Canada: CRA’s industry campaign approach
25 August 2014
Posted by: Author: Giancarlo DiMaio
Author: Giancarlo DiMaio (PricewaterhouseCoopers LLP)
The industry campaign approach (ICA) is a new initiative launched by the CRA to encourage voluntary tax compliance in various industry sectors. The CRA will work with industry associations to provide sector-specific tax information to small and medium-sized businesses in order to help them comply with their tax obligations. The CRA intends to (1) ensure a high level of compliance across an entire industry sector; (2) enhance relationships with industry associations; (3) provide information and education about potential tax pitfalls at key points in the business cycle; and (4) provide industry benchmarks that may help businesses to assess their financial performance in comparison with others in the same sector.
The ICA is part of the CRA’s "get it right from the start” approach. The ICA is intended to encourage businesses to self-correct and to take steps to prevent common mistakes, which may help them to avoid more intrusive CRA compliance measures. This approach complements the CRA’s three-point plan to support small and medium-sized business tax compliance. (For more information on the three-point plan, see "Small Business Compliance,” "Registration of Tax Preparers Program,” and "CRA’s Liaison Officer Initiative,” Canadian Tax Highlights, May, June, and July 2014, respectively.)
Industries selected for the ICA. The CRA will analyze data from a variety of sources to identify industry sectors that may benefit from the increased CRA support that the ICA offers. The CRA will then contact the relevant industry association to explain the campaign and get the association’s feedback. A business in the selected industry sector will receive more general communications, either from the industry association (in the form of newsletters or articles) or directly from the CRA. The communications will identify common tax errors that are specific to the industry and how to address them, and it will address tax issues raised by the industry association. In some cases, if the CRA has identified a concern based on a business’s compliance record or tax filing, the business may receive a letter or some other form of communication directly from the CRA. The CRA will contact a new business in the industry sector to make sure that the business receives the necessary support to meet its tax obligations "right from the start.” A business that finds a tax error as a result of the ICA can make a voluntary disclosure under the voluntary disclosure program if the CRA has not noted the commencement of an audit or criminal investigation (enforcement action) in the business’s file. The ICA itself is not considered an enforcement action.
Industry benchmarks. The CRA will develop industry benchmarks for the selected industry sectors. A benchmark is an indicator of financial performance, such as gross margin and other financial ratios, and is determined on the basis of information that businesses report on their financial statements and tax returns. The CRA will also consult with industry associations to develop the benchmarks to ensure that the benchmarks are sector-appropriate. If the CRA’s comparison of a business’s financial reporting with the industry benchmarks reveals a potential concern, the CRA will send the business an ICA benchmark letter in order to enable the business to address the problem early and thus avoid possible further action by the CRA. A business that receives a benchmark letter may wish to contact a tax adviser to discuss why it received the letter.
Fraudulent communications. A taxpayer may question the validity of communications that it purportedly receives from the CRA. Taxpayers should be aware that the CRA does not (1) request personal information of any kind by e-mail; (2) divulge a taxpayer’s information to another person unless the taxpayer provides formal authorization to do so; or (3) leave any personal information on an answering machine. If a taxpayer suspects that a communication did not originate with the CRA, the CRA advises the taxpayer to contact email@example.com, or the CRA at 1-800-959-5525 or online using "My Business Account.”
This article first appeared on ctf.ca.