tax debt your tax
arrears can be written off with no attempt made at collection. With a Major Balance tax
debt an attempt is often made to collect the outstanding tax assessment before writing it
off.
Before continuing it should be clarified that in the tax collector’s lingo, the term
‘account’ refers to an account receivable meaning a tax debt or a non-compliant
(delinquent filing) trust account. This includes T1 T2, T4, GST and any sort of tax debt
that may be found on the automated sub-ledger.
In the collections section of a TSO you will also hear the term ‘BF’. BF is another
slang that is also used to note a tax account. In reality BF is a short form for a tax
account’s Bring Forward date. After completing an action on your tax account the tax
collector should enter a calendar date or a number on the account for the date of the next
review. For example if today your tax account was BF’ed for sixty days, the collector
should review your account no later than sixty days from today’s date. A proper date may
also be entered such as October 3rd, 2009 and the account will be brought forward,
brought to the tax collector’s attention, on that date. An account may not be BF’ed for
more than 365 days. Also, if the collector tries to BF an account to a weekend or statutory
holiday or to a day that already has eight accounts, the system will flash a warning
message to select another date.
Once a tax liability has been determined the debtor tax account will travel through the
Revenue Enforcement Management Information and Tracking System (REMITS). But
when a tax account is in need of collection action, meaning the debtor has not paid or
arranged their tax liability within ninety days from the date of the assessment, the account
is transferred from REMITS to ACSES, the Automated Collections and Source
Deductions Enforcement System.
97 ©Alan Baggett
 Major Balance Tax Debts

When ACSES receives the account it immediately reroutes it to a subsystem. To

PAYDAC the Payroll Deduction, Accounting and Collections system for employer
source deduction tax arrears. CORPAC, the Corporation Accounting and Collections
system for a T2 or corporate tax debt and CINDAC the Centralized Individual
Accounting and Collections system for your personal or T1 tax debt. Since we’re
interested in your tax debt we will be discussing CINDAC.
When CINDAC receives a T1 debt in excess of $999.99 and payment in full or a
payment arrangement has not been made the debtor account is forwarded to a TSO. The
account will arrive at the TSO 90 to 120 days after the Notice of Assessment has been
sent. At the TSO the account is routed to a collectors inventory of account receivables
and is ready to receive its first human contact.
A TSO Collection workload is distributed between collection teams. A collection
team’s workload is further subdivided between its team members. For example a
collection team might handle debtor last names starting with the letters COA to FIZ. One
collector would then handle debtor names Coa to Cuz; the next collector might handle
Cva to Dez and so on. Each tax collector has their own inventory of debtor accounts. This
is why when you phone Revenue Canada and give your name they often transfer your
call.
But these alpha-splits do not remain constant. Three or six months down the road they
could change due to an increase in the number of debtor accounts flowing into the TSO
and due to the varying success of each individual team and collector. I.E. in three months
the T1 collection team discussed previously might now cover debtor last names between
CUT and DZZ. The individual collectors within the team would also see their individual
alpha-splits changed. Ever wonder why you always talk to a new tax collector when you
phone or correspond with the CRA? Well, now you know why.
Such shuffling of work creates major headaches. It creates a lack of continuity in the
working of a tax debtor’s account. When one collector assumes another collector’s
accounts and/or inventory they will not collect in exactly the same manner so any
investigation begins anew. This results not only in duplication of work but also increases
the likelihood that the debt will not be collected. Why? Duplication of work serves to age
a tax debt and aging decreases the chances of collecting the tax liability.
This talk of shuffling inventories and workloads reminds me of an account I worked
that had benefited from just such a lack of continuity.
An accountant by the name of Barbara P had a tax debt of $13,000. Investigation
confirmed that she earned a good income and owned two properties, one personal and
one rental. Although she could afford to pay off her tax arrears, and she made promises to
pay, she never did. And because of the constant shuffling of collector’s working her tax
account no one seemed to catch on. So she was able to slide through the cracks.
When I spoke with her and her promised payments did not arrive I sent a garnishment
to her employer. Livid, she calls up and orders me to release the garnishment, promising
payments of $100 a month. I refused not only because the garnishment of her wages
would result in larger payments but because she had no intention of paying her tax arrears
based on her past history. Within a week she decided to pay her tax debt in full.
Some tax debtors pay the minimum possible against their tax debt using it like a loan
or a line of credit. And it is the constant internal shufflings of collectors and alpha-splits

98 ©Alan Baggett
 Major Balance Tax Debts

that allows this to happen. Many tax debtors if they are not forced to pay or embarrassed
by legal action they will not pay.
The constant shuffling of collectors between inventories and the rearranging of alpha-
splits results in debtors going months and sometimes even years without being contacted
or making a payment. And they get away with it. Just ask Hayward P. His five figure tax
debtor account once went eighteen months between successive actions by a tax collector.
Yes, it was eventually written off as uncollectible.
Some tax debtors are aware of these constant internal shufflings and use them to their
advantage. Unless a collector is very aggressive in the short span of time they have
ownership of an account the tax debt is unlikely to be suitably arranged or resolved.
Furthermore the lack of workplace continuity results in collectors spending much time
duplicating work or accepting poor payment arrangements knowing that any payment is
better than nothing and that the next tax collector may not be as conscientious and might
be willing to accept nothing. Or because of the constant shufflings maybe they just bury
the account reasoning that soon it will be someone else’s problem.

The internal investigations of the tax collector

Probably the best way to understand how a debtor tax account may be worked is to
send you to work with the tax collector. From this point on you are going to view exactly
what the tax collector views from the moment they sign on to the ACSES computer
system; what investigations they might pursue and any actions they should initiate. This
is the first time such information has ever been made available to the general public.
The first thing the tax collector will see in the morning is the sign-on screen. This
screen is used to enter the ACSES mainframe, the doorway to collecting all tax debts
whether they are T1, T2, source deductions or subledger arrears.

If

99 ©Alan Baggett
 Major Balance Tax Debts

the tax collector is attempting collection of GST tax debts they may use the ACSES
computer system but are better served by signing on to the GST computer mainframe.
This is done by calling up the following sign-on screen.

Goods and Services Tax (GST) Sign-on Screen

To sign on the tax collector will enter their unique User Identification (Userid) and
their six-character password to gain access to the CRA mainframe and computer
databases. When a tax collector accesses your tax account for whatever reason or makes a
diary entry, their Userid will show so as to identify the investigator user and author.
There are many different Userid styles employed by TSO’s. Some use first names,
some use last names, others use double letters in front of a name like TT, XX or ZZ.
The most recent trend is to use the tax collector’s first initial of each name along with
three numbers (such as ASB120) to identify the collector.
A tax collector’s Userid is not secret and is available to any other employee.
Obviously a password is used to allow only those so authorized to use the database
and should protect the computer system from unwarranted intrusions. But in the land of
Revenue Canada the tax collector’s password can be easily circumvented in one of three
ways.
Firstly, some employees share passwords and some managers require that employees
share their passwords.
Second, it is not difficult to guess some user’s passwords. Some use the name of a
child or pet while others leave their password on a desktop scrap of paper for easy
reference.

100 ©Alan Baggett

 Major Balance Tax Debts

The third and final method however is the most devious.

If entry of a password is botched on three successive attempts the tax collector is
locked out of the system until the password can be reset by computer services. Now if the
collector is going to be away their password can purposely be ‘botched’ if you know their
Userid and Userid’s are no secret. Computer services will readily supply a new password
and a co-worker can use another tax collector’s computer access without their
knowledge. When finished with the stolen Userid the password is botched once again and
no one is the wiser as to the crime that has just been committed.
When the tax collector is accepted onto ACSES they will be prompted to choose a
workload consisting of Officer, Supervisor or Limited Access. The tax collector will
select Officer.
Next they are asked to choose between Collections, Compliance, PIER (Penalty and
Interest Employer Report) or Correspondence. The tax collector will choose the
Collections option and be presented with the Officer Menu.
The Officer Menu looks like this:

User Identification of
Always shows
the Tax Employee.
today’s date.

The tax collector will select one of these seven

options (usually No. 1 – Current BF list) to
access their assigned inventory.

101 ©Alan Baggett

 Major Balance Tax Debts

The Userid of the collector, ZZABAGG in this instance, will always be shown in the
upper right-hand corner of the screen.
The Officer Menu screen allows the tax collector a series of selections.

1. Current BF List – the officer’s workload of accounts listed by date of next action
2. Alpha List – the officer’s workload listed alphabetically
3. New Cases – the list of new accounts that have never been actioned
4. Work Section Alpha List – alphabetic list of all accounts in the TSO
5. Unallocated Accounts List – a list of accounts not yet referred to an inventory
6. Support Functions – used for clerical upkeep of accounts
7. Business Number System – used to assign and modify business numbers and related

Tax collectors are assigned an inventory but have the option of viewing other
inventories by changing the Specific Inventory number (middle right of screen. On the
page following find an example of the first page of a tax collector’s Bring Forward or BF
List.
If a specific tax debtor needs to be located from the collector’s BF list option 2 is
selected. Option 4 is selected to search the entire TSO.
The tax collector may view the tax account and personal information of any individual
or business in Canada. But in instances where a tax return has never been filed the tax
account has almost no information available.
The tax collector will normally choose option 1, Current BF List, and the menu
screen will be replaced with the collector’s Current BF List.
This collector is working inventory 12 00 03 which holds tax debtor accounts whose
last names begin with the letter D. The name ‘Doe’ and fictitious first names have been
employed.
This particular tax collector and inventory has 391 debtor accounts. 106 of the
accounts are scheduled for review on today’s date (assuming today is August 29, 2001).
For this inventory there are 24 brand new debtor accounts that have yet to been
investigated. An account on the “New Accounts” list remains there for thirty days. If a
new account is not examined within thirty days it is automatically placed on the BF list.
The Unactioned BF’s counter does not include any unactioned New Accounts. So for this
collector 130 accounts need current investigation.
The squiggle (~) beside the debtor name means the tax collector has looked at the
account today but has not completed any action.
The at (@) symbol indicates the collector has BF’ed the account to a future date and,
presumably, taken some collection action.
The exclamation mark (!) means the account is a priority BF and should be looked at
immediately.
The dollar sign ($) indicates the tax liability has increased since the last time the
account was BF’ed.
The greater than symbol (>) shows the account is an unworked BF from a previous
day.
The exclamation or dollar sign should take precedence over the greater than sign when
the collector selects an account to work.

102 ©Alan Baggett

 Major Balance Tax Debts

ACSES Current BF List Screen

By entering a SIN here Number of tax Number of

(Acct No.) the tax collector accounts in this tax accounts
can retrieve that Canadians inventory that need
personal information from current work.
the CRA’s database Should not be
more than
eight.

First and last

Userid of last Note of what
name of the A high risk code
tax collector last transpired
tax debtor. indicates that
to access that on that tax
the account is in
tax account account.
danger of not
being collected.

The ACSES - Current BF List screen also has a number of columns to help the
collector select a case.
The Risk Code column is a numerical representation of a particular tax account’s
perceived difficulty. The higher the risk code, 99 being of the highest, the higher the
danger of loss (not collecting). The risk code is based on the account’s age, dollar value,
the existence of concurrent assessments and previous history in collections.
The Account Type column represents the revenue stream such as T1 (individual), T2
(corporation) etc.
103 ©Alan Baggett
 Major Balance Tax Debts

Last User column shows the Userid of the last tax collector to access the account. The
officer assigned to the inventory is usually the user identification that will be found on
most if not all of the inventory’s accounts. A Userid is unique to each tax collector.
Last Action/Message acts as a memory jogger. Collectors may leave a brief note to
remind themselves of what last transpired on the account. Last Action/Message is also
where the computer management system can place a message to update the collector of
an action that has just occurred, like a payment or a bankruptcy.
The message list from the above screen shows REGULAR BF which means the
collector did not enter a message when last working the account so the computer filled in
the blank. Among the more common computer messages are an increased liability on an
account, INCR LIABILITY, write-off recommendations, T1520 PENDING or WRITE
OFF, and a LETTER SENT notation.
Many tax collectors ignore these helpful symbols and messages. Instead they sift
through their BF List for accounts that are easier to work in order to finish their expected
daily workload, eight accounts. That’s right, the CRA expects a tax collector to work a
maximum of eight tax accounts a day, about one per hour in a 7.5-hour workday.
However many tax collectors cannot handle even eight accounts a day and when the
next day’s and then the next day’s are added on top the collector can have one hundred or
more cases BF’d to the same day. Today. (As shown below).
Unworked tax accounts can pile up quickly because of vacation time, doctor
appointments, sick time, statutory holidays, job training, personal assignments and
extracurricular activities.
Yet whether a collector works eight, six or four BF’s, the amount of work completed
or left incomplete is never an issue. No monitoring is done as to the quality or quantity of
work completed. The result is debtor accounts being neglected and ignored. And, as an
account receivable ages collectibility decreases. The tax collector’s negligence often
turns collectible tax debts into write-offs.
As a new collector your BF list can be intimidating but after a couple of weeks or
months on the job one finds being a tax collector is not so tough. It all depends on the
attitude. If you are overaggressive, a poor organizer or afraid of confrontation you will
not be a successful. On the other hand, if you’re a competitor, tough but fair, you can be
successful and at the same time help people.
When the collector chooses an account from their BF list the Account Information
screen for that debtor is immediately shown (example shown on the page immediately
following). This screen displays all information related to you. Data from more than a
dozen different sub subsystems are retrieved. T1 IDENT supplies name and address
information. FIP details financial transactions in progress and TAB, T1 Accounting
Balance will retrieve your current account balance. And these are just a very few of the
feeder systems that complete the debtor’s picture.
Usually the account chosen will have a debt but fortunately for me this account does
not. I should note that one common misconception about collectors is that they’re all
accountants. Nothing could be further from the truth. Sure some collectors may have
taken business at school or a couple of high school accounting courses but a tax collector
does not need to be an accountant to be successful. They must be fair, know how to
prioritize and how to organize.

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 Major Balance Tax Debts

ACSES Account Information Screen

SIN, name, Total of any

Calendar date
address and tax amount(s)
account is to Location of
birthdate for outstanding
be worked office working
this Canadian.
next. this account

Total of any Indicates any

Total of any prepaid tax
undisputed disputed tax
tax amounts. amounts
amounts.

The Account Information screen provides the tax collector with all a Canadian’s basic
personal information. Their account number (social insurance number), full name, and
home address among other details as well any tax balance outstanding.
If this particular Canadian had a tax debt it would be displayed in the upper right
corner of the screen following BAL.
A partial breakdown of his tax arrears would be shown in the lower left under
ARREARS, DISPUTED and UNDISPUTED. Disputed identifies any tax arrears that are
under appeal and not collectible while Undisputed indicates any collectible amounts.

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 Major Balance Tax Debts

If the debt were for a year prior to the 2000 tax year the collector would place an ”x”
where it says “key x here” in the lower left hand corner below the debt breakdown and
the year of the debt would be shown if the tax debt was from the previous three calendar
years. If the individual’s tax debt(s) are previous to the last three calendar years they are
all lumped together and listed as an undated prior years tax liability.
Because this taxpayer does not have a debt ACS message 011 shows at the very top of
the computer screen: “This is an inactive case and not currently TSO in this workload.”
In this instance TSO means no office or tax collector has the responsibility of working
the account.
The installment field (lower right) shows the total amount of any installments made.
As this individual is an “X-Remitter”, see REM TYPE X in the middle of the screen, tax
is deducted at the source of income so no quarterly installments are necessary.
Among the very first tax cases I ever worked was that of Dave M. Dave was a self-
employed tradesman from Toronto North with a $4800 personal tax debt. His original
assessment was much higher but he had been making payments before he suddenly
stopped. Why did he suddenly refuse to continue making payments towards his arrears?
When his debt hit collections Mr. M told the tax collector that he had forgot to submit
some of his receipts and asked permission to do so. He was asking for a reassessment.
Without even reviewing the documentation the tax collector told him no reassessment
was possible.
As a result Mr. M was forced into a payment arrangement of five equal monthly
payments of about $1000 a month and a sixth payment of about $4000. This type of
arrangement is known as a balloon arrangement, a huge payment is left to the end. No
good collector would request or allow such.
Mr. M was able to make the first five payments but could not make that large sixth
payment. He informed the tax collector of his dilemma but was ignored. When his
payment bounced the collector sent a requirement to pay, a garnishment, to Mr. M’s
bank. A rather stupid move because if a cheque bounces obviously the money is not in
the bank account. The garnishment brought in a couple hundred dollars and ruined
Dave’s reputation with the bank. As a result he refused to make any further payments and
even stopped filing income tax returns.
In the interim a couple years passed and the account landed in my lap as a new
employee. I began regularly phoning him and only after leaving a slew of messages did
he bother to respond. He explained his story as I have just outlined. He agreed to come to
the office and bring the receipts needed for the reassessment. When I couldn’t promise a
positive reassessment he almost walked out in the middle of the meeting. But to my
novice eyes, I had worked as a tax collector for less than six months, the receipts
indicated he was eligible for a reassessment of his tax return. I submitted the receipts on
his behalf and promised that no collection action would be taken until any adjustments
were finalized. As it turned out, his tax debt was reversed and he received a refund of a
couple thousand dollars.
When Mr. M’s original tax assessment was reversed I thought that he would be
thankful but I guess he’d been turned off by the poor treatment he had received at the
hands of previous collectors. After the case was resolved he took his refund and moved to
E----- Lake. Since this fiasco he only bothered to file one further tax return, for a refund,
and his common law also became a sporadic filer. This was a good lesson for me because

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 Major Balance Tax Debts

I learned early on in my career what happens when a tax collector works poorly. The
offended party drops out of the mainstream and into the underground economy, never to
return. A Tax Exile.
Once the tax collector has finished viewing the ACSES Account Information Screen
they should browse through other screens to learn more about the debtor. Such
investigations should include the Taxpayer Information screen, which provides space to
enter dynamic data, data that can be altered, such as a phone number or a listing of
income and expenses. The Account Diary is used to record information or to review prior
investigations. The diary holds static information. Once entered it stands as a permanent
record for all to see. A copy of your tax diary can be requested under the Access to
Information Act. The Account Postings screen is a chronological listing of the most
recent financial transactions, payments, assessments, reassessments, payments and the
like. The RAPID version of Account Postings will be discussed instead of showing its
CINDAC counterpart. RAPID is a related database that is accessed through ACSES.
When a collector accesses your tax account. For any reason. They are supposed to
make a diary entry explaining why they entered the account. A sample diary entry related
to the job might look something like this (depending on the collector making the entry):

Joseph Doe
----------------------------------------------------------------------------------
09 APR 2001 – TTALANB (1213) – BF 18 Apr 01 - 12,345.67

Phoned client at home, LMTC on answering machine.

If no response to LMTC will request a contact letter.

This entry shows the date it was entered into the diary, 09 APR 2001 and the Userid of
the authoring collector TTALANB. The TSO of the diarist is 1213 with the 13 indicating
the Toronto Core office. The BF date is shown as BF 18 Apr 01 and the amount of the tax
arrears is $12,345.67. The diary entry also advises as to what transpired during the access
of the account, a phone call, and provides a future plan of action as a contact letter.
Are diary entries always just a simple statement of the facts and nothing more? Not
always. Some tax collectors take any disagreement, no matter how minor, personally and
as a challenge to their authority. As such when they do not get their way or they take a
dislike to a taxpayer a diary entry much like the one following may occur.

XXXXXXXX XXXXXXXXXXXX
--------------------------------------------------------------------------------------
10Apr 95 - XXXXXXX(1263) – BF 05May 95 - 5,236.26

WELL, WELL, WELL, this tp got what he wanted…the arrangement..

this tp has learned that if he is rude…he will get what he wants…if he
is difficult..he will get what he wants..if he is demanding..he will get
what he wants. WELL, WELL, WELL…

107 ©Alan Baggett

 Major Balance Tax Debts

The previous was an actual diary entry from an experienced tax collector. References
to the diarist and the taxpayer have been x’d out so as not to embarrass them. The
scenario? A tax collector hung up on a tax debtor after they refused to accept the
collector’s suggested payment arrangement. The tax debtor complained to a manager and
the manager ordered the debtor’s payment arrangement accepted. A new collector was
then assigned to handle the account. The original collector responded with the diary entry
shown above.
The ‘tp’ in the diary entry stands for taxpayer as most collectors refuse to call tax
debtors ‘clients’ as per the department’s politically correct request.
Some tax collector’s diary entries are so sloppy and full of abbreviations that their
coworkers often need them translated by the author just to understand them. Not every
collector records taxpayer contacts in this manner but entries like this are not unusual.
This anecdote confirms that a client, you, has an avenue of recourse if your assigned
collector is treating you poorly. It is also an illustration of why you should request a copy
of your tax account’s diary. Tax collectors have no fear of those that pay their salaries.
You. The result is sometimes less than professional work being offered. If the threat of
public intrusion did exist collectors would be more apt to suitably working accounts and
make appropriate diary entries. Every diary entry made is stored on the database for
every tax collector to view. Nationwide.

RAPID Menu Screen

The many different Warning to

Userid of the tax investigation options any who
collector accessing available to the tax access this
the personal and collector. database.
confidential
information.

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 Major Balance Tax Debts

When working a tax account the first thing the collector should do is to verify that the
tax debt is accurate (unlike in Dave M’s case) and legally collectible. Next, the account
history, if any, should be reviewed in the diary to determine the debtor’s attitudes as well
as current and previous payment history. Upon completing this review the tax collector’s
internal investigation of a debtor is continued by accessing the RAPID computer system.
The RAPID computer system offers the tax collector access to a vast array of your
personal information.
One item in particular stands out on the above RAPID menu screen, the box in the
upper right corner which states “Access is permitted on a need-to-know basis. All access
is audited”. Any audit of accesses is likely completed on a statistical basis only as our
examination of confidentiality confirms that the CRA does little to identify or punish
those who abuse their access privileges.
There are two RAPID menus. The one shown above is used for personal or T1
investigations. The second is for business (T2 and T4) related investigations.
Instead of examining every RAPID selection only those options a tax collector
regularly uses or should use in the course of their investigation of you will be discussed.
These selections should include:

1. Option A, used to request a filed income tax return.

2. Option C, to view the numbers on a tax return.
3. Option G, to obtain copies of Government cheques payable to the client.
4. Option I, notes the filing history of an individual.
5. Option N, outlines all financial transactions related to the client.

Also, Option DD from the RAPID business screen will be examined. Option DD
displays all your information slips, T4’s, T5’s etc., for a selected calendar year.

Account Postings

Tax Assessment for

the 1995 tax year.

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 Major Balance Tax Debts

The most commonly used RAPID selection is Option N or Account Postings which
provides the breakdown of all your tax assessments, reassessments, credits and debits.
Option N also lists any payments made and assists when reviewing past payment history.
Pages 9 and 10 of this client’s payment history are shown (above and following).
Some tax debtors have hundreds of pages of postings that must be sifted through.
The Account Postings screen may look muddled but most tax collectors, with a little
patience and lots of practice, can learn to sift out the necessary information. The first
page (nine – above) shows a refund issued for the 1994 taxation year followed by the
1995 assessment and refund issued.
The second page (ten following) shows reassessments to the 1994 and 1995 taxation
years. If a debt had been assessed, A DR instead of a CR would be shown and the
Account Information screen would show an outstanding balance. Account Postings also
makes available to the tax collector all your financial transactions beginning with the
1989 calendar year.
If there was a debt prior to 1989 it is simply noted as a balance forward but with no
other clue to its origin provided. Why 1989? Because this is the year Revenue Canada
(now the CRA) entered the computer age.
Social Insurance
Account
Number/ Account
postings page
Number.
number

Details of 1994
Details of 1995 T1 Results for each assessment
T1 reassessment.
reassessment. or reassessment (credit,
debit or nil).

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 Major Balance Tax Debts

One of the key uses the tax collector has for the Account Postings screen is to trace
your payments. This is done to learn where you bank if legal action should become
necessary (a garnishment). Unfortunately neither page has a payment to trace but a
payment on a tax account might look something like this:

13MAR 99AD005 90785 3413 PAYMENT 200.00CR PDC 14MAR99

If the tax collector wishes to trace a payment they will send the payment number, in
this case 90875 3413, to Records. Records will locate the microfiche copy of the payment
and forward a copy to the collector. This is one manner in which the collector locates
your personal bank account. Via your payments. With a copy of your payment cheque
they can determine where you bank and a garnishment source is presented.
There is one other option a collector can view in RAPID to trace cheques, Option G,
Payment Enquiry’s. Option G shows all manners of payments the department makes to
you, from Income Tax Refunds and GST credits to Child Tax Benefit Cheques. All
screens in RAPID G are very similar so only the T1 Payments screen is shown.

Payment Enquiries

If you give the CRA ‘Direct

The personal Deposit’ information your bank
information for account and bank would be
this Canadian. found here.

The tax year the The date of The dollar Reason for the cheque
issued cheque the cheque’s amount of the being issued, IAS
relates to. issuance. cheque. indicates a T1 refund.

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This is the complete history of all Income Tax Refund cheques received by this
individual up to August 29, 2001.
When the tax collector wishes to trace your refund cheque they send the cheque
number to Records. A photocopy, front and back, of the cashed cheque is returned. If
cashed at a bank, the cheque will have the cashing bank’s stamp. Using the bank’s stamp
another possible source for legal action, the garnishment, has been located.
In instances where the filer has direct deposit, the tax collector’s Option G screens
have T1 Bank, GSTC Bank or CTB Bank. Found at the center of the screen, this
identifies your bank your bank branch and your bank account number.
What if the tax collector sifts through N.5 and G and finds no payments to trace? The
next step is RAPID Option I (shown next page) for an examination of your filing history.
Option I records a Canadians filing habits over the course of the last eight calendar
years and lists the current year, one year in the future and the six years prior to the current
year. Option I identifies the status of your return as to date assessed and nil, debit or
credit result.
Under the Filing Info column notice several different acronyms. IAS stands for
Individual Assessment System meaning that a client has filed voluntarily. RAP represents
a reassessment and indicates that the client has been reassessed one or more times for that
year. SAS is the Secondary Assessment System and usually indicates that the client has
filed with the assistance of the department. An arbitrary assessment is noted by the letters
of ARB and indicates the department has filed in the client’s absence and without their
assistance.
T1 Filing History

Tax year and disposition Date of the tax Result of the tax assessment
of the corresponding tax assessment (credit, debit or nil).
return.

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This particular Option I screen shows one who is a sporadic filer. NOT FILED indicates
they have not filed for the corresponding calendar year. This Canadian may be one of
those taxpayers that files only when expecting a refund or when they have the ability to
pay. Not an uncommon scenario.
When the tax collector chooses to arbitrarily assesses they usually select those who are
consistently delinquent filers, people who miss several years consecutively, rather than
those who file haphazardly. It is more cost effective to assess a delinquent or non-filer for
several years at once rather than to assess them one at a time. And while this method may
save the department the cost of raising an assessment we now know that the longer a debt
remains uncollected the more likely it is to be written off. If a 1995 tax debt isn’t
arbitrarily assessed until 2000 the chances of collecting it are slim indeed.
When the tax collector has determined which years you have filed tax returns their next
investigation is of Option C known as Income and Deductions.
When selecting option C, a year is chosen applicable to a filed tax return. In the
following example, the 1996 taxation year has been chosen for viewing.
On this screen you will find two columns of three digit numbers. At the extreme left
and in the middle of the screen. These numbers correspond to the line numbers found on
your T1 Income Tax Return. A brief description of the line is provided to the immediate
right. The number opposite the line number following the description are the numbers
you have submitted on your return.
On lines where there are two sets of numbers to the right of the description an
adjustment has occurred. The leftmost of these two numbers was the number you
submitted and the right one is the correction.
Page one of this taxpayer’s 1996 T1 return on Option C is shown. This illustration
reveals why the hard copy of the client’s tax return has to be requested or “charged out”.
Because this option supplies no hard collection information. This is why the collector
fears the digitally filed return. Digitally filed returns show exactly what is available on
Option C and nothing more. Therefore there are no good collection leads available.

Income and Deductions

The subsequent example of the Rapid Option C (found page following) informs the
collector that the taxpayer has T4 earnings (Line 101) as well as interest income (121)
and capital gains (127). He also made a contribution to his RSP (208). These are all
potential sources from which tax arrears may be forcibly collected.
The spouse or common-law’s SIN may also be obtained from this screen when the
filer provides it. Spousal and common-law tax accounts should be investigated for
collection leads but most often the tax collector ignores them.
With the existence of collection avenues confirmed the tax collector still must
determine the whereabouts of the assets in order to undertake legal collection action. This
is done by examining Option DD.
Rapid Option DD.3 is chosen next because the tax return above shows several income
leads but does not identify the source of the income, the filer or payer. By viewing the
electronically filed information slips on Option DD.3 the name and address of the source
are easily identified.

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In the following example 1999 was the tax year selected.

SIN/Account First of two

Number of pages for this
spouse. tax return.

Line number from the tax When there are two columns the
return and the description numbers on the right is what the
of that line. taxpayer submitted and the one on
the left the CRA’s correction.

Flip to the second page.

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Supplementary Information Slips

Type of supplementary
The amount of any taxes
tax slip. T4 – Employer,
deducted or, in the case of
T5 – interest, T5008 –
a T5008, the amount
investment.
realized from the sale.

The name of the The Business Number of the employer

individual who or, in the case of the T5/T5008 that
received the monies. handled the transaction.

Shown above are three different types of information slips that might be found on a
tax account.
A T5008 is used to record securities transactions such as a sale of stock or mutual
fund units. In a moment I will reveal a startling tax collector secret about the T5008.
A T5 identifies how much interest income you received from a particular financial
institution, which branch your account is held and their address. If the interest income
earned from a bank account is less than $50 the bank files no T5 slip with the CRA.
The T4 is a record of your income all deductions made by your employer in earning
that income and the name and address of that employer.
The tax collector’s electronic representations of each of these slips can be found on
the following page.
There are several other types of information slips but those noted above are the most
commonly encountered.
If the collector wishes to view an information slip they key an “x” for their choice and
would see (page following):

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SIN and name of Name of the employer

the employee and their Business
Number.

The gross amount that this employee

earned and the various statutory and
deductions made from their income.

And that is the tax collector’s electronic representation of a Canadian’s T4 slip.

Their earnings, statutory deductions, employer name and address are the most
important bits of your personal information found here. With this information in hand all
the tax collector does is contact the payroll office of the company named on the T4 to
confirm if you are still employed there. If they answer with a “Yes” than expect a
garnishment to be issued with your name on it a short time later.
Other than basic payroll information, income and deductions, your employer should
not reveal anything else about you. But they do. Most payroll employees have access to
your personnel file and will answer just about any question the tax collector asks. This is
a violation of your right to confidentiality. They should release no personal information
about you until the tax collector has served them with a Requirement for Information.
You should also know that the tax collector does not receive their copy of your T4
slip, at the earliest, until February of the year following the end of the year in which the

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income is earned. This can make it difficult for the tax collector to locate your current
employer.
For instance if you were to quit your job and take up a new one the tax collector will
not know where you are currently employed until at least March 1st of the following year;
when your new employer has filed your T4 slip with the department. As long as fifteen
months can pass before you can be traced to a new job. And by the time that employer is
located you may have switched jobs yet again. Your T4 is the easiest way for the tax
collector to locate you but the information can not be accessed until the T4 filed.
The collector may also view your T5008. Take a look at the T5008 displayed
following and see if you can determine what vital information is missing.

SIN, name and address The Business Number,

of the supplementary name and address of the
recipient. supplementary’s issuer

The number of
The name of the The total dollar
shares or units that
stock or mutual value of this sales
were disposed of.
fund. transaction.

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You may have noted that while the electronically stored T5 confirms the number of
shares/units sold under Quantity Secured (Qty Sec.) and how much the shares were sold
for (Disp./Sett.) the tax collector has no idea as to how much the seller actually profited
or lost on the sale of the securities. If the individual above stated he paid $4000 before
selling for $6001 they have a capital gain of $2001, if he reports he paid $7000 then there
is a capital loss of $999.
In this rare instance the CRA operates on the trust system, initially at least – they still
reserve the right to perform an audit, that the tax filer is going to honestly report all such
transactions. Some do and some don’t, some will cheat and some won’t, some will be
caught and some won’t. It’s a crapshoot. It’s a huge hole that many take advantage of.
And by the time they are caught, if they are caught at all, they are no longer in the
financial shape to pay the tax debt assessed. More often than not those that fudge on their
taxes do so because they are not in a position to pay the debt on filing so they try to delay
payment. And if not fingered payment is delayed forever.
Shocking, when you consider how anal the tax collector can be. And those caught
making false claims are simply reassessed for the shortfall. Any “mistakes” made,
intended or accidental are always treated as accidents even when on a recurring basis.
Where does the tax collector turn to request your original filed T1 tax return? The
collector selects RAPID Option A where they will find the following menu:

T1 Charge-out Menu SIN/Account number and name

of person.

The tax year and the availability

of the tax return. If there is no Advises the collector that the tax
‘C’ or ‘R’ that means the return return is currently being examined
has not been filed or was filed by a tax employee.
but since destroyed.

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To request or reserve a tax return the tax collector will type an “x” over the “C” (far
left column) or “R”. For the tax account of this individual several returns are available to
be charged out (note the C), one return that is charged out (note the R), several tax returns
that are no longer available and two returns with the notation of “Return Status Not
Available”. When “Return Status Not Avail” shows it means the tax return has not been
filed or is filed but has yet to clear Assessing.
If the return is charged out the name of the requesting individual is noted which in this
case is an S Smith.
It takes three to five weeks to receive a requested return if it can be located. When a
return is misfiled, in the archives or at the TSO it usually is lost for good. And yes this
does happen.
A T1 tax return is rarely kept for more than five years due to space requirements.
When the tax collector receives the hard copy of your tax return they can obtain the
in-depth information that Option C does not show. In this instance the collector wants to
know where the debtor holds his RSP and would also like to pinpoint the source of the
capital gains. Why? In order to provide a source for legal action. The tax return should
have the RSP deduction slip attached. The sources of any capital gains income should
also be identified. When their location has been determined they can be subjected to a
writ and garnishment in order to effect seizure and collect the arrears.
That’s it. These seven simple investigations supply almost all the information
necessary for a tax collector to begin resolution of a tax liability. If the collector takes the
time to familiarize themselves with RAPID’s intricacies, find out exactly what
information is available and then act on what they have found, collecting is not a difficult
job. An in-depth RAPID investigation might last as long as twenty minutes. However
some collectors will ignore this preliminary investigation. Instead they simply send a
letter requesting a payment and BF the debtor tax account for sixty or more days. Hoping
that you will comply without any further work being needed on their part. But by the time
a debtor account has entered collections it has already had several computer generated
letters so at this stage of the game another letter is unlikely to have much effect.
The only defense you have against the computer investigation is to never have filed a
tax return at all. Like me when I was first hired as a tax collector. This way there is little
information about you on the database. Otherwise you have to hope that the data is
incorrect or out of date. Why? If the account looks difficult or work intensive the tax
collector may choose to bury it and hope it solves itself.

The external investigations of the tax collector

Obviously in house computer investigations are not the only method used to enforce
tax collection. Certain external investigations may also be conducted as the situation
warrants.
Before continuing once again I would like to be clear on the fact that I am not trying
to tell you to avoid paying your tax assessment, I am simply explaining what tax
collectors go through when attempting to enforce payment and how many tax debtors
choose to avoid payment. Some debtors will go to incredible extremes to avoid payment.
But those who do not pay do not end up in jail. Their tax debts are written off.

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Regardless of the size or age of the tax debt there are only about a dozen external
actions that a tax collector can consider when working towards resolving the tax liability.
A good tax collector should attempt to resolve collection as cheaply and as quickly as
possible.
Some collectors consider any investigation, completing any one internal or external
investigation, as the completion of work on that debtor account for the day. Some
collectors will only complete the minimum of work on a debtor tax account, to quickly
reach the eight accounts per day they are expected to work.
Following are the external actions the tax collector might undertake to collect your tax
arrears. The actions are presented (actions are underlined) in order of seriousness. The
farther down the list the action the more likely it is that the tax debt it is used on will not
be collected.

1) When completing any action on an account a diary update should be performed.

The tax collector will update your tax diary with the contents of your letters, cheque
tracing results, when they gave you a legal warning and how it was delivered (verbal or
written) a field call summary or any other pertinent correspondence such as a bankruptcy
notification.
The important points of a phone conversation or the mailing of letters should always
be entered into the diary as should notification of any returned letters though this is not
always the case as noted previously.

2. Personal contact with the debtor is the cheapest and most efficient method to initiate
collection of tax arrears. A phone call or an invitation for you to visit the TSO is the
most likely action.

The tax collector will contact you at home or work to request payment in full or a
payment arrangement.
Surprisingly the emphasis for tax collections is on contact and voluntary repayment
not brute force and legal actions. The CRA has an unwritten policy not to demand a bank
loan in order to repay tax arrears. Why? Because the tax collector is not allowed to
adversely affect the debtor’s lifestyle in order to gain payment. They may not cause you
undue hardship ergo the department is to accept what is reasonably proffered. However
some tax collectors conveniently forget this unwritten rule and demand that you
immediately pay or obtain a loan regardless of the impact to your self or family.
To locate your phone number or confirm your home address the tax collector uses
Teledirect (from Bell Canada), a phone number searching computer program. Teledirect
does not reveal the names, phone numbers or addresses of Canadians with unlisted phone
numbers. When the debtor’s phone number is unlisted and not included on the tax return
the tax collector is unable to phone your residence. Barring an unlisted phone, an
answering machine or voice mail is used by some trying to avoid contact.

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For those of us with listed numbers a phone call may also result in no answer, a busy
signal or a left message to call. Each of these actions is considered a days work and one
BF completed.
When no payment arrangement is forthcoming the phone is used to initiate
investigation such as confirming employment or contacting the land registry office to
confirm ownership of residence among other investigations.
Some Canadians are so distrustful of the tax collector that they have begun taping
their phone conversations. And, in fact, I received a letter from a gentleman out in
western Canada in which he told me that when he advised the tax collector that he would
be videotaping the meeting the tax collector cancelled the meeting and immediately left.
What I recommend is this: whenever speaking with a tax collector, always record their
full name, their real name and not the working name some use, the date and time of day
and what was discussed – be specific. The tax collector keeps a diary on you and you
should do the same on him or her in order to protect yourself.
But while some tax collectors use their phone for work related purposes there are also
those who will use the phone for their personal businesses. The Toronto West office had
a tax collector that was also a bookmaker. A bookie holds the bets, pays winners and
collects from the losers.
Just to confirm this allegation was true, that the tax collector was also running a
bookmaking operation out of the Toronto Office of the CRA, and by george it was, I
placed a $50 bet on a NCAA basketball tournament game – Arkansas and UMASS with
UMASS a ten point favourite – I watched my bet recorded in his book by this tax
collector-runner and coughed up the dough when Arkansas lost by twelve.
But this particular tax collector would spend his day on the phone taking bets and
marking them down in his little black book. While in front of the computer and accessing
the CRA database which holds all of your most personal and confidential information.
And in the instance that a bettor refused to pay this collector would locate them, using the
department’s computer database, in order to facilitate collection of the bookie’s debt.
Even worse, a couple of co-workers were so deeply in debt to the bookie that, to pay
down their gambling losses, became “spotters”.
Spotters locate cars to be stolen for resale or stripped for parts. When successful they
are rewarded with a couple hundred bucks.
These tax collectors were so deeply in hock that they ‘spotted’ the prized Mustang of a
close friend of theirs and also a tax collector by the name of James Stanley, and it soon
disappeared from its parking spot at the Mississauga City Center. The money they
received for spotting the car was used to pay down their gambling debts.
And the car?
It was found stripped and abandoned a few days later. Poor Mr. Stanley, he just didn’t
know who his friends were.
The bookmaker in this story later resigned his position at the CRA after being
transferred to the Toronto West office in order to further his career as an entrepreneur.
And, on an exceptionally sad note, in February 2009 he was found murdered in his
vehicle. The reason being given for his murder was a large unpaid gambling debt owing
to him.
No doubt some will scoff at this next story but in December of 2000 it was discovered
that a criminal organization has been obtaining some Quebecers most personal

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confidential information from the Quebec Transport Ministry though usually that of
police officers and criminal reporters.
Days after this fact was made public I was told that a member of Quebec’s Provincial
Assembly, during question period, advised the Revenue Minister that the same was being
done within the Quebec Ministry Revenue and an investigation was promised. The
Quebec Revenue Ministry and the CRA share their computer database.
As a tax collector I saw many a suspicious sight. Some of these were of Canadians
who deposited large cash amounts into their tax installment account. Yet they never owed
anything close to the amount they deposited. So, after filing their T1 and being assessed,
they would receive a large refund. Every year. It just didn’t make sense to me. At least
not until I read a newspaper article about criminals and money laundering. Only then did
it become clear to me that the CRA could be used to launder ill-gotten gains.
You see when you deposit a large amount of cash into your bank account; the bank
notifies the authorities. Even for amounts of just a couple of thousand dollars. But if you
deposit that same wad of cash into your tax account no alarm bells will be sounded.
If currently indebted the monies deposited will be used to pay off that debt. But if you
owe nothing or there is a balance remaining the amount will be placed into your tax
installment account. And it will sit there until you file your tax return or until you ask for
the money back. Then the monies will be refunded via a Government of Canada cheque
which can be deposited into any bank account no questions asked.
Now the legitimacy of those ill-gotten gains is unquestionable and they are as clean as
a whistle.

3) When a phone number cannot be located or you do not respond to phone requests for
contact the next step is to request a legal warning letter.

There are many types of letters available to the tax collector and by far the most
popular is the “contact letter”. The contact letter is a polite but useless letter when the
debtor fails to respond. If there is no response to a contact letter the tax collector must
then give you a legal warning before considering any legal action. The length of a BF for
a letter sent is set at the whim of the collector but commonly falls within the forty to sixty
day range to give you a chance to respond.
Some tax collectors will send you numerous contact letters and legal warning letters
before grudgingly deciding to take legal action. Other collectors send legal warning
letters and never see your tax account again, BF’ing it 120 days or more. In such
situations the tax debtor will need yet another warning before legal action may be taken.
Why? The department has an unwritten internal policy that legal warnings are only good
for 120 days.
As discussed early a legal warning letter is not sent via registered mail. Any letter sent
via regular surface mail may be returned unopened and even a registered letter may be
refused. If the debtor can avoid a legal warning they can avoid being subjected to legal
action. However, if the debt is excessive the tax collector may be more aggressive in
attempts to deliver the warning.
When receiving returned mail the department rarely requests new debtor addresses
from the post office. This is because the post office charges for the service. The tax

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collector would rather write off thousands of dollars than pay the forty dollars the Post
Office charges for their assistance.

4) Monitoring a previous action such as a filed Execution, a field call request, a payment
arrangement or a garnishment and BF’ing the account is also considered an action.

If it appears any type of regular payments are being made most tax collectors will BF
your tax account anywhere from six months to a year.
When waiting for field call results or a requested Execution to be received the tax
collector will just BF the account away with nary a second glance.
If an Execution is already in place the tax collector will BF the account for six months
or a year and forget about it hoping that the tax debt will take care of itself.

5) The next step to consider are any internal paper investigations left incomplete such as
requesting copies of cheques or income tax return(s).

If the tax liability can not be solved with your cooperation the tax collector by now
should have completed all internal investigations of asset leads in order to confirm any
possible avenues to legally collect the arrears. This is why all internal investigations
should be completed first. In this way collection action can keep moving forward instead
of being delayed by waiting for investigation results that should have already been
received.
As outlined previously the collector will try to obtain a copy of a payment to or from
you, either a government cheque you have cashed or personal payment cheque. These
sources help to locate a potential garnishment source.

6) If your tax debt cannot be solved amicably and attachable income sources exist the
next step is to consider a garnishment or a statutory set-off. It takes only three days
for one to be requested, printed, approved and sent.

After mailing this legal action your account is BF’ed at least two months for a
garnishment and three to four months for a set-off. This allows time for the third party to
receive the requirement, process it and begin making remittances. It takes much longer
for a Federal Department to process an attachment than it does the public sector
employer. Most tax collectors are not overly aggressive but when you are rude or
uncooperative they may send a garnishment out of a need for revenge.
Here’s a garnishment story to whet your appetite until the chapter of the same name.
A Toronto Core collector unable to obtain payment from a debtor sent a requirement to
pay to the tax debtor’s financial institution. The debtor responded by contacting the tax
collector at home late one evening and threatening harm to her and her parents if the legal
action did not cease immediately. As a result the Royal Canadian Mounted Police were
contacted.

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Canada Revenue Agence de Revenue

Agency du Canada
January 9, 2011

Royal Canadian Mounted Police

“O” Division P.O. Box 519
Adelaide P.O., 225 Jarvis Street
North York, Ontario M5C 2M3

Re: Request for Assistance in locating debtor John Doe

Last Known Address: 114 Bond Street, Richmond Hill, ON

Previous Addresses: 12 First Street, Iqualit, Nunavut

3454 Main Street, Kelowna, British Columbia
198 Lobster Crescent, Halifax, Nova Scotia

Last Known Business Connection: Amway Industries

Name: Cyril Donein

Address: 12 Yonge St., Toronto, ON

Reason for locating: Tax arrears

Information is necessary pursuant to the administration and enforcement provisions of the Income
Tax Act.

Investigating Officer may discuss matter with Collections Officer: Francis Arturro

Telephone Number: (905) 566-6617

This Department’s file does/does not indicate previous knowledge of subject on part of RCMP.

(This form has been submitted in quintuplicate as required.)

Yours truly,

Francis Arturro
Collections Officer

Toronto West Tax Services Office

P.O. Box 6000
77 City Centre Drive Local: (905) 566-6617
Mississauga ON L5A 4E9 Fax: (905) 615-2702

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The RCMP’s investigation quickly disclosed that the threatening debtor was an
underworld figure of some repute. Their advice was to immediately cease all legal action
and investigation of him. So the garnishment was released with no funds remitted and no
further actions were taken to recoup the tax liability.
This case is an extreme but it happens. Were a law-abiding Canadian such as you or I
to make such threats we would be charged to the extent that the law allows.
The attachment of funds is discussed in-depth in the garnishment chapter.

7) When the tax collector is unable to locate any avenues for legal action and/or are
unable to contact you a third party investigation is initiated.

This investigation is conducted from the desk. It includes a driver’s license search,
motor vehicle search, personal property search registration (PPSR), a Requirement for
Information, third party letters and phone calls for information.
A driver’s license search will reveal your most recent address.
The motor vehicle lets the tax collector know if you own a vehicle. The type of car or
truck you drive can be a good indicator of your income.
The PPSR informs the tax collector about any personal property (except for a home
mortgage) that you may have offered up as security for obtaining a loan or line of credit.
You can obtain one by attending your provincial or territorial Ministry of Consumer and
Corporate Affairs.
Third party letters such as to the RCMP (example shown previous page) and phone
calls, are just field calls conducted from a desktop instead of a doorstep.
The Requirement for Information is discussed in full in its own chapter.
One information tool the tax collector never uses is a Credit Bureau. This is because a
Credit Bureau enquiry leaves the name of the requesting party on file for subsequent
searchers to see. If Revenue Canada’s name were on your file it would have a detrimental
effect on your credit rating as most creditors would consider any investigation by the tax
collector to be serious.
It could also be argued that a breach of your right of confidentiality has taken place. If
Revenue Canada’s name is on your credit file it must be because you are in arrears. What
other reason could there be for the search. So a Credit Bureau is an investigation tool that
the tax collector never uses.

8) If the desk investigation does not help to collect your tax debt desperation begins to
set in and the tax collector will likely request field call to be completed.

When the tax collector is unable to contact you and/or unable to find any collection
avenues a field call may be requested. When conducting a field call the tax collector may
visit your residence or workplace, talk to your neighbors, landlord, coworkers, bosses and
tenants. They may root through your garbage and tail you as you travel through your

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daily schedule. It can take three to six months and sometimes even longer before
receiving field call results.
One particularly Randy collector, and today these types seem to be few and far
between, was so stumped by one debtor that he determined when the debtor’s garbage
day was and began picking up the debtor’s garbage before the trash collector had a
chance to. After several tries he had found bank statements, job applications and resumes
among other interesting items. So remember if you’re in debt to the CRA, make sure to
shred your correspondence and personal papers. And even if you’re not you should
anyway, you never know who is going through your garbage.
I have had many unusual experiences conducting field calls including surveillance and
death threats but my most particularly telling field call experience came as a new
employee when I was still sitting behind my desk.
As a novice collector my earliest experience with the perils of field calls occurred
when I had been on the job for less than six months. I made a recommendation for a field
call to an Athanasios (Gus) M. I suggested that the investigating officer may also wish to
investigate the client’s two business, both of which had source deductions tax debts. One
also had a corporate tax debt.
My Team Coordinator was furious. He stated that I had no business recommending a
field call on related accounts worked by other tax collectors. To spite me he moved the
debtor’s tax account from my inventory to the inventory of another collector with “more
experience handling these matters”. The end result? All four debts were eventually
submitted and approved as write-offs as was the tax liability that subsequently arose for
Athanasio’s spouse. It had only taken me a couple months on the job to pinpoint a major
operational flaw and I was severely rebuked for it.
I have also been told stories of tax collectors conducting field calls that have accepted
gifts from tax debtors yet they were never rebuked although such actions are contrary to
the department rules. I guess some tax debtors provide gifts such as tickets to
entertainment and sporting events, meals, cases of pens and foodstuffs, even flowers, in
hopes of receiving favourable treatment or at the very least getting in the tax collector’s
good books. What effect this had on the audit or on collections is hard to say but if the
gifts are accepted it could not be unfavourable.

9) When all else has failed and no other collection avenues exist the tax collector may
request certification of the debt and/or request an Execution.

An Execution will only be requested when an asset of yours can be found that holds a
reasonable amount of equity.
When the request or an Execution is approved the tax account is BF’ed for twelve to
sixteen weeks to allow Ottawa the time to obtain the Execution. In the interim no other
work is done. An Execution is most often the tax collector’s last dying stab at collecting
your tax arrears. Their issuance usually indicates a write-off to be the eventual resting
place for many tax liabilities.
But as one tax debtor (also a Member of Federal Parliament) demonstrated it was not
until after he told the tax collector that he was selling one of his properties that an

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execution was requested to protect Revenue Canada’s interest. Up until then no concerted
action had been undertaken to collect his tax arrears. Not even a garnishment to his
known employer your federal government.
Executions are discussed in full in their own chapter.

10) The final constructive action of the tax collector is to complete a writedown, a write-
off or a deferral.

When the tax collector is unable to locate any collection avenues and when they are
working overtime, deletion of part or all of your tax debt is considered. The length of the
BF does not matter as the debtor account is automatically removed from their inventory.
Write-offs and related are discussed in full in their own chapter.

11) But there is one more action a collector often opts for. And that action? Do absolutely
nothing or complete a blind BF.

The tax collector will look at your tax account and move to the next one as yours
appears to be difficult. This is not an uncommon occurrence by any stretch of the
imagination.
The tax collector may BF your account for six months if not too busy but the BF here
can be 200, 300 days or even a year. Other collectors might not BF the account at all.
They leave it sitting on their ‘Today’s BF List’ for all eternity.
When the tax collector chooses to take no constructive action towards collecting the
tax arrears you just know the debt will eventually be written off.
There are no checks and balances in the department to ensure an account is worked.
And with all the reorganizations of inventories and shuffling of employees no one seems
to care that such inaction is commonplace.

This examination of the tax collectors job, internal and external, shows that it is rarely
challenging or even time consuming. In nineteen out of twenty cases investigation and
action could be a simple straightforward process. One doesn’t have to be an accountant to
be a successful collector. Basic organization skills, some patience and a little intuition are
the best tools a collector can possess. However the department insists on requiring the tax
collector have a higher education when all that is really needed to be successful is a little
bit of elbow grease, some work ethic and a lot of common sense.

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 Major Balance Tax Debts

What you need to know

The tax collector needs to learn about you before they can collect your tax debt.
Where you earn, where you bank, what assets you possess and so forth. Those who
present this information to the tax collector on a silver platter make soft targets of
themselves and these are the ones that the tax collector holds up as an example to those
who evade or those who are considering tax evasion.
But those who make hard targets of themselves, who defy the tax collector by
avoiding contact when possible, by refusing to answer questions and by hiding their
income and assets, these are the tax stories that are quietly swept under the rug.
If you wish to make a hard target of yourself you now have the information to do so.
You now know what the tax collector sees and what information they keep on file about
you. You now know what they do with this information and what avenues their
investigations take. You now know the tax collector’s basic procedures for their
investigations and how you might take advantage of them if you so wish.
But you should also know that tax evaders are not the only impediments to tax
collection. Obviously the individual tax collector plays a part in this but there is one more
aspect that has yet to be discussed and that is the tax collector’s union. PSAC and the
UTE are silent allies to all Canadian tax debtors.
How could the tax collector’s union assist those with tax liabilities? They don’t do it
intentionally. The union’s aim is to employ as many people as possible. To further this
goal they try to limit the amount of work a tax collector completes. The collector is
supposed to work at most eight debtor accounts a day. They may choose to do an
investigation, summarize the investigation in the diary and BF the account. Or the
collector may phone the debtor, get no answer or a busy signal and BF the account for a
month. Any action completed on a tax account, not necessarily a constructive action to
collect the debt, means the collector has completed one of their eight BF’s for the day.
Even if the action duplicates a previously completed action.
When a tax collector completes more than eight accounts a day some union members
get upset. They feel that collectors should do exactly their job and no more. Otherwise
they are taking jobs or potential jobs away from others.
What are tax collector’s doing after they complete their easily worked eight accounts?
Many concentrate on their second income during office hours. In effect receiving two
salaries to complete one job. One tax collector, also a local town councilor, would spend
the department’s time organizing his political agenda and assisting his constituents.
Others moonlight in insurance or investment sales. They conduct business affairs from
their cubicle and get leads on potential sales avenues when reviewing your personal tax
account.
Many tax collectors run sports and lottery pools or sell personal products such as
Avon, Amway, and Girl Guide cookies. They spend their days walking around the office
trying to make a sale instead of working their inventory trying to resolve an account. If
these individuals collected tax arrears like they collected debts arising from those
purchasing their wares there would be few tardy tax debts.
If you spend some time at the Office of the Auditor General of Canada and use this
search page http://www.oag-bvg.gc.ca/search/oagsearch.aspx and the term “Canada

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Revenue Agency” you can read first hand the Auditor General’s personal assessment of
Revenue Canada’s collection policies and procedures.
Next is an interesting story about how diligent the employees of the Toronto West
Office are in ensuring that if they do not work uncollected tax accounts… then no one
will.
It seems that the Toronto West TSO tried to move a large number of untended tax
debtor accounts from one group of tax collectors to another. A group willing to collect
these neglected tax debts.
What happened?
A union representative published the Public Service Alliance of Canada / Union of
Taxation Employees stance in the diary of one tax account. For the many tax collectors
reading this book that account is Revenue Canada (MME) and the tax account number is
ADJ410316.
I was so intrigued that I asked a tax collector to obtain copies of the diary entries and
so can publish them word for word right here for the first time anywhere. Any emphasis
is by the original author of the piece and has been faithfully

12 Apr 95 - ZZKELLY(1262)

HAS EVERYONE SEEN THE LATEST? THE RCI (REGIONAL COLLECTION

PROJECT) IS NOW SCOOPING OUR $1350.00 & IN SOME CASES $1500.00
ACCOUNTS. PM-1’S PAY SOME ATTENTION TO WHAT IS HAPPENING! OUR
INVENTORIES ARE SLOWLY BEING REDUCED, What’s next $1750.00 to
$2000.00????. THEY ARE PAYING CR-4’S TO DO OUR WORK & ELIMINATING
PM-1 NECESSITY. LETS CONTACT UNION & RUBY HOWARD TO STOP
TAKING AWAY OUR WORKLOADS.THERE ARE TOO MANY PEOPLE’S JOBS
ON THE LINE LET’S NOT HAVE OURS INCLUDED.

12 Apr 95 - ZZCHALL(1262)

The union is looking into filing mass grievance on the issue of the CR4s upstairs. This
issue will be dealt with at the National level and as much as I would like to file the
grievances right now I have been instructed to wait for the wording of the grievance. I
understand your frustration and concern and we WILL do something about it. Grievance
wording is a science in itself and battles have been lost in the past over poor and
inaccurate wording. Have some patience, and I will be back to all the PM1s to ask you to
sign. I have been working on this since last week meeting with Dave Walsh (head of
RCI) and our case is building momentum. By the way, in case you didn’t know I am the
only Union Steward in the building so you can funnel your questions and concerns to me
for forwarding to the Local President, Mary Fenney or the Regional Vice President Gord
Hawkins.

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 Major Balance Tax Debts

13 Apr 95 – ZZCHALL(1262)

PM 1s
See Phil Sitarski to sign the mass grievance regarding the removal of YOUR workload to
a position in another bargaining unit.

PM 2s
See Brenda Bowers or me to sign the mass grievance regarding the removal of YOUR
workload to a lower grade.
THESE GRIEVANCES WILL BE PUT FORWARD ON TUESDAY, APRIL 18TH. IF
YOU HAVENT SEEN OR SIGNED THEM GET OFF THE FENCE AND GET
INVOLVED. THESE ARE YOUR JOBS.
Tell your friends in other TSO’s to do the same thing.

20 Apr 95 - ZZKELLY(1262)

PLEASE UPDATE ON THE STATUS OF THE GRIEVANCE FOR THE PM-1’S.

09 May 95 – ZZCHALL(1262)

PM1 grievance has been moved to the assistant deputy ministers desk and PSAC is
attempting to get a response as soon as possible.

The solution to this battle was to transfer the unworked tax accounts back to the
original tax collectors. So that they could remain unworked.
Those that were willing to work the debtor accounts eventually had to be let go
because there was no work available for them. As I understand the original collectors put
little effort into work the returned accounts and management decided against hiring more
collectors. There were no winners in this situation except maybe the tax debtors who
avoided payment.
When all this new information is combined together you can understand why more
and more Canadians are becoming tax debtors. Outside of field calls and phone calls,
letters and threats of legal actions the tax collector has considerably less bite than they
did as recently as fifteen years ago.
They have only themselves to blame for this.
And then when you further consider that the tax collector is only supposed to work
eight tax accounts a day (thanks to a strong union that bullied weak management into

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 Major Balance Tax Debts

such an absurd concession). And you combine this with the added burdens of spineless
tax managers who choose the path of least resistance in order to do what is easy instead
of what is right. And add in a deplorable union that exists only for the sake of ensuring
that people have jobs and no more. There can be no wonder why the tax collector can
do… or don’t do… what they want. At their leisure.
The inmates are running the asylum.
Which is why tax debtors who make hard targets of themselves often escape
unscathed and richer for it while those who paint a big bulls eye on their back turn into
those tax targets that we occasionally chance to hear about through the grapevine. But
such targets are becoming increasingly scarce.

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 The Garnishment

10

Probably the best known of the tax collector’s collection tools is the garnishment. But its
use or mere mention should not cause Canadians to cringe.
Why not?
Because some tax debtors have perfected maneuvers that allow them to protect their
income and assets from the tax collector’s garnishment.
The CRA has two means by which they can attach your income without seeking a
court’s approval, the garnishment and the Statutory Set-off notice. Each is a legal
summons or warning that a debtor’s income is about to be attached in order to satisfy a
tax debt. Both are issued to a third party when the tax collector seeks to seize or intercept
monies payable, monies to be loaned or monies to be advanced by a third party to you or
on your behalf. A Statutory Set-off notice however can only be used when the third party
is the Federal Crown. In all other instances a garnishment is used.
In fact the garnishment is the most common legal action undertaken by the tax
collector. Each year the tax collector issues tens of thousands of requirements to pay. No
figures are kept on just how many are issued but suffice to say a paper mountain of
garnishments is being issued to attack an Everest of tax debt.
Legal collection action, a garnishment or an Execution, is only supposed to be
undertaken when the tax collector cannot reach a payment arrangement with you, you
have been granted additional time to make an arrangement but since failed to contact the
TSO, you fail to return a phone message left for you and it is reasonable to expect the
message was received, or you have not responded to a letter requesting contact.
Of course a legal warning is supposed be issued and received by you before any legal
action can be undertaken. However, if collection of your tax debt is in jeopardy the tax
collector, with the Court’s agreement, may issue a garnishment before the Income Tax
Act’s mandated ninety day collection restriction period has expired and without first
warning you. Such action is usually considered only on very large tax debts.
One point touched on earlier in the chapter titled ‘Collection Restrictions and Legal
Warnings’ was the point that a legal warning, whether verbal or written, is only good for
120 days from the date of issue. I am discussing it here again because it is very relevant
to the event that is the catalyst for this and the following chapter, legal action.

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 The Garnishment

The Taxation Operations Manual Twenty-two, section 2253.4(2)(B) clearly states:

“Where there has been no contact with the taxpayer [you] within 120 days
from the date of the last contact, garnishment action will not be taken until
such time as the taxpayer is contacted again by telephone or letter and
given an opportunity to pay voluntarily. Exceptions can be made where
further delays could jeopardize the prompt recovery of the arrears or the
history of the account indicates that additional attempts at contact would
prove unsuccessful.”

Garnishment action also includes a Statutory Set-off notice.

Any legal actions must be timely with the legal warning given. Within the one
hundred and twenty-day period set out. If the legal action lags the legal warning than the
affected party may have a legal recourse.
Also of note is the fact that attachments to income, especially the garnishment, are
only supposed to be used against current assets, employment income, accounts
receivable, bank accounts and the like. But as you will see the tax collector and some
third parties ignore this and use a garnishment carte blanche to seize what they wish.
Much in the manner an Execution or Writ is used.
The Statutory set-off notice will be first briefly discussed before an in-depth look at the
garnishment is undertaken.

The statutory set-off notice

The Statutory set-off is also known to the tax collector as a ‘set-off’ or a ‘T1000A’
where T1000A is the number of the government form that the document is catalogued as.
The set-off is used as a stoppage of a specified sum or percentage from a Federal
Crown paid income source to the tax debtor. A set-off is not used if the third party is a
Crown Corporation unless the Crown Corporation specifically requests to be served with
a set-off.
In situations where the tax debtor is not employed by but will be in receipt of monies
from the Federal Crown a statutory set-off is used to attach funds such as government
pensions, Old Age Security (OAS) and Canada Pension Plan (CPP) payments among
many other types of payments.
The latter two are usually attached only when another source of income cannot be
found and when attachment of some of these monies will not cause undue hardship to the
debtor. Attachment of these assets used to be considered only as a last resort but in recent
years, due to the increasing number of tax debtors, it has become quite common.
Fortunately the tax collector will never attach a War Veterans Allowance as they are
issued based on need. But if the debtor does receive pension income from the Department
of Veterans Affairs (DVA) and this money is not supplemented by an allowance then the
monies will be subjected to a set-off if no other source of income is available to collect
the tax liability.

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 The Garnishment

Canada Revenue Agence du Revenu Date Office Code

Agency du Canada 1263

STATUTORY SET-OFF Toronto North Tax Services Office

Contact Telephone Ext.

Mary Collector (905)566-6583
Tax Debtor:
To:

Department of Veterans Affairs

Income Security Programs
Bill Melater War Veterans Allowance
117 College Street Post Office Box xxxx
Victoria Beach BC V9K 3H8 Ottawa ON K1A 1A1

PURSUANT to one or more of the following acts, the undersigned hereby requires that $38380.77 be
retained by way of deduction or set-off from such amounts as may be or may become payable by you to the
taxpayer whose name appears above, at the rate of an amount each month equal to 95 per centum of each
amount which may be or may become payable to the said taxpayer, in respect of the transaction(s)
detailed below plus any other amounts that may be or may become payable to the taxpayer, and where the
taxpayer is an employee, any amount payable upon termination of employment to such taxpayer by Her
Majesty in Right of Canada until such time as this requirement is withdrawn or the amount owed by the
taxpayer has been satisfied.

THIS REQUIREMENT has been executed under one or more of the following Acts:
the Income Tax Act, the Canada Pension Plan, the Unemployment Insurance Act, the Petroleum and Gas
Revenue Tax Act, the Employment Insurance Act.

Requisition for payment is to be forwarded monthly in accordance with interdepartmental settlement

procedures and must be identified with Intra Number, Creditor Account Code, the taxpayer’s name,
address, Social Insurance Number, where applicable and Account Number.

Director,
Vancouver Island Tax Services Office

Intra Number Creditor Account Code Social Insurance Number DETAILS OF CROWN DEBT
1224 9501 Contract Number Invoice number
Employee No. (if applicable)
Account Number
Type of service rendered or goods supplied
Other
Name of department receiving goods/services
(if other than paying department)

S’il vous faut la version francaise de la presente lettre, vieuillez appeler l’agent mentionne ci-dessus.
134 ©Alan Baggett
 The Garnishment

When the tax collector does decide to attach a veteran’s pension they will always attach
the following explanatory note to the DVA excusing their actions:

“In our opinion, based on the information in our possession, the

requirements of the attached Set-Off Notice should not cause undue
hardship to the pensioner and should not force the pensioner to apply for a
War Veterans Allowance.”

However no such proviso is offered when the tax collector chooses to seize your OAS
or CPP income.
In recent years the tax collector has also begun capturing income derived from
Employment Insurance (EI) payments. In the past the attachment of these types of monies
was also considered taboo, but no longer.
At the present your personal financial situation is supposed to be the determining
factor when faced with a Statutory Set-off Notice. If the tax collector is taking your
pension, or any monies for that matter, and you can prove that this action is causing you
financial hardship then you can have the seizure stopped. When sufficient proof is given
quite often your tax debt can also be written off.
If the tax collector refuses to listen to your pleas do not be afraid to speak to the TSO
Director, the Department or Agency paying out the income or your Member of
Parliament (see the chapter ‘Filing a Ministerial Complaint’ for full details) or the Office
of the Taxpayers’ Ombudsman.
But, if you receive your salary, wages or other income from the federal crown proving
hardship is being caused by the set-off is a much more difficult task.
From this point forward the focus will be on the garnishment at it is the most
commonly used attachment to income.

The requirement to pay

To the tax collector the garnishment is also known as a requirement-to-pay, a

garnishee, an attachment to income or a T1118 where T1118 is the form number the
garnishment is printed on. Whatever the name a garnishment is applicable to any amount
payable to a tax debtor whether it is for providing property or services or payment for
remuneration or any other reason.
Any legal action can only be initiated after the ninety day collection restrictions have
expired and a legal warning has been received. The one exception is for instances where
the Jeopardy provisions of the Income Tax Act have been invoked or when the
outstanding tax debt is a trust amount such as employer source deductions or GST
monies. In instances involving trust amounts there is no collection restriction period and
legal action can be taken concurrent with the mailing of the Notice of Assessment.

135 ©Alan Baggett

 The Garnishment

Canada Revenue Agence du Revenu Date Office Code

Agency du Canada 1263

REQUIREMENT TO PAY Toronto North Tax Services Office

DEMANDE FORMELLE DE PAIEMENT
Contact Telephone Ext.
Mary Collector (905)566-6583

Tax Debtor: To:

Royal Bank of Canada

Bill Melater Attn: Pensions Manager
117 College Street Post Office Box ####
Tannis Beach, ON L7R 3H8 Toronto ON M2C 1E7

Account Number
Numero de compte 123456789 RI

You are hereby required to pay to the receiver general on Il est exige par les presentes que vous versiez au Receveur general
account of the above-named tax debtor’s liability under one or au titre de l’obligation du debiteur fiscal susmentionne, en vertu d’une
more of the Acts cited below, ou de plusiers des lois mentionnees ci-apres,

(1) forthwith, the moneys otherwise and immediately payable to (1) immediatement, les sommes autrement et alors payables au
the tax debtor which you are liable to pay, Debiteur fiscal que vous etes tenu de payer,

(2) all other moneys otherwise payable to the tax debtor which (2) toutes les autres sommes autrement payables au debiteur
you will be, within one year, liable to pay, as and when the fiscal que vous serez tenu de payer dans les douze mois, au fur
moneys become payable, et a mesure que ces sommes deviendront payables,

(3) where the moneys referred to in (1) and (2) include interest, (3) lorsque les sommes don’t il est question en (1) et (2)
rent, remuneration, a dividend, an annuity or other periodic comprennent des interets, un loyer, une remuneration, un
payment, all such payments to be made by you to the tax dividende, une rente ou un autre paiement periodique, tous ces
debtor (at any time during or after the one year period) until paiements que vous devez faire au debiteur fiscal (a toute
the liability is satisfied, and echeance pendant ou apres le delai de douze mois) jusqu’a
extinction de l’obligation, et

(4) if the box marked on the right is X-ed, the moneys that within 90 days (4) si la case a gauche est cochee, les sommes qu’autrement
you would otherwise loan or advance to, or pay on behalf dans les 90 jours, vous preteriez ou avanceriez au debiteur
of the tax debtor, and, if you are a bank, credit union, trust fiscal ou payeriez en som nom, et, si vous etes une banque, une
company or other similar person, pay in respect of a caisse de credit, une compagnie de fiducie ou une autre
negotiable instrument issued by the tax debtor*, personne semblable, vous payriez a l’egard d’un effet
negociable emis par le debiteur fiscal*,
but do not pay hereunder more than $44,791.22 (the
maximum payable), at the rate of 95% out of each mais vous n’avez pas a verser plus que 44 791,22$ (le
period payment, loan or advance. maximum payable), au taux de 95% de chaque paiment
periodique, pret ou avance.

Please make cheques or money orders payable to the Receiver Veuillez etablir les cheques ou mandats a l’ordre du Receveur
General and remit them either with one of the attached Third general et les transmettre dans les enveloppes-reponses
Party Remittance Forms or with other identification providing the ci-incluses avec un des exemplaires ci-joints de la formule de
Tax debtor’s name, address and account number as well as the versement de tiers ou avec une autre piece qui indique l’identie
remitter’s name, in the enclosed addressed envelopes. du debiteur fiscal, son addresse et son numero de compte ainsi
que le nom du payeur.

Failure to pay the Receiver General the amounts required above Le defaut de verser au Receveur general les sommes exigees
renders you personally liable to pay those amounts to Her ci-dessus vous rend personnellement responsible du apiment
Majesty. De ces sommes a Sa Majeste.

This requirement has been executed under one or more of the La presente demande formelle a ete etablie en vertu d’une ou de
following acts (see reverse): plusieurs des lois suivantes (voir au verso):

Director, Director’
Toronto North Tax Services Office Bureau des services fiscaux de Toronto Nord

* (4) does not apply to a bank, credit union, trust company or other *(4) ne s’applique a une banque, une caisse de credit, une
similar person unless the tax debtor is indebted to it and has granted compagnie de fiducie ou une autre personne semblable qui se le
security in respect of the indebtedness. Debiteur fiscal est endette envers elle et lui a formi une garanti a
l’egard de la dette.

136 ©Alan Baggett

 The Garnishment

A garnishment is probably the most cost-effective method of collection available to

the tax collector. However the tax collector is supposed be careful when issuing one
because a garnishment’s issuance discloses the existence of your tax debt to a third party.
It is indefensible for Revenue Canada to issue a garnishment and reveal the existence of
your tax debt to any other unless the tax collector knows or has a very good reason to
believe that a third party is or will be about to make a payment to you.
Yet very often the CRA will ignore this proviso and issue them anyway. Hoping to
publicly embarrass the debtor into paying when all else has failed.
Subsections 224(1), 224(1.1) and 224(3) of the Income Tax Act give the tax collector
the right to issue a garnishment as do the corresponding provincial Income Tax Acts.
Using the various Subsections the Minister of Revenue may require a third party to:

i. pay immediately any monies payable to the tax debtor,

ii. pay any monies that become payable to the tax debtor for a period of ninety days
from the date the Requirement to Pay is issued,
iii. require financial institutions to pay any funds that will be loaned, advanced to or
paid on behalf of the tax debtor for a period of ninety days from the date the
Requirement to Pay is issued,
iv. require others than financial institutions to pay any funds that will be loaned, or
advanced on behalf of the debtor if: a) the debtor is or will be within ninety days
employed or engaged in providing services or property to the third party or b) the
payer is a corporation not dealing at arm’s length with the debtor.
v. moneys such as interest, rent, dividends, remuneration, annuities or other periodic
payments. For these types of payments the garnishment will last the life of the debt.

An attachment of income sent to your employer will stay in place until your tax debt is
paid in full, until you quit your job or until the tax collector decides to remove it.
When sent to a financial institution an attachment is good for one year from the date
issued except where an advance, loan or line of credit is targeted. In these instances the
garnishment is only good for ninety days.
If you want to know if the requirement sent to your financial institution is good for
one year or ninety days read your notice. Find category 4 and look at the box
immediately to the right of it. If this box is marked with an ‘X’ than this garnishment is
only good for ninety days from the date stamped in the date box found in the upper right-
hand corner. This box will normally only be activated when your tax debt is substantial,
over $5,000, and recovery cannot be made from other assets.
The tax collector will only ‘X the box’ when the debtor is or will be within ninety
days employed or engaged in providing services or property to the third party or the
payer is a corporation not dealing at arm’s length with the debtor. If either of these two
conditions is not met the garnishment will not normally be issued unless it is suspected
within the next ninety days that the debtor will borrow further and provide a security to
the lending institution.
Any payment restrictions become legally effective the day the garnishment is issued
plus a full year/full ninety days that follow that date (depending on the options the tax

137 ©Alan Baggett

 The Garnishment

collector has chosen. However, the requirement does not become operative until such
time as it reaches the third party.
Since garnishments are most often sent via regular surface mail the tax collector trusts
the third party to immediately begin making remittances. But in all honesty unless the
garnishment is hand delivered or sent via registered mail the tax collector has no way of
knowing if the document has been received or not.
Now unlike in the private sector where a creditor must go before a Court and receive
judicial approval before obtaining a garnishment the requesting process for the tax
collector is much simpler. All they need do is complete a few computer keystrokes,
rubber stamp the TSO Director’s signature on the requirement and place it in the mail.
The same day the garnishment can be off and winging its way to the third party. No one
else need know the deed was done.
Proper procedure states that only a Team Coordinator is to approve a garnishment and
Taxation Operation Manual 2253.55(A) confirms that: “Only personnel authorized by the
Director-Taxation may execute a Requirement by affixing a rubber stamp facsimile of the
signature of the Director-Taxation.” But in actual practice any tax collector can print and
approve a requirement to pay. Without the concurrence of any other Revenue Canada tax
collector or manager.
The letter found on the two pages immediately following is the authorization provided
that allows the tax collector to request, print and approve a garnishment. In fact it is the
only authorization that they need. But still it is the norm for any tax collector to approve a
garnishment whether or not they have this letter and their TSO Director’s approval to do
so. After requesting the garnishment they will take the first director’s facsimile signature
stamp they can find, stamp their garnishment and send it out. It certainly beats going to a
courtroom and requesting approval from a judge.
When a requirement to pay is to be issued by a private creditor they must first obtain a
certificate. The certificate means that the court agrees that the amount to be collected is
due and payable. Only then can a garnishment be used to legally attach income. It is a
long, slow and expensive process for the private sector creditor. If a private sector
creditor fails to obtain a certificate and attempt to issue a requirement to pay it holds no
force. Any third party would be remiss in honouring a garnishment issued in such a
manner.
But the CRA is not forced to operate this way. They do not obtain a certificate when
issuing a demand to pay nor do they request or even need a court’s approval. Why do
they operate in this manner?
When a garnishment is issued with the court’s concurrence the debtor named on the
requirement to pay automatically receives thirty days from which either they or the third
party received the document to challenge its issue as determined by the Federal Court
Act. The court may also allow an extension to this thirty-day challenge period at their
discretion. The tax collector purposefully forgoes this procedure in order to remove an
avenue by which you can challenge the legality of your debt. It makes the tax collector’s
job much easier. They do not care if the outstanding debt is valid they just care that it is
removed from their books.

138 ©Alan Baggett

 The Garnishment

REVENUE CANADA, CUSTOMS, EXCISE AND TAXATION REVENU CANADA, ACCISE, DOUANES ET IMPOT
MEMORANDUM NOTE DE SERVICE

Date May 1, 1996

____ ___
| |
To TORONTO WEST TAX SERVICES FROM TORONTO WEST TAX SERVICES
A Revenue Collections Division DE Director-Taxation
ALAN BAGGETT John Jackson
Team Leader (905) 566-6165
|______________________________________|
FILE CAJ 1268-2
DOSSIER

SUBJECT: ISSUE OF REQUIREMENTS TO PAY UNDER

OBJET: SECTION 224 OF THE INCOME TAX ACT, S317.(1)ETA

Because of the functions of the undersigned are so varied, in the interest of achieving efficiency in
transactions of public business, it is administratively and operationally necessary and you are hereby
instructed to issue requirements under Section 224 of the Income Tax Act, Section 317.(1) ETA and the
corresponding provisions of the Act and Ordinance cited on Form “Requirement to Pay” as may be
necessary to ensure the efficient collection and to prevent losses of public money.

The carrying out of such instruction includes the duty of satisfying yourself that:

(a) It is known or suspected that a person is or is about to become indebted or liable to make a payment to
a taxpayer who is liable to Her Majesty the Queen under one or more of the Acts or Ordinance cited on
Form, “Requirement to Pay”;

(b) A Requirement to Pay must be issued;

(c) The payment requirements are appropriate;

(d) The Requirement is complete and accurate

The Requirement may be executed by affixing a rubber stamp facsimile of my signature which I have
assigned to you for this purpose.

In addition, the following must be observed with respect to the Director’s Signature Stamp provided for
you:

1. The Stamp must be secured in a safe place, such as a locked drawer or cabinet, when not in use.

2. Should the stamp produce an unclear or damaged impression of the Director’s signature, it is to be
returned to the Director’s office for replacement.

3. Should you leave your present position, the Stamp must be returned to the Director’s office. The Stamp
will be reassigned, and a letter of authorization prepared for the new incumbent.

…./2

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 The Garnishment

Memorandum to Alan Baggett re Director’s Stamp

Page 2
May 1 1996

The Stamp assigned to you is identified as Stamp #20 with the number appearing on the face of the Stamp.

Would you please sign this memo and the attached copy in the space provided to indicate you have
received the Stamp and acknowledge instructions regarding restricted use of this Stamp as indicated. The
original memo is to be retained in the Director’s office for control purposes, while the copy is for your
retention and reference.

John Jackson
Director-Taxation
Toronto West Tax Services Office

Attach.

I hereby acknowledge receipt of Stamp #20

noted above, and instructions regarding its
restricted use.

___________________________________
Date

___________________________________
Signature

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 The Garnishment

It is unfair that the private sector collector needs the court’s concurrence before they
can issue a requirement while the tax collector can issue one when the mood strikes them.
As a result the tax collector can abuse their free reign and issue a garnishment as a tool of
harassment and embarrassment when actual tax collection seems unlikely.
But isn’t a garnishment used in this manner a breach of your confidentiality?
When the tax collector issues a garnishment it is revealing the existence of your tax
liability to a third party, which is inexcusable, unless the requirement results in recovery
of all or part of the arrears. There must be knowledge or a firm reason to believe that the
third party is or is about to become liable to make a payment to you before a garnishment
is issued. But this rule is not regularly followed.
I know from the anecdotes of the many tax collectors that I have worked with and
spoken to that it is not uncommon for a garnishment to be returned immediately and
unfulfilled. Why do they issue the garnishment then? Because many tax collectors hope
that if a garnishment does not collect the tax arrears than the embarrassment of legal
action combined with the knowledge that others are aware of your personal financial
woes will force you to pay up. This practice is a breach of a tax debtor’s confidentiality.
My feeling is that if a garnishment is issued and does not collect the arrears it gives
the debtor more bravado and reduces the chances of collecting their current or future tax
liabilities.
Does the tax collector always issue a garnishment when taxes remain unpaid? No,
they do not. Some Canadian tax debtors are given special treatment like the heavily tax
indebted Member of Parliament (noted in the following chapter). He made few payments
towards his arrears and while a clear and obvious source of income existed here yet it was
never attached. But he’s not the only one to receive such privileges. Of course such lax
procedures in so serious a legal situation as issuing a requirement to pay can cause
problems.
This next story came from an employee working in Revenue Canada’s Headquarters.
He told me that it was the tax collector’s garnishment that finally put the Ottawa Rough
Riders out of their on and off the field miseries.
Because the football team had been in dire financial straits for several years the local
TSO had an unwritten policy in place concerning the team. No legal action was to be
taken to collect tax arrears because it might put the team out of business. The department
did not want to be responsible for causing hundreds of people to lose their job or robbing
the Canadian Football League of a much needed franchise so they accepted any
reasonable repayment plan offered. Of course the team had no idea such a policy existed.
Unfortunately for the team their tax account fell into the hands of a gung-ho collector
who was unaware of the TSO policy so he quickly sent a garnishment to the teams bank.
Maybe he thought he would be a hero by collecting the tax debt so quickly. When the
requirement to pay reached the team’s financial institution apparently it caused a loan to
be called which the team could not meet
The department could not remove the garnishment once sent without a good reason so
the football team was forced into bankruptcy ending any future Grey Cup aspirations.
Now as this particular story is based in part on hearsay I do not know if it is one
hundred percent accurate but the Canadian Football League no longer has a franchise in
Ottawa so the rest you will have to decide for yourself.

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 The Garnishment

What types of income can a requirement-to-pay attach? What follows is a partial list:

i. Any type of employment income (T4, sales, commission, advances etc.)

ii. Rental income (but not 100% because then the Department would legally be
considered the landlord)
iii. Alimony payments not related to child support
iv. Registered Income Funds (RIF)
v. Privately administered pensions
vi. Interest or dividend income
vii. Shareholder loans
viii. Ontario Health Insurance Payments (OHIP)
ix. Legal aid billings
x. Bank accounts and lines of credit
xi. Account receivables

The tax collector can intercept part or all of almost any type of payment so long as
they know who the payer or third party is.
The astute reader will have noticed that the Registered Savings Plans (RSP) is
nowhere to be found on this list. This is because a requirement is only supposed to freeze
a Registered Savings Plan and stop withdrawals from being made. To seize an RSP the
tax collector is supposed to certify the tax debt and obtain an Execution and then a
Garnishee Order to retrieve the savings plan.
A Garnishee Order is an Order from the Court requiring a third party who owes
money to a judgement debtor (tax debtor) to pay the money and so satisfy the judgement
(tax debt) and judgement creditor (the tax collector).
The tax collector routinely jumps around these laws and most financial institutions are
no better, ignoring the rules and forwarding any monies directly to Revenue Canada. But
not before sometimes helping themselves to some of your RSP money.
When the tax collector attempts to seize your RSP and you also have some sort of
debt with that financial institution the institution will claim the right to offset their debt
using your RSP. Legally this is incorrect because an RSP cannot be used as collateral
under any circumstance even for a demand loan.
The effect of the assignment of an RSP is to immediately negate the RSP features of
any contract. This means that the RSP has been realized on and that withholding tax
should be payable immediately. However the tax collector will never fight the financial
institution that acts so. They let them take what they want and hope that something is left
over for them.
The seizure of an RSP brings to the fore an important question. Can the tax collector
attach/seize an asset which you have no intention of using until the age of sixty-five or
later? It is not a current asset and if there exists no intent of using your RSP in the
present.
Most often taxpayers and tax debtors will not challenge the tax collector because they
are afraid to do so, they are embarrassed, they are not aware of their rights, they cannot
afford to or they are afraid of some future wrathful retribution from Revenue Canada.

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 The Garnishment

However one who did chose to challenge the tax collector was the Maritime Life
Assurance Company vs. Her Majesty the Queen, June 7th, 1996. This case involved the
cash value of certain insurance policies available to satisfy a requirement-to-pay issued
under Subsection 224(1) of the Income Tax Act.
The tax collector issued multiple requirements-to-pay to attach and freeze the assets of
the tax debtors held by Maritime Life Assurance Company. There were two life insurance
policies in question. They were registered as RSP’s and each contained the clause, “The
right to surrender for cash value may not be exercised,” meaning the earliest the RSP’s
could be cashed was their respective maturity dates of July 22, 2000 and December 31,
2006 respectively for the debtor clients.
Maritime Life was brave enough to challenge the tax collector’s seizure of the
policies/RSP’s stating that:

“At the present time, we are not paying any funds out of this policy.
However, if the policyowner elects a withdrawal of funds, we will
advise the Minister accordingly before paying the proceeds”.

The court agreed with Maritime’s decision stating that the policy, “Is payable when a
claimant is in a position at law to enforce payment”.
Even though the tax collector’s representation argued that in the past Maritime Life
has granted the policyholder the cash surrender value despite the endorsement clause
being attached. The judge disagreed ruling that this would have to be requested by the
policyholder and doing so on their behalf may be disadvantageous to the policyholder
and the beneficiary depending on the financial market.
This case has several interesting interpretations that prove particularly troubling for
Revenue Canada. Not only does it mean a requirement to pay can be fought and beat in
respect of RSP’s but also in respect of bank accounts.
If garnishment of an RSP is only effective when a withdrawal is to be made than in
theory the same rule could be applied to a bank account. A requirement-to-pay would do
nothing more than “freeze” the bank account. If the owner and debtor were to withdraw
any funds a garnishment should only capture the amount withdrawn, nothing to the
excess. To seize the entire contents of a bank account an Execution and Garnishee Order
would have to be requested. All that is needed now is a taxpayer to challenge a
requirement-to-pay and a third party who is open to the tax debtor’s cause.
The worst thing about the snatching of your RSP, your future, is that it usually means
as additional tax debt for yourself depending on your current income.
And what happened to the tax liabilities of the husband and wife team with RSP’s at
the Maritime Life Assurance Company? To date Revenue Canada has written off one and
the other has been written down to what is perceived to be the eventual collectible
amount.
There are ways of keeping your RSP legally and out of the hands of the tax collector.
In some provinces Provincial Legislation exempts certain life insurance RSP’s from
seizure.
When?
In cases where the tax debtor’s spouse or child is the beneficiary and the tax debtor
needs the beneficiaries’ concurrence before making a change to the life insurance policy

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holding the RSP. Section 2253.32(6)(B) of the Taxation Operation Manual confirms this
protection. You should check with your province to see what your local rules are but I am
unaware of the tax collector realizing on an RSP when held in this manner.
What sort of payments can the department never attach via a garnishment?
The list is short but to date it stands as:

i. Income earned by a seaman or apprentice under the Canada Shipping Act 1970
ii. Income paid to a Native Canadian by an enterprise which is domiciled on a
reservation
iii. Accounts receivable and assets of a partnership to satisfy a personal tax liability of
one of the partners
iv. Income earned by a Canadian citizen employed by a foreign government
v. Welfare payments
vi. Amounts payable to a spouse in the form of alimony or maintenance payments for
the support of dependent children in accordance with a separation or divorce decree
vii. Workman’s Compensation benefits

The tax collector can require a percentage of any other type of payment be intercepted
and forwarded.
The unwritten rule within the CRA is that wages be subjected to garnishment action
before attempting a bank garnishment. This is by the reasoning that a bank garnishment
might cause hardship by capturing rent or grocery monies. But in fact most tax collector’s
prefer to avoid confrontations so they prefer to attach a bank account first in hopes that
the tax debt will be paid off in one shot and they’ll never be forced to deal with you.
CRA policy as per Taxation Operations Manual (TOM) 2253.4(18) is to follow
provincial laws with respect to amounts exempt from seizure and recognize provincial
exemptions in determining the amount of the required deductions from a tax debtor.
The garnishment’s terms are supposed to be realistic, based on your ability to pay. The
tax collector is to consider that you are able to meet all reasonable expenditures for food
and shelter, essentials for your family and necessary expenses for your job or the
operation of your business.
In Ontario, where my experiences stem from, the minimum garnishment percentage is
set at twenty percent of net wages after statutory deductions but most Ontario TSO’s
regularly ignore these guidelines and take a minimum of thirty percent. Not because the
situation warrants but because the tax collector wants the debt to be paid off quicker. It is
possible and I have seen debtor income sources attached as high as one hundred percent.
Subsection 153(1.1) of the Income Tax Act states:

“Where the Minister is satisfied that the deducting or withholding of the

amount otherwise required to be deducted or withheld under subsection
(1) from a payment would cause undue hardship, he may determine a
lesser amount and that amount shall be deemed to be the amount
determined under that subsection as the amount to be deducted or withheld
from that payment.

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 The Garnishment

If you currently or ever are subject to a garnishment contact your tax collector and see
if it is possible to negotiate a reduction in the percentage of your wages they capture. If
they refuse to even consider your request I would speak with the TSO director or your
Member of Parliament. Do not let the garnishment of your wages make welfare look like
an attractive alternative. Speak up.
Finally, and maybe most importantly for those who have been subjected to the tax
collector’s garnishment, have you ever wondered why you get your Notice of
Garnishment, only after the asset has been frozen? Probably not.
There are three copies to the garnishment, the tax debtor’s copy, the file copy and the
third party copy (for the employer, bank etc.) The date on a requirement is hand-stamped
on by the tax collector and forwarded to the mailroom for delivery. The mailroom sends
the garnishment to the third party on the day that it has been dated but holds your copy
for three to five days after the mailing of the garnishment.
Now according to TOM 2253.55(3)(C) “The debtor’s copy [your copy] will normally
be mailed the same day the Requirement is issued,” but this is qualified by a note stating
that, “The taxpayer’s copy need not be mailed nor the taxpayer contacted if in the opinion
of the Chief of Collections [now the Assistant Director of Collections] such action may
render the Requirement to Pay ineffective.”
This argument is used as an excuse to send out stale dated mail in all instances where
Revenue Canada issues garnishments. One hundred percent of the time. Without
exception. Whether any such danger of loss exists or not.

Non-compliance with a garnishment

When a third party is to remit funds to the department but fails to do so they can be
held liable to the extent of the amount of money that they should have remitted under
subsections 224(1), 224(1.1) or 224(3) of the Income Tax Act.
But, in actual practice, unless the unremitted amounts total in excess of $20,000 the
tax collector rarely enforces the third party to pay.
As an example let’s assume that you have a tax debt of $15,000 and that you net $500
a week after deductions. Not a bad income. If the tax collector were to take $100 a week
from your salary and put it towards your tax debt it would take 150 weeks to pay off your
tax debt. And I am not even considering interest charges. It would take about a year of
non-compliance for the third party’s debt to reach $5000 and two years to reach $10,000.
To make non-compliance cost effective the tax collector usually must wait a year or
more before they can take any action against the employer. They have to wait while the
crime unfolds before them just so they can gather the evidence. The tax collector’s time
costs money, their legal representation costs money so the non-compliance amount has to
be reasonably high before it is worth their while to prosecute.
But the catch twenty-two is that those of us with a T4 employer have tax deducted
from our income so any tax debt we accumulate is usually much less than $20,000. This
means it is rare for the tax collector to go after a T4 employer for non-compliance
because it just costs too much.
Those with tax debts in excess of $20,000, more often than not, are the self-employed.
They run their own business. When a garnishment arrives their business is already in dire
straits or else they would be paying their taxes. By the time non-compliance can be
145 ©Alan Baggett
 The Garnishment

considered it is too late. The company is in no position to pay. Once again the
garnishment has been defeated and the tax collector comes away empty handed.
Non-compliance is most likely to occur where the third party, the employer, is a mom
and pop operation or the debtor is a close acquaintance of the third party.
Refusing to prosecute third parties for failure to remit on a garnishment sets a bad
precedent but because of the time and expense involved recovering a “trivial” amount of
monies such abuse is acknowledged but allowed to continue.
Oftentimes, upon receiving a notice of garnishment, the debtor/employee will
immediately quit and their employer will pay them their last wages instead of sending
one hundred percent of all monies owed to the debtor on termination to Revenue Canada.
Once again the tax collector just chalks this up as a loss and continues no further in
attempting to gain the monies from the third party although legally entitled to do so.
Financial institutions are rarely non-compliant. Regardless of the amounts involved. If
the bank refuses to comply their customer/debtor will remove the money and put it in a
mattress or even worse will deposit it with a competing financial institution so they remit.
And lose their customer in the process.

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 The Garnishment

Canada Revenue Agence du Revenu

Agency du Canada
March 12, 2011

Attn: Gino G’aguanno

Mom and Pop Store Ltd.
1001 Yonge Street
Blankly, Ontario L5A 4E1

Dear Madam:

Re: Requirement to Pay Dated September 11th, 2001 in the name of:
Jane Doe, Suite 500-5001 Yonge Street, North York, Ontario M5A 4E1

A recent review of our records indicates that you have failed to comply with the
Requirements contained in the above captioned Requirement to Pay. Subsection 224 of
the Income Tax Act renders you liable for the amount that you should have been remitted
and, pursuant to the provisions of subsection 224(4.1), we are considering assessing you
in the amount of $31,116.61.

In order to comply with the Requirement to Pay and avoid assessment, please forward
payment forthwith to the Receiver General of Canada in the amount of $31,116.61.

If you feel that you are not liable, please submit the facts to this effect and forward to this
office within the next 30 days for further consideration. If you have any questions or wish
to discuss the matter further please contact Scarol Chew of the Collections Section at
(905) 566-6617.

Please note that failure on your part to pay or make representation may result in an
assessment being issued without further notice.

Yours truly,

Carol Chew
Collections Officer

Toronto West Tax Services Office

P.O. Box 6000
77 City Centre Drive Local: (905) 566-6617
Mississauga ON L5A 4E9 Fax: (905) 615-2702

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 The Garnishment

What you need to know

How have some Canadians skirted around attachments to their income?

The most common method is to plead a sob story to your tax collector. A sob story is a
real or fictitious tale of unbearable plights designed to make the tax collector take it easy
on you. Many tax collectors keep their job for the pay and security but intensely dislike
their work. As a result some tax collectors are easy targets for the sob story.
The tax collector sitting kitty corner to me at the Toronto North Office admitted that
she once released a bank garnishment on a tax debtor with a $14,000+ tax liability after
hearing his sob story. She agreed to accept $200 a month as payment and had
immediately released the garnishment. Days later the bank’s manager called up and asked
why the garnishment had been released. He had been prepared to remit the full $14,000.
He then advised that as soon as the garnishment had been released the debtor had cleaned
out his bank account. Closed it permanently.
And you can probably guess what happened.
Revenue Canada never received any payments towards the long overdue tax arrears
and the tax assessments were, eventually, written off as uncollectible.
In the pre Perrin Beatty era once a garnishment was sent it would never be withdrawn
unless you paid your tax balance in full. In the post Perrin Beatty era garnishments may
be released at the first sign of a complaint or when any sort of repayment schedule is
offered. No matter how unsatisfactory.
Now for a choice bit of information that few individuals outside of tax collectors are
privy to. Bank accounts that are held jointly or in more than one name (or any other
similar asset for that matter, like a house) can not be seized by the tax collector.
As a result many savvy tax debtors have begun to place the name of their spouse, a
relative, even children on a bank account with their name to ensure the account is held
jointly and therefore thwart seizure action by the department. I have had many a case
where the debtor had a joint bank account and the bank refused to remit the funds.
But I came up with this solution. At least I thought I did. I sent a letter to the bank
refusing to remit the funds and in the letter stated,

“Although the bank account is held jointly, in situations where the funds
are deposited by both signatories the Department is entitled to those funds
contributed by the tax debtor. Until such time as it can be determined the
extent of each depositor’s holdings, your institution is instructed that no
funds can be released to either signatory.

Once the forgoing facts have been established and a portion or all of the
funds on deposit are confirmed as being those of the tax debtor than your
institution is to honour the requirement to the extent of the funds
belonging to the tax debtor but not exceeding the total liability named on
the requirement.”

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 The Garnishment

The Royal Bank responded by sending all of the tax debtor’s funds on deposit in that
particular bank account. Which also happened to be the entire contents of the bank
account.
What did Revenue Canada management state when informed of my collection tactics?
I was told that, ‘the department does not attach joint bank accounts,’ and ‘that I should
not persist in attempting to obtain payment of tax arrears in this manner.’ But they did not
reimburse Dennis R for the amounts collected in this manner.
What is the department’s official policy on this matter?
In Ontario and Quebec joint bank accounts may be seized but in all other provinces,
because of adverse case law, if the bank declines to pay maintaining that the bank
account is a joint bank account and as such is not attachable no further action is to be
taken.
The bank simply claims that they do not know who deposited the funds (although this
can be easily determined) so they will not turn money over to Revenue Canada. Why?
Because they do not know whose money it is and are afraid the other party will sue if
they are in error.
As a result the department applies this policy to tax debtors in Ontario and Quebec as
well. I guess collecting tax debts in this manner would not be fair to them.
Another method some use to hide their cash from the tax collector is to open a non-
interest bearing bank account. This should be done at a bank you are not currently
connected with. Why does a non-interest bearing bank account escape the eyes of the tax
collector? Because a social insurance number is not needed to open one. A financial
institution only needs your SIN so they can report the interest income you earn to the tax
collector who can then note it on your tax account.
Also of note, a financial institution does not have to comply with a garnishment when
honouring a cheque that was certified prior to receiving the notice.
In another instance of a debtor with a joint bank account I decided to investigate his
spouse’s tax account for asset leads.
Upon pulling her tax account up from the database I immediately saw she had a tax
debt although a minor balance one at that. A debt not normally pursued for collection. I
issued a legal warning to the spouse and when there was no response separate
garnishments, one for each tax debtor, were requested. But I had to beg my Team Leader
to approve them but only with the stern reproach that I would not do this again as, “We
are not being paid to collect minor balance tax liabilities Mr. Baggett.”
Revenue Canada received payment in full for both of the debtors tax liabilities.
Clearly Revenue Canada can capture tax debtor monies held in joint accounts if they
want to and have the gumption to do so. But they just do not seem to want to collect from
this source so many take advantage of this loophole.
Another manner in which to circumvent a bank garnishment is to use your financial
institution’s head office.
Many many times garnishment of an RSP has been thwarted when the tax debtor went
to their bank’s head office and cashed it out. A garnishment is only good at the branch on
which it has been served and because RSP’s are generally a function of head office they
can be easily circumvented when the debtor avoids his bank branch. In one instance a tax
debt in excess of $70,000 was written off when the last known asset, the debtor’s RSP,

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 The Garnishment

was removed from right under the tax collector’s nose. Even with an attachment to
income in place the tax collector can be beaten.
What you should also know is that a garnishment is a legal document. As such any
errors on it immediately invalidate it. If your name or home address is misspelled, your
home address is incorrect, maybe the tax collector is trying to collect a debt that is not yet
legally collectible. All of these factors defeat the requirement to pay. But there is another
method along these lines that I have run into on several occasions.
I myself have had a number of cases where the tax debtor has either supplied Revenue
Canada with an incorrect spelling of their name/address or have done this with the third
party, their employer or bank. One even managed to change his social insurance number
the third party kept on file. The result? All garnishments were declared invalid because
the information on the third party’s file did not match the tax collectors.
I was able to collect on one of the tax debts worth $69,000 when I asked the bank not
to remove the garnishment until I could proved the gentleman’s SIN was false. Which I
did. A little research determined he was using his wife’s. But in other instances the debtor
will remove their monies from the bank or quit their job before the discrepancies can be
ironed out and the tax collector ends up with nothing.
Here is another little known trick that some tax debtors use to delay and avoid a
garnishment.
Legal action will not be taken on a tax account where payments are being made, even
if the department does not agree with the payment arrangement. If you make payments
the tax collector must acknowledge the payment and your reduced debt before legal
action can be taken. PDC’s will work if you’re considering this method because the
department must return your cheques before they can take garnishment action.
Once your cheques are returned you begin making regular tax payments at your bank
or at the cash wicket of your local TSO. As long as regular payments continue, no matter
how small, it’s very hard for the tax collector to make a case for a garnishment.
How does the tax collector locate income sources for seizure and attachment as the
need arises? Their computer databases are chock full of information.

i. they look at your T1 Income Tax Return for an employer, bank interest, business
income, RRSP contributions or rental income (a double bonus because you get a
tenant to send a requirement to and a property for an execution)
ii. information slips such as T4’s (from employers), T5’s (financial institutions)
iii. conduct a Personal Property Registration Search (PPSR) with the provincial
Ministry of Corporate and Consumer Affairs for asset leads
iv. complete an occupational search through professional associations or trade unions
for income sources such as legal aid or OHIP payments
v. cheque tracing

Cheque tracing is the easiest way to find your bank account. Every time Revenue
Canada receives your payment a micofiche copy is made of that cheque. Whether or not
you have a tax debt. Many Canadians get around this by making all payments in cash,

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 The Garnishment

paying by way of a postal money order or having someone write a cheque on their
behalf.
The alternate cheque trace method occurs when the Federal Government issues you a
cheque and you cash it. Once again, a microfiche copy of the front and back of the
cashed cheque is made. When the tax collector wishes to learn where you bank they look
at the back of your cashed cheque for the bank stamp and they have a bank source to
legally attach.
Many tax debtors counteract these measures by cashing their government issued
cheques at grocery stores, department stores, cheque cashing services or depositing the
cheque into a joint account knowing that a joint bank account can never be touched.
Some tax debtors use automated teller machines but only use those located at other
branches of their bank or other competing banks.
For those of you having any type of government cheque direct deposited your only
hope is to have the cheque placed into a joint account. Otherwise the account can be
cleaned out at the tax collector’s convenience.
Next, remember that when Revenue Canada obtains a garnishment they do not obtain
a certificate from the court. Therefore blocking your chance to dispute the legality of the
tax debt. However this ‘oversight’ on behalf of the department leaves tax debtors a
loophole. They can appeal a Revenue Canada issued garnishment under Section 18.1 of
the Federal Court Act. Your appeal would be based on the fact that when a public
authority makes a discretionary administrative decision from which there is no statutory
right of appeal an application for a judicial review can be made. The application can be
made and is to be made within thirty days from the date of being notified of the
garnishment.
And, finally, here is a little known tip that may allow the legality of at least some
CRA issued garnishment’s to be challenged. All the debtor has to do is first determine if
the tax collector is a male or a female.
And why is the gender of the tax employee important?
It’s important because many tax employees, especially female, are very often
embarrassed to be employed by the CRA. While others are afraid that tax debtors will
accidentally find them as they often live in the same community. So in order to maintain
their anonymity what some female tax employees will do is continue to use their maiden
name on all correspondence. After they have married. And even though they have
legally changed their name and taken that of their spouse’s. And this is a very important
point to note because a garnishment is a legal document. And on a legal document every
single ‘t’ must be properly crossed and every ‘i’ perfectly dotted. If even one thing is
askew the document can and will be ruled invalid. So if an employee is using a false or
improper name would that not invalidate the garnishment document? To date this has
never been an issue in a court case. Likely because no victim of a garnishment has ever
been aware that the CRA allows this practice.
But now you know.
So there are many methods, legal and other, in which you can attack and perhaps
even defeat the tax collector’s garnishment. If worse comes to worse you can challenge
any legal action by contesting that no legal warning was given or that the legal warning
given was not executed in a timely manner.

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Also, and this might be the most key of points to remember, when the tax collector is
forced to repay your monies captured by legal action the debt represented by these
monies cannot be subjected to the same type of legal action again. This means any future
repayment of your tax debt can only be voluntary or through a seizure initiated by an
Execution. How does the tax collector execute their Executions? That is the subject of the
following chapter.

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11

No doubt most of us have heard fireside tales of tax collectors who unexpectedly swoop
down like some vicious bird of prey to suddenly seize a vehicle, a home or some other
valued possession that Canadians prize most highly. As a tax collector I too was regaled
by such stories, but coming from old-time tax collector’s, who claimed to have drilled
open safety deposit boxes, snatched airline tickets from those preparing to flee the
country or who stole up in the dead of night to tow away some debtor’s car. Why I was
even told the tale of a tax collector who, when speaking with tax debtors, would pretend
that the sheriff was on his/her way to their home at that very moment readying to seize all
if the debtor did not immediately arrange for payment of their tax arrears. His ploy often
worked.
But today tales like these are few and far between.
We have all heard these tales of terror but they have never happened to us. It’s always
a friend of a friend or someone who knows someone who knew this guy or that gal. In
fact so removed from them are we that such stories almost qualify as urban legends.
Except that sometimes, in the very rarest of instances, the tax collector will seize chattels
or real property after first obtaining an execution. But such occasions are becoming rare
indeed. You may not wish to believe this but today the tax collector almost prefers not to
seize and sell a tax debtor’s assets.
So while many Canadians still believe that the CRA collects all tax assessments and
has unlimited powers to seize and sell the assets of Canadians when doing so, this is no
longer the case.

The Execution

The Execution goes by many names including Charging Order, Memorial of

Judgement (NB), Minute of Certificate (PEI), Certificate Registration (NS and MB) or a
Certificate (BC) but is commonly referred to as a Writ and formally as a Writ of Fieri
Facias or, in English, a Writ of Search and Seizure. And a Writ is simply a judicial order
that empowers an officer, usually a sheriff, to carry out a specific task: the seizure of
personal and/or real property.
Before an Execution can be obtained by the tax collector the tax debt in question must
first be certified by a court as due and payable and a certificate obtained. Now a
certificate itself does not allow collection of a debt. A certificate is only judicial
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confirmation that the tax debt exists. And by obtaining a certificate the Court is
confirming that, in their opinion, the tax debt in question is valid, has not been paid, and
is legally collectible.
In order for the tax collector to obtain a certificate and/or Execution they must fill out
government form T518, Request to Certify a Tax Liability. Depending on how fast they
can write it may take ten or fifteen minutes. When completing this form they have the
option of obtaining a Certificate or a Certificate and a Writ. They usually choose the
second option because a Certificate is not worth much without an Execution.
Once this form is completed, and without any other concurrence, approval or input the
form T518 is duly sent to Ottawa. In Ottawa a representative of the CRA, a couple of
times a year (or more often when needed), plunks a stack of like requests (from TSO’s
across Canada) before a judge who approves them within a matter of minutes. Then three
to four months later, the certificate and Execution are typed up and returned to the tax
collector for filing at the regional courthouse.
At this point you’re likely wondering: “Doesn’t the tax debtor get to go to court as
well?”
And the answer to that is: “No. They do not.”
All the tax collector must demonstrated to the court official is that the tax debt is due
and payable. And since the debtor has filed their income tax return and/or, in the case of
an arbitrary assessment, has received their Notice of Assessment they could offer little in
the way of proof to the contrary that the debt is not valid. So a tax debtor’s only avenue
of recourse to a Certificate/Execution is either to appeal the assessment or to request an
adjustment.
The tax collector may also certify tax amounts that are under appeal but only if the
debtor has appealed to the Supreme Court. Tax amounts where the Jeopardy provisions of
the Income Tax Act have been invoked may also be certified.
When the tax collector obtains the Certificate for purposes of expediency they will
usually request the Execution as well as this saves a second wait. The approved
Certificate and Execution are then sent back to the requesting TSO where the tax
collector registers them at the courthouse of the region where the debt has been certified.
However there are instances where the tax collector must obtain an actual court
judgement instead of just requesting the registration of a certificate. This must be done
when the outstanding amount is a Recoverable amount.
A regular tax debt stems from a tax assessment but a Recoverable amount arises
where by accident, fraud or deceit a tax debtor has come into possession of departmental
monies.
Recoverable Amounts include refunds that are issued in error (yes this happens) or
when an individual receives two refund cheques and cashes them both (yes this also
happens).
Such debts can not be subjected to a garnishment by the tax collector because the
Income Tax Act only allows for garnishment of amounts resulting from a tax assessment
so the tax collector must go to court and obtain a certificate, Execution and sometimes
even a Garnishee Order before they can legally collect if the debtor does not volunteer
payment.

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Because of the time and expense in obtaining payment of such debts, Recoverable
Amounts, they are rarely collected and most often are written off. Recoverable Amount
debts are tracked on the subledger.
Canadians should also be aware of the fact that the tax collector is supposed to be
subject to local provincial statutes of limitations which, when expired, preclude
certification of an amount. The time limit varies between Provinces/Territories and can
be found in your Provincial Limitation Act.
An Execution is only good for five years after which time it must be renewed. The
renewal extends its life for a further five years. If an Execution should expire the tax
collector has six years from the date of the certificate to obtain a renewal but in any
interim they will lose priority to other creditors who have since made claims.
Most importantly, because an Execution is filed against your name and not your assets
it is only valid in the region where it has been filed. It cannot be used to seize assets
outside of the jurisdiction of the courthouse where it was filed.
So, for example, if you live in the Regional Municipality of Simcoe and the tax
collector has filed an Execution against your name in that region, you can not easily sell
your home or your car without first negotiating with the tax collector.
Why not?
Because the CRA has registered a lien on your possessions. A charge against your
personal property for the satisfaction of their debt.
And if you are lucky enough to find a buyer and can sell an encumbered asset, the
purchaser can be held responsible for the debtor’s tax arrears to the extent of their
purchase.
However, if you try to sell an asset located in a municipality not covered by the
Execution this can be done without fear because an Execution is only enforceable in the
jurisdiction in which it has been registered.

How the tax collector uses an Execution

When will the tax collector certify your tax debt and obtain an Execution?
When the tax collector decides to obtain an Execution it is a sign that your tax debt is
in danger of not being collected and they wish to show CRA management that they are
actively trying to solve this impasse. So, usually, the tax collector has been unable to
force the debtor to come to terms with their liability and the only assets they can locate
are chattels or real property, possessions that are not always easy to dispose of.
In the event that the tax collector does register an Execution their usual strategy is not
to use the legal document as a catalyst to immediately enforce collection, to seize and sell
your property, but, rather, they are just looking for a means to secure the tax debt.
And, to be perfectly honest, it is the norm, after an Execution has been registered, for
the Canadian tax collector to sit and wait patiently, hoping for the tax debt to collect
itself. Rarely undertaking further investigations to collect the liability.
What is the tax collector waiting for?
They are waiting for you, the tax debtor, to create an action that will force you to
come to terms with your tax liability.
Meanwhile interest just keeps accruing.

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Actions that tax debtors undertake that may result in the CRA obtaining partial or full
payment are:

i. refinancing of a property or chattel

ii. sale of a property or chattel

When either of these actions takes place the tax collector may receive a payment
although it is not always payment in full.
When the CRA has encumbered your assets still they will allow for refinancing of real
property or for passage of title when they will benefit by achieving a partial payment or a
better position as a creditor. So do not despair if you have been subjected to an
Execution, attempt to negotiate with the tax collector.
But there are also times when the CRA will receive no direct benefit by allowing a
refinancing or passage of title but will allow your request for the sake of expediency
(appropriateness or propriety) as noted in the Taxation Operations Manual section 2256.
(12) 1A.
So, obviously, an offer of payment is not always required to protect or further your
interests.
But there are also other methods to circumvent an Execution.
In this tale the tax debtor, according to his family, upped and disappeared soon after
the department filed their Execution. His only known asset was the matrimonial
residence. So, after some pleading on the wife’s part, the tax collector allowed the
removal of the Execution against the tax debtor spouse in order that the property title
could be transferred to her, who had no tax debt. Soon after the tax debtor’s assessments
were written off. It sounds kind of fishy that someone would desert his family over a tax
debt but now that his tax debt has been deleted I would not be surprised to learn that the
debtor has suddenly reappeared.
I should also note that Executions registered in Quebec are dealt with differently than
those registered in the rest of Canada as Quebec’s Revenue Ministry is administered
separately from the rest of Canada. Quebec tax collectors are very aggressive at actioning
Executions. Often as soon as they are filed the sheriff is advised to immediately begin
seizure actions. And from what I understand the Quebecois tax collector is much more
aggressive than even the American tax collector.
Also to be noted is this. In English Canada the tax collector is allowed to acquire or
dispose of any interest in a tax debtor’s property that they are given a right to acquire as
per the English version of the Income Tax Act.
In Quebec the tax collector can only acquire any interest a tax debtor has in the
property but not the interest of any other creditor as per the French version of the Income
Tax Act. Yet when this becomes an issue the Quebecois tax collector will use the English
version of the Income Tax Act.
What methods does the tax collector use to locate your chattels or real property?
There are five asset investigations the tax collector will conduct.

i. A review of the debtor’s tax return

ii. Conversations with the tax debtor

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iii. The local land titles office

iv. A Department of Transportation motor vehicles search
v. A Personal Property Search Registration (PPSR)

A review of your tax return may reveal assets such as the addresses of rental
properties or the existence of a safety deposit box among other things.
Conversations with tax debtors will reveal the existence of boats, a cottage,
investment properties or other valuables. Assets that might otherwise have gone
undetected.
A land titles office will identify and confirm ownership of a home cottage or
investment property. The property’s abstract will identify the financial institutions you
currently deal with.
A search conducted with the provincial or territorial Department of Transportation
will reveal how many vehicles and what types of vehicle are currently, and were
previously, registered to you.
The tax collector may also request from their respective province a Personal Property
Search Registration (PPSR) be completed. Any business or individual can make a request
for a PPSR through their provincial Ministry of Consumer and Commercial Relations.
What is a PPSR?
This is your province’s record of all current and past mortgages and liens against
personal property or chattels. Everything except land.
If you or your business has an asset that is encumbered by financing the mortgagor
will register the charge with the province. Your or your business’s PPSR record lists the
asset encumbered, the amount of the loan and what has been used as collateral to secure
the loan. When used this can be an invaluable means of locating your assets as well as
providing further investigation leads if the tax collector chooses to act on what they have
learned. All they need supply is the name of the corporation or individual. But with more
information such as a middle name, birth date or address the search can be made more
specific. Heck, if you know your tax collector’s first and last name you could easily
request a PPSR in their name.
Once an asset is located, ownership confirmed and equity determined the tax collector
might obtain a certificate and Execution. It is very rare for the tax collector to obtain an
execution if they are unable to locate one of your assets that has a reasonable amount of
equity in it.
The direction to enforce an Execution, if initiated, is usually the last concrete step
taken to collect tax arrears yet it is very rare for the department to enforce an Execution
against a personal income tax debt. Quite honestly most tax collectors will bury T1
accounts where an Execution has been filed in hopes that it will solve itself.
Very often, after having taken over another tax collector’s collections inventory, I
encountered tax debtor accounts that had sat two, three and sometimes much longer, with
no further collection actions having been taken after the tax debt was certified and the
Execution filed. On aging tax debts such as these the last action taken will be the lifting
of the unsatisfied writ so the tax liability can be submitted and approved for deletion. The
tax collector will always lift their Execution before deleting a tax liability.

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Canada Revenue Agence du Revenue

Agency du Canada

February 12, 2011

The Sheriff of the Judicial District of York

10001 Eagle Street
Newmarket, Ontario M5A 4E1

Re: Writ of Execution, against Fred Friendly, account No: 123456789

Dear Sir/Madam:

Canada Revenue Agency instructs you to seize and sell the assets of the above named
individual through the execution of the writ number 99-05958 (attached). The asset(s) to
be seized is/are described herein as:

The property with the legal description of lot 19, plan 1114, Balsam
Township, Regional Municipality of York, all contents therein, and
located at 389 Know Street, Richmond Hill, Ontario.

If the above mentioned asset(s) can not be located, please contact Sheila Frouwn of the
Collections Section at (905) 566-6617.

Please be advised that the Department does not wish to attend the requested seizure. As
of today, the Department’s interest rate on arrears is 11% compounded daily, which we
expect to remain as such until June 30th of this year.

Should you require further information on the current balance outstanding, please do not
hesitate to contact the above named Collections Officer. The Department also agrees to
indemnify you for the costs of your action. In closing, I would like to thank you for your
usual cooperation and prompt attention to this matter.

Sincerely,

Sheila Frouwn
Collections Officer

Toronto West Tax Services Office

P.O. Box 6000
77 City Centre Drive Local: (905) 566-6617
Mississauga ON L5A 4E9 Fax: (905) 615-2702

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Quite frankly this is a policy I disagree with. If an Execution is filed let it expire on its
own instead of releasing it before that date. Who knows? Maybe the CRA will get lucky
and actually collect something
And Executions filed against businesses with employer source deduction (T4) and/or
Goods and Services Tax debts are not handled much differently. Though in situations
where a business has outstanding trust amounts it is much more common for the tax
collector to request the sheriff to move in and attempt collection. But the tax collector
will only do so only in certain situations.
And why do they choose to do nothing?
Again.
There are two reasons for the tax collector doing this.
First, if the tax collector were to cause a business to cease operating the CRA would
receive bad publicity for putting people out of work and hurting the local economy.
Secondly, the CRA knows that they can hold the director(s) of a debtor company
liable for any unremitted source deductions.
As per Section 227.1 of the Income Tax Act the tax collector can attempt to collect the
corporate employer source deductions tax debt or a GST debt from the personal assets of
a company’s director(s). And such is preferable to injuring a business and receiving bad
press. Of course when a business is in financial trouble likely its director(s) is/are as well
so the outstanding taxes are very rarely collected.
To be able to hold any director of a corporation responsible for the trust portions
(CPP, EI etc.) of a corporation’s tax debt the tax collector will wait until their business
has begun liquidation or dissolution proceedings or an assignment into bankruptcy has
been made. They will then request the sheriff to act on a previously filed Execution
knowing all the while that the business has no assets and the sheriff will be returning a
nulla bona return.
A nulla bona return means the Execution can not be satisfied because no assets can be
found in the name of the debtor.
With the nulla bona in hand the director(s) can now be held liable for the business
source deduction arrears or GST debt.
Under Federal and Provincial Acts corporate directors can also be held responsible for
federal or provincial taxes but the CRA rarely pursues them for collection of these tax
debts when a business ceases operations.
Now, obviously, such a course of action is irresponsible. The tax collector should step
in and enforce collections just as soon as they are aware there is a tax debt. But, instead,
the CRA purposefully lets a bad situation worsen just so that they can avoid looking bad.
So the tax collector is purposefully negligent when collecting corporate source deduction
tax arrears and GST debts solely because they can hold the director of the debtor
company responsible.
But this misuse of Executions is now beginning to have a devastating effect on CRA.
Recently, November of 1997 to be exact, some sheriffs have been refusing to action
directions to enforce Executions when issued by the CRA.
Why?
Because they contend it is not their job to investigate tax debtors and obtain nulla bona
returns.

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So the practice of enforcing executions against companies already known to be devoid

of assets is backfiring on the tax collector because sheriffs are now refusing to enforce
legitimate writs, writs that might actually result in a seizure.
At the time of this writing, all sheriffs in the Province of Nova Scotia are refusing to
return nulla bonas, apparently so is the sheriff of the County of Simcoe (Ontario). And
there is much concern that this action will spread further afield.

What you need to know

When the CRA does give sufficient direction to the sheriff he/she can seize and sell
your goods and chattels. In some provinces real property (land) may also be seized and
sold within the limits prescribed by the relevant provincial statutes.
But some Canadians are finding ways to successfully combat seizure tactics by the
CRA (and other creditors) and so hold on to their equity. They place their assets into
Trusts.
Simply put, a Trust is a vehicle used to hold assets for the benefit of others.
Some tax debtors take advantage of this and convey their assets (real property or
chattels) to a trustee who holds them so that the assets can be applied to the benefit of a
third party somewhere down the road.
I encountered a tax case where an older gentleman with a $70,000 and growing tax
debt as a result of business income from unknown origins. But, except for his home, no
other assets for the tax debtor could be found. So a decision was made to file an
Execution against his home so a Property Search was conducted at his local Land Titles
Office in York Region. Before filing an Execution the tax collector wants to confirm that
the debtor is on title and that there is sufficient equity in the property to make recovery of
a significant portion of the tax debt possible.
On obtaining the property abstract it revealed that, while our elderly tax debtor had
owned the house and property, it had been transferred to a ward, his fourteen year old
niece, in Trust, while he had been accumulating his tax arrears. No money exchanged
hands.
As part of the Trust agreement he was allowed to continuing living in the Richmond
Hill home for the remainder of his years.
After a further time the debtor came to receive federal pension monies and these were
attached. But finally the department gave up and released the garnishments in order that
they could write off his tax debt. If this guy lived to be a hundred the attachment of his
pensions would never pay off his tax debt. It was barely making covering the interest
charges.
So in this instance the tax debtor was able to protect his assets, in this case his home,
from a lien or seizure simply by placing it into a Trust. He no longer owned the property.
The trustee did not own it. And neither his niece own it. Although the niece did have a
residual interest in the property (the residual interest being that she would not own the
property until her uncle ceased to reside there – death). But the department has a habit of
not collecting tax debts from people who may have the assets to pay but not the income.
(Author’s note: If considering this option please read the Chapter: The Memorandum
Assessment and learn how to fully protect yourself before following through.)

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The Trust protection tactic has become increasingly popular with all sorts of current
and potential debtors, and not just tax debtors, and can be done with almost any asset you
own. In fact this little gem of a secret is how many Canadians wealthier than you protect
their assets from all types of creditors.
You should also know that when an asset is jointly owned and only one of the owners
has a tax debt CRA will never seize the asset.
As an example, in a situation where an asset, like a principal residence, is held jointly
(such as by a husband and wife) and not all the registered owners have tax debts, the tax
collector may certify the debts of the indebted parties and register an Execution, however
they can not seize the asset.
Why?
Because the tax collector is not allowed to cause hardship to the other owner(s) or
cause them to lose any interest or title.
To be sure most tax debtors have few assets to seize and to make a seizure worthwhile
the asset must have some equity because sheriff’s fees for seizure, storing, and selling can
mount up to the thousands of dollars in a very short period of time. Due to these costs the
department has an in house rule of only obtaining Executions on debts over $10,000.
Naturally there is a reason why and that reason is among the most telling stories of
Government waste to ever occur.
As it was told to me it seems there was a horse breeder with a tax debt of
approximately $15,000. It was determined that his sole asset with any value was a horse
that the debtor had pinned his hopes on. Sure enough, Revenue Canada certifies the debt,
obtains the Execution and directs the sheriff to seize the horse. The sheriff takes the horse
but try as he might he was never able to sell it. The equine creature was held for exactly
240 days at a cost of $500 a day for shelter and upkeep. A total cost of $120,000.
Eventually the tax collector gave up and was forced to return the horse to the debtor. The
department also gave up on trying to collect the breeders tax liability and wrote off the
debt.
As a result of this fiasco a policy of Economic Feasibility was instituted. The specifics
of the policy state that the acquisition of property by whatever method will not normally
be considered where the overall anticipated cost to Revenue Canada including all related
and incidental expenses exceeds seventy percent of the appraised value of the property.
Exceptions will be considered when the remaining equity in the property exceeds the tax
debt sought to be recovered through the acquisition.
The tax collector puts sometime and expense into certifying debts, going before the
courts and filing the claim, so you would you think that such an outlay would result in a
reasonable rate of return. But as you have seen most often it does not.
How often do you hear of the department seizing and selling the assets of a tax
debtor?
Rarely.
Why is this?
Well, the vast majority of those with tax debts have only two major assets, their
principle residence and their mode of transportation, their car.
And what happens when you take away someone’s transportation?
They lose their ability to earn an income.

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And if you take away their principle residence the entire family is thrown out into the
street. The media loves any story involving heavy-handed or excessive tactics by the tax
collector. Especially when it involves children or seniors. Stories like these are played out
in the press to the maximum.
Not too long ago I was told a story where a tax collector out in western Canada
engineered the seizure of all the assets in the home of the tax debtor, including his wife
and children’s. Obviously if the tax collector has an execution they have that right to the
debtor’s property but how could the CRA explain the seizure of the assets of a spouse or
children if they did not have a tax debt that has been certified? I still don’t have an
answer to this question but it does not seem legal to me and I was a tax collector at the
time.
Canadians have a heavy tax burden compared to Americans which is why we cringe
when hearing about tax collection tactics such as these but that Americans would take in
a stride. And this is why the CRA often sits on Executions instead of actioning them.
Waiting for the tax debtor’s actions to be a catalyst for the payment of their tax debt so
the agency will not have to search and seize and face yet another dose of public wrath.
To the delight of tax debtors everywhere.
Probably the tax debtor’s best defense against an Execution is to keep the tax collector
uninformed of their assets. This is not always possible so the next best thing is to hold
major assets jointly where possible. Barring this and if faced with an Execution you
might consider playing a long waiting game and hope that the tax collector lets the legal
document expire of its own accord. But if you are forced to play your hand through a sale
or when remortgaging, first make an attempt to negotiate with the tax collector.
Finally, and as you have just learned it is not unusual for Revenue Canada to tire of
waiting on an Execution and to suddenly release the Writ and then write-off the tax
liability (without informing the tax debtor). Why? Because whether a dollar is collected
or it is written off it all counts as revenue production and so collection.

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 The Memorandum Assessment

12

Most Canadians hate paying excessive tax but imagine being held responsible for the
tax debt of another. It can happen. And such an obligation is not as rare as one might
hope. A Memorandum Assessment, or memo assessment as it is commonly referred to by
the tax collector, results in an individual or business being held liable for the payment of
a tax debt assessed to another.
In the beginning the tax debtor is solely responsible for payment of his or her tax
assessment. No one else can be held responsible. But if that tax debtor transfers one or
more of his/her assets to another for less than what the CRA considers to be the asset’s
fair market value the one who assumes control of the asset can be held responsible for the
debtor’s entire tax liability or the amount of the monetary benefit conferred by the
transferred asset. Whichever is the lesser.
Under these rules even a gift can be considered a transfer of property and this is the
basis of the memorandum assessment.
The purpose of this type of assessment, a memorandum assessment, is to snare those
who try to avoid payment of tax, who try to escape payment of a tax liability and to help
counter and prevent tax evasion. But very often they do not. I raised my first memo
assessment in August of 1994 for $35,000 and more than three years later not one penny
had been collected.
For the most part these types of assessments are not considered for tax debts under
$20,000 due to the time and expense involved in raising and handling them. But, on
certain occasions, the tax collector may do so if a guaranteed avenue of collection does
exist.

Types of Memorandum Assessments

There are many different types of Memorandum Assessments and such assessments
can be raised through a number of different sections and subsections of the Income Tax
Act. For the tax collector the most commonly invoked memo assessments are as follows
(examples have been provided to clarify their use):

Subsection 159(3) -The liability of an executor or administrator for failure to obtain a

clearance certificate before distributing the assets of a deceased taxpayer’s estate.
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 The Memorandum Assessment

When we die we finally escape payment of taxes but our estate and heirs do not.
Before any assets can be distributed the manager or like individual of the estate must
receive a clearance certificate from the CRA. The clearance certificate is confirmation
from the tax collector that all outstanding taxes have been paid in full.
If the assets of a deceased debtor or their estate are distributed before the clearance
certificate is issued and a tax liability exists or arises the estate manager can be held
responsible for the tax bill up to the but not exceeding the amount of the assets
transferred or disbursed.
As well any individuals receiving the disbursements from the estate can be held liable
for the tax arrears but only when assessed under Section 160.

Subsection 160(1) - The liability of a transferee resulting from certain non-arm’s length
property transactions.

When a tax debtor disposes of an asset for less than the determined fair market value
the transferee may be assessed and held responsible for the tax debt to the extent of but
not exceeding the difference between the fair market value of the asset at the time of the
sale and the actual selling price of the asset. Whichever is the lesser.

Subsection 224(4) and 224(4.1) - The liability for employers, banks and other third party
payers for the failure to comply with a requirement-to-pay.

When an employer or financial institution fails to comply with a garnishment they can
be held responsible for the debtor’s tax liability up to the amount of the tax liability but
not exceeding the amount paid out under the requirement that should have been paid out
to the CRA.
In order for this type of assessment to proceed some length of time must have passed
where no remittances are made. Six months is usually the minimum time to prove non-
compliance. But for it to be economically feasible it often takes years of waiting. The
ultimate determination is the amount. Non-compliance for amounts under $20,000.00 is
rarely pursued.

Subsection 227.1(1) - The personal liability of the director(s) of a company for the failure
to remit corporate source deductions consisting of Federal and Provincial tax,
Unemployment Insurance, Canada/Quebec Pension Plan.

When a business fails to deduct, withhold or remit corporate source deductions the
director(s) can be held liable for the deductions that should have been remitted during
their tenure.
However, this type of memorandum assessment will not be considered if the director
can prove that they exercised due diligence and care to prevent the failure to remit the

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monies or if more then two years have elapsed since the individual last ceased to be a
director of the corporation.

The Section 160

The sole reason for the inclusion of Section 160 (and like assessments) in the Income
Tax Act was to stop tax debtors from avoiding the payment of tax liabilities by
transferring their real or personal property to divest themselves of equity. A transfer can
be every form of conveyance imaginable such as a gift or even a cash dividend by a
company if the transfer impoverishes the company to the point that it cannot pay its
income tax debt. But this is not the only type of transfer covered. The Section 160 can
also be applied to businesses trying to divest themselves of assets and even to recipients
of disbursements from an estate or trust.
In the court case of Gardner vs. the Minister of National Revenue, the Tax Court of
Canada said:

“The scope of Section 160 is extremely broad and extends to virtually

every transaction by which an individual divests himself of any rights to
property and at the same time vests such rights in someone with whom
he/she does not deal at arm’s-length, prima facie, at a glance for Section
160 to be operative, the person alleged to be the transferor must have
actually had an interest in the transferred property”

The types of asset movements that are most commonly considered as transfers are:

i. gifts of any sort

ii. forgiveness of a debt
iii. a sale of an asset
iv. the divesting of interest in a property
v. paying a debt on behalf of another, such as another’s credit card debts
vi. when beneficial or legal interest in the asset is not abandoned although title is

What does the tax collector look for as indicators of a possible non-arms length
transfer?

1. The transferor must have a tax liability outstanding during the year the transfer takes
place or a tax liability for one or more years predating the transfer.

In instances where the date of assessment postdates the date of the transfer, such as
when a reassessment occurs, the tax year(s) of the debt and the year of the transfer are the

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crucial and deciding elements. For instance if you sold an asset for less than the fair
market value in 1997 and in 1998 your 1996 tax return is reassessed with a debt. The
transferee could be held responsible for all or a portion of your tax arrears.

2. There must be a transfer of equity

The asset transferred must be transferred for less than the fair market value with fair
market value representing the price the asset would bring on an open market with no
restrictions.

3. The transfer must be conducted at non-arm’s length

As per Paragraph 251(1)(a) of the Income Tax Act, related persons shall be deemed
not to deal with each other at arm’s length under any circumstance.
Subsection 251(2) defines related persons for the purpose of the Income Tax Act. The
Act considers related kin to be parents, grandparents, brother, sisters, spouse, children,
brothers or sisters-in-law and grandmothers and grandfathers in law.
It would also appear that the term spouse refers only to a person of the opposite sex
who has cohabited for at least a twelve-month period.
Any connection by marriage ends with the passing of the person through whom the
connection arose. Meaning if your spouse dies your in-laws are no longer considered
related for the purposes of the Act. Whether unrelated persons are dealing at arm’s length
is determined by a question of fact.
When these three factors coexist, an illegal transfer of property is thought to have
taken place. But what conditions must exist before a tax collector will complete the
Section 160 assessment?

i. an asset transferred when a tax debt exists in the year of or the years prior to the
transfer
ii. an asset transferred for less than the fair market value
iii. a reasonable amount of equity in the property
iv. the transferee is:
a) a spouse or a person who has since become a spouse
b) a person who was or is under eighteen years of age
c) a person whom the transferor was not dealing at arms length
v. collectability, the transferee must have the ability to pay the amount to be assessed.

Immediately following find an example of a tax collector’s written threat to assess a third
party via a Section 160 Memorandum Assessment.

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Canada Revenue Agence du Revenue

Agency du Canada
March 9, 2011

Jane Doe
Suite 500-5001 Yonge Street
North York, Ontario M5A 4E1

Dear Sir or Madam:

Re: Taxpayer Joseph Doe

It would appear that the above-named taxpayer to whom you seem to be related or with whom
you seem not to be dealing at arm’s length, transferred property to you. According to our
investigations, this transfer resulted in your obtaining a benefit in the amount of $45,000.00. The
details of the transfer are as follows:

Property transferred: 1234 Evergreen Terrace

Property value: $125,000.00
Charge (mortgage) on the property: $79,900.00
Equity in the property: $45,100.00
Consideration given: $100.00
Benefit received: $45,000.00

Under the circumstances, as section 160 of the Income Tax Act prescribes, you may be liable with
the transferor for the lesser of his tax debt and the advantage you received as a result of the
transfer.

We are considering assessing you under subsection 160(2) of the Income Tax Act for the sum of
$45,000.00 which represents the lesser of the benefit you received, and the transferors tax debt. If
you feel, however, that the amount of the benefit you received is not as mentioned above, please
provide, within 30 days of this letter, information and documentation to that effect. In the absence
of such information, the proposed assessment could be raised without further notice.

Yours truly,

Bill Melater
Team Leader

Toronto West Tax Services Office

P.O. Box 6000
77 City Centre Drive Local: (905) 566-6617
Mississauga ON L5A 4E9 Fax: (905) 615-2702

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Probably the most common scenario for the Section 160 transfer is when a tax debtor
‘sells’ their interest in their principal or matrimonial residence to their spouse or a child
for “$2.00 plus love and natural affection”.
In this situation the tax collector may considering assessing the transferee with the
exception of a breakdown in a marriage when the spouses have separated, are living apart
and the transfer has been made pursuant to a written separation agreement, or a decree,
order or judgement of a competent tribunal. If the transfer occurred prior to these factors
than the Section 160 provisions do not apply.
Otherwise this brief notation on the property abstract is as clear an indicator of a
potential Section 160. Why would anyone sell an asset for far less than it is worth? Either
they are very nice, very stupid or else they are trying to divest themselves of assets. Why
would someone wish to divest themselves of assets unless they were trying to make
themselves creditor proof and judgement proof? When the asset is sold to someone so
near and dear to the heart it must be the latter.
A Section 160 memorandum assessment and scenario may play out like this. For
example, say a tax debtor has a tax debt of $30,000 and has an interest of 50% in an asset
worth $50,000. The debtor (transferor) proceeds to sell their interest in the asset to their
spouse (transferee) for $100. By law, the tax collector is allowed to assess the transferee
for $24,900.
The figure of $24,900 is arrived at by taking 50% of $50,000, which is $25,000, and
then deducting the $100 the transferee paid for the asset, which leaves $24,900. This
amount is the lesser of the equity transferred and the transferors tax liability.
If the asset had been worth $80,000 the transfer figure would work out to $39,900. But
in this scenario the tax collector would only assess the transferee for $30,000 the lesser of
the tax liability and the amount of the transfer.
When can an asset transfer occur but not be considered as an inappropriate transfer for
the purposes of the Income Tax Act?
In instances where there is no undue benefit transferred such as when:

i. the transfer is for repayment of a debt

ii. no beneficial interest is transferred
iii. the transferee is unrelated to the transferor
iv. the payment is made on account of a Family Law Statute
v. there is no Federal Tax liability
vi. it is a cascading transfer (multiple transfers are involved)

How do many Canadians dance around a Section 160 assessment?

Huge numbers of professionals keep all their assets in their spouse’s name to make
themselves judgement proof to all creditors, not just the tax collector. This is done in
anticipation of any future debts or actions arising.
Although the tax debtor continues making all mortgage payments and upkeep, if the
spouse is a stay at home spouse with no income or known assets the tax collector will not
proceed with the memo assessment. Why? Because the stay at home spouse has no ability
to pay the debt and the department, more often then not, will forgo seizing assets such as
a principle residence or vehicles as explained in the chapter on Executions. They don’t

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want to put a family out on the street. Allowing the professional tax debtor to have his or
her cake and eat it too.
A type of transfer increasing in popularity, although often illegal, is the cascading
transfer. If the asset is sold and resold again, one or more times after the original transfer,
the transferee will not be assessed with the transferor’s debt. The reason being one of
economics as well as determining the intent of the multiple sellers and purchasers to
actually assist the debtor.
The most common scenario for a non-prosecutable transfer of an asset is to make the
transfer to an individual from whom the tax debt cannot be collected. This instance can
be played out in two scenarios.
First, a memorandum assessment will not be raised when the transferee does not have
the ability to pay. Under any circumstance. There is no point in raising an additional tax
assessment that can not or will not be collected.
One case I was briefed on involved a Toronto area construction magnate whose
business had undergone tough times during the recession. He was an older gentleman, in
his seventies, with a tax debt in the $60,000 to $70,000 range. The tax collector chased
him for many many years and sporadically collected small payments. But by the time the
department decided to file an Execution against the debtor, his house was the only known
asset, it had already been transferred to his fourteen year old ward, a niece, in trust.
Obviously she had no means to repay the liability so the department was forced to write-
down the client’s debt to a what was thought to be a collectible amount and began
garnishment of his Canada Pension Plan payments at a measly rate each month. When it
was determined that this amount could barely keep up with the interest payments the
remainder of the tax debt was written off.
In the second scenario if the asset is transferred to a wife or husband of the tax
debtor’s spouse’s brother or sister than this is not a blood relationship and can pass as an
acceptable transfer.
To clarify, if X and Y are otherwise unrelated and they have each married one of a
pair of siblings then X and Y are not related by blood. Therefore the transfer of an asset
in this manner at less than fair market value can proceed with little fear of prosecution or
assessment by the tax collector. A memo assessment is never to be raised in these types
of situations and if the tax debt can’t be collected from the original debtor it is written off.
Sometimes the tax collector will use the power of the memo assessment to assess
viciously. However if the courts are made aware of this they will reverse the assessment.
In Gamache vs. Her Majesty the Queen, the Minister assessed a tax debtor under Section
160 on the same day Gamache was discharged from bankruptcy.
Now the guiding light behind the Bankruptcy and Insolvency Act is to rehabilitate the
debtor and start them anew unfettered by past debts. It was the court’s opinion that the
Minister was acting contrary to the purpose of the Bankruptcy and Insolvency Act and
that he must follow the procedures outlined therein. As such the Minister was forced to
vacate the memorandum assessment.
Yet another example of Revenue Canada wasting its time and money by assessing a
debt that would never be collectible. After all, how much money does one have after
leaving bankruptcy?
The first memo assessment I ever completed, raised on August 3rd, 1994, was Peter
and George P a father and son. The son’s memorandum tax debt came to about $35,000.

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Previously a model citizen, once assessed with the memorandum debt he appealed the
assessment and while waiting for a decision he began to run up his own personal tax
arrears with, I allege, no intention of paying. The last I saw, late 1997, no attempt had
been made to collect the $35,000 debt from this transferee.
This is similar to other tales I have told where the debtor gets disenchanted with the
system, turns off and drops out. When a debtor does not voluntarily pay their tax arrears
they are rarely made to pay at all.

The Director’s Liability Tax Assessment

Subsection 227.1 of the Income Tax Act allows for the director(s) of a corporation to
be held jointly and severally liable, along with the corporation, for the payment of any
Canada Pension, Employment Insurance and/or Federal and Provincial tax amounts that
they failed to deduct or that were deducted but were not remitted to the CRA.
The statement above likely scared those among us who run corporations but no tax
liability can be assessed to a director if they can prove that they exercised a degree of
care and due diligence that any reasonable person would have exercised facing a similar
situation. So there is a loophole to free yourself of such an assessment. But the problem is
is that what you and I may consider to be reasonably diligent, the tax collector may not. It
is a grey area open to much interpretation.
But there are also further outs to protect a director, most notably that no Director’s
Liability Assessment can proceed against a corporate director if more than two years has
elapsed since they last ceased to direct the company’s affairs. If you do choose to resign a
directorship make sure that you put it in writing.
Also, before the CRA can assess a director of a corporation with that corporation’s tax
liability they must meet at least one of the following three conditions:

i. The tax liability of the debtor corporation must have been certified and the writ
returned by the sheriff or bailiff unsatisfied in whole or in part.

So if the director of a corporation, your company has a tax debt and the CRA obtains a
writ against the company it may be prudent to immediately resign your position as it is a
sign that the tax collector may be setting you (a director) up for a memorandum
assessment. Directors are considered to be directors until they resign and then the two-
year limitation for this type of memorandum assessment starts ticking.

ii. If the corporation has commenced liquidation or dissolution proceedings the tax
debt must be proven within six months of the commencement of the proceedings.

iii. If the corporation is under a receiving order or the Bankruptcy and Insolvency Act
the claim must be proved within six months of the date of assignment or order.

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For items ii and iii this simply means that the tax collector must file a Proof of Claim
with the trustee administering any dissolution or dissolving within six months of the date
of the event or they may not pursue the company or its director(s) for repayment.

Now, when the CRA does file a writ against a debtor corporation, some director’s do
indeed resign in an attempt to limit their responsibility, appointing others in their stead,
while still directing the company’s affairs. And other’s, those previously aware of this
added responsibility, may have never taken on the official title of director though still
handling the responsibilities of a director. But the CRA may still assess those who
operate the corporation ‘unofficially’ by assessing them as:

i) a Passive Director, one who delegates some or all of their responsibilities to

others,
ii) a Nominee Director, those who were elected only to obey the instructions of
others,
iii) an Outside Director, one who is not an officer or employee of the company or has
stock interest or business dealings with the company.
iv) and De Facto Directors, ones who exercise the duties and functions of a director
though they many may not be qualified to do so because they were not elected or
appointed, their term has expired, did not have the necessary qualifying shares,
were not of age or were personally bankrupt.

Yet even though such people may not be responsible the CRA will assess them
anyway, as long as all statutory conditions have been met, in hopes that the assessed will
not appeal or in hopes that the Court will decide in the tax collector’s favour.
The best way to prevent a Director’s Liability Assessment against yourself, and other
than immediately resigning when trouble appears, is to show that you, the Director,
applied all due care and diligence. The easiest way this can be done is by keeping a
record or log of your company’s minutes. In this log you should establish corporate
policies for dealing with the withholdings from employees, you should regularly report
upon the implementation of these policies and you should record that you have checked
to see that the withholdings policies were being followed.
Once you sense trouble you can put special controls in place like obtaining a line of
credit to pay all necessary deductions. This way the CRA still gets their money and your
financial institution is left holding the bag, which doesn’t bother the tax collector one bit.
But what kind of financial institution is going to lend out money to a company facing dire
financial straits. So if your bank or trust says no get something in writing to show that at
least you attempted to exercise due diligence but that your bank would not co-operate.
But what if your company is being liquidated or in bankruptcy and you no longer have
control? Can the director(s) still be held liable for the company’s source deductions?
Yes, you can.
But one method of proving that you attempted to exercise due diligence and so
exonerating yourself is by advising the receiver/trustee, in writing, of any banking
arrangements in place for the payment of the source deductions.

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Canada Revenue Agence du Revenue

Agency du Canada
January 22, 2011

Jane Doe
Suite 500-5001 Yonge Street
North York, Ontario M5A 4E1

Dear Madam:

Re: ABC Corporation

The corporation named above, of which you appear to be/have been a director, is indebted to Her
Majesty for tax, interest and penalties which were not remitted in accordance with the provisions
of the law.

Section 227.1(1) of the Income Tax Act provides that the directors of a corporation are held
jointly and severally liable with the corporation to pay the corporation’s arrears.

On the basis of the information we have, it appears that you may be liable for the unpaid taxes of
ABC Corporation and we are considering assessing you personally in the amount of $112,110.13.

Your attention is drawn to the due diligence provision found in subsection 227.1(3) which
provides that a director is not liable where the degree of care, diligence and skill were exercised
to prevent the failure that a reasonably prudent person would have exercised to prevent the failure
that a reasonably prudent person would have exercised in comparable circumstances. If you feel
that you are not liable, and that an assessment should not be issued, please complete the attached
questionnaire and return it to this office within the next thirty (30) days of mailing. Your
submission should include factual information concerning actions which you took to prevent and
safeguard against the corporation’s failure to remit. Failure on your part to reply may result in an
assessment being issued, without further notice.

If you have any questions or if you wish to discuss this matter further, please contact Rich Cur of
the Collections Section at (905) 566-6617.

Yours truly,

Richard Cur
Collections Officer

Toronto West Tax Services Office

P.O. Box 6000
77 City Centre Drive Local: (905) 566-6617
Mississauga ON L5A 4E9 Fax: (905) 615-2702

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However, even when a director proves that they have exercised due diligence the CRA
will still hold them responsible. Lets pretend that you are the director of a company and,
realizing it was facing financial difficulties, decide that only certain cheques will be
approved, a selective payment scheme. If you can prove that this was so the tax collector
will not assess you under Section 227.1 of the Income Tax Act, instead they will choose
to assess the director under subsection 153(1.3) of the ITA whereby any payer of wages
can be held responsible for source deductions and remittances. So even where a director
can prove that they exercised all care and due diligence possible the CRA may still
choose to punish them. To be honest corporate directors really have little in the way of a
due diligence defense because even when they are careful the CRA will still find a way to
assess them.
When will the CRA decide to issue a Director’s Liability assessment against the
director of a corporation? When the tax debt in question is in excess of $15,000 (although
occasionally they will do it for less) because a lesser debt may not be worth the time and
expense that would go into the work. And when they have no means of collecting the
debt from the corporation, a last resort for collection so to speak.
However it is important to note that the CRA will not normally pursue Director’s
Liability Assessments if the tax liability pertains only to years prior to the current and
two preceding years though they may still consider doing so if the director(s) is/are repeat
offenders.
For the sake of consistency it is common for the CRA to assess all director’s (not
precluded by law) for the corporation’s tax liability. Whether or not each has the ability
to pay. So, prove you can not pay and you should be able to, eventually, get off the hook.
It is important to note that if, before being assessed with a Director’s Liability
Assessment, the CRA withdrew garnishments or other legal actions, then the courts (if
you challenge) may decide that the Director’s Liability Assessment is void. Why?
Because before assessing a director of a corporation for a debt each and every effort must
be made to first collect the debt from the corporation.
There have been several instances where corporate directors have requested that a
Requirement to Pay be removed then used its removal as a defense in any proceedings
initiated under 227.1 because the department did not collect the debt when they had the
chance.
Now think back on what was written in respect of Director’s Liability Assessments in
the Chapter 11: Executions, Writs and Certificates. Even though the CRA may be aware
of corporate assets, money or other, they will often avoid seizing such in order to avoid
looking bad with the community for closing a business and putting people out of work
and also because the tax collector knows that they can go after a corporate director for a
corporation’s tax liabilities. I am sure they would hate for this fact to become common
knowledge but it is my experience that the CRA, the former Revenue Canada, does
exactly this. They will purposefully watch a company fail so that they can hold the
director(s) responsible.
Now, when the CRA finally decides to assess a director with their corporation’s tax
liability they must first send a letter stating such to each of the company’s directors. And
then they assess after the time limit noted in the letter (usually thirty days). The tax
collector rarely completes any investigation or does any researches into the truth of their
accusation. Why?

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Canada Revenue Agence du Revenue

Agency du Canada
March 10, 2011

Jane Doe
Suite 500-5001 Yonge Street
North York, Ontario M5A 4E1

Dear Madam:

Re: ABC Corporation

This letter is further to your reply of February 1, 2002, wherein you provided reasons which, in
you opinion, demonstrated that you are not liable under the provisions of Section 227.1 of the
Income Tax Act.

After fully considering your response the Department is of the opinion that you have not met the
standard necessary to be exempted from liability under the “due diligence” defense provisions of
Subsection 227.1(3) for the following reasons, namely:

We do not believe your evidence as presented by you is sufficient enough to

satisfy your claim of due diligence.

Therefore, we intend to assess you in the amount of $116,146.16.

If you wish to make further representations, you should do so within the next 15 days.

If you have any questions of if you wish to discuss this matter further, please contact Mindy
Canser of the Collections Section at (905) 566-6617.

Yours truly,

Mindy Canser
Collections Officer

Toronto West Tax Services Office

P.O. Box 6000
77 City Centre Drive Local: (905) 566-6617
Mississauga ON L5A 4E9 Fax: (905) 615-2702

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 The Memorandum Assessment

Because it is up to the director of the company to show that they exercised due
diligence. But not the tax collector. If a corporation owes money they just want someone
to pay. If not the company then its director(s).
However, should you respond to their letter and claim due diligence was exercised,
supplying facts, then the tax collector will not immediately assess you. Instead they have
a checklist they run through hoping to rebut the evidence you have supplied. The
checklist is as follows (from the Taxation Operation Manual):

A) Examine the minute book and/or appropriate registers to determine:

i) the election, appointment and resignation of directors

ii) the appointment and resignation of officers
iii) the banking and signing authorities
iv) any amalgamations and corporate name changes
v) the treatment of source deductions and payroll remittances
vi) the declaration of dividends and the redemption of shares

B) Examine the payroll journal giving special attention to director’s salaries and the
amount of corresponding deductions claimed.

C) Examine the cash disbursements journal, cancelled cheques, related bank statements
and cheque register to:

i) determine the mounts paid to or on behalf of the directors

ii) establish the possible existence of a selective payment scheme
iii) determine if some cheques were written but not tendered, and, if possible
locate copies of same

D) Examine the general ledger to:

i) determine any recent loan to a shareholder, director or related party

ii) determine any recent payment to a shareholder, director or related party
iii) determine any unusual draws by shareholders
iv) uncover any recent loans made to a related company
v) uncover any recent payments of monies borrowed from a related company

E) From the central regulatory registry, obtain (if applicable) copies of the following:

i) Companies Branch – incorporation documents and the most recent annual

information return.
ii) Provincial Registry – security documents with respect to security pledged to
secure borrowings
iii) Bank of Canada (or authorized representative) – security documents with
respect to security pledged pursuant to section 178 of the Bank Act

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This information, when retrieved, will show the tax collector each director’s tenure
and their degree of involvement in the financial affairs of the corporation, any controls in
place regarding the handling of source deductions, any involvement by secured creditors,
and any affairs which may have aggravated the corporation’s financial problems.
Now, if the director does not respond to the director’s liability warning letter the tax
collector will almost always, immediately pursue a Director’s Liability Assessment but
should the director respond and claim due diligence, with evidence, then the tax collector
must refer the case to the Department of Justice for a legal opinion. Buying the director
time as a response could take weeks and sometimes as long as a month or two.
The kicker to all this work is that even though the CRA goes to all this trouble to
transfer and assess a corporate tax liability they rarely realize the debt in full. And very
often they collect nothing at all.
Why?
Because many directors will put their own assets on the line to fund their company
and they may also reduce their pay to help keep the company solvent. Or they may
actually plan to defraud and either spend what they take or else hide it away and out of
the CRA’s reach. In either instance the CRA realizes very little on Director’s Liability
Assessments and quite often receive nothing at all for the time and expense put into these
types of assessments. Think I’m kidding? Ron and Loren Koval allegedly made off with
over $90 million dollars in corporate funds from their King’s Health Centre. Less than $2
million of that money has been recovered to date. And that which was recovered will go
to their secured creditors. The CRA, after they assess them, as they are sure to do,
whether it be for the $90 million in unclaimed T1 income or for any unpaid source
deductions, will end up with nothing for their efforts.

What you need to know

Any memorandum assessment is a last ditch effort by the tax collector to realize on a
delinquent tax debt. Revenue Canada has been unable to collect from the originally
assessed party so they are trying to obtain payment from you. But quite often they are so
desperate to collect they will assess individuals or businesses that they have no business
assessing. Consider the case of the Ancaster couple Ed and Helga.
Helga separated from her first husband, Herman, in 1973 and finally divorced him in
1980. In 1993 Revenue Canada approached Helga trying to determine the whereabouts of
her first husband, now a tax debtor. She had allowed Herman to briefly use a property of
hers in the early 1990’s but he had since disappeared. She and her husband Ed co-
operated fully in Revenue Canada’s investigation, providing notes and paperwork, their
time and interviews.
How did the tax collector repay Ed and Helga’s assistance?
They transferred her ex-husbands tax debt to her. A debt exceeding $900,000.
Naturally the couple refused to pay and interest began to accumulate. Today with interest,
the figure is approaching two point six million dollars. For over six years they were
chased for a tax debt they protested time and again that they did not owe. And the tax

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collector ignored them. Not even bothering to read their letters. So they appealed the
assessment.
A little investigation determined that Helga and Herman were at arm’s length from
one another. That no transfer of any property of any kind had transpired. That Helga had
not received any benefit from Herman in any form whatsoever. Yet Revenue Canada,
knowing that their assessment was a sham, still chased them for almost seven years. By
the time you read this passage the courts will have dismissed their Section 160
memorandum assessment. And they will be considering action against Revenue Canada
for negligence.
The tax collector was so obsessed with collecting that they overlooked any contra-
indicators of a memorandum assessment, chasing and harassing the couple for many
years.
But honestly, the tax collector is raising fewer and fewer memorandum assessments.
In fact today many tax collectors are not even trained to recognize when a memorandum
assessment exists, as illustrated by the story above. Furthermore because these
assessments are always appealed by the transferee they can take many years to resolve
and the older a debt gets, the more likely it is to go uncollected.
Resisting a tax debt arising by way of a memorandum assessment is actually quite
simple. Assuming you have not already made yourself judgement proof the easiest
method is to transfer the asset to an individual who has not the money to pay your tax
arrears or to an unrelated trusted party.
Remember a memo assessment, like an Execution, is usually a last ditch effort by the
department to collect your tax arrears so if the assessment fails your tax debt is more
likely than not to end up written off.
The transferee may also appeal the memo assessment and delay payment until it is
possible to reorganize their affairs. Remember that an appeal will often stretch out two or
more years but often lasts much longer.
Today the tax collector rarely collects on Section 160 memorandum assessments and
they do not have much more success with a director’s liability memorandum assessment
(Section 227.1 of the Income Tax Act).
Clearly, even when the tax collector uses their specialized collection tools to catch tax
avoiders they still refuse to travel the full one hundred yards to collect the tax liability.
The end result is informed debtors who dance around collection.
What happens to the overwhelming majority of memorandum assessments no matter
what section of the Income Tax Act they were raised pursuant to? They are written off,
written off because collection can not be enforced, written off because the debt is not
valid, written of because the transferee is as smart as the transferor and has protected their
assets accordingly.
In essence, some tax debts are being assessed twice only to collect nothing.

177 ©Alan Baggett

 The Requirement for Information

Chapter 13

Canada Revenue Agence du Revenu

Agency du Canada

<Cover letter for the recipient of the Requirement for Information>

Canadian Savings Bank December 22, 2010

1 Any Street
Yourtown, Ontario
H0H 0H0

Dear Sir/Madam

Re: Joseph Doe and Jane Doe and Services Limited

It is understood that information relating to the above taxpayer, which would be of value
to this Division in the administration or enforcement of the Income Tax Act, may be
obtained from the records of your office. We would appreciate the opportunity of
reviewing those records and of taking therefrom the details required.

In complying with this request, would you please provide the information and produce
the documents, thereby requested on the attached list, to an officer of this Department
who will attend at your branch for that purpose.

Yours truly,

Jon Jaxson
Director – Taxation
Toronto West Taxation Services Office
of the Department of National Revenue, Taxation

c.c. The Director

Provincial Savings Office
Parliament Buildings
Toronto, Ontario

REGISTERED MAIL

Toronto West Tax Services Office Local: (905) 566-6617

P.O. Box 6000, 77 City Centre Drive Fax: (905) 615-2702
Mississauga ON L5A 4E9 Web Site: www.ccra-ardc.gc.ca

178 ©Alan Baggett

 The Requirement for Information

13

On the opening page of this chapter you just read an example of a cover letter the tax
collector might use when sending a Requirement for Information to a third party. In fact
most Canadians remain unaware of the fact that they are not required to reply to the tax
collector’s queries until those same questions are presented to them in written form. This
is where the Requirement for Information comes in to play.
A Requirement for Information is a legal instrument the tax collector uses to order
you, your authorized representative or another third party with which you have close
dealings with to supply information that, up until this point, they had refused to divulge.
When such a request is served it requires the recipient, within a specified time period, to
provide answers or information to the questions contained in the document. The tax
collector will usually request that copies of any and all information be made at your
expense for their removal.
Right now I’m sure thoughts are racing as minds ponder this new bit of information,
“I don’t have to answer Revenue Canada’s queries?”
No, you don’t. At least not until received as part of a Requirement for Information.
The way I feel about the matter is that if the tax collector asks you a reasonable
question about your tax situation or about your books and records you should answer and
answer honestly. There’s no point in beating around the bush.
But at the same time you should only answer the question asked and not provide any
additional information unless doing so is to your benefit. As a tax collector one of my
most effective weapons was silence. Just be quiet and let the debtor talk and talk and talk.
As like as not they would mention something they should not. Some small item that
would help enforce collection of a tax debt like that vacation property up north or an
emergency bank account.
But when the tax collector decides to ask you questions about a third party you should
avoid answering until legally bound to do so. Why risk yourself being subjected to the
legal wrath of the injured party in this day and age of litigiousnous.
On the following two pages you will find the actual Requirement for Information that
accompanied the cover letter that introduced this topic.

179 ©Alan Baggett

 The Requirement for Information

Canada Revenue Agence du Revenu

Agency du Canada

Canadian Savings Bank December 22, 2010

1 Any Street
Yourtown, Ontario
H0H 0H0

Dear Sir or Madam:

Contact: Moe Pattel

Re: Joseph Doe and Jane Doe and Services Limited

1. Pursuant to paragraphs 231.2(1)(a) and (b) for the purposes related to the
administration or enforcement of the Income Tax Act, I require you to provide within
fifteen (15) days from the date of delivery of this requirement, information and
documents as follows:

(a) A statement setting out all entries in all accounts at your Branch, that are known
to be or to have been operated or controlled by, for, or on behalf of the persons
named above or any of then and all joint accounts in the names of any of those
persons and another or others and are related to the affairs of those persons or any
of them, in all other accounts at your Branch including Casual, Manager’s Sundry
and similar accounts.

(b) A statement setting out particulars of all transactions, including loans and
discounts and collateral thereto, safety deposit box rentals, safekeeping and
security dealings at your Branch with, to, for or on behalf of the persons named
above or any of them either alone or with another or others, or any persons known
to be or to have been acting on behalf of those persons or any of them.

…/2

Toronto West Tax Services Office Local: (905) 566-6617

P.O. Box 6000, 77 City Centre Drive Fax: (905) 615-2702
Mississauga ON L5A 4E9 Web Site: www.ccra-ardc.gc.ca

180 ©Alan Baggett

 The Requirement for Information

- 2–

(c) All documents, including authorizations, powers of attorney, mail and telegraphic
transfers, accounts, vouchers, letters, contracts, letters of credit and statements that
are known to be or to have been related to the entries or transactions set out in the
statements required under (a) and (b) above.

2. To comply with this requirement you should provide the information and documents
hereby required to an officer of this Department who will attend at your Branch for
that purpose.

3. Your attention is directed to subsections 238(1) and (2) of the Income Tax Act for
default in complying with this requirement.

Yours sincerely,

Moe Pattel
Team Leader

Toronto West Tax Services Office Local: (905) 566-6617

P.O. Box 6000, 77 City Centre Drive Fax: (905) 615-2702
Mississauga ON L5A 4E9 Web Site: www.ccra-ardc.gc.ca

181 ©Alan Baggett

 The Requirement for Information

How does it work?

The Minister, through a tax collection officer, will require you to provide any
information or document for any purpose related to the administration or enforcement of
the Income Tax Act.
Subsection 231.2(1) of the Income Tax Act allows that the Minister or his authorized
representative, in this case a tax collector, may require you to provide:

a) any information or additional information, including a return of income or a

supplementary return and/or
b) any document

This must be done within a reasonable time as stipulated in the notice.

A reasonable time is defined as not less than thirty days for information located inside
of Canada. Section 231.6 of the Income Tax Act allows for the tax collector to request a
foreign based information or document but the served party has ninety days to comply.
The Requirement for Information can be issued on any person, company or institution
and is an enforceable process under law comparable to a court order, summons or
subpoena.
This type of demand can be served personally, by registered mail or by certified mail.
Should you fail to comply with a Requirement for Information you can be fined not
less than $200 and not more than $10,000 or, a fine and imprisonment with the time
served not to exceed six months. The Court will also make an order as it deems proper to
enforce your compliance with the requirement.
The tax collector will only use a Requirement for Information when:

i. the amount of your tax debt is substantial.

ii. there is evidence that you are uncooperative or are using evasive tactics to avoid
payment of tax
iii. the information can not be obtained from other sources and is so clearly essential to
the investigation that prosecution would be warranted in the event of non-
compliance.
iv. when it is necessary to prove non-compliance with a requirement-to-pay.

To the tax collector a substantial tax debt is usually considered to be in excess of

$20,000.
The issuance of this type of requirement is very serious not just because of the legal
implications but also because of the effect it can have on unrelated parties. It
demonstrates to the third party, the one receiving the document, that you are unable to
handle your personal and/or business affairs.
Because the use of such a document is so serious before one can be used the consent
of the TSO Director must be given.
An internal memo used to obtain such agreement is found following.

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 The Requirement for Information

Canada Revenue Agence du Revenu

Agency du Canada

<Letter to request the TSO Director’s concurrence for a Requirement for Information>

Director September 5, 2010

Toronto West Tax Services Office
Revenue Canada

Re: Requirement to Produce Books and Records

Canadian Savings Bank
1 Any Street
Joseph Doe and Jane Doe and Associated Companies

I am requesting this Requirement to Produce Books & Records under Section 231.2 of
the Income Tax Act, with a view to tracking the flow of banking transactions with respect
to the associated accounts of Joseph Doe and Jane Doe.

The history of the associated companies follow a similar pattern of operation in that until
the initial investment is recovered the company will continue to operate. Once Joseph
Doe recovers his investment, he then proceeds to sell the company’s assets and ceases to
pay any financial obligations owed to his creditors. Joseph Doe now operates his
companies under the umbrella of The Joint Companies Group, and up until the last
couple of months these accounts have remained current with their remittances. Recently
the regular remittances have not been received and efforts to resolve these issues have
been frustrated due to the lack of information regarding Joseph Doe’s banking
transactions.

The Requirements to Pay that have been issued to the Bank previously have produced
minimal results, as Joseph Doe has a myriad of accounts registered with this institution.
The Department would like to review these records in order that we will be able to
establish a more concentrated enforcement plan of action.

If you have any further questions please contact T. Rouble at 566-6617.

Yours sincerely,

Birt Sampson
Team Leader

Toronto West Tax Services Office Local: (905) 566-6617

P.O. Box 6000, 77 City Centre Drive Fax: (905) 615-2702
Mississauga ON L5A 4E9 Web Site: www.ccra-ardc.gc.ca

183 ©Alan Baggett

 The Requirement for Information

A Requirement for Information is also serious because of the expense to the third
party in fulfilling the request. An expense that neither the tax debtor nor the tax collector
will reimburse them for. They have to pay their employees to answer the tax collector’s
questions about you. As a result it usually affects your standing with the third party
detrimentally and it may taint the future of the third party-tax debtor relations. Nobody
wins.
A valid Requirement must have the actual address of the recipient, not a care of
address, as well as all proper legal names of the debtor and addressee. Any known
nicknames and aliases should also be included.
A Requirement can only be served to the person whom it is directed to and/or, in the
case of a company, a director, officer, official or adult person in the employ of the
business. Service must be made in person, via registered or certified mail. No other
methods of delivery are allowed.
Other factors that immediately invalidate a Requirement for Information include
spelling errors and/or typing erasures.
Because a Requirement for Information is a legal document, once issued there are no
provisions to extend its date to allow more time for the third party to provide the
information. To alter or allow for an alteration of the date on an issued Requirement
invalidates it making its enforcement impossible. Court cases have been lost on several
occasions when the tax collector allowed for a change in a Requirement’s date.
Should the expiry date of the Requirement fall on a Saturday, Sunday or Legal
Holiday the document will be ruled invalid. Nor can this legal document be delivered on
a Sunday or Legal Holiday. The tax collector has been challenged in such situations and
has lost each time.
When it comes to the questions that may be posed in a Requirement they must be
exact and not open to ambiguity. Because when the questions are vague or open to
interpretation it leads to trouble. But only for the tax collector.
It seems a tax collector asked a tax debtor to provide a list of ‘outstanding account
receivables’. On the thirtieth day the debtor complied and supplied that list. But it was
only a list of numbers. Nothing more. Not the names of the parties indebted to him, not
their addresses, not even the age of the debts. Enraged the department took the debtor to
court because they felt he had not answered the Requirement properly. It took the Court
less than a day to decide that he had. He had supplied everything they asked for. A listing
of his outstanding account receivables. The tax collector had not asked who was indebted
to him or any other particulars so he had answered the document truthfully and correctly.
The recipient can not be expected to know the mind of the tax collector or be held
responsible for supplying information that was not requested.
The department was forced to issue a second requirement with much more detailed
questions in order to get the necessary information. A third party though can not be
expected to drop everything to comply with the Requirement whether it is a first or a
second request.
I should also not that Requirements for Information have been successfully attacked in
court. Most often because the time allowed for compliance was unreasonable or the
questions asked were vague and open to multiple interpretations.
In days of yore the tax collector did not car about the effects the serving of a
Requirement for Information had on you or the third party but times have changed.

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 The Requirement for Information

Today, as a result of recently imposed judicial restraints, it is used only as a tool of last
resort. The tax collector has to be mindful of the fact that if such a Requirement is issued
for no reason and harm is caused as a result of its issuance they would be held
responsible.
What brought about such a change in the tax collector’s behavior?
With the passing of the Constitution Act (1982) a number of laws were declared
unconstitutional. The tax collector was directly affected by Section Eight of the Charter
of Rights which challenged their right of search and seizure. The interpretation of the
Canadian Charter of Rights and freedoms by the Supreme Court of Canada meant the tax
collector lost virtually all authority to search and/or seize documentation as allowed
under the Income Tax Act at that time. Such actions were declared as being
unconstitutional because Section Eight of the Charter gives all Canadians the right to be
secure against unreasonable searches and seizures.
Why was the department’s uncontested authority challenged?
In the years prior to the Constitution Act Revenue Canada and its tax collectors would
request anything and everything that crossed their minds, including the kitchen sink.
Whether the request pertained to the debtor’s tax liability or not was unimportant. One
tax debtor challenged the tax collector’s right to arbitrarily search and seize in this
manner after he had been subjected to numerous unusual requests. He won.
It was proven that Revenue Canada had been using their powers indiscriminately to
cause unwarranted stress both to Canadians and to tax debtors like him.
After several challenges to lower court rulings the Supreme Court of Canada then
decided that prior authorization from a representative of the judiciary was needed before
the tax collector could obtain a Requirement for Information.
Today a judge must be satisfied that an offence has been committed under the Income
Tax Act and that evidence will be found of such an offence at the place of the requested
search. The tax collector can no longer seize information, documents or other items as the
mood strikes them.
Strangely enough there are now times when the tax collector has issued this type of
Requirement and then failed to collect the third party’s response. This enrages the third
party because of their time and expense spent fulfilling the department’s unnecessary
request.
I am aware of a financial institution that, after receiving and completing the response
to a Requirement, made numerous requests for the tax collector to come pick it up. Long
after the thirty-day period noted on the document had elapsed they were still trying to
find someone to take it off their hands. Exasperated they complained to the TSO director
but when he did not act promptly they threw out the response. No action was taken
against the bank nor was a second Requirement for Information issued.
Stories like this embarrass the department, demean the importance of the legal
document, encourage third parties to frustrate collection and result in tax debts being
written off. Even worse, the courts frown on the tax collector frivolously using their
powers to the detriment or expense of others.
Finally, once the tax collector collects the third party’s response, the request is
considered to have been fulfilled. Even if all the requested information has not been
provided. There have been a number of instances where the tax collector has taken the
third party’s response only to realize that the response was incomplete. When they

185 ©Alan Baggett

 The Requirement for Information

returned to ask for the missing documentation they were refused and told to issue another
Requirement.
When such a matter was brought to court it was ruled in all instances that it is the tax
collector’s responsibility to make sure all information requested is present before it is
removed from the premises. Once the response is removed the Requirement for
Information is considered to have been satisfactorily fulfilled.
If the department feels the need to issue a second Requirement for Information to
obtain the missing information the department should pay the third party for the time and
expense involved because they can not be expected to bear the costs twice for the same
request.

What you need to know

Will the tax collector always use a Requirement for Information when they want
questions answered?
No, they will not.
Why not?
There are a number of reasons. The most likely being that the tax debt is too small to
warrant the expense of obtaining a legal requirement or the tax collector feels they can
use the department’s reputation to bully the third party into answering.
How?
Instead of sending you a Requirement for Information letter the CRA will send a
Request for Information letter. These two letters are very similar in appearance but one is
a legal document, the Requirement for Information while the other is simply a general
form letter or a Request for information.
An example of Revenue Canada’s Request for Information letter can be found on the
page immediately following.
But how can you, someone without a lawyer’s education, tell the difference between a
Requirement and a simple request. It’s really quite easy.
One, a Requirement, as a legal document is almost always hand-delivered by a
representative of the department. At times the Requirement may be sent via registered
mail but personal service is preferable in case the addressee claims the Requirement was
not received and the matter goes to court.
Two, the deliverer will attempt to obtain a signature to verify receipt. If no one signs
they will swear out an affidavit confirming that they handed to a qualified person or an
employee (anyone but a child) at the premises.
Three, Revenue Canada will always arrange to pick up the information requested.
With a Requirement they never allow for mailing as it may be lost.
Four, the letter will specifically state that they (the Department) “require” the
information requested and will make reference to their authority to impose a reply upon
you. Specifically Section 231.2 of the Income Tax Act. Quite often they will also make
note of any penalties they may apply by quoting subsections 238(1) and 238(2) of the
Income Tax Act.
And five, the Requirement itself and/or its cover letter is almost always signed by the
director of the sending Taxation Services Office.

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 The Requirement for Information

Canada Revenue Agence du Revenu

Agency du Canada

Tax Services Office

Mississauga ON L5A 4E9
March 5, 2011

Clark Griswald Account Number

Manager, Cerebrus Apartments 123456789
77 Patel Drive
Mississauga, Ontario L7R 3H8

Dear Sir or Madam:

Re: Mindy Cantser

We are writing requesting information to help us in administering and enforcing the

Income Tax Act.

Please send us the following information within thirty (30) days:

1) As landlord please confirm that Mindy Cantser currently rents the apartment 666 of
your Cerebrus Apartments.

2) Please provide a copy of Ms. Cantser’s rental/lease agreement with you.

3) Please provide a photocopy of the most recent cheque used to pay rent.

Thank you for your assistance in this matter. Should you have any further questions
please do not hesitate to contact the writer.

Yours Sincerely

Cyril Smyth
Collections Officer
Section 463-11

Toronto West Tax Services Office Local: (905) 566-6617

P.O. Box 6000, 77 City Centre Drive Fax: (905) 615-2702
Mississauga ON L5A 4E9 Web Site: www.ccra-ardc.gc.ca

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 The Requirement for Information

But when the tax collector is completing a simple form letter request for information
(example shown on previous page – the tax collector will ask any sort of question under
the sun not just these).
But how can you tell the difference?
One, most often the informal request will be sent via regular surface mail and
unregistered. On occasion such requests will be hand delivered but still it will not be
signed for.
Two, the department will request that you simply mail in your response. No date for
an in-person pick-up is scheduled.
Three, the tax collector will not say “require” or quote any sections or subsections of
the Income Tax Act in their form letter request.
Four, the letter is always signed by a low level employee and never the director.
The big difference is is that the form letter request is not a legal document and the
department has no recourse should the addressee fail to reply. Why? Because the tax
collector can not prove that the document (the form letter request) was delivered. Nor can
they prove that the addressee did not mail in their response. It could have just got lost in
the mail.
Then why does the CRA sometimes use a legal document, a Requirement for
Information, and at other time’s use a general form letter, a Request for Information.
Economics. It’s as simple as that. If the tax debt is insubstantial in dollar value (to the
department) or they figure that crystallizing on the debt is unlikely they will not go to the
time and expense of a Requirement. Why do that if the tax debt is only going to end up as
a write-off anyway.
But there is also another and slightly more sinister reason. They will not obtain a
Requirement for Information when they are trying to obtain information for criminal
investigations, they do not want to tip the party being investigated. Of course this is
illegal.
In the court case of Her Majesty the Queen and Dial Drug Stores Limited and Ronald
Cowell, January 18, 2001 in the Ontario Court of Justice it was revealed that on several
occasions a tax collector attended a third party, Novapharm Pharmaceuticals. The
collector repeatedly attempted to obtain information on Cowell and Dial Drug Stores
without using a Requirement for Information. Novapharm requested that the tax collector
cease attending their offices. They were correct in doing so.
Unable to obtain the necessary documentation the collector turned to Revenue
Canada Auditors reviewing Novapharm records to seek out and deliver those records
related to Cowell and Dial Drug as he needed them to build a tax evasion case against the
two parties. They did. This procedure was contrary to Taxation Operations Manual
(TOM) paragraph 1142.2(3) and TOM paragraph 11(10)1.1(1)(d). But department policy
does not hinder their actions.
When Revenue Canada is conducting a criminal investigation a criminal warning must
be given when seeking evidence to this end. If the warning is not given any evidence
obtained is most likely inadmissible in a court of law.
This decision was in complete agreement with the Soviak case decided in the Ontario
Court of Justice (Provincial Division). Although this case involved an investigation into
the failure to remit Ontario retail sales tax and resultant charges the decision should apply
to similarly conducted Federal cases as well.

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 The Requirement for Information

During the investigation the Ontario Finance Office’s Special Investigations branch
issued requirement letters to related third parties in order to obtain information regarding
the person under investigation. At the trial the use of those letters was challenged on the
basis that it violated Charter rights. The court reviewed the case on this question and
court concluded that when the first requirement letter was issued the review immediately
became criminal or quasi-criminal investigation and was no longer a compliance or audit
matter.
Failure to obtain a warrant led to the exclusion of evidence obtained via the
requirement letters.
But these two cases make it perfectly clear that statutory audit and other information-
gathering powers may be used to ensure mere compliance with tax legislation, but not
when the objective of the exercise becomes a criminal or quasi-criminal matter. If
information-gathering powers are involved and the user finds a basis to support criminal
charges, then a search warrant(s) must be obtained.
Now when should you answer questions posed by the tax collector? Without being
issued a Requirement for Information?
Only when they pertain to yourself and/or your personal business.
If you were to give out personal information about another individual or party without
their permission you are breaching their confidence.
If you do receive such a request you should examine it closely to ensure that no errors
are present on the document. Any type of error, no matter how trivial, automatically
invalidates the Requirement for Information.
I myself would never answer the tax collector’s questions about a third party until
served with a Requirement for Information.
As an employer you should only confirm the details found on a T4 about your
employee but nothing else, not a home address or confirmation they’re still employed
there.
A landlord should never give out personal information on a tenant other than to
confirm residence.
And so on.
Examine the questions posed on the Requirement for Information closely and be sure
to answer them in full. But do not supply any extra details unless those details will help
your situation. If you’re up for it you could try to answer as little as possible and see if
you can get away with it but because of the seriousness of any repercussions it is not
something that I would advise.
In fact there was a time when all major financial institutions freely handed out your
personal information, just as soon as they heard the words: “Hi, I’m calling from
Revenue Canada,” but they now refuse to give out any information whatsoever unless the
tax collector includes their query as part of a Requirement for Information. The reason
for this sudden reversal is to protect them from damaging and costly litigation that they
would end up losing. And Even if they were to win they would still lose you as a
customer.
And what if you, an individual, does not want to answer the queries of the tax
collector. What can you do? What excuses can you use?

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 The Requirement for Information

Employee Questionnaire
The following is based on the CANADIAN CHARTER OF RIGHTS AND FREEDOMS and CANADIAN
BILL OF RIGHTS and is necessary to ensure the rights of the questioner, hereinafter called the ‘mandator’.
The public servant is hereinafter called the ‘mandatarius’.
Note: As the status of the mandatarius may change at any time, this form should be filled out at each
meeting with each public servant in attendance.

1. Employee Identification Area

Name and address of employee (first name before last name) Birth name: Yes No

Agency or Ministry employed by: RC-303 Identification

Department of above Agency or Ministry

2. Questions: Note: Circle the number of any questions the mandatarius refuses to answer
Yes/No

1. Will the employee uphold the Canadian Charter of Rights and freedoms as it pertains to the mandator?
2. Will the employee furnish a copy of the law or regulations related to the matter at hand?
3. Will the employee read aloud, prior to asking a question the law or regulation that authorizes the questioning?

4. Are the questions to be asked part of a discovery process?

5. Are the answers requested of the mandator voluntary?

6. Are the answers asked of the mandator to be used in any other process or investigation?
7. Does the employee foresee civil/criminal action to be taken based on the information
sought?
8. Will any refusal to answer questions self-incriminate the mandator?
9. Will the employee guarantee the information supplied will not be shared with other departments or
agencies?
10. Will the employee uphold the Canadian Bill of Rights as it pertains to the mandator?
11. Are any other groups or individuals involved in this investigation? If so, who?

12. What agencies/departments have provided information to date related to the matter at hand?

3. Signatures of attending parties and date

Interviewer I certify the above information to be accurate.

Employee’s signature (print ‘refused’ if so).

Witness Witness

Date and location Witness

Note: Provide the mandatarius with a photocopy and keep original for your records.
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 The Requirement for Information

Some enterprising Western Canadians came up with a simple yet brash tactic that has
been sending the tax collector, auditor, and special investigator, scurrying away, tails
between their legs.
What could strike fear into the hearts of Revenue Canadian like Revenue Canadians
cause some of us to tremble? The Employee Questionnaire (example page previous).
The Employee Questionnaire form was devised by Westerners who felt their rights
were being trampled on by tax employees because they were not being fully informed of
the tax processes directly affecting them. So they came to devise this questionnaire to be
posed to department employees who asked them questions (verbal or written). Feeling
this would protect their rights and put their minds at ease.
But much to the Westerners surprise the tax employees refused to complete and/or
sign the questionnaires composed of questions that simply guaranteed the questioned
individuals rights.
In fact soon after the Employee Questionnaire first appeared all tax employees were
ordered not to sign them. Tax employees were also ordered not to allow themselves to be
video taped or audio taped while doing their job (see Appendix B to view the now
infamous Pacific Region Memorandum that deals with these three subjects). Any such
incidences of questionnaires, video/audio taping of tax employees are to be referred
immediately to Security.
Because the tax employees refused to guarantee the questioned individual’s rights the
questioned individuals refused to answer all tax queries. Written or verbal.
When approached in person the individual being questioned by agency employees
always promise to answer any and all tax questions if only the tax employee would sign a
slip of paper guaranteeing to protect their rights which, to date, the department has
refused to do.
When mailed a letter, such as a request for information or other form letter, the
addressee returns the letter and attaches a copy of the Employee Questionnaire. They
only ask that the tax employee complete the questionnaire and return it. Only then will
the answer the tax collector’s questions. Of course all tax employees have been advised
not to complete the Employee Questionnaire so their correspondence remains
unanswered.
This practice, refusing to answer any questions unless an Employee Questionnaire has
been completed and signed, has rapidly spread and now even concerned Quebecers are
using this tactic to frustrate the taxman and the taxwoman.
Any time the tax collector asks for information about a third party the questioned
individual should decline to answer unless the request is contained in a Requirement for
Information.
After all, if you want information from Revenue Canada or any government
department for that matter, you must make a request under the Access to Information Act
or the Privacy Act. And even then your request is just as likely to be ignored.
You may ignore the verbal request or an unofficial written request sent in the form of
a request for information without fear of legal retribution but ignore a Requirement for
Information at your own peril. I know of no court case where a properly served, worded
and timed Requirement for Information has been defeated.
Finally, find following, an example of a Requirement for Information that might be
sent to a law office.

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 The Requirement for Information

Canada Revenue Agence du Revenu

Agency du Canada

Confidential Registered

Smith and Smith December 22, 2010

Barristers & Solicitors
12 Any Avenue West
Toronto, Ontario
H0H 0H0

Dear Sir or Madam:

Re: Joseph Doe and Jane Doe and Services Limited

For purposes related to the administration or enforcement of the Income Tax Act,
pursuant to the provisions of paragraph 231.2(1)(b) of the said Act, I require you to
provide within thirty (30) days from the date of delivery of this registered requirement,
the following documents:

1. The Shareholders’ Register of Joseph Doe and Jane Doe Services Limited

2. The Minute Book of Joseph Doe and Jane Doe Services Limited

3. The Cheque Register of Joseph Doe and Jane Doe Services Limited

To comply with this requirement you should provide the documents hereby requested to
an officer of this Department who will attend your office for that purpose.

Alternatively, compliance with this requirement may be elected by mailing the

documents hereby required, by registered mail, to the undersigned at the address shown
within the time specified in the first paragraph of this requirement. Photostatic copies of
the documents will be sufficient.

Toronto West Tax Services Office Local: (905) 566-6617

P.O. Box 6000, 77 City Centre Drive Fax: (905) 615-2702
Mississauga ON L5A 4E9 Web Site: www.ccra-ardc.gc.ca

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 The Requirement for Information

Your attention is directed to the penalties provided on Subsection 238(1) of the Income
Tax Act for failure to comply with this requirement. Further, Subsection 238(2) also
provides that where a person is found guilty of an offence under Subsection 238(1) for
failure to comply with a requirement, the court may make such order as it deems proper
in order to enforce compliance with the requirement.

Yours truly,

Ron Jackson
Director – Taxation
Toronto West Taxation Services Office

Toronto West Tax Services Office Local: (905) 566-6617

P.O. Box 6000, 77 City Centre Drive Fax: (905) 615-2702
Mississauga ON L5A 4E9 Web Site: www.ccra-ardc.gc.ca

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 Jeopardy Assessments

14

Although the antics of the tax collector can provide hours of entertainment their
invocation of the jeopardy provisions of the Income Tax Act are no game. Indicate to the
tax collector that you have no plans to pay a recent or pending tax assessment and they
may consider jeopardizing your tax debt.
To invoke a jeopardy action is the decision to immediately enforce payment of tax
arrears that normally are protected by the ninety-day collection restrictions. Subsection
225.2(1) of the Income Tax Act allows the tax collector to enforce immediate payment of
your tax assessment or reassessment, regardless of the imposed collection restrictions,
when it is believed that recovery of the amount would be jeopardized by a delay in the
collection process. This is jeopardy.
As noted previously the tax collector must wait ninety days from the date of the
assessment before undertaking legal action of any sort to collect personal or corporate
income tax arrears. With one exception. When the tax collector feels that by waiting
ninety days that collection of the tax debt would be hindered they can apply to the Court
for an exemption of this restriction. If the court waives the ninety-day waiting period they
are in agreement that collection of the tax debt is imperiled.

How does it work?

The tax collector will only consider a jeopardy assessment when these four factors
exist in combination:

i. There is a substantial tax liability.

In this instance a substantial tax liability is considered to be one in excess of
$75,000.00. Rarely is a jeopardy action initiated on a lesser debt.

ii. There exists an imminent danger of loss to collect the liability.

A danger of loss occurs in cases where fraud is evident or when the tax debtor
may liquidate or transfer assets beyond the reach of the tax collector.

iii. A definite avenue to collect the tax liability exists.

A definite collection avenue means the disposition of the debtor’s assets have
been investigated and there is a very good potential for immediate recovery if the
collection restrictions are voided.
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 Jeopardy Assessments

iv. Evidence that the debt will not be collected after ninety days exists.
This means that there are reasonable and provable grounds to believe that
collection of the tax debt is in danger. Evidence is decided on a balance of
probabilities. If the danger of loss is more probable than not than the jeopardy
proceeds but if the probabilities are equal the jeopardy action can not proceed.

It is extremely rare for the tax collector to pursue a jeopardy application if all four of
these factors are not clearly evident.
What will the tax collector use as a possible indicator of a jeopardy situation? They
will look for evidence of the following:

i. a sale of your assets, such as real estate listings

ii. equity deduction techniques such as - straw mortgages
- defeating judgements by encumbrances
iii. your purchase of a property or transfer of assets outside of the country
iv. transfer of your property at non-arm’s length and/or sale at less than fair market
value
v. auction sales
vi. seizure actions by other creditors
vii. criminal activities
viii. a stated intention or a petitioning of bankruptcy

To the tax collector these are the most common indicators of a potential jeopardy. If
one or more of these indicators exist, in the eyes of Revenue Canada, a danger of loss
may also exist. When the tax collector feels a jeopardy assessment is in order they will
prepare a Statement of Facts and a Risk Analysis in support of the jeopardy
recommendation and forward this to their TSO Director.
The Statement of Facts lists in chronological order any facts supported by evidence
that a jeopardy assessment should be invoked. Opinions, observations and hearsay should
not be used to support this evidence.
The Risk Analysis should reach the conclusion that a reasonable person would make
that, in the balance of probabilities, a delay in collection action would jeopardize
collection of the outstanding tax debt.
If the jeopardy recommendation is approved the analysis is forwarded to Head Office
for concurrence and with their agreement the assessment is given priority. It will be
expedited through the Taxation Center.
In tax cases where the jeopardy assessment is a currently outstanding assessment the
debtor will receive a second copy of that assessment. This is done to ensure that the
debtor undeniably receives proper notification.
Upon completion of the assessment notice it is returned to the TSO, signed by the
Director, and the tax collector then will attempt to effect personal delivery of the notice.
A Jeopardy Assessment is, whenever possible, personally served. At the time of the
service the assessment will be explained to you and you will be given the opportunity to
voluntarily render payment. The Notice of Assessment or Reassessment is delivered

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combined with a Letter of Direction. The Letter of Direction requests that you, “Pay
forthwith the amount assessed.”
When it appears that you are deliberately avoiding personal service of the assessment
Revenue Canada has the option of taking immediate legal action to collect the liability.
They may also take immediate legal action when there is evidence you are outside of
Canada and is not expected to return. Specifically, when you are outside of the country
and it is unreasonable to await your return or when all reasonable efforts to personally
serve you have been exhausted. When personal service cannot be effected the Notice of
Assessment and Letter of Direction will be sent by registered mail to your last known
address.
You will be allowed a thirty-day review period in which you may apply for a Judicial
Review to have the Direction vacated. The only way the jeopardy action can be stopped
is by demonstrating to the Court that the amount would be collectible after the ninety-day
legislative restriction. During the period of review or where a review is pending the tax
collector will forestall search and seizures in most instances until the judicial review is
completed. A judge will grant an extension of time to a debtor who can demonstrate that
they could not have been reasonably expected to file the application within the thirty-day
appeal period.
Should you choose to negotiate with the department prior to the jeopardy provisions
being invoked, anything you tell Revenue Canada should not legally be allowed to prove
a jeopardy exists because litigation privilege lets settlement issues remain private whether
negotiations are successful or not. If the negotiations were unsuccessful and the tax
collector were to use information from the negotiation to invoke the jeopardy the Court
would refuse to allow the jeopardy action to continue.
Tax debtors and their advisors should also be mindful of the case of the Minister of
National Revenue vs. Rudyk which involved a jeopardy order being obtained after
settlement talks began. The talks broke down and the client applied for a judicial review
of the jeopardy within thirty days of the breakdown of settlement talks but more than
thirty days after the jeopardy order was obtained. The Court allowed the motion as it was
determined that if the thirty day period runs concurrent to any negotiations it may be
counter productive to efforts to settle in good faith.
Due to previous abuses of their jeopardy powers the onus is on the tax collector to
prove that a danger of loss exists rather than the tax debtor having to prove no such
danger exists. With the burden of proof resting on the tax collector’s shoulders the
jeopardization of a debt is rarely attempted.
In the post Charter of Rights Canada, the department does not want to set precedents
by losing cases. They could be held liable for huge damages if their actions adversely
affected you after invoking a false jeopardy action.
Jeopardy hearings are held in Ottawa in the Federal Court but because of distance and
the fact that time is crucial, many hearings are now held by way of conference call.
When actual court proceedings are required it is department policy that the TSO
Director not be made available. The official excuse is that it ‘would be counter-
productive to have a Director tied up in court proceedings giving live evidence’, although
the Director is also the affiant. Instead, any evidence is introduced by way of an affidavit
along with the Statement of Facts. With this method the department hopes to deflect any

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 Jeopardy Assessments

need to examine from the Director to other employees. The defense retains the right to
examine any Director but they always fail to do so.
Now in the good old days of tax collection Revenue Canada did not have to inform
you of an impending jeopardy. As a result the tax collector would jeopardize your tax
debt whenever a quick and easy avenue of collection was foreseen. Whether a danger of
loss existed was irrelevant. Such transgressions often caused the taxpayer undue and
unnecessary hardships just to allow for the premature collection of a tax liability. It was
breaking the law.
Originally Subsection 158(2) of the Income Tax Act allowed for the department to
demand payment forthwith but with the introduction of the Charter of Rights (1982) the
Department’s privilege to collect using 158(2) was successfully challenged as it deprived
the taxpayer of rights granted under the Charter including:

Section 7 - everyone has the right to life, liberty and security of the person and the right
not to be deprived thereof except in accordance with the principles of
fundamental justice.

Section 8 - everyone has the right to be secure against unreasonable search or seizure.

Section 11d - any person charged with an offence has the right to be presumed innocent
until proven guilty according to law in a fair and public hearing by an
independent and impartial tribunal.

Section 12- everyone has the right not to be subjected to any cruel and unusual
treatment or punishment.

As confirmation of these rights the Federal Government was required to amend the
current taxation legislation by 1985 and this gave rise to Sections 225.1 and 225.2 of the
Income Tax Act.
In 1988 Section 225.2 was further amended to provide that the department must obtain
judicial approval over and above the Revenue Minister’s approval where immediate
collection action is desired.
Why was a sudden check placed on the department’s power, over a three year span,
which stopped the department from jeopardizing a debt on a whim? For almost the exact
same reason as with the Requirement for Information. Abuse of power. The amendment
was added because of documented deficiencies in the tax collector’s approval procedures
for obtaining jeopardy assessments.
In the past it was not uncommon for the tax collector to abuse their unchecked powers,
jeopardizing tax debts to enforce immediate collection as the mood hit them. But one day
Revenue Canada unnecessarily attempted early collection of a tax debt from a debtor who
realized the department was taking advantage of their position to effect early collection.
He had never previously been a delinquent debtor nor had he any plans to stiff the
department on this particular occasion. There was no unreasonable change in the

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disposition of his assets and no evidence collection of the debt was or would ever be in
danger.
The problem, from the department’s point of view, was that his tax assessment was
rather large. So the debt was jeopardized and immediate payment enforced.
Upset the taxpayer challenged the tax collector. He went the full nine yards and was
able to prove that collection of his tax arrears had never been in jeopardy. He also proved
that he was caused serious damage financially and professionally with the accelerated
collection action and that in the course of collecting the debt too hastily his rights had
been broken as defined by the Canadian Charter of Rights and Freedoms. He won.
With this decision the courts immediately lost confidence in the tax collector’s ability
to accurately jeopardize tax debts and to supply full disclosure of any counter indicators
of jeopardy. Counter indicators are reasons why the invocation of jeopardy proceedings
should not be undertaken. As a result of the 1988 amendment to Section 225.2 of the
Income Tax Act a tax debtor must be given notice of the jeopardy procedure so they can
respond in kind.
The department had abused their powers under Subsection of 158(2) and the
replacement Section of 225.2 of the Income Tax Act. Instead of initiating a jeopardy
action on those tax liabilities, where a danger of loss truly existed, the department was
invoking jeopardy on a contingency basis, usually on high dollar amounts. They were
speeding up the collection process and trampling on people’s rights in order to obtain
payment quickly. Regardless of the debtor’s intentions.
It became clear to the courts that many tax debts that were being jeopardized were not
actually in a danger of loss position. Jeopardy was being used as a tool of harassment and
to accelerate collection instead of solely to protect the department’s interests, as was the
legislation’s original intention. This situation changed as a result of the challenge under
the Charter of Rights and brings us to the present where today, according to statistics
from the Department of Justice, there is an average of only twelve successful jeopardies
initiated each year across Canada. Before these important legislative changes in 1985 and
1988, individual TSO’s easily averaged more than twelve jeopardies per year as did many
tax collectors.

What you need to know

Today the tax collector can no longer proceed on a suspicion of a jeopardy and the
court will reject any such motions. As an example, the sale of assets at a loss is not
sufficient evidence to initiate a jeopardy.
Moreover, the courts decided in Danielson vs. the Deputy Attorney General of Canada
et al that a taxpayer’s inability to pay, in this instance the debtor had no income of her
own and was dependent on her husband, is not justification to proceed with a direction to
enforce immediate payment.
How can you fight a jeopardy action?
The most common Revenue Canada losses stem from the tax collector failing to
disclose counter indicators of jeopardy. If it can be proven that the department has
omitted reasons why a jeopardy action should not proceed the case will be thrown out of
court. Immediately.

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 Jeopardy Assessments

Jeopardy counter indicators include a healthy bank account in a Canadian based

financial institution, a Canadian property not for sale, even a recent rental agreement.
Anything that demonstrates that you and/or your assets will be staying in Canada and are
not being made liquid is suitable. Even if you are doing the exact opposite.
If you are relocating to the United States it may also be argued that article XXVIA
“Assistance in Collection” of the Canada-United States Tax Convention is a counter
indicator of jeopardy. The Internal Revenue Service (IRS) will collect Revenue Canada
tax debts when asked when meeting certain conditions (see the chapter on the Tax Exile),
as we would for them, so actual collection of your tax debt is not in jeopardy.
For those with a deeper and more abiding interest in jeopardy actions google the court
case of O'BRIEN, RE, QB98221, Date of Judgment: April 20, 1998, Q.B.G. A.D. 1997,
No. 2283 J.C. S., IN THE QUEEN'S BENCH, JUDICIAL CENTRE OF SASKATOON.
Today jeopardy actions are rare because of the trouble identifying them, the time
restrictions as well as the fact that they most often do not stand up to the scrutiny of a
judge. The reason why Revenue Canada lost their power to unilaterally invoke the
provisions of jeopardy is because they abused their powers by continually jeopardizing
debts that were in no way in a danger of loss position. Sure they were able to collect
some tax dollars quickly in the short run, but over the long haul it ended up costing them
the ability to collect much more.
Clearly the onus is on the tax collector to prove the tax debt is in jeopardy of going
uncollected because of past indiscretions. Informed tax evaders with competent legal
counsel can now easily defeat Revenue Canada’s motions. Even when the tax collector is
correct. A bank account, a recent lease, even a cheap property you hold in Canada is
enough to allow the court to rule in your favour. Allowing determined tax evaders to skirt
Revenue Canada and protect their wealth.

On the page immediately following find an example of jeopardy correspondence.

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Canada Revenue Agence du Revenu

Agency du Canada

February 5, 2011

Jonathan Doe Account Number

Suite 500-5001 Yonge Street 98765432
North York, Ontario M5A 4E1

Dear Sir:

This letter accompanies documents being served upon you. These documents are: a Court Order
dated September 5, 2001, of the Honourable Madam Justice Mary Smith, Judge of the Supreme
Court of the Province of Ontario; a Notice of Assessment dated September 5, 2001 and issued under the
authority of subsection 150(2) of the Income Tax Act and other statutes.

The above mentioned Court Order was obtained under the authority of section 225.2 of the Income Tax
Act, on application by the Minister of National Revenue without notice to you and was issued after the
above mentioned judge was satisfied that there were reasonable grounds to believe that the collection of all
or any amount assessed in respect of you would be jeopardized by a delay in the collection thereof.

The above mentioned Court Order constitutes authorization to the Minister of National Revenue, subject to
the terms (if any) contained in that order, to take forthwith any of the actions described in paragraphs
225.2(a) to (g) of the Income Tax Act with respect to the amount of $132,334.11, being all or any part of an
amount assessed in respect of you. Please note that the above mentioned amount includes the sum of
$68,666.45 referred to in the Notice of Assessment (and demand contained therein) dated September
5, 2001 referred to above.

You may, upon six clear days notice to the Deputy Attorney General of Canada, apply to a judge of the
Court referred to above to review the above mentioned Court Order. Your application must be brought
within thirty days from the day the Court Order was served upon you, or within such further time as a judge
may allow, provided you can satisfy that judge that your application was made as soon as practicable.

If you require an explanation of the basis of the assessment(s), please contact Daguano Jones at the Toronto
North Taxation Services Office, telephone (416) 555-5555. If on the other hand, you require any additional
information regarding the Court Order, please contact Balesteri Smith the Assistant Director – Revenue
Collections at the Toronto North Taxation Services Office (416) 555-4444.

Wally Wilson
Director,
Canada Revenue Agency
Toronto North Taxation Services Office

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 Bankruptcy and the Tax Collector

15

The threat to declare bankruptcy is one commonly voiced by many Canadian tax
debtors when speaking with a tax collector. But most who utter this warning have no
intention of doing so. You’re really just trying to scare them into accepting your proposed
payment arrangement with the thinking that some payment is better than nothing. Maybe
some of you even think that the tax collector will be disciplined if you do declare
bankruptcy before they can collect your tax arrears. But nothing could be further from the
truth. Neither the tax collector nor their boss could care less if you go bankrupt. In fact
quite often they are ecstatic to hear that you’re doing so. Why? Because when you
officially declare bankruptcy you’re doing the tax collector a favour, it’s one less tax debt
for them to collect.
An individual or business is considered insolvent when they are unable to meet their
financial obligations as they fall due. An individual is not bankrupt however until their
property is brought under judicial administration, usually a trustee, who acts primarily in
the interests of the creditors.
On a per capita basis Canada has about as many bankruptcies as any other western
nation. Today it is a relatively cheap and easy process to submit to. But best of all there is
no longer a stigma attached to being a current or former bankrupt. This may explain why
we have so many repeat offenders.
Canada’s Bankruptcy Act was enacted in 1919. Since this date it has been subjected to
several amending processes. In its current incarnation it is known as the Bankruptcy and
Insolvency Act. The current Act’s purpose is threefold to rehabilitate debtors, to punish
fraudulent debtors and to control the assets of the debtor for division and distribution to
their creditors.
Covering both business and personal failures the Act also contains provisions for
insolvent individuals or corporations to make repayment arrangements with their
creditors to avoid entering bankruptcy status.
How does the tax collector deal with bankrupts?
In Irwin (1992)’ 16 C.B.R. (3d) 93 (B.C.S.C.) a British Columbia judge stated that, “It
is my experience that Revenue Canada tends to be lax after a person goes into
bankruptcy.”
I can attest that this judge’s statement is right on the money.

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 Bankruptcy and the Tax Collector

Visiting a Trustee

When you are having trouble paying your creditors you will randomly select a trustee
in bankruptcy and make an appointment to meet with them. The trustee will review your
situation and advise of your options. These options are:

i. Credit counselling for better money management

When a trustee examines the finances of the applicant they will advise you as to
whether or not they feel you have the means to pay your debts. If you do a small fee is
charged for credit counseling services and you will be sent on your way when the
sessions are completed.

ii. An informal proposal

iii. A proposal as noted under Division I of the Bankruptcy and Insolvency Act
iv. A consumer proposal under Division II of the Bankruptcy and Insolvency Act

As these are very similar they will be discussed as a group.

If you do not have the means to pay your accumulated debts a proposal will be
considered. A proposal will cost approximately $5000.00 and entails gathering all your
creditors together to set up a repayment schedule. The period of time for repayment can
be no greater than five years. Under a proposal you will not be repaying your total debt
but a percentage of that total. This percentage will depend on your personal financial
situation but it could range anywhere from pennies on the dollar to sixty or seventy cents.
There are three different classes of proposals.
An Informal proposal is used when there are few creditors and debts, and assistance is
needed to organize and supervise a quick repayment of the liabilities.
A Division I Proposal is for those with total debts greater than $75,000 excluding
debts secured by a person’s principle residence.
When a Division I Proposal fails, meaning you have not followed the promised
repayment arrangement, you immediately become bankrupt as of the date the proposal.
A Division II Proposal is for those with debts totaling less than $250,000.
After the Proposal is completed it will still be noted on your credit record for three
years after the last payment is made under the terms of the proposal.
For tax debtors who wish to “cut a deal” with the tax collector, a proposal is the only
means of doing so.
When you make a proposal under Division I or Division II the tax collector will vote
yes to accept less than 100 cents on the dollar in lieu of full payment. This is done solely
to ensure that the tax collector does not operate to the detriment of the other creditors.
But honestly the tax collector is happy just to get your tax debt off of their ledgers.
My first dealing with a proposal happened just months after the legislation was
enacted. I was put in a tough situation at the time but now I look back at it and laughingly
refer to it as the ‘Alfredo P. Affair’.
Mr. P filed a proposal in bankruptcy thinking he would not be held responsible for any
future debts he ran up until the proposal ran its course. In fact a proposal only includes

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 Bankruptcy and the Tax Collector

those debts up to and including the date of the filing of the proposal. Creditors are
allowed to seek payment in full for any debts that have arisen subsequent to the
proposal’s filing date. Unfortunately I had no support when collecting this account.
The debtor had a post-proposal tax debt of about $6400 and he flat out refused to pay
telling me, “I don’t have to pay any debts for the next five years until my proposal runs
its course.” I disagreed and sent a garnishment to his employer.
The employer refused to remit any monies on the garnishment complained to the
trustee. The trustee called and advises me to remove the requirement to pay immediately
as it was not valid. I refused to do so and suggested the trustee familiarize herself with the
new legislation. The trustee the employer and the debtor all complained to my boss and
as a result of this I was ordered to remove the garnishment. I pointed out that the new
legislation backed my position but I was told not to cause a fuss. Needless to say I was
ticked so I delayed in removing the garnishment.
But before I could remove the garnishment the trustee calls and confirms that post
proposal debts are collectible but asks that I not enforce collection because the intent of a
proposal is to rehabilitate debtors without causing them undue hardship. Apparently,
forcing Alfredo to pay his debts was contrary to the purpose of the Bankruptcy and
Insolvency Act.
Without consulting my boss I refused to rescind the legal action and the trustee hung
up the phone in a snit. About an hour later Mr. P’s employer calls to berate me and then
states that he would be paying Alfredo’s debt in full. I learned later that the employer was
also Alfredo’s father-in-law.
This story speaks volumes about Revenue Canada, trustees and write-offs. The
department backs off at the first sign off conflict. Some trustees cannot be trusted to act
impartially. The deletion of a tax liability never causes conflict, which is why it is such a
popular alternative.
The kicker to this story? I came across Alfredo’s tax account on two further occasions.
The first time he had a tax debt for the current year and on the second occasion debts for
two consecutive tax years. None of the collectors had made a constructive effort to
collect the arrears because of the past conflict as well as the fact that the debtor was in a
proposal situation.
This is a fitting summary as to the “rehabilitative intent” of the Bankruptcy and
Insolvency Act as well as to why those debtors who don’t voluntarily pay are never made
to pay. If I were a betting man I would be willing to wager that there is a bankruptcy in
this guys future as well as a write-off

v. An informal or non-legislative proposal

vi. An assignment into bankruptcy
vii. The failure of a Division I proposal

There are three ways in which you may enter bankruptcy. You can arrive via a
voluntary bankruptcy (informal), a petition into bankruptcy by creditors or by the failure
of a Division I Consumer Proposal.
There are two sub categories of voluntary bankruptcy. A Summary Administration
where the total of all your debts does not exceed $5000.00 and an Ordinary

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 Bankruptcy and the Tax Collector

Administration where the total of all your debts exceeds $5000.00. In both instances you
go through a minimum nine-month bankruptcy period before being automatically
discharged as long as you have no surplus income. If you are a first time bankrupt and
have surplus income you will have to make payments for a minimum of twenty-one
months before you can qualify for an automatic discharge. Second time bankrupts with
surplus income will have to make payments for a minimum of thirty-six months before
qualifying for an automatic discharge. A second time bankrupt with no surplus income
will have to wait twenty-four months to receive a discharge.
Most importantly, for the tax debtor, there will be no automatic discharge for you if
your tax debts exceed $200,000 and the unpaid taxes make up more than seventy-five
percent of your total debts. You must go to court to formally apply for a discharge from
your bankruptcy.
When you declare bankruptcy your tax account is considered to be revenue
production, a collected debt for statistical purposes so the first thing the tax collector will
do when you declare bankruptcy is ensure that your tax account is transferred to the
Automated Subledger (ASL). Now they are no longer responsible for handling the
account a sundry tax collector is.
If your tax debt is less than $1000 and you declare bankruptcy (or enter a proposal) no
further action is taken. No investigation is completed, nothing. As per TOM 2264.2(1) it
is Revenue Canada policy that no Proof of Claim is completed. When a Proof of Claim is
not filed Revenue Canada is not eligible to receive any disbursements from your estate. A
Proof of Claim is the creditor’s claim that the bankrupt is indebted to them. Instead your
tax debt will be written off at the next write-off submission.
For tax debts in excess of $1000.00 the tax collector will usually file a Proof of Claim
but this is often the full extent of Revenue Canada’s involvement with your bankruptcy.
They rarely attend first creditor meetings or conduct any further investigation unless they
wish to get out of the office for the day and earn some travel expense money. But once
the nine-month bankruptcy period expires and you are formally discharged the tax
collector will rush to write off your tax liability. This time though the ‘production’ is
credited to the subledger.
For a first bankruptcy the debtor is immediately discharged after nine months has
passed. There are instances where a discharge is opposed. In these situations the courts
may order that the bankrupt continue payments to the creditors for a set time period or
until an agreed upon amount has been repaid before approving the discharge. But such
events are very rare.
But when a judge does set such a penalty the amount is rarely punitive. Why? Because
judges see bankruptcy as misadventure rather than as careless or intended. As well a
judge tends to have a lifestyle better than most of us so they will sympathize with the
debtor and try not to be unduly harsh. Often the debtor is a local professional who moves
in the same social circles so again the judge is more likely to be forgiving and lenient.
This prejudice hurts creditors and the rehabilitative intent of the Bankruptcy and
Insolvency Act. The debtor’s well being is held in higher esteem than those of the
individuals and businesses he has affected are. Nor do judges seem to realize that
bankruptcy is a chain. Odds are that for every bankruptcy one of that bankrupts creditors
will also declare bankruptcy. Non-rehabilitative bankrupts are prone to commit their
crime again if it costs society more than it costs them.

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 Bankruptcy and the Tax Collector

The bankrupt will fall into one of two categories. Those who through bad luck or
misfortune can no longer pay their accumulated debts as they come due and those who
use the system as a means to shed their debt only so they can begin the process anew.
This second type of “bankrupt” has learned that while they are supposed to declare all
their belongings for purposes of liquidation it is easy to avoid doing so.
One of the chief complaints of the bankruptcy trustee is of the debtor who, once
informed of the rules, crosses the street and files with another trustee. But in the process
of crossing that street they divest themselves of assets. Other bankrupts outright lie about
their assets from the beginning.
Some bankrupts plan their bankruptcy. They max out their credit cards spending to the
limit on trips and meals or purchasing other intangible assets. Why do they do this?
Because any material purchases must be returned, televisions and stereos and the like, but
how can the bankrupt return a trip or a meal? They can’s so they don’t. It’s a free
vacation at the creditor’s expense.
Trustees and creditors depend on the honesty of the debtor to declare all assets but
those who are caught in a lie are rarely prosecuted because of the time and expense
involved. If the debtor has yet to be discharged from the bankruptcy they will lose the
newly identified asset but other than that they are usually let off the hook with nothing
more than a stern dressing down.
A bankrupt with a Parry Sound island cottage ‘forgot’ to claim this precious asset.
Luckily a provincial clerk processing his bankruptcy claim recognized him as the owner
of a neighboring cottage. When she noticed his cottage property was not listed as an asset
she informed the trustee. And she only turned him in because he always held large noisy
parties at the cottage and she desperately wanted to see a much quieter owner next door.
The bankrupt lost his cottage but suffered no other ill effects from his attempt to deceive.
Another debtor, after learning he was coming into a large inheritance, ran up a
mountain of debt then declared bankruptcy. Not being very bright he named the lawyer
handling his inheritance as a creditor. His attorney informed the trustee of the pending
$250,000 inheritance and the trustee delayed the proceedings and seized the monies. This
time the bankruptcy was annulled.
But more often than not bankrupts who attempt these deceptions quite often get away
without suffering any consequence worse than the loss of the asset. A trustee does not
know if you are declaring all your assets or if you have shopped around for a trustee who
is creditor friendly.
As a fairly new employee I caught a tax debtor, Robert M., who failed to declare an
asset. I was attempting to seize his sizable RSP so he declared bankruptcy. When I was
examining his Notice of Bankruptcy I found no mention of the RSP so I contacted his
trustee. Of course his trustee had no idea that the bankrupt had an RSP and he readily
seized it. But this is typical of what some bankrupts are willing to try. Nothing ventured
nothing gained I suppose.
Yet it is not just bankrupts who abuse the system. There are trustees who favour
creditors and trustees who favour the bankrupt. The former will do the utmost to ensure
the creditor gets every possible penny they can out of you while the latter tries to help
you hold on to as much of your wealth as possible.
In fact one trustee went as far as to occasionally send bankrupts out of the city to a
branch office to declare their bankruptcy. The bankruptcy notice would be mailed tardily

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 Bankruptcy and the Tax Collector

and incorrectly. By the time the notification would be forwarded correctly the date to file
the Proof of Claim has passed. If the Proof of Claim is not filed the creditor is ineligible
to receive any disbursements. And the funny thing about this situation was that in each
instance it took place the only creditor was Revenue Canada.
For those with a deeper interest in Canada’s Bankruptcy and Insolvency Act the table
of contents can be found at http://laws.justice.gc.ca/eng/B-3/FullText.html. Clicking on
the appropriate topic in this index will link you to that bankruptcy subject.

“It is my experience that Revenue Canada tends

to be lax after a person goes into bankruptcy.”

In another badly handled tax case, a debtor with a large tax debt, a little over $390,000
to be precise, disagreed with his assessments and filed an appeal. While his tax liability
was under appeal he spoke with a trustee in bankruptcy and decided to file a proposal.
When the trustee informs creditors that a debtor has filed a proposal the creditor still must
complete a proof of claim and return it. For some reason the tax collector did not respond
to the trustee’s request to prove the department’s claim. As a result Revenue Canada was
not eligible to receive any monies over the life of the proposal. Nor could they pursue
repayment of the tax liability. The result? $390,000 was written off as uncollectible.
To be sure the tax collector would not have received payment in full but might have
received as much as seventy-five cents on the dollar if extremely fortunate. In this case
the tax collector settled for nothing. Oh, and the appeal? The tax debtor dropped it when
he realized even if he lost his appeal now he would never have to pay his tax debt.
When the tax collector fails to put any effort into investigating you not only does it
hurt their chance of receiving any dividends from the trustee; it also hurts other creditors.
Many creditors are small businesses where a couple of bad debts can cause them to close
up. They do not have the time, money or knowledge to investigate their claim. The tax
collector can help creditors and the bankruptcy process by responsibly handling and
investigating the affairs of the bankrupt. But instead the tax collector works contrary to
the rehabilitative intent of the Bankruptcy and Insolvency Act. The result of their
negligence, coupled with lax Canadian bankruptcy laws, is repeat bankruptcies.
One such multiple bankrupt was North York tax debtor G. P. He was an insurance
salesman who played the lotteries. So much so it became an addiction. In each
bankruptcy the department was far and away the major debtor. The first time he went
bankrupt for $24,000 plus. The second time he owed over $180,000 and the third time (to
date) his debt was in excess of $250,000. And these are only the tax debt portions of the
bankruptcy. The total debt for his last bankruptcy was in excess of $1,000,000 when all
creditor debts were tallied.
In his first two instances of bankruptcy the tax collector did nothing more than send a
Proof of Claim and write the tax liability off. In the third instance the tax collector did
deign to attend the first creditors meeting but little was undertaken following.
A little investigation might have prevented a second bankruptcy and most certainly
would have prevented the third but the tax collector only reacts to a debt after the fact.
They do not appear to see they have a vested interest in preventing the occurrence or
recurrence of successive tax liabilities.

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 Bankruptcy and the Tax Collector

Do tax collectors ever go bankrupt? Yes they do.

I handled at least four cases of bankrupt tax collectors and one was a collector who sat
a couple desks down from me. The weirdest one however was the collector who had
declared bankruptcy just days before being hired on full-time by Revenue Canada.
When I contacted her she asked that I not tell her trustee of her new job. She also
promised to pay the tax portion of her bankruptcy but nothing else. When I told her this
was illegal and that she should pay any monies to her trustee she flat out refused. Within
days of the conversation I was given another inventory to work and I was never able to
follow up. This story however proves a point. Often bankrupts can pay they just choose
not to.

What you need to know

If it is easy for a bankrupt to hide assets from a trustee when in bankruptcy and
Canadians are doing it then the it is just as easy for a tax debtor to secure their assets
from the tax collector when becoming indebted to Revenue Canada
Today more than ever indebtedness is not seen as a crime but as bad fortune. Maybe
this is why some abuse the system. They can live the life of a king or queen and have
someone else pick up the tab again and again and again. Please do not use this as chapter
as a ‘How to handbook’ on how to go out and do the same yourself. The point of
illustrating these methods was to show how the tax collector’s lax attitude towards
bankrupts not only hurts the department but also hurts creditors. Again and again and
again.
If you want to negotiate with the tax collector yes you can do so and there is no better
way than the proposal. If you wish to go the full nine yards and declare bankruptcy you
now know what you must look for in a trustee but if you have creditors other than the tax
collector think of them before you do so. If you go bankrupt more than likely you will be
taking one or more of them as well. But never the tax collector.
There are many times when the tax collector does mishandle collection of tax
accounts but with bankrupts it tends to be the norm rather than the exception. This has
been commented on and confirmed by the courts. In turn this intentional blundering costs
Revenue Canada tens and more than likely hundreds of millions of dollars every year in
written off tax dollars. Some which might have been collected or prevented. This
negligence encourages debtors to run up debts, tax and other, in the future with no fears.
A little legwork by the tax collector could go a long way in helping Revenue Canada
collect millions of dollars. But maybe it’s cheaper to write off a tax debt than it is to
enforce collection. Again and again and again.

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16

When Canadians think tax they think of personal tax (T1) and corporate tax (T2), the
deductions made from our weekly paycheques (T4) and the hated Goods and Services
Tax (GST). And although these represent the bulk of our taxed dollars these taxes
represent only a small number of the many different taxes the tax collector is responsible
for collecting. All told Revenue Canada seeks payment for over 100 different tax and
penalty amounts but any amount that is not a T1 debt, a T2, T4 or GST tax debt falls into
the category of Sundry tax collections.
Most often Sundry tax debts are all but ignored by Revenue Canada and its tax
collector. I am going to reveal to you what the most common Sundry tax debts are and
why the tax collector often chooses to ignore Sundry tax assessments.
As discussed most tax amounts have their own computer management systems such as
T1 with CINDAC or T2 with CORPAC but Sundry taxes embrace all revenue streams so
they need their very own management system. This management system is called the
Automated Subsidiary Ledger (ASL) or the subledger as it is commonly referred to. It
was constructed to handle all the various and sundry tax debts and tax accounts that
ACSES was not designed to handle. It is a dumping ground for more than one hundred
different taxes, miscellaneous tax debts, various penalties and bankrupt T1 accounts. It
can hold any type of tax debt or tax related debt in existence or yet to be dreamed up.
Because of the myriad of different debts on the subledger the collectors who work in this
area are known as sundry collectors.
Internally the subledger is known by tax collectors as Revenue Canada’s ‘other’
computer system. In fact some tax collectors are not even aware of its existence. Those
that are tend to ignore it or avoid it like the plague. The subledger is old and
cumbersome, it meshes poorly with ACSES and not at all with the GST system. In this
day and age of computers it is an archaic system still run by paper and pencil.
Unlike other collectors, sundry tax collectors do not have an inventory of debtor
accounts that can be electronically managed. Instead they work off of computer cards.
When a debtor account is created on the subledger database, a cardboard card
approximately six inches by six inches square is created. The card is forwarded to the
TSO where it is routed to the sundry collector. If the account card should get misplaced,
which is not uncommon, the debt is forgotten. Sometimes forever, sometimes for a
couple years, sometimes until a clerk in Ottawa decides to send out a new card.
On occasion Headquarters does send out a subledger reconciliation list. The
reconciliation sheet lists all the subledger accounts the TSO is responsible for
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collecting/writing off and this helps locate accounts whose cards have been misplaced.
The problem is is that the reconciliation stack is a computer printout many hundreds of
pages long. Most sundry collectors avoid going through a printout because it only saddles
them with more work.
The first time I went through the sundry account reconciliation list I found several tax
accounts with debts that had been ignored as long as ten years. Ten years.
As an even stranger quirk, interest on a subledger account is not calculated
automatically and daily by the computer as with ACSES and GST. On the contrary, in the
subledger the tax collector has to contact a clerk in Ottawa, specify the account name,
number and the time period for the interest to be calculated. The clerk completes a
manual calculation of the interest charges and updates the subledger account accordingly.
The collector usually receives the revised interest calculation in eight to twelve weeks.
Imagine phoning and asking how much you owe only being told you have to wait for
an interest calculation before you can supply the exact total owed. A calculation that will
take a couple months for the collector to receive. Of course interest keeps accumulating
while you wait to pay.

Individual Sundry Tax Accounts

As mentioned previously the subledger holds well over a hundred different types of
tax related debts. Instead of explaining each only the more common, or more amusing,
tax types are discussed. A running side commentary provides a brief explanation of the
sort of tax debts and penalties represented.
The Number column is Revenue Canada’s internal identification number.
The Account Type is the type of tax and the explanation is the official description of
the tax. All subledger account identification numbers are three digits long. Individual
related subledger debts always start with the number “1”.
Following are just a few of the many sundry accounts a collector may stumble across.
For individuals, the most common types of accounts are:

Number Account Type Explanation

111 Section 216 Tax on income paid to a non-resident

- a non-resident individual must pay tax on any income that is earned inside Canada
regardless of whether they are domiciled in Canada.

115 Recoverable Amount Recovery of funds issued in error

- occurs when the department issues a refund to an individual in error. As this is not a
tax debt repayment is supposed to be voluntary. The department is not supposed to
take legal action to collect a non-assessment related tax debt without the courts
approval but there are rare times when they will attempt to do so.

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In 1993 the department sent out millions of dollars of erroneous refund cheques. A
refund issued in error immediately becomes a recoverable amount because it was not the
direct result of a tax assessment. The lucky recipients were former or current bankrupts.
The cheques were supposed to go to their respective trustees but the tax collector ignored
this request.
It works like this, bankrupts rarely declare bankruptcy on December 31st so their
calendar tax year is divided into two periods, a pre and post bankrupt period, and a
separate tax return is filed for each period. One tax return for January 1st up to the date of
bankruptcy and another from the date of bankruptcy to December 31st. It is routine for the
bankrupt to sign over any refunds from these tax returns to their trustee.
In this case the department was forced to reimburse the trustees but did they go after
those who received the refunds in error? Except for opening ‘Recoverable Amount’
subledger accounts nothing constructive was done to collect these debts. It was decided to
wait until the debtor received some future T1 credit and use this credit to offset their
subledger debt rather than contacting them and requesting payment. Why? Because if
they refused to pay the debts could not be legally collected without the intervention of the
courts.
It is quite common for the tax collector to sit on all types of tax debts not just
Recoverable Amounts in hopes that they will pay themselves off. Maybe one day tax
debts will start writing themselves off as well.

121 Pre-Bankruptcy For T1 tax debts accumulated prior to the date of

bankruptcy.

- any debt accumulated prior to the date of declaring bankruptcy.

129 Deferred Tax For individuals who earned excessive income

between 1939-1945.

- the income was taxed but payment of the tax was delayed until the death of the debtor
with no interest charges.

The Deferred Tax is also worthy of more discussion. Tax type number 129 is known
as the deferred tax and is probably one of the sweetest deals ever cooked up for Canada’s
elite by the Federal Government.
During the Second World War some Canadians had an unfortunate dilemma, they
were earning so much money that they could not afford to pay all their assessed tax.
Quite the oxymoron. Maybe because their monies were tied up in profiting from the war,
who remembers now?
At any rate the Federal Government and these ‘disadvantaged’ hatched a scheme.
They decided the wealthy would be taxed on this income but wouldn’t have to pay the
tax. Nope, the taxpayer’s estate would pay any tax owed at the time of death and even
better, there would be no interest charged. Ever.

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So if the debtor died in 1946 or 1947 it was no great savings but now it’s 2001 and
some of these people are still living. Can you imagine running up a $5000-$10,000 tax
debt in the 1940’s and paying it off in 2001 dollars. With not a penny of added interest.
In the 1940’s $5000 was enough to buy a house, fully furnish it and put a top of the
line car in the garage. Today $5000 is barely enough for a down payment on the garage.
Most often tax debts of this type are written off as uncollectible because the debtor can
not be located or the debtor passes and there are no monies left in their estate.

130 Hutterites For members of the religious sect.

- special dispensation or treatment given to Hutterite members.

Corporate Sundry Tax Accounts

Corporation subledger debts always start with the number “2” and the most common
types of corporation subledger accounts are:

Number Account Type Explanation

201 a Section 115 Corporate non-resident taxable income in Canada

- a non-resident corporation must pay tax on any income that is earned inside Canada
regardless of whether they are domiciled in Canada.

224 T2018 Tax on excess of purchase price paid for capital stock

- when a company repurchases shares instead of paying out dividends they are taxed on
the excess of the purchase price over the paid-up capital of the share.

227 T2054 Election in respect of a capital dividend under a

subsection 83(2). These are usually reversed by
filing a subsection 184(3) election.

- the corporation has previously made a capital dividend and then uses 184(3) to
change the dividend to three separate dividends in order to avoid the penalty tax on
excessive elections in respect of a dividend.

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 Sundry Tax Debts

Miscellaneous Sundry Tax Accounts

Miscellaneous subledger accounts always start with a “3”. Some of the miscellaneous
tax debts that a collector might find on the subledger include the following:

Number Account Type Explanation

324 T1-OVP Individual income tax return for Registered

Retirement Savings Plan excess contributions.

- penalty and interest on the amount over contributed to an individual RRSP.

The T1-OVP account brings up some interesting yet rarely publicized benefit in
respect of Registered Savings Plans. Most Canadians do not realize that they can make a
onetime over-contribution of $2000 that is not subject to penalties.
Slightly related to this is the fact that Revenue Canada is required to return to you any
tax refund that is owed. Immediately. Even before the end of the tax year. Even before
you file your yearly return of income. They must pay refunds on the same basis that they
collect taxes. It’s payable when proven that it is owed.
Confused? Consider this.
For those who contribute to savings plans such as an RESP or RSP it is possible to
reduce the amount of tax your employer deducts from each paycheque. How? By
completing and forwarding a Source Deduction form (Form TD1) to Revenue Canada
requesting a reduction in the amount of tax deducted. Your employer payroll should have
this form.
When you inform the department of your expectation for a refund Revenue Canada
will notify their employer that it is permissible to deduct less tax from your paycheque.
This means more money in your pocket today and no waiting for your refund. The real
benefit however is this and I will use an RSP for my example.
If you are in the fifty percent tax bracket and on average contribute $400 monthly to
an RSP you can receive an extra $200 a month increase in your pay in the form of less
tax being deducted. This means that the monthly cost of the $400 is just $200 because
you are receiving your refund now, not in June or July of the year following. If you are
investing a lesser amount each month in an RSP, say $200 a month, you can invest $400
a month but it’s still only costing you $200 a month, you’re just getting your income tax
refund early.
All that you must do is request less tax be deducted from your pay each pay period.
You may not get a large refund come April but you get your money when you earn it and
when you need it. Today.
No matter what tax bracket you’re in there is some benefit to getting your income tax
refund early. It will have a positive long-term effect on the value of your RSP as well,
which is good for your future. Why dump all your money in an RSP in February when
you can invest it much earlier and increase the value of your RSP.

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327 T2057 Election on disposition of property by a taxpayer to

a Canadian corporation.

- allows taxpayer to make an election (read avoid paying some tax) when moving
property (not necessarily land) to the ownership of a Canadian company.

336 Estate Tax Self explanatory

- when an estate disburses income they issue a T3 to the recipient.

At the present time the tax collector has no way of knowing if a person receiving
income from an estate is reporting the income unless a manual check of the estate tax
return and the tax return of the individual receiving the benefit is completed. No
automated computer matching program is in place like that which exists with T4’s. The
department estimates that more than seventy million dollars of estate income goes
unreported and therefore untaxed each and every year.

Would you like another subledger inspired tip?

Few tax practitioners and even fewer taxpayers realize that in certain situations
payment of a tax liability may be deferred and spread out over a period as long as ten
years. In circumstances where you have certain deemed realizations that cause an
unusually large income you can choose this option. Such circumstances include:

i. a deemed disposition of property upon ceasing to become a resident of Canada.

ii. an individual dies and their income for the year must include the values of certain
rights.
iii. an individual dies and a deemed disposition of capital properties has occurred
iv. an individual dies who carried on a professional business and had to include as
income the previous year’s reserves for 1971 receivables.
v. situations subsequent to 1993 where a trust is deemed to have disposed of and
reacquired properties.

You can only defer that portion of your tax debt which arose from one of these five
circumstances. All other tax must be paid as normally required. You simply choose the
length of the period you want to pay the liability, agree to pay interest at the prescribed
rate and your deferral is granted. Your interest is calculated from the time the tax was
payable to the time that the annual payment is made.
But the subledger isn’t just a dumping ground for miscellaneous taxes; it’s also where
some Offices put their less productive collectors. Why? Because revenue production is
not expected out of the subledger. All work completed here is done so manually. Even
statistical data is manually collected. If a letter or garnishment is sent out it’s typed up on
the old IBM or Selectrex.

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 Sundry Tax Debts

There are no diary entries stored on the computer, they’re handwritten and kept on the
back of the cardboard subledger card. All statistics are manually tabulated by the
collector for management and those production enhancing write-offs are all completed by
way of typewriter. Huge numbers of subledger accounts end up as write-offs due to the
triple threat of managerial neglect, poor collection habits and a cumbersome computer
system that is not the least bit user friendly.
The subledger is so work intensive you’re probably beginning to realize why Revenue
Canada all but ignores subledger tax liabilities. Truth be told no one really knows or is
willing to say what the cumulative total of all the subledger liabilities really is. Certainly
this total is in the many hundreds of millions of dollars and the sum of one billion dollars
is likely a conservative estimate. Why so much money? Out of sight is out of mind.
The subledger is hidden compared to the other systems and the other taxes. Every tax
collector knows T1 and T2 but mention T2018 or T2057 and you will receive a blank
stare from ninety-nine point nine percent of all collection officers. As an experiment
phone up the collections section of your local TSO and ask for an explanation of your
Section 216 assessment and why were you assessed with it. The collector will ask you to
call another number. I can almost guarantee it.
Management does not expect production out of the subledger because on the whole it
represents fewer dollars than can be produced from the major taxes and it has a much
lower profile. A billion dollars is a lot of money to ignore but not to Revenue Canada. As
a subledger tax debtor it’s unlikely you’re doing any whining but as a taxpayer you
should have something to say.
The following is a true to life subledger story that I experienced. The Baruch D-----v
Trust was a debtor account that had been hanging around for ten-fifteen years. I removed
this account from another tax collector’s inventory, they were not attempting collection
of the debt due to its age, to see if I could collect these old tax arrears. The first thing I
did was send a letter to the trustee. Within days of the letter I received an apologetic
phone call from the trustee explaining that he had forgot the debt and within a week I
received a cheque in excess of $60,000 on the department’s behalf. All the executor had
been waiting for was a request to pay the arrears. One letter was all it took to collect the
tax liability. Might just be the best forty-five cents, or was it forty-two cents, Revenue
Canada ever spent.

What you need to know

If your debt is not a T1, T2 T4 or GST tax debt than it must be a sundry tax debt and if
it is a sundry tax debt it is very likely that the tax collector is doing little or nothing to
collect your tax arrears.
If you do not have the inclination to pay your Sundry tax debt or simply do not have
the means then consider yourself blessed if that tax debt falls within the realm of Sundry.
When I worked in Sundry collections I was stumped by one particular tax account
with a Large Corporation Tax Debt. It was only a small debt, about $6500, but the debtor
avoided me like the plague and the only asset I could find was some land in Richmond
Hill. So, just to protect the department’s interests, I decided to request certification of the
debt and obtain an Execution.

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But before my request was approved my Team Co-ordinator lightly lambasted me

pointing out that we usually don’t certify such small amounts nor do we make a practice
of obtaining an Execution on Sundry tax amounts. Why should we put time and expense
into collecting tax debts that are just going to be written off. But to humour me he would
agree to my request.
A couple of months later I received the Execution and requested the Sheriff file it at
the land titles office. A short while later I was transferred to another collection team and
promptly forgot about the case.
Approximately a year later, give or take, the collector who took over my inventory
approached me and said, “You know that Writ you placed on that company R-------
Properties? We’re getting payment in full.” The tax debtor had tried to sell the property
but before they could do so they were forced to pay their tax arrears.
I know in this instance it was only $6500 but I am sure similar scenarios play out in
Sundry Collections in Taxation Services Offices across Canada for much larger amounts.
Except instead of being collected they are being written off.
Why should Revenue Canada put time and expense into collecting tax debts? Why
indeed?
Subledger tax liabilities often remain uncollected because a system exists where there
are no checks and balances. A tax assessment written off is held in the same high regard
as one collected. It’s production. It is a system of mass chaos and poorly ordered
confusion. They say a fool and his money are soon parted but this seems like a case of the
fool never even getting his or her hands on the money.

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 Write-offs, Write downs and Deferrals

17

Have you ever wondered what would happen to your tax assessment if Revenue Canada
were unable to realize on it? Probably not. Most Canadians think that every tax
assessment is collected. In full. End of story. Revenue Canada would certainly love to
have you believe this but more and more Canadians are walking away from our tax
obligations and more and more the tax collector is giving up in frustration, writing these
uncollected tax debts off their books. Collecting just pennies on the dollar or nothing at
all.
The tax collector wants to keep up the appearance of a stern IRS type institution where
every dollar assessed is a dollar collected. The deletion of your tax debt does not fit this
image. In fact the tax collector’s biggest fear is that you will find out that tax debts are
written off and that this is done quite regularly. If this secret were to become common
knowledge it might encourage some to try it out and embolden others to become even
more evasive when it comes time to pay.
I remember the first tax account I ever worked, it was August 12th, 1991. The reason I
recall this particular account is not because it was the first one I ever worked but because
it is a case I have always regretted.
My first lesson as a tax collector was that your tax debt must be paid off within six
months with six equal sized payments or by April 30th, whichever is quickest. Keith M.
was a self-employed carpet layer who had been faithfully paying $150 a month towards
his $2400 arrears. His payment arrangement did not fit my teachings but a review of his
finances confirmed that he was paying the maximum he could afford at the time.
However, I was being mentored at the time and when my mentor asked what I was going
to do I replied, “According to department policy I should ask for more”. “Correct,” I was
told so I asked for larger payments.
I guess Mr. M was insulted by this because Revenue Canada never heard from him
again. With reorganizations and inventory shuffles both his tax account and I moved
around but not one thin dime was collected from this guy. He refused to pay his
outstanding income tax arrears and he also stopped filing his personal tax returns.
When I last ran across Keith’s account a deferral had been requested. A deferral
meaning that no action would be taken to collect the arrears for a set time period, usually
a year. Management however rejected the deferral and requested the tax debt be written
off. That’s right, payments were rejected through established policy and the arrears were
written off, about $2800 or so.
This is how and why some tax debts are written off.
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 Write-offs, Write downs and Deferrals

I have always regretted that I didn’t accept the payment arrangement and that it was
my fault that Keith M chose to enter the underground economy. Even though I was
following established department procedure.
If the monies had been owed to me personally I would have taken the payments and
been glad to get them but the tax collector has the, “It’s my way or the highway
mentality,” and this road reduces the amount of taxes they are able to collect.
Whether a business is located in the public or the private sector, and yes collecting
taxes counts as a business, any accounting system employed must make provisions for
doubtful accounts as well as the write-off of accounts identified as uncollectible. This
procedure ensures that accounts receivable, which are assets, are removed from the books
when it appears they can no longer be crystallized upon. The books and records are then
adjusted to present a fair representation of the financial picture of the entity.
The debt write-off regulations of the Financial Administration Act state that no debt or
portion of a debt can be written off the accounts of Revenue Canada unless the Minister
or his authorized representative are satisfied that the amount in question is uncollectible.
Through the Financial Administration Act and the debt write-off regulations the Canada
Revenue Agency and the Treasury Board are provided with the authority to delete all or
part of a tax liability. Both Revenue Canada and the Treasury Board have established
procedures to remove any tax debtor accounts deemed as uncollectible or not worthy of
further collection action from the accounts receivable records.
Procedures have also been established for the deferral of collection action on a debtor
account and for the write-down of a tax debt to an amount that is thought to be
collectible.
The business decision to refer an account for deletion is supposed to be the
responsibility of each individual tax collector but quite often, as illustrated in the case of
Keith M, the decision to delete is influenced by management’s desire to reach certain
production targets.
Each year Revenue Collections creates production goals for the number of accounts to
collect, the total number of dollars to collect and so on. Achievement of these goals is
reached through actual tax collection and the deletion of uncollectible tax debts. The
submission of uncollectible debts is both a necessary and integral contribution to
achieving and surpassing previous and current Revenue Collections programs. Or, in
plainer language, tax debts must be written off to help reach and surpass production
goals.

The deferral

Only a personal individual tax debt (T1) may be considered for deferral. This option
may be used when your tax account is not currently collectible but is thought to be
collectible one or more years in the future.
The deferral period is for a maximum of one year and a tax debtor’s account may have
no more than three deferrals, consecutive or otherwise, over the life of their tax debt
before the final decision is made to collect or write off your tax assessment(s). You will
never be advised when collection action on your tax debt has been deferred.

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One might think that when a tax debtor has a temporary problem such as
unemployment or a health problem that their tax accounts would be prime candidates for
a deferral period but this is just not so. The deferral is an option the department rarely
uses.
Why? Because most managers believe an overdue account is collectible now or never.
They want immediate production by either collection or a deletion. The deferring of
collection is neither. This attitude results in tax debts that might be collectible tomorrow
being written off as uncollectible today. It is almost standard for a manager to return a
deferral request asking for the debt to be written off.
Once submitted for deletion no future review of the deleted tax debt is conducted to
determine if it is currently collectible even when another tax debt is incurred after the
write-off. The collection of tax dollars is being sacrificed in order that production and the
current Revenue Canada program is met.

The write down

A tax debt of any revenue stream can be approved for a write-down as long as they are
not currently subject to a Notice of Objection or an appeal.
Your tax debt is written down when the full recovery is not and will not become
achievable but a portion of the debt may eventually be collectible.
A tax debt is never written down to below the upper minor balance. Instead the entire
debt is deleted.
The current upper minor balance limit for the different Revenue Canada tax revenue
streams are as follows:

Revenue Stream Upper Minor Balance

Individuals (T1) $1000.00
Corporations (T2) $800.00
Source Deductions $500.00
Non-Resident $500.00
T4 $500.00
Estates/Trusts $500.00
Goods and Services Tax $25.00
Child Tax Benefit $1000.00

When the write-down of a tax debt is approved your mailing address (on the
department’s computer database) is changed to ‘Care of the Assistant Director of
Collections’ of the TSO completing the write-down. This is done so that you will not
receive your tax letters or notices. Why? The tax collector does not want you to know
that your tax debt has suddenly been reduced and inquire as to why.
TSO management discourages the use of the write-down for exactly the same reason
as a deferral. They feel that either the entire debt is collectible today or it’s not. There is
no grey area. Managers want the work to go into an account once and once only.
218 © Alan Baggett
 Write-offs, Write downs and Deferrals

What would happen if your written down tax debt also proves to be uncollectible? The
original work would have to be duplicated. So for this reason it might as well be written
off now as opposed to later.

The write-off

As in the case of the write-down, a tax liability of any amount from any revenue
stream can be written off. The only caveats being that the amount is not currently the
subject of a Notice of Objection or an appeal and of course there is assumed to be no
reasonable prospect of recovering the tax liability.
Tax managers push for the write-off of a tax debt because a written off account adds
up to the same thing as a tax debt that is paid in full. Production. To managers, the TSO
and Revenue Canada, once your tax debt is off the ledgers it has been collected even if it
has been written off.
Before a tax debt can be written off the tax collector must decide why your tax
assessment(s) is/are uncollectible. To make this decision easier for the tax collector
Revenue Canada has ten pre-determined write-off categories for individual tax debtors
and three for business debtors. Immediately following is the title and a brief description
of each of the category types.
Individual (T1) write-offs are categorized as follows:

A) Cost of collection is not justifiable.

- this category applies when available assets are of minimal value, legal action would
not be cost effective and/or voluntary payment is not forthcoming. It is generally used
for debts that are smaller in size or accounts of several thousand dollars that need
extensive and\or expensive legal work.

B) Balance that remains after a compromised settlement has been effected pursuant to
an applicable authority (i.e. a proposal under the Bankruptcy and Insolvency Act).
- this is used when any other claim against the debt is unenforceable.

C) Debtor is not resident in Canada.

- the client no longer resides in Canada, there are no known remaining assets or
income sources in Canada. The Canada/US Collection Assistance Protocol is proven
not to be applicable.

D) Debtor cannot be located.

- this applies when all tracing possibilities have been exhausted or when further
tracing is not justified due to the size of the tax debt outstanding.

E) Evidence of the debt has been lost or destroyed.

- is a category that is rarely if ever used but is implemented when documentation to
support the debt is unavailable or where payment of the tax was deferred until the
taxpayers death in accordance with the Income War Tax Act (a forerunner of todays
Income Tax Act).

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 Write-offs, Write downs and Deferrals

F) Legal proceedings are statute barred or the debt is otherwise legally unenforceable.
- includes situations where a writ (or related) has expired or the collector is unable to
collect the debt because the debt has been previously collected from that source via
garnishment.

J) The debtor is an undischarged bankrupt individual and the trustee has been
discharged.
- this category is used when the trustee has been discharged and it has been confirmed
that there will be no disbursements forthcoming.

K) The debtor is an undischarged bankrupt individual and the trustee has confirmed in
writing that the trustee does not foresee any further payments
- used when the trustee has not been discharged but written confirmation from the
trustee has been received that no disbursements will be made.

L) The tax debtor is deceased and there is no known estate.

- this category is only used when the value of the taxpayer’s estate is less than
$25,000.00, the only beneficiaries are the tax debtors spouse or dependent children
and the only transferrable asset is the tax debtor’s principle family dwelling,
regardless of worth.

M) The tax debtor is incapable of repaying the debt.

Category M applies when:
- the taxpayer’s family income level is below the net monthly income level
requiring payments from income towards debts (Guidelines as per Industry
Canada)
- the amount available for debt repayment is deemed to be 50% of the amount by
which net income exceeds the poverty guideline
- the tax debtors financial situation is unlikely to improve in the foreseeable future
- the debtor has no known assets, real or personal property that can be applied
against discharging the debt in whole or in part.

Category “M” is the most popular write-off selection of collectors and managers
because it is both broad and vague.
I vividly remember reviewing a debtor account where the collector was
recommending a write off under category “M”. The debtor, Janet M, until recently had
been a well paid executive in the beverage industry. Her tax debt was about $5600. Little
work had been done to collect her tax debt so I decided a field call was in order before a
write-off should be considered. After attending her fashionable address in old Toronto
she promised to pay in full as soon as she sold her house which was currently for sale.
Although this debtor did not have the cash on hand to immediately pay her arrears she
obviously had the means to pay if the tax collector would but practice a little patience.
I advised the collector that an Execution should be filed in order to protect the
department’s interest just in case Janet ‘forgot’ our agreement. The collector was upset
with me but agreed to file the writ. But, I guess to spite me, she never did. The result?

220 © Alan Baggett

 Write-offs, Write downs and Deferrals

Janet M sold her house and moved, never making the promised payment. Her tax debt
was written off as uncollectible and I was proven wrong. It was a write-off.
When considering an account as a potential candidate for a write-off under category
“M” one tool the collector should consider using the National Council of Welfare’s
Estimates of Statistics Canada’s Low Income Cut-off. These estimates serve as a
guideline in indicating when a tax debtor is residing in a poverty situation and repayment
of the tax liability should not be pursued. The estimates are based on the type and size of
community a debtor resides in as well the number of members in the immediate family.
The chart immediately following is the National Council of Welfare’s Estimates of
Statistics Canada’s Low Income Cut-off for 2009 – the most recent year available.

National Council of Welfare Estimates of Statistics Canada’s Low Income Cut-Offs

Before-Tax Low-Income Cut-Offs (LICOs) 2009
Population of Community of Residence
Family Size 500,000 + 100,000-499,999 30,000-99,999 Less than 30,000* Rural
1 $22,229 $19,144 $19,026 $17,409 $15,302
2 $27,674 $23,832 $23,685 $21,672 $19,050
3 $34,022 $29,299 $29,118 $26,643 $23,419
4 $41,307 $35,573 $35,354 $32,349 $28,435
5 $46,850 $40,345 $40,097 $36,690 $32,250
6 $52,838 $45,504 $45,223 $41,380 $36,374
7+ $58,827 $50,661 $50,350 $46,071 $40,496
Notes: This table uses the 1992 base. Income refers to total pre-tax household income.

The tax collector should use this table in the following manner. They would determine
the size of your immediate family and for the sake of example we’ll settle on the number
five. Next they gauge the size of your community and for this we will choose Toronto.
Using Toronto the low-income cutoff would be $46,850. This means that if your pre-tax
household income for your family of five residing in Toronto is at or below the $46,850.
threshold you would not be expected to make any payments towards your tax arrears.
If your family of five resides in a rural area with a much lower community size the
threshold is a much lower $32,250.
Although this is one benefit you can’t claim on your T1 clearly there are unwritten tax
advantages to living in a big city.
Some tax collectors will heed this guideline and bury your account at the bottom of
their inventory instead of attempting any contact to confirm your present situation. Others
might immediately delete the tax debt. Any excuse is used by some collectors to count
one of their daily eight BF’s as done.
You can be sure Canadians are not made aware of these official guidelines. As a
result, when you are asked for proof as to why you are unable to make arrears payments
many supply ridiculously low estimates of your income combined with extravagant
expenses in order to avoid the appearance that any current payment is possible.
Tax collectors rarely believe the income and expense statements they ask you to
provide because they are rarely truthful. But they request them just the same because they

221 © Alan Baggett

 Write-offs, Write downs and Deferrals

are expected to by management. And sometimes you will list an asset that the tax
collector was completely unaware of.
If the department would inform Canadians of rules, regulations and guidelines for
repayment, when repayment is expected and how much, maybe tax debtors would be
honest when it comes to honestly completing income and expense statements and setting
up repayment arrangements. Then maybe fewer tax debts would be written off.
Now that you are familiar with the individual categories used for the write off of your
personal tax liability next we will look at the categories used for the deletion of corporate
tax debts and source deduction liabilities.
The three business categories for write-offs are:

G) The debtor is a corporation and the corporation is inoperative and without assets.
- the corporation has no assets or the fair market value of the assets is less than the
amount claimable by a non-arms length third party by right of a property registered
mortgage, collateral, chattel mortgage, conditional sales contract or similar
instrument.

H) The debtor is an undischarged bankrupt corporation without assets and the trustee
has been discharged.
- a bankrupt corporation cannot be discharged (and not operate) until all creditors
claims have been satisfied.

I) The debtor is an undischarged bankrupt corporation and the trustee has confirmed in
writing that the trustee does not foresee any further payments.
- when the trustee has not been discharged but written confirmation from the trustee
has been received that no further disbursements will be made.

Business tax debts are never considered for the deferral option and are rarely
candidates for a write-down.

The deletion process

How does the tax collector write off your tax debt? It’s really very simple.
After determining you tax debt is indeed a write-off and selecting which category code
to submit it under they will prepare a short essay, rarely longer than five paragraphs,
outlining why your tax debt should be deleted.
The format of the deferral, write down or deletion recommendation essay is as
follows:

Paragraph One: The date the account entered the TSO, the date(s) and taxation years of
all assessments or reassessments.
Paragraph Two: A description of the client debtor, age, occupation, health, financial
status, type of business.

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 Write-offs, Write downs and Deferrals

Paragraph Three: History of all voluntary payments and all legal collection actions taken
against the client.
Paragraph Four: A mention of any associated or related accounts and their present
disposition.
Paragraph Five: The conclusion sums up why the account is being recommended for
deletion. Usually a statement of the write-off category code.

Upon completion of their five-paragraph essay the tax collector will refer their
recommendation for approval to their Team Coordinator.
The following table illustrates which level(s) of management must concur with the
recommendation and is used in this manner:
For a tax debt greater than $999.99 and less then $5000 a Team Coordinator must
approve of the recommendation before the tax debt is deleted. Or, for a tax debt greater
than $24,999.99 and less than $250,000 the Team Coordinator, the Assistant Director of
Collections and the Assistant Deputy Minister of Regional Operations must all concur
before the tax debt is to be deleted. If any one level disagrees then the tax collector’s
recommendation is denied.

Level Team Assistant Assistant Deputy Deputy Deputy Minister

Coordinator Director of Minister Regional Minister of or Associate
Dollar Value Collections Operations Finance Deputy Minister
$999.99 -
$5000 b
$4999.99 -
$25,000 b b
$24,999.99 -
$250,000 b b b
$249,999.99 -
$500,000 b b b b
$499,999.99
and above b b b b b
Note: For a tariff debt up to $250,000 the Director of Customs Border Services must
make the approval.

This new approval process was made a requirement under the Financial
Administration Act. Jane Stewart installed this process during her brief tenure as the
Revenue Minister. She wanted to stem the overwhelming tide of write-offs by making the
senior officials of Revenue Canada responsible for the process. Regardless of this change
delegation of approval responsibilities is still the norm. Why?
High level managers often lack collection experience or the time to investigate the
write off. As a result they simply rubber stamp their approval without looking at the
recommendation, trusting their underlings decision, although that civil servant often has
no more experience then they. Or they delegate their approval power to someone else
because they don’t have the time to spare or the experience.

223 © Alan Baggett

 Write-offs, Write downs and Deferrals

Secondly, the approved deletion was to be removed from the database fourteen days
after the approval at the topmost level had been made. However, the computer system is
set up so that the debt is immediately deleted fourteen days after the recommendation for
deletion has been submitted. Regardless of whether it has been approved or not. Meaning
that your tax debt can be deleted without any approval at all after the initial
recommendation has been made.
The reason for this automatic deletion was to thwart Jane Stewart’s initiative to dam
the flood of write-offs by making senior management responsible for the approval of
deletions. But it is rare for all levels of management to find the time to examine a write-
off recommendation within fourteen days. As you can imagine tax debts are often
removed from ACSES before they are approved at all levels. In instances where this
occurs no further action is taken. Even when it has decided that the write-off was
incorrect.
Now the tax collector may deny that tax debts can be deleted without formal approval
but I ran a little experiment to test the system. I wanted to see if I could sneak a write-off
through with only myself being the wiser. A single unemployed mother on welfare for
several years owing a little over $5000 was my choice.
I completed and submitted my recommendation for write-off of her tax debt to my
manager. My manager neither approved nor rejected of my recommendation but, after
fourteen days passed, the tax debt was automatically deleted. Without any approval
whatsoever.
I then went back into the tax account and deleted the write-off details from the diary
so no one would know the write-off ever existed. The account was left with a $0 balance.
The only way anyone can tell the account’s tax debt was deleted is by a one line entry on
the account postings screen. However, if you don’t look for the write-off you’ll never see
it and those that do see it will never question it because when a tax debt is deleted quite
often the account diary, later, is also deleted. Clearly, if a surefire deletion can pass
through the system then so can the tax liability on a tax account that has no reason to be
deleted.
I should also note that tax debts on the automated subledger are often mass deleted
with no official summaries being completed. The TSO of record simply submits a list
bearing the account number, account name and the amount to be deleted. The list is
forwarded to Revenue Accounting in Ottawa to remove the amounts from the ledger.
This is yet another way manner in which the program and production goals are met.
When write-offs are rejected the reasoning behind it is often trivial. One manager
refused to approve a deletion recommendation until the word abattoir was removed from
the summary. He felt the word was offensive and preferred the term slaughterhouse be
used.
After the final approval has been made the approved write off is printed on form
T1520. This is why write-offs are affectionately known to tax collectors as T1520’s.
An example of the T1520 form follows.

224 © Alan Baggett

 Write-offs, Write downs and Deferrals

Canada Revenue Agence du Revenu T1520A

Agency du Canada

RECOMMENDATION FOR DELETION OF UNCOLLECTIBLE AMOUNT

RECOMMANDATION DE RADIATION D’UNE SOMME IRRÉCOUVRABLE

Name – Nom
1
Office – Bureau Inventory – Inventaire Revenue Type – Genre de revenu
2 3 4
Account Number – Numéro de compte Transaction Type – Genre de transaction 7
5 6 WRITE-OFF - RADIATION
Total Tax, Penalty, Interest, Law Cost Years – Années
Impôt, pénalité, Intérêt, frais jud.total 9
8

Uncollectible Category – Catégorie de dette irrécouvrable

10

History of Collections Actions – Historique de dette irrécouvrable

11

Committee Stamp – Timbre du Comité

12

225 © Alan Baggett

 Write-offs, Write downs and Deferrals

The divisions on the T1520 form are used as follows:

1. Name, the name of the debtor (individual or business)

2. Office, the Office number completing the deletion (e.g. 1262 is for Toronto West)
3. Inventory, the inventory number that the account currently resides
4. Revenue Type, Individual (T1), Corporation (T2), Source Deductions (PAYDAC) or
GST/HST
5. Account Number, the social insurance number, GST number etc.
6. Transaction Type, internal Department code to process the deletion
7. This box indicates whether this T1520 is a write-off, write down or deferral
8. Total liability not including any accrued interest to be deleted or written down
9. Years, taxation years of indebtedness for the debtor
10. Uncollectible Category, category code for the write-off
11. History of Collection Actions, is the collectors argument for recommendation of
deletion of the account’s liability
12. Committee Stamp, the UDC will stamp the T1520 to signify the Taxation Services
Office’s approval of the deletion

After the approved write-offs are printed on form T1520 the Uncollectible Debts
Committee (UDC) of the TSO will review each submission once again. The purpose of
the committee is to ensure that there are no spelling errors or grammatical mistakes. If
there are mistakes the write-off is rejected and returned for correction. The corrected
write off then travels through the various approval levels again.
With the approval of the printed copy of the write-off by the UDC all the T1520 pages
are bundled together and forwarded to department headquarters in Ottawa. This mass
forwarding of tax accounts for write off approval is called a submission.
Each TSO will include many hundreds, and sometimes even thousands, of tax debtor
accounts representing many many millions of dollars in each of their write-off
submissions.
Headquarters ensures that each of the recommended deletions is certified as
uncollectible and deleted pursuant to Section 18 of the Financial Administration Act. The
final approval authority for deletion of any tax debt is vested in the Treasury Board,
which is just another rubber stamp. By this time your tax debt has long since been deleted
from the database and all collection attempts have long since passed.
About once a year Headquarters will send an Audit Committee to each TSO. This
committee will review a selection of the office’s write-offs that have already been
approved and deleted.
The committee will concur with most T1520 recommendations but reject a few in
order to have collections staff rush around in a frenzy collecting proof to the contrary that
the debt is indeed a write-off. After the office presents the information the Audit
Committee will agree without further argument. The purpose of the Committee is to give
the appearance of fiscal propriety rather than to monitor the appropriateness of deletions.
On the pages immediately following you will find examples of actual tax collector
write-offs and write-downs presented on from T1520.

226 © Alan Baggett

 Write-offs, Write downs and Deferrals

Canada Revenue Agence du Revenu T1520A

Agency du Canada

RECOMMENDATION FOR DELETION OF UNCOLLECTIBLE AMOUNT

RECOMMANDATION DE RADIATION D’UNE SOMME IRRÉCOUVRABLE

Name - Nom

Office – Bureau Inventory – Inventaire Revenue Type – Genre de revenu

1263 17 09 12 T1
Account Number – Numéro de compte Transaction Type – Genre de transaction
46 WRITE-OFF - RADIATION
Total Tax, Penalty, Interest, Law Cost Years – Années
Impôt, pénalité, Intérêt, frais jud.total
1989, 1990, 1991
$19,790.42
Uncollectible Category – Catégorie de dette irrécouvrable
C - DEBTOR IS NOT RESIDENT IN CANADA
C - DÉBITEUR NE RÉSIDE PAS AU CANADA
History of Collections Actions – Historique de dette irrécouvrable

The account became Tax Services Office responsibility on January 20, 1992
as a result of a 1990 post bankruptcy assessment dated October 7, 1991. The
debt was increased as a result of a 1991 assessment dated June 29, 1991.
The last return filed and assessed was for the 1991 taxation year.

The client is a 49 year old married male. The client currently resides in the United
Kingdom.

Investigation has revealed that the client was in receipt of Unemployment

Insurance and social assistance in 1993, prior to his leaving the country.
The debtor has made only one voluntary payment on the account, in the
amount of $200.00. Collection action taken included the issuance of a
Requirement to Pay to the only known banking source. No funds were
realized as a result of this action. There are no other known assets from
which to effect collection.

Deletion of this account is recommended as the debtor is not resident

in Canada.

Committee Stamp – Timbre du Comité

227 © Alan Baggett

 Write-offs, Write downs and Deferrals

Canada Revenue Agence du Revenu T1520A

Agency du Canada

RECOMMENDATION FOR DELETION OF UNCOLLECTIBLE AMOUNT

RECOMMANDATION DE RADIATION D’UNE SOMME IRRÉCOUVRABLE

Name - Nom

Office – Bureau Inventory – Inventaire Revenue Type – Genre de revenu

1262 11 04 02 T1
Account Number – Numéro de compte Transaction Type – Genre de transaction
46 WRITE-OFF - RADIATION
Total Tax, Penalty, Interest, Law Cost Years – Années
Impôt, pénalité, Intérêt, frais jud.total 1985, 1986, 1987, 1988, 1992, 1993
$23, 381.31
Uncollectible Category – Catégorie de dette irrécouvrable
D - DEBTOR CANNOT BE LOCATED
D – DÉBITEUR NE PAS DE LOCATION
History of Collections Actions – Historique de dette irrécouvrable

The account became Taxation Services Office responsibility on November 30, 1989 as a
result of a series of assessments completed under subsection 152(7) of the Income Tax
Act on August 28, 1989 for the 1985, 1986, 1987 and 1988 taxation years. The liability
was increased as a result of an assessment for the 1992 taxation year dated July 3, 1993
and an assessment for the 1993 taxation year dated August 29, 1994.

Little is known about the thirty-two year old debtor as the Department has never been able
to establish contact with him. However, investigation has determined that the client is
self-employed in the construction industry.

No voluntary payments have ever been made by the client and there are no known assets
from which to effect collection action at this time.

Accordingly, as the whereabouts of the debtor are unknown, deletion of this account is
recommended.

Committee Stamp – Timbre du Comité

228 © Alan Baggett

 Write-offs, Write downs and Deferrals

Canada Revenue Agence du Revenu T1520A

Agency du Canada

RECOMMENDATION FOR DELETION OF UNCOLLECTIBLE AMOUNT

RECOMMANDATION DE RADIATION D’UNE SOMME IRRÉCOUVRABLE

Name - Nom

Office – Bureau Inventory – Inventaire Revenue Type – Genre de revenu

1213 49 08 21 PAYDAC
Account Number – Numéro de compte Transaction Type – Genre de transaction
34 WRITE-OFF - RADIATION
Total Tax, Penalty, Interest, Law Cost Years – Années
Impôt, pénalité, Intérêt, frais jud.total
1992, 1993
$56,687.05
Uncollectible Category – Catégorie de dette irrécouvrable
G – DEBTOR IS A CORPORATION AND THE CORPORATION IS INOPERATIVE AND WITHOUT ASSETS
G – DÉBITEUR EST UNE PERSONNE MORALE INACTIVE QUI NE DÉTIENT PAS D’ACTIF
History of Collections Actions – Historique de dette irrécouvrable

The account became Taxation Services Office responsibility on September 1, 1992. The outstanding
liability is the result of failure to remit assessments for the 1992 and 1993 taxation years.

The corporation, a printing shop, was incorporated on November 7, 1985 and ceased operating in May of
1994 when the landlord distrained due to rent arrears.

Voluntary payment arrangements recovered a total of $20,000.00. Requirements to Pay were issued to the
bank and to the known accounts receivable, after the landlord had distrained the premises. This action
was not effective as the corporation had already ceased operating. investigation determined that there were
no remaining corporate assets from which to effect collection. The corporate charter was surrendered
on July 9, 1994. There is no known corporate tax liability. A Goods and Services tax liability in the amount
of $15,570.82 has also been deleted.

Assessments under section 227.1 of the Income Tax Act against the three directors was considered. This
action was not pursued as two of the directors filed assignments in bankruptcy under the provisions of
Summary Administration. The third debtor has a substantial personal tax liability and lacks the ability to
pay any assessment. Due to the limitation of section 227.1(4) of the Act the Department is now precluded
from pursuing an assessment.

Deletion of this account is recommended as the debtor is a corporation and the corporation is inoperative
and without assets.

Committee Stamp – Timbre du Comité

229 © Alan Baggett

 Write-offs, Write downs and Deferrals

Canada Revenue Agence du Revenu T1520A

Agency du Canada

RECOMMENDATION FOR DELETION OF UNCOLLECTIBLE AMOUNT

RECOMMANDATION DE RADIATION D’UNE SOMME IRRÉCOUVRABLE

Name - Nom

Office – Bureau Inventory – Inventaire Revenue Type – Genre de revenu

1221 19 09 69 T1
Account Number – Numéro de compte Transaction Type – Genre de transaction
46 WRITE-DOWN RADIATION PARTIELLE
Total Tax, Penalty, Interest, Law Cost Years – Années
Impôt, pénalité, Intérêt, frais jud.total 1984, 1985
$170,875.00
Uncollectible Category – Catégorie de dette irrécouvrable
L – DEBTOR IS DECEASED AND THERE IS N0 KNOWN ESTATE
L – DÉBITEUR EST DÉCÉDÉ ET IL N’EXISTE PAS DE SUCCESSION CONNUE
History of Collections Actions – Historique de dette irrécouvrable

The account became Taxation Services Office responsibility on October 11, 1988 as the result of the 1984
and 1985 reassessments both processed on July 15, 1988. The liability increased as the result of an initial
assessment for the 1988 taxation year processed on August 16, 1989 and a reassessment for the 1986
taxation year processed on March 23, 1992. The liability decreased as a result of a reassessment for the
1984, 1985 and 1988 taxation years all processed on January 30, 1992 and a reassessment for the 1986
taxation year processed on July 13, 1993.

The client died on January 23, 1990. Prior to the client’s demise he was heavily involved in numerous
companies dealing in real estate and a restaurant with his sons. These companies are now all inactive.

No voluntary payments have been received on this account. Legal action in the form of a Writ of Fieri
Facias has been filed with the sheriff in an attempt to seize the shares of the client’s business. The business
was petitioned into bankruptcy making the shares worthless. Extensive collection investigation have failed
to locate any income or assets in the client’s name.

Collections investigation revealed that prior to the client’s death, funds were transferred to his spouse. On
September 13, 1994 a memo assessment was issued under section 160 of the Income Tax Act against the
client’s spouse in the amount of $234,306.77. The spouse appealed the memo assessment and the amount
was reduced to $148,168.26. Legal action issued against the spouse in the form of multiple Requirements to
Pay to financial institutions resulted in remittances totalling $32,395.37. The principal residence and the
cottage are registered to the spouse. Writs of Fieri Facias have been filed with the sheriffs of the
appropriate jurisdictions. In April 1996, the client filed a new appeal to the Tax Court of Canada. The
appeal has not yet gone to trial. On December 18, 1996 the client’s spouse passed away.

Committee Stamp – Timbre du Comité

WRITE-DOWN: TOTAL OWING $318,485.63
TO BE WRITTEN OFF: $170,875.00
BALANCE OWING: $147,610.63

230 © Alan Baggett

 Write-offs, Write downs and Deferrals

Canada Revenue Agence du Revenu T1520A

Agency du Canada

RECOMMENDATION FOR DELETION OF UNCOLLECTIBLE AMOUNT

RECOMMANDATION DE RADIATION D’UNE SOMME IRRÉCOUVRABLE

Name - Nom

Office – Bureau Inventory – Inventaire Revenue Type – Genre de revenu

1213 05 09 69 T1
Account Number – Numéro de compte Transaction Type – Genre de transaction
46 WRITE-OFF - RADIATION
Total Tax, Penalty, Interest, Law Cost Years – Années
Impôt, pénalité, Intérêt, frais jud.total 1992, 1993, 1994, 1995
$34,089.22
Uncollectible Category – Catégorie de dette irrécouvrable
M – THE TAXDEBTOR IS INCAPABLE OF REPAYING THE DEBT

History of Collections Actions – Historique de dette irrécouvrable

The account became Taxation Services Office responsibility on August 3, 1994 and the current liability is a
result of an assessment for the 1992 taxation year dated August 29, 1993, assessments for the 1993 and
1994 taxation years completed under subsection 152(7) of the Income Tax Act and processed on July 17,
1996 and an assessment for the 1995 taxation year dated May 3, 1996.

The twenty-eight year old client is a former real estate salesman who operated his own agency. Due to
fiscal mismanagement the client’s company ceased operations on December 12, 1995. The client has been
unemployed since this time and has stated that he has no intent to return to work in the near future. He
currently resides with his parents.

Legal action has never been taken against this client due to the distinct lack of exigible assets.

At this point in time it should also be noted that a related source deduction debt of $44,434.74 has been
approved for deletion, a corporation tax debt of $7412.78 has been submitted for deletion as has a Goods
and Services tax debt totalling $32,535.12.

Accordingly, as the client has no means of repaying his liability, deletion of this account is recommended.

Committee Stamp – Timbre du Comité

231 © Alan Baggett

 Write-offs, Write downs and Deferrals

These examples are representative of the types of tax accounts that the tax collector
submits and Revenue Canada approves for deletion on a regular basis.
One of the themes of this book is the fact that accounts that are not paid voluntarily
are rarely paid at all and each of these examples fits this statement.
Only one voluntary payment arrangement was made on these written off amounts and
ultimately even that failed to entirely collect the arrears.
You might also note the Requirement to Pay action was ineffective in each instance
where it was initiated. Furthermore, you just have noted that there was one instance
where an Execution was issued and this effort also proved to be ineffective in forcing the
debtor to come to terms with their tax arrears.
In the case of the debt that was written down (the fourth example), you will note that a
memorandum assessment was issued, subsequently appealed, and the amount of the
initial assessment was revised to reflect the new amount. The new amount was appealed
and still sits before the courts. To date, the Department has collected nothing and in the
interim, the client has passed away and the third party debtor, the spouse, is also now
deceased. This should be an example to all taxpayers and tax debtors alike. Just because
Revenue Canada assesses does not mean that the assessment is correct or even valid. Do
not be afraid to challenge what you’re being asked to pay because it’s your money.
I think you also noticed that several write-offs note that associated tax debts for
business and/or trust amounts have also been submitted and approved for deletion. For
the most part indebtedness is contagious. It can start with personal tax arrears and then
jump over to the business side of the ledger. And when some make it known that they
have successfully stiffed the tax collector it seems to encourage others to try as well.
What happens when the tax collector deletes your tax liability and subsequent to this
you become due for a refund?
Occasionally the credit is placed against the previously written off tax debt but if you
complain and pleads a hardship case or maybe just complain period quite likely you will
receive your refund. I am aware of a situation where the one time debtor became eligible
for a refund for exactly this reason.
She hadn’t filed in the couple of years since the write-off and I guess she decided to
file the first time she was eligible for a credit.
A review of her personal financial situation showed significant interest income which
would indicate a significant amount of cash the way interest rates are these days. The
interest income alone was certainly enough money to live on so that she wouldn’t miss
this refund terribly. However, she made a federal case of complaining and Revenue
Canada very quickly caved in so she received her refund. You’ve also probably guessed,
and correctly so I might add, that the tax collector never went after her to obtain payment
of the previously written off tax amount.
Does Revenue Canada ever reinstate previously written off amounts? Yes, but only on
the rarest of occasions.
When a previously written off debt is to be reinstated the collector must first receive
the concurrence of the Assistant Director of Collections. With his or her agreement Head
Office will reinstate the debt. However, they will not reinstate the debt on the client’s
account on ACSES. Instead a brand new tax account is created on the Automated
Subledger for the tax debt. The debtor now has two accounts that need to be managed.

232 © Alan Baggett

 Write-offs, Write downs and Deferrals

I have only seen one occasion where a debtor has had a tax liability reinstated. I tried
to certify the debt and obtain a writ but was unable to do so because the department had
no idea as to which years the reinstated tax debt pertained to. As a result the reinstated tax
debt had to be written off, for a second time, because the debtor would not voluntarily
pay and legal action could not be undertaken. When the other collector clued in that the
subledger debt was being written off she submitted the debtor’s T1 debt and it was
approved for deletion based on the fact that a related account had already been approved
for deletion. Mr. Finlay B M was one very lucky taxpayer.
These are your tax dollars at work.
Joe Markevich in Joe Markevich v. Her Majesty the Queen in Right of Canada was a
similarly fortunate individual. In 1986 Joe was assessed with a $267,437.61 tax debt and,
after a partial payment, the remainder of the debt was written off during that same year.
However, in 1998, the Department decided they would now like to collect this tax debt
which, with interest, was now $770,583.42. Mr. Markevich challenged them that the debt
was no longer collectible, saying their time period to collect had long since expired, and
the key issue being whether or not a Provincial Limitations Statute, in this case British
Columbia, can preclude the Crown from collecting an income tax debt. The Court ruled
that in this instance, yes, debt collection was subject to the British Columbia Limitation
Act. Revenue Canada lost. They could not enforce payment.
Visit: http://recueil.cmf.gc.ca/eng/2001/2001fca144/2001fca144.html to review the
full case details and text.
So, if you have a very old tax debt from any revenue stream, whether written off or
current, check your province’s Limitation’s Act or similar legislation for debt remedies.
Just maybe the tax collector will not be able to legally enforce payment.

Last words

The tax collector can write-off your tax account at any time but management will, at
certain times of the year, put an extra emphasis on writing off delinquent accounts as
opposed to collecting tax debts. Usually in September-October and once again in
February-March.
Early fall is chosen because this is when the most debtor accounts flood collections
and management wants to give the impression to Head Office that the number of debtor
accounts is not rising.
Late winter is chosen because it is near to the end of the fiscal year (March 31st) and
management wants to demonstrate to Head Office that they are meeting their production
goals. It is also chosen so to ensure the TSO’s entire budget is spent. In this way they can
receive a larger budget for the upcoming year.
Truthfully most tax collectors abhor completing write-offs because of the work
involved. So they shunt their write-offs aside in hopes that another collector will
complete them after the next office reorganization takes place.
Appendix A discusses the effects of the numerous reorganizations and shuffling of
workloads that are a common occurrence.
To entice the tax collector to delete accounts managers offer overtime, time and a half,
on weekdays or weekends as a ‘bribe’. This bribe serves to get delinquent accounts off

233 © Alan Baggett

 Write-offs, Write downs and Deferrals

the books and boost the TSO’s production demonstrating to Headquarters that they are in
fact ‘with the program’. Many tax collectors now refuse to write-off a tax debt during
regular hours in order to force management to offer overtime.
There are also times when the tax assessments are raised just so they can be written
off. Consider this story splashed across newspapers nationwide.
An Ontario lawyer embezzled several million dollars from his family and clients and
fled to Australia. He was caught returned and convicted. While in jail Revenue Canada
assessed him with a tax debt of almost three hundred thousand dollars. Why assess a now
destitute disbarred man who is in jail? There is only one reason. Production goals.
Naturally his liability was then soon deleted as uncollectible. Remember in CRA parlance
a tax debt written off still counts as a debt collected which translate to production even if
nothing was actually collected.
And yes all proceeds of a criminal act are considered to be taxable income.
Witless assessments and written-off tax liabilities provide the funding for increasing
budgets and increasing expenditures. This is not to say that tax debts are not collected
because some tax debts are resolved voluntarily, some debts are arranged and others are
collected via legal actions but there is a process of seriously skewed thinking here.
Raising assessments just to write them off adds up to many millions of wasted dollars
every year and represents poor value for the money and time spent unless the point of the
program is to be a make work project.
To prove this point, a goal of the Toronto North TSO was to increase the percentage of
dollars collected compared to the dollars assessed on source deduction audits.
As it stood in 1997, for every dollar Toronto North assessed on a source deduction
audit just seventeen cents was collected. In the whole of Southern Ontario an average of
twenty-two cents is collected for a dollar so assessed while the National rate is an
astonishing low twenty-nine cents on the dollar.
The figures for individual arbitrary assessments were not made available but from
personal experience I doubt the collection figures are no higher than those dollars
collected for source deductions.
This strengthens the idea that the thinking behind some of the department’s motives is,
at best, unsound. When an auditor raises a tax assessment they should first ensure a
collection avenue exists. An auditor should not raise an assessment just to reach audit
production goals and tax assessments should not be written off just to meet production
goals.

What you need to know

When I was a tax collector I was asked more than once by tax debtors, “You write off
stuff don’t ya? Then why don’t you write off my taxes then?”
Of course I would have to deny this and say something about death and bankruptcy
being the only sure cure for avoiding payment of tax. But of course the tax collector does
write off tax debts and now you know exactly how they go about it and some of the
reasoning behind their motives.

234 © Alan Baggett

 Write-offs, Write downs and Deferrals

Maybe the next time I write a book about taxes it will be about tax debtor’s who have
successfully tricked the tax collector into believing that their tax debt should be written
off by arranging their affairs so as to closely identify with one of the tax categories.
Heck, maybe you can even bribe a tax collector to write off your tax arrears. To be
honest I have heard rumours to this effect but I was never actually able to gain a shred of
proof that it was done so this is one story that must remain untold for the time being. But
one Revenue Canada manager was caught taking a bribe for agreeing to stop an
investigation of a tax debtor so there is no doubt that these things do happen.
One point that should also be made clear is that just because the tax collector has
written off your tax debt this does not mean that your tax debt is forgiven. It only means
that they have officially (and privately) decided that your tax debt is uncollectible at the
present time as well as for the foreseeable future. However the tax collector can choose to
reinstate your previously written off tax arrears and begin collection attempts anew if
they find that your financial picture has changed to such a degree that fu or partial
repayment is possible.
But, and there is a but to this, they have to do this (the reinstatement of a previously
written off tax debt) within a reasonable time period. And what is the length of this
‘reasonable time period’? It depends on which Canadian province or territory the tax
debtor (you) resides in.
In the 2003 court decision Markevich v Canada (noted previously and in Chapter 6 –
Collection Restrictions and Legal Warnings) the Supreme Court of Canada recognized
limits on tax debt collection.

“If the Minister makes no effort to collect a tax debt for an extended
period, at a certain point a taxpayer may reasonably come to expect that he
or she will not be called to account for the liability, and may conduct his
or her affairs in reliance on that expectation… a limitation period
encourages the Minister to act diligently in pursuing the collection of tax
debts. In light of the significant effect that collection of tax debts has upon
the financial security of Canadian citizens, it is contrary to the public
interest for the department to sleep on its rights in enforcing collection.”

So if the Canada Revenue Agency ‘writes off’ your tax debt and then later finds it may be
collectible it may be too late for them to collect on it. It all depends on which province or
territory you reside. For instance if you reside in British Columbia the time limit (with the
exceptions as noted in Chapter 6) is six years. So check your Provincial and Territorial
Limitations Acts or have your lawyer check for you.

(Update: March 2004: In light of the above decision the Federal government instituted
a nationwide ten year limit on the collection of tax debts – regardless of provincial and
territorial minimums - if they can not collect within ten years the debt will be
unenforceable. The ten years will not be retroactive meaning that if you have a debt that
was assessed before the proposal passes, the ten year clock starts ticking the date the
proposal is enacted and not the date your tax debt became outstanding or was assessed.
When this change does pass I believe that there may still be Court challenges to it.)

235 © Alan Baggett

 Write-offs, Write downs and Deferrals

Also, how do you determine if you have a previously written off tax debt?
You stop getting ‘outstanding balance’ letters from the CRA.
Or, if you do get notices, they may refer to ‘other amounts outstanding’ but not supply
a figure. And then when you get a refund or a GST credit they will refuse to refund it to
you and instead place it against the previously written off debt. If this happens to you, an
offset credit, contact the CRA and request a complete ‘Statement of Account’ to
determine the source and age of the previously written off debt. If you find that the
previously written off debt surpasses the time limit allowed for collection then you are
eligible for a refund of the amount they used to offset your old debt.
And don’t forget to charge them interest.
And finally, quite often I have touched on the subject of tax debt age. Here is why.
The 1994 Auditor General’s Report made note of the following in respect of the
‘Recoverability By Age of Unpaid Tax Assessments’ which I have converted into table
form following:

Tax debt age Percentage of a dollar resolved

1 – 3 Months 95%
9 – 12 Months 87%
2 Years 71%
3 Years 69%
4 Years 33%
5 Years 28%

The table is read as follows: For tax debts that are nine-twelve months old payments
make up eighty-seven cents of each dollar resolved. Or, for tax debts that are four years
old, payments make up thirty-three cents of every dollar resolved.
But what happens to the balance then? (I.e. if seventy-one cents is collected for tax
debts two years old what happens to the other twenty-nine cents?)
Well, some of these pennies are resolved when a tax debtor wins their appeal and
some through credit reassessments but the vast majority of these pennies are written off
the books as uncollectible.
It is amazing how fast the collectibility of a tax debt decreases after only three months.
And it is even worse in the commercial sector. After two months, commercially, the
chances of collection on a debt are only 75%! And after one year the odds drop to an
astoundingly low 25%. And remember that in the private sector most customers are
accepted only after they are screened, the CRA must accept all.
I hate to sound like a broken record but a dollar assessed is not necessarily a dollar
collected and those who don’t voluntarily pay their tax assessments are often never
forced to pay at all. The Auditor General’s report makes this fact crystal clear.
So, clearly if you and the tax collector allow your tax debt to age you stand an
excellent chance of escaping payment. As Mr. Markevich proved.
It is that simple.
Ben Franklin once remarked that the two things in life you can’t escape are death and
taxes. I guess he never had the good fortune to deal with the Canada Revenue Agency.

236 © Alan Baggett

 The Tax Collector’s Bible

Part III

Fighting Fire with Fire

“Your Rights”
 Appealing Your Tax Assessment

18

Have you ever filed your tax return expecting a refund only to receive nothing? Or, even
worse, when your Notice of Assessment finally arrives you’re startled to find out that
your tax bill is even higher than you originally anticipated? Not an uncommon scenario
by any stretch of the imagination. But what can you do? If you’re sure you’re right or
you’re positive that tax collector’s claims are incorrect your only choice is to appeal your
assessment by filing a Notice of Objection. On average, between 50,000 and 60,000
Notices of Objection are filed with the CRA every year. And that number is steadily
rising.
Up until very recently Canadians had to file an objection to their assessment on the
prescribed government form. But today, thanks to the miracle known as Fairness
Legislation, filing an appeal or a Notice of Objection to an assessment or reassessment is
as simple as writing a letter. The objecting party simply sends an ordinary hand-written
or typed letter to their local Taxation Services Office making sure that their letter clearly
identifies them, includes their social insurance number, states the basis of their reason for
appealing and notes the taxation year(s) for which their appeal is for.
Originally an appellant had only ninety days from the date of their Notice of
Assessment or Reassessment to make an appeal. But with the implementation of Fairness
Legislation (thanks again) Canadians now have as long as a year and in some instances as
long as two years in which to file their appeal. This topic is discussed in full in the
chapter on Fairness Legislation: Extending time limits to file a Notice of Objection.
Upon appealing your assessment or reassessment all legal collection action must cease
immediately for the taxation years that are under appeal. If you owe back taxes for 2007,
2008 and 2009 and have objected to your 2009 tax assessment this means no
garnishments, no statutory set-offs, no execution of Executions. No legal collection
action may be taken to collect your 2009 tax arrears until the original assessment or
reassessment has been varied or confirmed. However the 2007 and 2008 tax years can
still be legally collected by the tax collector.
When you do file your appeal the Agency will send you a confirmation letter and an
example of such is found on the two pages immediately following.
Now, in theory the appellant is supposed to receive a decision on their appeal within
ninety days of filing it but, unfortunately, decisions are never ever made this quickly.
And the letter on the page following confirms this fact stating, ‘…it will be
approximately three months before we can contact you…’
But it could be longer. Much longer.
238 ©Alan Baggett
 Appealing Your Tax Assessment

Canada Revenue Agence de Revenue

Agency du Canada

275 Pope Road, Summerside, PE C1N 5Z7

Summerside PE C1N 6A2
February 5, 2011

Account Number
CLAUDE RAYMOND 123 456 789
111 SWAN DR
OAKVILLE ON L5X 2X5

Dear Sir:

Re: Your Objection for the 2002 taxation year

This is to inform you that we have received your objection.

The review will be done by the Appeals Division of the Canada Revenue Agency, which
has a mandate to conduct a full and impartial review of the decision taken by CRA
officers.

An Appeals officer will contact you or your authorized representative to review all the
facts and discuss your objection. The Appeals officer will also ensure that the basis of the
assessment is understood, and will offer to provide you with the documents relating to the
issue in dispute. Based on our current inventory of cases, it will be approximately three
months before we can contact you or your representative.

Should you have additional information that you wish to provide concerning your
objection, it would be helpful if you or your representative could forward it to this office
prior to commencing our review.

If you have not paid the amount in dispute, interest continues to accumulate on the unpaid
balance. You can reduce or avoid interest charges by making a payment on your account.
The Canada Revenue Agency will pay interest on any amount it refunds to you if your
objection is allowed. The Revenue Collections Division has been advised that you have
filed an objection.

…/2

Local: (902) 432-6023

Summerside Tax Centre Long Distance: (877) 213-0576
275 Pope Road Fax: (902) 432-5593
Summerside PE C1N 6A2 Web site: www.ccra.gc.ca

239 ©Alan Baggett

 Appealing Your Tax Assessment

-2-

Should you have any questions, please do not hesitate to contact our Appeals Division at
1-877-213-0576.

Yours Sincerely,

Herbert Normore
Team Leader
Appeals

240 ©Alan Baggett

 Appealing Your Tax Assessment

If the CRA does take more than ninety days to reach their decision you have the
choice of appealing directly to the Tax Court for an answer or you can choose to wait for
the agency to finally make a decision. Naturally most tax debtors wait for the
department’s word which usually translates to a minimum six-month wait from the date
that your appeal was filed.
But before reaching a decision it is not unusual for the CRA to attempt to negotiate a
settlement with the tax debtor, and this is especially true in disputes that involve the
denial of certain types of losses. Whenever tax legislation is open to interpretation the tax
collector may make concessions if the appellant is willing to do the same. Both parties
come away from the table with something, they just don’t get everything they expected or
wanted. The CRA and the Department of Justice may also try to negotiate a deal when
they are afraid that a court loss could be a precedent setting decision. They will only
attempt to try cases that, when they reach the court, will result in precedents that protect
or enhance current legislation, not tear it down.
Should the CRA dismiss your appeal and you do not agree with the decision (who
does?), the next step is to appeal to the Tax Court of Canada. More detailed information
on this approach can be found at http://www.tcc-cci.gc.ca/.
Should an appeal be made to the Tax Court there are two ways to proceed, the general
procedure or the informal procedure.
The general procedure operates much like the formal courtroom setting seen in a
movie or on television but if your appeal is based on a small tax amount the cost of the
legal fees may outweigh the benefit of the appeal should you win. This is why the
informal procedure tends to be the method of choice for the majority of appellants. It
saves on fees paid for representation and expedites the time for which the court hears
your case. It does not include much of the process of the formal court proceeding such as
an examination for discovery. The hearing is usually held within eight months of your
appeal being filed but in the interim you may still negotiate a settlement with the agency.
When deciding to use the informal procedure you should know that this procedure can
only be used only when the amount of tax and penalties for any one taxation year does
not exceed $12,000, the amount of losses claimed does not exceed $24,000 or the only
subject matter of the appeal is interest charges.
Using the informal court procedure does have one rather large negative; your ability to
appeal if you should lose at this level is restricted as judgements rendered on informal
appeals have no precedential value.
No matter which method you chose the Department of Justice always represents the
tax collector in court and Justice will advise the tax collector in one of four ways.

i. They may agree with the appellant and advise the CRA to reassess the tax return(s)
accordingly.
ii. They will ask that the appeal be delayed until another case before the court with
similar facts is decided.
iii. They will advise the tax collector to proceed with court action
iv. They will ask the tax collector to attempt to negotiate a settlement with the
appellant.

A CRA appeal response letter can be found on the following three pages:

241 ©Alan Baggett

 Appealing Your Tax Assessment

Canada Revenue Agence de Revenue

Agency du Canada

XPRESS POST
Your File Votre reference

Our File Notre Reference

VINCE D’OMBRE D’ambraV
5001 YONGE ST
NORTH YORK ON M5A 2C5

Telephone (416) 973-3341

Dear Sir:

We have completed our review of your objections for the tax years 2005 and 2006.

As a result of our review, we have varied the assessments for these years. We will issue
under separate cover the “Notices of Assessment” that explain the Ministers decision.

If you disagree with the decision, you can file an appeal with the Tax Court of Canada.
We have attached information on how to proceed with an appeal.

Yours sincerely,

I. Tebbutt
Appeals Division

Facs: (416) 954-5313 Telecopieur: (416) 954-5313

Toronto East Tax Services Office Bureau des services fiscaux –Toronto est
200 Town Centre Court Suite 475 200 cour Town Centre suite 475
Scarborough, Ontario Scarborough (Ontario)
M1P 4Y3 M1P 4Y3

242 ©Alan Baggett

 Appealing Your Tax Assessment

Canada Revenue Agence de Revenue

Agency du Canada

Appealing Income Tax Assessments to the Tax Court of Canada

If you do not agree with our decision on your objection, you can appeal to the Tax Court of Canada. Your
appeal has to be received by the Court no later than 90 days from the mailing date of our Notice of
Confirmation or notice of (re)assessment.

The Tax Court of Canada hears appeals under two distinct procedures: the Informal Procedure
and the General Procedure. If you do not choose the Informal Procedure, the Court will hear
your appeal under the General Procedure. The following information will help you make the
appropriate choice.

Informal Procedure

Eligibility ▄ You qualify to use the informal procedure if:

- the disputed amount of federal tax and penalties is not more than $12,000
per assessment;

- the disputed loss is not more than $24,000 per determination; or

- interest on federal tax and on federal penalties is the only matter in dispute.

Representation ▄ You may represent yourself, or have a lawyer or another individual

represent you.

Costs ▄ There is no filing fee for appeals instituted under the lnformal Procedure.

▄ The Court may order the Minister to pay for certain costs you
incurred if you are more than 50% successful in your appeal. You
will not have to pay any of the Minister's costs, unless the court
finds you have unduly delayed the prompt and effective resolution
of the appeal.

Process ▄ Your notice of appeal has to be in writing and include the relevant facts and
your reasons for appealing. Please include your mailing address, telephone
number, the date of our confirmation or reassessment notice, and the name
of the tax services office or tax centre that dealt with your objection. You can
file your appeal by delivering or mailing your objection notice to the Registry
of a Tax Court of Canada Office. You can also send your notice of appeal by
fax or electronic mail. lf you send it in either of these ways, you will not be
required to send paper copies unless requested. You can find a list of the
Tax Court of Canada offices on the back of this document.

▄ You have to clearly indicate on your notice of appeal that you are choosing
the Informal Procedure.

RC444$2(E) Rev. 08
243 ©Alan Baggett
 Appealing Your Tax Assessment

General Procedure

Eligibility ▄ Unless you qualify for and choose to follow the lnformal Procedure, the court
will hear your appeal under the General Procedure, regardless of the disputed amount.

Representation ▄ lndividuals can either represent themselves or have a lawyer represent them.
A lawyer has to represent a corporation, except in special circumstances when
the Court may allow one of the corporation's officers to represent it.

Costs ▄ You must pay the filing fee indicated below within five days after receipt of documents
by the Registry. Please make your cheque payable to the Receiver General of Canada.

Total Federal Tax\

Filing Fee and Penalty in Dispute Loss Contested

$250 up to $49,999 up to $99,999

$400 $50,000 to $149,999 $100,000 to $299,999
$550 $150,000 or more $300,000 or more

▄The court can order the unsuccessful party to pay some of the other party's
legal costs.

Process ▄ You have to submit your notice of appeal in the form set out in the rules of
the court.

▄ You can get details on how to prepare your notice of appeal by contacting a
Tax Court of Canada office listed below.

Principal Office – Ottawa Calgary Edmonton Fredericton

200 Kent Street Canadian Occidental Tower Scotia Place Westmorland Place
Ottawa, Ontario 635 Eighth Avenue S.W. 10060 Jasper Avenue 82 Westmorland Street
K1A 0M1 3rd floor, P.O. Box 14 Tower l, Suite 530 Suite .100
Telephone: 613-992-0901 or Calgary, Alberta P.O. Box 51 Fredericton, New Brunswick
1-800-927-5499 T2P 3M3 Edmonton, Alberta E3B 3T3
TDD: 613-943-0946 Telephone: 403-292-5556 T5J 3R8 Telephone: 506-452-2424
Fax: 611-957-9034 TDD: 403:292-5819 Telephone: 780-495-2513 TDD: 506-452-3036
Fax: 403-292-5329 TDD: 780-495-2428 Fax: 506-452-3584
Fax: 780-495-4681

Halifax Iqaluit Montreal Quebec

Central Trust Tower Nunavut Court of Justice 30 McGill Street Palais de Justice
1801 Hollis Street Amakallak Building( #224) Montreal, Quebec 300 Jean Lesage Blvd
17th floor, Suite 1720 P.O. Box 297 H2Y 3Z7 Room 500A and 500E
Halifax, Nova Scotia Iqaluit, Nunavut Telephone: 514-283-9912 Quebec, Quebec
B3I 3N4 X0A 0H0 Fax: 514-496-1996 GIK 8K6
Telephone: 902-426-5312 Telephone: 867-975-6100 Telephone: 418-648-7324
TDD: 902-426-9776 Fax: 867-9794168 TDD: 418-648-4644
Fax: 902-426-5514 Fax: 418-648-4051

Toronto Vancouver Winnipeg

180 Queen Street West Pacific Centre Imperial Broadway Tower
Suite 200 P.O. Box 10065 363 Broadway Street, 4th Floor
Toronto, Ontario 701West Georgia Street Winnipeg, Manitoba
M5V 3L6 Vancouver British Columbia R3C 3N9
Telephone: 416-973-9181 V7Y lB6 Telephone: 204-983-1785
TDD: 416-954-4245 Telephone: 604-666-7987 TDD: 204-984-4440
Fax: 416-973-5944 Fax: 604-666-7967 Fax: 204-983-7636

Tax Court of Canada Web site: www.tcc-cci.gc.ca

244 ©Alan Baggett
 Appealing Your Tax Assessment

Now, should a court appearance become necessary you and/or your representative are
required to be to in attendance from the outset of the court’s day, 9:30 AM, even if your
case is to be heard many hours later in the day.
The setting is as in any courtroom but the presiding judges tend to be more lenient in
respect of the rules of the court as most participants do not have real world courtroom
experience unless they have actually hired a lawyer to represent them rather than their
accountant. Most Tax Court judges will allow the agent of an appellant to ask leading
questions as long as they are not too unreasonable.
Naturally the Department of Justice’s lawyer will object to such questioning but in
most instances the judge will overrule them when the interests of justice are being served.
You or your representative should take advantage of this and ask any question, leading or
otherwise, when it will serve your interests.
When it comes time to make a decision the judge may render the decision
immediately, after all arguments and evidence have been presented or, in the more
complex cases such as when much case law has been cited by one or both sides, he/she
may wait several days in order to conduct his or her own researches.
In the eight or so months between the CRA’s denial of your appeal and the Tax Court
hearing your case and reaching a decision, no legal action can be taken under any
circumstances to collect your outstanding tax liability unless a danger of loss position
presents itself.
Now the Tax Court can make one of three rulings:

i. They can dismiss the appeal,

ii. They can allow the appeal
iii. They can refer the matter back to the Minister for reconsideration and reassessment.

If the Tax Court rules in your favour the tax collector can still appeal their case to the
Supreme Court of Canada. Should they do so you are under no obligation to pay your tax
arrears until a judgement is rendered at this level.
But when the Tax Court rules in favour of the tax collector and the tax debtor chooses
to pursue the matter to the Supreme Court, the tax collector is allowed to collect or secure
the appealed amount as they see fit.
Yet while the tax collector has the right to collect tax debts appealed to the Supreme
Court they rarely exercise this right to collect. Why? Because CRA management does not
expect the tax collector to realize on an appealed debt until the appeal has been
conclusively and formally decided.
No matter what level the appeal is at.
But, to be clear, the CRA’s thinking on this is that when a tax debt is under appeal, at
any level, it is similar to a tax debt that has been recommended for a deferral or write-
down. Either the entire debt is collectible today or else it must be a write-off.
And this failure to secure debts being appealed at the Supreme Court level is costing
the department, and therefore Canadians, money. Here’s a story I took part in about one
of the many appeals that was decided at the Supreme Court.
A trust, the G----y Family Trust, was assessed three separate tax debts for each of the
1976, 1977 and 1978 taxation years. The executor disagreed with each of the

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assessments, originally totaling approximately $96,000, and appealed each of them. The
course of the appeals ran several years and the G----y family lost at each level.
So, finally, their appeal ended up at the Supreme Court where it stayed for yet another
length of time.
And while at the Supreme Court the tax collector never once tried to secure their debt
as is their right or even investigated the Trust’s ability to pay.
Finally, in 1986 the Supreme Court reached a decision. The court decided in Revenue
Canada’s favour.
In 1993 I was looking through another tax collector’s inventory and came across the
G----y account. By this time and with interest, the debt was closing in on $200,000.
There had been no attempts at collection whatsoever so I tried a novel approach
toward this tax debt. I tried to collect the arrears by contacting the executor and
requesting payment in full. I spoke with the executor and asked him why he hadn’t paid
and he replied that after the court decision in 1986 he had patiently awaited for Revenue
Canada to contact him and arrange for payment.
But no one did.
Ever.
The executor stated that after seven years he had assumed that the department had
forgotten about the debt. In short he was shocked that someone was actually contacting
him after all this time.
Within a week of speaking with the executor I received a cheque for $96,000 and
change. The original 1970’s debt was being paid in cheaper 1990’s dollars. For the large
interest amount the administrator was eventually able to negotiate with the department
where he paid about $40,000 but the remainder, another $60,000, was forgiven.
Now the tax collector will often pretend that the Income Tax Act does not allow for
the forgiveness of interest for tax debts prior to the 1985 taxation year but this is untrue
(Find out more about this topic in this chapter’s ‘What you need to know’). The tax
collector is allowed to forgive these kinds of tax debts. So in this instance I am guessing
that Revenue Canada made use of the Financial Administration Act and the
recommendation of a Minister to delete this large amount.
Why?
Due to the embarrassment of the department’s outstanding negligence in never once
attempting collection of the outstanding arrears.
Yet if I had not picked this tax debt out of another collector’s inventory it would have
remained uncollected to this day and most likely would have been written off by now.
Do you remember the Baruch D-----v debt discussed in Chapter 16, Sundry Tax
Debts? This is an example of another appealed tax debt that was ignored for years that
was soon paid after a simple contact. And no doubt there are many more tax accounts out
there like these.
Many more.
When a tax debtor runs the full gamut of appeals the decision process can take many
years, anywhere from one or two years to ten or more years.
As an example of this a series of appeals known internally as ‘the Yacht Project’ and
involving hundreds of tax assessments from the 1984 to 1988 taxation years was not
finally decided until 1998. I had the tax accounts for two of the many appellants and
wanted to secure the department’s position when their appeal went to the Supreme Court.

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I was told, “No,” to wait for the final outcome before making any attempt at collection.
So of course I did nothing.
And of course the final outcome was that Revenue Canada won the court case. But by
this time so much time had passed that some of the appellants had died, the financial
affairs of others had declined leaving them unable to pay and many of the remainder had
taken the time to move themselves and/or their assets out of the reach of the tax collector.
To date very little has been collected from these assessments. And when all is said and
done the department will have lost much more than they will have collected in this long
running fiasco.
When an appeal takes this long to decide and even if the CRA does win it is not
unusual for the debtor’s financial picture to have changed to such a degree that they are
unable to pay their tax liability. A person who is unable to manage their tax affairs is a
good indication of a person that has other fiscal shortcomings as well.
So, naturally, their tax debts are written off.
And to illustrate this another story comes to mind.
A real estate shell company bought and quickly resold buildings and condominiums,
flipping them at huge profits. This happened long before I became a tax collector (before
I even reached high school I think) but one day one of the individuals who allegedly
profited from the wheelings and dealings, a Mr. J N, pops up in my collections inventory
and is owing over a million dollars. His account was under appeal at the highest level.
But try as I might I was unable to locate any collection avenues or even any potential
collection avenues.
Nothing.
Then, one day, suddenly and totally out of the blue, I receive a call from an Appeals
Officer and I was told that Revenue Canada is finally going to back off and allow the tax
debtor to win his appeal.
Of course I asked, “Why?”
I was told it was because if the department were to win the appeal the appellant would
not be able to enforce payment of the debt. So they were not going to continue the battle.
As a result over one million dollars in tax assessments were reversed leaving the
debtor with a $10,000 debt that was soon written off.
I do not believe an appeal should not be settled in this manner.
A tax debt should be owing because the law says so or reversed because the
assessment is invalid. If an assessment can be reversed based on collectibility than maybe
Canadians should be objecting to their debit assessments based on the grounds that their
tax debt is uncollectible for lack of any other more compelling reason.
And what would happen if the tax collector was to collect an appealed tax debt via a
requirement-to-pay or an Execution and then you were to file an objection to the
assessment for the tax year that the debt was legally collected?
The tax collector would have to reimburse you for the money seized, with interest, if
the confirmation or variation of your assessment takes more than 120 days.
Where the department does reply within the 120 day time period, which they rarely do
and if you have filed an appeal to the Tax Court of Canada then you are eligible to
receive a refund of any disputed monies paid. When you wish to obtain monies paid for
an amount under appeal the debtor must send a letter to the Minister of Revenue

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requesting their refund. By law the Minister must refund the monies immediately upon
receiving the written request, with all due dispatch.
Just to be safe, I would send any such letter registered.
But legally collecting a tax debt that is under appeal or yet to be appealed can have
serious consequences for the tax collector whether they win or lose the appeal. In the
court case of McCullough vs. Minister of National Revenue 89 DTC 446 (T.C.C.) the
judge held that an action to collect a debt can only be invoked once to collect once only.
Once the purpose of the section of the Income Tax Act has been served it can not be used
again to justify the subsequent collection proceedings against a tax debtor. What this
translates to is that if the tax collector collects your tax debt with a requirement-to-pay
and then returns these legally collected monies to you, for whatever reason, they cannot
use a requirement-to-pay a second time to collect that same tax debt. The same logic
applies to collection by Execution.
Yet the tax collector continues to take legal action to collect your tax debt before the
period to file an appeal has expired. Sometimes hoping, and maybe praying even, that the
debtor will not file an appeal. But if the CRA retires your tax debt via legal means, you
subsequently appeal the assessment and then the agency takes more than 120 days to
reach their decision, you can have the seized monies returned just by extending your
appeal to the Tax Court. And even if you subsequently lose your appeal the tax collector
cannot collect that same tax debt a second time via the same legal means. Now, if the tax
debtor does not voluntarily pay your tax arrears the CRA has severely limited their legal
recourse to collect. Increasing numbers of tax debtors and their representatives have
wised up to this ploy and there is nothing the tax collector can do.
Another trick some tax debtors and their representative’s pull plays out like this.
When the debtor has an existing tax debt and is about to file their Income Tax Return
with a refund position (a credit), they file an appeal. Why do this? Because Revenue
Canada can not offset a refund against an appealed amount meaning the debtor will
receive their refund. They then drop the appeal upon receiving the refund and the tax
collector has been bamboozled out of a sure and easy way to offset part or all of the tax
debt. The case of Morch vs. The Minister (discussed earlier) addressed this very subject,
using an appeal to delay and frustrate collection, but laws only work when we all have
the same aims. Justice.
I believe that making a tax debtor pay any tax amounts that are under appeal is not a
breach of their rights if the monies are repaid to them with interest should they win.
Securing payment protects those that pay their tax debts and the integrity of the CRA.
The department always pays up when they lose an appeal but often appeals run so long
that many tax debtors are never forced to pay.
Now there is such a thing as a frivolous appeal and they do occur but for Revenue
Canada to prove an appeal has been frivolously filed is extremely difficult, expensive and
time consuming. And the fine or penalty is small enough that it’s no deterrent to debtors.
Of course Revenue Canada would also have to collect any levied fine so challenging the
seriousness an appeal is a recourse the tax collector never considers. In fact I am not
aware of a case where an appellant has been prosecuted for filing a frivolous appeal. The
Tax Court is allowed to impose a penalty when the judge feels that part or all of an appeal
was unnecessary and that one of the reasons for the appeal was to delay payment of taxes
owing. However, judges always seem to give tax debtors the benefit of the doubt.

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Subsection 164(1.2) of the Income Tax Act allows Revenue Canada to refuse to
refund an amount that is under an appeal/Notice of Objection if they feel the owed
amounts would be in jeopardy of being collected should the appeal be lost. But, due to
the cost of the jeopardy action and the onus on the department to provide substantial
proof, these ‘appealing for refund’ situations are rarely challenged.
How do some old time tax collectors treat Canadians with disputed tax arrears? In this
following instance an inquiring client had appealed his tax debt and wanted to know
when he would receive his current year tax refund. By law a refund he is eligible to
receive. Naturally I arranged for the refund but when the collector who “managed”, and I
use this term loosely, the debtor’s account found out he was livid. He called me stupid
and raged that if the debtor doesn’t know the law that the refund could be used to offset
the appealed tax amount because, “They’re not going to pay anyway”. For weeks after he
would barely talk to me except to refer to me as the idiot.
This next case is the tale of a precedent setting appeal that went all the way to the
Supreme Court of Canada with the court rendering a decision in the taxpayer’s favour.
That case was Pioneer Laundry and Dry Cleaners vs. the Minister of National Revenue,
December 12, 1938.
The substance of the case was that the owners of a dry cleaning business closed the
business and sold the assets at fair market value to another dry cleaning enterprise that
was also owned by them. This dry cleaning enterprise was a complete and separate entity.
The problem arose when the new business began claiming depreciation on assets they
had legitimately purchased from the original enterprise. The previous owners had already
claimed depreciation costs against these same assets and it was Revenue Canada’s belief
that if the owners of the two businesses were the same than the allowable depreciation
had already been claimed and therefore could not be claimed a second time.
The court held that as the sale and purchase of the assets was a legitimate business
transaction, and that as the businesses were two distinct entities, although operating in the
same line of business, that they had the right to claim depreciation expenses as a natural
course of business.
I can’t tell you how often I have seen a small business close up shop and then open
again, sometimes in the same location, in the same line of business and the same
furnishings.

What you need to know

Whenever there is a ‘grey area’ – taxation legislation that the CRA feels is open to
interpretation, very often the tax employees will always rule against you and hope that
that you will not proceed to Tax Court (and the Supreme Court if necessary) because of
the expense to you. Most times they are afraid of setting a precedent by allowing a
questionable deduction because then they would have to allow it for everybody. They
really do not care if a deduction is legitimately incurred.
And this scenario is especially true when it comes to deducting interest costs (costs
used to produce an income from property, business or investments) from earned income.
Why?

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The tax collector always assumes the worst in these situations, that you are trying to
cheat them, whether this was the individual’s (or business’) intent or not.
Consider the following two court cases where an individual and a business appealed
the department’s refusal to allow their interest costs and won.
In Her Majesty the Queen v. John R. Singleton (FC) (Supreme Court of Canada,
September 2001) In 1988 Mr. Singleton used $300,000 from the capital account of his
law firm towards purchasing a house in his wife’s name. On the same day he wrote the
cheque for the house, he borrowed money to replace the partnership capital and later
claimed a tax deduction for his interest costs. Of course the CRA decided that this action
was incorrect and so disallowed the interest deduction claimed. The Tax Court agreed but
thirteen years after the fact, in 2001, the Supreme Court did not, holding that Mr.
Singleton’s attempt to minimize his taxes was irrelevant. He had legitimately borrowed
funds to replace business capital and so he was entitled to the deduction.
The implications of this decision are clear and far-reaching. If you have business
assets or investments they can be sold to make personal purchases then you can borrow to
buy the same or new assets while deducting the interest costs from your taxable income.
Mr. Singleton was not the only one brave enough, or smart enough, to challenge the
tax collector. Irving Ludmer in Ludco Enterprises Ltd., et al. v. Her Majesty the Queen
(FC) (Supreme Court of Canada, September 2001) had his interest costs disallowed
simply because the tax man decided his investments did not produce enough income to
justify the writing off of interest costs. He had claimed a deduction for six million in
interest costs while earning only $600,000 in dividend income over an eight-year period.
However he did produce $9.2 million in capital gains but as you know while dividends
are considered income from property, capital gains are not. So Revenue Canada denied
the interest expense deduction. But the Supreme Court, for that is where it finally ended,
thought differently. They decided that Ludco did have a reasonable expectation of some
property income which satisfied the test required under the Income Tax Act and then
ruled that property income does not have to be the “exclusive, primary or dominant
purpose of the investment to qualify for interest deductibility”.
The lesson here?
Do not be afraid to appeal and challenge the department’s decisions, these people did
it and won. And the court’s rulings benefit not only them but also all Canadians.
But not only should you not be afraid to challenge the CRA and appeal nor should you
be afraid to negotiate and this comes back to those ‘grey areas’ mentioned previously. If
the tax employee working your case is uncertain but thinks that you might be a person
who would take a rebuff to court they may attempt to negotiate with you i.e. we will
allow this claim on your tax return if you will forget about this one. A trade off. Plain and
simple. You may not get everything you want but something is often better than nothing.
Now most taxpayer appeals center around deductions claimed from income earned:
what is allowable and what is not. When you are offered a concession or a trade-off this
means that you are entering a grey area where the tax collector has no hard and fast rules.
Nowhere in the Income Tax Act is there a list of acceptable and unacceptable deductions.
So any decisions made in this area are very often arbitrary. The tax employee personally
feels that a claim is valid so they accept or else they personally feel it is unacceptable and
so they disallow it. So please remember this, any expense incurred that is wholly
necessary in earning that income is allowed to be deducted.

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Have you ever had a deduction or some sort of claim refused because you did not have
the needed documentation? And so you just chalk it up to experience? Well don’t give up
you do have a remedy. In Merchant v. R., [1998] 3 CTC 2505 at 2511 Judge Bowman
ruled the following:

“It is my view that there is no requirement in law that expenses be

supported by receipts or other corroboration if such expenses can be
supported by credible viva voce [by word of mouth; orally] testimony and
the amounts can be identified with a reasonable degree of specificity.”

What this means is that not having a receipt does not mean that you cannot claim an
incurred expense. Of course it is always best (and easiest) to have receipts but if you do
not then try to substantiate the expense another way. Probably the best way is to keep a
dated diary that tells you where you travelled, how far you travelled, and what you did – I
had a work lunch here, I did a sales call there, I purchased this for the business and so on.
That way you have back up for misplaced and/or disorganized receipts. (Note: if you
keep your travel/expense diary in a loose-leaf binder it is easier to add pages as need
arises.)
But when the CRA seems willing to negotiate this is when you should consider trying
to press your advantage and even consider Court if you do not get what you fee you
deserve. The only rule as to a deduction from income’s legitimacy is that the deduction
was necessary to earning that income. But please, keep all your receipts and even a
business diary and/or appointment book will help you to win your case.
Have you ever had a loss disallowed because the Minister of National Revenue
decided that you had no reasonable expectation of profit and so no source of income for
the purposes of Section 9 of the Income Tax Act? It is a very common decision and one
that many Canadians have heard and meekly accepted. After all the CRA knows what its
doing.
Right?
Maybe not.
One Mr. Stewart invested much time and money in a business endeavor certain that he
would profit from it. Unfortunately it did not quite work out that way. And what was
worse was that when he filed his tax returns claiming certain losses the losses were
disallowed. The tax employee told him (and I am paraphrasing here) that ‘because he had
no reasonable expectation of profit that the losses would be disallowed’.
End of story right?
Wrong.
Mr. Stewart was not the type of person to just throw money away so he challenged the
CRA in court and, eventually, to the Supreme Court in Stewart v. Canada (May 23,
2002). The Supreme Court not only ruled in his favour deciding:

“The ‘reasonable expectation of profit’ test should not be accepted as the

test to determine whether a taxpayer's activities constitute a source of

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income for the purposes of s. 9 of the Income Tax Act. In recent years this
test has become a broad-based tool used by both the Minister and courts
independently of provisions of the Act to second-guess bona fide
commercial decisions of the taxpayer and therefore runs afoul of the
principle that courts should avoid judicial rule-making in tax law. The test
is problematic owing to its vagueness and uncertainty of application; this
results in unfair and arbitrary treatment of taxpayers.
[Break]
To deny the deduction of losses on the simple ground that the losses
signify that no business (or property) source exists is contrary to the words
and scheme of the Act. Whether or not a business exists is a separate
question from the deductibility of expenses. To disallow deductions based
on a reasonable expectation of profit analysis would amount to a case law
stop-loss rule which would be contrary to established principles of
interpretation, which are applicable to the Act.”

But so disappointed in the Canada Revenue Agency was the court that they provided
advice to the CRA, and to Canadians facing similar situations, as to how such questions
of fact should be considered and determined. The Court went on to say:

“The following two-stage approach should be employed to determine

whether a taxpayer's activities constitute a source of business or property
income: (i) Is the taxpayer's activity undertaken in pursuit of profit, or is it
a personal endeavour? (ii) If it is not a personal endeavour, is the source of
the income a business or property? The first stage of the test is only
relevant when there is some personal or hobby element to the activity.
Where the nature of an activity is clearly commercial, the taxpayer's
pursuit of profit is established. There is no need to take the inquiry any
further by analyzing the taxpayer's business decisions. However, where
the nature of a taxpayer's venture contains elements which suggest that it
could be considered a hobby or other personal pursuit, the venture will be
considered a source of income only if it is undertaken in a sufficiently
commercial manner.”

What the CRA was doing (and still often does) is deny Canadians legitimate claims and
deductions not because they are not valid but because the venture (business or
investment) simply did not make money. The courts have finally recognized this and
have put a stop to it.
And the point of these four court cases?
Do not be afraid to appeal your tax assessment when you have reason and do not be
afraid to challenge the tax man and tax woman.
They can and are often beaten.

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Now, in respect of any appeal of your tax assessment, it should be clear that the tax
collector can not enforce payment of a tax debt that is under an appeal until you have
appealed to the Supreme Court or it is felt that collection of the debt would be in jeopardy
if collection action were delayed.
Although not something I have done I have seen Canadians who were also tax debtors
use an appeal as a way to delay and to evade payment of their tax assessment. Resolving
an appeal often takes so long, many years when it goes to court, that the appellant has a
lot of time in which they can move their assets out of the tax collector’s reach.
And while a frivolous appeal is something you can be monetarily punished for the
onus is on the tax collector to prove that the appeal is frivolous. And determining your
intent is such a time and expense that they will rarely pursue such an action. But hey, I’ve
seen tax debtor’s who have appealed their outstanding tax assessment solely to get a
pending refund escape unscathed so your chances are as good as theirs. When your entire
tax debt is under appeal the CRA must give you your refund.
Once again I must say that I am not recommending either of these courses of action
but still there are some who choose to use them and do so successfully.
And if you’re worried about appealing your tax debt because it seems so complicated
do not be. Filing an appeal is easier now than ever before. You don’t have to be a lawyer
or an accountant to do so. A simple letter to your local tax office is at all takes but please
remember the time limits involved. You have a minimum of ninety days and for those
who file their T1 and T2 tax returns on time can have as long as two years and if lucky
even longer. Because the length of your appeal period is directly related to Fairness
Legislation full details can be found in Chapter 19, The Secrets of Fairness Legislation.
And remember, now that you do have an extended time period in which to appeal, you
can severely punish the tax collector who collects via legal means any of your tax debt
while your option to appeal is still open. Subsequent to the collection should you appeal
your tax debt you may be able to have any monies refunded with interest whether you
finally win or lose your appeal. Plus there is the added bonus of removing one of the tax
collector’s collection tools. The garnishment, the Execution or maybe even both.
Finally (and I am saving the best for last here) not only can you directly appeal your
tax assessments or reassessments but you may also appeal the size of the payments you
must make against your tax assessment(s). Though the tax collector will never advise a
debtor of this.
If you feel that the tax collector has not exercised their decision making properly you
can appeal for assistance from the courts. Your rights begin with section 153(1.1) of the
Income Tax Act which allows Canadians the right to seek reduced payments when they
feel they are being caused undue hardship.

“Where the Minister is satisfied that the deducting or withholding of the

amount otherwise required to be deducted or withheld under subsection
(1) from a payment would cause undue hardship, he may determine a
lesser amount and that amount shall be deemed to be the amount
determined under that subsection as the amount to be deducted or withheld
from that payment.”

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 Appealing Your Tax Assessment

At first glance this right of payment appeal would appear to apply only to statutory
deductions from current income but Revenue Canada’s internal policy (found in the
Taxation Operations Manual) clarifies a tax debtor’s (your) rights by asking of tax
collectors:

1) [Payment] Arrangements may be made to permit the client to retire the tax debt over
the shortest period of time without causing undue financial hardship.

2) Undue hardship for an individual person means causing the person unnecessary or
oppressive suffering or privation. This includes garnishing the taxpayer’s income
sources at a rate where the family is forced to cut reasonable expense of essential
goods or services (i.e. reduction of sufficient groceries, delaying or defaulting on rent
or mortgage payments).

3) Because of the department’s commitment to fair treatment the potential for causing
‘undue hardship’ is a critical test when requesting payment or setting garnishment
terms. Therefore the terms of any garnishment should be realistically based on the tax
debtor’s ability to pay. Consideration must be given to ensure that the taxpayer
continues to be able to meet reasonable expenditures for food, shelter and similar
essentials for himself and his family as well as any essential expenses incurred in the
performance of their job or the operation of their business.

The application of these provisions and guidelines is supposed to ensure that no

Canadian, for the purposes of the Income Tax Act, suffers undue hardship. It is also to
ensure that no taxpayer need proceed to bankruptcy or welfare as a result of any actions
committed in the name of the Income Tax Act.
What does this mean?
In theory, by advising the department that payment of a past, current or pending tax
assessment is causing you undue privation – hardship –, the tax collector is supposed to
work with the debtor to reach a mutually satisfactory payment arrangement.
In actual practice this does not happen.
When a tax debtor advises the department of their precarious financial situation
caused by the tax collector the standard reply, instead of advising you of your rights, is,
“Standard procedure is being followed. Nothing can be done.” If you’re lucky you might
get a reluctant, “Sorry,” but nothing more.
However something can be done.
In Canada when any public authority makes a discretionary administrative decision
from which there is no right of appeal an application for a judicial review can be made
under Section 18.1 of the Federal Court Act. The application must be made within thirty
days of the administrative decision’s rendering. But because the tax collector will almost
always reject your plea for a more favourable repayment schedule, often immediately and
without even investigating your claim, time is not the critical factor here. Your personal
and financial situation is. A tax debtor can easily engineer the time to suit their needs.

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Should you consider appealing the size of payments the tax collector is forcing on you
one must ensure that actual deprivation is being caused and that they can document their
hardship situation to a court’s satisfaction.
When the court decides they will not substitute its decision for that of the tax collector
even if it would have exercised its discretion differently. But if the court feels the
department has not exercised its discretion properly the matter is referred back to the
department for review and correction.
If you are a tax debtor and you feel that you are being caused undue financial hardship
by the tax collector, you find yourself unable to subsist under the terms of a garnishment
or an unreasonable payment schedule is demanded, you do have an avenue of protest
available.
Visit http://www.oag-bvg.gc.ca/internet/English/parl_oag_200411_06_e_14910.html
to review the Canadian Auditor General’s comments and investigation of Revenue
Canada’s appeal procedures – a revealing commentary on the process.
If you do have a problem with your assessment or reassessment don’t be afraid to file
an appeal. It’s your money you’re being forced to part with and who’s the best person to
spend your earnings but you who work so hard for it. Don’t work unnecessarily for the
system.
Make the system work for you.
Because that’s exactly what Tom Williams did using the Tax Court of Canada in
Williams v. the Queen when he was reassessed with a tax debt.
Tom Williams was employed by Whelan, Beliveau as a Technology Analyst, hired to
help the brokerage firm develop and sell high-tech securities offerings. He was to earn
one-quarter of any gross commissions the firm earned from his dealing BUT was to pay
his own expenses. Because he had no current income Tom was permitted to take monthly
draws against his anticipated earnings. All draws and advances were treated as
employment income.
Mr. Williams job required that he travel and that HE was responsible for expenses.
The expenses incurred were a necessary part of the job and Williams was not entitled to
be reimbursed for them. However, his employer paid them and treated them as a debt
owing. I.E. they would be repaid when he started to generate an income from future
commissions.
As it turned out, Mr. Williams completed no business for the company and so earned
no commissions. When he left Whelan, Beliveau in 1998 he owed them for the advances
taken against his expected commissions as well as for the expenses they paid on his
behalf.
When he filed his tax returns Mr. Williams included the advances as income and
claimed his expenses as deductions. Which sounds strange because, as was clearly stated,
the expenses incurred by him were not paid by him but his employer. Though he was
liable for them.
The Minister then reassessed Williams 1997 and 1998 tax returns. Denying the
expense deduction.
Williams appealed the Canada Revenue Agency’s decision.
On appeal the claim for expenses was quickly denied and the case ended up in the Tax
Court of Canada as Williams v. the Queen.

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 Appealing Your Tax Assessment

The Canada Revenue Agency’s argument was that Williams was not entitled to the
deductions because he did not repay the amounts his employer advanced him.
However, the Income Tax Act states quite clearly that a taxpayer is allowed to deduct
all reasonable amounts for travelling during the course of employment as long as the
amount expended was incurred to carry on employment duties away from the employer’s
place of business. As well, the employee must not receive an allowance for the
expenditures, they can not claim a deduction under certain other provisions AND the
employee is required to repay the amounts. As well there can be no requirement for the
taxpayer to incur the expenses.
Mr. Williams met all the conditions.
So as long as you have a real and immediate expense liability that was properly
incurred, the costs are deductible even though you may not have paid them. (also, see
Nissim v. the Queen http://decision.tcc-cci.gc.ca/en/1998/1998tcc972560/1998tcc972560.html).
In the Williams instance each time the employee generated the expense, quite clearly it
was the employee’s money that was being spent. Not the employer’s. So even though
Williams had not paid the expenses a liability was created with the employer with the
expectation that the expenses would be repaid in the future.
And now the numbers.
In 1997 Williams took $141,500 in advances
And in 1998 he took $165,960.
In expenses he racked up, respectively, $76,864 and $75,029 for those two years.
When you add it all up Mr. Williams was paid (notice I did not say earned) $307,460
for the two years while he generated $151,893 in expenses in trying to earn an income.
The expenses were not paid by him but were claimed by him which reduced his taxable
income for the two years to $155,567 or $64,636 and $90,931 respectively.
Which is a sweet sweet tax savings.
It’s like having your cake and eating it too.
Income tax law was clearly on Tom Williams side and the CRA knew this when they
assessed him.
Yet they did it anyway.
Illustrating why Canadians should not be afraid to challenge the tax man (or woman)
and even force them into Court if need be.
Because their word is not law.

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19

Most Canadians have never heard of the Taxpayer Relief Provisions of the Income Tax
Act (formerly known as ‘Fairness Legislation’) and even fewer can tell you what they are
or exactly how they work… so now would be as good a time as any to set the record
straight.
Minister of National Revenue Otto Jelinek enacted the Fairness Legislation as part of
Bill C-18 in December of 1991. The purpose of the legislation was to inform Canadians
of their rights under current tax legislation and to make the tax system simpler and fairer.
In short the “Fairness Package” was designed to assist the individual taxpayer who is not
aware of all the tax rules and regulations.
But, in actual fact, and as I will document shortly, there was already a mechanism in
place to forgive not only penalty and interest amounts but also to forgive assessed tax
debts as well. And this little known piece of legislation is still in place. Yet under the
Fairness package only penalty and interest can be forgiven. So Canadians actually lost a
right few even knew they had with the introduction of Fairness.
And while Fairness legislation is available to individuals, businesses and trusts, those
who benefit most from the legislation are those who can afford to pay someone who
knows the ins and outs of the Income Tax Act. And this is unfortunate because the people
who could most benefit from the legislation are those who are blissfully unaware of the
benefits Fairness provides; and sometimes of its very existence.

Fairness Provisions

Under the Fairness Provisions and in respect of 1985 and subsequent taxation years
the tax collector is now allowed to:

1. Cancel and/or waive interest and penalty, refund amounts beyond the normal
reassessment period and accept requests to late file, amend or revoke certain
elections.

2. Extend the time limit to file a Notice of Objection for individuals and testamentary
trusts.

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3. Streamline the process by which clients can make a formal objection to an assessment
or reassessment issued by the department.

Prior to the enactment of Fairness there was little discretion provided for in the tax
laws and statutes administered by the tax collector in respect to the cancellation or waiver
of penalty and interest no matter what the circumstances or how the charges arose. And
because the department was unable to address situations where it was unreasonable to
assess and enforce penalty and interest charges, complaints from Canadians were
common. But with the implementation of Fairness legislation the tax collector can now
cancel, reduce or waive charges where there was a just cause to cancel, reduce or waive
penalty and interest.
Fairness allow a for a common sense approach in dealing with tax debtors that,
because of personal misfortune or circumstances beyond their control, were unable to
meet the department’s guidelines or legislation requirements.
How can Canadians apply for consideration under Fairness legislation?
Simple, just send a letter to your local TSO outlining your past and your current
financial and personal situations with an opinion as to why you should be considered
under Fairness legislation.
Canadians may also apply for Fairness by attending their local TSO with relevant
documentation. And better yet, when the CRA is prepared to give you the benefit of the
doubt further documentation is not necessary.
When applying for Fairness you should provide a completed statement of your income
and expenses along with receipts and a net worth statement. If applicable, medical
certificates, doctor’s letters, social assistance statements, divorce decrees and statements
of Employment Insurance benefits or Workers Compensation. You may also supply any
other relevant documentation that you feel would help you to qualify for fairness.
However, it is up to the tax collector evaluating your request to determine whether the
documentation you have supplied is sufficient to make a determination. But whether a
request is approved or not often seems to be suited to the individual tax collector’s taste
rather than any firm legislative requirements or precedent.
With the implementation of the Fairness provisions corresponding additions were
made to the Income Tax Act. Each of these three Fairness areas will be discussed in turn
starting with the cancellation and/or waiver of penalty and interest.

Cancellations of Penalty and Interest

A. Waiver and/or cancellation of interest due to inability to pay.

Subsection 220(3.1) of the Income Tax Act gives the tax collector the right to waive
or cancel all or part of a penalty or interest amount in respect of the 1985 and subsequent
taxation years meaning that no tax year prior to the 1985 taxation year or any period prior
to the 1986 calendar year is eligible for Fairness consideration under this legislation.

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In circumstances where, due to a debtor’s inability to pay, it may be appropriate to

consider cancelling interest in whole or in part to facilitate collection of amounts owing
including:

i. where collection action has been suspended due to temporary inability to pay while
the client’s financial situation has improved.
ii. where a client has made or agrees to make an honest effort to discharge arrears over
a period of time but the interest charges are absorbing a significant portion of the
payments.
iii. where there has been an unreasonable delay in implementing collection action and
significant interest has accrued in the meantime.

Now Revenue Canada does not consider penalty and interest charges as sources of
revenue but rather as incentives to force compliance with the time for filing and payment
of taxes.
Your history of compliance with tax obligations or previous conduct of affairs under
the self-assessment system need not be relevant factors in determining whether or not to
cancel or waive interest due to an inability to pay. As long as you are currently making a
sincere and honest effort to comply with current tax obligations and will continue to do
so in the future, Fairness is to be considered.
This paragraph has been italicized because I want you to remember it for this is what
the CRA publicly states.
Fairness legislation only applies to the 1986 and subsequent tax years so the tax
collector will wrongly advise you that penalty or interest for the tax years prior to 1986
are not applicable for a waiver. But this is false.
Waivers or cancellations can be considered for any tax year whether that year is 1986,
a prior year or a subsequent year. Such forgiveness can be undertaken pursuant to
Subsection 23(2) of the Financial Administration Act. Fairness legislation is not needed
when a Minister of the Crown recommends a remission of your tax, penalty or interest.
And it appears that the applicant can be any Minister of any government department
not just the Canada Revenue Agency. All that is required of that Minister is to send a
request to the CRA Head Office in Ottawa. When Head Office approves the
recommendation they forward it to the Revenue Minister and the National Treasury
Board for rubberstamping.
Returning now to the Fairness Legislation, what if you were to apply for a cancellation
or a remission while on the brink of bankruptcy?
In this situation, even if you are fully eligible for interest or penalty relief, your
request will be denied.
How come?
Because if at some future time the CRA is forced to compete with the claims of other
creditors or in the instance that you fail to honour the commitment made, the tax collector
could be deprived of funds to which it might be otherwise entitled. So, clearly, the tax
collector has a double standard. Even if you are fully eligible for Fairness you can be
denied penalty and interest relief. Relief that just might keep you from going bankrupt.
And what if the Fairness applicants tax debt was considered uncollectible?

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When a tax debtor is incapable of repayment the granting of interest relief is of no

consequence to the taxpayer, although they are fully eligible for the relief, as it may serve
to perpetuate a bad debt on the books, a write-off. So when such a request is received the
tax debtor will be falsely advised that relief will not be considered until they are in a
position to enter into a meaningful payment arrangement. But in the meantime the CRA
will suspend collection action indefinitely and without advising the debtor.
The agency may argue these points I have just offered but these guidelines are
supplied as part of the Fairness Team Operating Plans.
Now read the previous paragraph highlighted with italics once again. It would appear
that Fairness is only to be considered for those who can afford to pay their tax arrears.

B) Waiver and/or cancellation of interest and/or penalty due to unusual circumstances.

The following Fairness provisions are the basis for a waiver or cancellation of interest
or penalty, in whole or in part, in circumstances where it would be unreasonable to apply
these charges. The legislation also permits the CRA to assist tax debtors in resolving
charges that arose through no fault of their own.
In the following circumstances the CRA allows for the waiver and/or cancellation of
penalty or interest:

i. manmade or natural disasters

ii. recent serious illness or accident which prevented or delayed the filing of a return or
making of a payment
iii. erroneous information from the Department in the form of incorrect written answers
iv. delays by the Department in providing information or processing a Notice of
Assessment

The tax collector is not supposed to waive or cancel interest or penalty when it arises
out of neglect, lack of awareness or where the tax debtor has not taken reasonable cares.
Even when the tax collector gives out erroneous information the CRA can not be held
responsible unless the information was tendered in writing. So should you call up your
local Tax Office and they supply you with misleading or wrong information YOU are
held responsible not them. And quite honestly, when you speak with a tax collector you
don’t know if it’s their first day on the job or if they are an original employee from 1917.
So if ever you need any information from the tax collector always get it in writing or be
prepared for the worst.
Once you make your application for cancellation of penalty or interest the tax
collector will use these four factors in determining whether interest or penalty should be
cancelled or waived:

i. whether or not the client has a history of compliance with the legislation the
Department administers

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ii. whether the client has knowingly allowed a balance to exist upon which arrears
interest or penalty has accrued
iii. whether or not the client has exercised a reasonable amount of care and diligence
and has not been negligent or careless in conducting their affairs under Canada’s
self assessment system
iv. whether or not the client acted quickly to remedy any delay or omission

Once the applicant has proven and supplied their documentation, usually in writing,
and has proven that one or more of the preceding conditions does or did exist they are
supposed to be eligible for a remission or cancellation of their penalty and/or interest.
A successful Fairness application for waiver of penalty and/or interest has four
possible outcomes:

i. full relief of penalty and/or interest

ii. partial relief of penalty and/or interest
iii. full denial of any relief
iv. suspension of the client’s account (meaning that no collection action is undertaken)

Should your application for a waiver or cancellation be rejected or you feel it does not
receive the amount of relief that you are entitled to you can appeal the decision and
receive a second review of the application which is done at the ‘Director’s level’. This
review is usually just a formality which confirms the original decision unless there are
political sensitivities connected to the case whereby a change may be considered.
But in actual fact, the TSO Director rarely sees your first or second level fairness
review except to sign the denial letter. General office staff will handle both reviews with
little if any input from the Director. And though the cancellation or waiver of penalty or
interest are supposed to be based in part upon the Common Law Duty of Procedural
Fairness this is not always the case as proven previously when the applicant has a proven
inability to pay their tax arrears.
But if you feel that the tax collector has not exercised their discretion properly you can
appeal for further assistance from the courts. Your appeal would be based on the fact that
when a public authority makes a discretionary administrative decision from which there
is no statutory right of appeal an application for a judicial review can be made. The
application can be made under Section 18.1 of the Federal Court Act and is to be made
within thirty days from the date of notification of the decision.
Rarely does the CRA make this fact known to Fairness applicants because it takes the
decision making out of the tax collector’s hands, temporarily at least, and sets a bad
precedent when the court asks for another review. To be clear the courts will not
substitute their decision for that of the tax collector even if the court would have actioned
its discretion differently. The process instead focuses on whether or not the CRA
exercised its discretion properly. If not the court refers the matter back to the agency for
further review.

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One such successful and interesting challenge was a court case whose full text and
decision can be viewed at: http://reports.fja.gc.ca/eng/2001/2001fct734/2001fct734.html
(Edison V. Canada 2001 FCT 734, Blanchard J.).
Across Canada Tax Offices have a Fairness Committee which is supposed to promote
the uniform application of the Fairness provisions. They are supposed to ensure that
every applicant is treated in the same manner but most often individual tax collectors will
make cancellation decisions. There is no checking or review of individually reached
decisions to confirm correctness, prudence, consistency or impartiality. In fact Fairness
Committees tend only to be used in:

i. complex, precedent setting, sensitive or higher dollar requests

ii. requests for a second review of items denied at the first level of decision
iii. requests based on an inability to pay involving more than $5000 in penalty and/or
interest

But whether any cancellation or waiver is made by committee or an individual there is

little consistency in many of the decisions reached. This is true not only about Fairness
decisions reached in the many TSO’s across Canada but also about decisions reached
within the same TSO.
Common law is based upon the precedent of previous decisions so the application of
the Fairness Legislation’s provisions should be held to these principles.

Late Filing

A) Reassessments and Refunds Beyond the Normal Reassessment Period

As I’m sure you’re already well aware the normal reassessment period for an
individual ends three years after the mailing of the Notice of Assessment for that year
though the period can be extended if a waiver is filed or a loss is being carried back.
However, under the Taxpayer Relief Provisions, the CRA, at its discretion, may reassess
an individual favourably beyond this legislated limitation to reduce the amount of tax
previously payable and even to issue a refund.
The CRA has officially stated that “it may issue a refund or reduce the amount owed if
it is satisfied that such a refund or reduction would have been made if the return or
request had been filed or made on time.” As well, “individuals can make such a request if
they were not aware of, or missed, claiming a deduction or a non-refundable tax credit
that was available for the year.”
Individuals may also request refunds or reductions of amounts owing for refundable
tax credits such as provincial tax credits that have not been claimed. Lastly for any
payroll deductions that may have resulted in an overpayment of tax a refund can be
requested.

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However please note that any request to do so must be made within ten years of the
relevant year i.e. a request for a reassessment for the year 2000 must be requested by
2010.
As well, if a tax return was not originally filed but is filed within the ten years after the
relevant year, the filer is eligible to receive any refund(s) due.

B) Late, Amended or Revoked Elections

Please note that not all elections under the Act qualify. To determine if your election
is eligible for such consideration please review Canada Revenue Agency Information
Circular 07-1.
But if your request is deemed eligible and as long as your request is not being made to
take advantage of laws passed after the election was made then the CRA has the right to
extend the time period for making, amending or revoking a prescribed election. However
it should be noted that if the Agency deems the request is being made simply for purposes
of retroactive tax planning, if adequate records do not exist, or if it reasonably concludes
that the request was made after the requestor was negligent or careless in complying with
the law, than the request will be denied.
There is one drawback however, you will be liable for a penalty of $100 per month for
each complete month from the original due date of the election to the date of your request
to a maximum of $8,000.

Extended time limits to file a Notice of Objection

The second addition to the Income Tax Act resulting directly from Fairness legislation
is Subsection 165(1).
Subsection 165(1) provides that the time limit for objecting to your tax assessment or
reassessment is the later of one year from the due date of the annual Income Tax Return
or ninety days from the date of the mailing of the Notice of Assessment or Reassessment.
Canadians used to have only ninety days to object to an assessment or a reassessment,
hence the ninety-day collection restriction period mentioned earlier. But today and in
certain situations Canadians have up to one year to protest and in some cases even longer.
However collection restrictions still max out at ninety days unless your tax debt is
currently under appeal.
This amendment is very straightforward but has proved to be an unexpected nightmare
for the CRA and the tax collector when they legally enforce payment before your appeal
period has expired.
How so?
During this additional period to object, and in an instance where amounts have been
collected, either through legal action or otherwise, and a Notice of Objection is
subsequently filed, monies collected in respect of the amount in dispute may have to be
repaid pursuant to Subsection 164(1.1) of the Income Tax Act.
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Though Canadians have up to twelve months to file a Notice of Objection to their tax
assessments (from the date of assessment) the tax collector can still legally collect the tax
arrears after only three months. So they should be mindful of the fact that a Notice of
Objection could subsequently be filed by the debtor who could then request and receive
payment of the amounts collected by the tax collector whether or not the appeal of the
assessed amount is overturned or not.
What this means to a collection officer is that when you indicate that a Notice of
Objection is planned, than the collector has to treat the potentially disputed amount as if a
Notice of Objection had already been filed and should take legal action only in a jeopardy
situation.
The tax collector should also avoid all legal action of a sensitive nature including:

i. severing of a line of credit by a requirement-to-pay to a bank

ii. a requirement-to-pay of a self-employed individuals bank account
iii. a requirement-to-pay of a self-employed individuals trade receivables
iv. seizure of goods and chattels representing an individuals means of production

Legal action must be avoided because any of these actions could lead to failure of
your business and result in a lawsuit against the tax collector for taking an unnecessary
action. However, and this may seem kind of unfair, if the professional is a doctor or a
lawyer legal action will still be taken because there is only a remote chance of causing
material injury as opposed to a tradesperson who has to finance materials, pay suppliers
and complete contracts in order to conduct business.
This legislation gives tax debtors, usually the self-employed, an extra year before
beginning payment of their tax liability just by indicating that they plan to file a Notice of
Objection. Or an extra year to safely hide their assets if they have ulterior motives.
What happens if the time period for filing your appeal has expired and you still wish
to file a Notice of Objection? Subsection 166.1 of the Income Tax Act allows you to
apply to the tax collector for an extension of time to file your Notice of Objection within
one year of the expiry date of the normal time limit. In effect this gives you as long as
two years to file a Notice of Objection to your tax assessment.
When a tax debtor makes such an application, legal action is not normally taken on the
portion of the tax debt subject to dispute until the application is denied unless legal action
is considered necessary such as in a jeopardy. To stay collection action on the income tax
arrears you must only send a letter to the TSO or TC or, advise a collection officer that
they are planning to file a Notice of Objection or to ask for an extension to file a Notice
of Objection.
Should the tax collector collect your tax debt you can request the collected monies
returned with interest.
If adverse affects were caused to you by the tax collector’s actions the CRA could be
subject to a lawsuit. A lawsuit that could cost them dearly. Courts usually take grave
offense when the tax collector abuses their powers so any judgement is made
accordingly.

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Streamlining of the objection process

The streamlining of the Notice of Objection process did not involve legislative change
only procedural changes within the department concerning how you are allowed to appeal
your assessment.
It used to be that any motion for an appeal had to be filed on the prescribed form in the
prescribed format and received in the time allotted. Today an objection received printed
on a paper bag is acceptable as long as you include your name and social insurance
number. Of course at a later date you will have to provide reasons why you wish to object
to your assessment but no longer do you have to be an accountant or an English major to
do so.

What you need to know

The most important thing to take from this chapter is that not only can penalty and
interest charges be forgiven but tax amounts can also be forgiven under subsection 23(2)
of the Financial Administration Act.
Secondly if your request for ‘Fairness’ is denied you have two alternatives by which
to appeal this decision or to further your case. Section 18.1 of the Federal Court Act and
the previously noted avenue in the Financial Administration Act.
The major problem with Fairness lies not with the legislation but within the inequities
of its application. Once again a Fairness committee is a group of tax collectors in each
TSO chosen to rule on debtor applications for relief. But because there is rarely
continuity in the membership of Fairness committees there is no consistency. Yet even
when the membership of an Office’s Fairness committee is static still the decisions they
reach can be less than fair.
Consider these next two cases if you think otherwise.
An application was made by taxpayer Edison requesting certain relief's under the
Fairness Provisions. The application was reviewed by an Appeals Officer Joan Oxner of
the Newfoundland and Labrador Tax Services Office and Joan recommended the
application be denied. Alan Ross, Chief of Appeals for the N&L TSO, agreed with Joan.
And there’s nothing wrong with that; every one is entitled to their opinion. Canadians
have the right to apply for Fairness and the CRA can deny the application. And if the
client (taxpayer) does not agree with the rejection they can seek an impartial
administrative review of denial.
Which is exactly what Mr. Edison did.
And this is where it gets fishy because the so-called impartial administrative review
was conducted in part by no other than the exact same tax employees who rejected the
original application: Joan Oxner and Alan Ross. No doubt you know what happened - the
Review Committee unanimously recommended dismissal of Edison's appeals.
And what did Edison do after learning that his impartial second review appeared not
to have been impartial at all?
He took the CRA to court. Alleging that the process breached the duty of Fairness.

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And the CRA had because, quite clearly, the second review of a rejected Fairness
application HAS to be impartial. It MUST be made independently of the original
decision-maker(s). Which did not happen in this case.
In Court it came out that Alan Ross was a member of the Review Committee and
ALSO the member who presented the case for review. The Committee's decisions were
taken on the basis of unanimity so Ross necessarily played key role in eventual decisions
of Committee when he should have recused himself from the deliberations.
As well it came out that that Joan Oxner was also involved as she actually drafted the
documents for the impartial second-level review.
Quite clearly Ross and Oxner's involvement confirm that the second-level review
WAS NOT independent of the first. So though the CRA advertises (and publishes) the
fact that second reviews of rejected Fairness applications are independent and impartially
held this is not always so. In fact it may never be so.
And the court properly ruled that the CRA had failed to follow their published
procedural guidelines, which is a breach of the duty of fairness. "Once set, such
guidelines must be adhered to at least in so far as to meet legitimate expectation created
by said norms".
Which brings us to the case of Brian Mulroney, not technically a fairness decision but
unfair all the same. For those of you who might not know Mr. Mulroney was a Baie-
Comeau Quebec lawyer who became Prime Minister of Canada. In 1993 and 1994 Mr.
Mulroney accepted at least $225,000 in payments, all of which he forgot to claim on his
income tax returns. Fortunately for him he never forgot where he stashed the money
because, allegedly, he stored it in safety deposit boxes, hid it in his house and even used
the cash to pay off his VISA bill in $5,0000 chunks. However in 2000 he suddenly
remembered that he had never claimed this income, so he approached Revenue Canada
and came clean.
What did the CRA do?
They gave him a sweetheart of a deal.
They agreed to let him off the hook if he would pay tax on only half of the unclaimed
$225,000 in income, so he was taxed on just $112,500. Better yet, six years plus of
penalty and interest payments were waived. All this for a rich multi-millionaire lawyer
politician who could certainly have afforded to pay the full tax amount plus all penalties
and interest.
But there’s more.
In his wisdom Mr. Mulroney declared the forgotten income as consulting fees.
Consulting fees are subject to the Goods and Services Tax. So he should have collected
and remitted the GST. Allegedly he did not do so. Alleged because he refused to
comment on the fact when questioned in court. But can you imagine that? The creator of
the GST tax not bothering to collect it or remit it himself? Shameful if indeed this is
indeed an accurate allegation. If you consider this and then visit the tax tale at
http://groups.google.com/group/can.taxes/browse_thread/thread/9c9034f4cb9181e6/9d97
f509a52fe7df?q= it kind of makes you wonder if politicians are above Canada’s tax laws?
Returning now to Fairness, the CRA’s official and public stance on Taxpayer Relief
Provisions can be found here at: http://www.cra-arc.gc.ca/E/pub/tp/ic07-1/ic07-1-e.html.
But what the CRA publicly holds doesn’t really seem to match the outcome of Mr.
Edison’s application, does it now?

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But as a result of this lack of consistency noted by the Auditor General some TSO’s
will look for any reason, no matter how small, to reject your Fairness application while
another TSO will look for any reason to accept your application. And if they can’t find
one they may make wild assumptions just to approve your request. If you make an
application for Fairness you just have to hope that you’re living in the region governed by
a forgiving TSO.
Do not be afraid to apply for relief or cancellation of any penalty or interest charged to
you. Whether you will receive such a windfall seems to depend more on the TSO your
Fairness application is sent rather than the principles of Common Law. And should your
application fail you can always apply for a second review and then to the Court under the
Federal Court Act if your costs can justify such a move.
Should these forays fail and you have political connections you may be able to gain
your cancellation or waiver under the Financial Administration Act.
Naturally Revenue Canada does not keep records of how much penalty and interest is
forgiven under Fairness provisions.
In 1994 the Auditor General recommended that systems for compiling such data and
for tracking requests and decisions granted under Fairness be developed and monitored.
This was done to ensure the uniformity and consistency of the application of Fairness
legislation. Recently I made a request to Revenue Canada for such numbers for the 1992
to 1996 calendar years and I was informed that such statistics were not kept.
http://www.oag-bvg.gc.ca/internet/English/parl_oag_200204_02_e_12375.html#ch2hd3d
provides a decent commentary of the Auditor General’s ‘Fairness Package’ commentary.
It is my best guess that the agency does not keep Fairness statistics because of the
huge inconsistencies in the granting and the denying of your waivers and cancellations of
penalty and interest.
Case in point, one collector who worked on a Toronto West team that deals with
Fairness requests told me a story that he says just disgusted him because it defeats
everything Fairness was intended to be.
A gentleman in his fifties applied for cancellation of a penalty and interest amount. He
was a chronic late-filer with documented ability to pay but he often broke his payment
arrangements for no good reason. The interest charges were justified yet the decision by
the Fairness committee was to cancel all penalty and interest charges. The reason for the
cancellation of all penalty and interest? Because the debtor was old and may get sick or
be in a car accident and find himself unable to pay. Yes you heard me correctly. The
threat of an impending car accident was grounds to have his penalty and interest charges
cancelled.
Some debtors have applied for fairness two and three years consecutively and get a
waiver or cancellation every year. Why? Because some TSO’s are sensitive to criticism
from the media or a complaint to a Member of Parliament who will bring political
pressure to the client’s aid.
A case handled by an officer in the Toronto West TSO had a client with a $90,000 tax
liability who refused to pay because as he stated, “I don’t have that kind of money.”
When legal action was threatened the debtor complained to his Member of Parliament.
The MP stepped in on the debtor’s behalf and negotiated a settlement where the debtor,
who previously was poverty stricken, would immediately pay $79,000 and change and
the balance of the arrears, a little over $12,000 in penalty and interest charges, would be
waived.
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This is a perfect example of why some offices so readily approve interest and penalty
cancellation. Political interference and/or the Fairness legislation are being used as
negotiation tool in the payment of tax arrears.
Another reason why some offices approve waivers of penalty and interest so easily is
related to production.
Every dollar removed from the ledgers is a dollar collected, even if the collected dollar
is forgiven or written off. Further to this point, once interest or penalty has been waived
or cancelled there is no provision in the Income Tax Act that allows reinstatement. If you
win the lottery, if your financial situation subsequently changes or even if the tax
collector determines you supplied false information, any cancellation of penalty or
interest can not be reversed.
I think it has been proven that the intent behind Fairness legislation and the actual use
of Fairness bear little resemblance to one another. Interference, inconsistencies and
indifference all combine to defeat real fairness.
The real crime about Fairness legislation is that Canadians who really need and
deserve the assistance are quite often too proud to apply for aid. Instead they insist on
struggling and paying off their debt to the penny while those who can afford to pay their
tax arrears apply for and receive relief whether or not they really deserve it.
It is unfortunate the system is not being used by those it was designed to help while
the system is being abused by those with little right to assistance through the intervention
of political pressure and some lenient CRA offices and tax collectors.

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20

Why on earth would Canadians ever need a Taxpayers’ Ombudsman? A person to

investigate the complaints of both businesses and private persons against Canada’s
Revenue Agency. I mean the CRA is always fair and upstanding with all Canadian
citizens.
Aren’t they?
And Brian Mulroney would certainly agree.
But lets consider the tax tales of ordinary Canadian citizens to assuage any doubts that
you might have.
Jim McAusland went to the Surrey TSO and made a $46,000 remittance on his tax
account one week before it was due. For being such a fine and upstanding citizen the
Canada Revenue Agency fined him $4,600. Why? Because the CRA preferred that he
make his payments at a bank and not at their office. And the CRA clerk who accepted
Mr. McAusland’s payment didn’t even have the courtesy to warn or correct him. Pissed
off, and rightfully so, McAusland complained and complained and complained until an
embarrassed CRA finally cancelled the fine. In the following year’s budget the Finance
Minister withdrew the fine-inducing legislation.
But that’s not the end of this story.
Several months later McAusland received another tax bill and headed immediately to
the bank to pay it. Later that same day the bank contacted McAusland and advised him
that under government rules the payment had to be made at a CRA office and not a bank.
Only in Canada eh!
Then there’s the sad story of Hal Neumann.
It took Hal Neumann three years to clear his name after the CRA sullied it and he was
awarded a $1.3 million verdict consisting of $300,000 in damages and $1 million for
breaching his Charter rights as a result of the indignities he suffered at the hands of
Agency employees.
What happened?
At all times co-operative, during a 2004 audit Neumann provided copies of requested
paperwork, some of which later led to a tax evasion investigation of a business associate.
Then, without any warning, on September 7th, 2005 the CRA conducted a surprise raid
on Neumann’s home, searching for the exact same documents that he had already handed
over during the 2004 audit. Two police officers and five CRA employees searched
Neumann’s home office and then worked their way through the entire house. Kitchen.
Living room. Family room. A police officer even said that he might be arrested.
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All of this to a man who, had not only been at all times compliant with the CRA, but
was not even the subject of their investigation.
Feeling wronged he took them to court.
In addition to the damages award he won Mr. Neumann was also awarded an apology
from the Revenue Minister by the jury. Naturally the CRA is appealing this decision.
And the topper?
Mr. Neumann said that if the CRA had simply requested that he provide the papers
once more, that he would have.
And gladly so.
Which brings us to Irvin Leroux.
In 1996 Mr. Leroux was visited by an auditor who proceeded to take all of his receipts
and business records back to CRA Headquarters and then, get this, the auditor misplaced
them. And with them every last little bit of proof that Mr. Leroux had of his honesty was
gone. Shredded. Literally. Because the CRA auditor candidly admitted that Leroux’s
paperwork had accidentally been fed to the shredder.
With no receipts the CRA proceeded to conduct numerous audits over a span of
several years and concluded that Mr. Leroux owed in excess of $1 million dollars in tax
and GST. The reasoning behind the CRA now disallowing his expenses you see was
simple – he had no proof of them.
But Leroux would not stand for this – he took the CRA to court. And he won.
Reversing all of the CRA’s tax reassessments. But in the process he lost everything.
House. Business. Land. Personal assets. Income. Savings. He lost it all. Because the CRA
placed a lien which caused the bank to demand the repayment of a large business loan
fearing its security was at risk, which caused the sale of his life’s work and possessions at
rock bottom prices. Leaving him with nothing. All because the CRA would not admit to
its mistake.
He has now filed a lawsuit against the Canada Revenue Agency seeking
compensation.
These are just the smallest sampling of some the many indignities that Canadians have
suffered at the hands of our esteemed tax officials.
And not as a result of these stories but finally on February 21st 2008, the Office of the
Taxpayers’ Ombudsman came into being. But before delving into the idea of taxpayer
redress a short statement is in order.
This statement may seem a bit unnecessary to some but in most quarters it is felt that
the introduction of this new institution is clear confirmation that the Canada Revenue
Agency (CRA) never took the concerns of Canadians seriously – complaints about their
methods and methodologies – simply because we had no means of independent recourse.
So the tax man (and woman) could and would run roughshod over us. Without fear of
facing reprimand. Newspapers and the media, even Member’s of Parliament, Cabinet
Ministers and the Prime Minister, all were powerless. Though not always completely
without influence.

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But maybe all this power became too much because, finally, in May of 2007 three key
announcements concerning the Canada Revenue Agency (CRA) were made public:

1.) a new and updated Taxpayers Bill of Rights

2.) news that the CRA was instituting a new complaint resolution process called CRA
Service Complaints
3.) a Taxpayers’ Ombudsman Office was being created to deal with the plethora of
Canada Revenue Agency complaints that filled the file cabinets of our poor
overworked MP’s.

While the Taxpayers’ Bill of Rights was immediately made public, the details and
procedures behind the CRA Service Complaints resolution process was not. In fact it was
not until February 21st, 2008 – the same date of the creation of the Taxpayers’
Ombudsman Office – that these details finally became public. Underscoring the point
made previously that the CRA never took the complaints of Canadians seriously until
finally forced to do so.

The Canadian Taxpayer Service Bill of Rights

The Federal Government says that Canadians have the right to be treated fairly and
with a high level of service each time they deal with the Canada Revenue Agency. They
set out our Rights in the Taxpayer Bill of Rights, which is a set of 15 rights confirming
that the CRA will serve taxpayers with high standards in all areas of service. For the
complete Taxpayers’ bill of Rights check Appendix E of this book.

The Canadian Taxpayer Bill of Rights is comprised of two types of rights:

- Legislative Rights (Rights set out in legislation) and,

- Service Rights (Rights that the CRA uses to govern its relationship with Canadians).

Legislative Rights and their rights of redress have already been discussed in detail
previously so this section will only discuss the previously undiscussed. Service rights.
Following are the Service Rights of Canadians listed in the most recent edition of our
Taxpayer Bill of Rights:

- The right to be treated professionally, courteously, and fairly.

- The right to complete, accurate, clear, and timely information.
- The right to lodge a service complaint and be provided with an explanation of the
CRA findings.
- The right to have the costs of compliance taken into account when tax legislation is
administered.
- The right to expect the CRA to be accountable.

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- The right to expect the CRA to publish service standards and report annually.
- The right to expect the CRA to warn you about questionable tax schemes in a timely
manner.
- The right to be represented by a person of your choice.

These service rights are to be upheld by administrative redress mechanisms in place at

the CRA which include the new complaint resolution initiative called CRA – Service
Complaints. As well, these service rights are to be upheld by the Taxpayers’
Ombudsman.
Now that you know what your Rights are – don’t be afraid to use them.

CRA – Service Complaints

The CRA Service Complaint process is supposed to make the Canada Revenue
Agency both transparent and accountable in its actions. It’s purpose is to provide
individuals, businesses and benefit recipients with an additional level of confidence in
their dealings with the Tax Agency and its employees because it allows any one who
feels they have been wronged to file an official complaint.
“This new agency-wide process,” announced the Canada Revenue Agency’s Internet
site, “will provide individual and business taxpayers and benefit recipients with an
additional level of confidence in their dealings with the CRA. The CRA – Service
Complaints program will also support the service rights outlined in the new Taxpayer Bill
of Rights.”
And that’s all Canadians really want.
Right?
To be treated fairly and as innocent instead of being presumed guilty and treated as
such before the facts are even made evident. As has been the case since 1917.
The CRA’s statement continued:

“If you are not satisfied with the service that you have received after
exhausting normal complaint channels, you have the right to make a
formal complaint about mistakes, undue delays, poor or misleading
information, or staff behaviour through the CRA – Service Complaints
program. The CRA will review your complaint, and will aim to resolve it
in a fair and timely manner. If you remain dissatisfied with the CRA –
Service Complaints program's review of your complaint, you will be able
to ask the Taxpayers' Ombudsman to review it, who will provide a final
impartial review.”

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The question that first arises is what can Canadians complain about and exactly how
can we complain?
This question can only be answered by defining what “service” really is.

In the context of the CRA service is defined as the quality and the timeliness of the
work performed. Still kind of vague but if you have a problem concerning:

- mistakes;
- undue delays;
- poor or misleading information;
- staff behaviour.

than you can be sure that you have a valid service related complaint.

So, now that you’re sure that you have a reason to complain what do you do? Go
straight to the Office of the Taxpayers’ Ombudsman?
No.
Before the Office of the Taxpayers’ Ombudsman will even consider your complaint
first you must exhaust the CRA’s new complaint process steps known as: CRA – Service
Complaints.

The new CRA Service Complaints Process consists of:

1.) Trying to resolve the issue with the CRA employee you have been dealing with or,
2.) If this does not work, talk to the employee's supervisor or,
3.) If you are still unsatisfied than you can fill out the brand new form known as the
Service-Related Complaint form or Form RC193 (example on page following).

Visit http://www.cra-arc.gc.ca/E/pbg/tf/rc193/README.html to view or download the

Form RC193. To have a copy mailed to you call 1-800-959-2221.

For additional information on CRA Service Complaints you can visit http://www.cra-
arc.gc.ca/E/pub/xi/rc4420/README.html or else pickup RC4420 Information on the
CRA – Service Complaints.

Please note that any complaint MUST be in writing. Though it does let you vent some
steam at an actual person the CRA does not accept verbal protests.
Complete the form, make a copy of the completed form for your records and than you
can either fax the completed form to 1-866-388-7371 or mail it to:

CRA – Service Complaints

National Intake Centre
P.O. Box 8000
Shawinigan-Sud, QC G9N 0A6
Canada

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Service-Related Complaint
Section 1 – Identification
First name and initial Last Name

Mailing address: Apt No – Street No Street name

PO Box RR City

Province or territory (or country, if outside Canada) Postal/Zip code

Daytime telephone number Alternate telephone Best time to contact you

Social Insurance Number/

CRA Account number

Section 2 – Information about your complaint (If you need more space, attach a separate sheet of paper.)
Note: If you only want to provide feedback, go to Section 3.

1. Describe your service-related complaint.

2. What actions have you taken to try to resolve your service-related complaint? Include the name(s) of the Canada
Revenue Agency (CRA) staff and office location(s) you have contacted, and describe any actions that they have taken.

3. Describe the outcome you want.

RC193 E (09). Vous pouvez obtenir ce formulaire en français à www.arc.gc.ca ou au 1-800-959-3376

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Section 3 – Feedback (If you need more space, attach a separate sheet of paper.)

1. Give the details of your comment, opinion, or suggestion.

2. What do you think we should do to improve our service?

Section 4 – Certification
I certify that the information given on this form and in any attached documents is correct and complete.

Signature of taxpayer Year Month Day

Section 5 – Authorization for representatives

If you are filing this form for a taxpayer or business, please attach a completed Form T1013, Authorizing or Cancelling
a Representative, for individual/trust accounts, or Form RC59, Business Consent Form, for business accounts, if you
have not already filed either form.
Name of representative Title

Signature of representative Telephone number Year Month Day

Section 6 – Filing instructions

To avoid delays in the processing of your complaint, please send this completed form, together with supporting
documentation and any authorization forms, separately from other tax forms. You can fax your form and documents to
1-866-388-7371 or mail them to:

CRA – Service Complaints

National Intake Centre
P.O. Box 8000
Shawinigan-Sud QC G9N 0A6
Canada

Important Please include all relevant documentation that you feel may be helpful in reviewing your complaint or feedback.

For more information If you want more information, see Booklet RC4420, Information on CRA – Service Complaints, or visit our Web
site at www.cra.gc.ca/complaints.

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After a formal complaint to the CRA – Service Complaints National Intake Centre has
been received the CRA will assign a Complaints Officer to the case whose job is to liaise
with the CRA function(s) involved in the complaint. The Complaints Officer will contact
you to confirm that they have received your complaint and at that time will provide you
with a file number which you will use for follow-up. The CRA Complaints Officer’s job
is to keep the complainant (you) informed of the status right through to the final outcome
of your complaint.
Which raises the question, “What if I don’t agree with the response of the CRA’s
Complaints Officer?”
If you disagree with the response of the CRA’s Complaint’s Officer than you have the
right to forward your complaint to the Office of the Taxpayers’ Ombudsman. As noted
previously the Taxpayers’ Ombudsman will NOT consider your complaint until you have
gone through the steps of the CRA – Service Complaints.

The Office of the Taxpayers’ Ombudsman

When you’ve reached this step it simply means that you have complained to the
Canada Revenue Agency and that you do not agree with the response they have provided.
A large part of the Taxpayers' Ombudsman job is to ensure that the CRA respects the
service rights outlined in the Taxpayer Bill of Rights BUT only after all of the CRA's
internal complaint resolution mechanisms (as noted previously in this chapter) have been
exhausted.
So, what than is the Taxpayer Ombudsman supposed to do for Canadians?

The Taxpayers' Ombudsman's role is to:

- Conduct impartial and independent reviews of CRA service-related complaints;

- Facilitate taxpayer access to assistance within the CRA;
- Identify and review systemic and emerging service-related issues that have a
negative impact on Canadians; and
- Provide advice to the Revenue Minister about service related matters within the
CRA.

But they can only do this within the context of a service related complaint. All other
complaints are outside there jurisdiction and any help you may receive regarding a non-
service related complaint will be to point you in the direction you should be going.

A service-related complaint includes:

- mistakes, which could refer to misunderstandings, omissions, oversights or delays;

- poor or misleading information;
- staff behaviour.
- the Taxpayers' Ombudsman also reviews complaint where any of the service rights
outlined in the Taxpayer Bill of Rights may not have been respected by the CRA.

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Government Gouvernement
Of Canada du Canada
Taxpayers’  Ombudsman  –  Complaint  Form  
Section  1  –  Identification  
Name (first and last if you are an individual) Mailing Address: Apt No. – street no. & Name

PO Box / RR City Prov./Terr./State Postal/Zip Code

Country Telephone number Alternate telephone number

Our hours of service are Monday to Friday (except holidays) from 8:15am to 4:30pm (local time).
Please tell us the best time during those hours to contact you, as well any contact restrictions.
 
Section  2  –  Information  about  your  complaint  (If you need more space, attach a separate sheet of paper.)
1. Please describe your complaint and submit all relevant documentation.

2. What actions have you taken to resolve your complaint? Include the actions taken by the Canada Revenue Agency
(CRA) staff and provide the name, title, telephone number and office location of whom you have dealt with regarding
this situation.

Section 3 – Consent to disclose information

I understand that the Taxpayers’ Ombudsman may need to disclose the information contained in, or attached to, this complaint
form to the Canada Revenue Agency in the process of reviewing my complaint, and I consent to such disclosure. I also
understand that the Canada Revenue Agency may need to disclose information to the Taxpayers’ Ombudsman for the purpose of
reviewing my complaint, and I consent to such disclosure.
_____________________________________________________________ __________________________________________
Signature of Complainant Day/Month/Year

Section 4 – Third Part Authorization

If you are designating a representative to file this complaint on your behalf, provide the following information and authorization
______________________________ ___________________ __________________________
Name and title of representative Phone Number Mailing Address

As the taxpayer identified in section 1 of this form, I hereby authorize this representative to act on my behalf in dealing with the
Taxpayers’ Ombudsman for the purpose of this complaint.

__________________________________________________ _________________________________________
Signature of Complainant Date YYYY/MM/DD

Section 5 – Submitting instructions

You can fax the completed form to 1-866-586-3855 or mail it to: Taxpayers’ Ombudsman
Suite 724, 50 O’Connor Street
Ottawa ON K1P 6L2
Canada

Information about your complaint is stored at the above mentioned address.

Section  6  –  Survey  (optional)

Please let us know if you are in any of the following categories:
_  Aboriginal person _  Non-resident _  Student
_  Benefit recipient _  Person with a disability _  Tax professional
_  Charitable organization _  Senior _  Other: _______________
_  Newcomer to Canada _  Small business _________________________

(Vous pouvez obtenir ce formulaire en français à droitsdescontribuables.gc.ca  ou en composant le 1-­‐866-­‐586-­‐3839.)

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What the Taxpayers’ Ombudsman will not do (or even consider) are complaints
involved in matters related to legislation or interpretation of tax policy. Since there are
already mechanisms for dealing with these issues the Ombudsman will only provide
advice on what you should do if your complaint is outside the Taxpayers' Ombudsman's
mandate.

The Office of the Taxpayers' Ombudsman will not:

- review complaints relating to tax policy or program legislation;

- review decisions that can be dealt with by the Courts;
- direct the CRA to take action; and
- discipline any person for their actions or behaviour.

Now that you know what you can complain about and what to expect the only detail
left is to learn how to proceed with your complaint.
What you will need is a copy of the Taxpayers' Ombudsman - Complaint Form. You
can contact them for a copy or visit http://www.droitsdescontribuables.gc.ca/frmRDM-
eng.html where you can download a copy for yourself. You already viewed a copy of the
form on the page immediately preceding this one.
The next step is to simply print out the complaint form and than complete it in full.
Make sure that you complete all applicable areas of the Taxpayers' Ombudsman -
Complaint Form, being particularly sure that you sign and date Section 3 of the form,
“Consent to disclose information” to authorize the exchange of information between the
Taxpayers' Ombudsman and the CRA for the purpose of reviewing your complaint.
When completing the complaint form be sure to tell the Taxpayers’ Ombudsman
exactly what you want. Do you want access to a service that has been denied? Certain
information? An apology? You have to be clear on this point or else your complaint will
not be properly serviced.

After you are done filling out your complaint, fax the form along with any supporting
documentation to 1-866-586-3855 or else you can mail it (after making copies for your
records) to:

Taxpayers' Ombudsman
Suite 724
50 O'Connor Street
Ottawa ON K1P 6L2
Canada

When the Ombudsman receives your complaint they will acknowledge its receipt and
will provide you with a reference number to use if you need to contact them regarding
your case.
Next, your case will be screened.

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If the complaint is not something reviewable because you have not attempted to
resolve it first with the CRA, or else it does not fall within the Mandate of the Taxpayers'
Ombudsman, they will let you know and refer you, as needed, to the appropriate area.
If the complaint is suitable for review an Examination Officer will be assigned to the
case. They will conduct a review of the complaint based on the available information in
order to decide what they believe is fair and reasonable in the circumstances of the case.
The examination officer will keep the complainant informed throughout the process and
of course you can contact them for updates.
At the end of the review they will send both the complainant and the CRA the
outcome of the review along with any recommendation.

As part of our recommendations to the CRA, the Taxpayers’ Ombudsman may suggest
that the CRA:

- Give further reasons for a decision;

- Correct a misunderstanding, omission or oversight;
- Offer an apology;
- Change a policy or procedure;
- Make changes to systems or applications;
- Review its service standards; or
- Consider further staff training.

But there are limits to what the Taxpayers' Ombudsman can do. They cannot direct the
Canada Revenue Agency to take an action nor can they discipline an employee for their
actions or behaviour.
Once the Taxpayers' Ombudsman review is concluded, complaint files are retained for
a maximum of five years. Under the provisions of the Privacy Act, you have the right to
the protection of and access to your personal information and to request that changes be
made to that information.

What you need to know

As usual there is always something you need to know and the key from hereon in is,
whenever in contact with the Canada Revenue Agency – keep records. A written diary,
tape and or video recordings wherever possible.
Yes, do not be afraid to video or tape record your CRA interactions. It is indisputable
and unquestionable proof of your side of the story.
Whenever dealing with any CRA employee get their first and last name, their position
and their phone number. If you are having a conversation, whether in person or on the
phone, make note of the time and the date and the details of the conversation. Make notes
WHILE you are speaking with them. Don’t wait until after when you may have forgotten
some detail or details or else let your personal feelings colour what you have recorded.
As well, as hard as it may be, always be polite. Be firm and let them know what you
want but do not get angry, be insulting or threaten them about their job, about going

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bankrupt, about complaining to your Member of Parliament, a media outlet or the

Taxpayers’ Ombudsman.
They just don’t care.
So any sort of threats or intimidation do not help.
And as the Godfather says “Sonny, never let anyone outside the family know your
mind.”
Simply decide what outcome it is that you are after and than work towards it.
As well, don’t hesitate to contact the Information Commissioner and get access to all
of your personal tax records.
And, finally, this is a worst case scenario of course, but what sort of tragedies might
be prevented by the institution of a Taxpayers’ Ombudsman?
On January 30th, 1994 Debora Stephan ran a rubber tube from her car exhaust through
a slightly open car window and started her car.
Why?
Her family had a tax debt of $27,170 and the note found beside her body stated that
she wanted her life insurance to be used to pay the tax debt off.
But even her death did not stop the now CRA from continuing to apply harsh
repayment measures. And when the tax debt finally was paid the CRA than assessed a
further $18,745 in overdue taxes which finally drove the family into bankruptcy in 1997.
In 2001, seven years later, the CRA sent still another tax assessment to the Stephan’s
claiming that Debora Stephan still owed money.
As a result of all this Mr. Stephan began to demand the creation of a Taxpayer
Protection Office. Maybe the Taxpayers’ Ombudsman is, in part, a result of this tragedy.
Maybe if there has been a Taxpayers’ Ombudsman many years ago this story would have
had a happier ending.
Howso?
Well, it is not within the CRA’s mandate to cause undue hardship. But that is exactly
what happened here. Due to the economy of that day the Stephan family had both lost
their real estate businesses and then their home. Family income fell to $1,000 a month.
And than lower still. That’s when the CRA hit them with the $27,170 tax assessment on
September 7th, 1993. They had so little money that their utilities were under threat of
disconnection and other creditors were threatening to sue. Their children were going to
school hungry. On Dec. 2, 1993, the family went on social assistance. When other
creditors found out how bad the family’s financial situation was, they laid off.
But not the Canada Revenue Agency.
The CRA was phoning three times a week and threatening legal action. They had them
write up a budget for the large ten child family but the CRA said it was unrealistically
high. This to a large family that was earning less than $1000 a month and accepting
social assistance. The CRA knew what the family was suffering as the CRA’s own
written records state that the family was living on $767 a month (with a $1,000 monthly
mortgage payment). “At this point, only mtge [mortgage], util [utilities], food and gas are
being paid as inc [income] is not sufic [sufficient] to pay any other bills [sic].” the CRA
employee recorded.
Days after this was written the CRA issued a garnishment on a cheque from an
employer because, “the account was not being dealt with in a timely manner by the
client...”

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The CRA knew that the family was destitute, knew that consideration must be given
for reasonable expenditures such as food and shelter and that they were not mandated to
cause undue hardship. Yet still they went ahead with a garnishment.
Weeks later Mrs. Stephan killed herself on January 30th, 1994.
Mrs. Stephan’s insurance policy paid out $100,000 on her death, even though it was a
suicide.
Sometimes it takes a tragedy before a remedy can be found.
With the creation of a Taxpayers’ Ombudsman, now that Canadians have an agent of
recourse, stories like this might never have a chance to take flight.
And that agent of change is working.
In the first year of operation The Taxpayers' Ombudsman received several hundred
complaints. Here are examples of some of the outcomes:
A single parent relying on the Canada Child Tax Benefit (CCTB) had her benefits
suspended by the CRA.
Why?
The CRA wanted her to provide proof that her children were born in Canada. So she
complied and provided a letter from the family doctor who delivered the babies. The
CRA however decided that this was not sufficient proof and so refused to pay her
benefits. This sad story went on for many months. And, as a result, faced foreclosure on
her home.
But a complaint to the Taxpayers’ Ombudsman forced the CRA to issue a CCTB
payment for $38,000 and the home was saved.
In this next sad story a man suffering from a brain tumour lost his tax records in a
house fire. When he failed to file on time, for obviously good reasons, he was slapped
with penalties and interest. When he applied under Fairness for relief, due to his
circumstances, the CRA provided some relief but not the full relief that was obviously
warranted. After a complaint, the Ombudsman got involved, commented on the lack of
fairness (no pun intended), and the CRA performed a quick about face. All penalties and
interest were cancelled.
Sometimes the CRA’s own employees don’t know the law as an operator of a special
care home for adults found out. The hard way. The CRA garnisheed and seized $4700
from one operator - causing great hardship.
Why did the CRA do this?
To collect taxes owing on a tax free subsidy.
The operator was receiving a per diem allowance for each resident from the provincial
government – a subsidy that is not considered taxable income.
But the CRA officials reviewed the file, decided that the income was taxable, contrary
to the law, and so took legal action. After the Ombudsman’s involvement the CRA
reversed its position and all legal actions were released.
The Ombudsman helped another single parent who was supporting a disabled
daughter, caring for an elderly mother all while trying to make monthly payments against
his arrears by providing post dated cheques. An arrangement which the CRA agreed to.
But when the cheques ran out the CRA decided to just seize his bank account. As a result
the household went without food for two days. But after the Ombudsman’s intervention
the garnishment was released AND he was issued a cheque from the CRA.

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The Taxpayer’s Bill of Rights, CRA – Service Complaints & The Taxpayers’ Ombudsman

And when a retired taxpayer proposed a repayment arrangement to the CRA, they
completely ignored him and seized his bank account. Without even sending him a letter.
The Ombudsman helped to have the bank garnishment and the taxpayer received a verbal
apology from the CRA.
When was the last time you ever heard of any Department or Agency of the Canadian
Government apologize to a Canadian? Let alone the CRA!
Just to be clear, the Ombudsman can not order the CRA to do anything.
At all.
But simply by getting involved and asking questions they gave a voice to someone
who would very often be ignored, you, causing the CRA to reconsider their position.

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 Filing a Ministerial Complaint

21

Most Canadians with a tax related beef will vent their anger on the tax collector and let
it go at that. Some that manage to muster a touch more bravado might venture as far as a
Team Coordinator or even approach their local TSO Director. But there are only a few
hardy souls who skip these middlemen and women and instead aim straight for the top.
They protest directly to the Minister of Revenue or to their elected representative in
Ottawa, their Member of Parliament (MP).
When filed your complaint about the CRA will usually fall into one of two broad
categories. Either you feel that the tax collector has been mistreating you, not an
uncommon occurrence, as I should know, or else the complainant wishes to grouse about
some aspect of current tax legislation.
When a taxpayer or a tax debtor complains to the Revenue Minister it creates a
situation within the department known as a Ministerial Complaint and is commonly
referred to as a ‘ministerial’ in tax collector lingo.
Such an action is called a ministerial because it indirectly involves the Minister of
Revenue. I would have said directly but the Minister’s staff does all the work while the
Minister does little more than sign the response.
The long process begins with your letter to your MP or the Revenue Minister and for
the sake of example we will assume you have just complained to your MP. Your MP’s
staff will take your letter and prepare a request to the Revenue Minister for a response to
their constituents, your, concerns. Again it is rare for your MP to see your letter unless
you are on personal terms with your MP i.e. a well-known party supporter, or you visit
their local constituency office. In such instances your MP will almost always take a
personal interest (and this is especially true for seniors).
Now when your MP’s request letter – with a copy of your letter attached, reaches the
Revenue Minister’s office the current Revenue Minister will rarely see your complaint
(after all he/she is also an MP). The Minister’s staff will usually forward a copy of your
letter to the office of the Deputy Minister of Revenue Canada.
A copy of a letter sent from the Minister of National Revenue in response to a
complaint can be found on the page immediately following. This letter displays the
amount of involvement any Revenue Minister actually has in resolving your complaint;
they just palm the responsibility off on an underling.

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 Filing a Ministerial Complaint

Minister Ministre
of National Revenue du Revenu national

July 22, 1997

Mr. Alan Baggett

367 North York Road
Surrey, British Columbia
V7R 2R7

Dear Mr. Baggett:

I am replying to your letter of June 27, 1997, addressed to the

Honourable Jane Stewart, former Minister of National Revenue.

I have asked senior officials of Revenue Canada to review the

matter raised and provide you with a reply as soon as possible.

Please be assured that your concerns will be given careful

consideration.

Yours sincerely,

Herb Dhaliwal, P.C., M.P.

House of Commons Chambre des communes

Ottawa, Canada K1A 0A6

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 Filing a Ministerial Complaint

Now the Deputy Minister has a staff of about fifteen to twenty people whose full time
job it is to handle complaints – ministerial correspondence. They will open up a docket
for your letter (a large file folder) and then pass the letter down the line to the Taxation
Services Office closest to where you reside.
When your letter reaches that TSO your tax account will soon be coded “Stall –
Minister’s Mail”.
When a tax collector sees this notation on your tax account it is the norm for all
collection action to cease. Immediately. The tax collector has to let the complainant/tax
debtor be. No letters or phone calls, no new legal actions and in many instances current
legal actions are withdrawn until your enquiry has been answered. And, truth be told, the
only thing the tax collector dislikes more than a completing a write-off is being forced to
respond to the complaints of Canadians, regardless of how legitimate the beef is. This
task is the curse of their very existence.
A response to the MP and complainant often takes as long as three months. And
sometimes even longer. Meanwhile, the tax collector sits and does nothing to further
upset the complaining party. But as you may have guessed by now, some tax collectors
sit and twiddle their thumbs even when they do not have ministerial correspondence to
answer. A second example of a CRA response letter to a complainant can be found in
Appendix C.
Next an employee of the function (collections, audit, assessing are all different
functions) will investigate the complaint and prepare a reply to the Minister.
Occasionally the offending party, the one with first hand knowledge of the case, will
prepare a response but most offices have full time staff whose only job is to handle
ministerial complaints. These employees prepare and return the response to your
complaint to the Minister’s office. The staff of the Minister’s office will then clean up
this reply to what they deem as being politically correct and send copies to you as well to
any intervening MP. The Minister or a similar high ranking employee’s name is placed
on the letter but they rarely have any knowledge of your complaint. It seems unfair to put
your name on someone else’s work but this is government after all.
The response letters, for the most part, are not form letters but the responses tend to
follow a formula. The CRA will never accept blame for any wrongdoing. Whether the
fault is theirs or not. Instead they will cite legislation where pertinent and then place the
blame on the legislation. Or else they take note of your ignorance, but much more kindly
worded, to explain away your complaint.
But in instances where the tax collector wishes to look magnanimous they will take a
slightly different approach to the situation.
The CRA hates to look bad or to receive bad publicity because taxes and tax collecting
are sensitive issues. So, rather than appear brutish, they have a habit of backing down in
instances where publicity is a threat.
But when it is felt that no such threat exists the tax collector takes a different tack.
One apartment dwelling Hamiltonian tax debtor complained that tax collectors were
regularly breaching his confidentiality by leaving sensitive information, information
about his personal tax arrears, with a neighbor. This happened on three separate
occasions in the space of one month. And the reason he knew the tax collector was
contacting his neighbors was because the neighbors kept leaving notes on his apartment
door asking him to contact Revenue Canada and proceeding to list some personal details.

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 Filing a Ministerial Complaint

I reviewed the case along with another Team Coordinator and after verifying that his
statements were true I felt that we Revenue Canada, should apologize. When the response
with apology was forwarded for approval it was sent back as unacceptable.
Why?
Because an apology to the wronged party had been included.
Instead the letter was rewritten and the official response, instead of admitting the
wrongdoing, stated instead that this practice was standard operating procedure when
initiating or attempting to contact debtor individuals.
But, in all honesty, it is standard procedure for the CRA/Revenue Canada and all other
federal departments and agencies to refuse to admit to any errors or wrongdoings. When
elected officials as well as civil servants realize they should be working with Canadians
to root out problems instead of trying to hide every mistake Canadians will have a better
opinion of both elected officials and civil servants. And we will be better served.
For the most part the only way to receive a response to your query is to at the top
rather than somewhere in the middle. You shouldn’t be afraid to make your case known if
you really have a case and you’re not complaining for the sake of complaining.
Then again, those who complain without a legitimate reason often seem to be the ones
who win if or our retired schoolmistress (story following) is considered. But by
complaining at the very least you will gain some satisfaction just by venting your
frustrations.
But, and this is a big but, when your MP gets personally involved making phone calls
and complaining loudly to the TSO the end result can be quite different than just the
normal brush-off response.
I vividly remember the case of a retired schoolteacher who loudly complained. School
teachers, current or retired, always seem to be among the worst tax debtors to deal with.
They always whine and think up some excuse why they should not be forced to pay.
Police officers are the best, they always arrange the debt immediately upon being
contacted.
Now this particular teacher had a good income for a retiree but still she refused to
make payments against her tax arrears. As a result, and after repeated warnings, she was
subjected to legal action via a garnishment. The tax collector rightly refused to remove
the garnishment when she complained so she threatened to complain to the Prime
Minister saying, “I’ll have your head and your job,” to which the tax collector coolly
replied, “Go ahead, make my day”.
Of course she complained and an underling from Ottawa vociferously took up her
cause. One of those toadying types eager to earn some brownie points in order to further
their career. But as a result of his intervention the tax debtor had over $1000 in penalty
and interest charges waived. She also had all future interest charges cancelled until such
time as Revenue Canada saw fit to reinstate such charges. And, finally, she was allowed
to repay her remaining tax arrears at the paltry sum of $75 a month until the debt was
retired or her financial situation improved.
A little math on the tax collector’s part determined it would take close to sixty months
to repay her liability to the department if she accumulated no further debt meaning she
just recently paid off her tax arrears. Interest free.
The kicker in this story is that the debtor clearly had the ability to pay in full
immediately, based on her current income and expenses. But because she complained to

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 Filing a Ministerial Complaint

her MP a sweet deal was negotiated on her behalf. This particular tax collector still has
his job but has never since been promoted.
Not all Ministerials end this way but it’s interesting to note that a tax debtor with the
means to pay was able to secure very favourable terms just by complaining and having
her MP take a personal interest. You may also recall the case mentioned in the chapter on
Fairness where the MP took a personal interest and the complainant saved over $12,000.
When an MP gets personally involved the outcome tends to be in the debtors favour.
Why doesn’t our Government or our Civil Service honestly answer complaints of any
type? Responsibility. Any employee who states that everything is not kosher is seen as a
critic and their upward mobility hits the ceiling. If ever it is admitted that a mistake has
been made it is always assumed the acknowledging party is the one who made the
mistake. Whether this is true or not is irrelevant. Buy they can say good-bye to ever
having a desk with a window view. For employees who take responsibility for the bad are
ferreted out. Literally. Any successful or prosperous organization should reward those
willing to take responsibility for the bad because these are the types of people that can
make any business a success, even when it’s a federally run operation. But because
politicians can blame civil servants and prior legislation, because civil servants can blame
legislation and politicians, this cult of irresponsibility will remain for as long as the buck
continues to be passed.
Have I ever been complained about? The first and only complaint I ever had, not a
ministerial, was from Motorola.
Around 1992 or thereabouts a division of Motorola had recently been reassessed with
a six-figure corporate tax liability. My Team Coordinator asked me to contact them and
determine whether they would be paying or appealing the assessment. When I asked the
Motorola accountant this question the paper pusher on the other end of the line went
ballistic. He bragged, “We’re a Fortune 500 company worth billions of dollars, this is
nothing to us and it’s none of your business what our decision is”. Then, before I could
respond, he turns abusive, starts shouting at me, and then just as quickly demands to
speak to my boss.
When he was done with my Team Coordinator my Team Coordinator says, “Hey Al,
we’re going to transfer this account to someone else”. And so the tax account was
transferred.
This transfer did not bother me but even today, almost ten years later, I still think
twice before purchasing any Motorola product. What if the productive was defective and
I had to phone them? Would they be any kinder? I sincerely doubt it.
But it is the huge number of pointless yellers and whiners that hurt those Canadians
with legitimate tax beefs to air. This is the primary reason why the tax collector gives all
complainers the brush-off instead of more serious consideration.

What you need to know

Although I would not recommend it filing a ministerial complaint for the purpose of
delaying collection of your tax debt does delay legal collection of your tax debt,
temporarily at least, as some have proven. But if you have really been offended you
should complain. Complaining is as simple as sending a letter or making a phone call.

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 Filing a Ministerial Complaint

You do not have to take abuse or poor treatment from the tax collector but in return you
must also try to be civil.
Of course if you are really offended by the underhanded way the CRA is treating you,
or ignoring you, you can always do what Blair Longley did: Challenge the tax collector in
court.
Mr. Longley did so in the case Blair T. Longley and Her Majesty the Queen as
represented by the Honourable Otto Jelinek Minister of National Revenue.
Now Blair Longley dreamed up a plan whereby Canadians could receive federal
political contribution tax credits for contributions made to a political party. But his idea
was a bit different because the contributor could direct their contribution so as to benefit
the contributor or to benefit the contributor’s designate. This plan became known as the
“Contributor's Choice Concept” (the “CCC”), or “Longley’s Loophole”.
Because some were skeptical of his scheme Mr. Longley requested confirmation from
the tax collector that his idea was legal. For five long years he pursued Revenue Canada
seeking written confirmation that his idea was legal under the Income Tax Act.
But Revenue Canada refused to acknowledge this to him in writing.
His patience finally wearing thin he decided to take this issue to Court.
It was the Court’s decision that:

“Revenue Canada dealt dishonestly with Mr. Longley. It is apparent that

Revenue Canada was aware from early on that Mr. Longley’s scheme did
not appear to be contrary to the provisions of s. 127(3) of the Act.
Nevertheless, they set out to discourage him and his potential contributors
by refusing to confirm that fact and, ultimately, to mislead him with
respect to the legal strength of the Department's position. The Department
acted without regard for its obligation to deal fairly and openly with all
taxpayers and to administer the Act in accordance with the law.”

But the judge’s decision did not end here, he concluded by stating:

“I am of the view that the award in this case ought to be one which reflects
the Court's displeasure with the abuse by Revenue Canada of its position.
In the circumstances of this case I have concluded that the appropriate
award of punitive damages, intended to dissuade Revenue Canada from
acting again in such a high handed, arrogant and dishonest way, is
$50,000.”

Most likely you will find it strange that the Minister involved in this case, Otto
Jelinek, is the same Minister who introduced the Fairness Legislation. But this court case
only serves to show that while the tax collector may act magnanimous in public, in
private and away from the spotlight they do not obey their own dictates. They do not care

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 Filing a Ministerial Complaint

that you have the right to pay as little tax as the law allows. And they get away with such
high handed behavior unless the oppressed fight back legally.
Internet link http://www.courts.gov.bc.ca/jdb-txt/sc/99/11/s99-1135.txt has published
the complete text of the Longley decision.
And my advice?
If the day comes when you should ever need to lodge a complaint go directly to your
MP or the Revenue Minister. Forget about complaining directly to the tax collector.
Complaining to anyone in the CRA will likely result in a form response or the bum’s rush
but if you can get your MP personally involved you have a chance of being heard and
maybe even winning your case.

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 Auditing the Auditor

22

What do you think would happen if you purposely filed an incorrect income tax return
and benefited as a result?
Because people do file improperly.
Most often by accident but sometimes on purpose too.
The Canada Revenue Agency, once they found out, would correct the return to
properly assess you. Tacking on the necessary penalty and interest to boot. As well, if the
error is egregious or if you are a multiple offender then you could be fined and even serve
time in one of our nation’s finest penal institutions.
And what do you think would happen if your accountant or appointed tax
representative filed falsely on your behalf?
The same thing.
You would be properly reassessed and your nominee could face fines and possible jail
time.
But what do you think would happen if a CRA employee, specifically an auditor,
purposely and knowingly filed a false return of income on behalf of you or any other
Canadian citizen?
What would Canada’s revenue agency do?
And what would they say when you complained and brought the injustice to light?
In no uncertain terms the Canada Revenue Agency would say it was your fault. They
would blame you for not filing in a timely fashion. They would blame you for failing to
file properly. Likely they would do both.
And, finally, they would say that there was nothing you could do about it.
THE END.
Sweeping it under the rug.
Hey would refuse to address or even consider the matter at all.
Which pretty much gives CRA employees a license to assess Canadians however they
see fit. With no repercussions to be faced if they should make an error or, worse, decide
to take certain liberties with your return and so impacting your life.
Because what are your options really?
You can file correctly of course but there is no guarantee that the CRA would accept
your version of events.
So of course you could appeal their rejection but appeals are discretionary. Meaning if
it was rejected you would have to go to Tax Court and perhaps even Federal Court in the
hopes of finding justice. But if you are like most Canadians taking time of work to fight
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 Auditing the Auditor

an unjust assessment is not always an option. Can you afford to take time away from
work? As well, going to court can be very expensive if you have to pay for accountants or
lawyers to represent you. And if it costs more to appeal a tax debt then it would to pay
then many just choose to pay.
There are the Taxpayer Relief Provisions of course but most often they do not apply to
such situations.
And a complaint to your Member of Parliament is usually fruitless because your MP
will send your letter right over to the CRA for an answer and there answer to them will be
the exact same one they gave to you.
Leaving the Office of the Taxpayer’s Ombudsman as your last means for recourse.
But even if you should win your battle and get your unjust assessment overturned
what sort of punishment does the CRA mete out to the auditor who abused their CRA
powers?
Nothing.
It’s the CRA auditor’s job to assess.
So that’s what they do.
It is a little known fact but the Canada Revenue Agency has a Program. Simply put,
the ‘Program’ consists of the goals that the organization as a whole aims to achieve in the
fiscal year. How many returns they want to assess. How many dollars they want to
collect. Or to write off. And so on and so forth. Every branch has their own goals to
achieve. Appeals. Assessing. Collections. And the goals of the Audit Branch include
raising a certain number of assessments and assessing a certain amount of dollars.
That’s right.
Audit and those employed within, the auditors, are expected to raise a certain number
of assessments through audit and assess a certain number of dollars. Which means each
individual auditor has to contribute to reaching that goal. Which gives them a reason to
sweeten numbers on their audits – it just helps them to reach their goal quicker. Though
most won’t do this, at least not unreasonably so, some will. And do. And if the CRA
auditor does not like you (and is unprofessional) then they can take liberties that are just
plain unfair.
Helping them to reach their goals quicker.
Putting you further in debt.
And there is nothing you can do about it.
At least that is what the CRA would have you believe.
So that is what they will tell you.
“Sorry there’s nothing that we can do. Parliament makes the laws and we just enforce
them. Now please pay up.”
But you do have one further course of action.
Any CRA auditor is going to have an accounting designation meaning that they have
completed all the necessary courses, that they have passed all the proper exams, and that
they have demonstrated through work placements the experience and the ability needed
to fulfill the requirements to become certified as an accountant. Successfully completing
each of these means that they become accredited. Accredited meaning that they are
recognized as meeting the minimum official standards set up by their official body of
Certified General Accountants. And once meeting these standards in order to maintain

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 Auditing the Auditor

their good standing within the society (to keep their accreditation and membership in the
society) they must uphold and maintain these standards.

Such basic standards include but are not restricted to:

- They can not be a discredit to their profession.

- They can not act in an unethical manner.
- They can not issue statements that are misleading

And, most importantly to those dealing with the CRA, according to society regulation
R402 – Association with Financial Information:

“A member shall not be associated with any letter, report, statement,

representation, financial statement or tax filing, whether written or
oral, which the member knows, or should know, is false or
misleading, regardless of any disclaimer of responsibility.”

The emphasis on ‘tax filing’ is mine because that is the key point of this discussion.
R402 makes it quite clear that any one who is accredited as an accountant and a
member of their Society is breaching a minimum standard when they assess anything
other than correctly and by the book.
So while the CRA does not care if their employees take license with their job, the
Society of Certified General Accountants to which they belong to does care.
And they will punish any member who breaks their rules. Regardless of whether they
are a CRA employee or not.

What you need to do

Once you have determined that some sort of wrongdoing has occurred you have to
undertake a series of steps.
Firstly, you will have to determine if the CRA employee has been accredited and is a
member of any of the various CGA societies of Canada. To do this you will have to
contact your local society or, failing that, you can contact the national body. You simply
give them the auditor’s name (first and last), their location (the city in which they work),
their employer (in this case the Canada Revenue Agency) and ask for verbal confirmation
that the named individual is accredited and so are they a member of the Society.

The current contact information for each of the Provincial Branches of the CGA is as
follows:

Alberta - https://www.cga-alberta.org/cps/rde/xchg/cgaab/hs.xsl/index.htm

British Columbia - http://www.cga-bc.org/

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 Auditing the Auditor

Manitoba - http://www.cga-manitoba.org/protecting_the_public.aspx

New Brunswick - http://www.cga-nb.org/en/home.aspx

Newfoundland & Labrador - http://www.cganl.org/home.aspx

Nunavut/NWT - http://www.cga-nwt-nu.org/home.aspx

Nova Scotia - http://www.cga-ns.org/

Ontario - http://www.cga-ontario.org/

Prince Edward Island - http://www.cga-pei.org/

Quebec - http://www.cga-quebec.org/home.html

Saskatchewan - http://www.cga-saskatchewan.org/home.aspx

Yukon - http://www.cga.org/canada/yukon/

and Canada - http://www.cga-canada.org/en-ca/Pages/default.aspx

Once you receive a positive response (a response that confirms that indeed they are a
member) next you can make enquiries with the society as to how to properly file a
complaint. Then you will begin gathering all the information together and properly and
chronologically document it.
Do not forgot to make enquiries under the Access to Information Act and the Privacy
Act (see Chapter Three ‘Your Right of Confidentiality’ for directions).
Upon completion you will forward your proofs (keeping copies for yourself of course)
to your local society for Certified General Accountants for investigation. At this point the
Society’s Discipline Committee will take over. They will conduct an impartial
investigation and if they agree with your complaint they will draw up charges and then
refer the charges under the Code of Ethical Principles and Rules of Conduct to the
Professional Conduct Tribunal who will notify the accused and set up a hearing giving
him or her a chance to defend their actions.
If found guilty they can be suspended, barred and/or even lose their accounting
accreditation.
Here is one such case involving accusations made against a CRA employee:
http://newsgroups.derkeiler.com/Archive/Misc/misc.taxes/2009-11/msg00005.html .

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 Auditing the Auditor

What you need to do

If you are planning to file an official complaint with the CGA society please make
sure that you have a legitimate reason for doing so.
Just because you disagree with an auditor’s assessment does not mean that the
assessment is wrong or that the auditor came into the audit with bad intentions. Most
auditors are professional and do there job properly and to the highest standards so
baseless complaints will accomplish nothing.
When it comes to an audit, and especially a tax audit, there are always going to be
some personal interpretation of rules and numbers i.e. what is allowed and disallowed
and how much can be claimed. Most of this can be worked out through communication
or, if need be, through the appeals process.
The complaint process is meant to deal with the bad apples.
The ones who do not meet the CGA Society’s standards of accounting practice.
The ones who do not meet the CGA Society’s standards of personal conduct.
So while Canadians may not have a method of recourse to deal with poor employee
performance with the Canada Revenue Agency directly, a method of recourse does exist.
And they should consider using it. And using it wisely.

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 The Tax Exile

23

The Tax Exile is the individual or business who chooses to pay as little tax as possible
by whatever means available.
And why do they choose this path?
Visit http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-py-eng.html to learn why.
But while some members of this class of Canadians are prepared to depart Canada
with their assets in tow not all do. In fact of those that remain some may be personal
acquaintances. The contractor who gets paid in cash, the neighbor who doesn’t declare
his basement rental income or the local business that fails to tax your purchase. But there
is no magic threshold where we all choose to begin evading payment of tax. It differs for
each and every one of us. Some will evade payment of tax no matter how little the
amount while others would not consider cheating if taxed at one hundred cents on the
dollar. There is no magical mathematical formula that determines a tax exile. It is a
personal threshold that must be breached before Canadians will consider avoiding
payment of tax and frustrating the tax collector.
The tax exile will fall into one of the following three categories. Those who choose to
leave Canada or whose assets are sent abroad. Those who remain in Canada but refuse to
comply with tax laws and, finally, the “immigrant” who uses Canada to gain citizenship
but has no plans to permanently reside here.

Departing Canada

If you take an overseas vacation some time and happen to bump into a non-resident
Canadian ask him or her why they choose to live abroad. Some might cite the weather.
Others may state better employment opportunities. But likely the most common answer
given will be because of Canada’s high rates and broad sphere of taxation. It is quite
likely that more Canadians leave Canada because of excessive rates and spheres of
taxation than for any other reason.
But contrary to popular belief it is not just the jet-set class who chooses to leave
Canada. It is also those of us who have a nest egg they are trying to protect, or who wish
to reduce or eliminate the tax they pay on their current income and/or investments.
With the introduction of these ‘new’ and more stringent foreign income/asset
reporting rules in Canada the government announced that Canadians must now report
100% of their worldwide income.
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 The Tax Exile

To be perfectly honest Canadians have always had to report all their foreign income.
But because so many of us were not doing it or were not even aware that we had to do it a
big to-do was made to grab everybody’s attention to publicize the “new” rules.
But even with the announcement there is little doubt that many Canadians will
continue to avoid reporting their foreign assets and incomes. In fact there will likely be an
increase in the numbers of individuals and assets leaving Canada for foreign destinations.
Why? Because although the requirements are not new they are seen as being yet another
new tax. Previously the rules were not well known or stringently enforced as it is
assumed they will be now. As a result of these ‘new’ reporting requirements no doubt
many more will choose to leave Canada. But what is the easiest way to accomplish this
goal?
When a Canadian citizen is away from Canada for more than two years it is
automatically assumed by the tax collector that they are no longer a Canadian resident.
The simplest way to achieve this is to spend 182 days or less in a calendar year inside
Canada. If this can be accomplished over two consecutive calendar years you will qualify
as a non-resident Canadian and are no longer be subject to tax in Canada on your non-
Canadian income.
Among the most popular destinations for tax exiles is the United Kingdom. Canadians
are beginning to emigrate to the UK in increasing numbers for a period each year. Not
only because of a common culture, climate and language but because a resident of Britain
is taxed only on income and capital gains from a British based source. Any income not
brought into the United Kingdom remains, legally, outside the sphere of British taxation.
Britains highest tax rate is only 40% while in Canada the highest tax rate currently stands
around 54%.
Most importantly take note of the fact that you can become a resident of the United
Kingdom for tax purposes but not actually domicile there and the British tax system
allows for this. Instead you can select a sunnier clime for your home. Once again you can
have your cake and eat it too.
Best of all, in Britain it is possible to pass on your estate with a minimum of tax
charges as compared to the hefty surcharges Canadians face.
But a tax exile isn’t always someone who leaves Canada. Many corporations and
individuals remain here but move their money or other assets out of Canada. By Revenue
Canada’s own estimates, over one point two billion dollars leaves Canada every year for
countries where there are no personal or corporate income taxes. And this number will
continue to grow as our tax burden remains oppressive and countries exist with little or
no taxation or reporting requirements.
More importantly, tax haven countries have strict laws pertaining to the privacy of
assets and their owners. These laws are especially strict for employees of, and assets held
by, financial institutions.
Bank employees of tax haven countries are committing a criminal act if they reveal
information about you or your assets. As a result, all requests are refused no matter how
simple or innocuous they may seem. This is why many average Canadians open bank
accounts in countries as diverse as Switzerland, the Cayman Islands or Austria.
The Austrian sparbuch bank account is one of the best kept secrets in the banking
world. No ID, no mailing address, no bank references, not even a single professional
reference is required to open the account.

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The “Sparbuch” itself is rather unimpressive in form, a folded piece of cardboard with
a few stapled pages, not entirely unlike the simple savings accounts of years gone by, but
It has a number of huge advantages over any other type of bank account.
It does not need to carry any name. It can be issued to ANY name, either a fictitious
name, or more commonly to passbook holder. This means that the person who possesses
the passbook is presumed to be the rightful owner of the account. In fact it is absolutely
impossible to establish just who opened the account and who owns it by means of
checking available records, as no identifiable records ever were created nor will be
created. All information the bank has is stored only under an account number. Not even
the bank knows who has actually opened the account.
Next, Austria has the tightest bank secrecy laws of any country. Although just to make
certain, no statements are mailed out ever so no paper trail is created. This means
Revenue Canada can never locate your money. Instead of regular statements, the account
is updated automatically and any interest accrued is added whenever the passbook is
presented to the issuing bank.
Also, it is completely legal to transfer your sparbuch account from one person to
another WITHOUT notifying the bank or anyone else. Just hand over the passbook and
presto - new account owner.
I know this sounds risky but actually the sparbuch is completely safe. Each account is
issued with a code word, a combination of letters and digits chosen by the account holder,
not the bank. If the passbook is lost, a new one can be issued by contacting the bank with
the control number and the code word.
Sparbuchs do not offer high interest rates, normally 3% to 5% annually. However, this
rate can be increased to 6% or even 8% by agreeing to give the bank twelve months
notice before withdrawing funds. Making your deposit is simple. Cash in any currency
can be deposited, no questions asked. It will be converted to the appropriate currency,
i.e., the Austrian currency, before being credited to your account. This can either be done
by you or left to a trusted friend.
Now the bad news.
Sparbuch account holders are supposed to be Austrian or have Austrian residence. But
if you speak German fluently than it won’t be hard to convince a bank clerk to open you a
sparbuch account. And if you don’t want to travel to Austria there is another method of
obtaining such an account. I’m sure your Canadian lawyer could put you in touch with an
Austrian based law firm who would be glad to open up a sparbuch account for you for a
small fee of course. Other middle income earning Canadians who wish to avoid payment
of tax and/or protect their assets are doing this so why shouldn’t you?
Also gaining in popularity is the Croatian Deposit Account. Anyone can open this
type of account, even a foreigner without identification or references as long as it is a
bearer account. And bearer accounts are easily transferable to third parties without
notifying the bank. The main drawback is that you have to go in person to withdraw
funds. As well, if you want a name on the account they will want identification. One
great benefit of such an account is that you can deposit any convertible currency without
a currency change. So you have a multi-currency deposit account that you can deposit
and withdraw any currency without charges or currency conversions.
Much less popular is the Lithuanian Certificate of Deposit and the reason being is that
they work best if you are a person who has access to or makes use of fictitious names. If

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you are one of those types then you can make as much as thirty-five percent on your
money. But when it comes time to cash out the Lithuanian banks will only make payment
by cheque or wire transfer in that name.
Some folks have even used Zimbabwe Currency Call Accounts but in light of the
current political and economic climate in Zimbabwe this might not the safest place for
your hard earned dollars.
Another destination for hiding assets and money is Nauru. Nauru is a small South
Pacific island nation located half way between Australia and Hawaii. This country
recently opened an Internet site allowing individuals to open a bank account without ever
having to visit the country.
Nauruan banking secrecy laws are also stricter than such legendary tax havens as
Switzerland and the Cayman Islands. These laws conceal the identities of banking clients,
which in turn allows the client to dodge taxes and shield assets from creditors. Those
sheltering in this manner protect the asset from any risk of future taxation. And they
never have to worry about getting caught for under reporting or non-reporting of income
or assets.
Another and increasingly common method of moving money out of Canada is by way
of a ‘hawala’. Hawala is a Hindi word meaning “in trust” and this method of money
transfer has been around for centuries. It is widely used in India, parts of the Middle East,
Africa and South East Asia but is becoming increasingly common to Canada as we
become more culturally diverse and it is very easy to use. An individual will deposit a
sum with a hawala broker for a fee. The broker will then inform the broker at the
destination how much the recipients are to be paid. Tokens or codes are sometimes used
to identify the payee and oftentimes the money will be home delivered. The best part is
that the cash does not actually travel with the transaction but is settled at a later date
between hawala brokers. The centuries-old system is based on trust, offers anonymity and
leaves no paper trail.
Quite clearly, if the tax collector remains unaware of an offshore asset’s existence and
you do not bring it to their attention, rarely will they find it. Unless of course the nation
housing your asset divulges its existence to our government. But why would they do this?
They would lose the asset and the future business of you and others like you who would
quickly remove their valuables.
Sure, our government might trade information on foreign nationals hiding assets here
for that of Canadians but how many people move assets from a low tax jurisdiction to a
higher one?
I doubt anything short of an exchange of information agreement would gain such
cooperation and the only nations that might cooperate would be the USA, the United
Kingdom and some of the Western European countries. There would be little benefit to
any other.
There are many many more methods of becoming an emigrant tax exile. These are but
a few of the modes I ran into that seemed to work successfully for those avoiding
payment of their taxes.
For an up to date list of nations with favourable tax situations in comparison to
Canada visit http://www.offshore-index.com/ as well as http://www.offshore-bank-
list.com/ (scroll down to the bottom of the page) to view the most popular tax exile
nations as well as a starting point for your further investigations.

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To be sure the offshore industry exists because nations that lack economic resources,
natural or otherwise, use it to attract hard currency and investment. To draw this financial
activity, some countries will levy nominal or even no taxes, while others have ‘relaxed’
banking regulations that require low reserve requirements and minimal disclosure of
transactions. Such nations are known as havens. And many tax havens are so small,
geographically, politically and/or economically, that you likely have never heard of them.
Vanuatu, Niue, Nauru are just a popular few of these. And these minor exotic locations
have some rather major lures. Access to international investments. Tax minimization.
Asset protection. And if your assets are in trusts that you don't officially own or control,
you may be able to forgo reporting them to the CRA and so paying tax on them. Money
typically moves to and from these havens via shell companies as interest-free loans.
But what about those Canadians who choose to remain here in Canada? By what
methods do they evade payment of tax?

Remaining in Canada

No matter how high or low the rate of taxation there is always going to be an
underground economy. There will always be Canadians who attempt to pay little or no
tax. What high rates and broad scopes of taxation do is influence the size of our
underground economy. In Canada, the raising and lowering of cigarette tariffs and duties
has underscored this fact.
Tax Exiles who remain in Canada are a growing class and problem for Revenue
Canada and the tax collector. This ‘underground economy’ of Canadians work for cash
whenever possible, pay in cash whenever possible and avoid payment of consumption
and income tax whenever possible. Instead of a bank account they choose a mattress or a
safety deposit box. Their income is estimated to be in excess of seventy billion dollars.
And growing. Most often they are the self-employed. They contract out their specialized
services ranging from drywalling and landscaping to balloon rides and babysitting.
Almost every occupation you can imagine. They move from job to job in their field of
work with the tax collector several steps behind if trailing at all.
Often these individuals and businesses do not have the luxury of leaving Canada.
Maybe they do not possess the know-how to move their assets, maybe the cost prohibits
them from doing so or maybe they have no desire to leave Canada. So they remain. But
they refuse to keep the tax collector informed as to their income and assets
But this class of people has not suddenly sprouted on the snowy Canadian landscape.
They have been around as long as taxes have existed. Why? Because some occupations
and job situations make it easy to evade payment of tax. By accepting cash and
purchasing in cash they create no paper trail and remain invisible to the tax collector.
Hundreds of occupations are open to such techniques and I will give you an example of
one and how some employed in this particular field manage to evade payment of tax
while remaining in Canada. The oft overlooked tow truck driver.
And I do not intend to pick on the tow truck driver.
I could just as easily picked lawyers or street vendors or restaurateurs or pharmacists
as my example occupation. For instance the Pharmacist News noted in the story link:
http://www.pharmacyconnects.com/content/phpost/1997/05-97/f10_features.html (note -

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this link is no longer active) Revenue Canada was reporting that it had found, “varying
amounts of fraud in 80%,” of the pharmacies audited in some regions. There are many
occupations where misreporting of income and/or deductions from income is normal.
There are so many practicing tax avoiders that the tax collector can not hope to catch all
of them.
Returning to the tow truck driver the majority of tow truck drivers are above board
when it comes to tax time but still I ran into quite a few as a tax collector.
Many tow truck drivers are paid by the job as opposed to a fixed weekly income. They
act as independent contractors who sell their services to the highest bidder. Whenever
they assist a motorist in distress they are paid in cash or by personal cheque. Often they
are also paid a finder’s fee by the garage they deliver the vehicle and customer to. The
garage is not responsible for making any statutory deductions from the driver’s pay
unless they are on the payroll but they will keep a record of this expenditure so they can
deduct the expense from their taxable income.
Because no statutory deductions are made, tax, UI etc., the tow truck driver will have
a tax debt come filing time in April. So many just don’t bother filing. The only way the
tax collector can determine they have untaxed income is to audit the garage’s books and
records. But of course not every garage can be audited. And if the tax collector sends a
garnishment to a garage where the tow truck driver is known to have earned income they
suddenly stop bringing cars and customers to that garage. This pisses off the garage
owner because they need to fix our broken cars to stay in business so they will refuse to
tell the tax collector what little they do know. As a result a self-employed driver can
escape being taxed on his income if he or she so desires.
But this is only half the story. Even when you know they owe the money finding them
is a whole other matter. Because they work independently the garage knows little more
than their name. They have no want or need to keep personnel records on contract
employees or jobbers. So the only way to find their address is to use the provinces driver
registration database to find them and to collect what’s owed. Problem solved, right?
Wrong.
I ran into a number of tax debtor tow truck drivers who, according to the Provincial
Ministry of Transportation, all shared the same little one story clapboard house in
Richmond Hill. Naturally their tax debts all came about as a result of arbitrary
assessments. When I conducted a field call to their address of record I was told that they
were only friends of the homeowner and that they used the address as a mail drop. She
claimed not to know where any of the tax debtors resided. I was stumped because there
was no way I could locate them. None whatsoever.
When the Ministry of Transport doesn’t know where their licensed drivers live what
chance does the tax collector have of locating them and collecting their tax debt? None.
But being a resident tax exile is not just an individual trait. It is endemic to certain
types of businesses. Consider the restaurateur. It’s a tough way to make a living with low
margins and rampant competition. And if you cut corners its hard to attract diners. To
stay in business and remain competitive some have been known to under report their
business income to Revenue Canada. In fact the computerization of the food service
industry has made tax evasion much easier for the restaurateur. Why? Some proprietors
purchase a “zapper” program.

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This underground computer program, designed especially for food sellers, erases or
“zaps” computer records of meal purchases. When record of the purchase is erased the
owner pockets the money, and taxes, or puts it back into the business to keep it afloat.
Many restaurant owners have been caught using this program and one Quebec based
restaurant chain associated with a well-known Canadian entertainer was especially
notorious for use of the zapper program although I am sure she did not authorize its use.
But why food preparers using this computer program get caught is because of their
GST returns. Their GST return will claim input tax credits that are too high for the
volume of sales they report. They are caught because they claim the GST rebate for all
their purchases when, if they do not want to get caught, they should only claim the input
tax credits for sales they will be including in their business income.
Its greedy little slips like this, Nickels and diming the tax collector, that brings down
many a tax evader.
But some Canadians manage to earn enormous incomes and still evade payment of
taxes. These are the Masters of Tax Evasion.
No, a Masters of Tax Evasion is not a degree of higher education. Not yet anyway. It’s
a label for those who have acquired the knack and the knowledge to live a virtually tax-
free existence. Even though the tax collector knows these Canadians exist, the Morris K’s
and the Peter T’s, they do nothing to stop them. Instead of prosecuting them in court they
write off their tax debts and pretend such people do not exist.
One ‘Master’ went so far as to hire a Revenue Canada Special Investigator to arrange
his business affairs. As a result he has not filed a tax return in years; his children (now
adults) have never obtained social insurance numbers. None of those involved has ever
been prosecuted. But other Canadians have managed to do just fine without the
specialized guidance of a Revenue Canada insider.
For my last example I used the tow truck driver and for this example I will use real
estate investors. Following is how typical ‘Masters’ involved in real estate transactions
manages to frustrate the tax collector. I have seen many Masters use this method and
profit again and again.

1) A number of companies are set up to manage residential and commercial properties

for a joint venture. The companies are related and are used to disperse earned income
and sometimes the properties purchased.
They are set up legitimately, registered both with the province and federally, and they
file all necessary tax returns except for GST. They never obtain a GST number. To
provide an air of legitimacy they will build up losses that can be utilized later.

2) The companies will purchase major commercial or residential property and then
manage them on behalf of arm’s length investors and the related companies.
A finder’s fee for the purchase transaction is negotiated with one of the related
companies who will then act as a trustee in all dealings. The finder’s fees are not
reflected on any statement but charged directly to the related company’s accounts.
The investors are usually doctors and dentists in Canada and investors from overseas.
The related companies are also investors. All funds received from the investors are
credited to a general ledger account.

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Upon closing the investors are charged an administration fee for the term of the
management contract. This fee is initially reflected as a liability on the financial
statements. At year’s end the portion of the fee earned is booked as income and the
remainder as a liability. These fees are then charged as consulting fees by the various
related companies.
The remainder of earned income will come from the management fees i.e. 5% of
rents. The fees are then reallocated arbitrarily to related companies as consulting fees
to utilize any losses already existing in these corporations. No payments are actually
made but the monies are recorded as loans among the related corporations or related
parties such as non-residents, non-filers and shareholders.

3) Once they can sell the investment property at a profit to an unrelated party they do so.
They then pay off the investors and circulate their profit through the books and
records of the related companies utilizing any losses. Once the profits have been
safely squirreled away they stop filing the corporation tax returns. Now all the
companies are devoid of assets, monies and property.

The process as I describe it has been overly simplified but you should understand the
gist of what is taking place. The companies appear to be legitimate concerns until they
divest themselves of all earned income and assets. Then they stop filing and just
disappear. When it is finally determined that something illegal has taken place there is no
way to collect any tax debts that arise.
What has the tax collector been doing all this time? The companies are seen as
legitimate until they quit filing their federal and provincial returns. The tax collector
usually waits two to three years before enforcing delinquent filers to file. By this time the
province has already revoked the company’s charter. Of course they do not file because
they are no longer operating so the tax collector will attempt to examine their books and
records.
On the occasions when company records have been able to be viewed they are seen as
unreliable as intercompany transactions with related parties are substantial making it
difficult to determine cash transactions from non-cash transactions. Furthermore, the
balance sheets show numerous intercompany transactions. Transactions that can have
many tax implications. General ledger entries are difficult to follow as hundreds of
adjusting entries are made at year end. In the accounting system employed by these
Masters descriptions of the posted transactions are omitted making them hard to follow or
understand.
When the investigation is complete the companies will be assessed for corporate taxes,
for payroll taxes and for GST. The company(s) though have never collected or charged
GST on the various fees and transactions although they should have.
But already having sold the property and disposed of any funds Revenue Canada has
no way to collect the debt, voluntarily or involuntarily, and the tax liabilities, corporate,
payroll and GST are written off. Meanwhile they are setting up another family of
companies and running the entire process again.
The tax collector lets the process continue by refusing to get tough with criminal
evaders. I have seen at least four separate individuals who have set themselves up like

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this. Two owed over one million dollars each after all personal taxes, corporate taxes,
payroll taxes and Goods and Services Tax were totalled. Each has made themselves
creditor proof with no assets in their name. One of them had a home address in
Mississauga that he rarely visited. He lived in a hotel in Niagara Falls and moved his wife
and kids to Massachusetts while he kept his scheme going. Why not? An untaxed
Canadian dollar is worth more than a taxed American one.
Those in the know are asking why aren’t the provisions of the Canada Business
Corporations Act and the various provincial Business Corporations Acts and Companies
Acts being used. These Acts allow creditors, among other rights, to collect corporate
debts from the Director(s) of a corporation when their businesses divest themselves of
assets in such a manner that they would be unable to repay past, present or future
liabilities as they become due.
Directors and shareholders can be held liable for corporate debts even if the
corporation has been dissolved. Yet many tax collectors are not aware of these avenues
and even when they are the provincial restrictions covering the time period to commence
proceedings against a director or shareholder, usually two years, have long since passed.
Pursuing these corporations, director’s and individuals for repayment is rare. Debts
accumulated in this fashion are written off as the normal course of action.
Canadians though will look for any way to pay less tax and while some use their own
initiative like the Masters many rely on the smarts of others. The biggest tax fraud in
Canadian history was known internally as the ‘Yacht Project’. The scheme consisted of a
plan to construct an armada of yachts.
Between 1984 and 1988 investors were invited to finance yacht building and write off
the construction costs as losses on their personal income tax return. When the losses were
used up the investors would own a fleet of boats, profit from their rental and claim the
yearly division of income from rental charters on their T1. Sounds good on paper but in
fact the company, Overseas Credit and Guaranty Corp, did not keep any books and
records. Nor did they file corporate tax returns. In fact only two yachts were launched
and both were soon sold.
The investors were left with no boats or charter business and are responsible for
repaying tax amounts resulting from the losses claimed. The department picked up on the
scheme in late 1986 but it took almost twelve years before the last court challenge ended
with a decision in Revenue Canada’s favour. The investors lost almost twenty three
million dollars trying to save taxes. Not including the penalty and twelve to fifteen years
of interest charges on the monies to be repaid.
The loss to Revenue Canada is unknown but will hinge on how many actually repay
and how many decide to go bankrupt or wait and hope for a write-off. One might blame
the investors for not properly investigating where they put their money but the Revenue
Canada should shoulder some of the blame. Excessive taxation forces us to look for ways
in which we can pay less in taxes and benefit in doing so. And sometimes we get burned.
Badly so.
Other Masters are beginning to use the Internet and e-commerce to challenge our
system of taxing. Using the Internet lets the buyer and seller avoid payment of tax at the
click of a button. Why? It used to be that a business had to have a permanent location in
the country they were conducting business. Thanks to the Internet this is no longer
necessary. Now a business need only a website on a computer server to have a presence.

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And the server could be located in any country in the world not necessarily Canada. But
no matter where the server is located this does not mean the business must collect
Canadian taxes on sales in Canada unless the business was to have a physical location
here. Geography does not matter in Cyberspace. As a result those earning an income from
e-commerce can easily avoid taxation. Transactions over the Internet can be traced but it
is illegal to do so without a search warrant.
Sure, if the goods are physically sent to Canada customs officers can tax the purchaser
at the border. If they catch them. But collecting taxes for goods that cross the border is a
hit and miss affair.
And what about products that are being delivered in a digitized format like computer
programs and games, music and even books. There is no mechanism to track such
purchases.
Why even interprovincial Internet sales pose a problem. The sellers aren’t always
obligated to collect the taxes of other provinces. In fact there are few ways to collect
taxes on goods and services travelling across these jurisdictions.
Of course purchasers do have a responsibility to pay taxes on goods and services
purchased in this manner but few do. There is no one to police the purchases or to enforce
payment.
As e-commerce continues to grow tax losses as a result of Internet sales will increase
at a dizzying pace. Already Canadian tax collectors fear they are losing hundreds of
millions as a result of e-commerce and there is little they can do about it. In fact I have
heard the figure one billion bandied about; but because no one really knows for sure the
size of the e-business market, estimates of tax losses are almost meaningless.
Probably the scariest development for the tax collector is the sudden development of
e-cash, a new form of currency that did not even exist five years ago. If this phenomenon
continues to exist and grow Canadians will soon be able to work for a company located
anywhere on this planet from their home. They would be paid in electronic chits or cash
and they would spend this electronic cash on the Internet to purchase their needs.
Once e-cash becomes standard and accepted, not just in Canada but worldwide, paper
money will become ancient history.
And currently Revenue Canada is clueless as to how to combat this growing and
possibly gigantic loss of revenue that e-business represents. They could decide that all
companies selling goods into Canada via the Internet must register so the sales can be
tracked. But more than likely the tax collector is going to ask Canadian businesses and
individuals to supply them with their e-mail addresses and web site addresses. This move
would allow them to determine who and how many of us are involved in e-commerce. If
the numbers are sufficient, and I am sure they will be, then the tax collector will decide
how best to capture this lost income. But by then I am sure that some will have already
figured out new method to evade payment of tax. In the meantime many will continue to
take advantage of this large gap.
Many resident Canadians do avoid payment of income and consumption taxes when
possible. I used the occupations, tow truck driver, pharmacist and real estate investor,
only as an example of avoiders only because I have experience with each. But by no
means are all or the majority employed in either of these lines of work tax evaders nor is
resident tax evasion limited to just these two jobs.

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Coming to Canada?

It is our Federal Government that created the final class of tax exile. Certain
‘immigrants’ get all the benefits of being a Canadian without being born here and without
having to pay any taxes. Some of these people are worth many millions of dollars.
Here’s how it works. A foreign individual who wishes to become a Canadian citizen
will invest a large sum of money in a Federal Government approved low-risk investment
fund with the money to be returned to them in five years with a portion of the interest.
This allows the individual and their family to become a permanent resident of Canada.
Now that he or she is a resident the Income Tax Act allows the investor to put all the rest
of their assets into special offshore trusts. The income generated by the trust is not taxed
for up to five years. But, after three years of living in Canada for at least 182 days in each
of the three years and becoming an official resident many of these ‘Canadians’ up and
leave Canada to become non-resident Canadians. They do this, more often than not,
strictly for income tax purposes. Two years after this, the Federal Government will pay
back the money from the government approved fund and this person will never have paid
any income tax and now as non-resident Canadians, they will never be required to pay
any income tax in Canada.
After never paying any income tax they will still have the rights that every other
resident Canadian has such as a visa and subsidized post-secondary educations for their
children in Canadian schools.
Some will return to visit Canada when sick, use our medical system illegally (as non-
resident Canadians don’t have access to medicare in most provinces but still use it
anyway) and then they’ll be on their globetrotting ways again. American’s who live out
of the United States are still required to file an annual return of income and pay any tax
liability that arises from the filing or suffer the consequences of severe penalties. Non-
resident Canadians are under no such obligation to file and pay. More notably, it seems
that there are an increasing number of resident Canadians who, while obligated to file
income tax returns and pay, no longer seem interested in doing so.
There’s more. When a born and bred Canadian or one who has lived in Canada for
five years or more decides to leave the country for greener pastures they do have
obligations? According to the tax collector they have to report the elected value of their
assets to the government when they declare their intention to leave. The individual will
be charged what is, in effect, a capital gains tax that is applied before ever selling the
property.
But for migrants who have left Canada after October 1, 1996, they may return at any
time and have the tax impact of their departure reversed. When the exile or non-resident
wants to postpone payment of their tax debt they are allowed to negotiate other
arrangements if they claim a hardship is being caused. Unless of course you have
connections.
Revenue Canada allowed the Bronfman Family trust, worth in excess of two billion
dollars, to leave the country tax-free. The Auditor General formerly complained that the
Income Tax Act had been circumvented but nothing was ever done.
There is a departure tax for dyed-in-the-wool Canadians but not for those people who
become Canadians for the sake of convenience or with political influence. But, if the

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department is not aware of your intent to depart the country Canadians can make out like
convenient Canadians and escape without paying a cent.

What you need to know

To be honest offshore tax enforcement by the CRA is weak though it has been trying
to step up enforcement in recent years with new reporting laws. At this time they have
about seventy-five ‘tax-haven specialists’ but, to date, they have rarely prosecuted
Canadians for tax evasion and fraud.
Why?
Because each case requires considerable effort and expense to start and see through to
its conclusion. So the chances of getting caught are quite small.
Proof?
The BC Securities Commission alleged that the founder and CEO of Clearly Canadian
Beverage, Doug Mason, traded shares in some companies in which he was a director or
executive, without filing the required insider trading reports. And Mason did this, it was
alleged, using a trust based on the Island of Jersey. None of these cases has been proved
in court. Nor has the CRA ever collected any monies that would have been owed for such
transactions.
And I should be clear that there are many many more legal and illegal methods of
beating the tax collector. I have only touched on a scant few of them. And these I have
only briefly discussed. Books have been written on these methods to discuss them here
would only be to repeat what they have already printed. In fact today offshore tax havens
are no longer the exclusive domain of the rich but are being actively marketed to the
middle class. It’s Canada’s new cottage industry.
But what exactly are your Federal government and the tax collector doing to combat
tax exiles and the movement of your assets outside of the country?
As part of the 1995 Federal Budget introduced new tax legislation which requires
Canadians to disclose certain foreign assets and interests. With Bill C-92 four new
amendments, sections 233.2, 233.3, 233.4 and 233.6, were added to the Income Tax Act.
Starting in 1999, foreign asset reporting for Canadian residents begins. The requirements
are to report transfers or loans of property to a foreign trust, to report distributions from a
foreign trust, and to report any interest in foreign affiliates.
That’s right, because of the outflow of taxable Canadians and taxable Canadian assets
all resident Canadians will have to report their world income, including that income
earned in tax haven nations.
It’s not that we didn’t have to make a report before, it’s just that so few of us were
using offshore methods to evade payment of tax that the cost of catching such evaders did
not justify the means. Such people were simply ignored. But now that so many Canadians
are taking steps to move assets offshore that the tax collector has finally decided to get
tough. Putting your income and assets offshore is not illegal but it’s when you fail to
declare the income from these investments that it becomes tax evasion. This is why the
changes were enacted.
The penalties for failing to report this income is $25 a day to a maximum of $2500 or,
if the taxpayer knowingly fails to make a report the penalty is $500 a month up to a

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maximum of $12,000. If the failure occurs for more than two years the fine is five percent
of the capital amount minus any previous penalty charged. Canadians have always been
required to report all their world income on their annual tax returns but they haven’t been
doing so and it has never been enforced.
It’s a foolish requirement when you think about it because at the present there is little
way of enforcing the foreign reporting requirements because of the severe penalties most
tax haven countries impose on those individuals who breach them.
However there is a small loophole when making declarations of foreign assets. If your
total initial cost in the investment was less than $100,000 then you do not have to
document the source or type of income although still responsible for the taxes. This
allows for some privacy.
It is also possible to have several offshore investments of less than $100,000 and still
be able to avoid preparation of supporting documentation. It is also possible to avoid
reporting requirements when you invest more than $100,000 if you invest through a
partnership and ninety percent or more of the income accrues to non-resident partners.
Any foreign held property that is for your personal use is also excluded from the
reporting requirements regardless of its value. This list includes vacation property,
vehicles, collectibles and the like.
One other questions remains, if these individuals don’t pay voluntarily who is going to
collect the arrears and how are they going to do it?
Can Canadian Tax Collectors attach or seize assets located outside of Canada?
Only if they know they exist and only if the asset(s) is/are physically located in the
United States http://www.fin.gc.ca/treaties-conventions/USA_-eng.asp, the United
Kingdom http://www.fin.gc.ca/treaties-conventions/UK2_-eng.asp, or in the Kingdom of
the Netherlands http://www.fin.gc.ca/treaties-conventions/Netherlands_-eng.asp.
These are the only nations where the Canadian government has a treaty allowing for
the collection of Canadian generated tax debts from Canadian citizens residing in foreign
countries at this time. (If you wish for a comprehensive list of all types of Canadian Tax
Treaties with all nations visit: http://www.fin.gc.ca/treaties-conventions/treatystatus_-
eng.asp#II)
However, I wouldn’t lose sleep over this, as most tax collectors are, most often,
blissfully unaware of any assets you own outside of your town or municipality let alone
outside of our nation’s borders. Furthermore, the huge majority of tax collectors aren’t
even aware that they can collect from assets a tax debtor holds outside of Canada.
Take the United States for example. Early in 1996 Revenue Canada and the Internal
Revenue Service set up a joint assistance program – Article XXVIA “Assistance in
Collection” of the Canada-United States Tax Convention. This article authorizes
Canadian and American tax authorities to provide mutual collection assistance regarding
each others taxes which they have the right to collect after November 9, 1985. The action
either party takes can range from simple collection letters all the way up to the seizure of
assets.
Either party (Revenue Canada or the IRS) will be provided with assistance when:

i. the tax involved is a tax other than a customs duty or tariff, and
ii. the country requesting the assistance has the right to collect the tax debt.

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 The Tax Exile

The right to collect exists when all objections and appeals have lapsed or been
exhausted.

Foreign tax collection assistance (Canada-U.S.) will not be provided when:

i. the debt pertains to a period when the debtor was a citizen of the country requested
to provide assistance, or
ii. the debt pertains to a period where the debtor derived their status from the laws in
force in the country that assistance is required from.

The CRA tax collector must locate the current address of the relocated Canadian tax
debtor in the United States and obtain their financial information before they can ask the
Internal Revenue Service to step in. If they are unaware of your US based assets they can
not effect collection of your Canadian tax arrears.
If the tax debtor still resides in Canada but has income or assets from/in the United
States the tax collector can now effect collection but again only after they have confirmed
the existence of the asset. If nothing is confirmed no collection action will be taken and
your tax assessment will be written off if no collection avenues are uncovered.
But when your American based assets are determined your tax account is referred to
Ottawa Headquarters where a tax collector will pass the information to the Internal
Revenue Service in the United States. The IRS will attempt to collect the tax debt on
behalf of the CRA. However the CRA will not pursue transnational tax collection
methods when the tax debt in question is less than $5000 in Canadian funds.
At the time of this writing determine Revenue Canada had referred less than eight
cases to the Internal Revenue Service (IRS) for assistance while the Americans have
forwarded in the neighborhood of one hundred. Both sides have had good success
collecting for the other but it does not appear our costs justify what the IRS collects for
the CRA.
But it is a fact that becoming a tax exile is no longer your future. It is today.
Canada’s tax system was developed after the Second World War when the transfer of
goods, capital and labour across borders was relatively non-existent. Canadians are more
mobile today than ever before. As taxes on labour increase and taxes on capital continue
to decrease tax evasion and asset emigration will continue to flourish. Canadians can and
will exploit the tax differences between our nation and others. This is the key problem the
tax collector has to face today.
What it amounts to is this. That skilled workers, those who earn the most money, also
tend to be the most mobile. As they move their assets and/or themselves to tax friendly
jurisdictions, the tax burden will increase on those in the majority of the population, the
unskilled labour who earn less and are less mobile. In turn, these are the people who drop
out of the system, refusing to file a return of income and/or pay taxes.
These growing numbers of Canadians are the fuel of the underground economy. They
stop paying income taxes and they start purchasing their goods and services from those
who do not charge provincial or value added taxes. It’s a snowball effect and the powers
that be don’t understand that by hurting those who support the system they are causing
irreparable damage to the system.

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 The Tax Exile

The effect of all these exiles and dropouts is not measurable. Yet.
However, if tax avoidance were to continue at its present rate and it were to eat away
just five percent of Federal revenues the current budget surplus would be turned into a
budget deficit. An increasing annual deficit will result in tax increases and the
implementation of new ones.
The only way the Federal Government can respond is by changing the tax base.
Historically governments throughout history have adjusted the tax base to reflect
economic changes. In this case, changes might reflect increases in property taxes or
consumption taxes and a reversal of current income tax rates.
If the current tax base is broadened by removing all exemptions; labour, capital and
consumption can be taxed at a lower rate which would reduce the incentive or need to
leave Canada, move assets or even to cheat.
Once Canadians turn their backs on paying taxes it becomes a habit, it becomes a
matter of pride and it becomes a matter of having an extra couple pennies in their
pockets.

309 ©Alan Baggett

The Tax Collector’s Bible

Part IV

The Big Picture

“Filling in the Blanks”
 The Tax Collector’s Perks

24
This chapter has undergone huge changes since the Tax Collector’s Bible was first
published almost ten years ago. There used to be huge disparities between what private
citizens were allowed to claim towards their mileage and meal claims and what Federal
government employees were allowed to claim. And this chapter centered on that and
illustrated that very clearly. But, due to a series of court challenges, great strides have
been made in closing these gaps. Though there are still gaps.

How does our federal government spend some of your hard-earned taxed dollars? And it
still is your money even when the tax collector snatches it from you.
I for one have always had the impression that government at any level, federal,
regional or local, feel they must spend every dollar that greases their palms. Worse, often
they will overspend then dream up new levies and increase tax rates to make us pay for
their lack of restraint. It’s almost as if we have traded in the military industrial complex
for a political economic complex, politicians shamelessly spending your money to get
themselves re-elected.
And if you’re at all like me you will blame politicians for their wasteful expenditures.
But they are not the only ones to blame. The civil servant must also be held accountable.
Sure, it is the politicians who ask for your money but ultimately it is the civil servants
that spend it. Government departments and agencies are so massive, with expenditures in
the hundreds of millions and even billions of dollars, that your Member of Parliament
depends on the civil servant to tell them what’s what.
Monies are doled out to each government department or agency based on need. Need
is determined by forecasting future expenditures in consideration with the previous year’s
expenses. If a particular department is unable to spend their previous year’s funding then,
most likely, their budget should remain the same or be reduced. Perfectly sensible.
But federal departments and agencies in Canada rarely report a budget surplus. They
seem to spend every last dollar to the penny or overspend and wind up in a deficit
situation. Why does this happen? Two reasons. First, if they are unable to spend their
budget it will be reduced for the upcoming fiscal year and two federal departments
compete with each other in a form of budget envy. They hate to see another department
with a larger budget so they spend accordingly with a ‘keep up with the Joneses’
mentality.
311 ©Alan Baggett
 The Tax Collector’s Perks

But this isn’t where the competition ends. It’s only the beginning. Not only do
government departments compete externally for larger budgets there is also internal
competition. Branch vs. branch. Office vs. office. Section vs. section. All competing in
order to receive a larger share of their department’s budget pie. Always looking for more.
Such envy results in this: each federal department and by association each office in the
department will spend every last penny of their budget in order to be eligible for at least
the same if not a larger operating budget for the upcoming fiscal year.

Federal Travel Rates and Allowances For 2008

Kilometric rates

The rates payable in cents per kilometre for authorized official use of private cars within
and outside the headquarters area during the 2008 calendar year are shown below:

Province Federal Rate Private Rate

Alberta 50.5 53.0
British Columbia 50.5 54.0
Manitoba 48.0 50.5
New Brunswick 49.0 52.0
Newfoundland 53.0 55.5
Northwest Territories 58.0 64.0
Nova Scotia 50.0 52.5
Nunavut 58.0 64.0
Ontario 52.5 55.5
Prince Edward Island 49.5 52.5
Quebec 55.5 58.0
Saskatchewan 46.5 49.5
Yukon 61.0 66.0

In the past, civil servants always received a higher rate of reimbursement for mileage
claims except in Alberta and Saskatchewan where the rates were slightly lower. Due to
complaints and challenges by many Canadians, mostly by those employed in the trucking
industry, the disparities have been eliminated and the privately employed now receive
rates on par and slightly in excess of those rates that Civil Servants receive.

The difference in the rates is determined by local costs for fuel and vehicle upkeep which
varies between provinces and territories.

312 ©Alan Baggett

 The Tax Collector’s Perks

To: Alan Baggett

Section: 461-1-4

In accordance with the intent of the Treasury Board Travel Policy this letter
will serve as your authority to travel, on government business related to the
taxpayers whose returns are filed in the North York District Office; as
necessary to perform your duties as an Collection Officer for the fiscal period
ending March 31, 1995.

This authorization will be deemed to conform with the requirements for pre-
authorization of travel and may be quoted as your authority in lieu of a GC72
when travelling on day-to-day operational requirements when no travel advance
was requested or to which a standing advance applies. Reimbursement of your
travel claim under this travel authority will, as always, be subject to the Travel
Authority for government travel, Revenue Canada, Taxation still retains the right
to determine the mode, means and class of transportation for every trip and to
specify and accommodation to be occupied.

This authority applies to you in you present position. This authority does not
apply to trips outside the described area, travel for competition or training
purposes.

When the use of a private motor vehicle is authorized, the employer does not
assume any financial responsibility other than the payment of the applicable
kilometric (mileage) rate. Employees are required to carry adequate motor vehicle
insurance as stipulated in the Travel Policy and the Employer does not assume
any responsibility for the deductible amounts related to comprehensive or
collision coverage.

24/ 3/ 94 .
Date

24/ 3/ 94 .
Date

313 ©Alan Baggett

 The Tax Collector’s Perks

And, just as the great disparities between the kilometric rates have been eliminated, so
have the gaps between what the public employee and the private employee been closed
when it comes to Meal and Allowance Rates.

Federal Meal and Allowance Rates 2008

Effective: Jan 01, 2008

1. TRAVEL IN CANADA Canadian $ (taxes included)
Canada & USA Yukon &
N.W.T. Nunavut
Alaska
1.1 Composite meal and incidental 79.30 92.50 101.25 119.95
allowances
– commercial
– private/govt./institutional
1.2 Meal allowances
– breakfast 13.45 15.00 15.90 19.65
– lunch 12.65 15.00 16.45 26.60
– dinner 35.90 45.20 51.60 56.40
1.3 Incidental expense allowances
– commercial accommodation
– private/institutional 17.30 17.30 17.30 17.30
2. TRAVEL IN USA
Rates in the USA are the same as in Canada but paid in US funds.
Private non-commercial
50.00 50.00 50.00 50.00
accommodation allowance

Thanks to recent court cases Canadians have two methods to choose from when
claiming meal expenses.
If you choose the detailed method to calculate meal expenses, they have to keep
receipts to prove their expenditures. The Treasury Board considers the numbers in the
above chart to be reasonable amounts for their employees so you can use this table as a
guide (2008 only).
If you choose the simplified method, you may claim a flat rate of $17 a meal, to a
maximum of $51 per day, per person, with no receipts necessary.
You should remember that:
- you should not claim the meal you have at home before you leave,
- a full twenty-four hour period is needed to claim all three meals,
- when travelling in the US claim any amounts in US dollars,
- several random weeks a year keep ALL receipts and place them in a dated envelope
for use if audited.

On the page immediately following you will find an example of the only authority a
tax collector needs to roar about town and charge up mileage and other expenses to the
federal government.
314 ©Alan Baggett
 The Tax Collector’s Perks

Revenue Revenu
Canada Canada
Toronto West Tax Services Office
Standing Travel Authority

This will constitute Standing travel authority for:

Name _______________________________________________

Work Section ___________

For the period of April 1, 1995 to March 31, 1996

This authority is issued in accordance with Part I of the Treasury Board Travel Directive. This authority applies only to
the above named person.

This authority covers travel for less than one day, for program-related reasons within the Southern Ontario Region as
required by the Department. Travel within the Greater Toronto Area territory for competitions and training is also
included in this Authority. All other travel and situations involving advances or over-night accommodation must be
pre-authorized on a GC72, travel Authority and Advance Form.

It is understood that:

- this authority covers the reimbursement of standard expenses and allowances in accordance with the Treasury
Board Travel Directive;

- unless otherwise stated, use of a private motor vehicle is authorized, if applicable, will be used at the request of the
Employer;

- the use of a private motor vehicle is authorized, providing that the traveler possesses a valid driver’s license and
carries adequate insurance coverage as determined in the Treasury board Travel Directive and should either the
driver’s license or insurance coverage be revoked or suspended, the traveler is obligated to inform the Employer
immediately;

- travelers are required to complete and submit a Travel Expense claim at least monthly if travel has occurred in a
previous calendar month;

- regarding civil actions, it is the policy of the government that as a result of employees’ negligence, errors or
omissions, no demand will be made upon employees for recovery of damages paid by the Crown when the Crown
has been deemed or found legally liable, and employees will be saved harmless from the claims of others when
they are threatened to be or are sued personally provided that the incident in respect of which the claim or suit
arose occurred while the employee was acting within the scope of employment or duties and that the incident was
not occasioned by the gross or willful negligence of the employee; and

- this Authority does not cover provisions of the policy which cannot be delegated further and must receive either
the personal approval of the Deputy Minister or Branch Heads as well as restrictions imposed by Treasury Board.

I accept the terms and conditions of travel as set out here and in the Treasury Board Travel Directive

_____________________________________________________ _________________
Traveler’s Signature Date

___________________________________________________ _________________
Team Leader’s Signature (Section 34 F.A.A.) Date

315 ©Alan Baggett

 The Tax Collector’s Perks

(AUTHORS NOTE: some of the comments that follow are dated. They were left in to
illustrate the great disparities that once existed between what Public Employees were
allowed to claim and what privately employed individuals were allowed to claim on their
tax returns. They also show why it is important to stand up to injustice!)

If the tax collector is more than sixteen kilometers from their home office they can
claim $10.00 for breakfast, $10.30 for lunch and $27.60 for dinner. Even if away for only
a couple of hours they can claim the applicable meal rate.
Of course the private sector employee can also claim a meal expense for the cost of
meals consumed during a period. But only when they are away for twelve or more hours
from the locale where they would normally report for work. Worse still the CCRA holds
that such claimants are only allowed to claim fifty percent of the $11.00 a meal or $33.00
a day maximum allowed. And so that’s what most do. Even though in reality they can
claim more. Much more. And in fact Manitoba truck driver Don Wilkinson challenged
the CCRA in this area and won in Don J Wilkinson and Her Majesty the Queen 1999-
4687 (IT) I. (Strangely this is a very difficult case to find in CCRA court records I am
told.) But now, thanks to Mr. Wilkinson, Canadians can deduct fifty percent of whatever
they have truly spent on their meals and is deemed reasonable. Just so long as they
support such with receipts.
Strangely again tax employees do not have to supply receipts to claim their applicable
meal allowance. Revenue Canada operates on the trust system, that the tax collector will
actually purchase a meal for exactly the amount they are allowed to spend. In reality
many tax collectors purchase a cheaper meal or they brown bag it and pocket the
difference or the entire meal allowance as a tiny tax-free bonus.
This is another example of a tax exempt allowance disparity that is allowed to exist for
no good reason other than to line some pockets with a few extra dollars. Why are there
two rules, one for federal employees and one for private employees? Because the public
remains unaware of these differences.
However it’s not all fun and games. When the tax collector works overtime in the
office they receive a $6 meal allowance only after working for three hours or more. Of
course their fifteen-minute break and meal break are paid time and a half or the
applicable rate as well.
In an unusual twist however the $6 overtime meal money is taxable and declared as
income on the employee’s T4 unlike all the other expenses listed to date. So the tax
collector loses $2 - $3 in income taxes and if they spend the full $6 on a meal instead of
brown bagging it they lose another ninety cents in taxes (Ontario) meaning they only
receive $2 - $3 to feed themselves. So don’t think federal employee receives a free ride
everywhere. In fact, it’s a wonder tax collectors and their useless union have not picked
up on this meal deal and had a stroke over it. Or a strike. But maybe with all the other
perks and benefits they find it best to keep their mouths closed.
There are also occasions where a tax collector may have to leave their
residential/employment area for weeks, months or even years to live in another
community rather than just days. This occurs when the tax collector has been selected for
training, education or a work assignment.
In such situations they will receive their accommodation paid for. Currently up to
$1750 per month for an apartment with furnishings, $30 a month for laundry and two

316 ©Alan Baggett

 The Tax Collector’s Perks

paid weekly ten minute phone calls when on an extended stay on the road. They will also
be reimbursed for all parking costs, telephone rental and the cost of basic cable television.
In addition, a return trip to their residence every third weekend is paid for. Unfortunately
for them when they do visit home their meal allowance is not paid.
These expenses may not seem unreasonable but take the Department of National
Defense employee whose Ottawa housing needs were paid for several years. This cost his
department over $120,000. Why not just ask him to move or fill the job with someone
willing to move. It certainly would be cheaper.
Returning to Revenue Canada, in 1995 a tax collector requested a transfer from an
office in eastern Canada to one in Ontario. The department paid all of the requestors
living expenses including accommodation. Her work term was so long that she actually
sold her maritime home and purchased a nicer one in Ottawa. And using Revenue
Canada’s kindly accommodation allowance her mortgage worries were taken care of. In
effect she is getting her home paid for through her expense claims. With your tax dollars.
In fact until she received her Ontario drivers license she insisted on being chauffeured
around to doctor appointments and other errands during office hours by a tax collector.
Visit http://www.tbs-sct.gc.ca/Pubs_pol/hrpubs/TBM_113/TD_E.html to become more
informed of the Treasury Board Guidelines of ‘perks’ available to tax collectors and civil
servants and to receive the latest updates.
How wasteful can a CCRA employee be?
One Assistant Deputy Minister after attending a meeting in Sudbury was in such a
hurry to return to her Toronto area home that she took a $500 cab ride to ensure she got
there in a timely fashion.
These are your tax dollars at work.
You’re probably thinking that $500 isn’t much but it all adds up. One abuse leads to
another and another if no one steps in to put a stop to it.
What about other Government Departments, Boards and Agencies?
Many Government appointments receive unheard of and untaxed benefits.
A Languages Commissioner received a $24,000 a year allowance for a second
residence. Tax free. Many other federal appointees also receive allowances ranging from
$1000 to $2000 a month to offset living and transportation expenses with no tax deducted
by the supplier of the benefits, your federal government.
The diversity of Government ‘businesses’ that provide tax-free allowances range from
the National Film Board and the Canadian Dairy Commission to the Immigration and
Refugee Board and the Canadian Space Agency.

What you need to know

Light is being shed on these hidden expenditures and undeclared earnings because the
Income Tax Act clearly states that, “A taxable benefit conferred on an employee is
taxable in the hands of the employee.”
Therefore Revenue Canada is guilty of the failure to report some of their employees’
income/benefits. As a consequence some tax collectors are guilty of failure to report all
their earned income/benefits. By extension the tax collector and Revenue Canada are
guilty of allowing other government departments doling out these perks and payments to

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 The Tax Collector’s Perks

sidestep the all employer reporting requirements and payment of any tax on these
benefits.
In private sector situations similar to these interest and penalties are charged to the
employer and employee for late reporting and/or for a failure to report as determined by
assessors and auditors.
By handing out these benefits and not taxing them, Revenue Canada as well as other
departments and agencies are in effect waiving Income Tax legislation for many civil
servants and federal appointees. By virtue of these departments and agencies relationship
with the federal bureaucracy our government is waiving certain laws for a select few
Canadian citizens.
But the abuses don’t just stop here. There are instances where the federal government
has clearly stated that it has paid the tax for the affected employee/appointee as part of
the terms of employment. Under current tax legislation this is not allowed.
There are many double standards here. Tax collectors are paid more in mileage during
the course of their job then most Canadians are allowed to claim. The same benefits that
are taxable in your hands by the tax collector are not taxed when they accrue to the tax
collector himself or to other government workers.
Why is this?
When the Federal Government is your employer they can break the rules as they see
fit because they make them.

(The original version of this chapter can be found starting on page 441)

318 ©Alan Baggett

 Professional Advancement CRA Style

25

Canadians will find this hard to believe but not so long ago their Civil Service was on
the cutting edge. But my how times have changed. And so today the Canadian Civil
Service lags the private sector by ten years (and oftentimes a good deal more) when it
comes to innovation. Yet there is no reason why this should be. The civil service has
more money and attracts some of the best and brightest from Canadian colleges and
universities.
So why the lag?
This lag exists because the Federals are unable to keep the best and the brightest that
they do attract. And those that remain turn into unmotivated mules. Paycheques and
promotions become their carrots. Their sole focus. There is little to induce them to
produce beyond this. And before you decide that I’m writing this book because I never
got promoted think again. I passed tests and/or interviews to become a PM-01, PM-02
and PM-03. I held several supervisory roles, I worked on projects pioneering
simultaneous excise-income tax collection, I helped introduce the Call Center to the
department and I researched aspects of re-engineering.
But at the same time I was stepping ahead I saw other people getting left behind. Civil
servants who were every bit as capable as I. Quite often they were even more capable,
more experienced and better qualified than those being promoted in their stead. So why
were they being left behind? Maybe they were older. Or maybe they were not quite as
good at writing tests and taking interviews. The very employees with the one thing that
can not be taught, experience and a nose to the grindstone mentality, are those the civil
services leaves behind. As a result these people become bitter and unproductive. But it’s
not their fault. It’s the system.
And in fact I too aspired to greater heights but one day I was told by the Toronto West
Assistant Director of Collections, “Alan, you’re bright, you’re ambitious, you’re
hardworking but that’s just not what we’re looking for in management. If you’d care to
set up a meeting we can discuss this further.”
This was when I finally realized that my days were numbered. But instead of joining
the ranks of the bitter and unproductive I packed my bags and walked.

The promotion process

A private sector business is successful because they value experience, hard work and
they reward such behavior through pay raises, promotions and other perks. Nor do they
319 ©Alan Baggett
 Professional Advancement CRA Style

pit their employees against each other; instead they challenge them to better themselves.
Private employers realize that by allowing the chaff to fall out of the mix that they are
only improving their product.
And such a strategy makes sense. Naturally you would expect the public sector to
follow this methodology but they do not. The brightest and hardest working civil servants
are treated exactly the same as the unmotivated employee. In the private business the
latter would be summarily dismissed but in the civil service they receive exactly the same
pay, the same perks and the same chances at promotion. In fact these types of civil
servants often have a better chance to succeed because they spend their time cultivating
the affections of their bosses instead of wasting their time working. Brown-nosing.
So exactly how are civil servants promoted?
Work history and habits play no role in the promotion of the civil servant. The only
ability one needs is to be a competent test writer.
The hardest working most knowledgeable civil servant with the best skill set has no
chance at getting ahead if they choke come test time.
But there have been rare instances where the department has promoted without
holding a competition.
When the Goods and Services Tax was first introduced Revenue Canada found they
would be short of tax collectors. Unable to hire and train enough new recruits they asked
for volunteers to move to GST. It was exactly the same job just a different tax.
Few volunteered to go. Why take the time to learn new rules and regulations? There
was no raise in pay or improved prospects.
Unable to get enough volunteers Revenue Canada did the next best thing; they offered
a promotion to any employee willing to transfer to Excise. All GST tax collectors would
receive a PM-02 salary as opposed to the PM-01 for income tax collectors. Of course
there was a sudden increase in transfer requests. But then a complaint was filed.
Why complain over a raise?
Two different groups of employees PM-01 and PM-02 were doing exactly the same
job but at different rates of pay. As a result of the complaint the department had to offer
all the GST tax collectors the perks and travel expenses offered to PM-02 employees
collecting income taxes. It was cheaper than increasing all income tax PM-01’s salary to
a PM-02 salary.
But how are civil servants normally promoted?
Like I said it is much different than in the private sector. The process is costly, time
consuming and neither merit nor experience are allowed to play a role when determining
a candidate’s suitability.
The hiring and promotion process is called a competition. A competition poster
advertising a job opening is posted and those interested may apply by submitting an
application and resume. If their credentials meet the competition criteria they are allowed
to write the competition test.
I should note that sometimes the competition to be promoted is so fierce, no pun
intended, that some less scrupulous civil servants will walk around the office and remove
the job advertisements in hopes of limiting their competition. I faced such situations more
than once and learned to immediately photocopy the poster of any job I was interested in
because I knew it might not be there tomorrow. I saved one of these job posters and a
copy of it can be found on the next two pages.

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 Professional Advancement CRA Style

Competition Concours
Classification: MM-1 Classification: MM-1
Salary: $36,201 (*) Traitement: 36 201 $ (*)
Selection Process No: 97-PSC-CC-MTP-001 No. de la methode de selection: 97-PSC-CC-MTP-001

Closing Date: October 6 1997 Date limite: le 6 octobre 1997

Participating departments: Ministeres participants:

Agriculture & Agri-Food (AGR), 2 positions Agriculture et Agroalimentaire (AGR), 2 postes
Canadian Heritage (PCH), 5 Patrimoine canadien (PCH), 5
Canadian International Development Agency (CIDA), 1 Agence canadienne de developpement international (CIDA), 1
Department of National Defence (DND), 3 Ministere de la Defense nationale (MDN), 3
Fisheries and Oceans (DFO), 1 Peches et Oceans (MPO), 1
Health Canada (HC), 1 Sante Canada (SC), 1
Human Resources Development (HRDC), 2 Developpement des resurces humaines (DHRC), 2
National Revenue (NAR), 3 Revenue national (NAR), 3
Public Service Commission (PSC), 1 Commission de la fonction publique, (CFP) 1
Public Works and Government Services (PWGSC) 1 Travaux publics et Services gouvernementaux (TPSGC), 1
Transport Canada (MOT), 1 Transports Canada (TC), 1 poste

MANAGEMENT TRAINEES STAGIAIRES EN GESTION

Linguistic requirements: see (**) below. Exigences linguistiques: voir (**) ci-bas.

Open to: Employees of participating departments across Admissibilite: Les employes des ministeres participants,
Canada, appointed pursuant to the Public Service nommes en vertu de la Loi sur l’emploi dans la fonction
Employment ACT can only apply for positions located publique et occupant un poste au Canada peuvent presente
Within their own department. leur candidature pour les postes situes dans leur propre
ministere seulement.
Profile: The MANAGEMENT TRAINEE PROGRAM Profil: Le PROGRAMME DE STAGIAIRES EN GESTION
(MTP) is looking for highly motivated individuals who (PSG) est a la recherche de personnes tres motivees et ayant le
have the potential to excel as future middle managers in potential pour exceller a titre de futurs gestionnaires intermediaires
the federal Pubic Service. This entry-level program offers dans la fonction publique federale. Ce programme de niveau
challenging work assignments, combined with specialized d’entrée leur propose des affectations combinees a des cours
courses in management-related fields. This combination of specialises en gestion. Cette Combinaision d’une experience
practical work experience and formal training provides pratique et d’und formation theorique donne aux participantes
participants with a unique opportunity to develop their une occasion unique de perfectionner, a l’interieur d’une periode
management skills over a period of four to five years de quatre a cinq ans (duree en cours de revision), leurs aptitudes
(duration under review). A la gestion.

Qualifications/Requirements: Qualites requises:

- by June 30, 1998, have completed at least a Bachelor’s degree - d’ici le 30 juin 1998, avoir obtenu un diplom de baccalaureat
from a recognized university or be able to provide us with a letter d’une universite reconnue ou nous fournir une lettre de votre
from your university, attesting to the fact that you have completed universite attestant que vous satisfaites a toutes les exigences
all requirements in order to obtain your degree; requises pour l’obtention de votre diplome;
- successful completion of the general Competency Test Level 2 - reussir ‘Examen des competences generales-Niveau 2 (ECG2)
(GCT2) and of the Written Communications Test (WCT) which et l’Examen de communication ecrite (CE) qui seront administres
will be held in locations across Canada in October 1997. You will a l’echelle nationale en octobre 1997. Nous communiquerons
be contacted and informed as to when and where the tests will be avec vous pour vous informer de la date et de l’endroit ou les
held; testes seront administres
- a definite commitment and willingness to relocate and remain - vous engager et rester dipose(e) a demenager pendant toute la
mobile throughout the program; duree Programme.
- demonstrate a strong management potential if you are invited to - demontrer un fort potentiel pour la gestion si vous etes invite(e)
an interview and to an Assessment Centre; a une entrevue et a un centre d’evaluation
- (**) ability and desire to become proficient in both official - (**) demontrer votre capicite et votre intention de devenir
languages at the CBC level, if you are not already bilingual. bilingue au niveau CBC, si vous ne l’etes pas deja. Les
Individuals who do not meet the language requirements at the time personnes qui ne repondent pas aux exigences linguistiques lors
of recruitment must undergo language training and successfully du recrutement devront suivre un programme de formation et
pass language tests at the required level before being accepted in reussir les tests linguistiques au niveau demande avant d’etre
the Program. acceptees au Programme.

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 Professional Advancement CRA Style

How to apply: Comment presenter sa candidature:

- Obtain the MTP kit for public servants, available from - obtenir la trousse PSG pour les fonctionnaires,
September 2 to October 6, 1997 through the human disponsible du 2 septembre au 6 octobre 1997 aux
resources offices in participating departments; bureaux des resources humaines des ministeres
- if needed call your department contact whose name participants;
appears below; - au besoin telephoner a votre responsible ministeriel dont
- complete and sign the Management Trainee Program le nom apparait ci bas;
Application form for Public Servants PSC 3383 (07-97). – remplir et signer la Demande d’emploi de l‘employe(e)
- This application contains the test admission number that de la fonction publique pour le Programme de stagiaires en
you require to write the exams; gestion PSC 3383(07-97). Cette demande d’emploi contient
le numero d’inscription don’t vous avez besoin pour
- attach a copy of your degree or of your most recent ecrire les examens;
transcript; - joindre un curriculum vitae qui temoigne de votre
- attach a current resume highlighting relevant work potentiel de gestion;
experience and volunteer activities; - faire parvenir votre demande dument remplie a l’adresse
- forward your completed application form to the address indiquee sur le formulaire de demande d’emploi d’ici le
indicated on the application form, postmarked no later than lundi, 6 octobre 1997, a minuit, (le cachet de la poste en
midnight Monday, October 6, 1997; faisant foi);
- bring the tear-off portion of the application form to the test - apporter la partie detachable du formulaire de demande
sessions. d’emploi aux seances d’examens.

Please note that your application will not be accepted if you Veuillez noter que votre demande ne sera pas retenue si
do not meet the stated requirements. The Program will not vous ne remplissez pas toutes les conditions precitees.
contact candidates to inform them that some of the required Le Programme ne communiquera pas avec les
documentation is missing. candidat(e)s pour les prevenir de l’omission de certains
documents requis.

Departmental contacts: Responsables ministeriels:

AGR Gary Proulx (613) 555-1169 AGR Gary Proulx (613) 555-1169
PCH Nat Rochon (819) 555-6583 PCH Nat Rochon (819) 555-6583
CIDA Sara Roy (613) 555-4362 CIDA Sara Roy (613) 555-4362
DND Kara Hanstead (613) 555-8458 DND Kara Hanstead (613) 555-8458
DFO Larry Theriault (613) 555-8932 DFO Larry Theriault (613) 555-8932
HC Cary Rule (613) 555-5138 HC Cary Rule (613) 555-5138
HRDC Dave Danis (613) 555-1224 HRDC Dave Danis (613) 555-1224
NAR Revenue Canada (613) 555-2569 NAR Revenue Canada (613) 555-2569
PSC Larry Allyson (613) 555-9482 PSC Larry Allyson (613) 555-9482
PWGSC Neve Asselin (819) 555-4241 PWGSC Neve Asselin (819) 555-4241

Security: Enhanced reliability Flabilite/Securite: Verification approfondie de la flabilite

Hearing impaired: TDD (613) 555-5640 Personnes malentendantes: ATME (613) 555- 5640

Visually impaired: Audio cassettes, large print and Personnes malvoyantes: Cassettes audio, imprimes en
Computer diskettes will be made available on request groscaracteres et disquettes d’ordinateur disponsibles sur
demande.

Internet: http//www.psc-cfp.gc.ca/mtp/mtp.htm Internet: http//www.psc-cfp.gc.ca/mtp/mtp.htm

Clearance: Exclusion Approval Order for MTP No. d’autorisation: Decret d’exemption pour le PSG

* Nota: Successful candidates whose salary currently * Nota: Les candidat(e)s selectionne(e)s don’t le
exceeds $36,201 will have their salary maintained up to a traitement actuel excede 36,201 $ verront leur salaire
maximum of $47,514 (salary under review). maintenu jusqu’a un maximum de 47,514 $ (salaire sous
examen.

Send your application to: Faire parvenir votre demande a:

MANAGEMENT TRAINING PROGRAM PROGRAMME DE STAGIAIRES EN GESTION

Public Service Commission of Canada Commission de la fonction publique du Canada
L’Esplanade Laurier West Tower, B-2003 L’Esplanade Laurier Tour ouest, B-2003
Ottawa, Ontario, K1A 0M7 Ottawa, Ontario K1A 0M7
322 ©Alan Baggett
 Professional Advancement CRA Style

At least two to three months (usually much longer) after the competition closing date
passes all approved applicants are invited to sit and write an examination. Tested are the
knowledge and abilities thought necessary to the position.
If, and only if, the applicant passes the test an interview is scheduled. Applicants who
interview successfully are ranked on a list. An example of such a list, an Eligibility List,
can be found on the page immediately following.
The Eligibility List’s ranking order is determined by adding the candidate’s test score
to their interview score. As jobs open up candidates are selected from the list in order
from highest ranked to the lowest. Competition results are usually good for six months. If
more positions open up after the six months expire another competition will be held and
the process begins anew instead of hiring those candidates that had already tested and
interviewed successfully.
The process sounds fair and in theory it was designed to be fair. It should at least
promote some of the best and avoid nepotism. Does it always work?
No.
Why not?
The process is regularly circumvented to promote yes men and yes women. The
advancement of beer buddies opposed to competent and innovative employees.
Consider the following stories brought to my attention.
Five candidates in a tax competition were given an advance copy of the test and
interview questions. As might be expected they finished the competition ranked one
through five. One of the individuals stupidly bragged of how he had managed to obtain
the position. The competition results were thrown out and a second competition had to be
held.
A board member of a completed competition was overheard remarking how he had
cheated a candidate out of a higher ranking on the competition list by mismarking his test
and using an erroneous answer sheet at the postboard review of the test. When the
situation was brought to light it was determined that this was indeed true. Instead of
cancelling the competition it was decided to hire all candidates on the Eligibility List
although there was not enough work for them.
Ten extra bodies were promoted to save face.
After a written test had been held and the successful candidates were waiting for
interviews to begin, one Mississauga candidate was overheard telling another what
questions to prepare for on the interview. As it turned out the advice was correct and
exact to the word for the phrasing of the actual interview questions. It was determined
that a board member had primed the candidate with the actual questions and answers. The
competition was annulled and another competition had to be held.
Not all competitions are run in this manner but it should be clear that many
competitions and promotion processes are run with nepotism first and foremost in mind.
And not all fixed competitions are caught. Not by a long shot.
And these stories only involve Revenue Canada. This method of promotion exists in
all federal government departments and agencies.

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 Professional Advancement CRA Style

Public Service Fonction publique ELIGIBILITY LISTE

Canada Canada LISTE D’ADMISSIBILITE

Employing department – Ministere employeur Code Position location – Lieu du poste Code Classification
Gr. S-gr. Lev-Niv
REVENUE CANADA NAR MISSISSAUGA, ON 062 PM 04
Position title – Titre du poste Conditions Security/Reliability – Securite/fiabilite Medical-Medical
Employment Yes No Yes No
TEAM LEADER, COLLECTIONS Conditions d’emploi XX
Language proficiency – Competence linguistique Appointment authority - Pouvoirs de nomination
Delegated Non-delegated
ENGLISH XX Delegues Non delegues
Tenure of appointment Duree des fonctions Competition number – Numero du concours

INDETERMINATE 97-NAR-SOR-TWTS-CC-25

Rank Family name and initial(s)

Rang Nom et initiale(s)
Personal information about yourself Vous renseignements personnels, relies
1 Melater, Bill relating to this competition, is a ce concours, sont proteges et vous
protected and is accessible to you sont accessibles en vertu de la Loi sur
2 Freel, Ivan under the Privacy Act. For access la protection des reseignements
procedures and additional information personnels. Pour y avoir acces ou pour
consult Info Source located in major obtenir plus d’information, veuillez
3 Smith, Lauren T. public libraries, in federal government consulter Info Source situe dans les
information offices, and constituency principales bibliotheques publiques et
4 Hoom, Maxwell offices of federal members of scolaires, les bureaux de circonscription
parliament. Federal Public servants des deputes federaux. Les fonctionnaires
may also consult their departmental federaux peuvent egalement consulter
5 Frist, Hugo Access to Information and Privacy le coordonnateur ou la coordonnatrice
Coordinator. de l’acces a l’information et de la
6 Wartly, Joanna (Jo) protection des renseignements
personnels de leur ministere.
7 Cancer, Mindy
In accordance with Access to Aux termes de la legislation sur l’acces
8 Gaguanno, Gino Information and Privacy legislation aux reseignements et la protection des
information collected for this form reseignements personnels des
may be disclosed in an appeal or reseignements recueillis por ce
9 Cur, Richard investigation process. formulaire peuvent etre divulgues
dans le cadre d’un appel ou d’une
enquete

LIST AUTHORIZED BY – LISTE AUTORISEE PAR EFFECTIVE DATE – DATE D’ENTRÉE EN VIGUER
Name, Title, Department – Nom, titre, ministre Signature Y-A M D-J

Deborah Danis, Asst. Director Revenue Collections

Mailing address – Adresse postale Telephone Number – Numero de telephone

77 City Centre Dr., Mississauga, On., L5A 4E9

LIST VALID UNTIL Y-A M D-J APPEAL PERIOD FROM Y-A M D-J TO Y-A M D-J
LISTE VALIDE JUSQU’AU 98 07 21 DELAI D’APPEL DU AU

DISTRIBUTION

324 ©Alan Baggett

 Professional Advancement CRA Style

Now if an applicant, accepted or rejected, successful or failed, does not feel that the
test or interview were fair or that they did not receive full marks they can appeal the
Competition to have their name added to the Eligibility List or to have the Competition
results thrown out.
If a Competition is thrown out, not an uncommon occurrence, the entire hiring process
begins anew.
In one such instance a select few candidates were illegally given an advance copy of a
competition exam several weeks before the official test sitting. At the actual examination
some of the questions were different than those on the advance copy. These changes
caused those with the advance copy to fail because they had studied nothing but the
advance copy. The failing candidates appealed the competition based on the fact that they
were induced to fail by being provided with erroneous study material. The competition
was overturned, at a huge cost, and another competition had to be held.
No wonder the cost of running competitions is so staggering.
Competition costs consist of the salaries of the employees managing the competition,
the time for preparing any tests and marking them as well as for interviewing. In addition,
any civil servant writing a competition during working hours is paid for the time it takes
to write the test, time it takes to travel to and from the test, and travel expenses such as
mileage. Same goes for the interview. The Assistant Director at the Toronto West TSO
told me that the average cost of running one single promotional competition is $120,000.
And sometimes only one employee is promoted. Many competitions are held each year in
the various government departments and agencies.
However, when a competition takes eleven months to run before any appeal disputing
the results is factored in maybe $120,000 is cheap. When a test participant launches an
appeal of the competition the costs can spiral much much higher
An appeal is lodged when a candidate feels some portion of the competition process is
unfair. It could be the qualifications on the poster, the marking of the test, even the
interview.
I was told the story of a tax collector who ‘failed’ a PM-02 competition exam. When
she reviewed her test she noticed that a question with a correct answer had been marked
wrong. When she pressed her case she was told that the board felt it was a coincidence
that her answer was correct. That she must have guessed at it. The tax collector wanted to
appeal the competition results but was afraid if she would be blacklisted and would never
receive a fair chance at another promotion. So she remained silent.
If an applicant does appeal the competition and the test board is unable to resolve the
appeal the appeal goes before an adjudicator. If one side or the other does not agree with
the adjudicator’s decision the dispute will be thrown before the Courts.
A Toronto area TSO had an appealed competition that did end up in court. The
department lost their case and the competition was thrown out. From start to finish the
competition lasted a little over five years to, eventually, promote no one.
This is how Revenue Canada spends many of the millions of dollars they collect every
year to run promotional competitions.
When a candidate is to be offered a job or a promotion they sign their job offer
(example shown on the two pages immediately following) and the competition finally
concludes.

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 Professional Advancement CRA Style

Revenue Revenu
Canada Canada

Alan Baggett

July 16, 1997

Dear A. Baggett:

Re: Selection Process Number: 95-NAR-SOR-NY-CC-04

Position Title: Collection Resource/Complex Case Officer
Group & Level: PM-03
Position Number: 1263-01234
Position Language: Toronto North Tax Services
Language: English

On behalf of Revenue Canada, I am pleased to offer you an indeterminate appointment to

the above noted position, effective July 14, 1997.

The salary range for the PM-03 group and level is $38,643 to $43,313. Your rate of pay
will be determined in accordance with the Public Service Terms and Conditions of
Employment Regulations.

The terms and conditions of employment of most employees in the Public Service are now
determined in large part by the provisions of the Collective Agreements. Most agreements
now in effect require the employer to deduct the amount of membership dues levied by the
bargaining agent from the monthly pay of employees in the bargaining unit concerned.
Most agreements contain a provision exempting an employee from check-off on grounds
of conscience i.e. where an employee is a member of a religious organization whose
doctrine prevents him or her, as a matter of conscience, from making financial
contributions to an employee organization. In these circumstances, exemption is
contingent on the employee making contributions in an equivalent amount to a charitable
organization.

As a condition of employment you must sign the Employee Certification Document

certifying that you have read and understood the Conflict of interest and Post Employment
Code for the Public Service, and that, as a condition of employment, you will observe the
code. If necessary, please complete a Confidential Report and submit it to the Director no
later than 60 days after your appointment. Both the Employee Certification Document
and the Confidential Report are contained inside the enclosed booklet.

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 Professional Advancement CRA Style

-2-

If you do not sign and return the attached Employee Certification Document to Human
Resources as soon as possible with your acceptance of this offer of employment, this offer
of employment may be withdrawn.

The Federal Government also has an Employment Equity program. The aim of this
program is to improve the numerical representation and the quality of worklife of target
group members. If you belong to a target group and you wish to benefit from the
Program, you are invited to complete and return the attached questionnaire on self-
identification. Participation is voluntary. Under the Privacy Act you have the right of
access to, and protection of information relating to you.

Should you have any questions concerning this offer please do not hesitate to call Nalini
Singh in Human Resources at (416) 512-4190.

May I take this opportunity to congratulate you and to wish you every success in the
future.

Yours truly,

Don Collins
Revenue Collections
Toronto North Tax Services Office

As confirmation of your decision is required, please sign the attached copies of this letter
and return them to L. Bourne, in Human Resources, 10th Floor, Toronto North as soon as
possible. The original is for your records.

I accept this offer

I decline this offer

Dated

327 ©Alan Baggett

 Professional Advancement CRA Style

The effects of the promotion process

If you are at all like most Canadians you often complain about the service you receive
from civil servants. Sure, there are some good stories too but the majority involve slow
service, passing the buck, providing incorrect information or some combination of these
complaints. Now you have an idea as to why.
When the civil servant finally sees that hard work plays no role in advancement, apple
polishers receiving special perks and the employee in the neighboring cubicle reading a
book, struggling through a crossword puzzle or busily working at a second job it acts as a
disincentive to be productive.
And the end result?
Civil servants worry more about passing a competition, receiving a promotion and
cultivating internal political goodwill than they do about working for you.
What are the effects of such a system of promotion?
Consider this: A tax employee was made responsible for building a connection
between two separate computer systems, ACSES and GST. The project goal was to allow
tax collectors to access the GST database from ACSES mainframe instead of having to
sign off one computer system and on to the other. To save time, when this ‘bridge’ was
crossed, the GST tax account being accessed would automatically be transported as well.
But a competing employee decided to sabotage this portion of the project to make the
project leader look bad and himself better. This omission may seem trivial but consider
the cost of this tantrum.
The tax collector has to write down an account number and reenter it into the GST
system when switching computer systems. A simple task but the net result amounts to
hundreds of thousands of dollars in tax collector time wasted, computer time wasted and
lowered production when you consider the thousands of times these two systems are
bridged every single day.
It takes about 24 seconds to grab some paper, grab a pen, write down the account
number, enter the GST mainframe and retype the GST account number. And that’s if
you’re fast and dedicated. I am sure some tax collectors spend much more time
completing this simple task.
If this maneuver is completed 7400 times a day across Canada (my estimate and I am
leaning towards the conservative side) this equals about 49 hours and twenty minutes of
wasted time each day. If this figure is multiplied by 251 working days in a year the total
of time wasted is now 12,382 hours and forty minutes. When the average hourly wage is
eighteen dollars the total cost in dollars is $222,882. Every year. Adding in lost revenue
production in the collection of debtor tax liabilities would only serve to increase this
total. This story put me on Thi vierge of tears.
And that is just one example.
When I worked out of Toronto North a fellow tax collector held a grudge against me
for some unknown reason. They vented their sentiments by selectively disposing of my
correspondence, usually legal warning letters. After a time some one was kind enough to
tip me off as to the whereabouts of my missing mail.
Now I wasn’t hurt by this action nor were you but Revenue Canada was.

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 Professional Advancement CRA Style

And many disgruntled civil servants put their personal feelings and personal agendas
ahead of the job. Some tax collectors, and many civil servants, will not think twice before
they sabotage the work of others to make themselves look better.
But this is exactly what can happen when a promotion is nothing more than another
rung on the ladder.

My competition experiences

What is my personal experience with competitions?

When I was hired the competition was an external competition meaning the federal
government did not currently employ me. The competition poster came out in early
September of 1990 and I wrote an assessment test in early October. In December of that
year I received a letter stating that I had passed the written portion. In February of 1991 I
received a call asking me if I would be available for an interview and I was interviewed
in Toronto. After the interview I heard nothing more so I assumed the job wasn’t mine. In
July of 1991 I received a call asking me, “Are you still interested in a job?” upon replying
with a grateful, “Yes,” I was told to report on July 29th, 1991 for my first day of work.
It took almost eleven months for me to be hired.
I am sure that some civil servants and tax collectors reading this book will not believe
that competition questions are handed out to selected candidates in advance of the test
and/or interview process. I found it hard to believe as well until it happened to me. At the
time I was applying for a PM-04 job and had just learned I had passed the exam portion
of the competition. Soon after I was approached I given some “advice” and examples of
what I was told were past interview questions for this position. I listened politely but I did
not study the advice. After all what were the chances of the exact same or similar
questions being used. None I thought. But I was in for a surprise. The questions used
during my job interview were the exact same as the friendly “advice” offered to me.
Right down to the wording. I was shocked. Maybe I’m a little naïve but I always assume
people to be honest. If this competition was crooked, I assume, so must the rest be. There
is no doubt that they are.
I later learned that the interview questions given to me in advance by a friend were
obtained from another candidate who knew exactly what they were and how to use them.
Of course she ranked very high on the Eligibility List and was offered a job promotion.
Are you still wondering why most civil servants seem slow and unmotivated?
Have I ever run a job promotion competition?
The first competition I helped manage was held in the summer of 1996.
In eight days we made over one-hundred phone calls, held 39 interviews (including
devising the questions), marked the interviews, managed all aspects of security and
clearance forms, performed approximately sixty-five reference checks resulting in a list
of twenty-two candidates of which we hired twenty-one.
Our board consisted of only two people and we had no help from security (which is
not the norm) for preparing the background security checks. Thirteen days from the first
phone call the twenty-one new employees were given orientation and training. When we
presented the results and all documentation to Human Resources. They checked and
confirmed our hiring.

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 Professional Advancement CRA Style

We were later told that it was a model competition and that it would be used in the
future as an example to others of how a competition should be held. We never got a
medal or any other recognition, which is fine. We still got our paycheques but we proved
how competitions could be run. Did our experiences change things for future
competitions?
No. They did not.
Not long after this praise was received I participated as a candidate in an internal
department competition that ran thirteen months from start to finish to promote three
people.
This illustrates the waste and mismanagement that occurs in Revenue Canada and
other federal government departments and agencies to a ‘T’.
Huge amounts of money are spent setting up and running a competition than the
competition is subjected to unreasonable delays. And competitions of this length are not
uncommon. They tend to be the rule rather than the exception.
By the time Revenue Canada is ready to hire for the position quite often the applicant
is no longer available. Therefore another competition must be run. In the meantime more
money is spent and one or more positions remain unfilled which affects both productivity
and the morale of those around the empty desk whom are required to shoulder the load.

What you need to know

I would like to state publicly here and now a fact that I am sure you have already
realized, that competitions in the Public Service are driven by a strange menage a trois of
bedfellows known as nepotism, the old boy network and political correctness. In short the
competition process in our Canadian federal government’s civil service is corrupt.
But how does the hiring and promoting of civil servants and specifically tax collectors
influence you? You might think it does not but it does if you have a tax debt. As a result
of this process some tax collectors purposefully do not work very hard at collecting your
tax debt.
I once asked a fellow employee whom I thought of as lazy why she did not do more
and she replied with, “Why should I? I never get a raise, I never get ahead. When that
happens then I’ll work hard.”
This sentence sums up the thinking of many civil servants and tax collectors. They
want their presents before the party.
But because this does not happen they are bitter. Most refusing to exert more than a
minimum of effort. They figure that just by showing up for work they deserve a
paycheque. And anything else the civil service gets out of them should be considered a
bonus. This is why tax debtors who make themselves a hard target to collect from maybe
just maybe can escape payment of some or all of their outstanding tax. The tax collector
rarely cares if you pay or not. They will always have work.
And why are promotions handled in this manner?
The union for civil servants insists so. They wanted to get rid of what they perceived
as favouritism and level the playing field for all applicants so they insisted on the current
promotion-competition process. But still they remain blind to the fact that any process is
only fair if those behind the scenes have fairness in mind.

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 Professional Advancement CRA Style

In all honesty the unions that are responsible for taxation employees, PSAC – the
Public Service Alliance of Canada and the UTE – the Union of Taxation Employees, and
all their union stewards, are the epitome of bumbling and incompetence. Through their
practiced incompetence, their laziness and their internal corruption, PSAC and the UTE
do a grave disservice to their members, to their brother and sister unions and to the many
Canadians who depend on them to provide a service.
Sue me if I’m wrong.
Consider the ‘bilingual bonus’. The bilingual bonus is paid to civil servants that are
proficient in French and English. In turn these employees are expected to work in both
languages and assist unilingual employees. However only one (two at the most) in any
one office are given this pay. Regardless of how many are qualified.
Now this next anecdote is hearsay but I was told that employee Union advised all
bilingual employees to work only in one language and to refer all other language callers
to those tax collectors who were receiving bilingual bonuses. They were instructed not to
handle (in this instance) French callers unless they were receiving the bilingual bonus. So
that is exactly what the majority do (not all I am relieved to say) even though capable in
both official languages. This situation is a shame and speaks volumes of the type of
people who are hired as civil servants and the people who run the unions.
And the kicker to this story?
If a tax debtor calls up speaking only Italian, Mandarin, Swahili or any other language
the tax collector is only too happy to assist them as long as its any language other than
French. And no, there is no bonus paid for being proficient in any language other than
Canada’s two official languages.
But returning to the subject at hand, what can be done to fix hiring and other
boondoggles that plague the public service, and to ensure that civil servant competence is
both rewarded and promoted?
As a start, have any government department requesting a competition prepare the test
and interview material and then pass off all responsibility to an external body who would
set the final questions, mark the tests, hold and mark the interviews. The body would
have no contact with whichever department was hiring except for receiving the materials
and handing back the results upon completion. This should ensure a fair and just hiring
process.
Until steps are taken to fix the competition process within federal departments and
agencies do not expect to see any improvement in the delivery of federal government
services.

331 ©Alan Baggett

 Revenue Canada College

26

This may be a little more than you want or even need to know but your tax collector has
his or her own special little training school, the Revenue Canada College, located in
Rigaud, Quebec. But don’t bother trying to submit an application for your son or
daughter because admittance is restricted to tax collectors and other employees of the
Canada Revenue Agency.

The following advertisement for this facility was taken from an internal CRA
advertisement and the announcement details every last little comfort about Canada’s least
known and most exclusive college.

REVENUE CANADA COLLEGE

Revenue Canada College offers professional facilities to hold training as well as
conference activities. The college provides hotel services for up to 300 residents. Its
conference and meeting facilities can accommodate a maximum of 125 people. The
college is to give priority of its facilities to activities directly related to training and
development. However, it often occurs that classrooms and rooms are not fully occupied
for that purpose; it is then possible to widen the range of activities and include conference
services scheduled by all department branches.
The Residential Sector has 300 rooms (including 1 suite, 14 apartments and 20 rooms
adapted for persons that are physically impaired).
The Academic Sector includes 20 classrooms of which 5 are equipped with various
computer systems, 16 workshops and one learning centre.
The Conference Sector includes 4 conference rooms of which 2 can provide
simultaneous translation services, 4 meeting rooms (up to 6 rooms), a reception-banquet
hall, and an administrative office for large scale conferences. In addition, the Auditorium
which can accommodate 125 persons, is equipped with a multi-functional projection
system (video, acetates and computer screen).
For all your training reservations please contact the appropriate Course Administrator
who will make the necessary arrangements with the residence.
For meetings or conferences, please contact Aline Mooney, at (514) 451-6711, in
charge of arrangements for any special event not related to training.

332 ©Alan Baggett

 Revenue Canada College

Information required prior to the course

If you choose Revenue Canada College, when deciding upon your activities, please
ensure that the information attached is shared with all participants before their arrival at
the College. This documentation gives all the details relevant to the college facilities such
as: transportation, parking, gymnasium, swimming pool, etc.

Revenue Canada College

We would like to welcome you to Revenue Canada College. This folder will inform
you about residence, academic and other services offered at the College and in the
surrounding community. Please take note that the supplementary information is also
provided in our “Guide to Services and Regulations” which is available in each bedroom.
We want to assure you that our staff will do the utmost to make your stay at Rigaud a
pleasant one. Should you require any additional information, please feel free to contact a
representative from the Residence Services at (514) 451-6711.

General Information

During your stay at the College, you might be contacted at (514) 451-6711. The
facsimile number (FAX) is (514) 451-0144. The College address is as follows:

Revenue Canada College

Training and Development Directorate
Chemin Grande Ligne
Rigaud (Quebec)
J0P 1P0

Your mail should be sent to the above address. You will be informed of incoming mail
or telephone messages through TV monitors located at the reception and the cafeteria
entrance. Your room number will be shown on the screen and you may obtain your mail
or messages at the reception desk. Long distance calls can be made from your room. You
must pay charges, either by cheque, money order or cash. Upon your final departure from
the college, you will be required to pay any outstanding balance when you return your
room key.
The College covers only the costs for lodging and meals. It is therefore essential that
you consult with your supervisor or your regional office to obtain information on travel
advance, airplane ticket reservations or other expenses to be claimed. It is also important
that you keep a record of your expenses as well as all applicable receipts.
The Revenue Canada College is accessible disabled persons and reserved parking
areas are available. There are twenty specially adapted rooms to meet specific needs in
order to ensure that all our residents fully enjoy their stay. Do not hesitate to
communicate with our staff to make sure that your specific needs will be addressed prior
333 ©Alan Baggett
 Revenue Canada College

to your arrival. If you require a special diet (religious belief or health problem), please
contact us.

Pre-Stay Information (514) 451-6711

All rooms are equipped with a telephone, a colour TV, a private bathroom, sheets and
towels. There is a non-smoking policy in effect throughout the entire building with the
following exceptions: the Vaudreuil Lounge, the recreational room and some bedrooms
reserved for smoking guests. The tuck shop offers in-house a variety of items such as
newspapers, postage stamps, candies, tobacco products, laundry soap, personal care items
and dry cleaning services. Laundry facilities and ironing boards are also available on the
premises. Irons mat be borrowed at the reception desk.

Shuttle Bus Service

The College offers you shuttle service from Dorval to Rigaud / Rigaud to Dorval. This
service is provided only on Sundays or statutory Mondays (Dorval – Rigaud) and on
Fridays or Thursdays when Friday is a statutory holiday (Rigaud – Dorval). All other
travel arrangements and their related costs will be the sole responsibility of
residents/regions. The shuttle bus schedule is as follows:

Dorval – Rigaud
Departure point: Airport exit – Main floor – “Domestic Arrivals” Section.
Departure time: 18:00 – 21:00 – 24:00.
Reservations: No reservation required.

Rigaud – Dorval
Departure point: Main entrance of the College
Departure time: 5:00 – 8:00 – 12:00 – 14:00
Reservations: Reception desk – before 16:30 on Tuesday prior to trip –
Services will be provided only when there are reservations

Nota Bene: If the number of people justifies it (groups of ten passengers and more per
shuttle bus), the College will provide shuttle service (Dorval to Rigaud and Rigaud to
Dorval) from Monday to Thursday. To benefit from such service, Course Administrators,
Regional Training Officers, Conference Organizers must contact the College Residence
Manager at (514) 451-6711, a week prior to the beginning of the planned activity.

334 ©Alan Baggett

 Revenue Canada College

Temporary Check Out – Weekend

Personal expenses incurred while travelling on weekends to a location other than the
home shall be reimbursed in accordance with the Travel Directive.

Please refer to Sections 5.8.1, 5.8.4 and 5.8.5 of the Travel Directive in order to
establish the daily allowances or reimbursable expenses. Generally, reimbursements
should be limited to:

- incidental expenses of $4.00 (lowest incidental allowance, Sec 5.8.4)

- Meals at $8.00 (meal costs at the college, Sec 5.8.5)
- Non-commercial accommodation allowance of $13.50 (Sec 3.1.1)
- Need of advising the college of departure (Sec 5.8.1), a “Temporary check-out-
Weekend”

C-34 form must be completed and submitted to the reception before 16:30 the
Tuesday preceding the weekend in question.

In case of special circumstances or for more details, you must refer to the Travel
Directive.

Sporting and Recreational Activities

The College offers sports and recreational programs to enable residents to relax by
participating in various individual or group activities. To conduct such programs, the
College provides the following facilities and equipment: indoor swimming pool,
gymnasium, physical fitness room, outside tennis courts and softball facilities, rackets,
balls, baseball and hockey gloves, bicycles, cross-country skis, billiard tables, ping pong
tables, darts and other equipment. The Vaudreuil Lounge is open from Sunday to
Thursday, with a bar service for residents.

Services Provided in the Community

In Rigaud, there is a medical centre, a CLSC (Local Centre for Health Services) and
two drugstores. At the medical centre, the residents from provinces other than Quebec
will be required to present their own health insurance card and complete an Out-of-
Province form to be reimbursed. There are three hospitals in the surrounding areas:
Pointe Claire, (Que.), Valleyfield, (Que.) and Hawkesbury, (Ont.).

Arrangements have been made with the following banks to cash Federal Government
Cheques:

National Bank of Canada (514) 451-5301

Caisse Populaire Ste-Madeleine-de-Rigaud (514) 451-5345
335 ©Alan Baggett
 Revenue Canada College

Local banks will not honour personal cheques and therefore, residents are advised to
bring sufficient funds with them to meet their cash requirements. The two banks have an
“INTERAC” system which will accept major credit cards. In addition to the local banks,
most major banks (i.e. Royal Bank, Toronto-Dominion, CIBC, etc.) have branches in
neighboring towns. The receptionist will be pleased to assist you

Code of Conduct and Security

During their stay at the college, residents must observe the Departmental Standards of
Conduct. Their appearance and dress have to reflect the professional image of the
Department and be consistent with the duties they perform. Uniformed employees will be
required to wear their uniform Monday through Friday during working hours. They must
conform with the guidelines of the policy concerning uniforms.

Residents are required to wear their ID card while on College premises. This ID card
will assist the security personnel in controlling access to facilities. If you have a
departmental ID card, please bring it with you.
Many activities held at the College require constant study and efforts from
participants. To offer residents an environment which fosters study and rest, parties or
excessive noise will not be tolerated in the Residence Sector. Also, quiet hours are
enforced after 23:00.

Pre-Stay Information (514) 451-6711

336 ©Alan Baggett

 The Badge

27

In a previous chapter I mentioned my failed attempt to return my employee

identification, my department building pass and my Audit Pass. This may seem a trivial
oversight by Revenue Canada but after you
learn of the privileges these identifications
hold you will see that their possession by a
non-employee could turn into a very
serious matter.

Now a building pass is common to

many employers, it identifies the employee
and the access privileges they possess i.e.
do they have the authority to be in the area
which you have just found them; areas
closed to the general public. An individual
bearing such a pass has the right to open
doors and wander through restricted areas
unmolested. In Revenue Canada these are
the very areas that hold your most personal
and confidential information. Where you
live, your birth date, spouse, children,
income, and a whole lot more.

The Audit Pass however is a very

different form of employee identification.
And yes although called an Audit Pass the tax collector uses it. Albeit for a different
purpose. Almost all tax collectors at the PM-02 grade
and above are issued an Audit Pass. This pass has the
same freedoms of the building pass and much much
more. Not only does the Audit Pass identify a tax
collector inside or outside of the office but it also
carries with it a power that a police officer would
envy. The Audit Pass allows the bearer the right to
access your premises, the right to examine book,
records or related documents and require any
337 ©Alan Baggett
 The Badge

individual connected with those premises to provide assistance in answering questions or

making copies of records; all without prior judicial intervention or concurrence.
Under section 231.1 of the Income Tax Act Revenue Canada has the right to inspect
records and request an answer to any question necessary to the administration and
enforcement of the act.
Under section 231.2 of the Act
Revenue Canada can obtain from any
person any document or information
demanded for any purpose necessary
to the administration and
enforcement of the act.
To the tax collector this usually
means banks, an employer or any
other person the tax debtor may have
dealings with as well as the debtor
him or herself.
But quite often the tax collector
will overstep these broad powers and use these two passages and their badge or Audit
Pass as a search warrant. This is especially so when conducting a field call. A visit to a
home or place of business.
Some tax collectors will request, and if refused demand, unrestricted access to your
premises and property for their own investigation and satisfaction.
Why?
Because they are looking for assets from which they might effect collection of your
tax debt.
Conducting a physical search under these conditions is illegal. No tax collector has the
right to physically search your real property. Such privilege is granted only in cases
involving tax evasion or other Income Tax Act offenses and even then the permission of
the Courts must be granted first. But this fact does not stop tax collectors.

338 ©Alan Baggett

 The Badge

A tax collector from the Toronto North TSO knocked on a tax debtor’s door. Failing to
receive an answer and hearing someone inside she brazenly marched into the house
uninvited; flashing her Audit Pass. Finding only minors present she quickly questioned
them while examining the home’s interior. When she left the scared children immediately
phoned their parents who launched a complaint. But of course nothing ever came of it.
An Alberta tax debtor was forced to escort a couple of badge flashing tax collectors
around her home, business and property as they searched for motor vehicles they were
sure that she had stashed away. Their information was based on a Motor Vehicle Search.
A Motor Vehicle Search is a comprehensive list that notes every vehicle owned by the
person being investigated. No one keeps every car they ever owned but these two
determined tax collectors obviously thought otherwise. They found nothing that the
debtor had not previously brought to their attention.
Once the tax collector suspects you of committing an offense under the Income Tax
Act they must advise you of your rights, including the right to remain silent. They must
also advise you that any answers given may be used as evidence against you in the event
of a trial. But when such an offense is suspected the powers of the Income Tax Act no
longer apply. The tax collector must obtain a search warrant. A search warrant will only
be provided when legal concurrence has been approved because the courts rarely trust the
tax collector’s tacit say-so.
The tax collector’s misuse of their special powers to obtain information would likely
make the evidence obtained inadmissible and might also impede any subsequent related
criminal prosecution. Improperly obtained evidence is rarely allowed at trial.
Revenue Canada and tax collectors cannot conduct criminal investigations under the
guise of a collection’s investigation or an audit. They are limited in doing so by the
powers of the Income Tax Act. But it seems they only heed these limitations when their
target, you, know and understand what the tax collector’s limitations are.

On the Audit Pass you will find the following wording:

“ [Name] is an officer of the Canada Revenue Agency, and is

authorized for any purpose related to the administration and enforcement
of the Income Tax Act, Part IX of the Excise Tax Act, the Canada
Pension Plan and the Employment Insurance Act, to enter the premises
(other than a dwelling house without the consent of the occupant, except
under the authority of a warrant); to inspect, audit or examine
339 ©Alan Baggett
 The Badge

documents, as defined in the said Acts or Part, and to make or cause to

be made copies of those; to examine property and processes; to require
any person on the premises to give all reasonable assistance and to
answer all proper questions; to require the owner or manager to attend
the premises with him or her. The bearer is also authorized, in
accordance with Part VII of the Excise Tax Act, to inspect records,
books, accounts and vouchers, and to make or cause to be made copies
of those; and for any purpose related to the administration and
enforcement of the Excise Tax Act, to inspect books, papers, accounts,
statements and returns, to take extracts or make copies of those and to
question anyone making those documents.”

Now this is a very powerful statement but if it fails to impress upon you the power of
an Audit Pass (and examples of its use have failed to impress you) than think of it like
this: a Revenue Canada Audit Pass is similar to the power of the badge of a police officer
but better.
To be perfectly blunt the Audit Pass is a vaguely limiting but open search warrant. It
can be used at the whim of the bearer; in no way is judicial concurrence a prerequisite to
its use.
Law enforcement officers
reading this are likely salivating at
the thought of such an unlimited
and unrestricted scope of power.
But use is not where the similarities
between the two ends. The audit
pass looks so similar to the badge
of some law enforcement branches
that it will fool the police officer
who quickly glances at it. This is
real power.

Hopefully you can now understand the power of the audit pass and why Revenue
Canada should not want one to fall into or remain in the wrong hands. Its potential
misuse could prove extremely
embarrassing to the department.
But does the tax collector abuse the
Audit Pass? Judge for yourself after
reading the following anecdotes.
In this story the police pulled over an
inebriated tax collector late one night. He
had been driving erratically. Upon
speaking with the driver the officer must
have immediately realized the tax
collector was drunk. Even before a
Breathalyzer could even be considered.

340 ©Alan Baggett

 The Badge

At any rate he asks the driver for identification and the tax collector offered up his Audit
Pass.
The officer, glancing at the tax collector’s badge, immediately mistook the Audit Pass
for the identification of a police officer and called out to another officer, “This guy is one
of us”.
The driver/tax collector was cautioned by the officer and told to park his car at a
nearby gas station. Thinking that this particular tax collector was a cop they chauffeured
him and his wife to their home in a police car.
Another story?
A tax collector about to be issued a parking ticket pulls out his Audit Pass and flashes
it in the ticketing officer’s face and away goes the ticket book. The collector was able to
convince the officer not to ticket a fellow officer’s corvette.
These are just two of a collection of stories with similar endings. Tax collectors
pulling out their Audit Passes to avoid all sorts of violations ranging from parking and
speeding to unsafe lane changes and driving without a seat belt.
The actual pass itself, building or audit, is printed on a thin piece of cardboard or thick
stock paper and combined with the photo of the employee and then laminated. Any
ingenious individual could scan one into their computer, make alterations and have their
own employee identification. Although some offices have a magnetic stripe on the back
of the building pass to open doors I am sure if your hands are full some willing employee
will hold the door open for you so you can waltz right in. And not all offices use the
magnetic stripe or magnetic door cards. Some have a receptionist or security guard lazily
eyeballing the badge. Some offices have combination locks on their doors but keep the
door wedged open.
In instances where the tax collector does not have their Audit Pass handy they may use
their building pass or a letter (a copy of such a letter can be found at the end of this
chapter) to the same effect. After all who is going to question someone claiming to be a
representative from Revenue Canada. They would be afraid such an affront would only
incur further wrath.
Martin Cauchon, the Minister of National Revenue, had this to say about the Audit
Pass in his April 17th, 2000 letter to Member of Parliament Derrek Konrad,

“[The Audit Pass] must be accompanied by picture identification and must

be signed by both the officer to whom the card is issued and the
Commissioner of the CCRA. Taxpayers being audited may request that
the auditors show their identification card before providing any financial
records, books, or documents for review.”

Martin Cauchon continued on and stated that, “Auditors will still be required to show
identification cards, upon request, authorizing them to perform the various audit-related
functions.”
It is very strange how he is quite particular in noting ‘Auditors’ use of the Audit Pass
but makes no mention of the tax collector’s use of the Audit Pass to question you and to
effect tax collection. Appendix C has the complete text of his response.

341 ©Alan Baggett

 The Badge

Are the higher-ups in Revenue Canada even aware that tax collectors are using the
Audit Pass and its related privileges to investigate tax debtors?
But that’s not the strangest part of this story.
A short time after the Saskatchewan tax debtor received this ministerial response letter
he was paid a surprise visit by a pair of Revenue Canada employees. As it was told to me
he demanded to see proper department identification. This is proper procedure as outlined
in Mr. Cauchon’s letter to MP Derrek Konrad. However neither employee seemed to
know what an RC303 was. Yet they still wanted to continue on with their interview
anyway. But when the debtor showed them a copy of Mr. Cauchon’s letter, instead of
producing their department identification, and after looking more than a bit confused,
they got up and left the premises. And to date they have not returned.
Now I’m not saying that this will work for you but …

What you need to know

Throughout this chapter you have seen copies (front and back) of various building
passes as well as an audit pass. Find the Audit Pass in English, a North York (Toronto
North) building pass, a Toronto West building pass, an Audit Pass in French, a
Mississauga (Toronto West) temporary building pass, an old North York building pass
and a Headquarters (Ottawa) building pass.

On the final two pages of this

chapter are two different copies of the
letter I spoke of previously which,
when combined with a building pass,
is the equivalent of the Audit Pass.
The tax collector and the auditor are
two completely different jobs. The
auditor should investigate your income
and the tax collector should confirm
and collect it.
When approached by either one of
these Revenue Canada employees you
should first determine what their intent
is. Are they auditing your tax return or
are the investigating your assets? I
doubt it is proper for a tax collector to
investigate you under the auspices of
conducting an audit but that is
something for the Courts to decide.
If I were in your shoes I would allow
an auditor to examine my books and
records without a hassle. But when it
comes to a tax collector I would provide
as little access as possible until they put

342 ©Alan Baggett

 The Badge

their request in writing. You are not required to answer any of the tax collector’s
questions until they are presented to you as part of a Requirement for Information as
discussed in a previous chapter. And then you should only answer specifically what is
asked and not provide any free information.
Revisit the chapter ‘The Requirement for Information’ for more specific details.
Under no circumstances should you allow tax employees the run of your premises
without a Court ordered search warrant.
If they insist on doing so, ignore your protests, and continue on a Court might decide
that any information they uncover was not done so legally and therefore can not be acted
upon or used against you.

And finally, as I am sure you are aware, Revenue Canada and the Department of
National Revenue recently changed their name to the Canada Revenue Agency. As a
result the department badges and Audit Pass pictured in this chapter have been
redesigned to reflect this change. So think twice before making copies of these badges
and trying to pass them off as the real thing. It may not work for you as the real ones do
for me. Of course there is always the letter…

343 ©Alan Baggett

 The Badge

Revenue Revenu
Canada Canada
Your file Votre reference

Our file Notre reference

To whom it may concern:

Alan Baggett whose signature appears hereon and bearing a Revenue Canada
Identification card with his/her photograph, is an officer of the Canada Revenue
Agency, and is authorized for any purpose related to the administration and
enforcement of the Income Tax Act, Part IX of the Excise Tax Act, the Canada
Pension Plan and the Employment Insurance Act to enter into premises (other
than a dwelling house without the consent of the occupant, except under the
authority of a warrant); to inspect, audit or examine documents, as defined in the
said Acts or Part, and to make or cause to be made copies of those; to examine
property and processes; to require any person on the premises to give all
reasonable assistance and to answer all proper questions; to require the owner or
manager to attend the premises with him or her. The bearer is also authorized, in
accordance with Part VII of the Excise Tax Act, to inspect records, books,
accounts and vouchers, and to make or cause to be made copies of those; and for
any purpose related to the administration and enforcement of the Excise Act, to
inspect books, papers, accounts, statements and returns, to take extracts or make
copies of those and to question anyone making those documents.

_________________________
Signature of officer

G.A. Troy, Director

Toronto North Tax Services Office

Date: ____________________

Facs: (416) 555-2558 Telecopieur: (416) 555-2558

Toronto North Tax Services Services fiscaux – Toronto nord

Suite 1000 Suite 1000
5001 Yonge Street 5001 rue Yonge
North York ON M2N 6R9 North York ON M2N 6R9

344 ©Alan Baggett

 The Badge

Revenue Canada Revenu Canada

Taxation Impot

Your File Votre reference

Our File Notre reference

TO WHOM IT MAY CONCERN

RE: Alan Baggett

This letter when presented with official Revenue Canada

Taxation identification, authorizes the bearer to enter
premise (other than a dwelling-house without the consent
of the occupant except under the authority of a warrant);
examine property; inspect, audit or examine books and
records and related documents; require any person
connected with those premises to give reasonable
assistance and answer proper questions relating thereto
and to make or cause to be made copies of books,
records, writings or other documents, in accordance with
subsection 231.1(1) and 231.5(1) of the Income Tax act;
subsections 73(1), (2) and (11) of the Unemployment
Insurance act, 1971, for the purposes of the
administration and enforcement of said Acts.

D. Collins
Assistant Director
Revenue Collections
G.A. Troy North York D.O.
Director-Taxation
North York District Office

Facs: (416) 512-2558 Telecopieur: (416) 512-2558

Suite 1000 Suite 1000
5001 Yonge Street 5001, rue Yonge
North York, Ontario North York (Ontario)
M2N 6R9 M2N 6R9

345 ©Alan Baggett

 CRA Psychology: Why the Canada Revenue Agency Can Do What They Do!

28

In Canada, if accused of murder, you are innocent until proven guilty. Conversely, if
accused of an offense under the Income Tax Act you are considered to be guilty unless
you can prove yourself innocent. Which leads to what is probably the most commonly
asked question by Canadians. “Why can they do that? Why is the Canada Revenue
Agency above the law?”
Well, I am not a psychologist.
Or a psychiatrist.
And I’ve never taken any college or university courses related to those professions.
But in addition to working a number of years for the CRA I have talked to many CRA
employees, past and present, and countless Canadians, leading me to reach the conclusion
that the fault lies with CRA employees, the Canadian media and Canadians themselves.
We are all to blame.
And of course I’m right. When you point the finger of blame at everyone you can
hardly be wrong. But I’m not just going to point. I’m going to prove that it is a
combination of these factors that can allow the Canada Revenue Agency to get away
with… murder.

1. The Canada Revenue Agency is a Monopoly

This may sound like a dumb thing to say (or write) but there is absolutely no competition
in the tax assessment and collection business. Where then is no competition customer
service and satisfaction is not a consideration to how the business is run. So the Canada
Revenue Agency can do exactly what they want. When they want. And as much as you
would like to stop patronizing them or take your business elsewhere you’re not going to
do that. You can’t do that. And they know it.

2. The Canada Revenue Agency Makes Money

Of all the Department’s and Agency’s of the Canadian Government there is only one that
is a true money maker, the Canada Revenue Agency. Just about every other arm of the
government works at a loss. They spend more money than they make – if they make any
money at all. Politicians of every stripe know this which makes them less inclined to
346 ©Alan Baggett
 CRA Psychology: Why the Canada Revenue Agency Can Do What They Do!

make the Agency user friendly. Politicians need our taxed dollars not only to pay their
salaries and ridiculously bloated pensions but also to get themselves re-elected. Erect an
arena, add a tourist attraction, pave some roads, build a park. Spending your money gets
them re-elected so they need the CRA to collect as much of it as possible.

3. The Bad Boy (or Girl) Reputation

You may not believe this but there are managers who cringe at some of the questionable
tactics employed by some CRA employees to complete the job. Truly. So then why are
they allowed to use and continue to use unfair practices? It makes their job easier. When
Canadians hear the tax horror stories (some are not always true and some other that are
just downright urban legends) they decide to be as compliant and complacent as possible.
Hoping that the CRA, like a hungry bear, won’t sniff at their seemingly dead body but
instead will chase after someone more lively. But all this really does is to confirm to them
their status as being highest on the food chain. But is this bad reputation costing them
dollars in the long run?

4. Job Identity

There are some employees, not just tax employees, who invest their whole selves into
their work. They define themselves through it. Their job becomes their identity. So when
Canadians question the CRA some employees take it personally. As if they and their
reputation has been irreparably impugned. Even when the question or complaint is valid.
So they lash out at the perceived attack. Punishing the “attacker” the only way they can –
using their position of authority to make them pay. Literally.

5. Canada Revenue Agency Management is afraid of their Union

Astonishing but true. When a tax employee works in a questionable manner, bending and
sometimes breaking rules even, unless it is incredibly serious, managers, more often than
not, will just slide it under the rug. Why? No matter how wrong an employee is their
Union will always defend them and their right to remain employed. For the manager
there is paperwork to be filed. Meetings. Discussions and maybe arguments. A
confrontational work environment is created that is not good for the office atmosphere
and production. As well, all this can reflect badly on the manager which affects their
future upward mobility. And in the end the Union always wins. Why fight a battle when
you’ve already lost the war. So the managers don’t fight at all. Which gives tax
employees free reign to work badly if they so desire. And some do.

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 CRA Psychology: Why the Canada Revenue Agency Can Do What They Do!

6. Job Justification

Remember how Ken Starr chased the Clintons in the 1990’s? Just like Ken Starr, tax
employees feel that they must find something wrong. Because if they don’t find
something wrong… then they’re just not doing their job. So they’ll be out of a job. So
they look and they look and they look. And if they can’t find something wrong than they
will fabricate something. Ever had a legitimate business expense questioned? This is job
justification at work.

7. Paying is Cheaper than Fighting. (And it’s less stressful).

Continuing on with the previous idea, have you ever had legitimate business expenses
denied? If you’re self-employed you probably have. How much was the total tax
reassessment? $420? $1030? $1440? Not nearly enough to bankrupt you but still enough
to cause some discomfort to your wallet. And how much does it cost to fight an unjust
assessment? You have to take time away from work meeting with the CRA which means
you lose earnings. If you employ an accountant, well, they don’t work for free. What if
you need a lawyer? And what if you end up going to Tax Court? That’s more time and
even more money. And if you or the CRA decide to carry the challenge further, to the
Supreme Court? That’s another chunk of cash you’ll never see again. Many wrongly
accused Canadians tally up all these potential expenses and realize that it can be cheaper
to pay an unwarranted and unjust tax assessment than it is to fight it. And it’s certainly
less stressful. So they pay.

8. Embarrassment

Many Canadians who have run-ins with the CRA are just plain embarrassed. Thinking
that they are all alone and the only ones who have ever had tax troubles. What will
family, friends or neighbors think of them if they find out? So they keep completely
mum. Suffering in silence even when if the CRA oversteps its authority.

9. Fear

Part I

Many Canadians are afraid that if they question or contest anything the CRA or a tax
employee does, that they will be subjected to retribution. Punished. That all their personal
tax files will be pulled, yesterdays, todays and tomorrows, and subjected to intense
scrutiny. Their business if they have one. And their family as well. As punishment for
having the boldness to question the CRA. Many Canadians, even when they fill out their
tax return to the best of their ability, will still send it in wondering if they’ve completed it
correctly. So they keep quite and meekly accept and pay the CRA’s findings. Whether

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 CRA Psychology: Why the Canada Revenue Agency Can Do What They Do!

they agree or not. Hoping that they’ll go away and never come back. Hoping to avoid
worse.

Part II

Then there is the fear that you will lose your business. As noted earlier many audit targets
are the self-employed – folks who own and run businesses. And people who run business
depend on the good will of customers, suppliers and especially financial institutions to
keep things running smoothly. When any of these three learn that the CRA is sniffing
around they are very likely to take their business elsewhere, especially banks who will
immediately class you as a risk and begin reining in loans and lines of credit. Which will
put you out of business. For good.

10. Lack of Responsibility

No matter who Canadians complain to, an excuse is made and the buck is passed. Tax
employees always blame their bosses who, in turn, blame the politicians who enact the
laws who claim that they’re only doing what Canadians elected them to do. So even when
we do everything right its still our fault.

11. The Crab Mentality

This is in an interesting phenomenon that you will have observed if you’ve ever watched
a bucket of crabs. The observation holds that, when one crab is attempting to get free
from the bucket the others will pull it back instead of allowing it to escape. When
translated to the human bucket it refers to people who try to hold other people back for no
other reason than to prevent them from getting ahead and pursuing their dreams. No one
is born wanting to be a tax collector so if they’re unhappy some of them may want to
make you unhappy as well.

12. The Media

It’s true. The Canadian media, whether print or television, is an embarrassment to the
time honoured journalistic tradition of defending facts and finding the truth. When any
Canadian complains about a perceived abuse at the hands of the CRA they are either:

a) treated like a wronged child or else

b) they are considered to be a disgruntled whiner who is simply trying to cheat the
system.

Sadder still is the fact that whatever the complaint may be it is treated like a one time
occurrence. Some thing that has never happened before and therefore as an oddity that is
surely never to happen again. Never has the media looked at the entire body of

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 CRA Psychology: Why the Canada Revenue Agency Can Do What They Do!

complaints against the CRA to establish if there is a pattern. They look at them
piecemeal. One at a time. Never looking forward or back to find a trend. Maybe they’re
afraid of some sort of retribution by tax officials if they make something big out of
something that is big. So, instead, they make a joke of it to placate public officials and
citizens alike.

13. The Power Trip

For those who may not be aware the term power trip is slang for any sort of action that is
begun chiefly for the pleasure(s) associated and received by the use of the power that one
holds over others. I don’t think anyone can much doubt that any organization of any size
has men and women who crave power not for the good they can do with it but to make
them feel good. And so when they gain power, which some inevitably must. They begin
to enjoy it. And when employees of the CRA begin to enjoy their power, they can cause
ruin.

I know that this is a long list of reasons with only the briefest of explanations but with
so many Canadian individuals and businesses that deal with the CRA and the CRA with
so many employees, there can not be just one or two reasons. Every body and every
body’s situation is different.
So what is the point of identifying these factors that allow CRA bad behaviors?
Courts have said time and again that Canadians have the right to pay the lowest tax
allowed by law. But, when they choose to do so, the CRA does not recognize this right.
Unless forced to. This is why it is okay to complain about the Canada Revenue Agency
WHEN and IF we have good reason to.
Most Canadians do not understand that they are not just fighting for themselves if they
choose to stand up to the CRA – they are fighting for the rights of all Canadians to pay
the lowest tax allowed by law.
So stand up and be noticed.
When you’re being bullied your best option is to confront the bully. Otherwise the
bullying behaviours will not be stopped. Unless we do Canadians will never get the tax
treatment we deserve.

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 Tales from the Cubicle

29

This chapter is comprised solely of interesting tax tales passed down through the years
from cubicle to cubicle and tax collector to tax collector. Much in the same manner you
might favour your most trusted with a chronicle of your family history.
In all honesty I wanted to title this chapter, “Baggett’s Believe it or Not,” (whatever
happened to that cartoon by the way?) but I think the good folks over at Ripleys might
have taken offense at the use of their most suitable slogan.
This chapter is an entire collection of strange but true tax tales believe it or not. These
tales did not quite fit into any of the other chapters but I hated to see them go to waste so
I present them here for your amusement.

Goods and services tax troubles

The following GST stories were brought to my attention as a tax collector working at
the Toronto North TSO and at the Barrie Excise Office.
When the hated GST was first introduced Revenue Canada was not properly set up to
administer the new tax. In fact in order to find tax collectors to collect the levy they had
to offer promotions to their employees. As a result some Canadians were able to take
advantage of this disorganization and used the opportunity to line their pockets with cash.
As you may or may not know a GST account number consists of nine digits just like
your social insurance number. The first digit of your social insurance number reflects the
region that number was obtained. The Maritime Provinces were assigned 1, Quebec 2 and
3, Ontario 4 and 5, the Prairies provinces and British Columbia numbers 6 through 8. The
number 9 is used when assigning a temporary social insurance number.
Have you noticed the similarity between the GST number and the social insurance
numbers assigned to Maritime Canadians? Both are nine numbers long and begin with
the number 1. Well, many Maritimers realized this too. Of those that did some decided to
play a prank on Revenue Canada. They filed GST tax returns using their social insurance
number and claiming input tax credits (refunds).
Why did they do this?
To show their displeasure for the new tax. But the joke was on them when they started
receiving refund cheques. And kept receiving them.
What happened?

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 Tales from the Cubicle

What happened was that at that particular time Revenue Canada issued GST refunds
without checking their validity. Any GST return received requesting a refund cheque
received one. The thinking was that when things were up and running that audits would
be conducted on selected claimants to confirm the refunds claimed were valid.
But it took some years for the tax collector to perform these audits and when they
attempted to do so the scam was uncovered. Of course by this time tens of millions of
dollars in refunds had been paid out. And what was done when the scam was finally
uncovered? Nothing. Nothing other than to institute rules and procedures when issuing
GST business refunds.
As I was told the matter was hushed up because the tax collector did not want other
Canadians attempting this same fraud. Nor did the department want it made public that
they were so careless handling your monies.
Very little money was repaid and there were too many perpetrators to prosecute so the
incidents were chalked up to experience. Big losses (read millions) were swallowed on
this gaff.
But incidents like this did not just occur in Eastern Canada. There were also isolated
occurrences of the same stunt right across Canada.
An Ontario man obtained a GST number and filed for a refund in excess of one
million dollars. And he received it. Yet he had no business.
He blew his blessing on lotteries, alcohol and dancing women.
When the money was finally gone he filed another GST requesting another very large
refund. Once again he received a cheque, cashed it and began spending his windfall. But
this time things were different. This time after sending the cheque the tax collector
decided to audit the claimant’s business. The audit determined no business existed or had
ever existed.
What happened?
In this case the filer ended up going to jail for a brief period. Of course a huge amount
of money had to be written off, as restitution proved impossible. But think about, if this
guy had had not been greedy and made a second attempt to defraud he would never have
been caught.
A commonly used method some use to save the cost of GST is pretending to start a
business. These types of GST claimants will purchase everything they need (or desire)
such as a computer and necessary furnishings. They then claim the GST paid on these
items as an input tax credit and are reimbursed for the expenditure claimed as part of the
cost of setting up their business. Later they will inform the tax collector that the business
ceased or they could not make a go of it and cancel their GST number.
When the tax collector comes a calling the claimant must prove that their business
attempt failed, i.e. advertising bills, maybe some flyers, anything that shows a legitimate
attempt was made to open a business, and when they do so the tax collector’s interest
suddenly disappears.
Unfortunately they are stuck with all these new possessions which have been acquired
free of any GST.
Of course there are also other slightly more complicated methods Canadians use to cut
down or avoid payment of GST tax altogether. Here are two common tricks some
Canadians use to reduce or avoid paying GST.

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 Tales from the Cubicle

As I am sure you are aware foreign visitors to Canada, while still here or after
returning home, can file a claim for reimbursement of GST they paid on goods they have
purchased here as well as selected services. The only catch being that they must have
spent more than $200 CDN, they must paid more than $14 CDN in GST and each of the
expenses must be a minimum of $50 CDN.
What some Canadians have been doing is handing their receipts to foreign friends and
relatives and asking them to claim the refund on their behalf. Once again this is not
something I recommend but Canadians do this and are reimbursed the seven percent GST
charged on larger purchases.
But it does not stop here. Some Canadians are a little cheekier. They cross the
American border and open up a post office box as a home address where they can have
their GST refunds mailed. When they receive the refund they deposit the cheque in an
American bank account they have already opened and the tax collector is rarely the wiser.
Those caught using this method were only caught because they were greedy, filing
numerous claims and sometimes claiming to make outrageous purchases.
These are just a few of the more outrageous GST gaffes and frauds I have been made
privy to as a tax collector.

Sad sundry tax stories

When I worked in Sundry collections in the Toronto North TSO I was told several
bone chilling stories that I still have trouble believing today. But I trust the storytellers so
I have no doubt that they are true.
I was told that the tax collector once issued an erroneous refund cheque to one lucky
Canadian. A seven figure refund cheque. But this story is a little bit different because this
man did nothing to request the cheque. He honestly filed and reported his income and
come tax assessment time he was rewarded with a huge refund. What happened?
To this day no one has told me how and why he got this large cheque but by the time
the error was discovered the money and the lucky recipient had departed Canada and
taken up residence in the United States.
When the tax collector finally caught up with him the money had been spent. When
asked why he had had spent money that was obviously not his he stated that he believed
that he was entitled to the funds as he had been expecting a refund.
Of course the department has trouble collecting ‘Recoverable Amounts’ normally as
discussed in the chapter ‘Sundry Tax Debts’ but this gentleman had also left the country
making it impossible to enforce repayment. And at this time the ‘Mutual Assistance in
Tax Collection Agreement’ between Canada and the United States had yet to be enacted.
But even if it were it would not have worked because, yes, this debt was a Recoverable
Amount and not a tax debt.
The story concludes with a few token payments but the individual did not feel any
obligation, or undue pressure, to return the monies. Although the tax collector pressed for
repayment of the funds there was little they could do to the foreign-based national.
The failure to repay monies from the issuance of an erroneous cheque is not the only
way some Canadians enrich themselves at the expense of the tax collector. The issuance
of a duplicate cheque can also serve to accomplish this.

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 Tales from the Cubicle

On occasions when a government cheque is issued, like a tax refund or a quarterly

GST cheque, but that cheque does not arrive a duplicate can be obtained. The tax
collector will provide you with what is known as a Statutory Declaration form. This form
simply acknowledges that the individual in question did not receive the original cheque.
Once the declaration is signed by yourself and authorized by a notary public or a lawyer
before whom you swear such is true the tax collector will cut you a duplicate cheque. It’s
that simple.
But the problem is is that while some really have not received their cheque others have
and have simply ‘forgotten’ for lack of a better word. What happens?
What happens is that the tax collector will check their records and note that two
cheques have been issued and cashed for the same credit. They then create a debt for the
duplicate amount on the subledger and request payment.
But since the vast majority of debts that arise in this manner are for less than $1000
the tax collector does not pursue the debtor for repayment. If you are still kind of fuzzy
on this subject I suggest you reread the chapter titled ‘Minor Balance Tax Debts’.
The collector allows the debt to hang around for a while hoping it will pay itself off
and when it does not the amount is deleted as uncollectible.
Events such as erroneous cheques and especially duplicate cheques are not as
uncommon as you would think. A book of such stories could be written with the only
changes between the stories being the names and the amounts forever lost.

T4 horror stories

One of the following stories has its roots in the Toronto Core TSO and the other in
Toronto North. Both are similar but one involves an employee who used her knowledge
to embezzle monies while the other is of a typical fed up Canadian who used his brains to
surreptitiously steal in exactly the same manner.
When you are employed by another statutory deductions are taken from your wages
each pay period. At the end of the year you will receive a record of all your earnings and
deductions in the form of a T4 information slip. If not enough tax is deducted from your
reported earnings you will be left with a tax debt at the end of the year but if too much tax
has been deducted you will be receiving a tax refund. Pretty straightforward stuff. But
one Canadian used this simple knowledge to easily scam the department out of tens of
thousands of dollars. How you ask?
This individual set up a company and properly registered it with Revenue Canada. But
in actual fact there were no business goings on, no employees, it was nothing but a name
on a piece of paper. It had no actual day to day workings.
When it came time to file his ‘company’s’ T4 slips informing the tax collector of
employee earnings he submitted just one. His own.
Why would someone claim an income that he had not even earned?
Well, when he claimed this income the statutory deductions his company had
supposedly made were overstated so of course when he filed his Income Tax Return with
this T4 he became eligible for a big fat refund.

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 Tales from the Cubicle

It was all nice and legal. He looked to be innocent and the employer to be the bad guy.
His paper company never remitted the monies it claimed to have deducted from its
‘employee’ so they were left with an employee source deduction debt.
It took a couple of years for the tax collector to catch on but when they finally did the
individual in question quickly declared bankruptcy.
None of the stolen monies were ever repaid.
Yes, it really is that simple. And once again it is not quite as uncommon as you would
think. In fact the temptation of raking in some big bucks so easily must have appealed to
one tax collector because she pulled a similar stunt. Except instead of working the scam
over a couple of years apparently she worked it all in one year. How? Because she had
access to all employers tax account numbers it was really quite simple.
She used legitimate employer numbers and claimed to have earned an income from
each of them. Like the individual in the first story she included the seemingly authentic
T4’s with the overstated the statutory deductions with her Income Tax Return. This left
her eligible for a nice refund.
By the time the entire puzzle was put together, a phantom employee on multiple
company payrolls, overstated statutory deductions, all the phantom T4’s led to the same
person, how did this person get business account numbers, oh my god they’re an
employee of Revenue Canada, it was much too late. The embezzling employee had
already left the department and moved to the United States, taking up residence
somewhere in New Jersey.
I was told that the amount in question was in the neighborhood of $35,000 and that no
charges were ever laid.
Defrauding and stealing from the tax collector is really not that difficult for those that
have the know-how when mixed with the courage and pluck to do so. Once again it is
quite likely that there are many more stories of this nature that have been quietly swept
under the rug.

T2 travails

This next story found its way to me from Winnipeg and involves a case of
fraudulently cancelled tax penalties against a major Manitoba based company.
An audit of this company revealed that they owed a substantial amount of back taxes.
As a result of this audit they were assessed for the delinquent tax amount, interest and
penalties. As well it was recommended that the company be prosecuted for their flagrant
disregard for the law.
Fortunately for the company its comptroller had previously worked for Revenue
Canada in Winnipeg. Naturally he took advantage of his connections by giving one high
ranking Revenue Canada tax manager a phone call regarding the penalties, interest and
recommendation for prosecution.
Soon after his call penalty and interest charges against the company, an amount
approaching $500,000, were forgiven.

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 Tales from the Cubicle

T1 misdeeds

Back in the 1920’s in the days of American Prohibition and bootlegging the Canadian
Minister of Revenue assessed one Canadian so as to include the income he earned from
his criminal activities. Naturally he was more than a little upset with this so he appealed
his tax assessment in his case versus the Attorney General of Canada in the Exchequer
Court of Canada on June 2, 1924.
Here the presiding judge decided that although the profits of crime were not to be
taxed that it was the opinion of the court that:

“if a man were to make a systematic business of receiving stolen

goods, and to do nothing else, and he thereby systematically carried on
a business and made a profit of 2000 a year, The Income Tax
Commissioners would be right in assessing him if it were in fact his
vocation.”

You would think that this would be the end of the debtor’s appeal but it was not. Mr.
Smith further appealed the tax assessment all the way to the Supreme Court where,
strangely enough, the Court sided with him stating in the May 5, 1925 decision of Cecil
R. Smith vs. The Minister of Finance (1 DTC 78) that:

“profits earned from a business, the carrying on of which is expressly

prohibited by law, are not income . . . to tax such income would be to
legalize it and condone it”.

This ruling meant that profits earned from illegal enterprises could not be taxed. What
a loophole. It was actually possible to profit from crime and avoid being taxed on it. For a
short time at least.
On July 22, 1926 this decision was reversed in the Minister of Finance vs. Cecil R
Smith (1 DTC 92). The judge stated that the definition of income covered under the Act
was broad enough to cover income from businesses considered to be illegal. The key in
his decision was also a key principle of all criminal law that a person should not be able
to benefit from his or her wrongs.
Today Revenue Canada will still assess any who earn income from illegal activities
whether it is their vocation or not, it just matters that they profit from it.
This of course raises a number of questions that any sharp lawyer or accountant would
pounce upon for his client were he willing to claim such an income. Questions such as:

1) If income derived from illegal activities can be taxed than any losses incurred should
also be deductible in order to arrive at a net “business income”. If the police seize the
proceeds from your illegal activities as the law allows, is this not a business loss?

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 Tales from the Cubicle

2) If your crime results in your prosecution and crime is your vocation, the legal
expenses incurred must be deductible from your income as expenses necessary to
earning that income. The same can be said for any damages you incur.

And what if you printed on your tax return in big bold letters that, “Six figures of my
earnings this year came from embezzling monies from my former employer,” what would
the tax collector do?
First, they would assess the claimant with a tax debt. No doubt statutory deductions
were not made when earning this money. Next, they would likely contact the RCMP and
inform them of this claim. Right? Wrong. The tax collector is not supposed to hand out
any of your information whether it be personal or financial because this would be a
breach of your confidentiality. But do they obey these rules or are they a law unto
themselves? Reread the chapter ‘Your Right to Confidentiality’ and reach your own
decision on this.
So if you do not report your criminal earnings to the tax collector just how do they
learn about such income?
The tax collector starts their investigation with newspaper and television stories and if
necessary will conduct policing agencies for more detailed information. They make their
best guess at what was earned, when it was earned and then they reassess your income for
that year or, if you failed to file your tax return, will arbitrarily assess you.
Of course these types of assessments, and there are hundreds of them each and every
year, are never collected. Crooks that are caught have either spent or stashed their booty
the last thing on their minds is paying income tax on it. Crooks that are caught often end
up behind bars earning pennies a day, how can they be expected to pay tax arrears? The
answer is they can not so their tax debts are written off.
Why does Revenue Canada waste their time and money raising certain kinds of
assessments just to write them off?
As discussed earlier, to make-work for auditors and collectors in order that the
program and production goals may be reached. Remember it does not matter how a dollar
it removed from the ledgers, paid, collected or written-off it is all Revenue Production
and another dollar toward the TSO Revenue Production goals.
In the meantime potentially collectible tax debts are being ignored in favour of
investigating a surefire uncollectible tax debt. While this happens the potentially
collectible tax debts turn into uncollectible write-offs themselves. What is the point?
Did you know a tax collector might easily embezzle monies from Revenue Canada?
It’s a simple process.
When there is a credit on a client account and where that client passes away or just up
and disappears the monies quite often remain. I have seen credits totalling as much as
$40,000 sit on a tax account as long as eight years just waiting for the missing client to
claim them. Of course they never do.
The tax collector has access to all of your most personal information, enough to open
a bank account and a mailbox in your name. Without your knowledge. A temporary
change of address on a tax account can be easily accomplished through their position.
Temporary enough for the monies to be ‘refunded’ then the account address can be
corrected.

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 Tales from the Cubicle

The next step for the tax collector is to manipulate ERA, Electronic Revenue and
Accounting computer system, to issue a cheque refunding the monies on the tax account.
The tax collector then retrieves the mailed cheque from the temporary address of the
rented mailbox, deposits the cheque and slowly withdraws all the funds using an
automated teller. The now empty bank account in another’s name is allowed to fall
dormant.
The computer userid of the collector does show up in ACSES and ERA diary entries
but if that tax collector has the know-how to use other tax collectors computer userids,
the exact know-how found in the chapter titled ‘Major Balance Tax Debts’ it makes an
easy steal even easier.
Sure, the tax collector could conduct a Personal Net Worth Test as discussed
previously and discover the monies. But the secret to having your cake and eating it to is
to keep your gains, ill-gotten or other, in a mattress or a safety deposit box or in the name
of another.
Revenue Canada has no way of knowing the theft has occurred unless the client comes
forward which is unlikely to happen when planned correctly. And if they do then maybe
the problem of a duplicate cheque issuance will arise.
A collector can grift in this manner ad infinitum and retire, return to school, maybe
even write a book about it if he (or she) so desired.

What you need to know

These stories are indicative of the abuses committed by taxpayers and employees
alike. Abuses that can and do occur within Revenue Canada. If you are experiencing any
doubts reread the chapter on confidentiality and visit the Internet link to the Auditor
General’s report. This should allay your suspicions but will also serve to stoke your fears.
Certainly you are surprised to find that it is not just taxpayers, Canadians, who take
advantage of and defraud Revenue Canada but also tax collectors. Stories like these are
rarely allowed to set foot outside a tax collector’s cubicle. Until today.
And why would anyone do this? Take advantage?
They have little fear of being apprehended.
Lax controls and lax monitoring make for loopholes that any determined anti-tax
advocate would be proud to use. Legal or not. Steal from a bank or a variety store and
you will receive a stiff sentence. Steal from Revenue Canada and that sentence is
suspended. Sure you might get a fine and be asked to repay the monies but as like as not
the monies will prove to be unrecoverable and written off. That’s a tough punishment,
having your tax debt written off as uncollectible.
More and more Canadians are using the loopholes in department policies, procedures
and regulations to profit in their own unique way. And Revenue Canadians are doing
little to stop them.

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 Criminally Speaking?

30

The actions of Carol Pakulak, outlined in Chapter 5 From A to C Assessing to

Collecting, while not criminal were certainly unethical.
To say the very least.
But it begs the question do tax employees ever have behave in a criminal manner?
And the answer to that is, quite simply, yes.
Consider these allegations made against the following Canada Revenue Agency
employees.

Andreas Hackner - Toronto

On October 30th 1986 the Toronto Incident occurred. A set of microfiche referred to as
the T1 Alpha records containing information on over sixteen million Canadians just up
and vanished. The information included the names of Canadians, their addresses, their
date of birth, their social insurance number and the name of their spouse (if any) among
other data.
At that time the microfiche were stored in unlocked cabinets in an unlocked room in a
room that was not supervised during working hours. All employees of the section had
access simply by signing a log. The room was locked after working hours but was opened
for cleaning staff. When the room was unlocked for the cleaning staff an employee,
Andreas Hackner, simply walked in, picked it up, and walked back out.
The theft was kept from the media and it wasn’t until the crime was made public that
the employee turned himself in. Just hours after an announcement was made by the legal
representative of junior tax assessor Andreas Hackner.
And the reason the files were ‘borrowed’?
Mr. Hackner was hoping to set up a business of reconnecting dormant bank accounts
with their long lost owners.
In the Queen v Andreas Hackner in the Supreme Court of Ontario, Toronto December
14, 1987 the judge sentenced Hackner to twenty-four months in a provincial reformatory.
Member of Parliament Elmer MacKay stated in the House of Commons that it was the
“most grievous blow to confidentiality in the department's history.”
As for Mr Hackner? After he graduated from prison he won five million dollars on a
scratch off lottery ticket.

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 Criminally Speaking?

Lori Pittaro - Hamilton

This case will no doubt make many people happy. Not very many people like taxes. And
seeing the Canada Revenue Agency rapped for abusing process seems a small victory for
all Canadians.
Why?
Because a Judge ordered the CRA to pay $25,000 to a harassed taxpayer.
In making the award Judge Douglas called the charges laid against the accused “an
abuse of the criminal court process” by the Canada Revenue Agency.
The Canada Revenue Agency alleged that John Marsden evaded payment of $20,700
in taxes between 1999 and 2001. During the trial, investigator Lori Pittaro testified she
spent 3,000 hours on the Marsden case.
If an investigator earns twenty an hour and spent 3,000 hours on the case it means that
$60,000 was spent in salary alone in an attempt to collect the $20,700. And this figure
does not include the time of others involved or other expenses.
And during those 3,000 hours Pittaro conceded she did not interview Marsden before
having the charges filed “because (alleged evaders) have a right to remain silent.” This is
a “flagrant breach” of the Canada Revenue Agency's own guidelines for investigations,
which state the tax filer “will be interviewed” and given “ample opportunity” to explain
apparent discrepancies before charges are laid.
Mr. Marsden wasn't ever interviewed by the CRA.
Policy was not only not followed but was flagrantly violated.
Justice Norman Douglas said there was not one shred of evidence to support the
charges, and spoke out against the methods used by the CRA, calling the Agency's search
of Marsden’s home “improper, abusive (and) oppressive.”
Marsden’s lawyer alleged his client's Charter right against unreasonable search and
seizure was breached and Judge Douglas called the search of Marsden’s home and office
-- during which revenue agency staff seized documents including the man's medical
records and even "love letters" – “improper, abusive (and) oppressive.”
The Canada Revenue Agency tax staff displayed a “shocking” lack of common sense
in pursuing tax evasion charges against the former Guelph businessman, the judge said in
ordering the federal government to pay John Marsden $25,000.
The award was just over one-third of the $70,000 John Marsden had been seeking
from the Federal Government to cover legal and other costs accrued defending himself
against the charges for the past three years.
Previously Marsden was acquitted of 28 counts of tax evasion. In the ruling, which
followed a two-week trial, Douglas noted there was no evidence Marsden had evaded the
payment of any taxes and said the prosecution was the result of “tunnel vision” on behalf
of The Canada Revenue Agency investigator.
Marsden noted it would have been much cheaper to simply plead guilty, even though
he had done nothing wrong but said a concern about the process was one of the key
reasons he had fought the charges for the past three years. “The whole department of
investigations needs to be reined in,” Marsden said. “The system is flawed.”
Marsden estimates he has spent $70,000 fighting the revenue agency over a period of
three years.

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 Criminally Speaking?

John Marsden could have pled guilty just to spare himself the expense and hassle of court
proceedings against the Canada Revenue Agency. But by fighting the injustice,
Marsden's decision brought to light serious problems at the CRA that no one can doubt.
Canadians should not have to plead guilty when they are innocent just to avoid a hassle
with the tax man (or woman as in this case).
Marsden’s problems are not unique.
But when the tax man accuses you of something you're sure you didn't do, fighting
back is your right.

Ronald Radhay – Toronto West

Peel Regional Police Intelligence Bureau and the Canada Revenue Agency Internal
Affairs Division completed an investigation that revealed an unauthorized access of tax
payer records, resulting in a forged tax audit of a Peel Regional Police officer.
The false letter was created by a Revenue Canada Trust Examiner from the Toronto
West Tax Services Office located in Mississauga, who unlawfully accessed the tax files
of Peel Regional Police Constable Harvey Sham. Officer Sham, assigned to Traffic
Services Bureau, received the forged document at his residence, requesting him to attend
the Mississauga office on June 9,2004, at 1:45 PM for an income tax audit. Investigation
revealed that this date and time coincided with a provincial offences court date for a
highway traffic act offence, the tax examiner had at the Ontario Court of Justice in
Mississauga. The officer who had written the traffic ticket that was the subject of the trial
for prosecution was Constable Sham.
Investigation revealed that both the forged document and personal tax information
about the officer had been accessed by the accused in an attempt to obstruct justice. The
tax examiner failed to appear at court, having another person attend in his absence
resulting in an adjournment.
Charged with Obstruct Justice, Uttering a Forged Document, Forgery and Breach of
Trust was Ronald Radhay,

Diane Speranza – Toronto North

Diane Speranza, of North York, was found guilty on one count of fraud over $5000 and
one count of breach of trust by a public officer, in the Ontario Court of Justice in Toronto
on January 9, 2007. She received a nine-month conditional sentence that includes three
months house arrest, followed by two years probation. She was also ordered to perform
240 hours of community service.
Police allege the accused made fraudulent adjustments to the tax accounts of
acquaintances, which resulted in tax refunds of approximately $270,000 dollars being
issued for which there was no entitlement.
This investigation began as a result of a complaint received from the CRA in
November 2005.
Ms. Speranza, who was an employee of the Canada Revenue Agency (CRA) at the
time the offences took place (July 1998 to November 2005), accessed the tax accounts of

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 Criminally Speaking?

acquaintances for the purpose of making fraudulent adjustments to their tax declarations.
This resulted in the CRA issuing approximately $270,000 in refunds to which these
taxpayers were not entitled. The CRA has recouped the majority of the refunds from
these taxpayers.

Unnamed Tax Employee – Edmonton

This verified story concerns an unnamed female Canada Revenue Agency employee
working in Edmonton.

Wronged Canadian Barbara Papke stumbled upon her case by accident.

Her ex-husband wanted to change his child support payments and boasted to his ex-
wife that his girlfriend worked for the CRA. So Barbara made some enquiries about her
files under an Access to Information request. When the request came through documents
showed that her file was accessed from Edmonton by her ex-husband’s “girlfriend”, who
works in the Verification & Enforcement division of the Edmonton Taxation Services
Office, accessed Barbara Papke’s file on July 4, 2002.
So Ms. Papke complained to her MP.
Only after receiving a complaint of the breach via the office of Okanagan-Shuswap
MP Darrell Stinson, did the CRA began a probe and then contact Papke to ensure her the
matter was being dealt with.
Stinson, who had his office staff assist Papke said: “if people are using income tax
files to access information for personal vendettas then charges should be laid.”
Canada Revenue Agency employees found to have violated the Agency’s rules about
computer access could lose their jobs and possibly face criminal charges.
“I don't know what she did with the information or if she printed out my records and
what they have done with it,” said Barbara Papke. The Canada Revenue Agency has told
Papke that if she wants to find out the outcome of the probe she would have to file
another Access to Information request.
Revenue Canada seems serious about taking unauthorized computer access seriously,
although it says it does not keep track of the number of incidents.
“I guess you could say they are moving speedily and rightly so...But you got to
wonder how many of these cases go undetected,” said Barbara Papke.

Bill Henderson - Kitchener

In 2002 tax employee Bill Henderson was convicted of 249 counts of fraud involving
more than $1.5 million dollars.
Henderson used his father and an unnamed tax employee to work his scheme.
In court his Father confirmed that his son gave him all the information needed to file
for and claim GST rebates by creating fictitious dairy farmers. The $1.5 million received
was then split between the pair.
Bill Henderson denied being behind the fraud but lost his appeal in the Ontario Court
of Appeal and lost.

362 ©Alan Baggett

 Criminally Speaking?

Michelle Mariano – Winnipeg

An employee of the Winnipeg Tax Centre was fined $120,000 dollars for falsifying
income tax returns. Between 2002 and 2005, Michelle Mariano altered information on
several individuals. personal returns in order to generate more than 130-thousand dollars
in false refunds.
Michelle Mariano was found guilty on charges of Criminal Fraud, Breach of Trust,
and Tax Evasion. Personal problems prompted her to adjust individuals’ tax returns and
pile up more than $130,000 in false refunds in her own bank account.
Mariano altered information on several individuals' personal income tax returns which
entitled them to an adjusted refund credit. She then altered the individuals’ information
and deposited the refund into her own bank account. To cover up her activities she altered
the mailing addresses of the individuals so they wouldn’t receive the refund statement
and than later re-instated the correct addresses. None of them were actually out of pocket.
Mariano also falsely adjusted her own tax return to generate a higher refund by
inflating tax credits she was owed and understating her income. In total she admitted to
diverting more than $130,000 into her own account. She filed for bankruptcy in 2005 but,
in a separate action, the Canada Revenue Agency assessed the $130,000 as income and
she has to pay taxes on that amount.

Julien Vincent Raymond – Toronto Centre

A Canada Revenue Agency employee received a twelve month conditional sentence after
pleading guilty to nine counts of using confidential taxpayer information to create false
statements on income tax returns.
Julien Raymond also pleaded guilty to eight counts of income tax evasion.
Mr. Raymond, who was an employee of the Canada Revenue Agency at the time the
offences took place (January 1999 to July 2001), knowingly used confidential taxpayer
information for the purpose of making false statements in the income tax returns filed on
behalf of three individuals. Mr. Raymond unlawfully claimed credits based on the
purported married status of these individuals. This fraudulent action resulted in the
evasion of federal income taxes. The $8,015 fine represents 100% of the federal tax he
attempted to evade.
The first three months of his sentence will be served under house arrest.
“(Raymond) knowingly used confidential taxpayer information for the purpose of
making false statements in the income tax returns filed on behalf of three individuals.”
and “unlawfully claimed credits based on the purported married status of these
individuals. This fraudulent action resulted in the evasion of federal income taxes.”

363 ©Alan Baggett

 Criminally Speaking?

Pertab Lall – Toronto West

A Canada Revenue Agency (CRA) employee from Mississauga was sentenced to

eighteen months in jail for stealing more than $150,000 from the CRA.
Pertab Lall of Mississauga pleaded guilty to one count of fraud over $5,000 and one
count of breach of trust by a public officer.
Mr. Lall was a CRA employee between 1999 and 2002 when he accessed the tax
accounts of 17 deceased individuals. He reactivated the accounts for the purpose of filing
fraudulent income tax returns and making bogus Canada Child Tax Benefit claims. The
CRA issued approximately $150,945 in refunds to post office boxes, and bank accounts
belonging to Lall.
The charges were the result of an eleven month joint investigation by RCMP Greater
Toronto Area Commercial Crime Section and the Toronto West office of the CRA which
determined Lall defrauded the Government of Canada of $150,945. The investigation
revealed that various false applications for tax refunds and benefits were filed.

Sterling Andrew Fish & Jorge Liviero - Hamilton

An angry Superior Court Justice denounced the Canada Revenue Agency and this pair of
investigators for using deceit to pursue charges against F. Marc Holterman, of Hamilton,
and Thomas Tiffin.
Judge Borkovich found that affidavits prepared by tax officials had contained
“fraudulent, false and grossly misleading” statements.
Based on the information that the pair provided the Department of Justice charged
Tiffin and Holterman, along with Nissi Financial Corporation, alleging tax evasion.
Accusing Sterling Andrew Fish & Jorge Liviero of serious misconduct including
misleading another judge in order to obtain search warrants in the case. He cancelled all
five warrants and ruled the evidence obtained as inadmissible. He then dismissed tax
evasion charges and ordered the Crown to pay more than $160,000 toward Tiffin's legal
costs. Holterman, a lawyer who defended himself did not get costs.
“We had a situation where the CCRA considered itself to be above the law. But it has
to be equally applicable to everybody. You can't break the law under the auspices of
enforcing the law,” said Holterman who also added, “That's what this is about,
accountability in the face of people who feel that they can do whatever they like.”
And now the tables have turned because Holterman and Tiffin have asked for, and
received permission to, file private charges against Hamilton TSO Special Investigator
Sterling Andrew Fish for Obstruction of Justice.
They did this after the Canada Revenue Agency ignored their complaints.

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 Criminally Speaking?

Kurt Fagan - St. John’s

An unnamed employee was fired after it was determined that they had tampered with the
tax returns of 102 individuals over an eleven year period confirmed Roy Jamieson, a
CRA spokesman.
The employee, unbeknownst to any of the taxpayers involved, would reassess their tax
returns, adding expenses such as child tax benefits, GST credits and moving expenses –
which would result in refunds. But as he was doing this he would also change their
mailing address to one that he set up. So the refund cheques went right to him. Almost
$700,000 worth of refunds over a ten year period it was discovered after a routine audit.
Fagan was charged with one count of fraud over $5,000.

Unidentified Employee - Vancouver

A Vancouver tax collector actually used CRA computer’s to look up the personal
information of prospective love matches – for himself. As confirmed by internal
government documents.
An audit discovered the collector had accessed almost sixty tax files not related to his
job. In excess of twenty of those files belonged to single Vancouver area women roughly
the same age as him.
The employee denied the allegations but investigators determined three of the women
whose tax files he accessed matched a personal e-mail list he had on his computer. A
fourth women on the list he ended up dating before moving in with her for several
months.
The investigation also confirmed that the employee in question had accessed the
personal tax files of his mother and cousin, had a history of not showing up for work –
resulting in reprimands and suspensions – and that, generally, his work was of poor
quality.
The Agency has refused to confirm if the employee is still working there.

Edgar Borde – Kitchener

In June 2009 Edgar Borde pled guilty to one count of fraud involving 229 government
cheques totaling $226,735 from 1999 to 2004.
At the time the offences were committed Borde, employed by the Canada Revenue
Agency in Kitchener from February 1997 to March 2002, worked as an auditor
investigating underground economy tax evaders and people who failed to file their
income tax returns.
He filed a total of 209 false income-tax return forms that resulted in 219 refund
payment cheques totaling $193,604, all which was sent to him, according to an agreed
statement of facts filed with the Kitchener Superior Court.
As well, Borde also requested adjustments to eleven tax returns that resulted in Borde
receiving ten refund cheques totalled an additional $33,131, the statement said.

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 Criminally Speaking?

Borde used five different schemes to commit fraud including forging the signatures of
taxpayers on refund cheques he directed to himself. He also changed the addresses of
twenty-nine individuals who had moved out of the country before claiming additional tax
credits and GST refunds. Pocketing over $90,000 in the process.
In addition to these schemes Borde changed the addresses on the tax accounts of
neighbors before filing false claims that resulted in refund cheques sent to him. He also
filed false returns for people he investigated who were non-filers netting him still more.

Unknown Male, Unknown Female – Undetermined Office

These next two cases were uncovered in 2008 but covered up by the CRA. In both
instances the employees collected hundreds of thousands of dollars by filing fraudulent
tax returns and depositing the refunds into their personal bank accounts. If it hadn’t been
for a request under the Access to Information Act by researcher Ken Rubin Canadians
would still be unawares of the crimes. The CRA, in an effort to protect the embezzlers
identities, refused to release their names, their office of employment or confirm whether
they have been charged and convicted, only confirming that they were no longer
employed with the CRA.
In the first case, over an eight year period, the male employee sent over $300,000 of
fake refunds, Child Tax Benefits and GST rebates into his bank account. And he was able
to do this quite easily as he was an expert on these benefits.
In the second case the female employee was able to snare over $100,000. During her
eight years of employment she filed hundreds of false tax returns, routing the refunds and
tax credits to her bank account.
Fortunately the CRA does not believe that there is an embezzlement problem within
their corporate culture Caitlin Workman . Ms. Workman also revealed that the CRA does
not keep records or statistics on the number of cases of employee related fraud.

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 The Tax Collector’s Bible

Part V

In Conclusion
“The Way Things Are and Just Might Be”
 In Conclusion

The Present

Horror stories abound of heavy-handed treatment by the tax collector but clearly this is
no longer the sole outcome for those who avoid Revenue Canada and refuse payment of
their tax responsibilities.
Today how you are treated by the tax collector will vary depending on where you live,
political interference, how well you organize your financial affairs and how tough you
make it on the taxman and taxwoman to collect.
If you present a hard target to collect from the department will eventually pass you
over in favour of one who presents less work. It is from these soft targets that Revenue
Canada has kept its image of a brutal totalitarian regime when in reality this is no longer
the only outcome.
Not convinced? Just ask the wealthy Bronfman family. They wanted to move their
$2.2 billion dollar family trust from Canada to the United States but faced a massive tax
liability, approximately $750 million dollars, if they were to do so. How did they manage
the trick? This I do not entirely know. My enquiry’s learned that all negotiations were
handled at the ministerial level. The level of politicians and deputy ministers. Only the
higher-ups were privy to the deal.
But stranger still is the fact that not too long after the secret deal between the
Bronfmans and Revenue Canada suddenly became public knowledge at least one high
ranking revenue Canada employee and perhaps others as well began to leave the
department. Soon after they were hired by a company that acts as a processing unit for
several Canadian banks. A company that I am told is owned by the Bronfmans or
Bronfman interests. A strange coincidence if that is what they still call such incidents.
Quite honestly the department does nothing to reform tax debtors, little to properly
inform them and even less to punish them. The result is not just growing numbers of
avoiders and delinquents but repeat offenders and repeat repeat offenders. And nothing is
being done to stop this trend.
As I have patiently illustrated there are many ways that Canadians avoid payment of
their tax debts. Legally and illegally.
And they do not have the money or influence of the legendary Bronfman family to
accomplish such feats. They just avoid being a soft target. The easy mark. Turtle and in
time the tax collector will give up in search of a more willing prey. I know because I have
seen it happen time and again.
So now would be as good a time as any to restate some of the methods Canadians tax
debtors use to take advantage of tax collector and Revenue Canada loopholes.
368 ©Alan Baggett
 In Conclusion

Behind closed doors

What you should have taken home from Part I was that the image Revenue Canada
presents publicly is not the same one that exists when the public eye is turned in the other
direction.
My Life as a Tax Collector, Chapter 2, outlined what the tax collector is up against.
Externally and internally.
As you might have guessed the tax collector will always face determined tax avoiders
and tax evaders no matter how high or how low tax rates may be. But the fact that tax
collectors abuse their position not only to cause hardship to Canadians but to line their
own pockets as well is certainly an unexpected revelation.
With department employees soliciting and accepting bribes, falsifying timesheets,
embezzling and pilfering it is no wonder that not all tax assessments are collected.
But these are all things that the tax collector has adroitly covered up. Successfully so
until now. To find something rotten one no longer has to look to the state of Denmark as
Shakespeare so aptly phrased it.
In Chapter 3, Your Right of Confidentiality, it is made clear that this ‘Right’ that the
department advertises is little more than lip service.
Your most personal and confidential information is stored on a computer database for
all tax collectors to see. And often the details and events stored here are slung around the
office with Hedda Hopper like respect ‘the public has a right to know’.
And some employees even cross this line and use the confidential information of
Canadians for their own financial gain.
When will the department clamp down and protect the rights of Canadians?
The same time the Access to Information Act and the Privacy Act actually become
useful legislation and not diversionary lip service promoting openness and honesty.
Chapter 4, Just how many tax debtors are there? confirms that an increasing number
of Canadians are becoming tax debtors.
The 1994 Auditor General’s report confirms this assessment when they found that
although income tax revenues had increased by 19% between 1988-1989 and 1992-1993
that unpaid income tax debts had increased by a whopping 58%.
As a result the tax collector has less time to spend on each debtor account. Tax debts
that are permitted to age are the least likely to be realized upon so by delaying the
collection process many Canadians are frustrating the tax collector and are rewarded with
their tax arrears being written off as uncollectible.
There is no doubt that in the year 2000 the number of tax debtors and the total tax
dollars outstanding is on the increase. This is one reason why the tax debtor most likely
to be pursued for payment is the one that is easiest to collect from. Some positive revenue
production must be shown so the softest targets are targeted.
In Chapter 5, From A to C: Assessing to Collections, you learned that some Canadians
make false claims on their income tax returns in order to lower their anticipated tax debt
or receive a refund while others of us do not file tax returns at all. In fact if you are a non-
filer and your primary income comes from a T4 employer and your tax debt would be
less than $500 or if you are self-employed non-filer and your tax debt would be less than
$1000 the tax collector will not waste their time assessing you.

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 In Conclusion

You should also have learned how a little self-restraint allows some to pass the Net
Worth Test where others normally fail and so save themselves a great deal of tax.
You were probably shocked to learn that the tax collector knows nothing more about
the sale of stocks and mutual funds other than the selling price and the number of shares
sold.
Finally, for those who do pay their tax debts but wish to avoid the hassle of the tax
collector, Chapter 5 informed you that you can send in eight post dated cheques covering
ninety percent of your total tax arrears or you can send in one cheque a month for 1/8 of
the total amount owed. Doing either allows you to avoid the tax collector and as soon as
your T1 tax debt falls under $1000 you can stop payments altogether.
Do not be afraid to use the BCB or bank charge back inhibit either if you must stop a
payment. Although the tax collector does not advertise this feature it is there for your use.
For the first time many have just learned that the tax collector is faced with some
collection restrictions.
Chapter 6, Collection Restrictions and Legal Warnings, outlines exactly what your
federal and local rights are.
You have also been informed that any legal warning given must be timely with the
legal action taken and, most importantly, if you do not receive a legal warning the tax
collector can not legally take legal action to collect your personal or corporate tax arrears.
If they do and you challenge the department both parties will be in for a surprise but only
yours will be of the pleasant variety.
I know this is hard to believe but as Chapter 7, Interest Charges: When to pay and
when not too shows there are times when you are better off not making a payment against
your tax arrears.
The overall effects of high interest charges and compounding the interest charged may
serve initially to punish the tax debtor but in the long run it causes non-compliance,
bankruptcies and yes, write-offs.
If you read and refer to this book again and again probably the hardest thing for you to
believe is that the tax collector completely ignores the repayment of some tax debts. But
Chapter 8, Minor Balance Tax Debts, confirms that the department’s present policy is to
ignore collection or stop collection once a T1 tax debt falls below $1000, before a T2 tax
debt falls below $800 and so on. Some Canadians who are tax debtors are already aware
of this fact and take advantage. They allow the tax collector to write-off fifty or even a
couple hundred dollars knowing they will never be asked to repay it.

Tricks of the trade

Part II, Tricks of the Trade, explains to you exactly how the tax collector works, their
policies, their procedures, their in-house rules. You even get to see what they see when
they sit down in front of their computer to discuss your tax situation.
You should also have learned some of the many tricks, loopholes and sometimes
downright deceits that many tax debtors employ to defeat the tax collector and tax
collection.

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 In Conclusion

Chapter 9, Major Balance Tax Debts reveals for the first time ever anywhere what the
Revenue Canada tax collector sees and exactly how they act when it comes to collecting
tax arrears.
This chapter also confirms that not all tax collectors are equal, that not all tax debtors
are treated equal and that there are surprisingly few investigations for the tax collector to
complete when investigating you. Phone calls, letters and field calls are the only way they
can contact you but they can easily be avoided by returning the mail unopened, delisting
your phone number or just refusing to answer your door.
There are only two legal collection actions the tax debtor can invoke, the garnishment
and the Execution.
If you are a T4 employee it is hard to hide your income but a self-employed evader
does not have that problem. The tax collector’s only record is what the filer provides.
But some tax debtors have been known to manipulate their capital gains and some
walk away undetected because of the lack of information provided to the department and
the fact that they can not audit all Canadians with this type of income.
Hiding your bank account from the tax collector is much easier, avoid direct deposit,
cash federal cheques anywhere but your bank and if you make payments pay by cash or
by a postal money order.
When it comes to the execution when filed it is not a sign that the tax collector is
about to collect but most often a sign that your tax debt has no other way of being
collected that a write-off may be imminent.
I bet you were surprised by some of the easy and legal methods of defeating the
attachment of income noted in Chapter 10, The Garnishment.
You now know how the tax collector locates your financial institution but who would
have known that a simple joint bank account is the safest and most effective means of
protecting your cash as long as one of the signatories does not have a tax debt. That you
can negotiate with the tax collector when subjected to a garnishment via a sob story or by
substantiating a claim of undue hardship being caused. That you can have a tax debt and
stop the tax collector from attaching your RSP in certain provinces.
You can also protect your assets, and many do, by providing erroneous information
that does not match with what the tax collector has on record for you. I have seen this
trick pulled successfully more than once by determined tax avoiders.
In fact by not receiving a legal warning you can also escape legal action or have the
department repay the funds taken while putting themselves squarely behind the eight ball.
Chapter 11, Executions, Writs and Certificates illustrates that while the tax collector
does have the right to immediately seize a tax debtor’s assets upon filing an Execution
they rarely do so. And with more and more Canadians placing their assets into Trusts it is
getting harder and harder for the tax collector to realize anything at all.
If you are an individual tax debtor the tax collector prefers that you create an action
that will collect your tax debt for them.
If the tax debt in question has arisen from a failure to remit trust amounts more often
than not the tax collector will wait for the business to go insolvent before attempting to
collect the arrears. Only the department will attempt to realize the debt from any
director(s) rather than the company.

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 In Conclusion

As a result of these tactics of collection by attrition many tax debtors will play a
waiting game, a game which the tax collector eventually will tire of and a game which
often ends with the tax assessments being written off.
Of course by keeping the tax collector in the dark as to your major assets and their
location and/or by holding major purchases jointly you can also keep Revenue Canada at
bay even when you have a tax debt.
Another shocking revelation was Chapter 12, The Memorandum Assessment. Who
would have believed that you could be assessed for the tax debt of another? Not many I
am sure. Fortunately there are ways around these types of assessments whether you are
the transferor or the transferee.
If you do not have the ability to pay the tax debt of the transferor the tax collector will
not assess you with their tax debt. Nor will you be assessed if the illegal transfer took
place at arm’s length. But, if you are so assessed the appeal and the passage of time must
work wonders on your ability to pay because more often than not a tax debt assessed in
this manner is written off.
No doubt you were also surprised to learn that you do not have to answer the tax
collector’s questions, at least not until they provide them in writing and as part of a
Requirement for Information as Chapter 13, The Requirement for Information points out.
It is a only a brave and hardy soul that will ignore such a legal document but if you
choose to do so make sure your reasoning is sound.
I know of no case where a Requirement for Information has been defeated other than
for the obvious of errors, incorrect dating or ambiguous wording.
But if and when Revenue Canada comes calling make sure you know the difference
between the Requirement for Information legal document and the general form letter
request for information. The latter can be ignored if you so choose with no fear of legal
wrath’s and retributions by the tax collector.
Chapter 14, Jeopardy Assessments, discusses a little used section of the Income Tax
Act that allows the tax collector to forgo the collection restrictions discussed in Chapter
6.
Jeopardy is rarely invoked and unless the tax debtor advises the department or
someone rats them out it is rare for the tax collector to learn until long after the fact.
To defeat a Jeopardy action is relatively simple now that you know how the tax
collector works and approaches such situations. Just show that tax collector or the Court
you plan to remain in Canada such as a recent rental agreement or, that some of your
assets will be remaining in Canada when you depart such as a healthy bank account or
investments. Beating this complicated process is that simple.
As Chapter 15, Bankruptcy and the Tax Collector confirms the only way to negotiate
with the tax collector about your tax arrears is to file a proposal and the only sure way to
avoid payment of tax is to outright declare bankruptcy.
Sure some abuse the current bankruptcy system and hide their assets and their
creditors suffer as a result but I do not agree with this in the least. Pay for what you
purchase and if you can’t pay for it than don’t purchase it.
If your tax debt is not a personal, corporate, employer source deduction or Goods and
Services Tax debt than it falls under the category of Chapter 16, Sundry Tax Debts.
And you should thank your lucky stars that it does because little production is
expected by most TSO’s from their Sundry Collections Team and as a result this is often

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 In Conclusion

where they put their least productive collectors. This does not mean that you are
guaranteed to escape payment of your tax debt but it sure ups the odds in your favour of
benefiting from a write-off of the assessment.
Much to the dismay of the tax collector Chapter 17, Write-offs, Write Downs and
Deferrals has finally let the cat out of the bag. All types of tax arrears are eligible to be
written off and yes, the tax collector does and will delete your tax arrears. For the first
time ever you now know how they go about it and oftentimes why.
You also should have noted the important table ‘The National Council of Welfare
Estimates of Statistics Canada Low Income Estimates’. This table (or a more recently
released version) is how the tax collector determines if you have the ability to pay your
tax arrears.
Although some collectors ignore its use now that you know the important dollar
thresholds the tax collector can ignore it no longer. Now I am not saying that you will
have your tax debt written off but if you are in a precarious financial situation and the tax
collector is breathing down your neck your claim for undue hardship being caused to you
can be easily and knowledgeably be made.

Fighting fire with fire

Part III, Fighting Fire with Fire, simply informed you of what your rights are within
the current system and how to protect yourself. Do not simply pay your tax assessment
because you are afraid to question the tax collector. Challenge. You have the right to pay
the minimum tax allowed by law.
If you ever disagree with your tax assessment and do not know what to do then
Chapter 18, Appealing Your Tax Assessment tells you how to do so, when you can do so,
the possible outcomes of doing so and, best of all, that no legal collection can be taken on
an appealed tax debt except in certain situations.
Remember, if the tax collector is willing to negotiate this means that they do not know
what the Court’s decision would be if your appeal went to court. If you can document and
substantiate your claim then do not be afraid to choose this route. The tax collector is
afraid that losses in Court could set a precedent (if using the General Procedure) and this
is why they wish to settle beforehand.
Due to the time an appeal takes to conclude an increasing number of Canadians are
using the appeal process as a means to delay and frustrate the tax collector. Others use an
appeal to ensure that they receive their tax refund.
If your tax debt is valid I do not believe you should be using either of these methods
but the fact is is that an increasing number of Canadians, frustrated with high taxes and
government waste, are doing so.
No doubt you were surprised to learn of the subject discussed in Chapter 19, Taxpayer
Relief Provisions. Today it is possible to have penalties and interest cancelled as well as
extend the time for filing a Notice of Objection.
To be perfectly blunt the term ‘Relief’ applies only to the name of the legislation itself
and not to its use or application. Even if your application is cut and dried there is no
guarantee that you will receive fair and equitable treatment. Quite often where you live is

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 In Conclusion

more important than the facts of your case as some TSO’s are more prone to accepting
Fairness requests than others. Unless of course you have some high-ranking department
or politically connected individual stepping on the tax collector’s toes on your behalf.
The first real step towards any fairness in the tax treatment of Canadians came with
the implementation noted in Chapter 21, Bill of Rights, Service Complaints & the
Taxpayers’ Ombudsman. Previously whenever Canadians had a complaint about the
CRA that complaint was directed to the CRA to solve. It was kind of like asking the fox
to punish itself for stealing from the hen house. It’s just not going to happen.
But with the arrival of an independent ombudsman the CRA can no longer cover up
their many transgressions. Pooh pooh them away as simply minor or a matter of course.
As I write this the office is still young but already I have seen many positive signs that
indicate while Canadians may still be mistreated by CRA staff that they now have an
independent avenue for both recourse and justice. Now this fact must only be widely
advertised.
Chapter 21, Filing a Ministerial Complaint points out that you should not be afraid to
complain when the service is not up to par or when you feel you are being abused but at
the same time you should not complain just to vent your anger abut the system.
If you have ever read ‘The Little Boy who Cried Wolf’ than you understand exactly
what I am saying. And if you have not read it’s about time you did.
Ministerial Complaints can take a long time to sort through and answer but if you wish
to delay collection action or you have a bigwig willing to step up to the plate on your
behalf than it is an option you might wish to consider.
Auditing the Auditor, Chapter 22, reveals that the Agency is not your only recourse
for action against certain classes of tax employee. When they won’t deal with improper
employee behaviour and conduct the Society of Certified General Accountants most
definitely will.
Chapter 23, The Tax Exile, clearly confirms that our system is open to abuse not just
by those who reside here but by those who reside in other countries. It also confirms that
some Canadians are willing to go to great lengths to avoid payment of tax. Yet they still
wish to remain Canadian.
World governments are slowly turning to address these abuses as noted by tax
collection type treaties enacted between Canada and such countries as the United States
and Great Britain. But these are nations that have taxes of their own and mutually benefit
from such an agreement. The countries most prominently used by Canadians the
Caymans, the Austria’s and the others have no such agreements.
But until out government cleans up their act and gets fiscally responsible Canadians
will continue to become Tax Exiles in order to protect their wealth.

The big picture

Hopefully Part IV, The Big Picture, left you with an understanding of how things
really are within the hallowed halls of the tax collector and why.
When the Tax Collector’s Bible was first sold in 2001 Chapter 24, The Tax
Collector’s Perks, subtly pointed out that there were two sets of rules, one for the tax

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collector and other Civil Servants and another set for all other Canadians when it came to
claiming expenses.
If you argue that this is not true than explain why a tax collector at work could claim a
higher expense for mileage than you can when you are at work?
Why must you supply receipts to verify your expenses while the tax collector does
not?
Why are benefits in the hands of the tax collector and other Civil Servants untaxed
while the same benefit accruing to you is taxed?
Why can the federal government pay the tax on an appointee’s salary while in the
private sector this is an illegal act?
There is only one answer and that is that there are two sets of rules, one for the haves
and another for the have-nots. And unfortunately we are the latter.
Clearly some of these gaps have closed in the intervening years and this chapter
(twenty-three) in particular has been worked and reworked continuously to reflect the
changes and advances made.
But maybe avoiding payment of tax is illegal but when the federal government sets an
example in this manner there is no wonder so many Canadians choose to follow.
If you have ever wondered why the typical Civil Servant may be less than motivated
than Chapter 25, Professional Advancement CRA Style, explains why. One reason for
working hard is to get ahead but when that avenue is blocked and you do not enjoy your
job what reason is their to work hard? None. Absolutely none.
I think Chapter 26, Revenue Canada College, is a little more than Canadians need or
even want to know when it comes to discussing taxes and the CRA. It was provided
merely out of general interest and to provide both comprehensive coverage and a
complete picture. So let’s leave it at that.
If you are ever approached by a Revenue Canada auditor make sure that they have
their Audit Pass and their department building pass/picture identification so says Minister
of Revenue Martin Cauchon in Chapter 27, The Badge. But certainly you must find it
strange that there are times when they won’t use their badge on the job but will use it,
inappropriately when off duty.
With Chapter 28, CRA Psychology I’m not trying to justify why the CRA or its
employees act the way they do. I’m just trying to explain it. To make it understandable.
Because, ultimately, we all have to bear some responsibility for its occurrence. Some of
us just look the other way when it does occur, others meekly accept it, while others hope
that if they don’t acknowledge it that it won’t happen to them, others still think such
actions are just and deserved. The final group refuses to believe such wild tax tales even
happen. And no one speaks out. All of which both condone the actions and encourage
their future repetition.
Tales from the Cubicle, Chapter 29 confirms that not all horror stories originating in
the confines of Revenue Canada are some variation of a tax collector mistreating some
poor undeserving soul. Sometimes tax collectors themselves abuse the system. And
sometimes the taxpayer themselves comes out on top.
For so long Revenue Canada has taken delight in publishing the names of Canadians
who break the tax laws. Publicly shaming them. For all to see. Chapter 30, Criminally
Speaking turns the table on the tax collector. Naming some of those tax collectors who
have broken tax laws. And worse.

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What you need to know

Probably the most important item of information you can take home from this book is
that you have a global right of appeal. Not only can a Canadian appeal a tax assessment
or the invocation of the Jeopardy provisions of the Income Tax Act they can appeal any
decision the tax collector makes where they feel the tax collector has not exercised their
discretion properly. Your appeal would be based on the fact that when a public authority
makes a discretionary administrative decision from which there is no statutory right of
appeal an application for a judicial review can be made. The application can be made
under Section 18.1 of the Federal Court Act and is to be made within thirty days from the
date of being notified of the decision.
But clearly there are times when Revenue Canada’s rules and processes act as an
impediment to collection. Assisting you. One just has to be at the right situation and place
at the right time.
It should also be clear that while the department is often lax in collection there are also
hard core tax evaders who use the department’s policies and procedures to delay and
frustrate collection.
The end result of these obstacles, poor collection methods, legislation with no bite,
poor procedures, lack of effective leadership, low morale, no incentives, determined
evaders, lack of effective deterrents and punishments is that tax debts just are not
collected as they should be.
Previous Statistics Canada findings showed that the 62,000 poorest families in Canada
reported average incomes of $1,645 yet they spent an average of $23,662.
If the poorest of families are underreporting their income to such a degree certainly
the middle class and elite are doing the same only with more money.
This lends credence to estimates that Canada’s underground economy is 20 to 25
percent of our Gross Domestic Product. An amount that is not being subjected to taxes.

Although many readers may still believe Revenue Canada to be a fearsome entity of
tax collecting wrath this is no longer completely true.
Why?
Because times are changing. Our government and its various departments and
agencies are more image conscious than at any time previously.
Why?
Because the attitudes of Canadians have shifted dramatically.
We see our bureaucracy as inefficient and politicians as wasteful ones who have
forgotten their roots and are living high off the hog. Why should our hard-earned dollars
go to some multi million-dollar pension for a six-year politician?
Because all tax collectors do not share the same work ethic and one bad apple really
can spoil a barrel.
Because inequalities exist in the manner Revenue Canada’s legislation is applied.
Because whether a Canadian is from the Maritimes, Quebec, Ontario or the Prairies
they can not expect the same treatment at the hands of the tax collector. As a result, of
two Canadian tax debtors facing the exact same circumstances, some will end up paying
and some will not.

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The end result?

Taxes go unpaid. Federal tax. Provincial tax. Goods and Services Tax. Employer
Payroll Taxes.
The payment of all types of tax is becoming more of a personal choice and less of an
obligation. If you arrived at this page after reading straight through from the introduction
you no longer have to ask yourself why.
Now you know why.

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The Future

Truth be told it is easy to sit and criticize others. And this is especially so if those others
are so universally disliked as the Canada Revenue Agency and the tax collector.
Therefore it would only be fair of me to open myself up to some criticisms by suggesting
what the future may hold for the both. I will comment on six distinct areas where the
CRA and the tax collector could consider implementing improvements or outright
change. These five areas are Legislation Alterations, Procedural Changes, Modernization,
Staffing Policies, Innovations and finally, the Future.
No doubt you will agree with some of the things I see, laugh at others and turn red
with anger at the remainder of what I both see and propose.

Legislative alterations

One subject I have harped on repeatedly is that the potential of collecting a debt is
inversely proportional to its age. As a tax debt ages the chance of obtaining payment
decreases. Private studies have shown that the window for a debt’s collectibility is
approximately ninety days in length. After ninety days many consider an unpaid debt to
be all but uncollectible.
This impacts the tax collector because their tax debts are always much much older
than ninety days before they are assessed and before collection is attempted. There are
ways in which Revenue Canada could combat debt aging that would cost next to nothing.
Changing the filing deadline from April 30th to March 31st or even March 1st would
save thirty to sixty days of aging. Information slips, T4’s and the like, could be issued in
the third or fourth week of January instead of February 28th.
Collection restrictions could be relaxed from ninety days to forty-five days or even
thirty days. How long does it take to read a Notice of Assessment? Thirty days should be
sufficient to read, understand and prepare an appeal.
The tax collector should be advised immediately of a debtor assessment rather than
waiting until collection restrictions have expired 90 to 120 days after the date of the
assessment.
Send a tax debtor’s Notice of Assessments via registered mail and enclose a legal
warning at that time. Let the legal warning run concurrent with all collection restrictions
instead of subsequent to this period. During the restrictive period the collector could

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investigate the debtor to prepare for legal action if payment in full or an arrangement was
not made.
If the debtor has not contacted Revenue Canada within the thirty-day period legal
action could be initiated immediately following the expiration of the shortened collection
restriction period.
If these potential time savings are tallied, a two month reduction in the filing deadline,
sixty to ninety days to be assessed and thirty days to respond the total time savings equal
three to four months. This would mean legal collection action could begin as early as five
months after the end of the year which the debt was accumulated as opposed to the now
standard fifteen months. Such a time saving would increase the amount of tax dollars
collected. There would be fewer write-offs reducing overtime and salary expenditures
related to processing deletions. There is virtually no added cost other than cost of a
registered letter. But, as proof of receiving the assessment and the legal warning is
needed it is a necessary cost. The benefits however would outweigh this small cost.
Previously it was noted that the tax collector receives large dumps of tax debtor
accounts at certain times of the year, especially the October to November period.
If the personal income tax (T1) filing reporting period were changed from a calendar
year to the birth year of each individual this would alleviate large dumps of debtor
accounts appearing in the collector’s inventory at one time.
Canadians would file their tax returns instead of April 30th one month after their
birthday. Using this method there would be no huge dumps of work, but a consistent flow
of tax accounts to the tax collector. If this idea were implemented debtor tax accounts
would arrive one or two a day rather than forty new accounts this week, fifty the
following and none the next.
By turning the flow of debtor accounts into an even trickle the flood of work has been
dammed and the tax collector would work each account properly rather than the current
method of having to pick and choose which tax debt to collect and which to write off.
Such a change would increase the total amount collected.
Maybe the tax collector could even find ways to avoid tax debts from arising. One
such method would be to have payees responsible for deducting and remitting tax from
investment income. Specifically stock, mutual fund transactions and interest income.
Currently no tax is withheld from these sources on earning. By collecting these
monies before it is “officially” owed the tax collector could reduce the number of tax
debtors come April 30th.
Changing the way a tax debt is handled when under an appeal should also be
considered. Currently nothing can be done to secure these amounts unless the appeal
reaches the Supreme Court. When a tax debtor wins their appeal they realize one hundred
cents on the dollar but what does the tax collector realize when they win?
The tax collector should conduct a study to determine two things. One, when a tax
debtor loses an appeal how much is collected. On average is it one hundred cents on the
dollar or ten cents? Two, determine how much the danger of loss increases as the appeal
ages. Does the chance of collecting the appealed tax debt decrease by one or two percent
a month or maybe even more?
If the tax collector collects seventy or eighty cents on the dollar for appeals they win
then leave things the way they are. But, if things are as I suspect and Revenue Canada
realizes much much less when they win on appeal then the tax collector should be

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allowed to make changes. Maybe securing an appealed tax debt at the lowest level of
appeal but not actually collecting should be an option.
Probably the best way of improving efficiency and production and eliminating
duplication would be the creation of one entity to collect all taxes. Federal. Provincial.
Municipal.
Instead of a debtor being chased by a different collector for each tax debt one collector
would handle collection of all of an individuals or corporation’s tax debts. Duplication of
work would be eliminated saving time and money.
At the present there is little sharing of information between different levels of
government nor are there combined actions to collect tax arrears. The sharing of
information between levels of government would increase the dollars collected, reduce
the cost of collection and provide early identification of multiple debt holders, those who
are the greatest risk of not paying.
Barring creation of such an entity a truly innovative method that would increase the
responsibility to actually collect the tax would be for the department to bundle up all its
tax liabilities, its debt, and sell it off as “trade debt”. Very radical but Revenue Canada
would be able to realize a percentage of all tax liabilities rather than collecting one and
writing off another.
It would work like this. Revenue Canada would take all the unarranged tax debts and
sell it to a trust arm of the department created solely for this purpose. The trust would
take individual tax debts and package them with the tax debts of similar individuals or
corporations. The bundle would be sold to investors looking for income. The debt in the
bundle would be sold at a discount to its actual value, as it would take time for people to
pay or collection to be enforced. The investor would also accept the risk that some tax
debtors might not pay some or all of their arrears. Such an approach would force the tax
collector to become more responsible when collecting or assessing because the better the
record of collections the higher the sale price for the debt. If Revenue Canada continued
to collect poorly the debt would be sold at a huge discount.
Altering current legislation to allow such changes would no doubt increase the
collection of tax debts and is just the first of many steps to be considered. The department
must also make changes to their policies and procedures to complement any other
changes introduced.

Procedural changes

Revenue Canada’s methodology behind the collecting of tax arrears is not conducive
to success or to rehabilitating the debtor.
Under the current system of collection much time passes between successive actions
on a debtor account. The average tax account might be worked three or four times in a
year. Sometimes more such as when the taxpayer initiates contact and oftentimes less
such as when the account or the debtor appear to be difficult.
Such a manner of working accounts when coupled with the many corporate
reorganizations and inventory shuffles explains in part why many tax debts end up as
write-offs. Tax debts are neglected as a regular course of business and aged account
receivables often go unrealized. Tax collectors should combine collection actions,

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completing several at once for efficiency and to propel the debtor account towards
collection and resolution.
To change this trend the first thing that must be done is to train tax collectors how to
collect. Presently tax collector’s are taught legislation but not how to manage an
inventory of debtors. This training must be coupled with a standardized system for
bringing forward or BF’ing of an account. As you will recall after the tax collector
completes an action on a tax account they enter a Bring Forward date into the computer.
This is the calendar date they next want to review the account. Revenue Canada must
implement a national system of standardized BF’ing.
Currently it is a coincidence when tax collectors work a tax account in the same
manner. For instance, when a legal warning letter is sent (on similar debtor accounts),
one collector might BF the account twenty-five days, another collector sixty days and the
third collector one hundred and twenty days. All for the exact same action. Sending a
letter.
Debtor tax accounts should be worked in a similar manner. Similar actions should
have similar BF dates. Like an assembly line process. If an account has a reason to be
worked off of the assembly line take it off, fix it up then put it back in place. By
standardizing the working and collection procedures production could be significantly
increased at no extra cost.
With a standardized plan of debt actioning in place a single account can be worked
better, faster and correctly reducing negligence and write-offs. Duplication of work, a
common occurrence because of the reorganizations and shufflings would be eliminated.
Best of all there would be no extra costs involved. Time is critical when it comes to
collecting account receivables. Revenue Canada must recognize this and make collectors
aware of it.
Another procedure that must be addressed is the failure to file an income tax return. At
the present if a person has an income tax debt the computer generates the debtor a letter
requesting payment. However, if an individual fails to file their return on time they may
never receive a letter. It’s all based on human whims. A crapshoot. This is ludicrous. Do
not allow any entity to become noncompliant in their filing. Delinquents should receive a
request to file immediately when overdue. Non-filers are overwhelmingly tax debtors.

Modernization

Revenue Canada should modernize and combine the computer systems necessary to
tax collection. They must consider an up to date computer system and equipment to
match. Many different computer systems are used, such as REMITS, ACSES, CINDAC,
CORPAC, PAYDAC, GST, OTIS, EMAIL, SUDS, ERA, ASL and RAPID to do one
thing collect tax dollars. The collector is forced to move between many different systems
in order to complete their task. Huge amounts of time are spent switching between and
navigating these systems. Information should be at the collector’s fingertips.
And when combining the various systems why not modernize the equipment as well?
Currently the tax collector uses what is known as a dummy computer terminal. A dummy
terminal has no ability to process information for the user; they are just a monitor and a
keyboard. Because of this the collector requires two computers to complete every day

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tasks. The dummy terminals are used for investigative work but if the collector wishes to
view their E-mail, create a freeform document or pursue a Teledirect search they must
physically relocate to a second computer located at another desk. It is a waste of time,
money and equipment to require two computer terminals where one would suffice.
Instead of using dumb terminals Revenue Canada could replace them Network
Computers. Network Computers (NC) are slimmed down versions of personal computers
that work around a central server. Revenue Canada could move to a NC, which will allow
the user to complete taxation work as well as processing work at one terminal. Although
they could not store applications or data locally they could still do so on the server.
Alternately, the department could move to a NetPC, which is similar to a NC, except
that the user can store applications and data locally.
With both, the interior of the machine is sealed off. Neither is as powerful as a PC but
both will let the user complete all computing tasks at one terminal.
When updating the network install colour monitors that avoid eyestrain and promote
productivity. At the present the tax collector uses “radioactive” green screen monitors
that went out of common usage in the late 1970’s. Revenue Canada made this their
choice when instituting a computer based collection system in the late 1980’s. They are
purchased in Mexico for $200 each. When they break it’s actually cheaper to buy a new
one than fix the broken one.
A better organized system with modern equipment will increase efficiency and
hopefully revenue production. Added cost savings would include only having to maintain
one computer system instead of multiple systems and fewer computers would be needed.
If software was to be upgraded it could be done on the server which will share the
applications instead of having to upgrade the application on each individual computer.
Instead of trailing the private sector, the department should be on the leading edge.

Staffing policies

When considering any changes staffing improvements should be seriously examined.

Revenue Canada must recognize that some are suited to be collectors and some are not.
Many tax collectors are transferees from other areas of the department. Unrelated areas
such as Human Resources, Material Management and Clerical. Like many hirees they do
not want to be tax collectors they are only looking for security and a paycheque. Both
management and the union have to understand that not all civil servants are cut out to be
tax collectors.
Some tax collectors are afraid of confrontations with tax debtors. The consequence
being that they send the odd letter or make a phone call but would never take legal action.
They happily sit and wait for a reorganization to occur. Hoping for a new inventory
where they can do the same old thing. Summarize the account and BF it. They realize that
few care if a debt is collected or not. The bottom line is production and whether that
production is by actual collection or the writing off of an account it doesn’t matter as long
as a dollar toward Revenue Canada’s program is accounted for.
It is exactly because of collectors like this that the department is trying to do away
with Contact Collection Officers and replace them with clerical staff.

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The current plan is to get rid of as many Collections Contact Officers (PM-01’s) as
possible by hiring call centre clerks. The clerks will work cheaper and work more debtor
accounts because the job will be machine paced rather than work at whatever pace you
want. Revenue Canada wants to solve as many accounts as possible by call centre clerks
because regular higher priced collectors can’t or won’t do the job. If the plan works fewer
accounts will go to the Tax Office and PM-01 inventories. The Contact Collection
Officer will then be done away with by promoting some to PM-02 and not replacing
those lost through attrition. There is no other way to get rid of them. Whether the union
catches on in time and stops the job loss remains to be seen.
The result, regardless of whether more dollars are collected or not, would be huge
savings by replacing unproductive staff with fewer numbers of lower paid staff that are
forced to more productive by machine paced work.

Innovations

The tax collector must also find a way to provide innovative service while preserving
the status quo and reducing costs. There are many improvements to be made that would
reduce the cost of services already provided.
An innovation that would save tens of millions of dollars in operating costs would be
to change the method in which government payments are issued. At the present there is
an amalgam of cheques and direct deposit payments. Our government should scrap the
issuance of cheques and only issue payments via direct deposit. No more bank charges
for cashing a cheque, savings in mailing and paper costs, no more having to copy each
cheque issued and store the copy on microfiche. No more lost cheques that have to be
reissued, no more collectors requesting copies of cheques because banking information
would be on-line. No more duplicate cheque issuances. The list goes on and on but the
savings would be immense and the payee couldn’t be unhappy because they would get
there monies immediately and on time. Naturally some individuals will complain about
being forced to accept direct deposit but the huge savings to be had outweigh the petty
grievances of the few complainers.
How about expanding the sphere of payment methods past the current cash, cheque or
money order? Many taxpayers ask if they can pay their debt by credit card, entirely or
monthly payments. To date revenue Canada has refused to consider this option. Probably
because of the 5% service surcharge charged by credit card companies. If the tax
collector were to negotiate a volume deal with credit card companies certainly this
surcharge could be reduced. If debtors are given a quick and easy method to pay they are
more likely to pay. The increased revenues and the decrease in the need for human
intervention and write-offs would more than offset the cost of the surcharge.
Another option to consider would be the pre-authorized cheque or PAC plan. The tax
debtor would supply a signed blank cheque to the tax collector for a preset amount and
the bank account would be debited on a monthly basis. It’s a simple process that
increases ease of collections and again should increase the total revenues collected. There
would be no added cost to implementing this payment method.
Revenue Canada must try to be fair and innovative when they tax but also when they
come up with solutions. Case in point. Remember years back when there was a very

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public complaint of an ex-spouse having to declare alimony/child support as income

while the other spouse would get a 100% deduction against their income for making the
payments. The tax collector could solve this by allowing the payer to claim only half of
the deduction for the payments while the payee would claim only half of the income
received. Each spouse would get a tax break and the lost tax revenue would be negligible.
If one was to ask the employees of any business how to improve the product or service
hundreds of suggestions would and could be made. And tax collection is no different.
There are many ways in which Revenue Canada can improve tax collection and decrease
expenditures. But tax collection isn’t an ordinary business it is a government monopoly
and governments, instead of trying to make do with what they have or better use what
they have, try to increase revenues when they need money by increasing the numbers and
rates of taxes. High taxes need large bureaucracies to run but large tax revenues are an
indication of poor money management. Fiscal shortcomings contribute to poor economic
performance that in turn reduces revenue. What future tax initiatives could be in store for
Canadians?

The Future

One future source of revenue could be the taxing of electronic transactions. A “bit” or
“byte” tax on the flow of electronic data could rake hundreds of millions of dollars if the
flows are tracked and reliably reported.
Electronic commerce is growing by leaps and bounds. Already Canadians are using
the Internet as a means to avoid provincial tax and the GST. Why not? It’s a 7 to 15
percent savings depending on your province of residence.
Currently the purchaser is expected to assess their purchase and remit this amount to
Revenue Canada who among us pays this if the tax collector does not ask? Most
Canadians who buy in this manner will wait patiently for the tax collector to request
payment. But the tax collector rarely contacts for payment.
Presently there is a tax loss through unreported excise taxes and duties because the
middleman has been cut out. The middlemen are the people who report the transactions
to Revenue Canada. When they disappear a source of information for investigators also
disappear. Not only does electronic commerce decrease tax revenues but also electronic
money will serve to make tax evasion easier because it can be anonymous while being
more convenient. The solution may be to put a bit/byte tax on the flow of information.
To raise monies locally Canadian cities might consider imitating their American
counterparts and place a wage tax on non-resident professional athletes and performers.
A tax in the order of one to two percent of the visiting athlete’s one day’s wages.
This may not sound like much but such a levy would raise at least one million a year
in cities with sports teams. The money raised might be used to subsidize the local team
and entice them into staying in Canada. Why help a millionaire sports franchise? Every
person that attends a sporting event will put at least $75 per game into the local economy.
The cost of tickets, transportation, parking, babysitting, food and souvenirs. This
spending generates tax dollars and employs people. If sports teams are chased away there
is some loss in revenues at the municipal, provincial and federal levels.

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Sure, some of this money will still enter the economy but at the very least Canada will
lose the tax revenue generated by these millionaires’ salaries but worse still; thousands of
people are put out of work as a result of the departure. Lose a sports franchise and lose a
thousand related jobs, their incomes and the related taxes. It’s a snowball effect.
A tax initiative could also be put in place to tax the salaries of foreign movie actors
that work in Canada.
Now industries related to movie making always whine saying that such a tax would
cause ‘stars’ to refuse to work in Canada. In turn this would result in the demise of the
Canadian movie and television industry. Not true. Because of tax treaties that eliminate
dual taxation these people would pay no additional taxes. Americans that pay tax on
income earned in Canada to the Canadian government receive a tax credit for the amount
paid from the American government. The result is little or no extra tax paid. The only
difference is the tax would be paid to our government as opposed to a foreign
government. America already taxes Canadians earning incomes in the United States so
we should reciprocate.
Another area where Canada might soon be forced to mimic are American counterparts
is having non-resident Canadians file income tax returns.
At the present the IRS requires that Americans living in other countries to file annual
U.S. tax returns to report their worldwide income. Even if they have no income from
American sources.
If our government is looking for more revenue they need to look outside our borders.
But how could this be enforced if the target is residing outside of Canada? Again we
would imitate the Americans. The IRS is beginning to link passport renewals to income
tax compliance. So should we. If you don’t file your tax returns up to date, and pay, your
passport or visa will not be issued or renewed. This sounds harsh but there are countries
that refuse to let their citizens leave when they owe even a dollar of tax. If you can’t
afford to pay your taxes how can you afford to travel abroad.
I’m afraid you’ll laugh at this but the sex trade is another area that should be brought
under scrutiny. Prostitution profits represent, conservatively, over one billion dollars a
year in untaxed income. Much of these earnings are funneled into the underground
economy or criminal activities. Legalizing prostitution would stop this outflow of funds
and could be managed so as to be a fiscal boon to society. I’m not saying I agree with
prostitution but you have a better chance of putting a farmer out of business than you do a
prostitute.
Governments could license the trade, set an age limit, enforce mandatory health
checks and tax the income and tips earned via personal income tax, the provincial taxes
and the Goods and Services tax. The taxes generated would in the hundreds of millions of
dollars a year for all levels of government.
Further, by legalizing the sex trade a bite is taken out of crime, youths can be legally
steered away from the trade and health matters can be addressed before they become
serious. This last one could translate into major savings for our healthcare system.
Police monitoring would no longer be required. Local law enforcement would have the
same budget but one less “crime” to monitor. They could beef up enforcement in other
areas at no extra cost. Fiscal benefits abound everywhere it just remains to be seen who
will have the guts to implement an unpopular solution.

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The same could be said for the illicit drug trade. By legalizing and taxing non-
offensive crimes revenue is produced and a method of funding criminal activities is
eliminated.
Is the government getting ready to tax our lottery winnings?
If you purchase lottery tickets every week whether it be Super7, ProLine or whatever a
loophole exists where the tax collector can assess you for any income earned. How can
they do this? The Income Tax Act clearly sates that lottery winnings are not taxable.
If you purchase lottery tickets every week or just about every week the tax collector
can argue that gambling via the purchase of lottery tickets is your vocation. If an
individual makes a vocation of gambling, meaning that they systematically carry this on
throughout the year, the tax collector will argue that this is your job and as such the
income earned at this job is taxable income.
This line of thought would mean profits from casinos, lotteries and betting could be
subjected to tax. In the United States these sorts of winnings are already taxed so I would
not be surprised to one day see Canada follow in their footsteps.
But there is a plus side to this. If Canadians can be taxed on any income earned from a
lottery than you would also have a host of new deductions to declare, such as travelling
expenses, accommodations and meals to offset any income so earned. But best of all your
losing lottery tickets would become a tax-deductible loss.
At the present personal income taxes are the biggest sources of revenue for the Federal
Government yet it is still thought that fifteen to twenty percent of total personable taxable
income goes unreported. Maybe the simplest way to increase revenue would be to
introduce tax reforms instead of raising taxes or levying new ones. One method of reform
commonly discussed is the flat tax rate.
With a flat tax rate all income tax returns would be one page. Just add up all your
income, multiply it by the current tax rate and remit that amount. Simple, No arguments
over deductions or losses and no appeals. Either its income or its not. If the playing field
were leveled it would reduce the incentive to hide income from the tax collector. Less
paperwork and easier to understand returns would increase filing compliance and reduce
administrative costs.
Changing the tax base from that of income driven sources towards the taxing of real
property and consumption taxes is another measure with merit.
Income can be hidden but real property is difficult to hide and consumption cannot be
hidden. Even invisible income has to be spent. Consumption taxes would always catch
such expenditures.
Who would be taxed under a scenario of increased real property and consumption
taxes? Individuals with the means to purchase. Those with little money to spend would
have no fear of being overly taxed.
Maybe the key to successful taxation is to take real punitive measures against those
who do not comply. Enforce compliance. Filing and paying. Those who don’t comply
aren’t stealing from a faceless government. They are taking your healthcare, your
children’s education and the infrastructure of everyday life. Roads, parks, schools and
hospitals. These evaders are stealing from you, your neighbors and your family.
The most important thing Revenue Canada could do to improve their own
effectiveness is to keep statistics.

386 ©Alan Baggett

 In Conclusion

As mentioned previously I have made requests many different types of numbers only
to be told they don’t exist. And it took six months for Revenue Canada to tell me such
numbers do not exist.
No statistics are kept on the total number or total dollars written off, no figures are
kept on ministerial complaints, Revenue Canada has no idea as to how many
garnishments are sent out, how much these garnishments collect and how many are
unsuccessful.
Similarly they have no idea as to how many Requirement’s for Information are sent out
each year, how many jeopardies are performed, how many memorandum assessments are
issued or how many writs are requested in a calendar year. The Auditor General himself
requested years ago that Revenue Canada keep a tally of fairness requests as to numbers,
dollars forgiven and types of decisions. Did they listen? No. The only numbers available
are how much revenue is produced each year and no discernment is made as to voluntary
or enforced collection or whether the revenue produced was by manner of a write-off or
deferral.
If keeping no statistics is irresponsible and Revenue Canada keeps no statistics than
Revenue Canada is irresponsible. Until statistics such as these are kept and analyzed
revenue production will only increase because our population is increasing, taxes are
increasing and the write-off of tax debts is increasing. Not because more Canadians are
paying their taxes.
One unwritten rule of Revenue Canada is the outright refusal to make available any
information whatsoever unless such a release would strengthen their position. This is
especially true when the information could exonerate the tax debtor. If you doubt this
reconsider the Dial Drug Store court case discussed in Chapter 3, Your Right of
Confidentiality. Tax collectors do not care if their pound of flesh comes from the guilty
or the innocent so long as it is paid.
If the agency or the federal government ever were or still are serious about protecting
the rights of Canadians they would create an ombudsman office specifically to deal with
the CRA. An ombudsman is one who impartially investigates complaints and possible
injustices. If Revenue Canada were to make public their policies and procedures instead
of manipulating them to arbitrarily enforce tax collection they would be forced to abide
by them.
Perhaps the tax collector’s greatest fault is that they are not conscious of their faults.
He is all fault who has no fault at all.
Finally, perhaps politicians should be taught not to tax everything but to tax
everything only as necessary. This might be the most useful reform of all.

(Author’s note: this essay was originally written early in the year 2000.)

387 ©Alan Baggett

 Appendix

Appendix A

388 ©Alan Baggett

 Appendix

The Organization of Tax Collections

How is the Collection Section of the typical Taxation Services Office (TSO)
organized?
Each TSO is responsible for collecting the tax accounts for a geographic area such as a
Halifax or a Calgary. The number of tax collectors in the TSO will depend on the size of
the population in this area and the number of tax debtors residing therein. Urban areas
tend to have more tax debtors than more rural area so a Toronto or Montreal area TSO
will have many more tax collector’s than the Northern British Columbia and Yukon TSO.
A Director heads each TSO. Reporting to him or her are a number of Assistant
Directors. Each Assistant Director manages a different responsibility such as Special
Investigations, Audit or Enquiries. For tax collectors the Assistant Director of
Verification and Collections is their authority.
The Verification and Collections is further sub-divided into three sections.
Personal Collections (T1) for individual tax debtors.
Corporate Collections for the collection of business taxes (T2), payroll taxes (T4) and
the Goods and Services Tax (GST).
And finally Sundry Collections which covers everything that does not fall into the first
two categories such as Estate taxes (T3), fairness rulings, personal bankruptcies, various
penalties and sundry taxes.
Each of these three divisions is subdivided once again into collection teams.
Collection teams house the nemesis of some Canadians, the tax collector.
On the page immediately following find the organizational tree which illustrates how
the typical collections Section of a TSO is arranged.
The three collection Sections Sundry, Consumer (T1) and Commercial (T2 and Trust
Amounts) are responsible for collecting your tax arrears. Each Section divides the
alphabet between their teams as illustrated by the team boxes found directly below and
connected to the Section head.
Each team box notes the leader of the collection team (Team Coordinator), the
revenue stream(s) they are responsible for collecting, the number of employees on that
team and the “alpha-split” the team is responsible for, e.g. CF to DZ.
For this Taxation Services Office the collection team has one PM-03 (Collections
Investigation Officer), four PM-02’s (Collections Enforcement Officer) and the
remainder of the officers are PM-01’s (Collection Contact Officers).
Example of how a TSO might divide their alpha-splits:

389 ©Alan Baggett

 Appendix

Assistant Director
of
Collections

Training Manager of Manager of Manager of Team

Coordinator Sundry Consumer Commercial Development
Coordinator
Collections Collections

Team Team Coordinator Team Coordinator

Coordinator CINDAC 16 Source/T2/GST 17
Rulings 14 A to CE A to BU

Team Team Coordinator Team Coordinator

Coordinator CINDAC 16 Source/T2/GST 17
Payroll Audit 15 CF to DZ BV to DE
Team Coordinator
Cindac 16
Team Team Coordinator Team Coordinator
Coordinator CINDAC 16 Source/T2/GST 17
Payroll Audit 15 E to GI DF to GZ

Team Team Coordinator Team Coordinator

Coordinator CINDAC 16 Source/T2/GST 17
Payroll Audit 15 GJ to LZ HA to MC

Team Team Coordinator Team Coordinator

Coordinator CINDAC 16 Source/T2/GST 17
Payroll Audit 15 MA to PI MD to SZ

Team Team Coordinator Team Coordinator

Coordinator CINDAC 16 Source/T2/GST 17
Fairness 12 PJ to TZ TA to ZZ

Team Team Coordinator Team Coordinator

Coordinator CINDAC 16 Source/T2/GST 17
Sundry 8 UA to ZZ Numbered Corp’s

390 ©Alan Baggett

Appendix

391 ©Alan Baggett

 Appendix

Immediately following the typical organizational tree (page 344) is an example floor
plan for Revenue Canada Collections graciously provided by the Toronto North Taxation
Services Office (page 345).
The typical tax collector works out of a tiny windowless cubicle. Team Coordinators
get the window seats. As noted previously their primary tax collection equipment consists
of a keyboard and green screen monitor. Other than that they share their cubicle with a
chair, a desk, an overhead shelving unit and a small filing cabinet. All vying for the
limited space available (as shown on the floor plan).
For those who complain that tax collectors are an ornery lot maybe it’s not just the
personality of the employee. Maybe it’s the job itself or maybe it’s the sometimes
comically Dickensian workhouse conditions they are forced to endure.
When I was in the GO train one evening heading home from work I heard two ladies
in the seats immediately behind me discussing Revenue Canada so I eavesdropped on
them. I know its wrong and I apologize but what the one lady said fascinated me. A tax
debtor herself she said that a Hamilton based tax collector had confessed to her about
hating the job. More telling was the claim that most tax collectors feel the exact same
way. They sympathize with Canadian tax debtor’s who are just like them. A house, kids,
mortgage, family woes and they hate having to demand money from them. But they stay
because while the pay is only average the benefits are great.
Maybe this is why, today, some Canadians who choose not to pay their taxes quite
often are never forced to pay. Because, while some tax collectors are overly zealous in
their duties, many more are just punching the clock in order to get a paycheque. Today
there are many tax collectors who really do not care if you pay your tax debt or not.
Returning to the TSO a Team Coordinator or PM-04 heads the typical collection team.
The Team Coordinator acts as a gofer for management and the collection team staff,
informing the team of management directives and updating management of team
progress. Individual team members rarely have any interaction with managers above the
Team Coordinator level. Other duties of the PM-04 include personnel reporting and
signing timesheets.
As I am certain you have guessed by now some managers are not the best when it
comes to managing. Late one afternoon just as I was about to head home my boss catches
me and says, “ Al, I need these collection statistics compiled before you go.” So I look at
him and I’m thinking why didn’t you ask me earlier but I say, “Can I have them for you
first thing tomorrow morning?” Without even hesitating he says, “If I wanted these stats
tomorrow I would have asked for them tomorrow”.
Next in line on the team is the PM-03 or the Collection Investigation Officer (CIO).
Their job is to handle an inventory of high dollar accounts. These accounts have tax debts
that are over $100,000 up into the many millions of dollars. The PM-03 will handle
fifteen to thirty debtor accounts at any one time.
The mandate of a CIO is to handle complex accounts regardless of the dollar value but
somewhere along the way this has been forgotten. The emphasis today is solely on the
debtor account’s dollar value. If the dollar value is high it must be complex otherwise it
would not be high. This results in lower dollar complex accounts being handled by tax
collectors who don’t have the experience to work the account so they bury it in favour of
ones that might be easier to solve. As a result complex low dollar accounts end up being
written off.

392 ©Alan Baggett

 Appendix

Ranking directly below the CIO is the Collections Enforcement Officer (CEO) at the
PM-02 level. A CEO will have usually handle between eighty and one hundred and
twenty debtor accounts on average. They handle tax accounts up to $100,000 that may
have indicators of a mild complexity. Once again it seems that dollar value is much more
important than complexity in determining who works the account.
A CEO’s accounts may not be solved from the office and could need field work. Field
work or a field call means the CEO will visit your home or work, talk to neighbors, co-
workers or a landlord and will investigate your assets such as your house, car, cottage or
investments. A team usually has three or four CEOs, depending on the size of the office.
The very lowest rung of tax collector is the PM-01, the Collections Contact Officer
(CCO). A CCO will handle three to five hundred and debtor accounts at one time. Their
tax debts are rarely higher than $30,000.
The CCO will make recommendations for legal action and deletion, send legal
warning letters, requests field calls and answer incoming collection enquiries generated
by local calls or 1-800 lines. While working in Ottawa I was told by the civil servant that
went on to a high ranking job in the first national Revenue Canada Call Centre in Ottawa
that currently (1997) only twelve percent of the incoming 1-800 calls were answered. I
was stunned and asked why wasn’t something being done. I was told that they did not
have enough employees and besides the unresolved enquiries would eventually end up in
the caller’s local TSO. I do not know if the National Call Centre improved this
abominable statistic but I certainly hope so. They could hardly do worse.

Example alpha-split from a CINDAC collection team:

Collector Position Alpha-split Phone Office Hours

F. Arturo PM-04 461-1-5 566-6616 8:00 – 4:00 16
B. Melater PM-03 Maa - Pia 566-6049 9:00 – 5:00
VACANT PM-02 Maa – Mea 803-7229 9:00 – 5:00
H. Jazz PM-02 Meb – Nou 566-6664 8:00 – 5:00 C
L. First PM-02 Nov – Ozz 803-7498 7:30 – 4:30 C
B. Mei PM-02 Paa – Pia 566-6617 9:00 – 5:00
M. Lightly PM-01 Maa – Mac 803-2120 8:00 – 5:00 C
P. Gustel PM-01 Mad – Mea 803-7321 8:30 – 5:30
S. Froute PM-01 Meb – Moc 615-2630 8:00 – 5:00 C
VACANT PM-01 Mod – Mue
D. Romano PM-01 Muf – Nab 803-7567 7:30 – 3:30
W. Gretzky PM-01 Nac – Now 566-6616 7:30 – 5:00 C
R. Howard PM-01 Nox – Oat 566-6050 8:00 – 5:00 C
P. Gravelle PM-01 Oau – Ols 615-2995 8:30 – 5:30
S. Ballestros PM-01 Olt – Ozz 566-6040 8:30 – 5:30
M. Leigh PM-01 Paa – Pei 803-7533 8:00 – 5:00 C
VACANT PM-01 Pei – Pia

This collection team handles T1 tax debtors with the first three letters of their last
name falling between Maa and Pia.

393 ©Alan Baggett

 Appendix

The CIO will handle all the high dollar complex cases that fall in this alpha split.
Notice how the same alpha-split (Maa-Pia) has been sub-divided between the four CEO’s
or PM-02’s. This is because there are many more debtor tax accounts at this level for
collection. The first CEO handles tax debtors whose last names begin with the letters
falling in the range of Maa-Mea, the second Meb to Nou and so on.
Finally there is the CCO or PM-01. At this point the collection team’s alpha-split has
been sub-divided eleven times between Maa and Pia and these collectors are working
anywhere from 300 to 500 tax accounts each. The first CCO handles tax debtors whose
last names begin with the letters falling in the range of Maa to Mac all the way to the last
collector who handles the end of this teams alpha split, Pei to Pia.
Notice the ‘VACANT’ notation. These are alpha-splits that currently do not have a tax
collector to work. The staffing problems as outlined in the chapter “Professional
Advancement” are one of the reasons for unworked inventories of debtor tax accounts as
is union interference. If you are an extremely fortunate debtor your tax account will fall
into one of these inventories.
This final anecdote illustrates something that can only happen in a federal unionized
environment. Before beginning I should point out that the job description for a CCO does
not include completing “complex” legal actions such as requesting certification of a tax
debt an Execution, nor is a CCO allowed to complete a field call. But CCO’s in the
Toronto West Office (Mississauga) were conducting field calls because their requests
were being ignored, delayed or completed poorly. As you now know tax collectors
receive expense mileage money, meal money as well as incidental expenses when away
from the office.
The CEO’s complained because they wanted the extra income from expense monies
provided by the fieldwork. The union grieved the issue and forced management to stop
CCO’s from completing field calls because it wasn’t in their job description. The miffed
CCO’s then refused to complete requests for Executions. Instead they transferred all writ
recommendations to the CEO’s for completion. This resulted in a huge transfer of
accounts from CCO inventories and buried the CEO’s under a mountain of work they
couldn’t come close to handling. The TSO was forced to hold a competition to promote
CCO’s to CEO’s. This anecdote is typical of the mentality of many civil servants and tax
collectors, never do more or even as much as the job asks.
The following diary entry was made on a tax account Revenue Canada (MME)
ADJ410316 and sums up perfectly how the average civil servant thinks.

09 May 95 – ZZCHALL(1262)

It has come to my attention that some of the PM1s are disgruntled about the success of
the PM2 grievance regarding field calls. Where we can all sympathize with the lack of
raises around here, and perhaps some peoples discontentment with their job descriptions,
there is a much bigger picture involved. There is no difference in the 1s complaining
about the 4s upstairs than there is the 2s grieving the 1s. It is VITAL that we work the
jobs we were hired to do and no more. It skews the stats on how many positions are

394 ©Alan Baggett

 Appendix

required to handle the workload, it defacto creates a sub-class of PM1s that won’t/can’t
go out, it indicates to Ottawa that the job is overpaid at the PM2 level.
Lets be cognizant that there are bigger issues down the line with more cutbacks coming.
Look no further than client assistance to see what might be happening here. You will get
no thanks or extra status for doing more nor will you have any better chance at a
promotion.
If people have problems dealing with the issues raised, please SEE ME. (please whoever
you are no more anonymous notes, it shows no class at all)

This is how many civil servants think: At the very most do what the job requires but
no more. It is sad when employees or a union will blatantly advise their co-workers to do
as little work as possible. As a result some lucky Canadians escape payment of some or
all of their tax debt.
And who really gets hurt by this? You do.

395 ©Alan Baggett

 Appendix

The Structure of Tax Collections

The following three flowcharts delineate how Revenue Canada is structured and
managed from the highest non-elected official, the Deputy Minister, down to the TSO
level.
The highest-ranking member of the Canada Revenue Agency is the Minister of
National Revenue.
The highest-ranking civil servant, the Deputy Minister, is shown as the head of the
Department as he or she is responsible for the day-to-day workings of the Department.
Reporting to the Deputy Minister are the various Assistant Deputy Ministers (ADM) who
each take charge of a different Responsibility of the Department such as Appeals,
Management or Policy and Systems to name but a few.
The first chart (pg. 351) shows how each of the country’s six Collection Regions is
structured for working.
The second chart (pg. 352) outlines each of the different Responsibilities that make up
Revenue Canada. The Policy and Systems branch is responsible for administering the
collection of tax arrears so this is where you would find the tax collector.
The third chart (pg. 353) is of the Policy and Systems branch. Policy and Systems is
responsible for all functions of tax collection. These functions are Investigations,
Collections, Audit, Information Systems and Assessing.
The final chart (pg. 354) is the structure of your local Taxation Services Office once
again with the emphasis on collections. The Director, to the Assistant Director of
Verification and Collections and the division of the different revenue streams, Sundry,
Personal and Commercial.

396 ©Alan Baggett

 Appendix

Deputy Minister

ADM Regional Operations ADM Regional Operations ADM Regional Operations ADM Regional Operations ADM Regional Operations ADM Regional Operations
Atlantic Region Quebec Region Northern Ontario Region Southern Ontario Region Prairie Region Pacific Region

Director, Trade Admin Services Director, Trade Admin Services Director, Trade Admin Services Director, Trade Admin Services Director, Trade Admin Services Director, Trade Admin Services
Atlantic Region (Halifax) Quebec Region (Montreal) N. Ont. Region (Ottawa) S. Ont. Region (Toronto) Prairie Region (Win. or Cal.) Pacific Region (Vancouver)

Director, Customs Border Quebec Office Director, Customs Border Windsor Office Winnipeg/Calgary Office Director, Customs Border
Services, Atlantic Region Services, N. Ontario Region Hamilton Office Services, Pacific Region
Director, Customs Border London Office Director, Customs Border
Nfld. And Labrador District Services, Quebec Region Ottawa District Services, Prairie Region Metro Vancouver District
Central N.B. District St. Lawrence District Vanc. Int. Airport District
Northern N.B. District Sault Ste. Marie District Director, Customs Border Pacific Highway District
Southern N.B. District Montreal District Fort Frances District Services, S.Ont Toronto Region Winnipeg District West Coast/Yukon District
Nova Scotia District Dorval-Mirabel District Emerson District
Thunder Bay District Okanagan & Kootenay
Montregie District North Portal/Regina District
Estrie District Pearson Commercial Central Alberta District
Pearson Passenger Northern Alberta District
Director, St. Johns TC Quebec District
Director, Ottawa TC Metro Operations Southern Alberta District Director, Surrey TC
Inland Operations
International Mail
Director, Summerside TC Director, Shawinigan Sud TC Director, Sudbury TC Director, Vancouver TSO
Director, Winnipeg TC

Director, Nfld. and Director, Jonquiere TSO North Bay TSO Director, CBS, Windsor/Niagara Director, Vancouver Island TSO
Labrador TSO Director, Winnipeg TSO

Director, Montreal TSO Director, Ottawa TSO Detroit Canada Tunnel Director, Burnaby TSO
Director, Bathurst TSO Ambassador Bridge Brandon TSO
St. Clair District
Director, Laval TSO Director, Kingston TSO Niagara Falls District Director, Northern B.C. TSO
Director, Moncton TSO Fort Erie District Director, Saskatoon TSO
Metro Operations
Director, Saint-Hubert TSO Director, Belleville TSO Whitehorse TSO
Director, Saint John TSO Director, Regina TSO

Director Sherbrooke TSO Director, Peterborough TSO Director, Toronto Centre TSO Director, Southern Interior TSO
Director, Halifax TSO Director, Calgary TSO

Director, Quebec TSO Director, Thunder Bay TSO Director, Toronto East TSO
Director, Sydney TSO Red Deer TSO
Lethbridge TSO
Rimouski TSO Director, International TSO Oshawa TSO Director, Toronto West TSO
Director, Charlottetown TSO

Director, Chicoutimi TSO Director, Toronto North TSO Director, Edmonton TSO Director, Windsor TSO

Director, Rouyn TSO Barrie TSO Yellowknife TSO Director, London TSO

Director, Trois Rivieres TSO Director, Hamilton TSO

Director General, Regional Director, St. Catherines TSO Director, Kitchener/Waterloo

Excise & GST Liaison Office

397 ©Alan Baggett

 Appendix

Deputy Ministerial Level

Deputy
Minister

ADM ADM ADM ADM ADM Senior General Senior Adviser

Management Policy and Legislative & Communications Of Counsel Fiscal Policy
Services Systems Intergovernmental & Corporate Appeals Justice Dept. & Technical
Affairs Development Legal Services Interpretations

|
ADM ADM ADM (2) ADM ADM
Regional Operations Regional Operations Regional Operations Regional Operations Regional Operations
Atlantic Quebec Northern Ontario Prairie Region Pacific Region
&
Southern Ontario

398 ©Alan Baggett

 Appendix

Systems and Policy Branch

ADM
Policy and Systems

Special Advisor Director General Director General Director General Director General Director General
to the Compliance Collections Audit Information Assessing
ADM Research & & Accounting Programs Systems & Enquiries
Investigations
Director Director Director Director
Director Source Audit Programs Computer Services Returns
Compliance Deductions & Assessing Processing
Research
Director
Regional Director Director Director Individual Tax Director
Investigations Systems
Revenue EDP Audit Examination
(Atlantic & Quebec)
Programs Applications
Director
Business Tax
Systems
Regional Director Director Director Director
Investigations Collections Special Enquiries &
(Ontario & Central) Director
Audits Informatics Client Assistance
Support

Regional Director Director Director

Investigations Director Office
Audit Systems & Tax Reform &
(West)
Applications Information Centre T1 Processing

Chief
Director EDP Financial
International Management &
399 ©Alan Baggett
Audits Administration
 Appendix

Structure of a Taxation Services Office

(Emphasis on Collections)

Director of Taxation

Public Affairs Office

Assistant Director Assistant Director Assistant Director Assistant Director Assistant Director Assistant Director
of Appeals of Audit of Collections of Internal Audit of Finance of Personnel

Training Manager of Manager of Manager of Team

Coordinator Rulings Consumer Commercial Development
Collections Collections Coordinator

Note:
The Rulings Manager determines rulings related to Canada Pension Plan and Unemployment Insurance decisions as well as payroll
audits, Sundry and Fairness. Consumer collections relate to personal individual tax collections. Commercial Collections Manager
handles business related collections such as source deductions, T2 and GST.

400 ©Alan Baggett

 Appendix

Appendix B

401
 Appendix

PACIFIC REGION
MEMORANDUM
Date: December 23, 1998

To: Regional Program Advisers - Birnie

Lum – V.E.C.R., Vince
Timm – V.E.C.R., Jim
Lawson – Appeals/Investigations Bob
Naim – Client Services, Tim
Knight – Surrey T.C.

Pacific Region

From: Ken Kerr – Program Adviser

Revenue Collections

Re: TAX PROTESTS AND SIMILAR DIFFICULT

SITUATIONS / FLOW CHART

Cc: David Harvey, Security Paul

Pelletier, D.O.J.

As I think we are all aware, the Tax Protests and Similar Difficult Situations is
no longer just a Revenue Collections Issue. They have hit a number of other
Divisions throughout the Region most notably V.E.C.R.

I have prepared the attached flow chart that I’d appreciate you sharing with
your Assistant Directors. Hopefully, it will assist them in dealing with this
issue. I have vetted it by security who agree with its contents. As you will
note; it gives all Regional Advisers a more active role in terms of:

• Acting as the liaison person with D.O.J.

• Ensuring that the HQ Function is aware of what’s transpiring and
• Updating the rest of your A.D.s as to events to date.

I’ll still act as D.O.J.s and Securities Regional contact person and will share
with you any information that I obtain,

Securities role hasn’t changed. All security incidents are to be reported to

them. On a periodic basis; they will prepare detailed memorandums updating
Senior Management of the events to date and where we’re at in terms of
proposed definitive actions.

402
 Appendix

The Department of Justice has assigned Paul Pelletier to handle this

portfolio on a full time basis. Paul has been receiving information from myself
and Security regarding the Employee Questionnaire, video and audio taping
etc. He’s been tasked with the responsibility of looking for opportunities to
take civil action through the courts.

Both Paul and Dave have met with Collections and V.E.C.R. staff at the
Vancouver and Burnaby locations and explained to them what’s been
done regarding this issue.

Again, hopefully this chart will be of some assistance. This situation is a very
difficult one for anyone to handle. Staff need all the support we can give them.

I can assure you that Senior Management, Security and Justice are doing
everything possible to manage this issue in a proactive manner.

Ken

403
 Appendix

Tax Protests and Similar Difficult Situations Flow Chart

Security Procedures

Conducting Investigations Roles and

In Tax Office or Responsibilities
in the field

Follow the Department Security

Guidelines manual – report David Harvey
incidents to Security (???-????)

If you know in advance Security Security consults

client’s coming to Tax Office. will prepare with appropriate
Advise security all correspondence responsible parties

Don’t sign Employee Questionnaires Security will prepare

Don’t allow ongoing progress
video or audio tapings. up-dates

Pass correspondence and Department Of Justice

purpose to your Regional Paul Pelletier
Advisor who will send to DOJ. (???-????)

DOJ will give Examine Offer advice

update on how all incidents for on how to reply to
to respond possible court actions correspondence

If situation becomes Regional Advisors Act on

unpredictable end Act on DOJ opinions. DOJ’s opinions.
the interview Update their HQ Functions Organize responses

Regl Advisor Regl Advisor Regl Advisor Regl Advisor Regl Advisor
Surrey TC Client Services VECR Appeals/Invest Rev. Collection
T Knight B Nalm Lum (???-???) Jim Lawson Ken Kerr
(???-????) (???-????) Timm (???-??) (???-????) (???-????)
405
 Appendix

Now, to be quite honest this memo would not be that interesting – it simply explains to tax employees how to act and react in certain
situations – were it not for one big thing. Follow the left branch of the flow chart down to the box where it says:

‘Don’t allow video or audio tapings’.

That’s right, the CRA will not allow you to video or audio tape their employees while on the job.
You see when the CRA questions you about your (or another’s) tax affairs they travel in two’s not only because there is greater
safety in numbers but to doubly confirm what you say. Each of the questioners will take notes and if both write down what you say
then there can be no mistakes, can there? Because if they wrote it down then you must have said it. After all they are not going to go
back to the office and confer and then rewrite their notes and then write up their reports so that they match are they? And of course
since you’re all alone, scared and nervous, and not taking notes there is no way for you to deny what they have written because you
are alone and likely not taking any notes at all. That’s why your best defense against any unfortunate ‘mistakes’ is to electronically
record (video or audio) your meeting with a tax employee. Only then you can be certain to have an accurate record of what has
transpired regardless of what they write.
But what happens if the tax employee finds you are recording the meeting in order to protect yourself?
They will ask you to stop saying, “You’re not allowed to do that. It’s Department Policy”.
And if you refuse to stop the tape from rolling?
They will immediately terminate the meeting. I.e. they get up and walk out.
But plain and simple any tax employee who states such is lying to you.
Special Investigations Taxation Operations Manual 11(10)1.3 (1) ‘Tape Recording of Interviews’ states that the mechanical tape
recording of interviews is acceptable and that ‘Such practice [taping] enables us [the CRA] to ensure the accurate recording of
questions posed and answers given during an interview.’
In short, if the electronic recording of conversations is permissible for tax employees then it must also be permissible for the people
they are conversing with.
You.
And if you are ever faced by such a situation just be sure to clearly (and politely) advise the taxman that you will be electronically
capturing your conversation. If they don’t wish to continue don’t try to pressure them into staying, just allow them to quietly walk
away.
But I wonder why the CRA publicly holds one thing (no electronic recording) yet their private policies and procedures manual
privately states just the opposite when it is for their benefit and that of their employees?

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Public Service Alliance of Canada

Alliance de la Fonction publique du Canada

By fax – 952-1547

November 28, 2002

Mr. Rob Wright, Commissioner,

Canada Customs and Revenue Agency
Connaught Building,
555 MacKenzie Street, 7th Floor
K1A 1L5

Dear Mr. Wright

RE: The detax/untax movement

During our meeting on November 6th, 2002, I raised the issue of the
detax movement and indicated that the PSAC and our Components, the
Union of Taxation Employees and Customs Excise Douanes Accise, will be
launching a campaign against the detax movement in the very near future.

During our very brief introductory discussion on November 6th, 2002,

you indicated that the CCRA is proud of the work that it has done to protect
its workforce and our members from the destructive actions of the detax
movement and its supporters. I agree that the CCRA has taken the issue
seriously and worked to ensure the health and safety of our members in
this regard on a case-by-case basis. That said, I believe that we have a
collective obligation to be proactive and challenge the movement and its
primary advocates in advance of the inevitable challenges that they make
to the legitimate rights of tax collectors to collect taxes levied by the state.

As a result, I am proposing that representatives of the PSC and the

CCRA meet to discuss the implications of the detax movement and

406
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determine whether there are actions that we can jointly undertake to

challenge the detax movement and its supporters before they confront our
members and your workforce during the course of their work. I note, for
example, that the detax movement maintains a web presence and uses
the internet to incite people against CCRA workers and other official
representatives of the state. That being the case, I would like our
representatives to discuss a common legal strategy aimed at undermining
what I regard as hate literature that is perpetrated by the detax movement
and aimed at state agencies and their workforce.

I should let you know, as well, that PSAC’s campaign against the
detax movement will be expanded beyond the specific impact that it has
on our members employed by the CCRA.

In September of this year, I convened a meeting of Union

representatives from Quebec, Australia, New Zealand and Great Britain
who were in Ottawa to attend the World Congress of the Public Services
International to discuss the challenges that the detax movement raises,
share experiences with the detax/untax/anti-tax movement, and to explore
the possibility of working together to combat the movement and its impact
on state workers who are mandated to collect taxes. International work on
the issue at the level of Union representatives will continue.

In addition, and as a union representing a great many public and

para public sector workers, we are acutely aware of the fact that the
ultimate objective of the detax movement is to erode the state’s ability to
finance needed public services. As a result, and as an important part of
our campaign against the detax movement, we will attempt to engage the
Canadian public on the issue.

Sincerely,

Nycole Turmel
National President

c.c. Ron Moran

Betty Bannon

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 Appendix

Canada Customs Agence des douanes

and Revenue Agency et du revenu du Canada

Assistant Commissioner Sous-commissaire

MEMORANDUM FOR MR. ROB WRIGHT

SUBJECT: The Public Service Alliance Campaign

Against Tax Protestors (Detax) .

You will recall that in the attached letter dated November 28, 2002,
Nycole Turmel requested a meeting to discuss the implications of the tax
protestor movement and actions that could be jointly undertaken to challenge
this movement and its supporters. I wish to apprise you of the outcome of the
meeting that took place with Nycole Turmel, Betty Bannon, and Ron Moran, on
January 9, 2003.

During the meeting, Ron Quiney spoke to the actions CCRA has
taken so far on this issue and a productive exchange of views occurred. It was
agreed that continued dialogue would be beneficial, particularly discussion on
further legal actions against the more repellent uses of the Internet. To this end,
there was agreement to convene a small meeting of our respective legal
counsels.

I have attached for your signature, a reply to Ms. Turmel’s letter of

November 28, 2002. I am available to discuss this matter in more detail at your
convenience.

D.G.J Tucker
Assistant Commissioner
Human Resources Branch

Attachment

408
 Appendix

Canada Customs Agence des douanes

and Revenue Agency et du revenu du Canada

Commissioner Commissaire

Ms. Nycole Turmel

National President
Public Service Alliance of Canada
233 Gilmour Street
Ottawa, Ontario
K2P 0P1

Dear Ms. Turmel:

Thank you for your letter of November 28, 2002, concerning the
actions of a small number of Canadians that take extreme measures
to protest taxes. I am delighted to hear that a productive exchange of
views took place on January 9, 2003.

I am proud of the progress CCRA has made in the last two

years, both in taking steps to protect our employees from the
unacceptable tactics employed by a very few protestors, and in publicizing
the myths about this subject to help others understand their obligations as
citizens of this great country.

I want to reiterate the offer made in the meeting to continue

the dialogue on this subject, and in particular how we might take further
actions against the more odious uses of the internet. I understand that
there was an agreement to convene a small meeting of our respective legal
counsels and, in this regard, I would ask that your representatives contact
Roderick Quiney, Deputy Assistant Commissioner, Assessment and
Collections Branch. He can be reached at 954-6614,

It is clear that both of our organizations take the responsibility of

the health and safety of CCRA employees very seriously. I look
forward to future updates on this important file.

Yours sincerely,

Rob Wright

Tel: (613) 957-3688

Ottawa ON K1A 0L5 Fax (613) 952-1547

409
 Appendix

Canada Customs Agence des douanes

and Revenue Agency et du revenu du Canada

MEMORANDUM TO: NOTE DE SERVICE AUX:

Assistant Commissioners Sous-commissaires

Deputy Assistant Commissioners Sous-commissaires adjoints
Directors General Directeurs generaux
Directors, Tax Services Offices Directeurs, Bureaux
Directors, Tax Centres services fiscaux
Regional Directors, Customs Directeurs, Centres fiscaux
Directeurs regionaux, Douanes

Subject: Tax Protestors Detax Objet : Contestataires du fiscc

You will find attached, for your Vous trouverez ci-joint, pour
information, a copy of a letter votre information, une copie
from the Commissioner sent to de la lettre du Commissaire a
Ms. Nycole Turmel, National Madame Nycole Turmel, Presidente
President of the Public Service nationale de l’Alliance de la Fonction
Alliance of Canada, dated January 31, publique du Canada
2003, concerning the Union’s du 31 janvier 2003, concerning
Campaign Against Tax Protestors la campaigne du syndicat contre les
(Detax). Contestaires du fisc

Sous-Commissaire
Direction generale des resources humaines

D.G.J Tucker
Assistant Commissioner
Human Resources Branch

Attachment Piece jointe

c.c.: Regional Human Resources c.c.: Directeurs regionaux en

Directors ressources humaines
Branch Executive Committee Comite executif de la
Direction generale

410
 Appendix

April 1, 2003

Rod Quinnie
Deputy Assistant Commissioner
Assessment and Collection Branch
CCRA
25 McArthur Avenue, Tower C
10th Floor
Ottawa Ontario K1A 0L5

Dear Mr. Quinine

Further to your telephone conversation with Sarah Belanger in my office,

I have asked Jacquie de Aguayo to work on the legal aspects of our work
on the detax file.

Ms. De Aguayo has been monitoring the various web sites of the de-tax/
un-tax movement for some months now, and has undertaken some research on
the legal questions posed by the movement. As a result, she is well
situated to continue the discussions between the PSAC and the CCRA that
were initiated earlier this year. Ms De Aguayo can be reached at
613-560-4329.

I will leave it to the two of you to discuss a framework for the

discussions on the issue, and any ongoing collaborative work that can be
undertaken.

Sincerely

Nycole Turmel
National President

c.c. Betty Bennon

Ron Moran
Dan Tucker
Mike MacDonald
Jacquie De Aguayo

233 Gilmour, Ottawa, ON K2P 0P1 . (613) 560-4200 . www.psac-afpc.com

411
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Public Service Alliance of Canada

Alliance de la Fonction publique du Canada

August 11, 2003

Rod Quiney
Deputy Assistant Commissioner
Assessment and Collections Branch
Canada Customs and Revenue Agency
25 McArthur Ave.
Vanier, ON K1A 0L5

BY FAX: (613) 954-4434

Patrick Dornier
Counsel
Legal Services
Canada Customs and Revenue Agency
3rd Floor, Connaught Building
555 MacKenzie Avenue
Ottawa, ON K1A 0L5

BY FAX: (613) 954-6282

Dear Mr. Quiney and Mr. Dornier

RE: De-Tax Movement

I write to you further to our meeting in April 2003 and consequent upon
discussions within the PSAC, UTE and CEUDA on establishing a cooperative
and coordinated approach to respond to aspects of the de-tax movement.

Let me first clarify for both of you where the core of the Union’s concerns lie.
Our goal is not to shut down de-tax movement web sites or to silence debate.
Despite the unmeritorious and sometimes bizarre basis for some of the
arguments advanced to support the claim that the Government has no lawful
right to tax, the ability to exercise the right to freedom of expression is not
and should not, be the focus of the attention. From our discussions, I believe
that the CCRA and the Union do not diverge on this point.

233 Gilmour, Ottawa, ON K2P 0P1 . (613) 560-4200 . www.psac-afpc.com

412
 Appendix

I believe we are also in agreement that, where the activities of the de-tax
movement move toward defamatory statements and violent threats, a more
serious and pointed response is warranted.

Where we seem to diverge is in answering the question of where one

draws the line between actions that warrant a litigated response and those
that do not. Notwithstanding this, I came away from our meeting in April with
the understanding that the CCRA is interested in establishing an ongoing
dialogue with the Union and that, In appropriate cases, it is committed to
ensuring that its employees and their representatives are protected.

The basis for our continued interest in this area is clear: the Canada Labour
Code imposes on the employer a duty to ensure that its employees have a
safe work place. While de-tax movement threats may be considered a
relatively unique or out of the ordinary workplace risk, credible threats are
nevertheless a tangible hazard to the safety of the individual, or groups of,
workers. As a workplace partner on occupational safety and health issues,
the Union is legitimately concerned that threats may continue unabated and,
accordingly, could escalate. What neither party wants is a “cry wolf” situation
where we begin to tolerate what is clearly unacceptable and potentially
violent or defamatory behaviour until something tragic happens. We need
only recall the Oklahoma City bombing to see that there does exist an
attraction, whether cultivated by groups or not, between the principles
advocated by the de-tax movement and fringe, violent elements in society
looking for the “moral” justification to act. The Union believes that the CCRA
would be remiss in ignoring this linkage in assessing the potential hazards
wrought by the more extreme elements in the de-tax movement.

It is also the Union’s view that the employer – on questions such as these –
stands in something of a fiduciary relationship with its employees. The CCRA,
by the nature of the functions it performs on behalf of the Crown, asks its
employees to put themselves in harm’s way as a routine part of the duties of
their position. This potential harm can occur in controlled environments, such
as ports of entry or site visits, but it can also occur simply as a result of the
nature of the work and its impact on taxpayers.

Again, we are not advocating a knee jerk response or a juggernaut of

litigation against the de-tax movement. What we do want is to maintain the
momentum gained on this issue through our April discussions and to move
toward a method of communicating and identifying criteria that would justify
a decision to act on the part of the CCRA.

Accordingly, I am proposing that we meet again to discuss concrete ways

that we can achieve this. Here are some areas that the Union would like to
explore further:

413
 Appendix

1) A Legal Framework

a) The identification of the most viable legal avenues for dealing with
these issues is critical. The CCRA has actively sought to have websites
cut off de-tax “customers” where the web site contains offensive
material and it has litigated Income Tax Act violations such as the
failure to pay. These are all welcome actions, however, we would like
to discuss some additional ones such as:

i) Criminal harassment (section 264 of the Criminal Code)

ii) Uttering threats (section 264.1 of the Criminal Code)
iii) Defamatory libel (sections 297 to 301 of the Criminal Code); and
iv) Civil Actions (this is the least advisable in our view given the costs
and potentially broad nature of the issues that can be raised
however we would still invite a discussion on whether there may be
some circumstances where action in the civil courts would be
warranted.

b) Jurisdictional issues for prosecutions.

c) Identification of an individual for prosecution (for example, what if

there is a group website but there is a clear figurehead?);

d) The identification of issues and criteria in these subjects will assist in

informing the types of communications and guidelines that we may
agree on (below).

2) Communication

a) In order to properly serve our members and to act as a liaison for

information and awareness training, the union is interested in being
informed when an individual employee or a work location has been
targeted (whether through a website, newsprint, local flyer campaign
or phoned in or received out in the field);

b) The CCRA currently has staff dedicated to an ongoing review of de-tax

movement websites and activities, The Union is interested in
establishing a set of guidelines (see below) for identifying threats or
statements that are clearly threatening or offensive and those that fall
into the gray area. When such a communication is detected, the Union
would be notified of the content and location of the threat and, on
request, the parties will meet to discuss whether further action ought
to be taken; and

414
 Appendix

c) Any other matters for discussion such as mobilization among

employees on this issue, mechanisms for distributing information and
the Union’s role.

3) Guidelines

a) This involves establishing the types of conduct that would require that
the Union be notified and would warrant additional discussion between
the Union and CCRA on whether action ought to be taken; and

b) What would constitute an appropriate test case.

I trust that the two of you are available to meet in the near future. The
enclosed framework, I trust, will serve as a springboard for our ongoing
discussions.

I look forward to hearing from you.

Yours truly,

Jacquie de Aguayo
Counsel
Collective Bargaining Branch

Tel: (613) 560-4329

Fax : (613) 236-3239
e-mail: deaguaj@psac.com

cc. B. Bannon
R. Moran
N. Turmel
S. Jelly
M. MacDonald

415
 Appendix

Appendix C

416 ©Alan Baggett

 Appendix

Minister Ministre
of National Revenue du Revenu national

Ottawa, Canada K1A 0A6

Mr. Derrek Konrad, M.P.

House of Commons
Ottawa, Ontario
K1A 0A6

Dear Mr. Konrad:

Thank you for your letter of July 8, 1999, addressed to my predecessor, the
Honourable Herb Dhaliwal, and written on behalf of your constituents, Mr. (name
withheld) and Mr. (name withheld) regarding the identification auditors must present to
allow them access to taxpayers’ books and records.

The Income Tax Act and the Excise Tax Act require persons to maintain
adequate books and records which, upon request, must be made available to officers of
the Canada Customs and Revenue Agency (CCRA) for audit purposes at all reasonable
times. An authorized person may, for any purpose related to the administration or
enforcement of the Income Tax Act or the Excise Tax Act, audit or examine the books and
records of a taxpayer, enter the premises or place where any business is carried on, and
require the owner or manager or the property or business to give all reasonable assistance
and to answer all proper questions.

Under section 287 of the Excise Tax Act and under section 231 of the
Income Tax Act, an “authorized person” means a person authorized by the Minister to
exercise the audit powers conferred by the legislation. While not specifically mentioned
in the legislation, such authorization is evidenced by the issuance of an RC303
authorization card to CCRA employees. The RC303 identification card when used in
conjunction with the photo identification provides authorization to the bearer of the card
to perform the above noted functions.

…/2

417 ©Alan Baggett

 Appendix

-2-

The RC303, which replaced the T3000 and the GST223 authorization cards in
1998, specifically states that the bearer of the card

“ [Name] is an officer of the Canada Customs and Revenue Agency, and is authorized
for any purpose related to the administration and enforcement of the Income Tax Act,
Part IX of the Excise Tax Act, the Canada Pension Plan and the Employment Insurance
Act, to enter the premises (other than a dwelling house without the consent of the
occupant, except under the authority of a warrant); to inspect, audit or examine
documents, as defined in the said Acts or Part, and to make or cause to be made copies of
those; to examine property and processes; to require any person on the premises to give
all reasonable assistance and to answer all proper questions; to require the owner or
manager to attend the premises with him or her. The bearer is also authorized, in
accordance with Part VII of the Excise Tax Act, to inspect records, books, accounts and
vouchers, and to make or cause to be made copies of those; and for any purpose related to
the administration and enforcement of the Excise Tax Act, to inspect books, papers,
accounts, statements and returns, to take extracts or make copies of those and to question
anyone making those documents.”

To be valid, the RC303 must be accompanied by picture identification and

must be signed by both the officer to whom the card is issued and the Commissioner of
the CCRA. Taxpayers being audited may request that the auditors show their
identification card before providing any financial records, books, or documents for
review.

The impact of Bill C-43, an Act to establish the CCRA, should be minimal.
Auditors will still be required to show identification cards, upon request, authorizing
them to perform the various audit-related functions. In that regard, a new authorization
card, the RC121A, is being issued to appropriate CCRA officials to replace the RC303.
The RC303 will remain valid until the employee receives the new card.

I trust this will be helpful in responding to your constituents.

Yours sincerely,

Martin Cauchon

418 ©Alan Baggett

 Appendix

Appendix D

419 ©Alan Baggett

 Appendix

If you want to learn more about the policies and procedures of the CRA then request a
Taxation Operation Manual (TOM) in the area you are most interested. I would suggest
the Appeals Officer TOM, the Collections TOM, the Audit Techniques TOM and the
Audit Techniques handbook, the Special Investigations TOM and the Tax Avoidance
TOM to start.
As the Agency refuses to honour such requests please make them via the Access to
Information Act and the Information Commissioner.

Complete CRA Taxation Operation Manual (TOM) List

Appeals Branch
Appeals Officer - Taxation
CPP/EI Appeals Officers
Management Appeals Division
Support Staff - Tax

Assessment and Collections Branch

Abbreviations and Messages
Accounting Data Capture
Assessor
Automated Trust System
Business Window Information
CAL Keying Instructions
Cancellation Examination
Child Tax Benefits - Eligibility (CTB)
Child Tax Credit Prepayment
Children’s Special Allowances Manual (CSA)
Client Services
Collections
Common Operator Information Files (COIF) System
Confidence Validities
Confidence Validity Guidelines
Confidentiality
Control Clerk - Control
Coordinator Display Manual (T1 Keying)
Coordinator Manual (T1 Keying)

420 ©Alan Baggett

 Appendix

CORPAC Control
CORPAC Error Correction - Ottawa Taxation Centre
Correspondence by Paragraph Selections
Correspondence Referral Unit (CRU)
CPP-EI Rulings Program Administration Policies and Procedures
Direct Data Entry - Other Transcripts
Disposition of Taxable Canadian Property and/or Other Properties by Non-Residents
Document Control
Electronic Filing (E-File) for T1 Returns
Electronic Letter Creation System (ELCSs)
Electronic Revenue Accounting (ERA) System Overview
Electronic Statement of Account (ESA)
Enforcement Action for Returns and Information
ERA Event and Transcript Preparation
ERA Interest Calculation General Procedures
ERA Procedures for Managers
ERA Statistics
Error Correction Instructions for Electronic Returns
Error Inspection - Error Clues
Error Inspection Control
Error Inspection of T2 Returns
Error Inspection Work Instructions
Exhibits
Explanation Codes and Messages
Explanation Codes used on Reassessment
Family Order and Agreements Enforcement Assistance and the Refund Set-Off Programs
Family Orders and Agreements (FOA) Enforcement and Refund Set-Off Program
Family Orders and Agreements Enforcement (FOA)
Farmer's and Fishermen's Program
FIP Keying Procedures
General Information
General Ledger Goods and Services Tax Credit
Goods and Services Harmonized Sales Tax (GST/HST) Credit
Identification Keying Instructions
Individual T1 Identification Master Update
Initial Assessing and Reassessing of T2 Returns
Initial Assessing of T1, Rejects, SAS, DOA and Prior Year
Installment Program
Installments and Installment Interest
Key Verification
Matching
Matching Programs
Non-Resident Tax
Notice Production
421 ©Alan Baggett
 Appendix

On-line Taxpayer Correspondence Systems (OTCS)

Operators and Coordinators Work Instructions
Penalties
Pension Reform
Policy
Preliminary Reassessment
Processing Instructions
Processing Leads and Liaison with the Minister du Revenue du Québec
Processing Payments on Filing
Quality Review
Reassessing T2 Returns
Reassessment Messages and Cancel Codes
Reassessment Processing Instructions
Recording and Flagging Procedures
Referrals
Refund Set-Offs
Refunds Enquiries
Registered Plans or Retirement Savings (RRSP, RRIF, RPP and DPSP)
Registered Retirement Savings Plan
Remission Orders
Resolution of Error Conditions
Resource Officers Instructions
Review Procedures
Reviewer
Reviewer Instructions
SAS-TCA Control Instructions
SAS-TCA Assessing
Seasonal Tax Assistance Centres
Selection Instructions of Returns
Sorting and Numbering
Source Deductions
Special Elections and Returns - TSO
Specialized Processing
Subsidiary Ledger Unit
Subsidiary Ledgers
Supervisor
Supplementary Instructions
T1 Accounting Data Capture
T1 Accounting Error Correction
T1 Accounting Related Guidelines
T1 Accounting Systems
T1 Mismatch
T1 Processing Review Program
T1 Records
422 ©Alan Baggett
 Appendix

T2 Identification Manual
T2 Interest Calculation
T2 Mismatch and Combines
T3 Initial Assessing, Adjustments and Correspondence Manual
T3 Records
T3 Returns
Tax Calculation Procedures
Taxable Benefits
TCA Processing
Team Leader Procedures
Technical Interpretations and Referrals to Other Sections
Topical Index
Tracing Refunds
Unemployment Insurance Coverage
Work Instructions
Years Not On TAPMA

Compliance Programs Branch

Audit Applications Guide
Audit Programs
Audit Techniques
Audit Techniques (Handbook)
Audit Techniques Guidelines Related to the Oil and Gas (Exploration, Development and
Production)
Audit Techniques Guidelines Related to the Oil and Gas (Marketing)
Audit Techniques Guidelines Related to the Oil and Gas Industry (Refining)
Business Equity Valuations Section and Real Estate Appraisal Section
Computer-Assisted Audit Selection System (CAAS)
Non-Resident Correspondence
Preparation of the Auditor's Report
Reviewers Instructions
Special Investigations
Supervisor Instructions
Tax Avoidance

Finance and Administration Branch

Administration - Information Management
Administration - Materiel Management
Administration - Telecommunications
Budget and Program Control
Finance
Financial Administration Directorate
Information Processing System
423 ©Alan Baggett
 Appendix

Mail
Material Management Division
Resource Management Division
Resource Projections
Security Directorate
Tax Forms

Human Resources
Personnel Management System (PMS)
Personnel Services
Reference Sources

Information Technology Branch

Computer Output Control System
Computer Output Microforms
RAPID System

Policy and Legislation Branch

Departmental Objectives and Policies
Income Tax Agreements with other countries
Public Affairs Policy
Release of Information

424 ©Alan Baggett

 Appendix

Appendix E

425 ©Alan Baggett

 Appendix

The Canadian Taxpayer Bill of Rights

The Taxpayer Bill of Rights describes the treatment Canadians are entitled to when
dealing with the Canada Revenue Agency. You can expect that the CRA will serve you
with high standards of accuracy, professionalism, courteousness and fairness. The
Taxpayer Bill of Rights also sets out the CRA Commitment to Small Business to ensure
their interactions with the CRA are conducted as efficiently and effectively as possible.

1.
You have the right to receive entitlements and to pay no more and no less than what is
required by law.

You can expect to receive the benefits, credits and refunds to which you are entitled
under the law and to pay no more and no less than the correct amount required under the
law.

2.

You have the right to service in both official languages.

You can expect us to communicate with you and provide services in the official language
of your choice (English or French) on the Internet, by telephone, in writing or at our
designated bilingual offices.

3.

You have the right to privacy and confidentiality.

You can expect us to protect the confidentiality of the information that you provide. Your
information will be used only for purposes allowed by law. Only those persons who are
authorized by law and who require the information to administer programs and legislation
have the right to access your personal and financial information.

426 ©Alan Baggett

 Appendix

4.

You have the right to a formal review and a subsequent appeal.

You are entitled to a formal review of your file if you believe that we have not applied
the law correctly or that you have not received your full entitlements. Appeals officers
who were not involved in the original decision will conduct a formal and impartial
review. Filing an objection (an appeal in the case of assessments and rulings related to the
Canada Pension Plan or Employment Insurance) will start the review by Agency appeals
officers. If they do not resolve the matter to your satisfaction, you are entitled to appeal to
the courts.

5.

You have the right to be treated professionally, courteously, and fairly.

You can expect we will treat you courteously and with consideration at all times,
including when we request information or arrange interviews and audits. Integrity,
professionalism, respect and co-operation are our core values and reflect our commitment
to giving you the best possible service. You can also expect us to listen to you, take your
circumstances into account, and treat you fairly to make fair and impartial decisions in
accordance with the law. We will explain our decision and inform you about your rights
and obligations with respect to that decision.

6.

You have the right to complete, accurate, clear, and timely information.

You can expect us to provide you with complete, accurate and timely information that
will explain in plain language the laws and policies that apply to your situation, to help
you get your entitlements and meet your obligations.

7.

You have the right, as an individual, not to pay income tax amounts in dispute before you
have had an impartial review.

You are entitled to withhold payment of assessed income tax amounts that you are
disputing in a formal objection, other than source deductions, until you have had a formal
review by the CRA or, if you have filed an appeal, until the Tax Court of Canada has
issued its decision. If you appeal to a higher court, you will be able to provide equivalent
427 ©Alan Baggett
 Appendix

security instead of paying the amount in dispute. However, in certain circumstances that
are specified in the legislation, the CRA can exercise its authority to take collection
action even though an objection or appeal has been filed.

8.
You have the right to have the law applied consistently.

You can expect us to apply the law consistently so everyone gets their entitlements and
pays the right amount. We will take your particular circumstances into account to the
extent that the legislation we administer allows us to do so.

9.

You have the right to lodge a service complaint and to be provided with an explanation of
our findings.

You can expect that if you lodge a complaint about the service you receive from us, you
will be listened to and given the opportunity to explain your situation. We will deal with
your complaint promptly, impartially and in confidence, and we will provide you with an
explanation of our findings.

10.

You have the right to have the costs of compliance taken into account when
administering tax legislation.

We recognize the need to keep to a minimum your costs, including your time and effort,
that are incurred to comply with the tax and benefit legislation we administer while
balancing our responsibility to administer the legislation efficiently and economically.
We strive to make our dealings with you as straightforward and convenient as possible.

11.

You have the right to expect us to be accountable.

You have the right to expect us to be accountable for what we do. When we make a
decision about your tax or benefit affairs, we will explain that decision and inform you
about your rights and obligations in respect of that decision. We are also accountable to
428 ©Alan Baggett
 Appendix

Parliament, and through Parliament to Canadians, for what we do. We report to

Parliament on our performance with respect to tax services and benefit programs and the
results we achieve against our published service standards.

12.
You have the right to relief from penalties and interest under tax legislation because of
extraordinary circumstances.

You can expect us to consider your request to waive or cancel in whole or in part any
penalty and interest charges if you were prevented from complying with your tax
obligations because of circumstances beyond your control, e.g. a disaster such as a flood
or fire, or if penalty or interest arose primarily because of erroneous actions of the CRA,
e.g. material available to the public contained errors which led you to file incorrect
returns or make incorrect payments based on incorrect information.

13.

You have the right to expect us to publish our service standards and report annually.

You have the right to expect us to make our service standards publicly available for you
to consult. Our service standards state the level of performance that you can reasonably
expect to encounter in your dealings with us under normal circumstances. You can also
expect us to measure our performance against our service standards and publish the
results in the CRA Annual Report that is tabled in Parliament every year.

14.

You have the right to expect us to warn you about questionable tax schemes in a timely
manner.

You can expect the CRA to provide timely and relevant information about questionable
tax schemes that the CRA intends to scrutinize so that you can recognize and avoid
falling into tax schemes that could put you at odds with Canada's tax laws. We strive to
provide information that will help you understand how to protect yourself against tax
schemes and understand the consequences you may face as a result of your participation
in tax schemes.

429 ©Alan Baggett

 Appendix

15.

You have the right to be represented by a person of your choice.

You can get advice about your tax and benefit affairs from and be represented by a
person of your choice. If you provide us with authorization, we will discuss your situation
with the representative of your choice. However, it is important for you to be aware that
you are legally responsible for your tax and benefit affairs even if you choose to obtain
assistance or have someone act on your behalf.

430 ©Alan Baggett

 Glossary

Tax Talk

ACSES – Automated Collection and Source Deduction Enforcement System. Revenue

Canada’s computer inventory management system for tax liabilities. It is the shell into
which the CINDAC, CORPAC and PAYDAC subsystems all fit.

Account – electronic storehouse for all information pertaining to an individual or business

debtor, also known as a BF.

Appeal – method of challenging the department’s assessment or reassessment.

Arbitrary Assessment – assessment raised by the Department when a debtor client fails to
file. See subsection 152(7) of the Income Tax Act. Also called an ARB

Attachment to income – see garnishment.

Automated Sub-ledger – archaic computer system managing all sundry tax debts.

BF – short for Bring Forward. Calendar date a tax account is next scheduled for review.
Also tax collector slang for your tax account.

Certificate – Judicial concurrence that a tax liability is outstanding. Debt is certified as

due and payable.

CINDAC – Central Individualized Accounting and Collections System. Sub-system of

ACSES system for managing T1 tax liabilities.

Client – the CRA’s politically friendly way of saying taxpayer or tax debtor. Wouldn’t
want to offend anybody now would we?

Cold Call – A surprise visit by the tax collector to your residence, business, place of
employ or other.

CORPAC – Corporation Accounting and Collections System. Sub-system of ACSES for

management of T2 tax debts.

Deferral – used to delay investigation and collection of a tax liability for up to one year.

Diary entry – collector’s written record of actions stored electronically.

District Office (DO) – how Taxation Services Offices were previously known as before
millions of dollars were spent to change the name.

436 ©Alan Baggett

 Glossary

Electronic Filing – also known as E-Filing. Term for the electronic submission of a T1
Income Tax Return. No receipts are required when sending in a return electronically.

ERA – Electronic Revenue Accounting, computer system used by the tax collector to
issue cheques, transfer or allocate payments.

Execution – upon filing gives the department the right to request that the sheriff seize and
sell a tax debtor’s real property and chattels. The department rarely actions writs unless
they are preparing to write off a tax debt. Also known as a Writ of Fieri Fascias (Search
and Seizure).

Fairness – legislation enacted to allow penalties/interest to be waived or cancelled in

certain circumstances.

Field Call – an investigation completed outside of the office.

Garnishment – also known as a Requirement-to-Pay, Attachment to Income or T1118.

Used to intercept an income source or asset of a debtor being held by a third party such as
a bank or an employer.

Jeopardy – situation where a danger of loss may occur if collection of a tax debt is
delayed. A jeopardy can only occur in the first ninety days from the date of assessment or
reassessment.

Jerk – term used by tax collectors for clients (taxpayers) who are difficult to deal with.

Legal Action – garnishments, set-offs, certifications and seizures. Does not involve the
debtor going to court.

Legal Warning – warning that legal action may be taken. Must be relayed first person or
via a registered letter to be acceptable and enforceable in the eyes of the judiciary.

Log of Action – alternate name for a taxpayer diary.

Memorandum Assessment – assessment of a related third party for the tax debt of another.

Ministerial – a taxpayer/debtor complaint directed through the National Minister of

Revenue.

Minor Balance Account – a tax debt that is not normally pursued for collection. A T1
debt under $1000.00 is a minor balance account and repayment is rarely requested.

Non-compliance – failure to remit payments on an issued garnishment.

437 ©Alan Baggett

 Glossary

PAYDAC – Payroll Deduction and Accounting Collections System. Sub-system of

ACSES used to manage source deductions and payroll tax liabilities.

Payroll Taxes – Canada Pension Plan, Quebec Pension Plan, Unemployment Insurance,
Federal Tax and Provincial Tax are all employer remitted payroll taxes. Also known as
source deductions.

PM – program management. All collector’s fall within this work classification, PM-01,
PM-02 etc.

Program – the agencies production goals, how much to collect, how much to arbitrarily
assess and how much to write off etc., for the CRA as a whole.

REMITS – Revenue Enforcement Management and Information Tracking System.

REMITS transfers debtor accounts that are ninety days and older debtor to ACSES for
management of collection action.

Request for Information – a non-legal request to supply information or documentation.

The recipient of such a letter is under no obligation to answer or reply.

Requirement for Information – a legal request to supply information or documentation.

The recipient must respond unless they have a valid reason not to e.g. the request
contains errors or is unreasonable.

Requirement to pay – see garnishment

Statutory Set-off – attachment or set-off of funds paid to a debtor from a crown derived
source of income. Also known as a set-off or a T1000A.

Sundry – any tax debt or penalty outside of GST, non-bankrupt T1, T2 and Source
Deductions.

T1 – form for recording an individual’s income earned in one calendar year. Due to be
filed on April 30th of the year following the calendar year.

T1000A – see statutory set-off.

T1118 – see garnishment.

T2 – form denoting a corporation’s income earned in one fiscal year. Due to be filed
within six months of the end of the fiscal year.

T3 – form denoting an estate's income earned in one taxation year. Due to be filed within
ninety days of the end of the fiscal year.

438 ©Alan Baggett

 Glossary

T4 – a report of an employees earnings and deductions for one calendar year. Due to be
filed on February 28th of the year following the year which the income was earned.

T5 – a report of interest income earned by a client in one calendar year. Due to be filed on
February 28th of the year following the year which the income was earned.

T5008 – a report of sales and transactions of securities.

Taxation Centre – the district hub which services a number of Taxation Services Offices.
Also known as a TC.

Taxation Services Office – the local office that handles dealings with individual clients.
Also known as a TSO, a District Office or a DO.

Tax debtor/Taxpayer – the non-politically friendly term used to denote an individual who
has tax arrears.

Tax Exile – person who leaves Canada or whose assets leave Canada for reasons of over
taxation.

TOM – Taxation Operations Manual. Manuals of policies, procedures and directives

written by the Department of National Revenue for Revenue Canada. The collections
TOM is TOM 22.

Uncollectible Debts Committee – also known as the UDC. A TSO ad hoc team that
reviews deletions and rubber stamps their approval.

Writ – see Execution.

Write Down – deletion of a portion of a tax liability. An account is never written down to
an amount that is less than the minor balance limit unless that amount is nil.

Write-off – the deletion of an entire tax liability. Also known as a T1520, the form which
a write-off is printed before submission to the Uncollectible Debts Committee.

Finally, for those with a deeper and more abiding interest in Revenue Canada, the
CRA and tax collection http://www.cra-arc.gc.ca/ is the current location of the agency’s
Internet home.

All Rights Reserved

Copyright © 2001, 2002, 2003, 2004, 2006, 2008, 2009 By Alan Baggett
439 ©Alan Baggett
 Glossary

Copyright

No part of this book may be reproduced or transmitted in any form

or by any means electronic or mechanical, including photocopying,
recording, or by any information storage and retrieval system, without
permission in writing from the publisher and author.

Please note…

The contents of this book are presented for purposes of information

only. While many already use the methods about to be described
herein to avoid payment of tax neither the author nor the publisher
intends to suggest or recommend that you do so.
Please consult your lawyer, financial adviser or competent other
before considering any change to your current personal, financial
and/or taxation situation.

440 ©Alan Baggett

 Glossary

(Author’s note: This is the one chapter of this book that is outdated. Subsequent to this
book being written Court Cases arguing exactly the disparities I first outlined caused
policy changes that benefited all Canadians – ending the wide expense “gaps”. I felt it
was important to keep this unedited BECAUSE it shows what happens when we do speak
up instead of silently accepting the status quo.)

23
How does our federal government spend some of your hard-earned taxed dollars? And it
still is your money even when the tax collector snatches it from you.
I for one have always had the impression that government at any level, federal,
regional or local, feel they must spend every dollar that greases their palms. Worse, often
they will overspend then dream up new levies and increase tax rates to make us pay for
their lack of restraint. It’s almost as if we have traded in the military industrial complex
for a political economic complex, politicians shamelessly spending your money to get
themselves re-elected.
And if you’re at all like me you will blame politicians for their wasteful expenditures.
But they are not the only ones to blame. The civil servant must also be held accountable.
Sure, it is the politicians who ask for your money but ultimately it is the civil servants
that spend it. Government departments and agencies are so massive, with expenditures in
the hundreds of millions and even billions of dollars, that your Member of Parliament
depends on the civil servant to tell them what’s what.
Monies are doled out to each government department or agency based on need. Need
is determined by forecasting future expenditures in consideration with the previous year’s
expenses. If a particular department is unable to spend their previous year’s funding then,
most likely, their budget should remain the same or be reduced. Perfectly sensible.
But federal departments and agencies in Canada rarely report a budget surplus. They
seem to spend every last dollar to the penny or overspend and wind up in a deficit
situation. Why does this happen? Two reasons. First, if they are unable to spend their
budget it will be reduced for the upcoming fiscal year and two federal departments
compete with each other in a form of budget envy. They hate to see another department
with a larger budget so they spend accordingly with a ‘keep up with the Joneses’
mentality.
But this isn’t where the competition ends. It’s only the beginning. Not only do
government departments compete externally for larger budgets there is also internal
competition. Branch vs. branch. Office vs. office. Section vs. section. All competing in
order to receive a larger share of their department’s budget pie. Always looking for more.
Such envy results in this: each federal department and by association each office in the
department will spend every last penny of their budget in order to be eligible for at least
the same if not a larger operating budget for the upcoming fiscal year.
What does all this have to do with the tax collector? Well, the tax collector is a civil
servant and you ought to know how they spend your money.

441 ©Alan Baggett

 Glossary

And how does the tax collector spend your hard earned tax dollars? We all hear of the
big things but it’s the little things that often escape our attention that really add up to
something big.
Take the collector who leaves the office to complete a field call. Or consider the
manager who attends a conference or a meeting. Each is reimbursed for the mileage they
travel using their personal vehicle with a tax-exempt mileage allowance. This is nothing
new. Private sector employers and employees also avail themselves of this. But as you
are about to see inequities exist between what the private sector employee is allowed to
claim and what the tax collector claims when making use of such allowances.
In Ontario and at the time of this writing, for the first 6500 kilometres driven the tax
collector is paid 42.5 cents for each kilometre. For kilometres 6501 to 12,900 37.0 cents
is paid per kilometre while for kilometres traveled in excess of 12,900 32.5 cents is paid.
These rates differ by province or territory as noted in the following table.

Federal Travel Rates and Allowances For 2000

Kilometric Rates

Province/Territory 0 - 6500 km 6501 - 12900 km 12901+km Employee requested

Alberta 39.5 34.0 29.5 12.0
British Columbia 42.0 36.5 32.0 13.0
Manitoba 41.0 35.5 31.0 12.0
New Brunswick 42.0 36.5 32.0 12.5
Newfoundland 43.5 38.0 33.5 13.5
North West Territory 47.0 41.5 37.0 20.5
Nova Scotia 42.0 36.5 32.0 13.0
Nunavut 47.0 41.5 37.0 20.5
Ontario 42.5 37.0 32.5 13.0
Prince Edward Island 41.0 35.5 31.0 12.5
Quebec 46.0 40.5 36.0 13.0
Saskatchewan 38.5 33.0 28.5 12.0
Yukon 48.5 43.0 38.5 21.5 .

The above table is read as follows: For example the first 6,500 kilometres a Quebec tax collector travels

on the job they are paid 46.0 cents for each kilometre. As soon as the Quebec collector travels kilometre

6,501 and until he/she reaches 12,900 they receive 40.5 cents. Beyond 12,900 they are paid 36.0 cents a

kilometer.

442 ©Alan Baggett

 Glossary

The mileage driven is cumulative throughout the Government’s fiscal year of April 1st
to March 31st whereupon the mileage counter is immediately reset to zero for the new
fiscal year.

To: Alan Baggett

Section: 461-1-4

In accordance with the intent of the Treasury Board Travel Policy this letter
will serve as your authority to travel, on government business related to the
taxpayers whose returns are filed in the North York District Office; as
necessary to perform your duties as an Collection Officer for the fiscal period
ending March 31, 1995.

This authorization will be deemed to conform with the requirements for pre-
authorization of travel and may be quoted as your authority in lieu of a GC72
when travelling on day-to-day operational requirements when no travel advance
was requested or to which a standing advance applies. Reimbursement of your
travel claim under this travel authority will, as always, be subject to the Travel
Authority for government travel, Revenue Canada, Taxation still retains the right
to determine the mode, means and class of transportation for every trip and to
specify and accommodation to be occupied.

This authority applies to you in you present position. This authority does not
apply to trips outside the described area, travel for competition or training
purposes.

When the use of a private motor vehicle is authorized, the employer

does not assume any financial responsibility other than the payment of
the applicable kilometric (mileage) rate. Employees are required to
carry adequate motor vehicle insurance as stipulated in the Travel
Policy and the Employer does not assume any responsibility for the
deductible amounts related to comprehensive or collision coverage.

24/ 3/ 94 .
Date

24/ 3/ 94 .
Date

443 ©Alan Baggett

 Glossary

The difference in the rates is determined by local costs for fuel and vehicle upkeep
which varies between provinces and territories.
Discussing mileage rates may seem boring or trivial but consider the fact that Revenue
Canada does not allow the private sector to claim anywhere near as much per kilometre
as it does its own employees in most provinces. Saskatchewan and Alberta tax collectors
are the exceptions and actually receive a lower mileage allowance than private employees
do. For tax collectors in Manitoba and Prince Edward Island there is no difference. But in
all other provinces and territories the tax collector reaps a decided advantage.
However I am sure that there will be some tax collectors surprised to learn of the
provincial/territorial travel allowance variations.
The limit on tax-exempt allowances paid by private sector employers to their
employees using a private vehicle is an across the board rate regardless of your locality
and is as follows: Provincially, for the first 5000 kilometers travelled 41 cents per
kilometre is the maximum allowance allowed. For each additional kilometer travelled
over 5000, 35 cents is allowed. That’s it. For the Yukon and Northwest Territories these
amounts are 45 cents and 39 cents respectively.
So the tax collector receives not only a higher rate (in most cases) but they are also
allowed to claim this rate over longer distances. So when a Quebec tax collector is still
receiving 46 cents a kilometre the private Quebecois employee is only receiving 35 cents.
You may think this is just the difference of a couple of pennies but if you are self-
employed it quickly adds up.
There are such and so many differences between the tax-exempt allowance rates
between the public and private sector that this does not seem to be fair. There should be
one single allowance rate for all employees regardless of being a public or private sector
employee. But as long as this disparity remains a secret there will be no changes.
And what about meal allowances? The following table is of the most recent Federal
Meal and Allowance Rates for tax collectors and other civil servants.

There are such and so many differences between the tax-exempt allowance rates between
the public and private sector that this does not seem to be fair. There should be one single
allowance rate for all employees regardless of being a public or private sector employee.
But as long as this disparity remains a secret there will be no changes.
And what about meal allowances? The following table is of the most recent Federal
Meal and Allowance Rates for tax collectors and other civil servants.

Federal Meal and Allowance Rates

Provincial Canada U.S.A. Yukon/NWT Nunavut

Breakfast $10.00 $10.00 (US) $11.65 $12.35
Lunch 10.30 10.30 (US) 12.05 20.05
Dinner 27.60 27.60 (US) 34.15 38.95
Incidentals 11.50 11.50 (US) 11.50 11.50

Composite Allowance $ 47.90 $ 47.90 $57.85 $71.35

444 ©Alan Baggett

 Glossary

Note: The private accommodation allowance remains at $13.50 with an incidental

allowance of $4.00.

On the page immediately following you will find an example of the only authority a
tax collector needs to roar about town and charge up mileage and other expenses to the
federal government.

Revenue Revenu
Canada Canada
Toronto West Tax Services Office
Standing Travel Authority

This will constitute Standing travel authority for:

Name _______________________________________________

Work Section ___________

For the period of April 1, 1995 to March 31, 1996

This authority is issued in accordance with Part I of the Treasury Board Travel Directive. This authority applies only to
the above named person.

This authority covers travel for less than one day, for program-related reasons within the Southern Ontario Region as
required by the Department. Travel within the Greater Toronto Area territory for competitions and training is also
included in this Authority. All other travel and situations involving advances or over-night accommodation must be
pre-authorized on a GC72, travel Authority and Advance Form.

It is understood that:

- this authority covers the reimbursement of standard expenses and allowances in accordance with the Treasury
Board Travel Directive;

- unless otherwise stated, use of a private motor vehicle is authorized, if applicable, will be used at the request of the
Employer;

- the use of a private motor vehicle is authorized, providing that the traveler possesses a valid driver’s license and
carries adequate insurance coverage as determined in the Treasury board Travel Directive and should either the
driver’s license or insurance coverage be revoked or suspended, the traveler is obligated to inform the Employer
immediately;

- travelers are required to complete and submit a Travel Expense claim at least monthly if travel has occurred in a
previous calendar month;

- regarding civil actions, it is the policy of the government that as a result of employees’ negligence, errors or
omissions, no demand will be made upon employees for recovery of damages paid by the Crown when the Crown
has been deemed or found legally liable, and employees will be saved harmless from the claims of others when
they are threatened to be or are sued personally provided that the incident in respect of which the claim or suit
arose occurred while the employee was acting within the scope of employment or duties and that the incident was
not occasioned by the gross or willful negligence of the employee; and

- this Authority does not cover provisions of the policy which cannot be delegated further and must receive either
the personal approval of the Deputy Minister or Branch Heads as well as restrictions imposed by Treasury Board.

445 ©Alan Baggett

 Glossary

I accept the terms and conditions of travel as set out here and in the Treasury Board
Travel Directive
_____________________________________________________ _________________
Traveler’s Signature Date

___________________________________________________ _________________
Team Leader’s Signature (Section 34 F.A.A.) Date

If the tax collector is more than sixteen kilometers from their home office they can claim $10.00 for

breakfast, $10.30 for lunch and $27.60 for dinner. Even if away for only a couple of hours they can claim

the applicable meal rate.

Of course the private sector employee can also claim a meal expense for the cost of
meals consumed during a period. But only when they are away for twelve or more hours
from the locale where they would normally report for work. Worse still the CCRA holds
that such claimants are only allowed to claim fifty percent of the $11.00 a meal or $33.00
a day maximum allowed. And so that’s what most do. Even though in reality they can
claim more. Much more. And in fact Manitoba truck driver Don Wilkinson challenged
the CCRA in this area and won in Don J Wilkinson and Her Majesty the Queen 1999-
4687 (IT) I. (Strangely this is a very difficult case to find in CCRA court records I am
told.) But now, thanks to Mr. Wilkinson, Canadians can deduct fifty percent of whatever
they have truly spent on their meals and is deemed reasonable. Just so long as they
support such with receipts.
Strangely again tax employees do not have to supply receipts to claim their applicable
meal allowance. Revenue Canada operates on the trust system, that the tax collector will
actually purchase a meal for exactly the amount they are allowed to spend. In reality
many tax collectors purchase a cheaper meal or they brown bag it and pocket the
difference or the entire meal allowance as a tiny tax-free bonus.
This is another example of a tax exempt allowance disparity that is allowed to exist for
no good reason other than to line some pockets with a few extra dollars. Why are there
two rules, one for federal employees and one for private employees? Because the public
remains unaware of these differences.
However it’s not all fun and games. When the tax collector works overtime in the
office they receive a $6 meal allowance only after working for three hours or more. Of
course their fifteen-minute break and meal break are paid time and a half or the
applicable rate as well.
In an unusual twist however the $6 overtime meal money is taxable and declared as
income on the employee’s T4 unlike all the other expenses listed to date. So the tax
collector loses $2 - $3 in income taxes and if they spend the full $6 on a meal instead of
brown bagging it they lose another ninety cents in taxes (Ontario) meaning they only
receive $2 - $3 to feed themselves. So don’t think federal employee receives a free ride
446 ©Alan Baggett
 Glossary

everywhere. In fact, it’s a wonder tax collectors and their useless union have not picked
up on this meal deal and had a stroke over it. Or a strike. But maybe with all the other
perks and benefits they find it best to keep their mouths closed.
There are also occasions where a tax collector may have to leave their
residential/employment area for weeks, months or even years to live in another
community rather than just days. This occurs when the tax collector has been selected for
training, education or a work assignment.
In such situations they will receive their accommodation paid for. Currently up to
$1750 per month for an apartment with furnishings, $30 a month for laundry and two
paid weekly ten minute phone calls when on an extended stay on the road. They will also
be reimbursed for all parking costs, telephone rental and the cost of basic cable television.
In addition, a return trip to their residence every third weekend is paid for. Unfortunately
for them when they do visit home their meal allowance is not paid.
These expenses may not seem unreasonable but take the Department of National
Defense employee whose Ottawa housing needs were paid for several years. This cost his
department over $120,000. Why not just ask him to move or fill the job with someone
willing to move. It certainly would be cheaper.
Returning to Revenue Canada, in 1995 a tax collector requested a transfer from an
office in eastern Canada to one in Ontario. The department paid all of the requestors
living expenses including accommodation. Her work term was so long that she actually
sold her maritime home and purchased a nicer one in Ottawa. And using Revenue
Canada’s kindly accommodation allowance her mortgage worries were taken care of. In
effect she is getting her home paid for through her expense claims. With your tax dollars.
In fact until she received her Ontario drivers license she insisted on being chauffeured
around to doctor appointments and other errands during office hours by a tax collector.
Visit http://www.tbs-sct.gc.ca/Pubs_pol/hrpubs/TBM_113/TD_E.html to become more
informed of the Treasury Board Guidelines of ‘perks’ available to tax collectors and civil
servants and to receive the latest updates.
How wasteful can a CCRA employee be?
One Assistant Deputy Minister after attending a meeting in Sudbury was in such a
hurry to return to her Toronto area home that she took a $500 cab ride to ensure she got
there in a timely fashion.
These are your tax dollars at work.
You’re probably thinking that $500 isn’t much but it all adds up. One abuse leads to
another and another if no one steps in to put a stop to it.
What about other Government Departments, Boards and Agencies?
Many Government appointments receive unheard of and untaxed benefits.
A Languages Commissioner received a $24,000 a year allowance for a second
residence. Tax free. Many other federal appointees also receive allowances ranging from
$1000 to $2000 a month to offset living and transportation expenses with no tax deducted
by the supplier of the benefits, your federal government.
The diversity of Government ‘businesses’ that provide tax-free allowances range from
the National Film Board and the Canadian Dairy Commission to the Immigration and
Refugee Board and the Canadian Space Agency.

447 ©Alan Baggett

 Glossary

What you need to know

Light is being shed on these hidden expenditures and undeclared earnings because the
Income Tax Act clearly states that, “A taxable benefit conferred on an employee is
taxable in the hands of the employee.”
Therefore Revenue Canada is guilty of the failure to report some of their employees’
income/benefits. As a consequence some tax collectors are guilty of failure to report all
their earned income/benefits. By extension the tax collector and Revenue Canada are
guilty of allowing other government departments doling out these perks and payments to
sidestep the all employer reporting requirements and payment of any tax on these
benefits.
In private sector situations similar to these interest and penalties are charged to the
employer and employee for late reporting and/or for a failure to report as determined by
assessors and auditors.
By handing out these benefits and not taxing them, Revenue Canada as well as other
departments and agencies are in effect waiving Income Tax legislation for many civil
servants and federal appointees. By virtue of these departments and agencies relationship
with the federal bureaucracy our government is waiving certain laws for a select few
Canadian citizens.
But the abuses don’t just stop here. There are instances where the federal government
has clearly stated that it has paid the tax for the affected employee/appointee as part of
the terms of employment. Under current tax legislation this is not allowed.
There are many double standards here. Tax collectors are paid more in mileage during
the course of their job then most Canadians are allowed to claim. The same benefits that
are taxable in your hands by the tax collector are not taxed when they accrue to the tax
collector himself or to other government workers.
Why is this?
When the Federal Government is your employer they can break the rules as they see
fit because they make them.

448 ©Alan Baggett

 Glossary

A little something extra

The decision
“In December 1998 the B.C. Provincial Court in R v. Roberts & Viccars, heard the case of two taxpayers
charged with offences contrary to Section 239 of the ITA. Following a preliminary examination to
determine whether charges should be stayed for abuse of process, the court concluded that the taxpayers'
Charter rights (sections 7 and 11(d)) had been infringed upon and ordered a stay of proceedings.

The story
“CCRA Special Investigations (SI) opened a docket after receiving a memo titled “suspected scam.” The
memo raised the suspicion of fraud, a matter of critical importance in determining whether SI’s aim was a
criminal investigation. Repeated disclosure requests by the defense did not result in production of the
memo until just before trial when the Crown finally made it available. The court found that the handling of
the disclosure requests was unsatisfactory and negligent and that SI officers who gave evidence were
pointing fingers at each other as the one responsible for the grossly negligent handling of the vital
document.
The SI officer assigned to the case, one Dan Bourque, testified that an SI officer “wears two hats,”
having the authority to audit or investigate and in this case he commenced with the audit. In Mr. Bourque’s
view it was not necessary to warn anyone of a possible criminal investigation until something incriminating
was said. Bourque also admitted to consciously and intentionally misleading the taxpayers (and their
lawyer) by claiming he was from the Audit Division.
The court observed that: In his capacity as an officer of Revenue Canada and as a person in authority,
Bourque showed disdain for the Charter as all internal correspondence indicated that a criminal
investigation was being conducted while all external correspondence referred only to an audit. Also, within
days of receiving the case, Bourque contacted an auditor in another RevCan office, who, along with SI
there, directed an auditor to extract information from the taxpayers for use in a criminal investigation.
Again without telling them so.
Also, Requirements for Information were issued to compel the provision of information both before and
after the date SI alleges the investigation commenced. Even worse, the document required to obtain search
warrants and the prosecution report was carefully crafted to convince readers that a criminal investigation
did not commence until after much of the information was gathered.
Mr. Bourque admitted that the judge who issued the search warrants was, “deprived of the ability at the
most fundamental level of evaluating indeed any of the issues”.
Pat Cowley, a head office employee responsible for SI training, said that the practices of Bourque and
his supervisors was not consistent with policy. He also said that he would be shocked if an SI officer misled
a taxpayer by claiming to be from Audit and then discredited the preparation of misleading information’s to
obtain search warrants and a deceptive prosecution report. Such actions (in his view) would be an example
of “rebels out there deciding policy of the department,” and if condoned by a manager (as they were in this
case) it would indicate that an entire SI division was “out of control.”
The court concluded that Bourque engaged in a criminal investigation from the outset and that the facts
represented one of the “clearest of cases” of an abuse of process that justified a stay of proceedings:
‘The abuses in this case are varied and blatant and span the investigation reaching into the prosecutorial
and trial processes. If I decide that a stay is not justified in the extreme circumstances of this case then the
conduct of an investigation under the guise of an audit will become widespread, and in tax matters the rule
of law will be threatened by arbitrary and capricious behavior. What Bourque did, aided and abetted by his
supervisor Cowan, and continued by Fleming to the point of prosecution, was a willful attempt to use the
administrative audit process as an investigative tool. This was not a case of them saying, ‘We made an
honest mistake’ when testifying before me--not at all, for each of them, with a synergy that bristled with a
common purpose and a lack of candor, claimed that the taxpayers were only being audited and not
investigated and that an investigator has an inherent right to act as an auditor until reasonable grounds are
achieved.’”

449 ©Alan Baggett

 Glossary

The End?
This is how the CRA verifies your social insurance number as accurate. I supply this information because I
know that some people do not like to give their SIN to a bank but still wish to have a bank account. This is
one example of a SIN that a bank will accept as valid. You can engineer your own SIN by running the
formula backward (and being mathematically inclined) – allan@taxcollectorsbible.com

Example Employee's social insurance number (SIN): 550 911 895 – nine digits in total.

Formula: Assigned Digits

Digits Check digit
Recipient's SIN
(Exclude the check digit, position 9, from calculation)
550 911 89 5
==
5 9 1 9
Multiply every second digit by 2 x2 x2 x2 x2
-- -- -- --
10 18 2 18

Cross add the resulting digits (1 + 0 + 1 + 8 + 2 + 1 + 8) = 21

Cross add the intervening digits (5 + 0 + 1 + 8) = 14

--
Total 35

Subtract from the next highest number ending in zero 40

--
Check digit (i.e., 40 - 35 = 5) 5
======
Following this example, 550 911 598 would satisfy the question.

If your are planning to engineer your own SIN be aware of the following:
First digit of the Nine digit SIN:
0 - Person not entitled to work in Canada, such as a visiting student without work authorization, alien
business or rental property owner
1 - Person applied for SIN while resident of the Maritimes
2 - Person applied for SIN while resident of Quebec
3 - Overflow for when 2 is used up
4 - Person applied for SIN while resident of Ontario
5 - Overflow for when 4 is used up
6 - Person applied for SIN while resident of Manitoba, Saskatchewan, Alberta or the Northwest Territories
7 - Person applied for SIN while resident of British Columbia or Yukon Territory
8 – Overflow for 6 and 7
9 - Alien who has a temporary residence permit and is permitted to work. Often restricted to indenture with
one listed employer only, can be converted to a regular number if residency or employment status changes

Last digit of the Nine digit SIN:

The last digit is a check digit. All SIN's must be valid when put through a mathematical formula as shown
above. The resultant sum must match this check digit or the SIN is not valid. Many computer programs
automatically check for this.

450 ©Alan Baggett

Glossary

451 ©Alan Baggett

 Glossary

Here we go again

Ontario Court of Justice (General Division) in Norway Insulation.

An audit of Norway Insulation disclosed what the auditor considered to be unreported
income from sales. He immediately referred the matter to Special Investigations (SI). SI
sent an auditor to investigate Norway further. After that audit search warrants were
requested and obtained from which criminal charges were eventually laid (against the
corporation as well as certain key individuals).
When the case went to court the judge soon excluded all evidence obtained under the
warrants because the Charter rights of those accused had been violated.
On appeal the decision was upheld: the use of the second auditor to obtain further
information under general income tax audit powers infringed Charter rights.
In the court's view, in the beginning this was simply a case of a regulatory compliance
matter and the use of general audit powers was appropriate. However, after SI became
involved, the accused were no longer being audited. They were being criminally
investigated. Therefore the requirements and safeguards for criminal and quasi-criminal
investigations became applicable. And at that point, based on the Supreme Court's
decision in Hunter v. Southam, Revenue Canada should have obtained a search warrant in
order to proceed with their investigation.

452 ©Alan Baggett

 Glossary

The End?

http://taxcollectorsbible.com/

If you like CRA Tax Tales then give this link a look!

453 ©Alan Baggett

 Glossary

-1-

May 25, 1998

Carlos Balestreri
Revenue Canada
77 City Centre Drive
Third Floor
Mississauga, Ontario
L5A 4E9

Dear Carlos Balestreri

I am writing to inform you or my decision to resign my position with the

Department of National Revenue, Taxation Branch, effective as of the date of this letter.
While I am very appreciative of the time and money the Department has invested in me
to develop my particular talents and skills I feel that it is in my best interest to sever this
relationship.

The sole reason for my decision to leave the Department is based on the fact that
have been denied the use of my accumulated vacation privileges since January of 1995.

At the time of my departure, November 12 1997, my accumulated vacation time was

equal to 357.25 hours. By my calculations I am owed for 270.25 of these hours as my pay
was continued until November 26, 1997. I am also owed for 23.25 hours of overtime
(expanded hours) plus three meal allowances, and the signed timesheet for same is
enclosed with this letter.

As per my understanding of the Ontario statutes and legislation pertaining to leaving

the workplace, an employer has seven days from the date employment ceases to pay any
and all wages and vacation monies owed. If there is a problem in this regard, please do
not hesitate to contact me so as to avoid any difficulties or perceived misunderstandings.

I am also enclosing a form T2151 to have my pension monies transferred to my RSP

account. It is my understanding that I have until June 20, 1998 (see bulletin no. 96-
23/HR-P27) to effect transfer so I am asking for your cooperation in having these monies
transferred to ******* Funds of Canada, ****-**, ***** Street ****, Toronto, Ontario,
*** ***. If you could complete this form it would be much appreciated.

If at all possible, I would also like a complete accounting of the monies to be paid
out to me in respect of both wages/benefits as well as my registered pension plan. In
respect of the monies paid to me, I request at this time that no tax be deducted from these
monies, as I have no other income at this time and more than sufficient deductions are
available to me to offset any such tax that would be deducted. Please advise me as to
when I can pick up these monies and I will return the Departmental RC300A and T3000
identification at this mutually agreed upon time and place.

454 ©Alan Baggett

 Glossary

-2-

Once again, I would like to take this last opportunity to thank the Department for
being both kind and generous to myself in respect of taking the time to educate me. I
would also like to wish you and all yours all the best, if I can be of assistance to yourself
or the Department at any time in the future please do not hesitate to contact me.

Warmest regards,
Alan Baggett

455 ©Alan Baggett