CRA Response to the 2018 Systemic Examination Report: Fair Warning
Original report submitted to the Minister of National Revenue December 2018.
An examination into service issues related to legal warnings issued by the Canada Revenue Agency during debt collection procedures.
Recommendation #1
The Taxpayers’ Ombudsman recommends the Canada Revenue Agency change the validity period of the legal warning back to 180 days, from 365 days.
CRA’s response
The CRA agrees to conduct a study to determine the best course of action to address this recommendation.
The CRA is not sure that a change in the validity period from 365 to 180 days would have an impact on whether a taxpayer remembers the consequences of non-payment. As a result, the CRA commits to first examining the implications of this recommendation. This will assist in the decision-making process of whether to change the validity period from the current policy of 365 days to 180 days or another reasonable timeframe.
This first step in addressing this recommendation will be completed by the end of December 2019.
2020 update
The CRA completed a review of its policy. As a result of this review, the validity period for legal warning to taxpayers was changed from 365 days to 180 days.
The CRA’s external website was updated and the procedures for Collections officers were updated. The changes to the policy and communications were finalized on January 14, 2020.
Through the changes implemented since the publishing of this report, the CRA has addressed this recommendation in full.
Recommendation #2
The Taxpayers’ Ombudsman recommends the Canada Revenue Agency (CRA) update its legal warning policies to ensure the following information is provided to taxpayers when a legal warning is given:
- An explanation of the meaning of the legal warning;
- The validity period of the legal warning;
- The consequences of non-payment; and
- What legal actions can be taken by the CRA.
CRA’s response
The CRA agrees with the recommendation. Although the report highlights the fact that legal warning is currently embedded in the CRA’s operations, the CRA recognizes there are opportunities to refine its policies and explanatory material for even greater clarity.
A fulsome review of the collections content on Canada.ca is already underway as a result of usability testing conducted with taxpayers in the Spring of 2018. This review will result in an updated architecture for the CRA’s website as well as a comprehensive review of content, making it easier for taxpayers to find information that is clear and consistent.
In addition, the CRA commits to the following actions:
- providing an explanation of the meaning of “legal warning” and ensure that it appears on its website;
- ensuring that the validity period is provided to taxpayers who are dealing with employees responsible for the collection of debts
- Note: Although there is no legislative requirement for the CRA to have a validity period, it put one in place to ensure that there was consistency among the employees responsible for the collection of debts when dealing with taxpayers.
- reviewing its external publications related to Collections (web content on Canada.ca, information to taxpayers, etc.) in collaboration with communication advisors who will help to develop messaging and products that are clear, easily interpreted as well as consistent in the terminology used throughout the various channels.
Although information on the consequences of non-payment and the legal actions that can be taken by the CRA is currently available on its external website, this information will also be looked at as part of this global initiative.
Given the scope of this commitment and the consultations required, this initiative is expected to be completed by December 2019.
2020 update
The CRA conducted a review of publicly available information related to legal warning. As a result of this review, content was rewritten to make it easier for taxpayers to understand the legal warning process and included information related to the meaning of legal warning, validity periods, consequences of non-payment as well as possible legal actions that may be taken.
The updated content was shared with the Office of the Taxpayers’ Ombudsman (OTO) in late June 2019. The OTO provided additional feedback and the website content was adjusted in response to that feedback.
The updated pages were published on January 8, 2020.
Through the changes implemented since the publishing of this report, the CRA has addressed this recommendation in full.
Recommendation #3
The Taxpayers’ Ombudsman recommends the Canada Revenue Agency (CRA) update the information available to taxpayers, to include:
- An explanation of the collection process, including all levels of collection;
- An explanation of the legal warning policy;
- The validity period of the legal warning;
- An explanation of when the legal warning is not required;
- Exceptions about the renewal of the legal warning;
- The consequences of non-payment;
- When and what legal actions can be taken by the CRA; and
- Definitions of terminology.
CRA’s response
The CRA agrees with the recommendation. Although the report highlights the fact that legal warning is currently embedded in the CRA’s operations, the CRA recognizes there are opportunities to refine its policies and explanatory material for even greater clarity.
The CRA feels that the documentation currently available to the public in Information Circular IC98-1R7, Tax Collections Policies, sufficiently describes its collection process.
As indicated in the CRA’s response to Recommendation #2, the CRA is committed to completing a global review of its external products that relate to Collections. In addition to those areas already mentioned, the CRA will:
- replicate sufficient information in its collections content on Canada.ca in plain language including a description of the areas of the collection program that may contact a taxpayer;
- publish the validity period of legal warning once it is determined through the process identified in the CRA’s response to recommendation #1;
- review the information available to the public on the topic of debts in jeopardy and make the necessary changes to ensure that it is clear and easily understood;
- Note: When a taxpayer’s account is within the Collections program and they have been contacted by a CRA Collections employee, there is only one situation where legal warning is not required and that is when the CRA goes to the court for a jeopardy order. Information on debts in jeopardy is currently available on the CRA’s external website.
- continue the work started on updating its internal manuals in the Collections program.
Given the scope of this commitment and the consultations required, this initiative is expected to be completed by December 2019.
2020 update
The CRA completed the work it had begun on updating its Collections manuals. This update ensures that the information is consistent in its explanation of the process to be followed and information to be provided to the taxpayer when a legal warning is given.
Please also see actions taken in response to recommendation #2.
Through the changes implemented since the publishing of this report, the CRA has addressed this recommendation in full.
Recommendation #4
The Taxpayers’ Ombudsman recommends the Canada Revenue Agency (CRA) update its internal and external messaging to ensure all debt payment and collections related terminology is clearly and consistently defined and used; and information communicated and available to taxpayers is clear, in plain language, complete, and consistent. External messaging includes, but is not limited to, information relayed using: the CRA website, correspondence sent to taxpayers, and procedures/scripts used to inform and direct taxpayers (for example, the Debt Management Call Centre Manual, the National Collections Manual, and the Individual Services Technical Help Guide (ISTHG), etc.).
CRA’s response
The CRA agrees with the recommendation and is taking action to refine these information products.
The CRA has already began the process of updating its internal manuals in the Collections program by taking the following actions:
- updating the legal warning scripts in the Debt Management Call Centre (DMCC) manuals by removing the phrase “legal measures” for consistency;
- changing its Tax Services Office (TSO) and National Verification and Collections Centre (NVCC) letters in January 2018 to include the following:
"If you fail to pay your account or respond to this letter within 14 days, we may take legal action against you. For example, we may garnish your income, garnish your bank account, seize and sell your assets, or use any other means under the laws that apply to collect the amount you owe."
As indicated in the CRA’s response to Recommendation #2, the CRA is also committed to completing a global review of its external products that relate to Collections. Given the scope of these combined commitments and the consultations required, this initiative is expected to be completed by December 2019.
2020 update
The CRA conducted a review of its Collections manuals, processes, and letters as well as call centre scripts to address any gaps or inconsistencies where legal warnings were referenced.
These products were updated to ensure that the information is consistent in its explanation of the process to be followed and information to be provided to the taxpayer when a legal warning is given.
The CRA also conducted a review of publicly available information related to legal warning and rewrote the content to make it easier for taxpayers to understand the legal warning process. The updated content included information related to all of the topics enumerated in this recommendation.
The updated content was shared with the OTO in late June 2019. The OTO provided additional feedback and the website content was adjusted in response to that feedback.
The updated pages were published on January 8, 2020.
Through the changes implemented since the publishing of this report, the CRA has addressed this recommendation in full.
Recommendation #5
The Taxpayers’ Ombudsman recommends the Canada Revenue Agency (CRA) ensure sufficient training is provided and knowledge is transferred to:
- All CRA employees who may be involved in the collection process so they are able to accurately speak with a taxpayer about the taxpayer’s debt and their particular circumstances;
- All CRA employees who provide legal warnings, so they are able to provide an explanation of the legal warning, the validity period of the legal warning, the consequences of non-payment of debts with the CRA, including legal actions that can be taken by the CRA; and
- All CRA employees who may be contacted by taxpayers about collection matters (including agents at the individual tax enquiries line) so they are able to provide information to taxpayers about the consequences of non-payment of debts with the CRA, including legal actions that can be taken by the CRA.
CRA’s response
The Agency agrees with the recommendation.
Although the CRA believes that the training currently provided to the agents involved in the collection process as well as those who provide legal warnings to taxpayers is sufficiently robust, it does commit to reviewing its training products to identify if opportunities exist to bolster these messages. The goal being to ensure that the employees who are directly involved in the collection process understand the responsibilities as well as consequences of non-compliance at each level of the DMCC, the NVCC, and the TSO.
The CRA feels that the training currently provided to non-collection agents such as agents on the individual income tax enquiries (IITE) line and auditors, is sufficient. Non-collection agents do not provide legal warning and should not provide any of this information. While non-collection agents can suggest to taxpayers that they can make arrangements to pay their debt, they should refer taxpayers to the CRA website or to the Information Circular for more information on legal warning and the consequences of non-payment.
Based on a discussion between the CRA and the Office of the Taxpayers’ Ombudsman (OTO), the CRA is of the understanding that the intention of #3 under Recommendation #5 was to ensure that CRA employees outside of the collection process, who may be contacted by taxpayers about collection matters, have sufficient training to direct taxpayers to the Collections program, its available resources, or to answer general questions. It is further the understanding of the CRA that this recommendation refers only to general information about consequences of non-payment and not to consequences related to specific individual accounts
The CRA has already taken steps to reinforce with non-collection agents such as auditors that they are to direct taxpayers to the Collections Division and/or to the Collections content on Canada.ca. Audit procedures were updated accordingly in September 2017.
The CRA will review messaging to other non-collection agents, such as IITE agents, to ensure that they provide sufficient information to taxpayers and direct those requiring more information to the Collections program.
Given the scope of this commitment and the consultations with other program areas within the CRA that will be necessary, this initiative is expected to be completed by December 2019.
2020 update
The CRA conducted a review of all of its formal training products as well as the national Collections manual to ensure that all information provided about legal warnings and the related processes are consistent in their messaging.
The CRA has addressed this recommendation in full.
Recommendation #6
The Taxpayers’ Ombudsman recommends the Canada Revenue Agency (CRA) conduct a fulsome review of processes, policies and information regarding payment arrangements, to ensure clear, fulsome, and consistent information and wording in external messaging to taxpayers, manuals, training products, policies, and procedures for CRA employees involved in the collection process and who may be contacted by taxpayers about collection matters.
CRA’s response
The CRA agrees with the recommendation.
The CRA has already initiated a review of its policies, procedures, manuals, and training products with respect to payment arrangements. As indicated in the CRA’s response to Recommendation #2, the CRA is also committed to completing a global review of its external products related to Collections.
Given the scope of these combined commitments and the consultations required, this initiative is expected to be completed by the end of March 2020.
2020 update
The CRA conducted a review of its Collections manual, processes, and letters as well as its call centre scripts to ensure that they contain consistent messaging related to payment arrangements.
All of the information contained within these products is consistent in its explanation of the payment arrangement process to be followed and information to be provided to taxpayers.
The CRA has addressed this recommendation in full.
Recommendation #7
In the course of reviewing its processes, policies and information regarding payment arrangements, the Taxpayers’ Ombudsman recommends the Canada Revenue Agency (CRA) consider:
- Making information available to taxpayers on the parameters and other requirements for a binding payment arrangement;
- The need for clarity and consistency in its terminology and definitions;
- The need for clarity and consistency in its processes; and
- Making information available to taxpayers to explain the differences in the types of arrangements for payment, which are not binding payment arrangements, the consequences for non-payment in each situation, and which CRA agents can make binding payment arrangements.
CRA’s response
The CRA agrees with the recommendation.
As indicated in the CRA’s response to Recommendations #2 and #4, the CRA is committed to completing a global review of its external products related to Collections and has already begun the process of updating its internal manuals in the Collections program.
The CRA encourages the voluntary compliance of taxpayers who pay off their debts. This includes taxpayers who voluntarily set up payment arrangements without involving a CRA agent involved in the collection process. The review of information related to payment arrangements, regardless of whether it is voluntary or with a CRA agent involved in the collection process will be part of the global review as described in the CRA’s response to Recommendation #2.
The CRA requests that any outstanding debt be paid in full by taxpayers. Should the taxpayer be unable to pay the debt in full, payment arrangements may be considered. General parameters related to payment arrangements can be made available to taxpayers; however, a collector has some discretion as each collection case is judged on its own merit.
Given the scope of these combined commitments and the consultations required, this initiative is expected to be completed by December 2019.
2020 update
As indicated in the actions taken in response to recommendation #2, recommendation #4, and recommendation #6, the CRA conducted a review of publicly available information related to binding payment arrangements. As a result of this review, it rewrote the content to make it easier for taxpayers to understand the payment arrangement process.
The updated content was shared with the OTO in late June 2019. The OTO provided additional feedback and the website content was adjusted in response to that feedback.
The updated pages were published on January 8, 2020.
Through the various changes and updates implemented since the publishing of this report, the CRA has addressed this recommendation in full.
Recommendation #8
The Taxpayers’ Ombudsman recommends the Canada Revenue Agency send the payment arrangement confirmation letter to all taxpayers who make a payment arrangement, unless the taxpayer requests not to receive the letter.
CRA’s response
The CRA agrees that this recommendation has merit, and will conduct a review to better evaluate the most appropriate and beneficial approach.
As noted in the report, the CRA currently provides a payment arrangement confirmation letter to taxpayers upon request. It is the understanding of the CRA that not all taxpayers or their representatives want a confirmation letter. Therefore, before determining whether a letter should be sent to all taxpayers or representatives who make a payment arrangement, the CRA will undertake to further review this option to better understand taxpayers’ preference and will conduct a cost/benefit analysis of this proposal. The review will be completed by December 2019.
In the meantime, the CRA will update its current procedures to allow for an active offer of service. This means that the CRA will give taxpayers the option of whether they would like a payment arrangement confirmation letter or not at the time that the arrangement is made. This change will be implemented by the end of March 2019.
2019 update
The CRA implemented the active offer of service on February 8, 2019.
In the almost 6 months since its implementation, the Debt Management Call Centres have reported a 300% increase in the number of payment arrangement confirmation letters issued. This translates to an increase of approximately 4,050 letters per month compared to the previous 6 months.
The Taxpayers’ Ombudsman has confirmed the following:
"The active offer of service to provide the confirmation letter at the time a payment arrangement is made is sufficient to satisfy recommendation 8; therefore, no further review or a cost benefit analysis would be necessary."
Recommendation #9
The Taxpayers’ Ombudsman recommends the Canada Revenue Agency regularly review its payment and collection policies and procedures to ensure they align with a service approach consistent with the Taxpayer Bill of Rights.
CRA’s response
The CRA agrees with the recommendation.
The CRA, on an ongoing basis, reviews its collection policies to ensure they align with the Taxpayer Bill of Rights.