One Comment About Taxation – Canada Revenue Agency’s Service Needs to Improve Especially in Light of Their Massive Headcount Increases

 

I’m not one to regularly bash the Canada Revenue Agency (“CRA”), Canada’s tax administrator. They have a very important job to do which is to administer Canada’s very complex taxation laws and those of most of the provinces and territories.  If a country has income tax laws, then it had better properly administer them.

In all my years of dealing with the CRA, I have had mostly had good experiences.  There are some very good and dedicated public servants who take pride in the job they do and generally do it well.  Don’t get me wrong, I have had my fair share of head scratching moments as well or days when you wonder how the person you’re dealing with got a job in the first place.  But, again, my experiences have generally been good.

In many of the recent federal budgets, there have been significant amounts of money added to the CRA’s budgets.  In some of the recent budgets, the additions were under the guise of going after “offshore tax evasion” (a long-time bogeyman phrase that has more fiction to it than fact).

Given such increases, the headcount of the CRA has also been growing.  For example, the CRA had 39,484 employees as of 2016.  But that number has grown to 59,019 as of 2023 (last updated as of June 2023).  That is a 49.5% growth in the span of 8 years.  While Canada’s population has been growing as well (especially recently), the pace of employment growth at the CRA is certainly outpacing that growth.  While some of the recent years CRA headcount increase was because of the administration of COVID support programs, the trajectory was on a steep incline even before such COVID demands.

The CRA has long been Canada’s largest employer.  Accordingly, I don’t think it’s unreasonable to ask whether or not Canada is getting good value for its large annual outlay in salary and other costs.  An annual read of the CRA’s Departmental Results Report is always interesting to see how they evaluate themselves.

A view from the “cheap seats” (meaning taxpayers and their advisors) always has the following general comments about the value provided by the CRA:

• Phone call wait times are horrifically long;
• Can’t get through at all;
• Technology is archaic and frustrating (but to be fair, one can understand that security of information is critical so the CRA must always prioritize security ahead of convenience); and
• Auditors or other front-line employees are inexperienced and not helpful.

I think the above list is generally fair and certainly consistent feedback.  Recently, though, the above list, in my experience has been magnified even more.  It’s pretty obvious that a good chunk of CRA’s employees are still “working from home”.  While CRA employees may find that more convenient, it is doubtful that it adds to overall productivity, good training and “client experience”.  In recent years, there have been no shortage of horrible cell phone connections that often drop when conversing with a CRA employee, spotty Microsoft “Teams” meetings with the CRA’s fake virtual background, blanket / voluminous requests sent to taxpayers that are out of touch, not acceptable turnaround times for resolution of even routine matters and agents that are so obviously undertrained.

The CRA has historically competed for talent with the professional community. In most cases, the professional community can pay more but to counter the CRA can often offer more time off and better long-term pensions. Does this impact the overall quality of the applicants?  One can debate that forever. At a minimum, though, it is clear to me from a number of recent experiences that the CRA training for their new employees needs to be improved with better results.

Overall, though, I think it’s long overdue to question why the CRA’s headcount is growing while its “client experience” is less than appealing.  Our income tax statutes are certainly growing in complexity and thus proper administration demands a highly educated / trained workforce to ensure good but targeted compliance.

Lastly, it would be good to see such significant funding increases afforded to the CRA in recent years partially re-directed to the Tax Court of Canada which is in dire need of technology and other improvements so as to help it handle its workload.  I have sat in the audience at a number of tax conferences in recent years where representatives from the Tax Court of Canada have publicly plead with the government of Canada to increase its resources so as to help with the administration of justice in a more timely and efficient manner.  While I appreciate that is often easier said than done, that does on its face appear to be a decent alternative to simply throwing more money at the CRA so they can continue to hire more employees.

 

One Comment About Leadership – Good Leaders Say “We” vs “I”

 

For those that know me, you’ll know that I’m not much for titles. While I understand the benefits and use of titles, I think there is often too much emphasis placed on the importance of a title.

For example, I was the CEO of our firm for years.  However, the title meant nothing to me.  Instead, it was my leadership communication, execution, efforts to build a great culture and day-to-day examples that I cared about more.  As I said in a recent email exchange about this topic with some colleagues, you could have called me “Chief Shithead” for all I cared as long as my colleagues appreciated my leadership, could provide me direct feedback and my external audience understood my role and how I could help.

Instead of focusing on titles – a very individualistic exercise – I prefer to focus on “us” or “we”.  One of my “heroes” as a budding young student was the eminent management author, professor and consultant Peter Drucker.  In one of his classic Harvard Business Review articles “What Makes an Effective Executive”, he listed eight attributes of an effective leader.  I’ve written about those eight attributes before in this newsletter.  One of the eight attributes is “think and say “we” not “I””.

I was always enamored with the idea of “we” vs “I” because it was very apparent to me early on in my tax and entrepreneurial career that there was no way I could learn taxation and build an organization without the help of a great team and centres of influences.  Along the way, however, there was no shortage of professionals that I would run across that would say “I think I can solve that problem” or “what if I did this?” or “my idea really worked!”.

In the early days of my career, I would bite my tongue to counter those statements since I didn’t have the courage to speak up.  However, as time went on, I started speaking up to counter those statements often made by egotistical people. It was always done politely and sometimes it was accepted in the spirit it was offered.  However, in some cases the person was shocked and ultimately didn’t understand the message (or perhaps I could have done a better job in my messaging?).

As I progressed throughout my leadership career, I adjusted my language to “we” to ensure the team understood that I was very aware of the power of team and their contributions.  I still do that today.  “We” is more powerful than “I” and certainly gives credit where credit is due.  And in this case, while not exactly a title, choosing your words carefully indeed makes a difference.

 

One Comment About Economics and Politics: Canada is Caught in a “Population Trap”??

 

Last week, I read a short column that stated Canada is caught in a “population trap”.   Huh?  Whenever I hear a phrase that I’ve never heard of before I try to dig into it and understand it.

From another recent article about this topic:

The Oxford dictionary defines population trap as an economic “situation where no increase in living standards is possible, because the population is growing so fast that all available savings are needed to maintain the existing capital-labour ratio.” In layman’s terms, this means there are so many new people, that all our investment capacity is getting used up incorporating them into the economy and getting them up to speed — there is nothing left over to actually increase the overall standard of living. Stéfane Marion, one of the National Bank economists who authored the report, described a population trap as something akin to a toolbox not big enough to hold all the tools people need. “If you invite three people into the country and you only have two hammers, the third person is lacking capital and can’t be as productive (as the other two),” he said. The concept of a population trap has historically been the preserve of emerging economies. But Canada’s rapidly rising population, a result of recent immigration policies, appears to be mimicking that effect of high birth rates. Immigration is good for Canada’s potential gross domestic product, said Marion, but “all good things have their limits.”

Canada’s population increased by more than 1.2 million people or 3.2 per cent in 2023, five times higher than the average for nations in the Organisation for Economic Co-operation and Development. The economists said this population growth is extreme relative to the absorptive capacity of the economy, given that the workforce is not aging faster than the OECD average. This absorption challenge is most evident in Canada’s housing market, where the supply deficit reached a new record of only one housing start for every 4.2 people entering the working-age population, compared to the historical average of 1.8 ratio, they said. 

The economists say Canada lacks the infrastructure and capital stock to adequately absorb current population growth and improve the standard of living. While the housing shortage has attracted the most attention, capital stock includes components of everything from infrastructure, hospitals, schools, machinery, equipment to software. “Given that we’re running a current account deficit in this country, the only way that we can grow our capital stock is to attract foreign capital at the same time,” said Marion.

So, having too many people come into a country when its infrastructure is not ready for it is called a “population trap”?  Ok.

But putting my “common sense” (look that up in the Oxford dictionary too) hat on, it only makes sense that a country should have sensible immigration policies to defend its borders and ensure its overall infrastructure (roads, schools, hospitals, housing) can absorb population increases while trying to obtain the obvious benefits and necessity of immigration. My phrase for having an “open-door like” immigration policy when a country is not ready for it is “foolish”.

Canada, let’s drop the jargon and return to common-sense when it comes to our immigration policies.

 

Bonus Comment – Quote From an Ancient Navajo Proverb About the Fact You Cannot Force Someone To Do Something That They Do Not Want To Do

 

“You can’t wake a person who is pretending to be asleep.”

 

Yep, totally agree!  Leaders, are you “pretending to be asleep” in any area of your life?

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