Operating context and key risks

Operating context

The CRA delivers its core responsibilities by administering tax and benefit legislation enacted by Parliament and provincial and territorial legislatures, in collaboration with the Department of Finance Canada, and in alignment with Government of Canada priorities.

In 2017-18, the CRA continued to transform its services in response to the mandate given to the Minister of National Revenue, and worked with other departments, such as Employment and Social Development Canada. We gave renewed importance to seeing service from the point of view of Canadians, especially vulnerable people, making filing easier and telling them how to get the benefits to which they are entitled. We collaborated with Canadian and international organizations and consulted Canadians on issues ranging from more people receiving benefits to overall service improvement. During this planning period, the CRA undertook a major service culture initiative to integrate our new commitment to those we serve in our every action and interaction with Canadians.

This year, the Agency continued the journey to becoming a world-class tax and benefit administration. This involved engaging employees and conducting an objective and comprehensive assessment, which applied the International Monetary Fund's Tax Administration Diagnostic Assessment Tool. It showed us opportunities to improve and we are using its direction to do so.

Tax evasion and aggressive tax avoidance are complex global priorities for tax administrations around the world. The Government of Canada made significant investments in Budgets 2016 and 2017 to address these priorities and improve tax compliance. These investments are being used to fund new initiatives and extend existing programs that ensure our tax system is fair and equitable for all Canadians, and to increase our capacity for global collaboration.

The CRA continues to target tax avoidance schemes and the underground economy. We increased targeted research and improved our business intelligence. We used information from many external sources, including the Panama and Paradise papers to identify potential non-compliance issues.

In 2017-18, the Government continued to deliver on its commitment to study the tax gap and published a report on individual income tax non-compliance. The publication of tax gap estimates and methods provides information to the Government of Canada and the public on tax non-compliance and the Agency's compliance efforts, while helping to deliver on the Government's commitment to transparency. Understanding how and why taxpayers are non-compliant is critical to addressing that non-compliance to preserve the integrity of the tax system and protect Canada's revenue base.

We also analysed data to identify patterns and predict outcomes in order to ensure an appropriate response to technological change, protect the security of personal information, and respond to cyber threats, as well as improving digital service to assist Canadians.

Like all government departments, the Agency is also affected by the Phoenix pay system issues. While impacts on CRA employees are fewer than in other departments, they are nonetheless significant and difficult for those affected. Our compensation advisors have worked very hard to minimize the impacts of Phoenix. The CRA is also an active member of public service committees of senior officials created to monitor and correct problems related to Phoenix. We have maintained a commitment to constant communication with our employees on challenges and progress.

Focus on experimentation, Gender-based Analysis Plus, and the World-Class Tax and Benefits Administration initiative

Throughout this report, we highlight three areas of focus for the CRA, wherever you see the following logos.

Logo of a maple leaf

This logo refers to efforts undertaken to address gaps identified through the Tax Administration Diagnostic Assessment Tool iii (TADAT), released on May 14, 2018 on Canada.ca. The report provides results of the World-Class Tax and Benefits Administration (WCTBA) assessment and opportunities for the Agency to improve.

Logo of a light bulb

This logo identifies areas of innovation. The CRA often focuses on evidence-based experimentation and innovation to find new ways to address outstanding issues and provide taxpayers and benefit recipients with the best possible service.

Logo for Gender-based Analysis Plus

Finally, this logo identifies areas of interest with regard to Gender-based Analysis Plus (GBA+ ). Gender equality, diversity, and inclusion are key priorities for the Government of Canada. The CRA is committed to GBA+ as part of good program analysis and informed decision-making, and applying GBA+ to all federal government proposals to ensure improved outcomes for all Canadians.

Key risks

The evaluation using TADAT scores the Agency highly on having a structured and comprehensive process in place to identify, assess, prioritize, and mitigate institutional risks.

The CRA's mature risk management process regularly scans, identifies, and assesses key enterprise risks to manage unexpected events and seek solutions.

The table on the next page highlights some of the key risks that could impact the CRA's ability to meet its objectives and priorities owing to the influence of a number of emerging global trends. These trends include the increasing prevalence and sophistication of cyber threats, which could lead to the unauthorized use of information, global economic uncertainty, changes in digital commerce such as the adoption of digital currencies and online payment systems, and taxpayer's expectations for seamless digital interactions and services. Further on the horizon, new technologies such as cloud computing, blockchain, artificial intelligence and robotics may change Canada's economy and the CRA's way of doing business.

There are also risks in the internal environment. Continuing to enhance business intelligence though the secure management of the CRA's data assets is critical, particularly in areas such a compliance and collections. The Agency's workforce is aging, making knowledge-transfer, leadership development and training even more important. However, this trend is also a unique opportunity to reshape the workforce to meet the evolving business practices and environment of the CRA. In many ways, the pace of change of the CRA's environment is accelerating. As such the CRA is focused on its agility, ensuring that the organization works in a coordinated and horizontal fashion, so that commitments are met, expected outcomes are achieved and the CRA acts swiftly and fairly in the face of uncertainty.

Effectiveness of risk implementation strategies

The Agency Management Committee assesses the Agency's enterprise risk on an annual basis, determining the effectiveness of controls and, where necessary, risk mitigation strategies. The CRA has built a risk tolerance methodology to appropriately target resources to areas in need of more attention. The Agency follows a mature risk action plan and follow-up process to implement these strategies, based on the anticipation that they will respond to each risk effectively and reduce the risk's impact and likelihood of occurring.

Effectiveness of risk implementation strategies
Risks Mitigating strategy Link to core responsibilities
Link to mandate letter commitments and government-wide or Agency priorities
There is a risk that cyber threats will compromise CRA services and taxpayer information.
  • Implementing the Data Security Initiative to further reduce the risk of data being disseminated to unauthorized parties
  • Using advanced malware protection to neutralize threats to our web services
Tax, Benefits, and Internal Services

Agency priorities

  • Integrity and Security

Government-wide priority

  • Government of Canada Strategic Plan for Information Management and Information Technology 2017 to 2021
Pace of delivery
There is a risk that the speed and expected outcomes of implementing operational change will not respond to the expectations of Canadians and of the Government.
  • Implementing the Results and Delivery approach to monitor and report on the Agency's progress toward mandated priorities and core responsibilities
Tax and Benefits

Agency priorities

  • Service

Mandate letter commitment

  • All mandate letter commitments are affected
The CRA's compliance risk is subdivided into categories. These are the top risks given their potential impact on the CRA's  bility to protect Canada's revenue base, and the public's confidence in the fairness and integrity of the tax system.
  • Offshore assets
    Hiring more auditors and specialists, increasing verification, enhancing investigative work, and developing business intelligence infrastructure
  • Transfer pricing
    Implementing a country-by-country reporting regime for transfer pricing that will give the CRA more information on Canadian and foreign multinational enterprises through information exchanges with other countries
  • Digital commerce
    Strengthening compliance strategies by focusing research on the types and extent of non-compliance for evolving digital currencies, digital payment systems, and online businesses
  • Sharing economy
    Expanding research capacity to better understand the extent and varying types of non-compliance in the emerging sharing economy to help identify proper risk models to support potential strategies and new areas of focus

Agency priorities

  • Compliance
  • Service

Mandate letter commitment

  • Crack down on tax evaders and work with international partners to adopt strategies to combat tax avoidance
Tax debt
There is a risk that the growth of the tax debt will outpace the growth of revenues.
  • Implementing various initiatives and strategies, including a five-year plan supported by commitments in Budget 2016, to improve ability to collect outstanding tax debts; using data-mining initiatives to enhance collections strategies, which include developing and experimenting with behavioural techniques and predictive analytics through business intelligence projects

Agency priorities

  • Compliance

Government-wide priority

  • Inclusive and sustainable economic growth
  • Enhancing tax collections was a major priority for the CRA under Budget 2016, with major collection targets made over a five-year period
Service channels
There is a risk that the CRA's service channels will not evolve to meet the expectations of taxpayers, businesses, and benefit recipients.
  • The implementation of the Benefits System Renewal Project will renew and strengthen the benefits system by modernizing the IT foundation, and introducing processing improvements, which will incorporate new technologies to ensure the CRA meets its priority of issuing timely and accurate benefit payments to the millions of Canadians who depend on them
Tax and Benefits

Agency priorities

  • Service

Mandate letter commitment

  • Improve service to Canadians to ensure the CRA is fair, helpful and accessible
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