I remember when I was a kid, I broke a window at home with a baseball that I had hit. My father made me pay for the window which, as I recall, cost quite a few weeks of my allowance. Imagine if your employer made you do the same thing if you cost the company money. Then imagine a scenario where you cost the company millions. That's a lot of overtime you'd have to put in to pay it all back.
Last Friday, April 24, an employee at the Canada Revenue Agency (CRA) may have cost the agency big bucks when he or she sent out a communication suggesting that the tax-filing deadline for 2014 is actually May 5, 2015, not the usual April 30 deadline. To be more accurate, it was Revenue Minister Kerry-Lynne Findlay that cost the government potentially millions when she announced that the CRA would give Canadians five extra days, until 3 a.m. on May 5, 2015, to file personal tax returns to avoid any confusion that was created by the April 24 announcement.
Don't get me wrong. I'm not complaining that I've got extra time to file my tax return, but you have to question what's going on at the CRA when there have been more than just a couple of incidents that point to questionable competence at the agency.
The theme
So, this is a recurring theme with the CRA. You might recall that last year there was a technology security breach, which caused the CRA to announced that taxpayers would have until May 5, 2014, to file their 2013 personal tax returns. Before that, there was 2008 when the CRA had an issue with its website and also extended the deadline to May 6 that year.
Is there really a cost to delaying tax filings by five days? Sure. When you're talking about collecting billions of dollars of tax revenue on April 30, but you don't collect it until May 5, the interest on those billions for even a five-day period can add up. Consider this: Statistics released by the CRA in 2013 show that the total taxes owing by individual Canadian taxpayers in 2011 (the most recent stats available) was $169.2-billion.
For fun, let's assume that two-thirds of Canadians remit their taxes throughout the year in the form of payroll deductions or instalments. Suppose that one-third have to make a payment when they file their tax returns. Using my back-of-the-napkin math, the government can expect to collect, perhaps, $56.4-billion at the tax deadline. Using short-term government of Canada bond yields as a proxy, with a rate of 0.64 per cent, the lost revenue to the government for the five days extra time given to taxpayers would be in the neighbourhood of $4.9-million. Pocket change for the government, perhaps, but not for the many organizations or purposes that might have benefited from those dollars.
The response
In talking with taxpayers, the true procrastinators are quite happy about the extended deadline. And who wouldn't be if they would otherwise face penalties for filing late? Our tax law says that you'll face a 5-per-cent penalty immediately on any taxes owing at the filing deadline if you fail to file your tax return on time. Further, you'll face an additional 1 per cent a month for each month you have failed to file while owing taxes – to a maximum penalty of 12 per cent.
As for accountants and tax preparers, many may be crying the blues this morning – particularly those who had booked their all-inclusive vacations to the Caribbean with flights leaving May 1.
All of this comes at a time when the CRA is regularly criticized for being less than helpful when providing tax information to taxpayers. The Canadian Federation of Independent Business (CFIB) regularly issues a report card for the CRA. Based on the CFIB's last survey, 73 per cent of respondents said they feel the CRA is not accountable for the mistakes they make, 60 per cent said the CRA treats taxpayers as though they've done something wrong, and the overall grade for the CRA was a "C" (up from "C-minus" in 2012).
You'll never please all of the people all of the time, but the CRA's track record is dismal. Sure, some things have improved over the past couple of years, but many things have become worse with the CRA trying to do more with less. These are our taxpayer dollars at work, and Canadians deserve more.
Tim Cestnick is managing director of Advanced Wealth Planning, Scotiabank Global Wealth Management, and founder of WaterStreet Family Offices.
Tim Cestnick