The Supreme Court of Canada ruled on March 6 that Joe Markevich won't have to pay $771,000 to CCRA (Canada Customs and Revenue Agency, formerly Revenue Canada).

In 1986 Mr. Markevich admitted that he owed Revenue Canada $234,000 in unpaid taxes. As Mr. Markevich was unable to pay, CCRA wrote this debt off internally. For 12 years CCRA made no collection efforts at all, and didn't even say on statements that taxes were owing.

Suddenly in 1998, CCRA told Mr. Markevich that he owed $770,583.42 - the 1986 amount plus interest!

In court, Mr. Markevich argued that the six-year limitation period in federal legislation prevented CCRA from collecting on debts more than six years old. He said that CCRA's failure to make any collection efforts was like failing to start a law suit within the limitation period. CCRA disagreed, arguing that an unpaid tax bill was enforceable at any time, like a judgment obtained after a trial.

The Supreme Court of Canada ruled nine-to-zero that if CCRA has not made any efforts to collect on a debt for six years, it cannot start (or re-start) collections proceedings. This ruling does not say that unpaid taxes owing from more than six years ago do not have to be paid. As long as CCRA has continued its collection efforts, the unpaid taxes could date back to 1980 (for example) and must still be paid - plus interest!

The Court said (www.lexum.umontreal.ca/csc-scc/en/rec/html/markevic.en.html) that limitation periods "promote certainty, avoid stale evidence, encourage diligence, and bring repose." These same rationales apply to the collection of tax debts. If CCRA makes no effort to collect a tax debt for an extended period, a taxpayer should be able to expect that he or she will not be called to account for the liability.

This judgment will encourage CCRA to act diligently in collecting tax debts. CCRA bureaucrats should focus their collection efforts on the largest outstanding debts, and target those who have not filed in five or six years, or those who owe huge back taxes. CCRA should not focus on honest taxpayers who may owe a couple hundred (or a couple thousand) bucks and are trying to pay it off in installments.

This court ruling does not justify hiring more tax collectors. CCRA is already the largest arm of government, employing 40,000 people. There is no need to hire more tax collectors, especially when one considers that over two million low-income Canadians are paying 16% federal income tax on earnings in excess of $7,756 per year. Canada's $7,756 basic personal exemption is so low that a person earning minimum wage must pay federal income tax on half of her salary! The federal government could take two million low-income Canadians off of the income tax rolls by raising the Basic Personal Exemption from the current $7,756 to $15,000. This would give all Canadians a tax cut, and would make it possible to reduce the size of CCRA's tax-collecting army.

This court decision gives taxpayers some security. If they have not been pursued for debts by CCRA for six years or more, they can't be surprised. CCRA should respond to this ruling by becoming more efficient - not by becoming bigger.