(Chapter 3—Income Tax Legislation - Fall 2009 Report of the Auditor General)
Ottawa, 3 November 2009—Some activities needed to ensure the clarity of the Income Tax Act are not well managed, creating difficulties for taxpayers, says the Auditor General of Canada, Sheila Fraser, in her Report tabled today in the House of Commons.
“The Income Tax Act is one of the longest and most complex pieces of federal legislation. Taxpayers have the right to expect clear guidance on how to interpret the Act so they can determine how much income tax they owe,” said Ms. Fraser.
The Canada Revenue Agency identifies technical issues arising from wording in the Act that is unclear or that does not adequately reflect government policy. The Agency then refers some of the issues to the Department of Finance, which is responsible for drafting and releasing legislative changes for Parliament’s consideration.
The audit found that the Agency has no formal system for tracking the technical issues it has identified and how they are dealt with. In addition, the Agency does not make the public aware that some of its existing guidance on interpreting the Act is outdated.
The audit also found that the Department of Finance needs to improve the way it manages the development of amendments to clarify the Income Tax Act. While its staff are well-informed about the identified issues, they do not make effective use of available electronic tools to record, track, and prioritize them for possible legislative amendment.
There is now a backlog of more than 400 technical changes to the Act that are needed, more than half of which have not been drafted and released by Finance as proposed amendments. The remainder are amendments that have not yet been enacted by Parliament. Parliament has not passed a technical bill containing significant changes to the Act since 2001.
“The Department of Finance needs to do more to bring the urgency of the problem to the attention of the government and Parliament,” said Ms. Fraser. “It ought to review the way it manages this process.”
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The chapter “Income Tax Legislation” is available on the Office of the Auditor General of Canada website.
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