Collections, compliance, and verification

Performance results 

Compliance and verification

The CRA's compliance and verification function applies across virtually all of the domestic program activities of the Agency. We employ a wide range of measures to ensure that individuals and businesses fully comply with Canada's tax laws, and we verify and validate taxes reported and remitted, or benefits claimed. The work we do encompasses not only individual and corporation income tax, but payroll source deductions, non-resident source deductions, and goods and services tax/harmonized sales tax (GST/HST) as well.

To encourage and ensure compliance, the CRA continues to use cost-effective, educational, and proactive methods. One of the more effective ways in which the CRA has provided taxpayers with information pertinent to their situation has been through the Agency's interactive webinars offered on the CRA website. During 2016-2017, the CRA continued to deliver webinars to educate employers and taxpayers of their tax responsibilities. These webinars reached some 41,000 participants, most of whom were small and medium businesses with only a beginner's knowledge of tax obligations for employers. Most of the topics covered by the webinars during the year related to payroll issues, such as how to deduct, remit, and report payroll source deductions, but there was also a webinar on how to complete a GST/HST return, and another on automobile and motor vehicle benefits and allowances.

On January 25, 2017, the CRA launched its first-ever podcast series. The initial series, comprising four podcasts, focuses on taxable benefits and is available not only on the CRA's website, but through iTunes and GooglePlay as well. This new outreach tool provides in-depth information to employers who require information on more complex payroll topics.

In taking concrete steps to facilitate compliance, the Agency must also address the issue of non-compliance. The CRA pursued a number of initiatives in 2016-2017 to deal with non-compliance, particularly in specific areas such as GST/HST requirements. These initiatives included:

• identifying business owners who reported business income above the threshold that would require GST/HST registration, but who were not registered
• registering businesses for the GST/HST where unreported income was discovered
• identifying businesses that were charging GST/HST, but which were identified through an audit as being unregistered for GST/HST purposes

Targeted compliance projects aimed at the underground economy continued throughout the reporting period. In particular, we were able to assess 33,283 returns from the beginning of July 2016 to the end of March 2017 through our initiatives designed to identify non-filers. As a result, the CRA secured an additional $238 million in federal and provincial taxes assessed that would have otherwise been lost.

KEY RESULTS

In 2016-2017:

• We reviewed over 750,000 payroll accounts
• We completed 807 employer compliance audits
• We reviewed 11,582 GST/HST registrations and resolved over 980,000 delinquent GST/HST files
• We verified over 4 million individual and business accounts, with a corresponding fiscal impact of $2 billion
• We identified over $4.3 billion in non-compliance, including source deductions
• We received over 647,857 income tax and information returns as a result of our actions to prompt compliance by non-filers
• We identified over $2.6 billion in non-compliance in the non-filer segment
• 91% of individuals filed their tax returns and paid their taxes on time
• 84% of corporations filed their tax returns and paid their taxes on time

Collections – tax and government programs

The CRA collects tax debts on behalf of the federal, provincial, and territorial governments, as well as on behalf of other government departments and agencies. It also collects non-tax debts, including social program overpayments and defaulted Canada Student Loan debt on behalf of various government programs that have transferred collection responsibilities to the CRA.

The Agency continues to evaluate and adopt strategic, horizontal, and often innovative approaches in its effort to strengthen tax-collection activities. To this end, improvements in information technology and data analysis have allowed the CRA to take a very targeted and risk-based approach to collecting tax debt.

With Budget 2016 funding, the ability of the Agency to collect outstanding tax debts was significantly strengthened. As a measure of the Agency's success in 2016-2017, the Enhanced Collections Initiative met its first-year target of collecting an additional $400 million and the initiative is on track to meet its five-year target of $7 billion. Meanwhile, a High-Risk Collections initiative was implemented during the reporting period. It also met its first-year target of $69.8 million and is on track to meet the five-year target of $349 million.

The CRA continues to make strategic use of business intelligence to ensure that the most appropriate collection action is employed, and employed at the right time, in relation to a taxpayer's particular circumstances. We strive to be as efficient and effective as possible through our use of tools and methods to resolve a taxpayer's debt, as well as to prevent the debt from aging. The Agency's collections strategy involves a graduated approach, with measures appropriate to the level of deliquency and non-compliance, as illustrated by the following actions used by the Agency:

• allowing taxpayers, who are generally compliant and considered low-risk, an appropriate length of time to resolve their debt on their own without any intervention by the CRA
• sending letters to influence behaviour and encourage timely debt resolution
• having an official from one of the Agency's call centres contact the taxpayer
• referring the account directly to a tax services office for enforcement activity

Targeting low-risk taxpayers generally entails using a variety of communication techniques. During 2016-2017, the Agency employed a number of innovative communication initiatives involving the use of social media. For example, the Agency launched its second collections-themed business video on the CRA's YouTube channel, in addition to posting it on the Agency's website. The video targeted small to medium businesses, informing them of the importance of remaining current with their tax obligations, advising them of what to do if they are experiencing difficulties in remitting their taxes, and informing them of the consequences of not complying. In collaboration with the Efile Association of Canada (EAC), the CRA released an education series called "2 minutes 2 know" on the EAC website. The series focused on the information and options efilers can provide their clients when the clients owe money to the CRA. The Agency used Facebook as well to promote its Collections webpage and Collections videos and, through the CRA's Twitter account, the Agency tweeted various collection and "nudge" messages to make taxpayers aware of their tax obligations and to influence their behaviour towards meeting those obligations.

Regarding "nudge" messages, this represents another example of where the Agency has been expanding and enhancing its use of innovative communication techniques to deter non-compliance and improve the collection of taxes owing. Nudging involves sending soft messages to taxpayers in order to encourage them to resolve their debt in a timely manner, and encourage them as well to avoid tax debt altogether. In February 2017, the CRA added a nudge message to the collections letters it sent to individual taxpayers in the early stages of the collections process. The nudge message read "Only 1 out of 10 individuals who owe tax do not pay on time." The Agency has found the use of the nudging concept to be a very low-cost and effective approach to influence taxpayer behaviour, and it can result in more taxpayers resolving their debt with the CRA on their own. We currently issue over 800,000 of these messages annually.

The Agency also ran nudge experiments during 2016-2017 using an automated dialing announcement device to promote filing and payment compliance. Calls were placed to remind taxpayers that it was time to file their return or make their instalment payment. In addition, using both nudge letters and the automated dialing announcement device, we also achieved some success in improving responsiveness to our business compliance interventions by delivering reminders about businesses' tax obligations.

Meanwhile, under the Enhanced Collections Strategies, the Agency made use of information technology resources to design, develop, and run seven new data-mining models related to the collection of individual income tax. These models will make use of the most recent business intelligence to provide us with data that we can analyze with a view to assigning our collections resources to take action where it is most needed. By March 31, 2017, two of our data-mining models had been finalized and were in use to enhance and facilitate debt collection.

The Agency developed an online payment calculator during 2016-2017 that calculates different payment proposals by factoring in individuals' current financial information and accumulated interest in order to customize a payment arrangement that the taxpayer can maintain for a selected period. Our work on the tool was completed in February 2017, meaning the calculator will be available to taxpayers via the CRA website soon.

In 2016-2017, the Agency began exploring various solutions to allow digital communication between the Agency and third parties to improve requirements for information and requirements to pay processes, as well as insolvency practices. As part of our commitment to modernize our communications with taxpayers and third parties, we met with several financial institutions over the past fiscal year. We finalized an agreement with one of these institutions to respond, beginning in 2017, to requirements for information through our Secure File Transfer Protocol Pilot.

KEY RESULTS 

In 2016-2017:

• We resolved over $52 billion in outstanding tax debt
• We resolved 96.3% of the dollar value of debt our tax services offices received

Collections, compliance, and verification