Canada's Tax Auditors Treat Corporations with Kid Gloves

Don't just take my word for it. That's the conclusion of an audit of the Canada Revenue agency:

OTTAWA (CP) - Federal tax auditors are reluctant about ordering Canada's largest corporations to turn over key financial records because they don't want to damage relations, says a new audit.

Damage relations? If corporations owe tax money, it seems they ought to pay up just like everybody else. Who cares if those relationships are damaged? There's a pesky thing called "the law" that applies here.

And that kid-glove approach is adding to the massive backlog in a program that roots out $1.4 billion in unpaid corporate taxes each year.

The finding is highlighted in a report about how effectively the Canada Revenue Agency manages a $51-million program that focuses on the country's biggest businesses, those with annual revenues of more than $250 million.

The agency dedicates more than 600 auditors to the task of examining the books of these 9,400 corporations, most of them in Vancouver, Calgary, Toronto and Montreal.

The October 2006 document found a raft of problems unresolved since they were first identified by the auditor general of Canada a decade ago, including poor planning, training and documentation.

Investigators also found that fewer than four per cent of 719 audit files closed between 1999 and 2003 were completed on time.

The issue is key because once a public corporation has filed its income-tax return and receives a notice of assessment, the agency has just three years to reassess.

Beyond three years, the return cannot by law be reassessed unless the company agrees to waive the deadline or there's been deliberate fraud.

That's willfull negligence - plain and simple.

The audit report found that the current backlog exists largely because big corporations fail to provide key financial information on time.

In a sample of 16 files in which corporations voluntarily agreed to a timetable for turning over their books, for example, investigators determined that only five of them actually met the deadlines.

Canada Revenue Agency can issue compliance orders, but "legislated enforcement tools to obtain books and records were not considered or issued for these files," says the report.
[...]
The agency says it is analyzing the timeliness problem and developing a strategy, but warns "it may take a number of years to achieve the desired results."

Years? Just bring down the hammer on the corporations and the slacking tax auditors and get on with it.