Canadian Manufacturing

Ontario Liberals plan to write off $1.4 billion in unpaid business taxes

Figure outed by Auditor General Jim McCarter in his annual report.



TORONTO—Ontario’s cash-strapped government is expected to write off at least $1.4 billion in unpaid taxes, mainly because it failed to act quickly and aggressively to collect the debts, auditor general Jim McCarter found in his annual report.

“That’s an awful lot of money, especially in this economic climate,” he said Wednesday.

The province—which is facing a $14.4-billion deficit—is owed about $2.46 billion in taxes, mostly business and corporate, he said. But it isn’t doing enough to collect the debts, most of which have accumulated for years, and now lacks the manpower to pursue tax evaders.

“We felt that there was a risk that perhaps more than $1.4 (billion) out of $2.4 billion will be written off,” McCarter said.

It took collectors an average of seven months before they picked up the phone to call delinquent taxpayers, McCarter said. Personal visits weren’t made, and liens and warrants for the seizure and sale of properties weren’t enforced.

In one case, collectors didn’t attempt to revoke the liquor licence of a debtor who owed $1.1 million. The licensee eventually agreed to make payments, but defaulted after repaying just five per cent of the debt. They voluntarily gave up their licence two years later, just as it was set to expire.

The Finance Ministry said it’s already written off $600 million of the $1.4-billion, adding it will use “all available collection tools” to recover back some of the money.

But McCarter warned that may not happen. Last March, three-quarters of Ontario’s tax collectors were transferred to the Canadian Revenue Agency as part of the province’s deal with Ottawa to harmonize sales taxes.

There are only 62 provincial tax collectors and bankruptcy officers now, down from 264 before the transfer.

When the Liberals agreed to switch in 2010 to the HST, they boasted that the transfer of employees would reduce their spending by taking public servants off their payroll.

But it’s also hindering their ability to pursue delinquent accounts, with some collectors seeing their workload double or even triple, the report said.

While the government has failed to recoup a significant chunk of change, it’s also collecting money for programs that appear to have outlived their usefulness, McCarter suggested.

The government is collecting $30 million a year from its Drive Clean vehicle emissions-testing program, even though emissions have declined significantly due to better vehicle standards and cleaner fuel, he said.

The Progressive Conservatives want to scrap the program, saying it no longer serves a purpose.

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