A new report from Canada’s Taxpayers’ Ombudsman found that a “very small number” of taxpayers do not receive warning from the Canada Revenue Agency about debt collection, but many more do not understand the consequences of not paying.
Taxpayers’ Ombudsman Sherra Profit also recommended that the CRA provide more information to taxpayers about payment arrangements and conduct a “fulsome” review of the debt collection process.
“It is important the CRA ensures its legal warnings in debt collection are clear,” Profit said in a statement. “The consequences need to be explained in a way that is understood by the taxpayer.”
The report, Fair Warnings, was prompted after the Ombudsman’s office received many similar complaints about the CRA suddenly freezing or putting holds on taxpayers bank accounts.
“Some stated the CRA had put a hold on their bank account without any kind of warning. Another taxpayer claimed the CRA ‘froze a personal bank account with little legal notice’,” the report said, pointing to a common theme among the complainants.
“(It) was not the case that a debt was in dispute, but it was the perception that no notice had been given prior to the CRA taking legal action.”
The CRA is required to provide notice to taxpayers about debt collection through a legal warning, which is a written or verbal statement advising someone that the government can take legal action if the payment is not completed.
While the report found that “only a very small number” of taxpayers did not receive legal warning before the CRA took action, a significant concern arose in that many do not understand the severity of not paying the CRA.
“There is a lack of understanding by taxpayers about these consequences,” the report said. “Many taxpayers do not understand what ‘legal action’ involves, or the seriousness of the specific measures that can be taken.”
Although it was not specified exactly how many taxpayers do not receive any legal warnings, the Ombudsman found that those situations were anomalies.
“The issue lies in the lack of clarity in the information available and provided to taxpayers about the collection process and what is meant by the legal warning provided by the CRA,” the report said.
The Taxpayers’ Ombudsman made nine recommendations to address the issues surrounding the debt collection process, including having the CRA update its legal warning policies to ensure it, and the consequences of non-payment, are adequately explained. The report also recommended the CRA conduct “a fulsome review” of processes and policies regarding payment arrangements, considering the need for clarity and consistency for taxpayers.