One Comment About Taxation – The CRA Has An Important Job To Do But They Need to Improve

 

When I attend social events and meet new people the topic of taxation routinely comes up after I introduce that I’m a tax professional.  It is common for the conversation to go in the direction of the Canada Revenue Agency.  I explain that the CRA simply administers the laws that politicians – in conjunction with the Department of Finance – draft and ultimately brings to Parliament to pass into law.  It performs a critically important function since without it the laws would be meaningless and there would be no funds to ensure that various levels of government can carry out their functions and duties. Despite such explanations, it is common for my new acquaintances to expound negatively about the CRA or state that they are scared to interact with them.

 

Such views are consistent with biblical accounts of tax collectors – especially in the New Testament – who are viewed negatively, likely because of their association with the oppressive Roman government and many apparently collecting more than what was owed.  I think it’s fair to say that views about government tax collectors have largely improved since Roman times but people still hold deeply personal views about such agencies.  Again, often negative. 

 

For me, I’m quite agnostic about the CRA.  I don’t hold negative or positive views but instead I continue to respect the CRA for the critically important job they do.  

 

Over my 30-year taxation career as an advisor, I have seen both the good and the bad.  For the good, I’ve had the pleasure of working with some of the most talented and dedicated public servants who truly care about Canada.  They make a difference.  Often the “good” involves getting to an answer quickly, courteously and efficiently with the CRA’s help.  An audit that is done efficiently and effectively is also “good”.  

 

The “bad” contains stories of public servants who are poorly trained, use their “power” to purposely intimidate taxpayers, conduct very poor audits and form conclusions that are laughable which the affected taxpayers are then forced to spend time and money to challenge.  

 

On balance, my historical experience with the CRA has been positive. It’s not easy to run a behemoth that is beholden to the government of the day.  

 

Lately, however, the “bad” experiences are starting to become much more common than the “good”.  In chats with my colleagues across Canada, many would agree.  This is despite the CRA’s headcount growing from 40,059 people in 2015 to 59,155 people this year – a whopping 47.6% increase during that time period.  Every time I review those statistics, I shake my head at such massive increases.  

 

Although this is a simplistic comparative, the U.S. equivalent to the CRA, the IRS, had 82,990 employees as of 2023.  With a population of roughly 336 million, that is the equivalent of 1 IRS employee for every 4,049 US residents. In Canada, with a population of roughly 40 million, we have 1 CRA employee for every 676 residents; a roughly 6 times per capita increase.  I’d like to understand why. Is the CRA overstaffed?  Is the IRS understaffed?  My guess is it’s a combination of both.  Notwithstanding, for reasons that I discuss below, I think the CRA can do better. 

 

With increased headcounts and resources, I would expect the CRA would be providing significantly improved services to Canadians but that simply has not been the case.  Yes, the electronic services have improved over time but compared to the private sector, such services lag with security often being the primary reason for such slow advancement.  

 

Some of the “bad” experiences that I have experienced lately include audits of some taxpayers that are laughable.  One such audit involved a holding company that has significant financial assets due to a prior sale of a business.  The only other assets of the company besides cash and marketable securities was one non-financial property that represented 0.015% of the overall assets.  The non-financial property was the only asset that generated revenue that was subject to GST considerations and filings.  The accounting records of this company are squeaky clean.  

 

The audit started out as a GST audit with a 20 page questionnaire.  It has grown to numerous video and phone calls with the auditor (who is obviously working from home with multiple distractions in the background) and over 18 months later, with zero adjustments (which is not a surprise), the auditor is still convinced that there is something to find.  This is an example of an inexperienced, poorly trained and guided auditor who has spent countless hours searching for a needle in a haystack with no such needle existing.  While I appreciate that CRA has the right to – and frankly should – review taxpayers’ affairs, there should be a level of practicality and common sense applied to reviews so as to protect Canadians’ assets and not waste available resources. 

 

Other “bad” experiences include the ever-prolonged wait times to contact a CRA representative despite hundreds of millions of dollars in recent budgets to improve, how foreign tax credits are processed by the CRA (especially those who have US taxes paid and have claimed such taxes as a credit), very long processing times for routine adjustments to individual and corporate tax returns, audits of the claiming of small business deductions that are aggressive and nonsensical and many other frustrating experiences. 

 

While the CRA annually publishes its “Service Standards”, such standards do not deal with many of the common frustrations above.  

 

Like at the social events I attend, it’s almost too easy to criticize the CRA. But it’s not constructive.  The harder thing to do is to actually try to improve the beast that is CRA and ensure Canadians are getting good value for their money. 

 

Instead of continuous self-reviews, I think it would be good and proper for the CRA to be subject to a thorough and independent review with mandated improvements by the recommendations provided.  

 

It’s time to tackle the recent “bad” CRA experiences and conduct a review for efficiencies for the benefit of all Canadians. 

 

One Comment About Leadership – Leaders, Are You Showing “Little Sparks of Appreciation”?

 

A few years ago, Lee Brower, a phenomenal leader and coach who I follow, recommended on his weekly Meaningful Monday videos, an old book entitled Try Giving Yourself Away by David Dunn.  Originally published in 1947, it’s a great book about how people can conduct themselves in a more meaningful way.  I ended up buying a third edition 1970 copy from a secondary re-seller.  It’s full of nuggets.  

 

The closing paragraphs of chapter 18 – “Little Sparks of Appreciation” contains one of those nuggets:

 

What applies to professionals applies doubly to workers in offices, stores, factories, laboratories, or studios.  In our working relations we should try to remember that the girl at the next counter, the man at the next bench or machine, the person at the adjoining desk or in the next office is a human being first of all, and after that a salesperson, machinist, cost accountant, or department head.  And all human beings hunger for appreciation.  

 

Leaving a friendly trail of little sparks of appreciation is largely a matter of cultivating the habit of reflecting your happiness by expressing it to the people around you.  It will prove a heart-warming habit – for them and for you.

Love that.  Leaders, are you leaving a friendly trail of little sparks of appreciation to the people around you? If not, what can you do to create that habit?

 

One Comment About Economics: Smart Phones Don’t Belong in the Classroom of Our Children

 

While this comment isn’t exactly an economics topic, it does have a long-term impact on how our country teaches our youngsters / next generation.  When I was in grade school, there was no such thing as handheld smartphones or computers for that matter.  Today, we all hold powerful computers in our pockets and many parents give their children smartphones which they promptly take to school.  I was guilty of that.  

 

What has been the impact?  Well, it doesn’t appear to be good.  I see it whenever I guest lecture at universities.  The youngsters, often fresh out of high school, are highly addicted to their phones, laptops and constantly looking at them during my lectures.  I see that too when I have lectured for professional development programs.  In other words, the addiction is not reserved just for children.  

 

A good article was released by Danny Randell in the National Post on August 27, 2024 about this topic entitled Disruptive smartphones have no place in school.  From the article:

 

Self-control is harder for children than it is for adults. That’s why we limit their access to things like sugar and alcohol. Yet most kids have unlimited access to an endless source of distraction: their cellphones — and they’re addicted.

 

Smartphones and social media are wreaking havoc on our schools and our kids: Teachers have noted addict-like behaviour when trying to enforce cellphone restrictions. Symptoms range from an inability to stop scrolling, to a “fear” of being separated from their device to angry outbursts when their phone is taken away.

 

Ten years ago, smartphones and social media were still relatively new phenomena, but there is now data to suggest that these technologies pose a serious problem to young people’s ability to learn. One study published in the International Journal of Mental Health & Addiction found that youth are more prone to smartphone addictions than adults.

…

And it’s not just the interruptions to learning which require attention, but the detrimental impact social media has on kids both in and outside of the classroom.

 

Long before the advent of smartphones, research already linked media consumption to eating disorders in girls. That was when a magazine might have had a tenth of the audience of what a single “influencer” can have now.

 

The media landscape may have changed, but children haven’t. They still imitate their role models and each other. They continue to suffer from traditional mental health struggles like eating disorders and a lack of self-esteem, but as New York University social psychologist Jonathan Haidt points out in his book, The Anxious Generation, increased social media use has led to a concomitant rise in psychogenic illnesses. 

…

Let’s put all this in biological and developmental context: A young person’s prefrontal cortex does not fully develop until they reach their early to mid-20s. Not only are they more likely to become addicted to their devices, but they are also susceptible to phenomena like social contagion and sextortion.

…

Today’s young people grew up with smartphones and social media with few to no guardrails in place, including at schools. It is encouraging to see more provinces restrict the use of smart devices in schools, yet more must be done to minimize the harm this technology is causing.

It’s good to see Alberta, BC, Ontario, Quebec, Nova Scotia and New Brunswick implement varying forms of restrictions for cell phones in classrooms.  I’d like to see a complete ban across Canada except for those very rare cases where it would be ideal for a child to carry one.  Yes, there are always exceptions but not many.  

 

Bonus Comment – Quote From Ralph Marston – American Motivational Writer – About a Leader Showing Sparks of Appreciation

 

“Make it a habit to tell people thank you — to express your appreciation sincerely and without the expectation of anything in return. Truly appreciate those around you, and you’ll soon find many others around you. Truly appreciate life, and you’ll find that you have more of it.”

 

Absolutely agree!  

 

Hope you enjoyed this edition of 1-1-1…please sign up for my mailing list today.