Read on Twitter
In 1949, Canada’s head tax man, Fred Brown, instructed his staff to cancel the income tax debts of the nation’s combatants who died while serving.
A thread on unexpected debts and fear of the CRA. #CERB
A thread on unexpected debts and fear of the CRA. #CERB
Tax forgiveness to the estates of the fallen was just one of several tax reliefs inspired by the fact that personal income taxation was, for most Canadians, a new thing.
During the war, enforcement had been lax because the five-fold growth of tax filers after 1942 overwhelmed even the expanded tax offices
Brown (formerly a banker and a CD Howe $-a-day man) was hired in December ’46 to oversee the catch-up and clean-up. He burned out after 10 months on the job. But while he was there, he took a compassionate view on enforcement.
He instructed his staff to garnish wages only as a last resort, and instead work out more painless ways to collect small tax debts.
His successor, W.D. Scully, carried out the real lesson of the new mass income tax. Don’t design tax admin systems to make 100s of 1000s of ordinary wage earners into tax debtors.
It will not turn out well. I’ve written here about the measures they took to fix the problem inherited from the WWII crisis.
Now it seems that CERB and CRB will leave a legacy of repayment and (smallish) debts to the Crown. https://activehistory.ca/2020/07/from-crisis-to-clean-up/
Now it seems that CERB and CRB will leave a legacy of repayment and (smallish) debts to the Crown. https://activehistory.ca/2020/07/from-crisis-to-clean-up/
There is enough blame to go around: to the CRA for vagueness in the April 1 to April 21 FAQs about what the $5,000 self-employment income meant. Of course it meant net, but readers of the CRA’s comms don’t always hear the words as they are meant.
The CRA for circulating educational letters in December that were too stiff and conventional. To reach a population with an unprecedented message, the style of communications has to be different, too. Prepare for the next time.
Some journalists and politicians who seem more concerned with scoring points against the CRA and the Liberals than with helping some vulnerable Canadians navigate a confusing situation. Comforting the afflicted can’t mean accepting mistaken beliefs.
Some self-employed people who, after April 21, did not go past the FAQ to see the Q and A “buried” on the CERB site to check what $5,000 self-employed income meant – gross or net.
Also, and here I’m guessing, some of the recipients of the “we cannot confirm your eligibility” letter hadn’t filed their 2019 return or indeed may even have been conducting their business largely on a cash basis. Consider the underground economy estimates.
All that said, there are positives enough to go around, too.
The self-employed person whose net business income hovers around $5,000 is making a vital contribution to their household/family income. They are smoothing out seasonal variations, they are supplementing small pensions, cushioning against emergencies, and buying a few luxuries.
When the Covid-19 crisis stopped their income, their households suffered. They were right to see themselves as having legitimate needs, and I’m glad as a Canadian taxpayer that the CERB provided support.
In positives, the notorious December CRA “we are unable to confirm” letter was trying to keep CERB recipients informed, to help them plan. The CRA has tried to make clear that collection pressures will await a future, more prosperous time. https://www.cbc.ca/news/politics/canada-revenue-agency-cra-cerb-pandemic-covid-1.5812925#:~:text=The%20Canada%20Revenue%20Agency%20says,upon%20to%20repay%20the%20money.
And to journalists and politicians: I know how hard it is to get people to listen to routine announcements. There needs to be drama. In 1949, the nation’s biggest journalist in the nation’s biggest newsmagazine made a great story out of tax compliance.
In 1948 Blair Fraser didn’t sanctify flawless tax collectors or laud clever tax dodgers. But neither did he depict tax collection is inherently brutal and unfair. He was informing people and helping build the nation’s treasury. You can do it! https://archive.macleans.ca/article/1948/3/15/who-are-the-income-tax-dodgers
Here, for example, is a Global News story that is both critical, fair, and constructive. http://globalnews.ca/news/7513742/self-employed-cerb-repayments-tax-fix/
So – solutions. The accountancy fix for the self-employed who can redescribe their 2019 assessment to get over the $5,000 threshold has come from a variety of directions. Sounds reasonable to me. https://www.hoyes.com/blog/cra-collection-letters-for-cerb-ineligibility-repayment/
The confusion over gross & net? You don’t need to be a tax accountant to “get” that concept. In schools & in journalism, this can’t be specialist knowledge.
Love to volunteers who do free tax prep for ppl who can't cope. Let's decommodify simple returns, as @LindsayTedds says
Love to volunteers who do free tax prep for ppl who can't cope. Let's decommodify simple returns, as @LindsayTedds says
And dear CRA: I’m rooting for you. I want you to do the tax admin job that we all need you to do. I want you to be equipped both to go after the wealthy abusers of the system, I want you to have enforceable laws, and I want you to educate with flair and impact.
I predicted that this moment would come, when enforcement of tax (or overpayment) debts might threaten undue hardship to vulnerable people. And in the next issue of Canadian Tax Journal, I draw other lessons from WWII “crisis to clean up.”
So. Let's all work together to get out good information and to put some real flesh on the vague bones of reassurance. We needn’t punish people for missteps that were predictably hard to avoid during the strange times we’re in.
