Small and medium-sized businesses selected by the Canada Revenue Agency for audits are waiting longer for those audits to be completed, which business groups say is causing unnecessary stress for small business owners across Canada.
Documents tabled in Parliament show that it now takes the CRA nearly a year on average to complete a small business audit – an average that was increasing even before the pandemic hit.
While it took the CRA an average of 171 days to complete an audit of a small or medium business between April 1, 2015 and March 31, 2016, it took an average of 348 days between April 1, 2021 and March 31, 2022. At the start of this year, it took the CRA an average of 314 days to complete such an audit.
Corinne Pohlmann, senior vice-president of national affairs for the Canadian Federation of Independent Business (CFIB), said her members were complaining about the CRA’s longer audit times even before the pandemic.
“We’ve seen over the past few years an increase … in the duration of these audits and, anecdotally, more complaints about how long it takes,” Pohlmann told CBC News.
“So it’s concerning to see that some of these audits take up to a year, which is a long time to feel stressed about what’s going to happen in this whole process.”
The CRA said the pandemic remains one of the reasons audits are taking longer.
He said the number of audits of small and medium-sized enterprises fell to 11,328 in 2020/2021 from 23,135 the previous year, as staff who carry out such audits were reassigned.
“Due to the COVID-19 pandemic, several programs have been suspended,” the CRA said in a recent response to a House of Commons Order Paper question by NDP MP Daniel Blaikie.
“Employee workload has shifted to essential services, such as COVID-19 benefit programs and COVID-19-related call center operations. Audit activity continued throughout the pandemic, but was limited to high-risk audits and exceptional circumstances.
In response to questions from CBC News, the CRA also said it has suspended these audits in order to help businesses during the pandemic.
“The CRA has deliberately paused audits, lasting approximately six months in 2020/21, for small and medium enterprises in recognition of the difficulties caused by the COVID-19 pandemic,” the door wrote. -ARC spokesperson, Nina Ioussoupova, in an email. answer.
She said operations have not returned to pre-pandemic levels in 2021/22, but regular audit workloads have now resumed.
CFIB said halting audits of small and medium-sized businesses during the pandemic was the right thing to do.
“We knew, and even asked ARC to step down during COVID because so many businesses were closed, weren’t even able to operate, that we felt the last thing [they needed] at this point had to go through an audit,” Pohlmann said.
“So the fact that the audits went down a lot during that time, and they even moved people into other areas to help with services around COVID, I think that was all kind of what it was necessary to do.”
Conservative revenue critic Adam Chambers said most small businesses had been audited very thoroughly in recent years.
“If you’re a small to medium-sized business and it takes longer than 250 or 350 days to complete an audit, that’s a big distraction for you in running your business,” Chambers said.
“Many small [or] mid-sized companies have had a tough time over the past two years, so I think it’s reasonable that they’ve diverted some resources to other priority areas. »
NDP revenue critic Niki Ashton said the fact that the CRA had to pull audit staff to run COVID benefit programs raises questions about whether the CRA has what it needs to do its job.
“The fact that resources have been diverted from verification is a problem and really speaks to the lack of resources for the CRA to work with,” Ashton said.
“We need to make sure small and medium businesses pay their fair share and we really need to make sure the ultra-rich pay their fair share.”
Ashton said the CRA appears to be implementing two sets of rules – one for small businesses and another for very wealthy Canadians.
“We’ve seen more cases get criminal investigations and even convictions when it comes to small business audits compared to the ultra-rich,” she said. “So we need to make sure the CRA has the tools to prosecute anyone who is avoiding their fair share of tax, and that’s clearly not being done right now.”
In its response tabled in Parliament, the CRA said 304 cases involving small and medium-sized businesses have been referred to its criminal investigations program since April 1, 2015, and 16 of those cases have been referred to the Prosecution Service. of Canada for possible criminal prosecution. pursuit.
As of March 31, 2022, the last date for which figures are available, seven criminal investigations had resulted in the conviction of 13 taxpayers. Although the CRA publishes convictions for violation of tax laws, it declined to identify the cases mentioned in the response it filed.
The period from November 2015 to March 31, 2022 saw one wealthy individual convicted of tax charges – and no charges brought in relation to the massive amount of offshore account information leaked in the Panama, Paradise and Pandora newspapers.
The CRA was also tight-lipped when asked what prompted the agency to choose some small and medium-sized businesses for audits over others.
In its response, the CRA cited several aspects that contribute to the decision to audit a company, including leads and “other sources of data”, as well as “local projects, internal references and strong trust in the local judgment”.
“All SME (Small and Medium Enterprises) workload is selected for audit because of an item on their tax return that presents a high degree of risk of non-compliance, relative to each of the major programs. .and their particular income brackets,” the CRA wrote.
Yusupova declined to reveal exactly what risk factors the CRA measures when selecting a company for an audit.
“Generally, the CRA selects records for audit based on a number of conditions such as compliance history, potential for errors, and types of deductions/credits claimed,” he said. she writes.