Speech to Canadian Institute of Chartered Accountants (October 7, 2009)

Keynote address by Mr. J. Paul Dubé, Taxpayers' Ombudsman
CICA Annual Conference on Income Tax
Metro Convention Centre
Toronto, Ontario
October 7, 2009

Check against delivery

Good morning everyone.

Thank you for the invitation to address your 8th Annual Conference.

Having looked at some of the materials for this conference, I am impressed with the range of issues to be discussed, and I am honored to be your keynote speaker.

I was invited here in my capacity as Canada's Taxpayers' Ombudsman.

Since I am Canada's first Taxpayers' Ombudsman, and since a lot of people still do not know what an Ombudsman is (or does), I welcome opportunities like this to educate and inform Canadians about the Taxpayer Bill of Rights and the role that I play.

What I propose to do this morning, is talk about the institution of ombudsman, explain my role as Taxpayers' Ombudsman, and show you how my Office is making a difference in the lives of Canadians.

So what then is an Ombudsman?

An ombudsman is an independent and impartial officer who deals with complaints about an organization or agency. (And by the way, the term "Ombudsman" is Swedish and gender neutral. It means "people's representative" and a woman can be called Ombudsman.)

Typically, the complaints received by an ombudsman involve issues that an organization or agency has been unwilling, or unable, to resolve to the complainant's satisfaction.

Because Ombudsmen encourage confidential complaints, they may hear about issues the subject organization is either not aware of or not motivated to resolve.

There are Organizational Ombudsmen such as university Ombudsmen and the CBC Ombudsman.

And there are Classical or Parliamentary Ombudsmen, such as myself, who work in the public sector providing oversight of government departments or agencies.

This year marks the 200th anniversary of the appointment of the first Parliamentary ombudsman in Sweden.

Since then, the institution of Ombudsman has grown and been adopted in many jurisdictions around the world.

That is because the institution of Ombudsman has demonstrated itself to be a fair, flexible, cost- effective way to resolve disputes.

The comments of a former Chief Justice of the Supreme Court of Canada provide an eloquent description of the genesis, and historical development, of the institution of Ombudsman.

In what is referred to as the "Friedman case" out of British Columbia, Dickson, CJ noted that governments have grown in size and complexity over time.

That has been especially true as the modern welfare state worked its way into the lives, and livelihoods, of individuals following the Second World War… often in ways that could not have been imagined several decades before.

As a result, citizens have become increasingly susceptible to "maladministration, abuse of authority, and official insensitivity".[Footnote 1]

Chief Justice Dickson pointed out that the distant, impersonal nature and professionalized structure of government tends to dehumanize interactions between citizens and the governments that serve them.

British professor and writer, H.W.R. Wade explains that every form of government needs a mechanism for feeding back the reactions of its disgruntled citizens, and for correcting whatever may have gone wrong.[Footnote 2]

Governments around the world have come to recognize that the traditional controls over the administration of government policies—namely the legislature, the executive, and the courts—are not completely suited nor entirely capable of providing the oversight a vast bureaucracy requires.

Scholars in Ombudsmanry, and public administration, remind us that thousands of decisions are made every day by governments or their agencies, and that there is no easy way for the ordinary citizen to get redress if some of these thousands of daily decisions are arbitrary, unjustified, or unfair.

Dickson, CJ therefore summarized the role of the Ombudsman as follows:

"The Ombudsman represents society's response to these problems of potential abuse of supervision. His unique characteristics render him capable of addressing many of the concerns left untouched by the traditional bureaucratic control devices.

He is impartial. His services are free, and available to all. Because he often operates informally, his investigations do not impede the normal processes of government.

The Ombudsman "can bring the lamp of scrutiny to otherwise dark places, even over the resistance of those who would draw the blinds".[Footnote 3]

Until recently in Canada, taxpayers and benefit recipients who felt that they had not received professional service or fair treatment from the Canada Revenue Agency (CRA) had only one place to go if they wanted to file a complaint—back to the CRA.

Taxpayers, business and professional groups, associations, and Members of Parliament have long called for more CRA transparency and accountability, as well as measures to ensure fair treatment and better service for taxpayers.

In response to these calls for action, the Taxpayer Bill of Rights was strengthened in 2007 when eight service rights were added.

The Taxpayer Bill of Rights is a set of fifteen rights that govern the relationship between taxpayers and the CRA.

The service rights added in 2007 were intended to make the CRA more accountable and transparent, by ensuring that taxpayers and benefit recipients are treated fairly and provided with the quality of services, advice, and information they need from the CRA.

Those service rights are:

• the right to be treated professionally, courteously, and fairly;
• the right to complete, accurate, clear, and timely information from the CRA;
• the right to lodge a service complaint and to be provided with an explanation of the CRA findings;
• the right to have the costs of compliance taken into account when tax legislation is administered;
• the right to expect the CRA to be accountable;
• the right to expect the CRA to publish service standards and report annually;
• the right to expect the CRA to warn you about questionable tax schemes in a timely manner; and
• the right to be represented by a person of your choice.

But rights do not afford much protection without awareness, oversight, and redress.

That is why many stakeholders in the tax administration system were calling for an Ombudsman to oversee the CRA's treatment of, and service to, taxpayers.

After hearing testimony from witnesses and submissions from stakeholders (such as the Canadian Federation of Independent Business and the Minister of National Revenue), the House of Commons Standing Committee on Finance recommended the appointment of an Ombudsman to ensure that Canadians were better served by the Canada Revenue Agency.

I was appointed in February of 2008 as Canada's first Taxpayers' Ombudsman.

As a Special Advisor to the Minister of National Revenue, my mandate is to assist, inform, and advise the Minister about any matter relating to services provided to taxpayers by the CRA.

There are four parts to my mandate:

• First: providing an impartial, independent, and efficient system for handling individual complaints from taxpayers about the service or treatment they receive from the CRA and upholding the Taxpayer Bill of Rights; that means that I am not part of the CRA and operate at arm's length
• Second: identifying and investigating emerging and systemic service issues related to CRA programs and processes and making recommendations for improvements or corrective action directly to the Minister of National Revenue
• Third: facilitating taxpayer access to the CRA
• Fourth: developing community awareness of the Taxpayer Bill of Rights and the role of the Taxpayers' Ombudsman

So my Office was established to provide oversight of the Canada Revenue Agency's treatment of taxpayers and ensuring that the CRA respects the eight service rights contained in the Taxpayer Bill of Rights.

I summarize my role by saying that it is "to see that Canadians get the professional service and fair treatment they are entitled to from the CRA."

I must emphasize that seven of the Taxpayer Rights deal with the administration of tax laws and policies by the CRA and therefore do not fall within the mandate of my Office.

Objections about the calculations made by the CRA or other strictly legislative actions or decisions by the CRA may be made to the Appeals Branch of the CRA and, if necessary, to the courts.

We do, however, investigate complaints by taxpayers about unprofessional service or unfair treatment by the CRA.

So I often say that while we don't deal with the calculations the CRA does, we do deal with the way they communicate, or act on, those calculations.

And our evaluations of the CRA's professionalism and fairness, whether in the context of individual complaints or systemic issues, are always based on the service rights in the Taxpayer's Bill of Rights. 

In addition to investigating individual complaints, we also identify and investigate systemic and emerging issues related to service and fairness. 

Despite the professionalism and competency of CRA employees in general, it is not surprising that complaints do arise—CRA employees administer such complex legislation and conduct so many transactions.

It is very gratifying for my Office when our intervention in a dispute between an individual taxpayer and the CRA leads to a resolution of the problem.

It is a great relief for the taxpayer too.

However, many complaints about service are due to an underlying systemic issue that will cause the problem to recur if not corrected.

If we were to resolve individual complaints in isolation, without looking at the policies and procedures that gave rise to them, we could miss the opportunity to identify problems that may be affecting groups of taxpayers.

That's why we also conduct systemic reviews—to identify and help correct service and fairness problems that could have a negative impact on a large number of taxpayers, and to do so as quickly as possible.

We don't wait until we have hundreds of complaints about an issue before we decide that it qualifies for a systemic investigation.

Stakeholders want to know about problems before they escalate and the aim of our intervention is to avoid escalation.

To be able to provide the most effective and timely recommendations possible, we take a proactive approach to identifying systemic issues.

We gather information by examining individual complaints; communicating with taxpayers, tax professionals, businesses, associations, and interest groups; paying attention to the media; and talking with the CRA.

We may hear about issues from people or groups who would never bring such matters to the attention of the CRA.

We can launch a systemic investigation based on very few individual complaints, or even our own initiative, if it appears to us that an issue might be having a negative impact on taxpayers.

There are, of course, limitations to what the Office of the Taxpayers' Ombudsman can do.

I cannot review decisions of the courts or matters that are before the courts.

I can review the administration or enforcement of CRA program legislation, only to the extent that the complaint relates to service matters. 

In other words, my Office is not a tax court and does not deal with disputes strictly about amounts of tax owing to the government.

And, we cannot review any matter that arose prior to February 2007, unless asked by the Minister to do so.

To keep our activities in context, we have to remember that the CRA interacts with more Canadians than any other government organization in Canada.

It processes approximately 24 million individual tax returns and 1.6 million corporate returns every year.

It also administers benefits to nearly 11 million Canadians.

So even if the CRA had a 99.9% satisfaction rate in those 36 million transactions, there would be a potential 36,000 complaints about the way taxpayers were served or treated.

Of course, taxpayers don't expect the CRA to be perfect—they just want the CRA to fix things when they go wrong.

When the CRA does not resolve an issue to a complainant's satisfaction, we are there to intervene. We investigate the complaints in an impartial manner.

The Office of the Taxpayers' Ombudsman is intended to be a third and final level of redress for complaints about service or fairness.

Taxpayers with a complaint are first encouraged to speak to the supervisor of the CRA employee they are having difficulty with.

If they do not get satisfaction, they should file a complaint with CRA-Service Complaints.

That makes sense because the CRA has all the information about the taxpayer.

If there is potential for a quick resolution, it is worth trying to get the CRA to solve the problem first.

But if the taxpayer is not satisfied with the CRA's response to their complaint, they should contact our Office.

In exceptional circumstances, we do accept complaints from people who have not gone through Service Complaints.

We do so when the taxpayer would experience hardship if he or she were required to go through the Service Complaints program.

Investigating complaints allows my Office to see where the problems exist in the relationship between taxpayers and the CRA, and propose solutions to correct them.

In our first year of operations, we received nearly 4,000 contacts and conducted reviews of nearly 900 individual taxpayer complaints and helped the CRA correct many administrative deficiencies.

Our tax system is based on voluntary compliance and self-assessment—so service and fairness are essential.

The CRA states that it operates on the premise that taxpayers are more likely to comply with the law if they are treated fairly and have the information and services they need to meet their obligations.

If we help the CRA improve its service by bringing to its attention matters it might not have otherwise heard of, or even by causing it to address issues it would not have addressed of its own volition, we contribute to greater trust and confidence in the tax system.

This will result in greater compliance and lower costs to all stakeholders.

Here are a few examples of the work we do on individual complaints:

1. A single mother relying on the Canada Child Tax Benefit (CCTB) to make ends meet, had her benefits suspended by the CRA. The CRA asked her to provide documentary proof that her children were born in Canada.
   
   She provided letters from people who knew her family, including a letter from the doctor who delivered her babies. These letters were deemed insufficient proof by the CRA.
   
   The dispute went on for months and the taxpayer was facing foreclosure on her mortgage and the possibility of losing her home.
   
   She filed a complaint with my Office and we reviewed the matter. Following the our intervention, the taxpayer was issued a $38,000 CCTB payment and was able to keep her home.
   
   
2. A man suffering from an inoperable brain tumour lost many of his tax records in a house fire in 2005. For not filing his tax returns on time, he had  penalties and interest imposed on his personal income tax account as well as his GST account.
   
   He applied for taxpayer relief under the Income Tax Act, asking that he be absolved of these penalties and interest due to the exceptional circumstances and hardships that led to them.
   
   His applications for income tax and GST relief were processed in two different tax offices.
   
   Although the evidence being considered by the two offices was the same, one office granted relief while the other office said the taxpayer did not qualify.
   
   My Office reviewed the case and questioned the apparent lack of fairness in the outcome of the taxpayer's request for relief.
   
   As a consequence of my Office's involvement, the CRA granted the taxpayer's request and the penalties and interest were cancelled on both accounts.

So what do we think warrants attention as systemic issues?

1. Costs of compliance, fairness, and reasonableness of documentation requirements:
   
   We've received complaints from tax professionals across the country that the CRA sometimes requires taxpayers and/or small business owners to resubmit documents that had been provided to the CRA for their files in previous years. Providing these documents again often requires taxpayers to involve their accountants or lawyers, resulting in a higher cost of compliance for the taxpayer.
   
   
2. Allocation of payments:
   
   Businesses and individuals have complained about misallocated payments. Despite the fact that payment directions (such as a remittance voucher) were attached, payments made by cheque were applied to incorrect accounts, incorrect months, and/or wrong tax years.
   
   We've been reviewing this issue since May 2009. Last week, the CRA announced a new service called My Payment—individuals and businesses can now pay their taxes online. We will monitor the impact My Payment has on our systemic issue of misallocated payments.
   
   
3. CRA policy on access to professional working papers:
   
   One of the most common complaints from tax professionals is the fact that the CRA routinely requests to see the notes, drafts, and other "working papers" that are generated in the course of accountants advising and serving their clients.
   
   The CRA began a consultative process related to the review and amendment of a policy called Acquiring Information from Taxpayers, Registrants, and Third Parties several years ago.
   
   Complainants claim that various CRA publications have promised for several years that an amended policy was soon to be released. The policy is not yet finalized and details on implementation are unknown. We will look into the timeliness and accuracy of CRA communications on this subject.

These are just a few of the issues we have identified and will be researching.

We have begun announcing systemic issues on our Web site and are inviting people to submit information online. We have received tremendous input already.

We need to inform Canadians about their rights as taxpayers and what role the Ombudsman can play in helping them receive the best possible service from the CRA.

We also need to build a relationship of credibility, understanding, and trust with the CRA—these two tasks are crucial to our success.

Helping us with these sizeable tasks, are stakeholders such as you.

We are grateful for the support we have received from organizations and associations across the country, who help spread the word by mentioning us in periodicals, providing links to our Web site, and otherwise informing their members about us.

As you probably know, many people see dealing with the CRA as a David vs Goliath scenario.

They often have a hard time getting explanations from the CRA, getting their points across, or getting their stories heard.

With a Taxpayers' Ombudsman, Canadians now have someone independent and impartial to review their complaints about the way they are served and treated by the CRA.

And the CRA has someone providing it with valuable feedback that allows it to improve its service delivery.

The current economic climate is likely presenting many challenges for both the CRA and taxpayers, and will continue to do so in the coming months.

Many Canadian households are facing the loss of one or more jobs, reduced income, and/or higher expenses. Debts are becoming harder to pay. And tax liability is a debt.

The government also faces higher costs and increasing debt. It needs to generate and collect as much revenue as possible. For example, today's Vancouver Sun (October 7, 2009) quotes a study: "Canadian multinationals face more audits and disputes as CRA intensifies enforcement of regulations." If indeed that is happening to multinationals, is it likely happening to individuals?

That climate gives rise to potential for unfairness, inconsistency, or what Justice Dickson called "official insensitivity".

That is why the Taxpayer Bill of Rights is so important and why my Office is there to uphold it.

I used to be a criminal defence lawyer and made a career of defending the Charter of Rights and Freedoms.

Fairness, access to justice, and the respect for individual rights have always been the foundations of my philosophy.

So I now say in my new career that, just as civil rights must be preserved and defended in times of upheaval, taxpayer rights must always be given their due, even in tough economic times.

Although most Canadians pay their taxes and receive their benefits without complaints about the CRA, people need an impartial office to intervene when they are treated unfairly or don't get the service they are entitled to.

Once again, my role as Taxpayers' Ombudsman, my role is to see that Canadians get the professional treatment and fair service they are entitled to from the CRA.

I am privileged to play that role and look forward to continuing to contribute to an improved relationship between taxpayers and the CRA.

I am optimistic that over time, the benefits of an ombudsman will become apparent to everyone.

After all, an Ombudsman is someone who:

• builds relationships
• reduces conflict
• promotes fairness
• and acts as an agent of change

To all of you tax professionals I say this; we are here to help you serve your clients.

We are only a phone call away or a few clicks away. Our Web site is www.taxpayersrights.gc.ca.

And look for our first Annual report this fall.

I think it is clear that Canadians need and want a Taxpayers' Ombudsman. A big part of my job is informing taxpayers of their rights and the role of my Office.

As tax professionals you are a key group of stakeholders in the tax administration system, and I will be relying on our partnership to assist me in that endeavour.

In closing, I would just like to say that  I hope I have given you something you can put in your toolbox and I encourage you and your clients to contact my Office should the need arise.

I thank you for the opportunity to speak to you today.

Have great conference!

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Footnotes

[Footnote 1]

(Dickson, C.J., B.C. Development Corp. v Friedman (Ombudsman) (1984) 2 S.C.R. 447; at page 459)

[Footnote 2]

(See Wade, Administrative Law (5th ed.), pp 73-74)

[Footnote 3]

Re Ombudsman Act (1970), 72 W.W.R. 176 (Alta. S.C.), per Milvain C.J., at pp. 192-93

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