Canadian Tax Authority To Pursue Bankrupt Firms And Individuals

by Mike Godfrey, Tax-News.com, Washington

08 October 2002

The Canada Customs and Revenue Agency (CCRA) is to become more proactive in pursuing tax debts owed by bankrupt companies and individuals, according to recent reports.

According to the CCRA, statutes governing insolvency, such as the Bankruptcy and Insolvency Act are being used by firms and individuals to rid themselves of particular debts, such as large tax liabilities.

'This increase is caused by many factors, such as bankruptcy reform, social attitudes towards bankruptcy, the ease of obtaining credit, and most notably the fact that people are using insolvency statutes more strategically now,' the tax authority explained, adding that: 'The behaviour of non-compliant debtors may even encourage non-compliance by others, by perpetuating the notion that you can avoid paying taxes if you take certain steps.'

The crackdown on this type of avoidance will focus primarily on the recovery of payroll taxes which companies have collected from employees but have not turned over to the CCRA, GST revenues collected from customers but retained by firms, and income tax from defaulting self-employed taxpayers.

Reports in the Canadian media have revealed that a two year project designed to identify struggling companies before they resort to use of the insolvency statutes, was begun last month.

'It's the catching ahead of time that's most important,' CCRA spokeswoman, Collette Gentes-Hawn told the Canadian Press news agency. 'We want to identify them earlier when there's still a chance to get our money.'

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