Dear Minister Caplan:

Last week the Supreme Court of Canada ruled that Joe Markevich won't have to pay $771,000 to CCRA (Canada Customs and Revenue Agency, formerly Revenue Canada). In 1986 Mr. Markevich admitted that he owed Revenue Canada $234,000 in unpaid taxes. As Mr. Markevich was unable to pay, your department wrote the debt off internally. For 12 years CCRA made no attempt to collect the money and didn't even say on statements that taxes were owing.

All of a sudden in 1998, CCRA told Mr. Markevich that he owed $770,583.42 - the 1986 amount plus interest!

Mr. Markevich argued in Federal Court that the six-year limitation period in federal legislation prevented CCRA from collecting on debts more than six years old. He said that CCRA's collection efforts are like filing a statement of claim, and that making no collection efforts for six years is like failing to file the statement of claim within the limitation period. CCRA disagreed, arguing that an unpaid tax bill was enforceable at any time, like a judgment obtained after a trial.

The Supreme Court of Canada ruled nine-to-zero that if CCRA has not made any efforts to collect on a debt for six years, it cannot start (or re-start) collections proceedings. This ruling does not say that unpaid taxes owing from more than six years ago do not have to be paid. As long as CCRA has continued its collection efforts, the unpaid taxes could date back to 1980 (for example) and must still be paid - plus interest!

The Court's decision (http://scc-csc.lexum.com/scc-csc/en/nav.do) notes that "limitation periods ... are meant to promote certainty, avoid stale evidence, encourage diligence, and bring repose," and that these same rationales "apply to the collection of tax debts." The Court also noted that "If the Minister makes no effort to collect a tax debt for an extended period, at a certain point a taxpayer may reasonably come to expect that he or she will not be called to account for the liability, and may conduct his or her affairs in reliance on that expectation. As well, a limitation period encourages the Minister to act diligently in pursuing the collection of tax debts."

This judgment is potentially dangerous because it might encourage the government to hire more tax collectors. But CCRA is already the largest arm of government, employing 40,000 people. CCRA bureaucrats should focus their collection efforts on the largest outstanding debts, and target those who have not filed in five or six years, or who owe huge back taxes. CCRA should stop harassing honest taxpayers who may owe a couple hundred (or a couple thousand) bucks and are trying to pay it off in installments.

There is no need to hire more tax collectors, especially when one considers that over two million low-income Canadians are paying 16% federal income tax on all earnings in excess of just $7,756. The federal government could take two million low-income Canadians off of the income tax rolls by raising the Basic Personal Exemption from the current $7,756 to $15,000. This would give all Canadians a tax cut, and would make it possible to reduce the size of CCRA's army of tax collectors.