OTTAWA — Christopher Buckley, a resident of Calgary, was surprised to receive a $1,000 fine from the Canada Revenue Agency (CRA) after submitting a paper tax filing for his inactive film production company. Buckley had filed similar returns without issue for years, but this time, he was penalized for not filing electronically.

"You file on paper and you’re a corporation, boom bada bing, automatically, you get the penalty, at really no cost to CRA," Buckley said. He is among nearly 5,000 inactive companies that faced the same fine for filing their 2024 tax returns by paper. This situation has raised concerns about the implications of a legislative change made in 2023.

The fine is a result of amendments in the 2023 Budget Implementation Act, which removed the previous $1 million revenue threshold for electronic filing. Under the new rules, most companies, including many inactive ones like Buckley’s, are now required to file electronically or face a $1,000 penalty starting in the 2024 tax year. Exceptions to this rule apply only to certain types of corporations, such as insurance companies and charities.

According to CRA data, 11,640 companies, including 4,840 dormant ones, were fined last year for submitting paper filings despite the new requirements. Buckley argues that there are valid reasons for continuing to file on paper, especially for inactive corporations. He cited the simplicity of the process, the challenges faced by those who are not tech-savvy, and the costs associated with upgrading technology to meet electronic filing standards.

Buckley explained that his computer does not meet the minimum requirements for electronic filing, which would necessitate a costly upgrade. "It cost me $2 to print off three pieces of paper. I pull up my fillable PDF that I filled out last year, I change the date, I print it off, I sign it, I stick it in my envelope with my personal tax returns and off it goes," he said. He expressed his frustration, stating, "I’ve minimized my cost to $2 and they’re going to charge me $1,000 for doing that… or $333.33 per page."

Buckley has filed an objection with the CRA regarding the fine. His Member of Parliament, Greg McLean, expressed concern over the penalties, suggesting that the CRA is overly aggressive in its enforcement. "The CRA is acting here I think with a little too much aggression," McLean said. He believes there should be exceptions for individuals like Buckley who face challenges with electronic filing.

In response, CRA spokesperson Sylvie Branch stated that the agency is required to impose the maximum fine as the law does not allow for discretion. "The legislation does not provide for exceptions related to inactive corporations or those with no revenues, expenses, or taxes to pay," Branch said. She emphasized that the CRA must follow the law, which does allow for some exceptions.

The 2023 policy aimed to significantly reduce the number of corporations filing tax returns on paper. Data indicates that the number of corporate income tax returns filed on paper by companies with under $1 million in revenue decreased from 235,820 in 2015 to 115,080 in 2023. However, after the removal of the exception and the introduction of the $1,000 penalty, the number of corporate paper filers dropped by half to just under 60,000.

Branch noted that taxpayers who believe they should not have to pay the fine can apply for relief directly to the CRA. The agency has the discretion to cancel or waive penalties in cases of financial hardship or other extraordinary circumstances.