Small business group unfairly impugns CRA; Canadian Federation of Independent Business takes advantage of fact that agency will not fight back

   The Canadian Federation of Independent Business supports small business. This is admirable. Small business is the engine of our economy. What I object to is the way it some-times does this. One of its favourite targets is Canada Revenue Agency. CFIB regularly trots out surveys that purport to show that CRA's level of service and customer satisfaction is declining. It also cites specific examples of how CRA is abusing small-business taxpayers. CRA is an easy target for three reasons: . Nobody likes paying taxes. People aren't going to have particularly warm feelings for the agency that collects them.There are millions of taxpayers in Canada. With so many people inter-facing with CRA and dealing with highly sensitive money matters, there are bound to be complaints. No doubt some are legitimate.CRA doesn't fight back. CRA employees are under strict instructions not to discuss a taxpayer's file with anybody, including the media. So taxpayers and their advocates can make whatever allegations they want through the media and CRA can-not and will not refute them. It's the equivalent of beating up somebody who has their hands tied behind their back. This makes it incumbent on critics, whether they be reporters or lobby groups like CFIB, to make sure they get their facts right. Sadly, this doesn't always happen. CFIB's latest screed against CRA is a classic example. Last month, Shachi Kurl, CFIB's director of provincial affairs for B.C. and Yukon, sent an email to The Vancouver Sun promoting its annual Red Tape Awareness Week: "The really neat thing we are doing is a series called the Red Tape Digital Diaries," she said in her email.

   The diaries, she explained, are profiles of "real-life small-business owners who have been screwed by real red-tape nightmares." She said one diary was about the "salad bar owner in Vancouver who, after 11 years of being told the opposite by the taxman, was slapped with a $100,000 CRA bill because the agency decided cutting the fruits and vegetables he sells constitutes a taxable service." The Sun reported this story on Jan. 16, with careful attribution to CFIB. It included a colour photo of the salad bar owner, Stephen Chan, standing in front of some fruit with knife in hand, capturing the dual theme of cutting fruit and cutting red tape. Taken at face value, Chan's story was a classic example of CRA duplicity and betrayal. Not surprisingly, it percolated through cyberspace and landed on several dozen different websites. Unfortunately, it wasn't true.

   In an interview this week, Chan said CRA never told him he didn't have to charge GST. He said he formed that opinion based on his reading of CRA interpretation bulletins. Unfortunately for Chan, CRA disagreed with his opinion. After discovering he hadn't been collecting GST, the agency reassessed him just over $100,000, which represented some, but not all, of the GST he failed to remit. While CRA took a position that was offensive to Chan, and perhaps to others, it had not acted in an under-handed and duplicitous manner, as the story implied. In that regard, CFIB falsely impugned the agency and, by extension, its employees.

   When I raised the matter with Laura Jones, CFIB's senior vice-president of research, economics and Western Canada, she wasn't about to fall on her sword: "In hindsight, which is always 20/20, we should have been clearer as to what we meant." She gave no indication she was going to publish an apology, or even a clarification. There was something else about Chan's red-tape diary that bothered me. While acknowledging that CRA eventually resolved the dispute in Chan's favour (with help from CFIB), it didn't indicate when the matter was resolved. One would have assumed it had happened fairly recently. The diaries were unveiled last month. If you go to the CFIB home page, Chan's story is the featured video. By all appearances, it's breaking news.

   That's why I was shocked to learn that CRA resolved the matter in January 2005 - exactly seven years earlier. Is it fair that CRA be pilloried today for something that happened (or more accurately, didn't happen) seven years ago? Not in my books. It's interesting to note that Chan wasn't anxious to resurrect the matter, either: "When Laura first called me to do the Red Tape Diary, I refused to do it because I didn't want to drag up old things and risk CRA retribution," he told me this week. "But because CFIB was so kind to me, I felt indebted to them for helping us through a hard time, so I relented." There's another thing about Chan's diary that's misleading. CFIB reported that Chan sent "nearly 100 letters" to CRA in an effort to resolve the issue. But when I asked Chan about this, he said that figure included copies to multiple officials, including politicians. He said the actual number was more like 25, which is still significant, but about one quarter the stated amount. When the point you are making is the burden of red tape, that's a material exaggeration.

   That prompted me to look at another CFIB tale of red tape: the story of Claude Lavoie. He is an Ontario cabinetmaker who claims that CRA increased its collection of employee payroll deductions from monthly to twice monthly without telling him. As a result, he filed his remittances one day late and was fined $1,000. As presented, one would have thought this was also a fairly recent event. However, I discovered that the Financial Post magazine wrote about Lavoie's complaint in a CFIB-inspired story about red tape in October 2010 - 16 months ago. I would have thought that if this sort of CRA boondoggle was common, CFIB could have found a more current example, rather than recycle an old story like this. CFIB claims it's difficult to persuade small business people to go public with their concerns for fear of retaliation from CRA.

   I also learned from the Financial Post story that CRA had resolved the matter in Lavoie's favour and had refunded the $1,000 fine, a fact that the CFIB neglected to mention in its red-tape diary. I would have thought the fact that CRA listened and responded to Lavoie's complaint was relevant information. Since CRA is unable to discuss the matter, I asked Jones what evidence she had that CRA failed to advise Lavoie in advance that he would have to increase the frequency of his remittances. This is the axis upon which the whole story turns. She did not answer the question. When I asked Lavoie whether he could positively say that CRA failed to give him advance notice, he was surprisingly vague: "Not that I recall," he replied. "I am sure that if I had such notice I would have acted upon it."

   I asked whether he had asked CRA for proof that it had sent him advance notice. That strikes me as the obvious thing to do, but apparently not for Lavoie: "It didn't come to my mind at the time," he said. What I can say for sure is that Lavoie's story is inconsistent with my experience. When CRA told me I would have to remit income taxes more frequently, they told me well in advance. It's also inconsistent with CRA's stated policy, which is that if a taxpayer's remittance status changes, "we will advise you in writing, usually in December, of when we have to receive your remittances for the following year." Based on my audit of the red-tape diaries, and other stories of this ilk, I would advise readers to take them with a large grain of salt, especially those emanating from the CFIB.

   dbaines@vancouversun.com