Blogs & Comment

GST remittances when cash is tight

When cash flow becomes tight, some businessesstop remitting the GST (and provincial sales taxes). Indeed, according to a report from Canadian Revenue Agency(CRA), one in four businesses was late in their GST payments in 2007. The rate likely moved up closer to one in two during the recession of 2008 and 2009.
Before the recession, CRA said it was concerned about the number of late GST payments and was looking into increasing prosecutions and publication of convictions. It seems the recession has delayed that process somewhat: the agency recently told me for a report I was working on that they wont introduce any new measures until next spring or so.
While preparing the report, Ialso had an illuminating chat on GST remittances with John Wright, a chartered accountant at McLarty and Co. in Ottawa. I thought he had some great suggestions for what businesses with cash-flow problems should do in regards their GST remittances:
1. At least file with CRA to avoid paying the penalty (6% of balances); then a business only has to pay interest (currently 5% annually) when theyget caught up.
2. Dont ignore the CRA, or they will get tough; if the business talks to them and tries to make arrangements to pay what it can, CRA is usually more understanding.
3. The sooner a business realizes it has a cash problem and takes action, the better. Their banker or accountant will have more options for helping out them out. Many firms think they may be able to wait it out but when they realize they cant wait much longer, their options are much fewer.