Canada Revenue Agency Departmental Performance Report 2013-14

Section 1: Organizational expenditure overview

Organizational profile

Minister:
The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P.

Deputy head:
Andrew Treusch

Ministerial portfolio:
National Revenue

Enabling instrument: Canada Revenue Agency Act

Year of commencement: 1999

Organizational context

Raison d'être

The Canada Revenue Agency (CRA) administers tax, benefits, and related programs, and ensures compliance on behalf of governments across Canada. Our activities provide the government revenue needed to deliver essential services to Canadians that lay the foundation for continued economic prosperity and future growth. We process hundreds of billions of dollars in taxes annually, and issue billions of dollars in benefit and credit payments.

Our mandate is to ensure that Canadians:

• pay their required share of taxes;
• receive their rightful share of entitlements; and
• are provided with an impartial and responsive review of decisions they choose to contest.

Responsibilities

The CRA has a broad range of responsibilities. In addition to the Income Tax Act and the Excise Tax Act, we administer legislation relating to the Canada Pension Plan and the Employment Insurance Program. We are responsible for enforcing legislation governing charities, collecting tobacco taxes and duties, administering registered plans, and collecting non-tax debts for the federal government.

Serving taxpayers: The CRA provides taxpayers with the accurate and timely information they need to comply with Canada's tax laws through our website, call centres, technical publications, and through our technical interpretations and rulings services. We regulate charities and monitor and administer deferred income and savings plans to ensure they meet legislative requirements. We assess and process tax returns and payments for individuals and businesses as quickly and accurately as possible, providing taxpayers with early certainty to help them manage their tax affairs with confidence.

Promoting and enforcing tax compliance: The CRA identifies, addresses, and deters non-compliance with Canada's tax laws by promoting and enforcing compliance. We promote compliance through outreach activities, targeted taxpayer assistance, and by educating taxpayers about their reporting responsibilities. We undertake domestic and international examinations, audits, and criminal investigations. We help to ensure tax debt is resolved on a timely basis and enforce compliance with tax laws for registration, filing, withholding, and payment of debt obligations.

Facilitating redress: The CRA provides a fair and impartial redress process to resolve disputes and requests for relief arising from decisions made by the CRA. If taxpayers are not satisfied with the outcome of this process, they can appeal to the courts.

Administering benefits: The CRA administers a range of ongoing benefits and one-time payment programs for the provinces and territories and the federal government, such as the Canada child tax benefit, the good and services tax/harmonized sales tax credit and the universal child care benefit. We ensure that the right benefit payment is made to the right individual at the right time and give recipients accessible information and timely responses to their enquiries.

Strategic outcomes and program alignment architecture

Strategic outcome: Taxpayers meet their obligations and Canada's revenue base is protected

• Program: Taxpayer and business assistance
  • Sub-program: Taxpayer services—enquiries and information products
  • Sub-program: Policy, rulings and interpretations
  • Sub-program: Registered plans
  • Sub-program: Charities
  • Sub-program: Charities—public safety and anti-terrorism
• Program: Assessment of returns and payment processing
  • Sub-program: Individual returns and payment processing
  • Sub-program: Business returns and payment processing
• Program: Reporting compliance
  • Sub-program: International and large business
  • Sub-program: Small and medium enterprises
  • Sub-program: Criminal Investigations Program
  • Sub-program: Scientific research and experimental development
  • Sub-program: Voluntary Disclosures Program
• Accounts receivable and returns compliance
  • Sub-program: Trust accounts—compliance
  • Sub-program: Non–filer—compliance
  • Sub-program: Collections—tax and government programs
• Program: Appeals
  • Sub-program: Income and commodity tax – Objections, determinations, and appeals to the courts
  • Sub-program: Canada Pension Plan/employment insurance appeals to the minister and appeals to the courts
  • Sub-program: Service complaints
  • Sub-program: Taxpayer relief

Strategic outcome: Eligible families and individuals receive timely and accurate benefit payments

• Program: Benefit programs
  • Sub-program: Benefit enquiries
  • Sub-program: Benefit programs administration
  • Sub-program: Statutory children's special allowance payments

Internal services

Organizational priorities

Summary of progress

We held consultations with small businesses in November 2012 to help prioritize our red tape reduction measures, and more consultations will take place in the fall of 2014. Based on our first consultations, we have implemented a number of significant red tape reduction measures, such as:

• We launched the My Business Account online enquiries service which enables businesses or their representatives to email tax-related questions about their accounts to the CRA and receive answers online and in writing.
• We implemented Agent ID for the CRA's business enquiries telephone service. Agents provide an identification number to business owners when they answer a call, offering better accountability and a more consistent experience for callers. This makes it easier for business owners to give feedback on CRA services.
• We redesigned the CRA's audit webpage to make it more user-friendly. We also developed a series of audit videos that contain information about our audit process, and linked them to the audit landing page so that they are easy to find.
• We created a new red tape reduction action plan webpage to give businesses up-to-date information on red tape reduction initiatives.  

Summary of progress 

The vast majority of Canadians voluntarily report accurately because we provide quality services that make it easier to meet tax obligations. Key service results:

• We processed over $451 billion in payments and issued almost $22 billion in benefit and credit payments.
• More than 92% of individual taxpayers filed their taxes on time without intervention from the CRA.
• 80% of individual returns were filed electronically for the 2014 filing season.
• 83% of business returns were filed electronically for 2013-2014.
• 70% of GST/HST returns for businesses were filed electronically for 2013-2014.
• 71% of payments were received electronically (including payments remitted at financial institutions) for 2013-2014.
• We answered 16.9 million tax and 5.6 million benefits calls through agents and automated services.
• We made more than 120 million payments to close to 12 million benefit recipients.
• Benefit and credit payments made by direct deposit increased to 65%, moving us closer to meeting the Government of Canada's commitment to phase out federal government cheques by April 2016.  

Summary of progress

In May 2013, the federal government announced new measures to strengthen the CRA's ability to ensure offshore tax compliance and combat international tax evasion and aggressive tax avoidance. Over five years the CRA will invest $30-million dollars to implement measures in the government's Economic Action Plan for 2013. During 2013-2014:

• The CRA created the Offshore Compliance Division to provide a focussed approach to the implementation of Economic Action Plan 2013 measures targeting offshore non-compliance and to deliver related program activities, including the creation of dedicated offshore compliance specialized teams in three regions across Canada.
• The CRA began administering legislative changes announced in Economic Action Plan 2013 that extended the normal reassessment period for taxpayers who fail to report income from a specified foreign property on their tax return and properly file Form T1135 Foreign Income Verification Statement. The measure received royal assent on December 12, 2013.
• The Offshore Tax Informant Program was launched in January 2014. Under this program, rewards are paid to individuals who provide information to the CRA about major cases of international tax non-compliance that lead to the assessment and collection of federal taxes. As of March 31, 2014, the Offshore Tax Informant Program had received 63 written submissions.
• The CRA is building a facility for banks and other financial intermediaries to electronically submit reports to the CRAon international electronic funds transfers of $10,000 or more. This link will build on existing infrastructure and no new burden will be imposed on financial intermediaries when it is introduced in January 2015.
• Canada continues to work bilaterally with tax administrations around the world. It participates in the Organisation for Economic Co-operation and Development's Working Party on Exchange of Information and Tax Compliance. It also participates in the Forum on Tax Administration's various networks such as, High Net Worth Individuals, Large Businesses Network, and Offshore Compliance to examine new trends and approaches to offshore compliance.  

Summary of progress

Canadian taxpayers trust us to conduct our activities with integrity, and this trust supports their willingness to voluntarily report accurately, file on time, and pay amounts due. We implemented new measures to ensure taxpayers' information continued to be managed with a high level of integrity and security.

• We updated the CRA's Integrity Framework, the Conflict of Interest Policy, and the procedures for addressing employee misconduct.
• We implemented procedures to improve audit quality and internal controls.
• We improved how we manage and monitor employee access to taxpayer information.
• We introduced a new level of security screening for people holding or applying for positions requiring a high degree of public trust.
• We took initial steps to establish an anonymous internal fraud and misuse reporting line.
• We updated internal investigation procedures.
• We met or exceeded Government of Canada standards for information technology security protocols, including cyber security protocols, based on a third-party (Gartner Group) review.  

Risk analysis

Risk management supports evidence-based decision-making in the face of change and uncertainty and contributes to the effectiveness and efficiency of business operations. As such, it is a sound corporate practice and an important part of good governance. The CRA's demonstrated ability to manage enterprise risk helps to maintain the trust and confidence of taxpayers, partners, and stakeholders, contributing to the organization's effective administration of tax and benefits.

The CRA produces an annual corporate risk profile (CRP) that supports corporate decision making. The risks identified in the CRP represent future events that may or may not occur depending on the environment. The intrinsic risks the CRA faces as the federal agency mandated to administer Canada's tax and benefits system are related to non-compliance and to the processes, resources, and systems that help the CRA successfully deliver its mandate.

The two business risks to which the CRA was most exposed in 2013-2014, in order of their potential impact on the CRA were the underground economy and aggressive tax planning. By properly identifying and managing these risks, the CRA ensures that it is well positioned to achieve its plans and priorities.

Key risks

Underground economy risk and aggressive tax planning risk

The underground economy and aggressive tax planning directly threaten the CRA's ability to protect the Government of Canada's revenue base and undermine the integrity and fairness of our self-assessment tax system. These risks are strongly influenced by external factors outside of the CRA's direct influence. This includes factors such as taxpayer behaviour, the state of the economy, globalization and transfer pricing, and the actions of aggressive tax planning scheme promoters in areas known to be tax havens.

Budget 2013 proposed a number of measures that would further enhance the CRA's ability to deter the underground economy and aggressive tax planning, several of which were implemented this past year as noted above. For more details, see section 2, the sub-section entitled "Reporting compliance."

Actual expenditures

Budgetary performance summary for strategic outcomes and programs (dollars)

Variance analysis

Taxpayer and business assistance

The variance between planned and actual spending is mainly due to lower than expected statutory payments related to the Canada/U.S. softwood lumber agreement (planned spending was $283 million and actual spending was $42 million, resulting in a difference of $241 million). This amount was partly offset by severance payments, parental benefits, and vacation credits included in actual spending, but not reflected in planned spending at the beginning of the year, as well as changes in employee benefit plans.

Alignment of spending with the whole-of-government framework

Alignment of 2013-2014 actual spending with the whole–of–government frameworkⁱⁱ (dollars)

CRA spending trend

Planned spending refers to those amounts for which a Treasury Board submission approval has been received no later than February 1, 2014. This cut-off date differs from the Main Estimates process. Therefore, planned spending may include amounts incremental to planned expenditure levels presented in the 2014–2015 Main Estimates.

As shown in the planned spending trend figure, the total spending includes all parliamentary appropriations (Main Estimates and Supplementary Estimates) and revenue sources. These include changes in the Canada Revenue Agency appropriation for: policy and operational initiatives arising from various federal budgets and economic statements; transfers from Public Works and Government Services Canada for accommodations and real property services; transfers to Shared Services Canada as a result of the creation of Shared Services Canada; disbursements under the Softwood Lumber Agreement; responsibilities related to the administration of corporate tax in Ontario and the harmonization of sales tax in Ontario and British Columbia; and the children's special allowance payments.

For fiscal years 2011-2012 to 2013-2014, total spending includes certain technical adjustments such as the CRA's carryforward of resources unused in the previous year and funding for maternity and severance benefits.

The CRA's spending trend over the period 2011-2012 to 2016-2017 is mainly due to:

• the implementation of initiatives to improve efficiency; and
• the fluctuation in the CRA's statutory authorities for the children's special allowance payments for eligible children in the care of agencies and institutions, the disbursements to the provinces under the Softwood Lumber Products Export Charge Act, 2006, the rates for the contributions to employee benefit plans, and the spending of revenues received through the conduct of operations under section 60 of the Canada Revenue Agency Act.

The planned spending trend figure also identifies funding in fiscal years 2014-2015 to 2016-2017 that will eventually "sunset" for the Softwood Lumber Agreement (expiring after 2015-2016) and the project to upgrade the CRA's individual income tax processing system.

The following table details the additional authorities approved for the Canada Revenue Agency after the tabling in Parliament of Main Estimates and reconciles with the total authorities shown on page 23.

Estimates by vote

For information on CRA's organizational votes and statutory expenditures, see:

Public Accounts of Canada 2014 on the Public Works and Government Services Canada websiteⁱⁱⁱ.

Footnote 1: The Canada Revenue Agency's total authorities increased by $134.0 million when comparing the planned spending to the total authorities available for use, an increase of 3.1%. This is mainly due to increases resulting from the carryforward of funds from 2012-2013 and severance payments, parental benefits, and vacation credits offset by reductions in the statutory authority for the disbursement of softwood lumber export charges to the provinces. For more information, see authorities approved after Main Estimates in section I of the departmental overview.

Footnote 2: The figure represents the actual spending for the CRA on a modified cash basis, based on Parliamentary appropriations used. See pages 106-107 of the Annual Report to Parliament for an explanation of how actual spending relates to results in the CRA Financial Statements – Agency Activities.

Footnote 3: Planned spending has been restated from the Canada Revenue Agency 2013-2014 Report on Plans and Priorities to distribute the real property accommodations funding (previously centralized in program 7 – internal services) to all applicable programs. Planned spending excludes severance payments, parental benefits, vacation credits and the carryforward of unused funds from 2012-2013 pursuant to the Canada Revenue Agency's two-year spending authority. This funding is received during the fiscal year and is only included in actual spending.

Footnote 4: Planned spending in 2015-2016 does not yet include a forecast of disbursements to the provinces under the Softwood Lumber Products Export Charge Act, 2006 (which amounted to $80.0 million in 2014-2015 and $283 million in 2013-2014); actual spending does include the following softwood lumber statutory disbursements: $42.3 million in 2013-2014; $136.9 million in 2012-2013; and $213.9 million in 2011-2012.

Footnote 5: Includes payments to Revenu Québec for the administration of the goods and services tax in that province (actual spending is $142.8 million in 2013-2014; $142.2 million in 2012-2013 and $141.1 million in 2011-2012).

Footnote 6: Includes statutory children's special allowance payments (actual spending is $235.4 million in 2013-2014; $238.0 million in 2012-2013; and $223.5 million in 2011-2012).

Footnote 7: Since the taxpayers' ombudsman operates at arms-length from the CRA, this department performance report does not report on the performance results of that office.