(Chapter 3—Auditing Small and Medium Enterprises—Canada Revenue Agency - March 2009 Status Report of the Auditor General)
Ottawa, 31 March 2009—The Canada Revenue Agency (CRA) has made unsatisfactory progress on previous key recommendations for improving how it assesses the risks of non-compliance with tax laws and how it targets small and medium businesses to audit for unreported income, says the Auditor General of Canada, Sheila Fraser, in her Report tabled today in the House of Commons.
“Businesses that don’t report all their income deprive the government of revenues to fund programs for all Canadians,” said Ms. Fraser. “The CRA has an important role of ensuring fairness by identifying those with unreported income.”
The Report says that the CRA audited a far higher proportion of low-risk tax returns than those rated as high-risk by its computerized risk assessment system; about half of the Agency’s underground economy audits over the past five years did not detect any unreported income. Although an internal study found that CRA auditors lacked confidence in the system’s risk ratings, the Agency has done little to validate those ratings.
The CRA made good progress in other areas. It conducted a major review to identify all threats to the tax base. It developed a tool to improve the way it monitors trends in compliance with tax laws. It also increased its outreach activities to promote taxpayer awareness of what the underground economy costs society.
“The Canada Revenue Agency has taken some important steps forward, but it needs to resolve the long-standing weaknesses we point out in our report,” added Ms. Fraser.
The Status Report follows up on the government’s progress in addressing issues identified in previous reports. Progress is deemed either satisfactory or unsatisfactory, taking into account the complexity and significance of the issues and the amount of time that has passed since the original audit.
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The chapter “Auditing Small and Medium Enterprises” is available on the Office of the Auditor General of Canada website.
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