Every time Paul MacDonald gets the brown, Government of Canada envelope in the mail, he feels something akin to a kick in the gut.

Courtesy of Paul MacDonald
A snapshot of Paul MacDonald’s records of tax return reassessments. The Inuvik resident has had his taxes reassessed more than a dozen times in the last 13 years.
July 31, 2018

That is because he knows its a letter from the Canada Revenue Agency (CRA) telling him his taxes are being reassessed – again.

The Inuvik resident and owner North of 60 Medical Solutions Ltd. has had his taxes reassessed more than a dozen times since 2007.

“I’ve never done anything wrong and I’ve lived here consistently for 15 years,” MacDonald said on Tuesday.

MacDonald is not alone.

According to a document tabled in the House of Commons on June 20, Northerners had their tax returns reassessed at a notably higher rate than their southern counterparts.

In 2016, the reassessment rate for territorial tax filers who claimed northern deductions was 13.6 per cent. For other taxpayers in Canada, the reassessment rate was nine per cent.

In Northwest Territories and Nunavut, 13 per cent of taxpayers had their tax returns reassessed. At 15 per cent, Yukoners were reassessed at the highest rate.

MacDonald is frustrated he continues to be reassessed, year after year. He said he does not use cash in his business and always pays his personal and corporate taxes on time.

“I don’t know if I’m on a hit list,” said MacDonald.

“(The CRA) is almost like the mafia, they’re worse than the mafia.”

He said CRA agents have hung up on him and that one time, the agency got a court order shutting him out of his bank account because it did not believe he lived in Inuvik.

“I couldn’t even get money to buy groceries,” said MacDonald. “I had to depend on friends.”

Melinda Gillis and her husband, also of Inuvik, have had their taxes reassessed every year for more than 10 years.

“We have had to prove our residence every year,” said Gillis. “It’s exhausting.”

NWT MP Michael McLeod said Thursday he has raised the reassessment issue with Diane Lebouthillier, the federal minister of National Revenue.

“People a lot of times that are being audited are also of the greatest need, and they’re expecting income tax returns that would provide them some income, and that’s also delayed, so it causes a lot of hardship in some cases,” said McLeod.

He said he would like NWT residents to have easier access to CRA agents, be it through more service counters or a northern office.

Cathy McLeod, the Conservative shadow minister for Indigenous and Northern Affairs, demanded an explanation for why Northerners are disproportionately reassessed in a letter sent last month to Lebouthillier.

“It’s clear that (Northerners) are being assessed at a significantly higher rate, and she has to tell us whether for legitimate reasons, and if so, why, and if there’s no legitimate reasons, she needs to take action,” McLeod said in an interview on Tuesday.

A reassessment, said McLeod, is “anxiety provoking. It’s time consuming and of course it takes sometimes significant additional work.”

Andy Wong, a Yellowknife accountant (and News/North columnist) with thorough knowledge of the Northern tax regime, says Northerners do get their tax returns reviewed at a high frequency.

One reason for this, said Wong, is the complexity of the northern travel deduction.

Northern residents may be eligible for a tax deduction for trips outside the territory, depending on their employment agreement.

The amount which Northerners may claim for travel, however, is based on a rather oblique figure, said Wong – the lowest return airfare ordinarily available.

That number is difficult to ascertain, both for the taxpayer and the CRA.

“It’s a tax law that states you that can claim up to the lowest return airfare ordinarily available and the tax law was not written by the CRA, it was written by politicians,” said Wong.

“So the CRA and taxpayers are left to struggle to make sense of what that amount is.”

Canadian North and First Air will provide a figure for the lowest return airfare available on a particular date of travel, if asked, said Wong.

He said the CRA is working on clarifying the Northern travel deduction and that a guideline is expected in 2019.

Claiming a Northern living allowance can also send red flags aflutter, but this complication is easier to remedy, said Wong.

Taxpayers need simply to submit their property tax statement or rental agreement document.

Wong also noted that once a taxpayer is reassessed, he or she is guaranteed to be audited the following year.

Wong said the best way to avoid getting reassessed is to file taxes through the mail.

“Unfortunately, that’s the way I would recommend because that forces you to document everything you are claiming.”

Jeremy Ghio, spokesperson for the minister of National Revenue, said Lebouthillier is aware of Northern residents’ concerns related to reassessments.

Ghio said the Lebouthillier has asked the CRA to develop a “Northern Strategy for Service.”

“This will advance a solution that addresses the unique realities of living in Canada’s remote northern regions,” he said.

“The strategy promises to improve service and the northern residents deductions administrative practices to help address issues faced by Northerners.”

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