The size of Canada’s federal tax agency, the Canada Revenue Agency (CRA), has ballooned in recent years, while the size of comparable agencies in the United States and Australia have remained unchanged.
Since 2018, the CRA’s headcount has grown by almost 40 per cent, adding 17,000 people to reach a total of 59,000 in 2023. By comparison, between 2010 and 2018, the CRA’s size had been largely stable, fluctuating between a low of 39,000 and high of 43,000.
The equivalent institution in the United States, the Internal Revenue Service (IRS), had only 79,000 employees as of 2022, and has added a mere 5,500 staff since 2018. The IRS serves a population and economy that are both roughly 10 times the size of Canada’s.
“Why do they have to hire more employees?” asks Franco Terrazzano, federal director of the Canadian Taxpayers Federation, a taxpayers advocacy group. “Everything is becoming more efficient over time as technology improves. The only place where we’re seeing things become more inefficient over time is the government.”
Australia agency employs 20,000
In Canada, there is one tax employee for every 700 citizens in 2023. By contrast, in 2022, the United States had one tax employee for every 4,200 citizens.
The 2022 Inflation Reduction Act allocated roughly $80 billion dollars to the IRS over 10 years. With that new funding, the IRS will hire nearly 20,000 new staff over the next two years, the agency laid out in its 2023 strategic operating plan.
If the new employees are all net additions to staffing, there would still only be one tax employee for every 3,400 American citizens, assuming stable population growth.
According to Peter Psiachos, a New York-based tax attorney, running a modern tax bureaucracy requires a certain baseline of staffing. It therefore shouldn’t be expected that Canada and the United States have the same per capita number of tax employees.
The more analogous institution to the CRA, Psiachos says, is Australia’s federal tax bureaucracy, the Australian Tax Office (ATO).
Since 2013, the ATO has employed roughly 20,000 people, with 20,400 employees as of 2022. That means that Australia had one tax employee for every 1,300 people in 2022, roughly half the number of employees per capita as Canada.
Australia is a better comparison to Canada, Psiachos notes, because both countries have a national corporate, personal and sales tax, whereas the US does not have a national sales tax. Australia and Canada’s corporate tax regimes and enforcement are also similar, as both countries are homes to branch or subsidiary offices of multinational corporations.
New responsibilities
According to CRA spokesperson Etienne Biram, the CRA has two main functions: services and compliance.
The CRA’s services responsibilities grew during the pandemic, Biram said. The agency played a “key role” administering supports like the Canada Emergency Response Benefit and the Canada Recovery Benefit.
“As we took on these new responsibilities, it was necessary to augment our workforce, which is made up of both permanent and temporary (term) staff,” Biram said.
The CRA also hired approximately 2,500 call centre staff between October 2020 and March 2021. The CRA did not provide specifics for the increased hiring before the pandemic or the additional 4,000 employees hired from 2022 to 2023.
On the compliance side, the CRA added an unspecified number of auditors. The agency “has enhanced its compliance and enforcement efforts by focusing on higher risk taxpayers and those involved in aggressive tax planning strategies and complex offshore structures,” Biram said. The agency plans to add an additional 600 new auditors by the end of 2023.
The government expects these enhanced compliance efforts to recover an additional $3.4 billion in revenue over the next five years, Biram said.
The 2022 budget said the government’s “investments in the CRA since 2016 have yielded five dollars for every one invested.” The budget does not directly reference any data to support this claim.
According to the Canadian Taxpayers Federation, the CRA’s growth is part of a broader trend.
Since the Liberals took office in 2015, the number of federal employees has grown by 40 per cent, an increase of 98,000 people, according to Terrazzano. As of 2023, there were 357,000 federal employees.
From 2010 to 2015, the size of the federal bureaucracy decreased from 283,000 to 257,000.
Excellent article! The IRS also has many more businesses to deal with than the CRA. The CRA has become very bloated.
I’ve had interactions with CRA around GST and Carbon rebates, going back and forth as they make minor changes to my income assessment, none of which increased my tax owed. The entire tax structure needs to be reviewed and simplified. If staff were cut in half, they wouldn’t have wasted time making me jump through hoops, just to get back to where they started. At the same time corporations and the rich need to pay a fair share.