Close up of the phone receiver of a business phone

According to the latest CPA Canada fraud survey findings, released in March 2018, 35 per cent of the respondents reported being a victim of financial fraud at some point in their lives. (Getty Images/code6d)

Features | From Pivot Magazine

Calls and effect

Tax-collection scams aren’t just bilking Canadians. They’re corroding trust in the real Canada Revenue Agency.

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Just about everyone, it seems, has received one of those urgent calls from someone purporting to be with the Canada Revenue Agency, even the Ottawa fraud investigators assigned to track them down. The callers inform their victims that they owe a huge tax bill, sling around scary phrases like “arrest warrant,” and finally say they need to send cash or face dire consequences. 

While this scam has been rolling across the country for much of this decade, it has escalated in the past few years, with 12,000 complaints recorded in 2017 alone. These scams are part of a bigger problem. According to the latest CPA Canada fraud survey findings, released in March 2018, 35 per cent of the respondents reported being a victim of financial fraud at some point in their lives. But despite stepped-up police surveillance and public awareness, the fraudsters persist because there’s money to be made—victims lost an estimated $4.7 million in 2017 because of fake CRA calls, and those are just the individuals who filed reports. (By way of context, Canadians reported losses of over $85 million from identity fraud and identity theft in 2017, and the total reported loss due to telemarketing fraud was almost $21 million, according to the Canadian Anti-Fraud Centre.) In a recent discussion with the CRA, we were told that many of these fraudsters are not in Canada, which makes cracking down on them even more difficult. Public Safety Minister Ralph Goodale recently said that Canadian and Indian authorities are now working together to shut the CRA scam down.

There’s another victim: the CRA itself. Some taxpayers are either ­hanging up on or failing to respond to messages from actual CRA staff.

Canada is hardly the only country contending with this form of telemarketing fraud. The U.S. Internal Revenue Service has issued repeated bulletins and warnings about tax call scams, as has the United Kingdom’s tax agency.

It’s now becoming clear that there’s another victim: the CRA itself. With the fraud so well-known, there seems to be growing anecdotal evidence that some taxpayers are either hanging up on or failing to respond to messages from actual CRA staff. 

The dilemma facing CRA officials is compounded by a rule designed to ensure the privacy of taxpayers: if someone receiving a legitimate call is suspicious and demands proof that the caller is legit, CRA policies preclude staff from proving their identities by sharing the taxpayer’s personal information with them. The problem is that neither party wants to divulge personal information until the other party has proven their credibility. 

All of which could wind up preventing the agency from collecting taxes. After all, CRA officials need to contact taxpayers and their advisors to sort out filing problems, obtain more information and deal with other matters. If it is going to perform these tasks in a fair and efficient way, surely it has to be able to communicate with them. 

The most promising strategy to fix the problem may be for CRA to transition to a system where the agency uses digital tools to notify taxpayers to expect a call, or to send written information. At present, CRA typically communicates with individuals with form letters that are easy to counterfeit, and which may inadvertently prompt taxpayers to become suspicious about scams. 

$4.7 million—the estimated amount that Canadians lost to fake CRA calls in 2017.

In recent months, CPA Canada has been working with CRA to develop an online notification system linked to CRA’s “My Account” portal. Because the portal already allows CRA to communicate with account holders or their advisors on a secured basis, it can provide a more reliable way of allowing CRA to set up phone calls and other means of contact to address filing issues. 

One additional worry is the impact on new Canadians who may not be familiar with the tax system and could be especially vulnerable to fake calls and other communications. Ensuring that these individuals understand the risks is important, and could be part of a specific information campaign.

Finally, it would be interesting to have CRA investigate the extent of the skepticism caused by fraudulent calls, and how much it may be costing the system—from financial and efficiency perspectives. We must ensure that these frauds do not erode the integrity of the tax system. 

CPAs have a role to play to remind Canadians to be cautious and protect themselves against fraud, whether it be a CRA scam or some other scheme. We should also be doing whatever we can to inform our clients about the risks of ducking legitimate inquiries from CRA. And if the solution lies with encouraging more tax filers to transition to CRA’s online secure portals, all the better. After all, though the internet has attracted legions of hackers, encrypted online transactions tend to be reasonably safe and efficient, and certainly far more resistant to the fraudsters who work the phones in boiler rooms.