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Section II: Analysis of program activities by strategic outcome
Taxpayer and business assistance (PA1)
Strategic outcome
Taxpayers meet their obligations and Canada’s revenue base is protected.
Program activity description
Assisting taxpayers and businesses in meeting their obligations under the self‑assessment system through the provision of accurate and timely responses to their enquiries; information products through various media such as, Website, pamphlets and brochures; targeted outreach activities and services; income and commodity tax rulings and interpretations; Canada Pension Plan and Employment Insurance Act eligibility determinations; services relating to the registration of pension and other deferred income plans; and services relating to the registration of charities.
Performance summary and analysis of program activity
Building trust to promote compliance
Strengthen outreach
Our outreach programs and communications activities promote compliance by providing information and tools to reach our diverse audiences through a variety of formats and venues. During 2010-2011, our continued use of technology allowed us to connect with wider audiences efficiently and cost effectively, including those who live in remote locations. For example, we provided 6 distinct outreach groups with 48 video conferencing sessions. We delivered outreach sessions to a total of 28 distinct target groups such as small and medium enterprises, individual taxpayers, youth, newcomers to Canada, seniors, volunteers, people with disabilities, and Aboriginal communities.
In 2010-2011, work continued on furthering our outreach strategy. We developed an inventory of existing outreach products, gap analysis and recommendations. Based on these recommendations, work will continue to strengthen outreach. We also developed integrated outreach plans for taxpayer segments and responsible citizenship messaging.
A prime focus during 2010-2011 was the advent of the harmonized tax regimes in Ontario and British Columbia, which required targeted communications strategies and products to create awareness. A proactive multi-media approach was used to educate businesses. Interactive on-line seminars (webinars) were conducted. In addition, a series of short videos were produced and made available on the CRA Web site which provided information on various HST topics. Our communication and outreach activities are most often used to inform and assist individuals and businesses with ongoing programs and issues.
Optimize service delivery channels
Individuals and businesses often require information and services specific to their situations. Providing information alone is not sufficient to support the needs of Canadians. We strive to ensure that taxpayers can rely on our agent-assisted services including specialized 1-800 telephone numbers, technological interactive services such as Smartlinks, and in-person appointments to meet their information needs. Comprehensive automated telephone response systems provide service 24 hours a day, seven days a week. During regular business hours, we route calls among call centres as demand increases or decreases. This makes the most effective use of our resources, reduces costs, and provides extended hours of service for Canadians.
In 2010-2011, we met our caller accessibility targets of 90% for general and business enquires, despite a more than 7% increase in call demand on the business lines. This increase was largely due to enquiries related to the implementation of the Harmonized Sales Tax in Ontario and British Columbia as well as changes in mandatory electronic filing for GST/HST registrants. We also exceeded the 90% caller accessibility target for answering tier 1 charities enquiries.
We also work hard to ensure that the information we provide to taxpayers through our enquiries services is accurate. We make sure that agents have access to up-to-date training and online reference materials, including a newly developed service excellence training product, and use quality assurance techniques that provide ongoing, prompt feedback to our individual and business enquiries agents. This helps our agents to provide technically accurate responses to taxpayers’ questions.
We provide an array of user-friendly electronic services that help individuals and businesses to pay their taxes. Over the past year we made improvements to My Account based on our analysis of client needs. While electronic services can generate efficiencies for the CRA, they may also create a need to provide support and assistance to those who wish to take advantage of them. For instance, calls to the e-Services Helpdesk increased almost 15% over the previous year. Many of the calls were enquiries about the introduction of mandatory electronic filing for GST/HST registrants that came into effect on July 1, 2010. The introduction of the Credential Management System, which replaced the Government of Canada epass process for CRA services also contributed to the increase.
Enhance the Charities program
In 2010-2011, we continued to provide timely telephone and written responses to the charitable sector through our registration application processes, our call centers, and our written enquiries process. We offered 75 Charities Information Sessions to registered charities across Canada, with 96% of participants indicating they were satisfied or very satisfied with the sessions. We also delivered 17 webinars (a limited interactive environment in which dialogue can occur between participants and CRA representatives) to 2,164 individuals. When surveyed, 91% of participants indicated that they were satisfied or very satisfied.
We also enhanced the functionality of the Charities and Giving Web site by updating search tips, download instructions, links to definitions, and providing the latest available web and e-mail addresses of registered charities. There were over 1,700,000 visits to the Charities and Giving Web site, an increase of 14% over 2009-2010.
Making non-compliance more difficult
Implement an enhanced tobacco stamping regime
In 2010, Parliament passed legislative changes to implement a new tobacco stamping regime in Canada. The CRA responded immediately by developing the necessary framework of policies and procedures to manage the new tobacco stamping program. To ensure successful implementation, the CRA consulted regularly with stakeholders, including industry members. A detailed communication strategy was also developed that included industry outreach.
All implementation deadlines were met. We consider the successful execution of this initiative to be a very significant achievement.
Improve the detection and deterrence of non-compliance in our Charities program
Registered charities in Canada are tax-exempt and can issue charitable donation receipts to donors. To maintain these privileges, registered charities must operate within the parameters of the Income Tax Act. In cases of serious non-compliance, contraventions can result in the revocation of the registered charitable status of the organizations involved. The overall level of compliance by registered charities with the requirements of the Income Tax Act is determined based on an analysis of the results of random audits conducted annually. For the past three years, audit results show that the overall level of compliance has been stable and confirm that the vast majority of registered charities are complying with legal requirements. While some charities required education on mostly minor compliance issues, very few serious issues of non-compliance were noted. For the third consecutive year, less than 4% of random audits resulted in a revocation action against a charity. In 2009 (last year of complete data), 99% of registered charities filed an annual information return. 61% of registered charities filed within the required six months of fiscal year end, with the remaining 38% having been filed late. Based on returns filed to date, we anticipate a similar filing rate for 2010.
Continue implementing a risk-based approach to registered plans
In 2010-2011, we delivered outreach sessions on registered plans in Toronto, Montreal and Vancouver. We also published several bulletins and a guide to assist our clients in the administration of deferred income plans.
We continued our work on our registered plans compliance strategy. Once implemented, this strategy will enhance the risk-based approach to registered plans by providing accurate data for risk assessment. The strategy itself is currently in development. In the meantime, we continued to use a risk-based approach in registering pension plans, resulting in the inventory dropping below 10,000, representing an improvement on recent years.
Enhance the Tax-Free Savings Account program
The response to the TFSA has been overwhelmingly positive. At the end of 2009, there were approximately 4.8 million TFSA holders. That number rose to 6.7 million by the end of 2010. Given the program’s popularity, we anticipate continued and considerable growth in the number of holders in future years. To accommodate the increase, and to ensure timely updating of TFSA records, we are exploring ways to streamline our processing routines.
As part of the administration of the program, the CRA reviews information received from financial institutions and TFSA issuers to identify individuals who may have over-contributed. The results of these reviews showed that a small minority of Canadians, around 1.5% of all TFSA holders, did not fully understand the rules. We responded to this by:
- conducting public opinion research;
- improving the information on the CRA Web site; and,
- conducting Outreach with the financial industry.
In the second year of the program we saw a slight decrease, to 1.4%, in the proportion of TFSA holders who made excess TFSA contributions.
We continue to work to increase awareness of TFSA guidelines among Canadians and financial institutions. We will do so by continuing to update TFSA web pages, issue relevant Tax Tips, write community newspaper articles, and deliver webinars to financial institutions.
Lessons learned
What worked well: We improved the quality of our services to taxpayers by making them more timely, accessible, and easier to use. We maintained our high caller accessibility levels on all of our enquiries lines. Following the passage of legislation in the Parliament, we successfully implemented an enhanced tobacco stamping regime to aid in the detection of counterfeit products. We enhanced the functionality of the Charities and Giving Web site.
What could be improved: We must further pursue opportunities to enhance our service offerings to meet the evolving information needs to taxpayers, make sure that individuals and businesses are better able to navigate and understand an often-complex tax system, and be responsive and adaptive to emerging business practices and economic developments.
Performance report card
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87% Table note 7
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46.5% Table note 8
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Percentage of general callers who reach our telephone service Table note 9
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Percentage of business callers who reach our telephone service Table note 9
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- Table note 7
- This became a service standard in 2006-2007. Prior year results reflect performance against an internal target. Return to Table note 7 source text
- Table note 8
- For more information on this result, please visit: http://www.cra-arc.gc.ca/gncy/nnnl/menu-eng.html Return to Table note 8 source text
- Table note 9
- The caller accessibility targets for general and business callers were raised from 80% in 2008-2009. Return to Table note 9 source text
Assessment of returns and payment processing (PA2)
Strategic outcome
Taxpayers meet their obligations and Canada’s revenue base is protected.
Program activity description
Processing and validating taxpayer returns for both individuals and businesses through initial assessment, validation, accounting, and adjustments; registering businesses for the Business Number, establishing, and maintaining accounts; and receiving payments.
Performance summary and analysis of program activity
Strengthening service to make compliance easier
Enhance our electronic services
We added features to My Business Account this past year to encourage businesses to perform certain transactions. One of the key new features has made it easier to transfer payments within a program account and between program accounts of the same nine digit business number, to make adjustments to GST/HST returns, and to make online requests for certain financial transactions. We also added an instalment payment calculator to our Web site in 2010‑2011 to make it easier for businesses to calculate their instalments for corporation and GST/HST accounts. Enhancements have been made to our Payroll Deductions Online Calculator, as well, to calculate payroll deductions more easily. The improvements include enhancements to screen displays, organization of tools, and information access. For GST/HST NETFILE, features were added so that registrants can now also file their Public Service Bodies’ Rebate at the same time as they electronically file their GST/HST Return.
A new option added to our Web site in 2010-2011 helps employers ensure that enough Canada Pension Plan contributions and Employment Insurance premiums have been withheld for full year employees. The growing number of log-ins to this Web page provides evidence that businesses see the benefits of using this online service.
We witnessed a 2.5% increase in self-service transactions by individual and business taxpayers, benefit recipients and/or their representatives from a year ago. This places us firmly on track to attain our objective of a 5% increase by 2012. The public appetite for online services has been increasing with electronic filing rates for individuals and businesses continuing to trend upwards. Our Quick Access online option continues to be a popular choice for taxpayers, as it provides information on their taxes and benefits, such as tax return status, RRSP deduction limit, TFSA contribution room, and the status of benefit payments. We have added even more services for TFSA administrators, their agents, or representatives, by including TFSA payment and a related search facility. We also increased the capacity for taxpayers requiring assistance to connect directly with enquiries agents from the My Business Account profile through the addition of Smartlinks.
In 2010-2011, we introduced important new measures to increase security. As one example, we implemented our own credential management service. These measures have lowered the overall cost, allowing the CRA to offer a broader suite of secure electronic services.
Promote the take-up of electronic filing and electronic payments
The timely and accurate processing of returns is another way to encourage voluntary compliance. We met our external service standards this past year for processing T1 individual returns in both paper and electronic formats, confirming that we provided timely service to Canadians. In addition, we met our internal processing target by processing 100% of the individual returns that were filed on time by mid-June 2010.
Despite the recent introduction of HST in Ontario and British Columbia, which significantly impacted the complexity of the GST/HST return and review process, we were able to process 90.3% of GST/HST returns within 30 days. Although we did not meet our 95% target, we are working to introduce additional efficiencies that will accelerate our processing times.
Our My Payment service lets individuals and businesses make payments electronically through a secure link with participating Canadian financial institutions that offer the Interac® Online payment service. We promoted the use of My Payment during 2010-2011 through outreach and promotional activities including news releases and other CRA announcements, mail-outs and conferences.
Our T1 Quality Evaluation Program reviews initial assessments of individual tax and benefit returns. It is our primary tool to determine the accuracy of individual returns assessed. Our results for 2010-2011 show that processing errors with an impact on a taxpayer’s refund or balance due was 1.17%. This compares with 0.96% the previous year. From 2000 through 2010, the amounts per error averaged $252.06.
Effectively manage business partnerships
We expanded the use of the Business Number (BN) this past year as a common client identifier for businesses to securely and efficiently interact with various levels of government. In December, 2010, the CRA and the Province of Saskatchewan signed a letter of intent to adopt the BN for their Corporate Registry in April, 2012. The wider use of the BN will reduce the administrative burden for both businesses and the CRA.
In July 2010, the CRA implemented the harmonized sales tax (HST) in Ontario and British Columbia Footnote 2. Harmonization involved a significant number of system enhancements and changes to CRA programs and activities.
A multi-media campaign to educate businesses and create public awareness was rolled out. It included interactive online seminars, short video presentations, in-person information sessions, and the distribution of over 1.1 million HST information sheets. Videos providing information on topics such as HST transitional rules, electronic filing, housing rebates, and forms for both businesses and consumers were posted on the CRA Web site and YouTube. Filing information was provided in several formats including inserts sent with GST/HST returns and webcasts on filing electronically using GST/HST NETFILE and how to identify the changes to GST/HST Rebates.
Making non-compliance more difficult
Optimize program efficiency and the accurate assessment of tax owed
The CRA strives to be fair in all aspects of its activities as this is crucial to sustaining taxpayers’ trust. When we find errors on tax returns, we correct them, if possible. While some errors result in additional tax owing, others mean taxpayers pay more tax than required. As part of our processing review, we compare an individual’s return to third-party information to identify areas where the taxpayer may have under-claimed credits. We adjust these returns to allow amounts the taxpayer is entitled to and, if applicable, issue a refund. In 2010-2011, we identified and corrected over 341,000 individual returns, resulting in an average beneficial adjustment of $284 per return.
Enhance our ability to detect and address non-compliance
Individuals
In 2010-2011, we estimated that 17.6% of claims or deductions made by individuals on key tax credits and deductions not subject to third-party reporting were non-compliant, meaning they were disallowed following a review. The increase may be attributed, among other factors, to the change in deductions and credits that were reviewed in each program year.
One of our pre-assessment review programs is the Confidence Validity Program. Through this program, various deductions and credits on returns are reviewed and corrected before a notice of assessment is issued. During 2010‑2011, we identified an average of $472 of additional tax assessed per review, for a total of almost $162 million in additional taxes assessed. This represents a decrease of 5% over the previous year.
Our Processing Review Program selects files for review after the assessment notice (and any refunds) have been issued. The program promotes compliance and help to maintain confidence in the fairness of our programs through increased education, effective risk-scoring systems, and a balanced approach to our file selection process. In 2010‑2011, this program identified and assessed almost $232 million in additional taxes, an increase of 15% over the previous year.
Our T1 Matching Program compares information on an individual’s tax return with information provided by third‑party sources, such as employers or financial institutions. In 2010-2011, this program identified and addressed additional tax assessments of almost $600 million.
The objective of the three programs is not simply to assess dollar values but also to educate taxpayers by identifying common areas of misunderstanding. We also gauge the effectiveness of our targeted reviews, through looking at the value of additional tax dollars assessed by targeted reviews compared with random reviews. Over the 2007-2008 to 2010-2011 period, for the Processing Review Program, our targeted reviews were approximately three times as effective as random reviews. Because the volume of each deduction and credit examined change according to our annual review strategies, in addition to new claims being added or dropped, the average dollars recovered, and the ratio of targeted to random, vary each year.
In 2009-2010, we launched our Corporate Assessing Review Program (CARP). The main objective of the program is to validate the accuracy of our assessments by ensuring that corporations file accurate and complete information on their T2 Tax Returns and that reported amounts are consistent with applicable tax legislation. In 2010-2011, CARP reviewed more than 48,000 corporation returns generating assessments totalling more than $45 million dollars in additional federal and provincial tax. During this past year, we embarked on a number of reviews to ensure that tax reserves, pool balances, and tax credits were accurately represented based on businesses’ past and present reporting. Through this work, we detected and reduced overstated pool balances by $43 million. These are amounts that would have been available to corporations to reduce future tax payable.
Lessons learned
What worked well: We expanded our electronic service options to make it easier for taxpayers to interact with us. We introduced new online security measures to protect taxpayer information, allowing us to offer a broader suite of secure services. We processed individual and business tax and information returns and payments accurately and on time. We carried out pre-assessment and post-assessment activities to detect and address instances of non-compliance.
What could be improved: Our programs are directly impacted by evolving government priorities, budget announcements and economic updates. We must make sure that we are well positioned to maintain effective delivery of our programs under all circumstances. We must also work to sustain this capacity in the longer-term.
Performance Report Card
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Service Standards Table note 10
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Processing T1 individual income tax returns (electronic): within an average of 2 weeks Table note 11
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97.3% Table note 12
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not available Table note 13
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- Table note 10
- See www.cra.gc.ca/annualreport for breakdown of indicators, targets, and overall results against external service standards. Return to Table note 10 source text
- Table note 11
- Represents the average number of weeks. Return to Table note 11 source text
- Table note 12
- The service standard was changed from 21 to 30 days to align with a legislative change. Return to Table note 12 source text
- Table note 13
- Substantiated results are not available for 2009-2010. Revised data capture method began in June 2010. Return to Table note 13 source text
For supplementary information on this program activity, please visit:
www.cra.gc.ca/annualreport
Accounts receivable and returns compliance (PA3)
Strategic outcome
Taxpayers meet their obligations and Canada’s revenue base is protected.
Program activity description
Identifying and addressing non-compliance with the registration, filing, and remittance requirements of the Acts administered by the Canada Revenue Agency and managing the level of debt. These are achieved through the collection of accounts receivable and the development, implementation, and maintenance of national systems, policies, and guidelines. This framework facilitates and enforces compliance with the requirements for the filing, reporting, withholding, and payment of individual and corporate tax returns, employer source deductions, Goods and Services Tax/Harmonized Sales Tax, and other levies, as well as delinquent non-tax account receivables administered on behalf of other government departments and agencies.
Performance summary and analysis of program activity
Making non-compliance more difficult
Enhance strategies to manage payment non-compliance
Once an assessment is completed through self-assessment, or re-assessed through our subsequent verification actions, taxpayers must remit any amounts due. We use various means to collect the amounts that are owed to the Government of Canada in order to protect Canada’s revenue base.
Almost all reported taxes are paid on time by individuals and businesses. In cases where monies owed are not paid when they become due, we pursue taxpayers using a range of collection and enforcement actions. To do so, we use a risk-based approach to identify the right compliance response for debtors, ranging from helping individuals further understand their obligations, to undertaking swifter and firmer responses with those whose history demonstrates a need for such action. The CRA manages the federal government’s largest debt collection service, collecting debt arising from taxes, related interest, and penalties owed to the Government of Canada. A recent international benchmarking study showed the CRA has the second lowest cost to collect a dollar of debt among the ten participating tax jurisdictions for the period studied.
In 2010-2011, almost $388 billion in taxes and duties were processed by the Agency. Of this amount, more than 97% was received within the current fiscal year. This situation has been stable over the past four years and is indicative of our receivables being well managed. The international benchmarking study referenced earlier noted that the CRA ranked first among the ten participating tax jurisdictions, for the period studied, in the collection of debt as a percentage of its revenue.
In 2010-2011, our collections area continued to identify efficiencies and strategies related to current workloads as well as new business. As one example, our Debt Management Call Centre started handling another revenue line, deductions from employee salaries remitted by employers. This allows collectors at our Tax Services Offices to focus on more complex cases for these types of accounts. In preparation for the amalgamation of our national and regional pools into one national inventory, we centralized certain accounts, creating Centres of Expertise for these particular workloads. This past year, collections work related to the Harmonized Sales Tax (HST) on behalf of British Columbia and Ontario was initiated. This work has led us to examine our current practices for collecting GST and has resulted in an enhanced focus on improved workload management practices and increased the use of risk management, since it is anticipated that the introduction of HST will have an impact on the level of tax debt in this revenue line.
Managing tax debt poses a significant challenge since levels of indebtedness are strongly influenced by our external environment. According to the OECD’s 2010 Comparative Information Series report, tax debt is a growing problem for the majority of OECD countries. We have implemented strategies to address this issue, including our Payment Compliance Action Plan, which addresses the underlying cause of payment non-compliance at the behavioural level. Nonetheless, we anticipate that the level of tax debt will continue to grow over the short to medium term.
At the end of the 2010-2011 fiscal year, our total tax debt inventory rose to about $27.4 billion, an increase of $2.4 billion over the prior period. This debt includes accounts for which a pending resolution has been reached (for example, the taxpayer has agreed to pay the debt over a specified time) but the debt has not yet been paid in full.
Early determination of our ability to collect debt facilitates both timely and efficient debt collection, since the longer the debt exists, the harder and more expensive it is likely to be to collect. For this reason, during 2010-2011, we continued to rely on our Debt Management Call Centre (DMCC), which addresses high volume routine, low-risk, tax debt at minimal cost within a specified period of time. The DMCC allows our Tax Services Office (TSO) agents to focus on addressing more complex, higher-risk accounts that involve the use of escalating collection measures, including legal and enforcement actions, to deal with non-compliant taxpayers.
Our automated strategies, including our Debt Management Call Centres and our Tax Services Offices addressed a total of $34.1 billion of tax during 2010-2011. When compared to results from the previous year, this total represents an increase of 15.2%. Included in this result are amounts totalling $2 billion that were deemed to be uncollectible and have consequently been written-off. A recent international benchmarking study discussed the prevailing practices of other tax jurisdictions. The study noted that the CRA maintained, for the period studied, the lowest percentage of write-off to total tax revenue among the ten participants. In addition, it is important to note that this is an essential administrative function that is key to maintaining a healthy accounts receivable portfolio. The process is governed by both the Financial and Administration Act and the Bankruptcy and Insolvency Act, whereby accounts must meet prescribed criteria before being subject to write-off.
Timely resolution of debt facilitates our collection efforts. To assess our performance in addressing tax debt on a timely basis, we expect to resolve at least 60% of the TSO intake of new debt in the year of intake. In 2010-2011, we achieved 64.4%, exceeding our target.
The $17.7 billion tax debt we resolved in our TSOs represents 93.1% of the dollar value of the intake of new debt in the past year. This exceeded our target of 90%, indicating that we are successfully managing the higher risk inventory addressed by our TSOs.
The proportion of the age segments of our debt inventory has remained relatively stable over the last five years. This trend confirms that we are managing all segments of the tax debt portfolio in a consistent manner. The international benchmarking study referred to earlier also ranked the CRA second out of the ten participating tax jurisdictions with respect to debt aged less than one year for the period studied.
At the end of 2010-2011, debt over five years old represented 16.9% of the inventory. In absolute terms, the dollar value of inventory greater than five years old at the end of 2010-2011 was $3.4 billion, which represents an increase of approximately $500 million from the previous year, but remains within our targeted threshold of $3.5 billion.
strengthening service to make compliance easier
Enhancements have been made to our Payroll Deductions Online Calculator, as well, to calculate payroll deductions more easily. The improvements include enhancements to screen displays, organization of tools, and information access.
Reporting non-compliance
Our employer withholding and GST/HST examination activities enforce employers’ and taxpayers’ obligations to withhold, report, and remit source deductions, taxable benefits, and GST/HST. To increase and encourage compliance, we use a balanced approach to identify and address non‑compliance through the use of education, assisted compliance activities, and, where warranted, more rigorous actions, such as prosecutions. In 2010‑2011, 2.2 million non‑compliant cases were addressed. Although this represents a shortfall from our initial target of 2.6 million, it is explained by a realignment in workload which resulted in 500,000 cases being transferred to another area within the CRA. We also completed 556,227 reviews and exams and 15,056 GST/HST examinations which generated a total value of identified non-compliance of $1.6 billion.
Maintain and enhance non-filer/non-registrant programs, including underground economy identification projects
The goal of the filing and registering compliance area is to ensure that taxpayers file a return and/or register for the GST/HST if they are required to do so. Our compliance actions range from a simple request to file to more punitive measures such as penalties and prosecution. We make efficient use of available resources by focusing on early intervention. Accounts are identified and strategies are applied to non-compliant behaviour according to recognized risk factors.
Accounts that do not respond to early intervention measures are considered high-risk. We identify these accounts through various means including third-party data and risk models. These accounts require human intervention and are referred for escalating enforcement action. The CRA also undertakes underground economy projects aimed at identifying and addressing filing and registration non-compliance in cases where there are no records on the CRA databases as well as where new or additional information is obtained.
This past year, an evaluation of the Non-Filer/Non-Registrant program was completed. This evaluation will contribute to the renewal of the national program delivery model. The overall intent is to create program improvements that will, over time, contribute to increased short and longer term compliance with filing and registration requirements, thereby furthering the CRA’s goal of making non-compliance more difficult.
Our activities extend to GST/HST registration requirements of businesses. Over the past year, 8,464 businesses were identified as required to register for GST/HST. Our estimates of the rate of registration compliance have remained consistently above our target over the past several years. By comparing our data with information from Statistics Canada, we estimate that 93% of businesses were registered to collect GST/HST during 2010-2011. This met our 90% target.
In 2010-2011, our work to identify non-filers, including underground economy, generated 722,487 returns from individuals and corporate taxpayers that had not met their filing requirements. 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 segment. For 2010-2011, 92.6% of this population filed their tax return on time, exceeding our 90% target. These estimates have consistently remained above the 92.5% level for every year since the 2001-2002 reporting year, providing a reliable trend for this high degree of voluntary filing compliance that we observe.
Our compliance rate estimates apply to those corporations which are taxable and have filed a T2 Corporation Income Tax Return showing that tax is payable. The incidence of timely filing among such corporations in 2010-2011 was 85.1%, a result which is comparable with past years.
Another important measure of our success in addressing identified filing non-compliance is the increase in the observable long-term filing rate by both individuals and corporations. Our research on filing behaviour shows that, of the taxpayers who did not file their return on time, a majority file these returns within five years after the year the return was due. For example, 93% of individuals and 86.4% of corporations filed their returns on time for the 2005 tax year and, over the subsequent five years 97.4% of individuals and over 99% of corporations had filed their 2005 returns. In addition to the long-term filing rates witnessed, our actions identified $2.8 billion in non-compliance in 2010-2011.
Lessons Learned
What worked well: We identified efficiencies related to current collection workloads and implemented appropriate solutions. One good example is having our Debt Management Call Centre handle an additional revenue line, deductions from employee salaries remitted by employers, which permits our TSO collectors to focus on more complex cases resulting for these types of accounts. We met our targets for timeliness on resolving tax debt and government programs’ (non-tax) debt and our Tax debt and government programs’ (non-tax) debt were within targeted levels.
What could be improved: We acknowledge the need to improve our performance measures to better assess our contribution to our business outcomes. To this end, we will continue to identify the best methods available to gauge the effectiveness of our activities in both identifying and addressing overall non-compliance.
Performance report card
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Dollar value of TSO tax accounts receivable older than five years ($ billions) Table note 14
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$2.8 Table note 15
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Upward trend Table note 16
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- Table note 14
- This is a revised indicator and target Return to Table note 14 source text
- Table note 15
- The target of $2.4 billion includes both T1/T2 and T3 non-filer and GST/HST non-registrant sources. The resulting fiscal value of non‑compliance was identified as $2.64 billion from the T1/T2 and T3 non-filer source, and $118 million from the GST/HST non-registrant source. Return to Table note 15 source text
- Table note 16
- Target does not include GST/HST delinquent filer program. Production and fiscal impact results were unavailable in 2009-2010 and 2010‑2011. Return to Table note 16 source text
For supplementary information on this program activity, please visit:
www.cra.gc.ca/annualreport
Reporting compliance (PA4)
Strategic outcome
Taxpayers meet their obligations and Canada’s revenue base is protected.
Program activity description
Verifying the complete and accurate disclosure by taxpayers of all required information to establish tax liabilities and protect the tax base through audit, enforcement, and incentive administrative activities. Activities for enhancing compliance include; increasing taxpayers’ understanding of their tax obligations through outreach activities, client service, and education; identifying and addressing non-compliance through risk assessment, audit and investigation; and establishing strategic partnerships with stakeholders to leverage compliance efforts.
Performance summary and analysis of program activity
Building trust to promote compliance
Enhance the administration of the Voluntary Disclosures Program
The Voluntary Disclosures Program (VDP) allows taxpayers to come forward and correct inaccurate or incomplete information or disclose information they have not previously reported to the CRA. Taxpayers using the program have to pay the taxes owing, plus interest, but may avoid penalties and prosecution relating to the amounts disclosed.
During 2010-2011, we promoted the program through speaking engagements and other outreach initiatives as well as increased references to VDP in our correspondence with taxpayers and in tax alerts. In addition, clarification of VDP policies was provided through presentations to various associations and responses to media enquiries.
The program saw growth in intake and an increase in the number of disclosures processed during the past year totalling $600 million in additional tax revenue. Voluntary disclosures led to the identification of $773 million in unreported income compared to $1.8 billion identified during 2009-2010. The latter was significantly larger than historical norms because it included two large disclosures with income totalling more than $900 million. Despite the growth in intake, the average number of days to process a file was 180 compared to 196 in 2009-2010 and our VDP inventory is the lowest it has been in years. This program is driven by taxpayers coming forward and therefore it is not possible to control either the number of taxpayers disclosing, or the associated unreported income.
Strengthening service to make compliance easier
Enhance the administration of the SR&ED program
The CRA oversees the integrity of various tax incentives that promote economic growth in Canada, such as the Scientific Research and Experimental Development (SR&ED) program. The SR&ED program is the largest single source of federal government support for industrial research and development. The CRA strives to deliver the tax incentives in a timely, consistent, and predictable manner, while ensuring businesses prepare their claims in compliance with tax laws, policies and procedures.
During 2010-2011, the SR&ED program provided about $3.5 billion in tax assistance to over 21,000 claimants. In addition, as a result of our risk assessment process, in 2010-2011, we identified and addressed $473 million of non‑compliance, an increase of 5.6% from the previous period.
Making non-compliance more difficult
Identify aggressive tax planning schemes more effectively
Aggressive tax planning (ATP) schemes are arrangements purposely undertaken to minimize tax liability. These transactions, often arranged by tax planners and promoters for individuals, trusts, and corporations, are intended to reduce, avoid, or evade Canadian taxes and they may not be consistent with the spirit and intent of the law.
These schemes sometimes involve international transactions or the use of tax havens. Left unchecked, aggressive tax planning presents a risk to the integrity and fairness of Canada’s tax system. Recognizing the problems inherent in relying on traditional audits alone, the CRA has a multi-faceted strategy to combat ATP.
The first component of the strategy is to strengthen legislation to reduce participation in ATP schemes. Over the reporting period, Finance Canada, with the support of the CRA, introduced proposed legislation that would require the mandatory reporting of tax avoidance transactions. This would provide an early warning system which would enable us to gather information on tax avoidance schemes at an early stage and address them before they become a larger problem.
A second component is to use tax information exchange agreements, negotiated by Finance Canada, to reduce the ability of taxpayers to hide income and assets in overseas banks. Of note, Canada signed a Protocol amending the Tax Convention with Switzerland in October 2010.
Thirdly, we work with international organizations such as the Seven Country Working Group, the Joint International Tax Shelter Information Centre and the Organization for Economic Co-Operation and Development (OECD) to share intelligence and best practices to combat ATP.
In 2010-2011 we secured information from our partner countries which identified Canadian taxpayers participating in a significant ATP scheme. There was a large amount of media interest in this information and the resulting CRA action. Taxpayers are realizing these types of schemes are highly risky. Our Voluntary Disclosures Program (VDP) continues to receive disclosures from taxpayers hoping to avoid penalties and prosecutions, by putting their tax affairs in order.
A final element of the multi-faceted strategy is to influence taxpayers by communicating our success in identifying ATP schemes, and outlining the consequences of tax avoidance and tax evasion. An example of the success we have had through communications is the reduction in the number of gifting tax shelter arrangements from 48,000 in 2006 to 10,000 in 2011. We achieved this by identifying arrangements that appeared problematic, following up with audits of 100% of these tax shelter claims, targeting tax shelter alerts to participants, and following this up with a letter campaign.
Identify non-compliance in the underground economy more effectively
The underground economy (UE) remains a priority for the CRA. Underground economic activity is any legal business activity that is unreported or under-reported for tax purposes. The UE undermines the competitiveness of Canadian businesses because it offers an unfair advantage to those who fail to comply with Canada’s tax laws. UE activity is concentrated in sectors where cash transactions are prevalent between businesses and consumers, books and records are weak or non-existent, taxes are not deducted at source, third party reporting is absent, business-to-consumer transactions are generally widespread and services are commonly offered at a discount, and where there is greater acceptance of tax evasion by either individuals or by businesses.
A recent study by Statistics Canada on the size of the underground economy relative to the Gross Domestic Product showed a reduction of half a percentage since 1992. We will continue our efforts to combat this area of non‑compliance.
Our UE strategy is to use a mix of outreach, education, communication, and compliance actions. This is supported by research and intelligence gathering and the systematic allocation of workloads to industry sectors with the highest risk. In 2010-2011, 78% of UE cases selected resulted in a tax assessment. These audits identified $595 million of unreported income with associated fiscal impact of $374 million. This amount represents an increase of 32% over the previous year.
In addition to our ongoing efforts in this area, a number of specific initiatives were conducted in the year to improve our intelligence and focus our efforts. For example, the Federal-Provincial-Territorial Underground Economy Working Group completed the Trade School Initiative. This initiative combined focus group research and a quasi-experimental study to develop a prevention-through-education strategy by aiming appropriate messaging at an early stage in a typical career path, ideally before bad behaviours become entrenched. Construction trade school students were selected as the initial target audience and the initiative will be ready for a full scale launch in 2011-2012. As part our strategy to address the UE, we share best practices with other tax administrations. The CRA has taken the lead for OECD countries to write a paper on the cash economy and we are supporting the Netherlands who are the lead on writing the paper, “Right from the Start.” This approach uses outreach and communications to target new businesses to ensure that “Right from the Start” compliance is encouraged.
We also initiate regional and local projects to identify and study emerging issues, conduct research and gather intelligence, gain industry knowledge by working with associations and other levels of government, and determine the complexity and the range of compliance risk treatments required to resolve the problems uncovered.
Use better risk assessment to detect and correct reporting non-compliance
Once a return is filed, we conduct various reviews and verification and risk assessment activities to identify areas where reporting by individuals, trusts, registered plans, and businesses is not consistent with taxpayers’ obligations to report complete and accurate information. Once identified we proceed to address the highest-risk accounts.
Businesses
In 2009-2010, our Core Audit Program selected self-employed individuals for examination. By examining small businesses that were subjected to its random sample audit, we estimated the percentage of all businesses in this segment that are likely non-compliant to a significant degree, defined as businesses underreporting $5,000 or more in federal taxes.
In 2010-2011, a non-compliance rate estimate was established for self-employed individual filers based on audits conducted during the 2009-2010 program year. The estimated rate of non-compliance was found to be 12.2%. This segment of the SME population has been reviewed twice previously: once in 2001-2002, when the non-compliance rate estimate for self-employed individuals was 8.6%, and again in 2006-2007, when the non-compliance rate estimate was 12.7%. We will focus our efforts on developing a strategy targeting this area of non-compliance.
In 2010-2011, we implemented the Research Audit Program (RAP) to replace the Core Audit Program. It conducts random audits that establish statistically valid levels of non-compliance for sectors of the Canadian economy. The RAP augments existing programs that gather risk intelligence at local, regional, and national levels and channels it into mechanisms used for workload selection. We will begin gathering results from the RAP assessments of the T1 Small and Medium Enterprises population in 2012.
Identifying non-compliant businesses involves a combination of risk assessments, reviews, and audits. Small business audits include owner-operated businesses, small corporations, and partnerships that have revenues of less than one million dollars. Medium-sized business audits typically include individuals with annual revenues over one million dollars and corporations with annual revenues between $1 million and $20 million for Income Tax.
One of the ways we evaluate our success in identifying non-compliance is by tracking how frequently a case selected for audit results in an adjustment. For the past year, the percentage of cases resulting in a change for SMEs was 80.3%, which was a slight decrease from 2009-2010. Research work conducted through our Core Audit Program indicates that our targeted audits are 3.8 times more likely to identify significant non-compliance than randomly selected audits. A recent international benchmarking study showed the CRA change rates for full SME audits fell within the mid-range of the rates identified by the other countries involved in the study.
We are also enhancing our approach to ensuring compliance within the large business population. We assess risk levels using sector intelligence, CRA-based expertise, and information from our tax treaty partners. We further combine these resources with information related to the nature of the business in question and their current and past behaviour, including aggressive tax planning (ATP), that indicates the potential risk of non-compliant behaviour. This further evolution of our approach should enable us to focus our resources on those large businesses most at‑risk of non-compliance. This will enhance change rates and encourage a level playing field for compliant businesses. For the past year, the percentage of cases resulting in a change for international and large business programs was 94%.
Through a combination of our employer actions and our SME and large business audits and reviews, we identified $8.3 billion of non-compliance for the 2010-2011 period. New this year is the introduction of a new performance measure aimed at measuring the effectiveness of our actions in obtaining fiscal impact per employee. This new measure highlights the value of our auditing function. For instance each audit Full Time Equivalent (FTE) is responsible in addressing an average of $2.9 million for the large business population and $400,000 for the small and medium enterprise and other populations. The inclusion of this measure permits the CRA to demonstrate the efficiency gains over time within the context of its available resources.
Use enhance risk assessment to identify non-compliance by employers and GST/HST registrants
The HST regime was extended to Ontario and British Columbia on July 1, 2010.Footnote 3 The HST now represents a significant source of tax revenue. In addition to significantly increased workload for the CRA, the combined federal and provincial rates entail increased compliance risks that the CRA is mitigating through a dedicated GST/HST organization and increased focus on risk intelligence and assessment.
During 2010-2011, review of business filings in our GST/HST pre-assessment program provided an early warning that a potentially significant number of large businesses would, perhaps inadvertently, not comply with HST reporting requirements for the recapture of input tax credits. This would normally result in audit action and the application of penalties. Our response was to take a proactive and constructive approach that involved acting on risk intelligence available from our systems to proactively communicate with businesses at risk of non-compliance to clarify their obligations and offer assistance where needed. Some 26,000 letters were sent to large registrants identified by our systems. Follow-up telephone calls were made to more than 15,000 businesses that were still at risk of non-compliance after the mail-out, and subsequent calls are still being placed to a subset of these businesses that still remain at risk.
We have determined that compliance action, including re-assessment and penalty application, is necessary and appropriate for a smaller number of businesses and are proceeding with these steps. The distribution of tax revenues collected by the CRA to participating provinces is dependent on registrants reporting full and accurate information about their taxable expenses. The approach followed in this instance protected the revenue base of our client governments through early identification of businesses at risk, proactive compliance communication based on intelligence, assistance and follow-up. In addition, the presence of the CRA within the community of large taxpayers may have prevented significant reporting non-compliance from arising, and averted important audit expenses and compliance costs for businesses.
Enforcement
While the CRA has a sustained audit presence across sectors, our Special Enforcement Program is focused on addressing the small minority of taxpayers who are engaged in more serious acts of non-compliance. Our Special Enforcement Program conducts audits and undertakes other civil enforcement actions against individuals and businesses known to be, or suspected of, deriving income from illegal activities. Suspected significant cases of fraudulent non-compliance are dealt with by our Criminal Investigations Program, which investigates and refers cases for prosecution to the Public Prosecution Service of Canada. These cases can result in penalties, court fines and up to five years of incarceration. We communicate the consequences of fraud committed against the Canadian public, in order to maximize the deterrent effect of these convictions. The CRA works with regional communications advisors to distribute news releases containing details of convictions on tax evasion to local, regional, and national media. In 2010-2011, the CRA distributed 235 news releases on convictions which were used to generate articles and broadcast news topics. In 2010-2011, a total of 204 taxpayers were convicted for tax evasion or fraud. The courts imposed $22.8 million in fines and 47 years of jail sentences. For the reporting period, 129 income tax and GST/HST investigations were referred to the Public Prosecution Service of Canada.
The nature of this taxpayer segment makes it difficult to measure the influence of our enforcement program on others who may be considering similar non-compliant behaviour. This is, in part, because the drivers of non-compliant behaviour among this population may go beyond strictly attempting to avoid taxes. Other criminal considerations may be at play.
The effectiveness of CRA enforcement programs and activities is essential to achieving its compliance objectives. In 2010, a multi-year evaluation of the CRA’s enforcement programs was completed. The findings from the report are being incorporated into action plans to support a more focused approach for the Criminal Investigations and the Special Enforcement programs, which will enhance file selection and further build upon partnerships with the Public Prosecutions Service of Canada and law enforcement agencies. The rate of conviction is very high due to case selection. Cases are selected for prosecution based on their expected outcome as there is a high cost to this type of compliance intervention. In this way, Canadians and Canadian businesses are reassured that the most egregious cases are pursued to the fullest extent. The results achieved during 2010-2011 support our assessment that we contributed to making non-compliance more difficult.
Lessons learned
What worked well: We worked closely with our international partners to identify Canadian taxpayers participating in a significant aggressive tax planning (ATP) schemes. These efforts attracted a large amount media interest. Over the reporting period, Finance Canada, with the support of the CRA, introduced proposed legislation that would require the mandatory reporting of foreign avoidance transactions. This would provide an early warning system which would enable us to gather information on tax avoidance schemes at an early stage and address them before they become a larger problem. The underground economy (UE) remains a priority for the CRA. Our UE strategy is to use a mix of outreach, education, communication, and compliance actions. The CRA has taken the lead for OECD countries to write a paper on the cash economy and we are supporting the Netherlands who are the lead on writing the paper, “Right from the Start.” This approach uses outreach and communications to target new businesses to ensure that “right from the start” compliance is encouraged.
Our Voluntary Disclosures Program (VDP) continues to receive disclosures from taxpayers hoping to avoid penalties and prosecutions, by putting their tax affairs in order. We promoted the program through speaking engagements and other outreach initiatives as well as increased references to VDP in our correspondence with taxpayers and in tax alerts.
What could be improved: We will proceed with developing a strategy to target non-compliance by self-employed individuals. In 2010, a multi-year evaluation of the CRA’s enforcement programs was completed. The findings from the report are being incorporated into action plans to support a more focused approach for the Criminal Investigations and the Special Enforcement programs.
Performance report card
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Fiscal Impact: Table note 17
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$7.2 Table note 18
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Fiscal impact generated per audit FTE Table note 19 ($ million)
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Small and medium-sized enterprises ($ billion) Table note 20
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- Table note 17
- Fiscal impact targets are used to measure overall performance of the CRA for planning purposes. Individual quotas are not assigned. Return to Table note 17 source text
- Table note 18
- The two billion dollar increase over 2008-2009 is attributable to two audits which were unusually large in nature. Return to Table note 18 source text
- Table note 19
- This includes all support staff, auditors, management, and executives who report to the audit function area. Return to Table note 19 source text
- Table note 20
- This includes the fiscal impact generated through our work in addressing the underground economy. Return to Table note 20 source text
For supplementary information on this program activity, please visit:
www.cra.gc.ca/annualreport
Appeals (PA5)
Strategic outcome
Taxpayers meet their obligations and Canada’s revenue base is protected.
Program activity description
Providing a timely and impartial dispute resolution process for taxpayers who disagree with decisions made by the CRA, by actively engaging in dialogue with the taxpayer and exploring alternative processes to resolve disputes when appropriate, as well as assisting the Department of Justice in handling appeals to the courts.
Performance summary and analysis of program activity
Building trust to promote compliance
Resolve taxpayer disputes and service complaints
Redress
The right of taxpayers to request an impartial review of CRA decisions is integral to our tax administration system. If they are still not satisfied following this comprehensive review, recourse through the judicial process is available.
We continued to ensure high quality standards during 2010-2011. Two key measures of our quality redress process are our measures of consistency and transparency. Transparency measures evaluate whether we offered to provide to the taxpayer all relevant information supporting the issues under dispute. Consistency measures evaluate whether we reviewed, researched, and addressed taxpayers’ issues under dispute, applied the law correctly, provided taxpayers with an opportunity to respond to our proposals, and arrived at correct decisions. During 2010-2011, we exceeded our transparency and consistency targets, except for commodity taxes where we achieved 95% against a 98% consistency target.
The largest proportion of our dispute-resolution workload involves income tax disputes. During 2010-2011 it took, on average, nine workable days more to provide taxpayers with a decision compared to 2009-2010. In contrast, we took 30 workable days more in 2009-2010 compared to 2008-2009. Even though the workable days to resolve disputes has continued to climb, this growth is lower than in prior years.
During 2010-2011, the average time to resolve commodity tax disputes rose by an average of 48 days and the average age in inventory for our commodity tax files increased. These increases resulted from the reassignment of resources from commodity tax to income tax resolution activities in 2009-2010. This past year, we adjusted our commodity tax capacity, leading to the resolution of more commodity tax disputes than in the previous year.
The average time to resolve a CPP/EI appeal to the Minister of National Revenue rose by six days in 2010-2011. Our production rate increased and our inventory of workable files at the end of the year dropped. These changes were influenced by the resolution of older files and a slight drop in intake. The average age of inventory for our CPP/EI files also improved this past year, dropping to 118 days during 2010-2011 from 135 days in 2009-2010.
Service complaints
Service complaints help us to identify problems, propose solutions, and provide taxpayers with a formal avenue of recourse, which is guaranteed under the Taxpayer Bill of Rights. If taxpayers disagree with a decision resulting from our Service Complaints process, they can file recourse actions with the Taxpayers’ Ombudsman.
Improving this service to taxpayers is critical to the ongoing success of the program and to increasing Canadians’ confidence in the CRA’s promise of fairness. In 2010-2011, we reviewed the cases received by the Service Complaints program to identify common complaints from taxpayers.
We identified 26 issues of national importance through analysis of our Service Complaints Program. Of these, 5 were resolved, 21 are still under review. Some of the examples of issues resolved included:
- An international fax number for anyone not satisfied with the services provided by CRA.
- Tax information for the Retirement Compensation Arrangement slips.
We have in place three performance indicators to demonstrate our determination to provide taxpayers with a consistent and effective service complaints process:
- We aim to send the taxpayer a complaint acknowledgement letter within two business days of receiving the complaint;
- We are committed to updating the taxpayer on the status of their complaint every 15 days thereafter; and
- We strive to resolve the taxpayer complaint within 30 working days.
For the period 2010-2011, we exceeded the 90% performance targets for all three standards.
Fully integrate the Problem Resolution Program and the CRA Service Complaints initiative
We completed the integration of the Problem Resolution Program and the CRA Service Complaints initiative in June 2010. This integration strengthens existing service redress mechanisms in place at the CRA and safeguards the service rights outlined in the Taxpayer Bill of Rights.
Address the challenge of dealing with increasing mandatory workloads
The CRA is experiencing an increase in disputes from taxpayers impacted by the CRA’s audit approach to aggressive tax plans. These plans typically involve transactions, arrangements, or events that are specifically designed to reduce taxes. We have preserved our high quality standards in the processing of disputes. However, due to the high volume, this approach has been maintained at the expense of overall timeliness.
During 2010-2011, we further strengthened service to Canadians by taking a centralized workload distribution approach to the less complex disputes received. Previously, this work had regional boundaries but today it can be distributed throughout the country. This strategy is starting to produce improvements in service delivery.
Develop and implement program status reporting and regional management for the taxpayers relief workload
The Taxpayer Relief Program was successfully launched on April 1, 2011. This program is being delivered by newly established four regional intake centres and four centres of expertise.
The key deliverables achieved as part of the project implementation are:
- A regional service delivery model established to improve consistency in processes and decisions;
- Performance measures being developed to monitor and report on the Program's effectiveness in achieving its objectives;
- The Taxpayer Relief Registry System enhanced to support the taxpayer relief business transformation;
- A scanning system developed and introduced to support the CRA’s sustainable development strategy; and
- The CRA’s external Web site on taxpayer relief updated in line with the taxpayer relief external communications strategy.
Lessons learned
What worked well: We further strengthened service to Canadians by taking a centralized workload distribution approach to the less complex disputes received. Previously, this work had regional boundaries but today it can be distributed throughout the country. This strategy is starting to produce improvements in service delivery.
What could be improved: We are experiencing an increase in disputes from taxpayers impacted by the CRA’s audit approach to aggressive tax plans. These plans typically involve transactions, arrangements, or events that are specifically designed to reduce taxes. We have preserved our high quality standards in the processing of disputes. However, due to the high volume, this approach has been maintained at the expense of overall timeliness.
Performance report card
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Workable days to complete a case Table note 21
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- Table note 21
- The overall rating is based on whether or not results were achieved against established targets for the combined workloads. Return to Table note 21 source text
For supplementary information on this program activity, please visit:
www.cra.gc.ca/annualreport
Benefit programs (PA6)
Strategic outcome
Eligible families and individuals receive timely and correct benefit payments.
Program activity description
Providing Canadians with income-based benefits and other services that contribute directly to their economic and social well being through administration of the Canada Child Tax Benefit, Goods and Services Tax/Harmonised Sales Tax credit, Children’s Special Allowances, the Disability Tax Credit, the Universal Child Care Benefit, and Working Income Tax Benefit (WITB) advance payments as well as a range of ongoing benefits and one-time payment programs on behalf of the provinces and territories, and other federal government departments. Assisting benefit recipients in meeting their obligations through the provision of timely responses to their enquiries.
Performance summary and analysis of program activity
Making it easier to receive the right social benefits
Strengthen service to benefit recipients
Although e-services are fast becoming Canadians’ preferred choice, many people still rely on the telephone for access to information and services. Information exchanged over the phone can be critical to timely account updates and accurate benefit and credit calculations. In 2010-2011, the total of benefit calls (CCTB and GST/HST credit) handled by agents or through automation was over 9% higher than in 2009-2010. The increase was primarily due to calls related to two new credits: the Ontario Sales Tax Transition Benefit and the Ontario Sales Tax Credit. We were successful in meeting our target of 90% of callers able to reach us by telephone for the third consecutive year.
Support business growth and partnerships
In 2010-2011 we delivered four new programs; the Nova Scotia Affordable Living Tax Credit, the Ontario Sales Tax Transition Benefit, the Ontario Sales Tax Credit and the British Columbia Harmonized Sales Tax Credit. Combined, these programs represented 24 million payments worth more than $3.6 billion. By delivering such programs on behalf of our provincial and territorial partners, we are reducing the overall cost to Canadians of benefit and credit issuance through reduced duplication in administration.
We gauge our progress as the provider of choice by the volume of programs and services we are asked to deliver each year for our federal, provincial, and territorial clients. In 2010-2011, we introduced 19 new programs and services, bring the total to 115.
During 2010-2011, CRA worked in partnership with Human Resources and Skills Development Canada on a telephone survey o Universal Child Care Benefit (UCCB) recipients to determine the effectiveness of the program. CRA provided data for the analysis, as well as information to identify UCCB recipients for the survey.
Strengthen benefits delivery infrastructure
The Taxpayer Representative Identification System (TRIS) is an online database that permits CRA employees to verify whether a third-party representative is authorized to act of behalf of a particular taxpayer. During 2010-2011, enhancements were made to allow Efile service providers to submit TRIS forms electronically. This enhancement has contributed to improved results for the timely processing of TRIS forms.
Our individual credit determination (ICD) system determines entitlement to benefit and credit payments and also provides information, where authorized by law, that supports other governments in delivering their own programs. To make sure we can deliver reliable benefit and credit programs for years to come, we have made strategic investments in our system infrastructure.
Optimize service delivery channels
E-services are growing in popularity among benefit recipients. There was an increase of 62% over the last year in visits to Benefits related Web pages of My Account. We attribute this trend to several things including enhancements of our web pages and giving access to recipients legal representatives to the Benefits Online Application and View Children in my Care options.
Another example of enhanced service for Canadians is the Automated Benefit Application (ABA). The ABA enables Canadian newborns to be registered automatically for the federal and provincial benefit programs we administer. This eliminates the need for a separate application for each program and the related processing time, speeding delivery of payments to recipients. In 2010-2011, the number of provinces participating in the ABA program increased from three to five with the Provinces of Ontario and Quebec joining in July 2010.
Ensure accurate payments
To measure levels of compliance, we review and verify recipient information each year, contacting individuals to confirm details of their accounts. If the account information is incorrect, we update it. We use both random sampling and specific criteria to select accounts. More than 95.5% of the random accounts that were validated during 2010-2011 contained accurate information, meeting our target of 95%, while over 49.9% of the individuals contacted as a result of targeted reviews required account adjustments, meeting our target of 50%.
We measure payment accuracy by comparing the net value of CCTB overpayments to the total amount of CCTB payments issued. Net CCTB overpayments in 2010-2011 were 38 million, representing only 0.38% of the $10 billion in CCTB payments issued during the year, coming in under our established target of less than 0.4%. These figures suggest that we have been successful in delivering accurate payments to benefit recipients.
Lessons learned
What worked well: In 2010-2011 we launched four new programs; the Nova Scotia Affordable Living Tax Credit, the Ontario Sales Tax Transition Benefit, the Ontario Sales Tax Credit and the British Columbia Harmonized Sales Tax Credit. Combined, these programs represented 24 million payments worth more than $3.6 billion.
What could be improved: We are challenged each year to ensure that increased needs and limited resources do not have a negative effect on our delivery of essential benefits and services.
Performance report card
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Percentage of CCTB callers who reach our telephone service Table note 22
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Percentage of GST/HST credit callers who reach our telephone service Table note 23
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- Table note 22
- Caller accessibility targets were increased from 80% to 90% for 2008-2009. Return to Table note 22 source text
- Table note 23
- There was no target for GST/HST credit callers before 2008-2009. Return to Table note 23 source text
For supplementary information on this program activity, please visit:
www.cra.gc.ca/annualreport
Internal services (PA7)
Strategic outcomes
Taxpayers meet their obligations and Canada’s revenue base is protected; and
Eligible families and individuals receive timely and correct benefit payments.
Program activity description
Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.
Performance summary and analysis of program activity
Maintaining business sustainability
MANAGEMENT OVERSIGHT
In 1999, the Canada Revenue Act established a unique governance structure for the CRA. This structure encompasses a direct, legislated relationship between the Minister of National Revenue and the Board of Management, as well as specific, legislated roles and responsibilities for each.
To make sure that we are effectively meeting our responsibilities for accountability, we use two complementary tools: the Management Accountability Framework (MAF) assessment conducted by the Treasury Board of Canada Secretariat and the Board of Management Oversight Framework (BoMOF) assessment conducted by our own Board of Management. Together, the two assessment tools provide a complete evaluation of the CRA’s management performance.
In 2010-2011, our Board of Management conducted the fourth BoMOF assessment and gave our management team high grades. Out of the nineteen indicators, none required attention or presented an opportunity for improvement. All were found to be “strong” or “acceptable”.
The 2010-2011 MAF assessment examined six indicators during the most recent MAF round. The CRA received “strong” ratings for half of these indicators and “acceptable” for the remainder.
The positive results of these assessments provide Canadians with assurance that the CRA is actively pursuing management excellence.
Improving our human resources capacity
The CRA environment is experiencing the effects of some important changes that continue to have an impact on our workforce and workplace. These include baby boomers leaving the workplace, taxpayers’ changing needs, and the emergence of new technologies. The challenge lies in identifying where to focus our efforts and resources to ensure that we continue to attract, develop and retain a workforce that will enable us to meet both current and future business requirements.
In 2010-2011 we have taken an increasingly strategic and horizontal approach to aligning its human resources planning with its business planning. Our third consolidated Strategic Workforce Plan (ASWP) lays out how we will ensure that it acquires and develops the human resources talent necessary to achieve program objectives.
Since its first publication, the ASWP has matured into an effective planning tool that establishes the workforce goals and objectives that we must achieve to support the strategic priorities identified in our Corporate Business Plan.
The CRA implemented several components of the ASWP in 2010-2011:
- A Respectful Workplace intranet module was launched that added new topics throughout the year, including a video featuring our Commissioner.
- The CRA’s Injury and Illness Policy was complemented by our Managing Injury and Illness Process Tool, which was promoted extensively throughout 2010-2011. It has been recognized as a best practice within the Public Service and is now shared with three other government departments.
- A voluntary survey of managers was completed in summer 2010 to gain a better understanding of employee mobility issues and challenges. The survey results were published to enable branches and regions to use this information in their development of tailored strategies.
The CRA also fulfilled commitments made in the ASWP related to leadership development, employee orientation, and learning strategies for key jobs:
- Various initiatives were undertaken to address the learning needs of managers as their careers progress. A manager Café was created on the Manager’s Corner Web site to allow for the exchange of information and ideas. An Executive/Cadre Orientation Session and an Executive/Cadre Learning Program were launched to support newly recruited executives.
- Employee orientation is a key activity in developing the CRA’s talent pool. In 2010-2011 we launched “A Good Start”, an employee orientation program to provide new employees with helpful information about the organization. We also launched a web site to support managers in integrating new employees.
In addition, as a result of agreements with the provinces related to HST this past year, we welcomed new provincial employees into our organization. The first wave of provincial employees made a successful transition to the CRA in November 2010.
In 2010-2011 we undertook activities that reinforce our ongoing commitment to values, ethics, and integrity. An Integrity Framework is being developed to support the CRA in balancing two significant responsibilities: fostering our culture of integrity; and, preventing, monitoring, detecting, and managing integrity lapses. A “CRA culture of integrity value chain” was developed. Tailored orientation and training products help executives, managers, and employees recognize and fulfil their roles in a way that reflects the CRA’s culture of integrity and its core values.
Our Discipline Policy and Procedures, which were extensively reviewed and enhanced in 2010-2011, contribute to the overall integrity of the CRA by clearly articulating the possible consequences when an employee fails to act in accordance with the values and expected standard of conduct. Appropriate disciplinary and/or administrative action (up to and including termination of employment) is promptly taken in all cases where employee misconduct has been determined.
IT responsiveness and sustainability
Information technology (IT) is integral to 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.
System updates
In October 2010, CRA-Credential Management Service was implemented, significantly reducing the CRA’s cost of authentication for e-services and positioning the CRA to grow its e-service offerings cost-effectively.
In 2010-2011, we updated the Information Technology – Infrastructure Investment Plan to reflect both funding restraints and planned expenditures. Our Application Sustainability Program was enhanced by implementing a long range plan. We also agreed to share our technological expertise with Treasury Board Secretariat in developing a government-wide response to the Office of the Auditor General audit on IT sustainability.
Working with others
The CRA has entered into a tri-lateral arrangement with the Bank of Canada and Public Works and Government Services Canada to jointly acquire data centre services in the National Capital Region from the private sector. The data centre supports the work of the CRA and the Canada Border Services Agency (CBSA). The contract to build the new facility was awarded in 2010-2011. The state-of-the-art data centre will meet long-term availability, business continuity, security, and growth requirements, while incorporating “green” energy and environmental technology.
Environmental upgrades were implemented at all of the CRA’s data centres in 2010-2011, while ensuring recoverability efforts continue to meet business requirements for all CRA systems. In the event of a disaster at Data Centre Heron we have improved our ability to respond and provide near-continuous availability to taxpayers and benefit recipients through the automatic transfer of mainframe services to Data Centre St-Laurent. We also dedicated significant resources to prepare our systems and infrastructure for the tax season, avoiding major outages, and decreasing the number of critical incidents that have a national impact during the filing season.
During the year, we maintained high levels of availability for the multiple national CRA and CBSA systems, while meeting the challenges of safeguarding our IT assets from accidental or deliberate security threats. We also worked with the CBSA to ensure that our shared IT services relationship, the largest within the Government of Canada, continues to be cost effective for the Government. In 2010, we updated our Memorandum of Understanding for the provision of Corporate Administrative Services to the CBSA.
Awards and secure systems
In October 2010, we were recognized as Distinction Award Honourees for four of our information technology projects at the Government Technology Exhibition and Conference. We further developed our IT strategy, focusing on our commitment to sustain and improve our performance by strengthening the governance of our IT investments and implementing best practices for risk management.
In addition, over the past year, we continued to advance our Security Modernization Program as we began deploying host intrusion protection technology and advanced preparations for the implementation of network access control technology. We also implemented the CRA-Credential Management Service on time and within budget, significantly reducing the cost of authentication for e-services and positioning the CRA to grow its e-service offerings in a cost-effective manner.
Ensure secure management of protected information
Safeguarding Canadians’ personal information is a priority at the CRA. In 2010-2011, we made investments in our security management systems in order to protect information. We are modernizing the National Audit Trail System (NATS) to streamline employees’ access to our systems and to permit a more proactive approach to detecting unauthorized access. NATS was selected as a project to be included in the CRA’s Strategic Investment Plan. We continued to advance the Identity and Access Management Project. Its objective is to standardize processes used to manage access to our data, thereby ensuring compliance with security policies and rules. We also advanced the Internal Fraud Control program, to ensure that the organization continues to take all reasonable measures to safeguard the assets, resources, information and reputation of the organization. This includes the development of tools and methodology to perform fraud risk assessments. The Internal Fraud Control Policy received Board of Management approval in June 2010. This policy defines internal fraud for the CRA and describes roles and responsibilities for control of fraud.
During the reporting period, the Information and Technology Security Strategy was produced to ensure an integrated and consistent approach to the delivery of our security program. It articulates a consolidated governance structure to further strengthen the CRA’s ability to safeguard the confidentiality, integrity and availability of our information and technology assets. The Strategy was approved by the Board of Management in December 2010.
Manage business information
This past year saw the CRA take a major step forward in enhancing information management practices. We developed the CRA Information Management Strategy 2010-2011 to 2012-2013, the first of its kind for the organization. The strategy approved in 2010 will help us to align with emerging Government of Canada direction.
We completed the primary functional information classification scheme and retention periods for all program and most corporate branches. As well, we advanced the development and implementation of detailed functional information classification including three pilots and research on metadata and recordkeeping. A report with recommendations will be presented early in 2011-2012, which is expected to be followed by detailed planning in 2011-2012.
Accountability and oversight
The CRA takes accountability very seriously, recognizing that transparency is crucial to demonstrate results for Canadians and to gain taxpayers’ trust. In 2010-2011, we tested the design and implementation of its key internal controls related to financial reporting on CRA activities and partially completed operational effectiveness testing of these controls. These efforts support the Chief Executive Officer’s and Chief Financial Officer’s annual Statement of Management Responsibility, including Internal Control Over Financial Reporting, which is published with the annual Financial Statements audit report.
This work will help provide assurance that appropriate internal controls over financial reporting are operating effectively and that the CRA’s financial reporting is reliable. It ensures that significant financial controls, risks, and issues are identified and addressed as required by the Tax Collection Agreements, the TBS Policy on Internal Controls, and the Financial Administration Act.
Budget 2010 announced that federal government departments’ and agencies’ operating budgets would be frozen for two years at fiscal year 2010-2011 levels. This year, we developed a cost containment management plan to ensure that resources would be available to continue to support government priorities, as well as to fulfil our legislated responsibilities and maintain the delivery of core business, while respecting the need for fiscal restraint.
Refine our strategic investment plan
First introduced in 2009, our Strategic Investment Plan (SIP) provides decision-makers with the necessary information to effectively manage our portfolio of major infrastructure investment projects. It is integrated with our strategic themes and objectives, and consistent with the Treasury Board’s Policy on Investment Planning. Annual updates to the SIP focus on ensuring the integrity and sustainability of our mission-critical systems, and allow for adjustments to be made in view of changing priorities, emerging risks, or government-wide initiatives that affect funding.
The second, 2010-2015 edition of the SIP was successfully developed and approved by senior management in the reporting period. During its development, particular attention was devoted to ensuring the plan adequately reflects our needs and priorities in terms of IT infrastructure and business/IT solutions. This theme was replicated throughout the various related SIP products, such as the Treasury Board Submission and Capital Plan prepared in support of the condition to access the funding for the T1 Redesign. The plan led to investment decisions and the granting of approval for a number of projects to initiate their planning stages and present a submission to our Agency Management Committee.
In 2010-2011, we also implemented an integrated project management tool, Project System, for major new investment projects. Project System was integrated into our Corporate Administration System to facilitate project and portfolio structuring and reporting. Among its benefits, the new tool enables the multi-year tracking of project costs and enhances our ability to compare planned costs to actual expenditures. In accordance with the plan for gradual implementation, seven projects were captured in Project System in 2010-2011 as they entered new stages of the approval process. To ensure the successful implementation of the new system, monthly discussion forums were held to gather feedback and provide training. A strong commitment to consultation and coordination with key stakeholders ensured that issues were addressed and that the most accurate financial information possible was captured in the system.
Employ risk management consistently and systematically
The Enterprise Risk Management program is designed to effectively manage risks through a systematic and comprehensive approach that is methodically integrated into its decision-making, planning, and reporting processes.
An update to the Corporate Risk Inventory 2009 was completed in 2010. The 2010 edition of the Inventory was developed by conducting interviews that provide a broad perspective on shifts in the internal and external environments that drove changes to the risks presented in the 2009 Inventory. The conclusion drawn from these interviews was that no significant changes to the enterprise risks have been identified to warrant additional action. Consequently, we are continuing to implement strategies for already identified risks requiring mitigation.
During 2010-2011, the CRA consulted with national and international organizations from the public and private sectors as well as communities of expertise on leading practices. Based on our research findings, we adopted an improved enterprise risk management cycle. This multi-year approach will eliminate cycle overlap and process fatigue, provide a more horizontal outlook, and reduce inefficiencies while increasing the availability of more timely and relevant risk information.
Service Standards in the CRA
Maintaining the confidence of Canadians in the integrity of the tax system is essential to the success of the CRA. Service standards that are reasonable and consistently met contribute to increasing the level of confidence that Canadians place in government. Our service standards publicly state the level of performance that citizens can reasonably expect to encounter from the CRA under normal circumstances. We set targets that state the percentage of time or level of accuracy that we expect to attain for the established standard. Targets represent the percentage or degree of improvement we expect to attain, based on operational realities such as resource availability, infrastructure, historical performance, the public’s expectations, and the complexity of the work. Our standards and targets are reviewed annually and updated, as necessary.
For more information on CRA’s service standards, please visit: http://www.cra-arc.gc.ca/gncy/nnnl/menu-eng.html
Enhance Sustainable Development
This past year was a transition year for the CRA in implementing our Sustainable Development (SD) National Action Plan. While we continued to focus on maintaining SD momentum, we began preparing the CRA to support Canada’s first Federal SD Strategy. During 2010-2011, we implemented numerous activities under the SD National Action Plan including increasing SD awareness, the sustainable business travel course, green procurement, energy conservation, battery recycling program implementation, SD performance reporting and the paper use reduction. The following reflects the results of these efforts:
- 97% of employees are familiar with SD as it relates to the CRA (up 8% from 2007 and exceeding the 2010 target of 95%);
- A total of 1,400 employees completed the Sustainable Business Travel course;
- Over 49% of goods purchased in Synergy were “green”;
- Energy waste was reduced by 25% in six pilot facilities;
- Battery recycling programs were expanded; and
- An updated SD Performance Reporting Tool, SD Criteria Tool, and new SD wiki space were launched.
As encouraging as the above results are, average office paper use per employee increased by 4%, highlighting the need for continued efforts to meet our paper reduction commitments.
The CRA Sustainable Development Strategy 2011-2014 was developed to specify direction for future CRA SD activities.
Enhance the Integration of Social Media
Due to the rising popularity of social media and increased demand from both Canadians and internal stakeholders to accelerate its use, the CRA completed a Strategic Plan for External Communications through Social Media for 2010‑2012. This plan establishes clear goals and objectives when using social media to communicate with Canadians and identifies planned activities in support of these objectives.
In 2010-2011 social media components were considered for all major communication and marketing or advertising initiatives. When deemed appropriate, social media tools, YouTube videos or videos for the CRA video cast window were incorporated into larger communication and marketing strategies. Social media was fully integrated into the tax‑filing season strategy.For example, CRA used its new Twitter account to issue tweets of its popular Tax Tip series.
For the second consecutive year, the CRA repeated its YouTube Video Contest – The Underground Economy: Not Your Problem? – as a component of the Compliance Communication Strategy. The objective of the contest was to continue the discussion initiated during the first contest about the downside of the underground economy.
The CRA Web Site Strategic Plan
The CRA Web Site Strategic Plan 2009-2010 to 2011-2012 was approved in February 2010. The plan established four key objectives. To meet them, the CRA undertook a variety of initiatives to better understand and respond to Canadians’ expectations for CRA Web services. The following highlights illustrate how the CRA has moved the Strategic Plan forward:
Objective – Increase the overall awareness of the services offered on the Web site:
Objective – Increase the ease of finding information by 5%:
- We conducted the 2010 CRA Web Site Individual Telephone and Online User Survey.
- We conducted usability testing with individual and business users.
- We developed high-level business requirements for advanced Web site research.
- We completed an upgrade of a new search engine for the CRA Web site.
- We developed business requirements for a test environment.
- We actively participated in the User Experience Working Group.
Objective – Explore and implement three new web technologies:
- We improved Web site infrastructure to support enhanced multimedia content.
- We continued with CRA-wide implementation of the Publishing Content Management Solution.
Lessons learned
What worked well: We delivered on our management priorities through timely and responsive decision-making, a fully accountable senior management culture, streamlined management policies and practices, and improved planning and reporting.
What could be improved: We continue to do additional work on our management regime. We will also continue to advance Information Management.
For supplementary information on this program activity, please visit:
www.cra.gc.ca/annualreport
Canada’s Economic Action Plan Initiatives
Reducing the tax burden on Canadians is a central theme to many of the action plan initiatives undertaken in recent years. The Economic Action Plan introduced significant new personal income tax reductions that are providing relief, particularly for low- and middle-income Canadians, as well as measures to help Canadians purchase or improve their homes. These tax reductions allow individuals and families to keep more of their hard-earned money and improve incentives to work, save and invest, while also contributing to the Government's long-term economic agenda.
Our efforts at the CRA have enabled the Government to successfully deliver on these commitments. We continue to administer programs to help families, seniors, workers, and persons with disabilities. We also administered corporate income tax reductions that were put in place to help Canadian businesses weather the effects of the global economic challenges, to maintain and create jobs.
In 2010-2011, the CRA was provided with $9.6 million in action plan funding to administer the Home Renovation Tax Credit, First-Time Home Buyers Tax Credit. Additional monies were also provided for Late filing and incorrect format penalties and for the simplification of GST/HST for the direct selling industry. These supplementary funds enabled the CRA to augment our capacity to deal satisfactorily with the increased information requirements presented by these initiatives.
The following are just a few of the action plan initiatives that the CRA administered and delivered on behalf of Canadians.
The Working Income Tax Benefit Program provided a refundable tax credit for eligible working low‑income individuals and families who are already in the workforce and encouraged Canadians to enter the workforce.
The First-Time Home Buyers’ Tax Credit assists first-time home buyers with the costs associated with the purchase of a home.
The Home Renovation Tax Credit Program provided a non-refundable tax credit for eligible expenses incurred for work performed or goods acquired for an eligible dwelling.
The Canada Child Tax Benefit Program provided a tax-free monthly payment to eligible families to help them with the cost of raising children under the age of 18. Through the Economic Action Plan, the federal government raised the level at which the National Child Benefit Supplement amount for low-income families and the Canada Child Tax Benefit are phased out, so that eligible families with two children received additional benefits.
We are pleased to report that the tax relief measures for individuals, families and businesses announced in Canada’s Economic Action Plan have now been fully implemented. Our efforts over these past few years in implementing the action plan initiatives demonstrate our commitment to make sure that Canadians have all of the information they need, not only to meet their tax obligations but also to take full advantage of the tax savings to which they may be entitled.
