ARCHIVED - RPP 2006-2007
Canada Revenue Agency

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Chapter 1 – Our Operating Environment

The Canada Revenue Agency (CRA) operates within a dynamic environment, where societal and technological trends, economic conditions, government policy, and public attitudes can significantly influence the achievement of program objectives. As part of our strategic planning process, we conduct regular environmental scans and maintain a corporate risk inventory to identify and manage key challenges and opportunities at an enterprise level. The results of these assessments are discussed periodically with our Board of Management, which brings a broader public- and private-sector perspective to the management of the CRA.

For this report, six broad strategic challenges were identified:

• the imperative values of trust, transparency, and accountability demanded by Canadians, and by their governments, in dealings with the CRA;
• demographic trends;
• the demands and impacts of technological change;
• advancing the CRA’s legislative flexibilities;
• opportunities and demands coming from the changing economic environment; and
• compliance challenges from aggressive tax planning, tax havens, the underground economy, non-filers/non-registrants and collections as well as the ongoing challenge of maintaining compliance in a self-assessment system.

Imperatives of Trust, Transparency, and Accountability

Trust, transparency, and accountability have always been imperative values at the CRA. This is because of the extent of our public dealings; our collection, accounting, and disbursement of public funds; and the critical role that the values play in supporting the integrity of the tax and benefit systems. Those systems must not only be administered in a fair and effective way, they must be perceived as fair and effective. Any risk to our reputation as an honest and competent manager of money and information imperils the achievement of our operational mandate.

The 2004 CRA Annual Survey found that 81 percent of respondents agreed with the statement “The information that Canadians provide to the CRA is treated confidentially,” while 77 percent supported the statement “The CRA treats taxpayers honestly.” Although results have been relatively strong and consistent over the past several years, they still demand constant effort and attention.

Two challenges stand out. First, the protection of taxpayer and benefit recipient information will continue to be critical to public trust. Tax and benefit administrations—federal, provincial/territorial, First Nations, and in fact, those of other countries—must balance a desire for better access to information with strong and legitimate concerns about privacy and confidentiality. The security of information technology systems and CRA facilities are essential elements in our approach to meeting this challenge.

Second, we are entering a new era in our relationship with provincial, territorial, First Nations and other clients. Understandably, they have come to expect a high level of service and accountability. Providing this requires special attention not only to client-specific program delivery but also to associated monitoring, measurement, reporting, and remediation. All this is needed for us to be truly accountable for the tax and benefit services we carry out on behalf of our clients.

Demographic Trends

It is projected that by 2015 the size of the Canadian workforce will begin to decline, with any net growth due to the participation of new Canadians. Annual immigration is likely to increase from current levels of approximately 225,000. Equally important is to communicate effectively with culturally diverse communities; some of them may lack familiarity with Canada’s tax system and its reliance on self-assessment, or with benefit programs that could assist them in making Canada their home. Since much of Canada’s immigration continues to go to our largest urban centres, these service and outreach challenges will be felt especially by our Pacific, Québec, and Ontario regions.

One of the challenges for the CRA will be to protect corporate memory, maintain technical expertise, and ensure that required professional skills are in place in critical areas such as audit. Supported by focused investments in training and development, the CRA will be able to offer new and existing staff more challenging and rewarding work as the balance of jobs continues to shift from traditional processing activities to work that requires more technical, analytical, and client-relationship competencies. This approach will ensure that the CRA has the required staff in place as experienced managers and staff retire in the coming years.

Technological Change

The CRA is a leader in using information technology to improve service and increase productivity. Effectively managing the impact of the rapid pace of technological change by maximizing its benefits and minimizing its negative effects is a key challenge for the CRA.

Clients and Canadians are demanding electronic service options that are fast and efficient, and that guarantee the privacy and appropriate use of confidential information. The CRA is dependent on technology-based information management to respond to growth in e-commerce and the Internet. CRA employees use data from multiple systems to support decisions; they need a greater capacity to integrate data and assemble it into immediately usable information.

Our key challenge in terms of IT is to maintain the right balance of effort and investment between existing program commitments and creating new or additional capacity to respond to the changing business context of Agency 2010 (discussed in the next chapter). This balance must be achieved while addressing pressures such as the “enterprising” of government and the ever-evolving technological environment. Strategies are required to enhance the continuity of IT services, to modernize security, and to facilitate information and knowledge management.

Another challenge is to improve the corporate focus of our technology investments. There is a need to refine and communicate the IT costing model. The aim is for the funding of IT to be treated more as corporate infrastructure—which ultimately supports the whole of CRA and our clients—rather than being treated as individual projects.

IT solutions will demand new skill sets in the CRA workplace, while eliminating certain manual and data entry processing requirements. The resulting impact on training and staffing must be managed carefully to make technology a net benefit to the organization.

The CRA’s Legislative Flexibility

The CCRA was created in 1999 (on December 12, 2003, the Government transferred the customs function of the Canada Customs and Revenue Agency to the Canada Border Services Agency, the Agency continues its operations under the name Canada Revenue Agency/CRA) to improve service, increase administrative efficiency, and establish a closer, more accountable relationship with provinces, territories, First Nations, and other clients. The Canada Revenue Agency Act (CRA Act) was passed to provide the flexibility and authority to explore innovative methods of service and management. The CRA was effectively given full authority for human resources and general administration.

More recently, the Government of Canada has launched initiatives to integrate internal services such as administrative systems and IT infrastructure across federal departments and agencies, while increasing central agency involvement in financial audit. As well, the Service Canada initiative has been launched to provide a single window for most services to the public.

As we move forward, the CRA will maintain its strong and dynamic service delivery capacity. We will continue to be the primary direct service provider for all tax and benefit programs across Canada.

As the next chapter explains, our plans for the CRA rely to a large degree on taking further advantage of the management flexibilities provided for in our founding legislation. These management, governance, and accountability enhancements will make the CRA more efficient and accountable. At the same time, they will contribute to the CRA’s ability to provide innovative products and services to federal, provincial/territorial, First Nations and other clients. Support from our clients for this evolution will help determine the CRA’s direction and pace of change over the planning period and beyond.

Economic Environment

Several aspects of the Canadian and global economies will influence the CRA over the coming years.

Currently, the Canadian economy is strong. The federal government is expected to continue emphasizing productivity as the means to further improve Canada’s economic performance; the CRA-administered Scientific Research and Experimental Development (SR&ED) credit is one of the tools to encourage a more modern, productive economy.

Internationally, the CRA will increasingly be involved in tax treaty work and other forms of co-operation to support service and compliance. Globalization requires intensified international co-operation, including transparent systems and information-sharing across borders, despite often divergent privacy laws. Canada currently has tax treaties with 83 countries to avoid double taxation, and the CRA often relies on information from national governments to enforce compliance, especially in cases involving tax havens.

Compliance Challenges

Tax compliance is the core of our mandate. It has long been recognized that voluntary compliance and self-assessment are the best, most efficient ways to administer Canada’s tax system. When tax payers do not comply, our strategy is to identify and detect the most serious non-compliance issues and cases, take appropriate action, and encourage future compliance.

The CRA promotes voluntary compliance, which is an effective approach for the majority of Canadians. The CRA also delivers a wide range of programs to protect Canada’s tax base and ensure that Canadians pay their taxes. The CRA has a robust set of checks and balances, including both preventive and detective controls; examples are source deductions, third-party information slip and document matching, risk profiling and scoring, compliance research, examinations, audits, investigations, and prosecutions.

Individual Canadians and businesses want to know that others are paying the taxes they should. Maintaining high levels of taxpayer compliance is a constant challenge since many factors influence compliance. There are also many reasons for non-compliance that, in turn, require tailored programs. The CRA works to identify areas where the risk of non-compliance and the potential loss of revenue are highest, and to understand the contributing factors. We examine socio-economic trends as well as emerging business practices to identify indicators of possible non-compliance. We have also developed sophisticated risk-assessment systems that examine the tax characteristics of Canadian taxpayers to identify and estimate possible non-compliance.

The CRA’s risk-assessment systems and procedures enable us to target compliance activities toward areas of highest risk and to shift resources to these areas. By doing this, we also reduce the cost to compliant taxpayers.

The CRA has identified the following key risk areas: aggressive tax planning (including the abusive use of tax havens); GST/HST compliance (in particular, fraudulent GST refund claims); the underground economy; and non-filers / non-registrants and collections.

The CRA also faces unique challenges in the administration of charities. We have a critical and demanding role under the Charities Registration (Security Information) Act to ensure that charitable dollars are not used for illegal purposes.

While the bulk of our compliance challenges relate to the tax system, we increasingly must manage risks in benefit programs. By informing and educating existing and potential new recipients about their obligations under benefits legislation, and by having a credible enforcement presence based on enhanced risk-based account selection criteria, we aim to ensure that only those entitled get benefit payments.

Conclusion

By continually gathering and assessing intelligence regarding our operating environment and by applying this knowledge through our robust risk management processes, the CRA maintains a high level of integrity and can continue to improve our overall efficiency and effectiveness. The next chapter outlines the directions that the CRA will pursue to address our strategic challenges and opportunities. Chapter 3 describes more specific plans for managing our program activities over the next three years.

 

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