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Tax Debt, Uncollected Tax Debt, Offer-in-Compromise


Unlike the American Internal Revenue Service, the Canada Revenue Agency (CRA) is not permitted to compromise a tax debt or to accept less than the full amount that an impecunious taxpayer owes. Recent estimates of undisputed-uncollected tax debts in Canada approach $29 billion, suggesting it may be time for a change. This article advocates for the implementation of an offer-in-compromise program as a way to mitigate these uncollected tax debts and to promote overall equity in the tax system. The author argues that if the CRA has discretion to accept less than the full amount owed in certain cases, where the unique circumstances warrant such a compromise, the tax system as a whole will benefit. Further, safeguards within the system can mitigate concerns regarding moral hazard, where possible forgiveness of tax debts may incentivize risky behaviour. Such a system would operate on a case-by-case basis to determine if a compromise is warranted, and if so, the amount to be collected based on the individual taxpayer’s “ability to pay”

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