If the Canada Revenue Agency weren’t a government monopoly, the organization could well be fighting for its survival.
This past year has seen the agency repeatedly make headlines for poor service standards.
This week, The Globe and Mail reported that taxpayer objections to CRA decisions have risen to about 130,000 claims a year, up from about 70,000 objections six years ago. Taxpayers can file objections when they believe the CRA has issued a wrong decision.
These data come on the heels of the auditor general’s findings, released in October, showing the CRA answered individual taxpayers’ questions correctly just 17 per cent of the time. The audit also revealed the CRA fails to meet its own service standards in most cases.
Dedicated Canadian Affairs readers may further recall our own reporting, in March, of a troubling tax court decision. In that case, the court upheld a CRA error requiring a taxpayer to pay tax on twice his actual income, because the taxpayer failed to challenge the CRA’s error in time.
The troubling aspect of that case was not that the court upheld the CRA’s error, or even that the CRA made an administrative error.
No. The really alarming part was that the CRA chose to fight the man all the way to court, rather than simply correct an error it acknowledged it had made.
All of this brings us to automatic tax filings.
The 2025 budget reiterated plans for the CRA to begin filing tax returns for some low-income Canadians.
The Canadian Taxpayers Federation has come out against automatic filings, saying they represent an unacceptable conflict of interest.
“The CRA acting as both tax collector and tax filer is a serious conflict of interest,” the federation’s national director, Franco Terrazzano, said in a news release. “Trusting the taxman to do your tax return is like trusting your dog to protect your burger.”
We like the analogy, but disagree with the position.
In principle, automatic filings have merit. They have the potential to relieve many Canadians of the burden and cost of completing their taxes.
More importantly, they would ensure the roughly 10 per cent of Canadians who currently do not file taxes receive means-tested benefits such as the Canada Child Benefit.
At present, though, it seems the CRA is not ready to take on this important obligation.
Not only is the CRA not applying the law correctly much of the time, it is not even taking ownership of its mistakes when it does mess up.
Clearly, some pretty major changes are needed first. And by changes, we do not mean more manpower.
The CRA has grown explosively in the past decade, without a commensurate boost in service standards. In 2024, the CRA employed nearly 60,000 people, up an astonishing 47 per cent from 2015.
To put that number in context, the U.S. Internal Revenue Service, which serves a population about ten times Canada’s size, employed about 90,000 individuals in 2024. Australia, which is more comparable to Canada in population and tax complexity, employed about 21,000.
Instead, less would be more. Specifically, the government should focus on simplifying the tax code and improving the CRA’s processes.
The first point requires little explanation. At around 3,300 pages, the tax code is too complex. Complexity privileges the wealthy, enabling an elite few to take advantage of the tax code’s boutique goodies, while leaving most Canadians to navigate a morass of confusing rules alone.
Second, the tax code’s complexity affects the CRA’s own service standards. As policy expert John Stapleton has written in these pages, the CRA’s frontline agents themselves often explain the Income Tax Act by reference to “guides, bulletins and web explanations ostensibly written in ‘plain language.’”
The problem is, these summaries can and do contain errors, which can affect thousands of Canadians. These summaries often take on “near-sacred status” within the agency, while holding “no legal force,” Stapleton writes, meaning it does not matter if taxpayers rely on their guidance in good faith.
At the end of the day, it is the Income Tax Act‘s rules that matter — and that are causing headaches inside the CRA and outside of it. Reform must start there.
We want to get behind automatic filings; we do. But until the CRA develops a better track record, we believe the right answer is for most Canadians to continue doing their own taxes.
Yes, tax season is dreadful; but fighting the CRA after the fact is even worse.
I can’t believe anyone would use ‘competence’ in the same sentence as CRA!
Far too many ‘working at home’ employees with little to no understanding that they work for Canadians and not their union!!
Excellent article! It is good on Canadian Affairs for to be reporting on the CRA. Most Canadians are unaware about how bad the CRA has become. The CRA is crippling innovation, is heavy-handed, and incompetent. It has become a bloated organization that is unaccountable.
p.s. from a governance perspective, it would be wrong for the CRA to file taxes. In addition for the CRA to gain competence, it would be good to simplify the tax rules.