OTTAWA: The taxman had to forgo as much as $1.5 million in interest when the Canada Revenue Agency extended last year’s tax filing deadline after mistakenly giving the wrong date.
Agency officials estimated that moving the income-tax returns deadline to May 5, from the usual April 30 midnight deadline, meant $1.43 million in lost interest from Canadians who filed their taxes late over those five days, according to documents released under the Access to Information Act.
The information comes more than a year after the Star first requested details about the error that likely resulted from repeating an old message, or possibly copying and pasting information from 2014, when a five-day extension was granted to taxpayers due to a hacking incident.
The $1.43-million figure assumes all tax payments — totalling $2.09 billion — were late by five days, based on a five-per-cent interest rate, but the CRA said it has no way of knowing what the true financial impact was. By May 6, it had received 24.7 million individual tax returns, in line with projections.
The $1.43-million estimate was provided to show “a worst-case scenario,” CRA spokesman David Walters said in an email.
“It is not possible to determine the exact cost as we do not know when individuals would have filed and paid their taxes, if the extension had not been granted,” Walters said.
Last April, the agency did not disclose cost implications, stating that “given the extended period is short, and most taxpayers filed by April 30, the costs resulting from the filing extension will be negligible.”
Immediately after the deadline was extended, the Star filed two separate requests for information under the Access to Information Act. One asked for the financial implications of lost revenue related to the extension, which was released last week as part of 38 pages of documents, while the other asked how the mistake was made and discovered.
That request is still outstanding, though the released documents hint at how the error was made.
Even though income taxes are due April 30 annually, the CRA has a long-standing practice of giving Canadians who file electronic returns a five-day grace period in case of transmission problems or technical difficulties.
The grace period message is posted on the EFILE webpage annually and sent to approximately 45,000 tax preparers indicating that if they have transmission errors, late filing penalties will not be assessed as long as the tax return is submitted within five business days of April 30.
“The grace period message is considered to be routine in nature and is posted on the EFILE webpage annually. It is sent to EFILERS using an email distribution system,” reads a draft report dated May 4. “Typically, the previous year’s message is edited by an officer to reflect the current-year circumstances.”
In another draft report, dated June 2, the agency said: “This year’s message was posted on the CRA website on Friday, April 24, 2015. It was incorrect and provided an extension of filing deadline for all, similar to the message that went out last year where a filing extension was given due to heartbleed,” the document reads.
“Heartbleed” refers to the Heartbleed Bug, a software flaw discovered in 2014 that could expose online passwords and sensitive personal information. In April 2014, the CRA had to shut down its website to all electronic filing for five days after determining someone had hacked into the service and accessed social insurance numbers. The filing deadline was extended to May 5, 2014.
In the documents, the agency said it will ensure this does not happen again.
“Additional reviews and more formal approvals will be introduced to ensure quality and accuracy of public messaging in the future,” the CRA said.
Estimate of financial impact on CRA as assessed in April 2015:
<bullet>$5,612 average amount owing
<bullet>372,634 taxpayers who owe money
<bullet>$2,091,552,227 owed in taxes
<bullet>Five-per-cent interest rate
<bullet>$40,000 in IT system costs. The data systems that process individual tax returns have 175 applications.
<bullet>$389,000 to boost service at call centres, including adding toll-free lines due to the extension. But the CRA said money resulted from “in-year reallocation,” which means total call centre spending was unchanged. Initial estimates suggest the impact could be $600,000 to $1 million.
