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Section I: Agency Overview

Message from the Minister


Photo of The Honourable Keith Ashfield, P.C., M.P.Minister of National Revenue and Minister of the Atlantic Canada Opportunities Agency and Minister for the Atlantic Gateway

The Canada Revenue Agency (CRA) administers a fair, and responsive tax and benefit system that contributes to the economic and social well being of our nation. The support the CRA provided during the difficult economic climate that dominated 2009-2010 was especially important. By being flexible in how it delivered key aspects of Canada’s Economic Action Plan, the CRA helped secure stability and future prosperity for Canadians.

The CRA is committed to protecting Canada’s revenue base by making sure everyone complies with tax laws. To do this, during 2009-2010, the CRA actively pursued individuals and businesses, including participants in the underground economy and those avoiding taxes by hiding funds offshore, who were not paying the taxes that they owed to Canadians. This document highlights many of the CRA’s achievements over the last year and describes the CRA’s role in supporting individuals, businesses, and families across Canada.

“Our country’s tax system relies on honesty and voluntary compliance. The Canada Revenue Agency wants to help Canadians meet their tax obligations.”

As Minister of National Revenue, I am pleased to present the Departmental Performance Report 2009-2010 for tabling.

The Honourable Keith Ashfield, P.C., M.P.
Minister of National Revenue and
Minister of the Atlantic Canada Opportunities Agency and
Minister for the Atlantic Gateway

Message from the Commissioner and Chief Executive Officer


Photo of Linda Lizotte-MacPherson Commissioner and Chief Executive Officer

As Commissioner and Chief Executive Officer, I am accountable to the Minister of National Revenue for all program matters, and to our Board of Management for administrative matters. I am proud to report that the Canada Revenue Agency (CRA) has once again demonstrated its capacity to achieve meaningful and measurable results for Canadians. While we recognize that we have more to do in some areas, our achievements during this past year provide further evidence of the strength of our core business expertise: administering taxes, collecting revenues, and delivering benefits.

The CRA touches the lives of more Canadians than any other single department or agency in the country. In 2009-2010, we processed about $358 billion in taxes and duties and delivered over $17 billion in benefits and credits to millions of individuals and businesses on behalf of Canada’s provinces, territories, other federal departments, and First Nations.

Our 2009-2010 results

During 2009-2010, the CRA placed significant emphasis on ensuring the integrity of Canada’s tax and benefits system. We encouraged compliance with tax legislation by designing initiatives that make it harder for individuals and business to not comply. For example, over the past year we successfully targeted areas like aggressive tax planning and tax havens through partnerships with provinces and international tax administrations, and further refined our risk assessment and management tools. Overall, individuals, corporations, business that collect GST/HST, and employers continued to demonstrate strong levels of voluntary compliance with their registration, filing, and remittance obligations. Our robust system of checks and balances, coupled with the legislative and other compliance tools available to us, provide assurance that Canada’s revenue base is being protected.

“The CRA is known throughout government as a well-managed, leading-edge organization committed to excellence. That commitment is extremely important in these still-uncertain economic times, when more Canadians than ever depend on the benefit programs the CRA administers.”

We continued to strengthen service as a means of increasing levels of voluntary compliance. In 2009-2010, we took further steps to make it easier for Canadians to comply with legislation by improving access to tax and benefit information and interactive tools.

In our day-to-day activities, we met most of our performance targets for 2009-2010. For those that we did not meet, we sought to understand the factors involved—such as the recent economic downturn—to identify the steps we can take to improve performance in the future.

One particular challenge that we face, which is shared by tax administrations worldwide, is the measurement of the impact of our activities to detect and address non-compliance. Although we continue to achieve strong ratings overall for our performance management framework, we recognize the need to further refine this area.

Management Results
“The 2009-2010 assessments from the Treasury Board of Canada Secretariat and our own Board of Management showed that the CRA rates strongly in most areas of management.”

Moving forward

November 2009 marked the end of our first decade as an agency. The programs and services that we provided over the last 10 years made an important difference in the lives of Canadians. We took on new business, developed and adapted how we worked, built on our management initiatives, and ensured that we continued to deliver on the expectations and needs of taxpayers, businesses, and our government clients. None of this would have been possible without the dedication and hard work of our skilled employees. Their collective knowledge will continue to help us provide innovative and efficient services to individuals and businesses on behalf of the Government of Canada, other levels of government, and First Nations communities.

Our reputation as a world-class tax administration is well-earned and we are proud of our accomplishments over the past year. In submitting this report, I would like to extend my sincere thanks to all of my coworkers, managers, and union leaders who have made the CRA’s successes possible. As we move forward, I remain confident in the dedication, knowledge, and professionalism of our employees as they deliver quality results that matter to Canadians.

Linda Lizotte-MacPherson
Commissioner and Chief Executive Officer
Canada Revenue Agency

Our Raison d’Être

Canada’s tax system is based on voluntary compliance and self-assessment. A well-functioning tax system is critical to the ability of federal, provincial, territorial, and First Nation governments to deliver programs and services that are important to Canadians and Canadian businesses.

The Canada Revenue Agency (CRA) has the mandate to administer tax, benefit, and other programs on behalf of the Government of Canada and provincial, territorial, and First Nations governments.

Parliament created the CRA so we could meet the mandate by:

The CRA’s mandate reflects the broad role that the CRA plays in the lives of Canadians. The CRA contributes to three of the Government of Canada’s outcome areas:

In 2009-2010 we processed about $358 billion in taxes and duties ($8 billion less than in 2008-2009) on behalf of Canada, the provinces (except Quebec) and territories, and First Nations.We also delivered over $17 billion in benefits and credits, and provided other services that contributed directly to the economic and social well-being of Canadians.

Benefit to Canadians

No other public organization touches the lives of more Canadians on a daily basis than the CRA does. Each year we administer billions of dollars in tax revenue and distribute timely and accurate benefit payments to millions of Canadians. We deliver income-based benefits, credits, and other services that assist families and children, low- and moderate-income households, and persons with disabilities–programs that contribute directly to the economic and social well-being of Canadians.

Our ability to deliver efficient, timely, and accurate high-volume programs and services makes us a valuable partner for government clients.

The following two strategic outcomes summarize the CRA’s contribution to Canadian society.

In addition to administering tax and benefit programs, we administered harmonized sales tax for three provinces and verified taxpayer income levels in support of a wide variety of federal, provincial, and territorial programs, ranging from student loans to health care initiatives. We also provided other services, such as our Refund Set-Off Program, through which we helped other federal departments and agencies, as well as provincial and territorial governments, collect debts that might otherwise become uncollectable.

This Performance Report assesses the extent to which we achieved these outcomes during the 2009-2010 fiscal year. On balance, our results show that we met both our strategic outcomes.

Risk Analysis

Our Enterprise Risk Management Program was created to ensure that we develop and implement a systematic and comprehensive approach to managing risks that is fully integrated into our strategic, operational, and financial decision-making processes and mechanisms.

To keep abreast of the risks the CRA faces as an organization, during the planning period, we completed our Corporate Risk Inventory 2009, an integral part our annual strategic planning exercise. The five key priorities of the Corporate Business Plan 2010-2011 to 2012-2013 were based on the highest CRA risks identified in the 2009 inventory (related to payment compliance and the underground economy). A CRA risk action plan was also developed to ensure that we have appropriate response strategies for all the risks identified in the inventory. In this way, the 2009 risk inventory guided the strategic and operational business priorities for the 2010-2011 planning period and led us to integrate risk management in our day-to-day business.

An update to the Corporate Risk Inventory 2009 was also initiated in early 2010. The update indicated that the overall risk profile of the CRA remains generally unchanged from 2009.

We believe that our approach to risk management will help us maintain services to the Canadian public and protect their interests.

Rating our Results

We use qualitative and quantitative indicators, also called measures, to determine the results achieved in terms of our strategic outcomes and expected results. We gather operational data, statistical samples, and survey results that form the basis for our assessments. We continue to face challenges in strengthening our indicators; in particular, ones that are concrete and allow us to make clear links between our achievements and our strategic outcomes and expected results. To this end, we share information with other tax administrations on results measurement through various international forums. In addition, the CRA participates in international initiatives to benchmark key aspects of tax administration with jurisdictions from around the world.

We also rate our strategic results and those of our program activities in terms of whether the targets identified in our Corporate Business Plan 2009-2010 to 2011-2012 were met, mostly met, or not met.

Our targets identify the percentage or degree we expect to attain for a performance level. Where targets are numeric, they are listed beside each indicator. Our management teams establish performance targets by analyzing affordability constraints, historical performance, the complexity of the work involved, and the expectations of Canadians.

Rating
Results
Met
Our results met or exceeded our expectations.
Mostly met
While the results met most of our expectations, some gaps exist.
Not met
Significant gaps exist in results and most or key expectations were not met.

Our Program Activity Architecture

The Program Activity Architecture depicted below identifies our program activities and demonstrates how they link to our strategic outcomes. Program activities are groups of related activities that are designed and managed to meet a specific public need and reflect how we allocate and manage our resources to achieve intended results.


Government of Canada Outcome Areas

Performance Summary

(in thousands of dollars)
2009-2010
 
Program Activity
2008-2009 Actual[Footnote 1] 
Main Estimates
Planned Spending
Total Authorities
Actual
Alignment to Government of Canada Outcomes
Strategic Outcome: Taxpayers meet their obligations and Canada’s revenue base is protected
Taxpayer and Business Assistance[Footnote 2] 
483,467
690,626
690,626
542,727
531,371
A transparent, accountable and responsive federal government
Assessment of Returns and Payment Processing[Footnote 3] 
645,529
587,917
587,917
728,359
690,835
Well-managed and efficient government operations
Accounts Receivable and Returns Compliance[Footnote 4] 
497,808
429,712
429,712
533,979
529,982
Well-managed and efficient government operations
Reporting Compliance
1,037,944
922,077
922,077
1,129,081
1,092,367
Well-managed and efficient government operations
Appeals
132,605
126,895
126,895
149,799
148,009
A transparent, accountable and responsive federal government
Strategic Outcome: Eligible families and individuals receive timely and correct benefit payments
Benefit Programs[Footnote 5] 
341,843
331,566
331,566
342,634
342,440
Income security and employment for Canadians
The following program activity supports all strategic outcomes within the organization
Internal Services1
1,057,515
1,295,854
1,295,854
1,156,451
1,068,803
 
Strategic Outcome: Taxpayers and benefit recipients receive an independent and impartial review of their service-related complaints
Taxpayers’ Ombudsman1
1,945
3,328
3,328
3,130
2,741
A transparent, accountable and responsive federal government
Total
4,198,656
4,387,974
4,387,974
4,586,160
4,406,548
 
Less:
Non-Tax Revenues
Respendable Revenue – Pursuant to section 60 of the Canada Revenue Agency Act
219,585
204,803
204,803
213,920
213,920
Non-Respendable Revenue
51,074
Not Applicable
54,183
Not Applicable
 
55,676
Plus:
Cost of services received without charge
250,314
Not Applicable
 
259,782
Not Applicable
 
269,188
Net Cost of CRA
4,178,311
Not Applicable
4,388,770
Not Applicable
4,406,140
Note: Numbers may not add due to rounding

[Footnote 1] Commencing in the 2009-2010 Estimates cycle, the resources for Program Activity: Internal Services are displayed separately from other program activities; they are no longer distributed among the remaining program activities. 2008-2009 Actuals have been restated to more accurately reflect the total spending attributable to each Program Activity and to provide a better comparison of spending information by Program Activity between fiscal years.
[Footnote 2] Includes the Softwood Lumber statutory disbursements ($180.5 million in 2008-2009 and $205.5 million in 2009-2010).
[Footnote 3] Includes payments to the Ministère du Revenu du Québec in respect of the joint administration costs of Federal and Provincial sales taxes ($131.7 million in 2008-2009 and $148.4 million in 2009-2010).
[Footnote 4] Includes Payments to Private Collection Agencies ($9.1 million in 2008-2009 and $3.3 million in 2009-2010).
[Footnote 5] Includes a) Relief for Heating Expenses (program announced in 2000) ($0.9 million in 2008-2009 and $0.5 million in 2009-2010); b) Energy Costs Assistance Measures expenses (program announced in the Fall of 2005) ($0.5 million in 2008-2009 and $0 in 2009-2010); and c) Statutory Children's Special Allowance payments ($211.8 million in 2008-2009 and $215.3 million in 2009-2010).

2009-2010 Financial Resources (in thousands of dollars)

 
Planned Spending
Total Authorities
Actual Spending
                                           
4,387,974
4,586,160
4,406,548

2009-2010 Human Resources

 
Planned
Actual
Difference
Full-Time Equivalents
39,481
40,228
(747)

Contribution of Priorities to Strategic Outcomes

As identified in our 2009-2010 Report on Plans and Priorities, our tax and benefit focus over the planning period was on tax integrity, strengthening service, benefits validation, effective relationships, and business sustainability.

The following table identifies the strategic priorities we pursued in 2009-2010, our results, and how these priorities support our Strategic Outcomes. Additional details concerning individual program activity achievements related to these strategic priorities are provided in Section II: Analysis of Program Activities by Strategic Outcome.

Tax Operational Priorities
Tax Integrity:
Non-compliance is the failure, for whatever reason, to register as required under the law, file returns on time, report complete and accurate information to determine tax liability, and pay all amounts when due. It takes many forms, from errors and omissions to deliberate tax evasion. We are constantly assessing non-compliance risks and taking steps to focus our resources on areas of highest risk in order to make non-compliance more difficult.
Type
Link to Strategic Outcomes
Status
2009-2010 Summary of Performance
Ongoing
Taxpayers meet their obligations and Canada’s revenue base is protected
and
Eligible families and individuals receive timely and correct benefit payments
Successfully Met
Over the past several years, we have significantly augmented our research capacity to enable us to better understand and manage debt. Our work in this area has allowed us to use information on taxpayer characteristics, compliance behaviour, and other factors to construct risk-based models that help us select appropriate and effective approaches for specific debtor cases. We began to use our risk-based approach to identify the right compliance response for individual debtors, ranging from helping individuals further understand their obligations, to undertaking swifter and firmer responses with those whose history demonstrates a higher risk of non-compliance. Our risk-based selection models are being integrated into our decision-making to more effectively manage the tax debt accrued by both taxpayers and businesses.
We also commenced the implementation of Phase II of our National Insolvency Strategy, with the goal of improving the coordination and management of complex filings under the Companies’ Creditors Arrangement Act.
We developed a suite of directives that set the direction of our future communication with taxpayers by issuing tax alert messages and publishing criminal convictions obtained by the CRA through the judicial process.
Sectors of the CRA worked together to better manage collections related to aggressive international tax planning cases, an effort that has produced valuable information. Such improvements will serve both taxpayers and the CRA by enhancing our ability to address the current global accounts receivable inventory.
We also communicated with Canadians about the risks and consequences of using tax havens to avoid paying taxes, and about the actions that we take to counter these abusive practices. A pamphlet to inform taxpayers who are potential users of tax havens was published in 2009.

Tax Operational Priorities
Strengthening Service:
Taxpayers and benefit recipients are the focus of our service work. We are committed to providing timely and accessible information products and services to make it easier for taxpayers and benefit recipients to comply with their obligations and receive their rightful share of entitlements. Each tax and benefit service we deliver, however, must be integrated with our compliance strategy and must consider costs and our capacity, as well as the needs and expectations of the individuals, businesses, and government clients we deal with every day.
Type
Link to Strategic Outcomes
Status
2009-2010 Summary of Performance
Ongoing
Taxpayers meet their obligations and Canada’s revenue base is protected
and
Eligible families and individuals receive timely and correct benefit payments
Successfully Met
Electronic self-service is the most economical means of reaching the greatest number of individuals and businesses, and it represents the best opportunity to respond to the evolving service expectations of taxpayers. Our Smartlinks program supports taxpayers who self-serve by providing direct telephone access to tax experts and provides us the opportunity to solicit feedback in order to improve the Web site. In 2009-2010, we expanded this feature to the transactional pages of our My Business Account electronic service.
While many Canadians use electronic self-service options, we continue to serve and support taxpayers through more traditional channels. For example, a large number of taxpayers interact with us over the telephone. Comprehensive automated response systems provide service 24 hours a day, seven days a week. During regular business hours, we can route calls among call centres as demand increases or decreases. This allows us to use our resources more effectively, reduce costs, provide extended hours of service, and efficiently resume our business after any service interruption.
We are improving our understanding of why taxpayers use the telephone through our Profile of Enquiries studies. We are also providing our agents with more updated and relevant reference tools, and making system improvements to ensure the information agents provide to callers is consistent. This will ensure that our agent-assisted telephone services meet taxpayers’ needs.
Through our communication and outreach activities, we deliver the information taxpayers need to meet their obligations. Given changing demographics, compliance risks, and other key trends, outreach programs and communications activities delivered by programs across the CRA must continually adapt. They must also be fine-tuned to the needs of specific taxpayer subgroups such as seniors, new Canadians, youth, small or new businesses, and high-risk sectors.
In 2009-2010, we worked with several government departments and agencies to reach out to different segments and communities to deliver tailored services or messages. Partners include Agriculture and Agri-Food Canada, Human Resources and Skills Development Canada, the Financial Consumer Agency of Canada, and the Province of Manitoba.
We continue to build on partnerships with the provinces of Ontario and British Columbia to provide information sessions on the transition to the harmonized sales tax.
We used webinars and webcasts as outreach tools. This gave taxpayers in remote areas easy access to information. We also conducted a call-out campaign to give rural small business owners in Ontario and British Columbia information about the upcoming implementation of harmonized sales tax in their provinces.
The telephone has always been an important service channel for benefit recipients. Many people rely on the telephone as their main contact route for reasons such as availability and prompt access to information and services. Information that is exchanged over the telephone can be critical to timely account updates and accurate benefit and credit calculations. The number of Canada Child Tax Benefit and GST/HST credit callers able to reach us by telephone exceeded 90% for the second consecutive year. The increased level of service for benefit recipients was possible due to the additional resources directed into our telephone services since 2008.
We launched the Automated Benefits Application service, which allows parents to apply for child and family benefits when their child is born, by ticking a box on their provincial or territorial birth registration forms.

Tax Operational Priorities 
Effective Relationships:
Maintaining effective partnerships with other federal government agencies and departments, provinces, territories, and First Nations governments increases the effectiveness and efficiency of our administration of Canada’s tax and benefits system. Co-operation among tax administrations, including sharing tax information, is a key tool in protecting the integrity of Canada’s tax system.
Type
Link to Strategic Outcomes
Status
2009-2010 Summary of Performance
Ongoing
Taxpayers meet their obligations and Canada’s revenue base is protected
and
Eligible families and individuals receive timely and correct benefit payments
Successfully Met
We maintained a strong presence in international organizations such as the Inter American Center of Tax Administrations, the Commonwealth Association of Tax Administrators, and the Centre de Rencontres et d’Études des Dirigeants des Administrations Fiscales in order to advance protocols and practices to guide the work of tax administrations around the world.
We worked with a number of international groups, such as the Organisation for Economic Co-operation and Development, to identify and respond to compliance threats. We also worked with multilateral compliance groups, such as the Joint International Tax Shelter Information Centre, with whom we conduct analyses of compliance issues.
We enhanced our relationships with other tax jurisdictions through tax treaties and tax information exchanges. In 2009-2010, we participated with Department of Finance Canada in negotiations to update existing treaties with Australia, Malaysia, the Netherlands, New Zealand, Poland, Singapore and Switzerland. We similarly pursued tax information exchanges with Anguilla, Aruba, Bahamas, Bahrain, Bermuda, Cayman Islands, Dominica, Guernsey, Jersey, Liberia, Saint Lucia, St. Kitts and Nevis, St. Vincent and the Grenadines, San Marino, and Turks and Caicos. These enhanced relationships improve our ability to conduct international compliance work by providing the CRA with access to offshore tax information, including bank information, notwithstanding bank secrecy legislation.
Our relationship with the Department of Finance Canada is critical to the success of our strategies. In 2009-2010, we worked with that department to prepare for the implementation of Harmonized Sales Tax in Ontario and British Columbia.
When we administer programs and provide benefits and credits on behalf of client governments, we reduce the need for separate calculation and delivery systems at federal, provincial, and territorial levels. Building and maintaining effective relationships between the CRA and various client governments makes it easier for them to work with us and encourages them to use our delivery systems, as authorized by legislation, whenever possible. By working cooperatively, the overall cost of government is reduced.
During 2009-2010, we worked with Human Resources and Skills Development Canada on assessing whether the administration of the Universal Child Care Benefit is effective and efficient. Results of this review are expected during 2010-2011.

Tax Operational Priorities
Benefits Validation:
Our validation work helps recipients understand their legal rights and obligations and creates a credible enforcement presence to deter non-compliance by benefit recipients. We are continuing to ensure the integrity of our administration of benefit and credit programs by following through with strategic initiatives that focus on validation.
Type
Link to Strategic Outcome
Status
2009-2010 Summary of Performance
Ongoing
Eligible families and individuals receive timely and correct benefit payments
Successfully Met
We applied elements of our compliance strategy to enhance the accuracy of benefits and credits issued. To measure levels of compliance, we reviewed and verified recipient information, contacting individuals to confirm details on their accounts.
In 2009-2010, we contacted 212,017 recipients to confirm that their account information was accurate. The responses that we received enabled us to identify recipients who were overpaid as well as those who were underpaid. Our results indicate that our targeted reviews are successfully revealing areas of non-compliance.
The correct calculation of benefits and credits relies on timely information from the recipient. It is the responsibility of each recipient to provide us with complete and accurate information to maintain their eligibility and receive the proper amount of benefits. The results of the most recent benefits measurement study indicated that 94.4% of Canada Child Tax Benefit recipients provided us with correct information and were therefore receiving their proper entitlements.

Management Priorities
 
 
Business Sustainability:
Modern and innovative management practices and sound infrastructure are necessary conditions to sustain the high-quality tax, benefit, and related services that we deliver on behalf of governments across Canada.
Type
Link to Strategic Outcomes
Status
2009-2010 Achievements
Ongoing
Taxpayers meet their obligations and Canada’s revenue base is protected
and
Eligible families and individuals receive timely and correct benefit payments
Successfully met
To ensure that we are effectively meeting our responsibilities for accountability, we use two complementary tools: the Management Accountability Framework assessment conducted by the Treasury Board of Canada Secretariat and the Board of Management Oversight Framework assessment conducted by our own Board of Management. Together, the two assessment tools provide a complete evaluation of the CRA’s management performance.
Our 2009-2010 Management Accountability Framework assessment was very positive. Of the 11 indicators, we received 7 “strong” and 4 “acceptable.” In 2009-2010, our Board of Management Oversight Framework assessment results were also positive. Out of the 18 indicators, we received 14 “strong” and 4 “acceptable.”
The CRA implemented its first multi-year strategic investment plan, supported by a documented project portfolio management approach. The Agency Management Committee regularly reviewed investment projects to ensure resources are allocated to the CRA’s highest priorities.
We completed our Corporate Risk Inventory 2009. A CRA risk action plan was also developed to ensure that we have appropriate response strategies for all the risks identified in the Inventory.
The CRA developed and published guidelines to help managers with succession planning.
We continued the use of mandatory pre-qualified processes (PQPs) and the migration to End-State PQPs project. Initial results indicate that the time to staff was reduced from 185 days to less than 100 days.
In 2009-2010, to complement the CRA Learning Policy, a directive and procedures were developed to strengthen the planning, evaluation, and alignment of learning investments with CRA objectives.
Information technology is a fundamental element of the CRA’s capacity to deliver its programs and services to Canadians. To maintain this capacity, we work diligently to ensure that our systems and infrastructure are robust, secure, reliable, and recoverable. In 2009-2010, we:
  • successfully implemented the Corporate Tax Administration for Ontario, Enterprise Content Management, Integrated Revenue Collections, and the Compliance Systems Redesign projects to meet evolving CRA business requirements.
  • replaced older technology, resulting in significant improvements in system capacity and application stability.
To enhance the controls already in place to prevent the inappropriate access and disclosure of information, the CRA began to develop an Identity and Access Management program.
We developed the CRA Information Management Strategy 2010-2011 to 2012-2013.
We further advanced our vulnerability assessment and management capabilities by deploying anti-spyware technology to all CRA workstations.

Our Strategic Outcome Measures

We use our strategic outcome measures to gauge the compliance behaviour of Canadian taxpayers. Using data from internal and external sources as a baseline of compliance information, we group our indicators into the following four broad categories of taxpayer obligations to help us measure and assess our results against our Tax Services strategic outcome. These four categories are: registration compliance, filing compliance, remittance compliance, and reporting compliance.

To facilitate further research and discussion of compliance, we analyze the following segments of the population: individuals, self-employed individuals, corporations, GST/HST registrants, and employers. Our discussion of compliance includes macro-indicators which help us evaluate reporting compliance trends and to determine if the economic data provides an early indication of a change in the levels of compliance

Registration compliance

Registration Compliance estimates the proportion of Canadian businesses that have registered as required by law to collect the GST/ HST.

Our Measure
Year
Performance Rating
Data Quality
Rates of registration for the GST/HST
2009-2010
Met
Good
2008-2009
Met
Good

Our Indicator[Footnote 1] 
Current Target
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Rating
Canadian businesses that were registered for the GST/HST[Footnote 2] 
90%
97.2%
97.8%
98.4%
95.8%
93.5%
Met
[Footnote 1] Data for the 2005-2006 to 2008-2009 period have been restated as more complete and accurate information has become available.
[Footnote 2] These estimates use the number of businesses who file timely returns as a proxy for registrants. The population of businesses includes some small businesses which are not required to register as part of the calculation. As a result, the estimate may understate the proportion of businesses who actually register to collect GST/HST.

Our estimates of the rate of registration compliance have remained consistently above our target over the past several years.

Our assessment is also supported by the results from our non-registrant program which seeks to ensure that all businesses that are required to register for the GST/HST meet their obligations. Each year, this program identifies several thousand small businesses that are required to register, mostly those that are new or that recently exceeded the registration threshold. We are persuaded, therefore, that there is a very low risk that medium-sized or large enterprises are carrying on business without being registered to collect the GST/HST.

Filing compliance

Filing Compliance indicators estimate the proportion of the Canadian population who file their returns on time.

Our Measure
Year
Performance Rating
Data Quality
Rates of filing on time
2009-2010
Mostly Met
Good
2008-2009
Mostly Met
Good

Our Indicators
Current Target
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Rating
Individuals 18 years and older who filed their returns on time
90%
92.8%
93.0%
92.5%
92.8%
92.8%
Met
Corporations – taxable incorporated businesses that filed their returns on time[Footnote 1] 
90%
86.4%
86.4%
85.8%
84.4%
85.5%
Not Met
Businesses that filed their GST/HST returns on time
90%
91.8%
91.4%
Not Available
90.5%
Not Available
Not Applicable
Employers who filed their T4 returns on time
90%
94.5%
96.0%
95.5%
96.4%
96.3%
Met
[Footnote 1] The remaining percentage of taxable corporations used for this calculation filed their returns after the due date, either voluntarily or as a result of our non-filer work.

To gauge the compliance of individual taxpayers with their obligation to file a timely return, we compare our data for individual filers 18 years of age and older with Statistics Canada’s Census of Population data for this population. In fact, these estimates have consistently remained above the 92.5% level for every year since the 2001-2002 reporting year, providing a reliable trend for the high degree of voluntary filing compliance that we observe.

Our research on filing behaviour shows that, of the remaining individuals who were not compliant (7.2% in both 2005-2006 and 2009-2010), a large majority file their return within five years. For instance, although 92.6% of individuals filed their returns on time for the 2003 tax year, this percentage rose to 97.4% in less than five years. Filing for the following tax year (2004) showed exactly the same pattern, reaching 97.4% in less than five years, and filing behaviour for subsequent years follows a similar trajectory. We have learned from this research that the majority of non-compliant individual filers comply within about five years, indicating a long-term non-filing rate of about 2.6% for the 18-year-and-older population. Over the last six tax years, more than two thirds of the returns filed late owed no taxes for any tax year at the time of filing, with the remaining third owing taxes for at least one tax year.

Remittance compliance

Remittance compliance indicators estimate the proportion of taxpayers who owed taxes and paid the full amount on time.

Our Measure
Year
Performance Rating
Data Quality
Remittance compliance – Rate of timely payments
2009-2010
Mostly Met
Good
2008-2009
Mostly Met
Good

Our Indicators
Current Target
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Rating
Individuals who paid their reported taxes on time
90%
92.4%
92.9%
91.5%
93.2%
93.7%
Met
Percentage of payable corporation taxes paid on time
90%
92.9%
90.9%
92.4%
92.2%
93.5%
Met
Employers who forwarded at-source deductions on behalf of their employees on time
90%
88.7%
87.7%
89.2%
87.3%
89.9%
Mostly Met
Trend in ratio of outstanding tax debt to gross cash receipts[Footnote 1] 
Downward trend
5.64%
5.78%
6.30%
6.65%
6.98%
Not Met
[Footnote 1] This indicator has been restated for the 2005-2006 to 2008-2009 period to reflect the latest available information.

We measure how various taxpayer segments comply with their remittance requirements by the degree to which they paid all taxes, based on their self-assessment, on or before the due date. When monies owed are not paid at the time of filing, we take steps to obtain payment.

For employers who remit at-source deductions on behalf of their employees, the rate of timely remittance has been below our target of 90% for several years. This year, however, our estimate indicates, that employers have remitted in a more timely fashion compared to previous years. On this basis, we are inclined to conclude that we mostly met our target for this compliance measure.

Reporting compliance

We conduct various reviews and audits to identify areas where reporting by individuals and corporations may not be consistent with their obligations to report complete and accurate information.

In 2009-2010, our review programs estimated that 15.4% of claims or deductions made by individuals were non-compliant, meaning they would be disallowed following a review[Footnote 1] . It should be noted that the number and type of credits and deductions have changed over the 2007-2008 to 2009-2010 period, so that the non-compliance rate shown in the above table represents both changes in compliance and in the scope of the study.

Results of reviews of individual tax returns
2006-2007
2007-2008
2008-2009
2009-2010
Non-compliance rate
14.7%
14.8%
16.5%
15.4%
Estimated dollars at risk ($million)
669
890
895
987

For large businesses, we detect and address non-compliance through a combination of corporate audits and risk assessment, which includes research and monitoring. The process involves an annual risk assessment of large taxpayers that uses expertise from across CRA to assess the risk levels using information related to the nature of the taxpayer’s business, their current and past behaviour including aggressive tax planning, transparency, as well as information available from our tax treaty partners that indicate potential risk of non compliant behaviour. We have increased our use of research relating to risk based targeting of large business in response to the evolution of large businesses as a result of globalization and electronic commerce that have made certain complex business structures more prone to risks of non-compliance.

For small businesses, including self-employed individuals, we rely more on risk assessment in selecting businesses for audit. Our Small and Medium-sized Enterprise (SME) audit program selects its audits based on a range of risk information that includes past risk history and business condition indicators that are associated with non-compliance risk.

We also monitor and analyze a number of macro indicators that gauge trends in taxpayer behaviour with respect to reporting compliance.

Macro indicators

Figure 1 The trend in personal income reported to the CRA compared to personal income estimated by Statistics Canada


Figure 1 The trend in personal income

Figures for the years 2005, 2006, and 2007 have been restated as a result of improved data.

Data quality: Reasonable

Figure 2 The trend in corporate income taxes that we have assessed compared to corporate profits before tax reported to Statistics Canada


Figure 2 The trend in corporate income taxes

Figures for the years 2001 and 2002 have been restated as a result of improved data.

Data quality: Reasonable

Figure 3 The trend in net income of unincorporated businesses reported to us compared to Statistics Canada’s estimate for its National Accounts


Figure 3 The trend in net income of unincorporated businesses

Figures for the years 2005, 2006, and 2007 have been restated as a result of improved data

Data quality: Reasonable

Figure 4 The trend in CRA’s net GST/HST revenue compared with retail sales and personal expenditure estimated by Statistics Canada


Figure 4 The trend in CRA’s net GST/HST revenue

Data quality: Reasonable

Conclusion

Our strategic outcome measures provide estimates of filing, registration, remittance, and reporting compliance to gauge the levels of voluntary compliance with Canada’s tax laws. Our review of these estimates for 2009-2010 indicates that voluntary compliance remained generally high, although the dollar value of identified non-compliance is financially significant. Our assessment of our results indicators is that they are consistent with a high level of taxpayer compliance.

It is our assessment that we met our Tax Services strategic outcome in 2009-2010. We draw our overall conclusion largely from the significant proportion of Canada’s revenue base originating from personal income that is subject to third-party reporting, and that a major proportion of the remainder originates from large corporations that are subject to a high rate of audit coverage. In addition, much of our assurance that we are achieving our strategic outcome is based on our robust system of checks and balances, which includes both preventive and detective activities. These activities incorporate a mix of compliance tools to protect Canada’s revenue base from non-compliance.

Our Benefit Programs Strategic Outcome Measures

Our Measure
Year
Performance Rating
Data
Quality
Eligible families and individuals received timely and correct benefit payments.
2009-2010
Met
Good
2008-2009
Met
Good

Our Indicators
Current Target
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Rating
Eligibility is established
Percentage of potential entitled recipients who receive the CCTB
95%
Not Applicable
Not Applicable
Not Applicable
94.9%
Not Applicable[Footnote 1] 
Not Applicable
Payments are timely
Percentage of benefit recipients who receive payments on time
99%
99.9%
99.9%
99.9%
99.9%
99.7%
Met
Benefit payments are correct
Percentage of CCTB recipients who provide complete and accurate information and receive the proper entitlement
95%
95.1%
95.5%
95.5%
92.9%
94.4%
Mostly Met
CCTB overpayment debt as a percentage of payments issued
<0.4%
0.3%
0.2%
0.3%
0.4%
0.1%
Met
Provinces, territories, and other federal departments rely on the CRA as a key service provider
Number of programs and services administered
Upward trend
67
72
77
93
96
Met
[Footnote 1] These percentages are only available for census years

It is our assessment that we met our Benefit Programs strategic outcome. Through our efforts in administering benefit programs, eligible families and individuals received timely and correct benefit payments, and our government clients were afforded reliable services, enjoyed lower administration costs and more effective compliance. Benefit recipients can rely on the CRA to administer a better-integrated benefits system of high integrity and be assured that the CRA contributes to reducing the overall cost of government in Canada.

For more discussion on our performance against our Strategic Outcomes, please visit:
www.cra.gc.ca/annualreport

Expenditure Profile

Figure 5 Spending Trends


Figure 5 Spending Trends
 
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
 
(in millions)
Main Estimates
3,029
3,228
3,380
3,737
4,388
Planned Spending
3,450
3,222
3,480
3,875
4,388
Total Authorities
3,812
3,626
4,560
4,371
4,586
Actual Spending
3,707
3,405
4,423
4,199
4,407

For the 2005-2006 to 2009-2010 period, total spending includes all Parliamentary appropriations and revenue sources: Main Estimates, Supplementary Estimates, Treasury Board Vote 5 – Government Contingencies, Vote 15 – Compensation Adjustments and Vote 23 – Paylist Requirements as well as carry forward adjustments. It also includes spending of revenues received through the conduct of the Canada Revenue Agency’s (CRA) operations pursuant to Section 60 of the Canada Revenue Agency Act, Children’s Special Allowance payments, payments to private collection agencies pursuant to Section 17.1 of the Financial Administration Act and statutory disbursements to the provinces under the Softwood Lumber Products Export Charge Act, 2006.

Since 2005-2006, the Canada Revenue Agency’s Vote 1 reference levels have increased primarily as a result of: collective agreements/contract awards; legislative, enhanced audit and enforcement measures, including policy and operational initiatives arising from various Federal Budgets and Economic Statements; the transfer from the Department of Public Works and Government Services Canada for accommodations and real property services; and the assumption of the responsibilities related to the Corporate Tax Administration for Ontario, the Softwood Lumber Agreement and Inter-Provincial Compliance.

The increases to Vote 1 have been offset by a number of reduction exercises including: the 2005 Expenditure Review and Procurement reductions, the 2006 Expenditure Restraint Program, the 2007 Federal Budget Cost Efficiency Savings and the 2008 Federal Budget Strategic Review reductions

The Agency’s Statutory Authorities have fluctuated over the course of the 2005-2006 to 2009-2010 period as a result of: adjustments to the Children’s Special Allowance payments for eligible children in the care of specialized institutions; adjustments to the rates for the contributions to employee benefit plans; increases to the spending of revenues received through the conduct of operations pursuant to Section 60 of the Canada Revenue Agency Act; the introduction from 2007-2008 to 2009-2010 of payments to private collection agencies pursuant to Section 17.1 of the Financial Administration Act; and the statutory disbursements to the provinces under the Softwood Lumber Products Export Charge Act, 2006.

In 2009-2010, of the $4,586.2 million total authority, CRA’s actual spending totalled $4,406.5 million resulting in $179.6 million remaining unexpended at year-end. After deducting unused resources related to the proposed Offshore Trusts initiative, Accommodation and Real Property Services, and costs for the Employee Benefits Plan associated with the conversion of Other Operating to Personnel costs, the remaining $150.3 million is available for use by the Agency in 2010-2011. This amount represents 3.3% of the total authority.

Voted and Statutory Items
(in thousands of dollars)
2007-2008
2008-2009
2009-2010
Truncated Vote or Statutory Authority Wording
Actual
Actual
Main Estimates
Actual
1
Program expenditures and recoverable expenditures on behalf of the Canada Pension Plan and the Employment Insurance Act
3,023,433
3,154,525
3,114,391
3,297,434
(S)
Minister of National Revenue – Salary and motor car allowance
71
76
78
78
(S)
Spending of revenues received through the conduct of its operations pursuant to Section 60 of the Canada Revenue Agency Act
171,763
219,585
204,803
213,920
(S)
Contributions to employee benefit plans
402,012
419,900
413,423
469,401
(S)
Children’s Special Allowance payments
208,163
211,848
221,000
215,264
(S)
Payments to private collection agencies pursuant to Section 17.1 of the Financial Administration Act
12,431
9,067
5,279
3,286
(S)
Payments under the Energy Costs Assistance Measures Act
992
489
 
13
(S)
Statutory disbursements to Provinces under the Softwood Lumber Products Export Charge Act, 2006
603,602
180,495
429,000
205,545
(S)
Spending of proceeds from the disposal of Surplus Crown Assets
126
785
 
111
(S)
Court Awards
366
1,886
 
1,496
Total CRA
4,422,959
4,198,656
4,387,974
4,406,548

Authorities approved after tabled Main Estimates

The following table details the authorities approved for the Agency after the Main Estimates and reconciles with the Total Authorities shown on Page.

(in thousands of dollars)
 
2009-2010 Main Estimates
4,387,974
 
 
Planned Spending (RPP)
4,387,974
Carryforward from 2008-2009
147,065
Severance Pay, Parental Benefits and Vacation Credits
70,860
Various Collective Agreements
56,641
Year-end adjustment to statutory authorities:
 
Employee Benefit Plan contributions
55,978
Statutory disbursements to provinces under the Softwood Lumber Products Export Charge Act, 2006
(223,455)
Payments for Children’s Special Allowances
(5,736)
Payments to private collection agencies
(1,993)
Provincial Sales Tax Administration Reform
39,957
Transfer from Public Works and Government Services Canada for increased accommodation and real property services charges
18,551
Initiatives arising from the 2009 Federal Budget in support of Canada’s Economic Action Plan such as the Home Renovation Tax Credit and the First-Time Home Buyers Tax Credit
12,338
Government Advertising Programs
11,000
Respendable Revenue adjustment primarily for processing Employment Insurance claims on behalf of Service Canada in Québec and Ontario
9,117
Financial Interoperability and Stewardship Initiative in support of the Corporate Administrative System
6,349
Court Awards
1,496
Increasing Federal Public Service Student Employment
861
Crown Assets Disposals
111
Payments under the Energy Costs Assistance Measures Act
13
Reduction in Public Opinion Research
(564)
Transfer to Foreign Affairs and International Trade – To provide support to CRA staff located at missions abroad
(203)
Transfer to Treasury Board Secretariat – To support the National Managers’ Community
(200)
Total Authorities at year-end
4,586,160

[Footnote 1] Credits and deductions for the random sample in 2009-2010 included an additional credit compared to the previous year with a rate of non-compliance lower than the average. Excluding this item would result in a non-compliance rate of 17%. Similarly, the study that produced the 2008-2009 results included an item that was not part of the key credits and deductions of the prior year. Excluding the latter from both 2008-2009 and 2009-2010 would result in non-compliance rates of 16.2% and 16.7%.


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