Auditor: Ont. to write off $1.4B in unpaid taxes

TORONTO -- Ontario's cash-strapped government is expected to write off at least $1.4 billion in unpaid taxes, mainly because it failed to act quickly and aggressively to collect the debts, auditor general Jim McCarter found in his annual report.

"That's an awful lot of money, especially in this economic climate," he said Wednesday.

The province -- which is facing a $14.4-billion deficit -- is owed about $2.46 billion in taxes, mostly business and corporate, he said. But it isn't doing enough to collect the debts, most of which have accumulated for years, and now lacks the manpower to pursue tax evaders.

"We felt that there was a risk that perhaps more than $1.4 (billion) out of $2.4 billion will be written off," McCarter said.

It took collectors an average of seven months before they picked up the phone to call delinquent taxpayers, McCarter said. Personal visits weren't made, and liens and warrants for the seizure and sale of properties weren't enforced.

In one case, collectors didn't attempt to revoke the liquor licence of a debtor who owed $1.1 million. The licensee eventually agreed to make payments, but defaulted after repaying just five per cent of the debt. They voluntarily gave up their licence two years later, just as it was set to expire.

The Finance Ministry said it's already written off $600 million of the $1.4-billion, adding it will use "all available collection tools" to recover back some of the money.

But McCarter warned that may not happen. Last March, three-quarters of Ontario's tax collectors were transferred to the Canadian Revenue Agency as part of the province's deal with Ottawa to harmonize sales taxes.

There are only 62 provincial tax collectors and bankruptcy officers now, down from 264 before the transfer.

When the Liberals agreed to switch in 2010 to the HST, they boasted that the transfer of employees would reduce their spending by taking public servants off their payroll.

But it's also hindering their ability to pursue delinquent accounts, with some collectors seeing their workload double or even triple, the report said.

While the government has failed to recoup a significant chunk of change, it's also collecting money for programs that appear to have outlived their usefulness, McCarter suggested.

The government is collecting $30 million a year from its Drive Clean vehicle emissions-testing program, even though emissions have declined significantly due to better vehicle standards and cleaner fuel, he said.

The Progressive Conservatives want to scrap the program, saying it no longer serves a purpose.

Ontario is also facing a problem that's cropping up across Canada: police costs rising at a time when crime rates are dropping, McCarter said.

Ontario Provincial Police expenditures rose 27 per cent over the last five years, even though both crime rates and the severity of crimes has been declining over the past 20 years, he said.

Overtime costs for the Ontario Provincial Police jumped 60 per cent since 2004 to $53 million, even though calls to the OPP for service have remained about the same since 2005.

"We found the same trend in the major police forces across Canada, notwithstanding that crime rates are down, the severity of crimes are down, motor vehicle accidents are down," McCarter said.

"Everybody's expenditures are going up more than the rate of inflation."

He also took aim at the OPP for failing to keep track of what's in their evidence lockers and parking lots.

McCarter's staff couldn't locate 200 vehicles in the OPP fleet, although the police later informed them that they had accounted for all the vehicles.

Items like guns were missing from evidence lockers in six or seven of the eight detachments his staff visited, McCarter said. Sometimes there was more cash in the locker than there should have been.

When he brought it to their attention, OPP's senior brass said it was "like a smack in the face" and promised to do an audit in every detachment, McCarter said.

The auditor also found little explanation for rising costs in criminal prosecutions. The number of Crown attorneys has more than doubled over the last 20 years, but the total number of criminal charges they handle in a year has barely changed.

The Ministry of the Attorney General says cases require more time today, yet a money-saving project to manage and track cases electronically that was supposed to be completed in 2010 is still "plagued by delays," the report said.

The government hasn't done much analysis to figure out why it costs $437 on average to prosecute a charge in Toronto, compared to $268 in the rest of the province.

The government also doesn't have the information to figure out why Ontario has Canada's highest rate of adult criminal charges withdrawn or stayed -- 43 per cent versus 26 per cent in the rest of the country -- and the lowest rate of guilty verdicts.