departmental performance report 2012-13

[section 1: organizational overview]

[raison d'être]

The Canada Revenue Agency (CRA) is responsible for administering, assessing, and collecting hundreds of billions of dollars in tax revenues annually. The money the CRA collects is used by federal, provincial, territorial and First Nations governments to fund important social programs, provide essential services and build and maintain the infrastructure needed for continued economic prosperity. The CRA also directly delivers billions of dollars in benefits and tax credits that contribute to the well-being of Canadian families, children, seniors, and persons with disabilities.

In carrying out its mandate, the CRA strives to ensure that Canadians:

[responsibilities]

The CRA has a broad range of responsibilities. In addition to the Income Tax Act and the Excise Tax Act, the CRA administers legislation for the Canada Pension Plan, the Employment Insurance Program, and softwood lumber. 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.

We believe that providing exceptional service is one of the best ways to maximize compliance and ensure that recipients receive their full benefit entitlements. We are working with taxpayers and other important players in the tax system to identify service gaps, reduce the compliance burden, and develop innovative ways to deliver services and information. As the guardians of the integrity of our tax and benefits system, we are also tasked with enforcing compliance. In this role, we identify, deter, and correct non-compliant behaviour.

The CRA delivers a number of benefit and tax credit programs on behalf of the federal government. In addition, we act as the service provider of a number of on-going and one-time tax credits and benefit programs on behalf of provincial, and territorial governments. As a central service provider for these other levels of government, we help to reduce the cost of government by providing cost-effective services and programs that prevent unnecessary administrative duplication. Having one point of service delivery also helps to reduce the compliance burden placed on benefit recipients and taxpayers.

Finally, the CRA ensures the fairness and transparency of our tax and benefits system by offering recourse for those who do not agree with our decisions, a formal service complaints process for those who are not satisfied with our service, and relief to taxpayers who, through no fault of their own, find themselves unable to fully comply with their obligations.

Our approach

Providing exceptional service to make compliance easier - we believe that providing the best possible service and easing the compliance burden is the best way to empower taxpayers and optimize compliance.

Ensuring compliance to safeguard our self-assessment system - the CRA is committed to ensuring that everyone pays their share and meets their obligations.

Acting with integrity to maintain the trust of Canadians - we believe that our absolute commitment to integrity preserves the trust that Canadians place in our administration.

Leading change through innovation - our goal is to remain among the world's top tax administrations by embracing innovation and leading change.

[strategic outcomes and program alignment architecture]

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[organizational priorities]

Leading change through innovation

Our approach to innovation is driven by our desire to remain a world-class tax and benefits administration. From the delivery of tax information through social media to the re-engineering of internal processes, we are demonstrating our ability to innovate and find better ways to meet the evolving needs and expectations of taxpayers, benefit recipients, and governments. As an organization, we are not satisfied by simply reacting to change, we are embracing innovation and leading change.

Priority Type
(Footnote 1)
Strategic outcome
Service - Providing exceptional service to make it easier to comply. Ongoing
  • Taxpayers meet their obligations and Canada's revenue base is protected
  • Eligible families and individuals receive timely and correct benefit payments.

Summary of progress

Priority Type
(Footnote 1)
Strategic outcome
Compliance - Ensuring that all taxpayers pay their share. Ongoing Taxpayers meet their obligations and Canada's revenue base is protected.

Summary of progress

Priority Type
(Footnote 1)
Strategic outcomes
Integrity in our core business operations - Maintaining Canadians' trust.  Ongoing
  • Taxpayers meet their obligations and Canada's revenue base is protected.

Summary of progress

(Footnote 1): Type is defined as follows: previously committed to--committed to in the first or second fiscal year prior to the subject year of the report; ongoing--committed to at least three fiscal years prior to the subject year of the report; and newly committed to--in the reporting year of the Departmental Performance Report.

The following key performance indicators support the achievement of our strategic outcome.

Performance indicators Targets 2010-2011 2011-2012 2012-2013
Individuals who paid their reported taxes on time 90% 94% 94% 95%
Individuals that filed their tax return on time 90% 93% 91% 92%
Corporations with taxable income that filed their tax return on time 90% 85% 85% 85%

Businesses registered for the GST/HST

90% 93% 94% 95%

[risk analysis]

Risk management is a sound corporate practice and an important component of good governance. It supports evidence based decision-making in the face of change and uncertainty and contributes to the effectiveness and efficiency of business operations.

To support the use of risk management in corporate decision making, the CRA produces an annual corporate risk profile (CRP). The risks identified in this profile represent uncertain future events that may or may not occur depending on the evolution of the environment. Our CRP identifies the intrinsic risks the CRA faces as the federal agency that is tasked with the administration of Canada's self-assessment tax and benefits regime.

The 2012-13 risk profile identified 30 enterprise risks that could potentially impact the CRA's ability to successfully fulfil its mandate. These risks are divided into three broad categories: business risks, strategic risks, and operational risks. Business risks are those that could directly compromise the achievement of the CRA's mandate. Strategic and operational risks relate to the plans, people, processes, and systems required to enable the CRA to effectively deliver tax and benefits programs both now and in the future.

As an enterprise, we are addressing these risks by ensuring that the CRA has the right plans, resources, and systems in place to mitigate current and future risks and remains in a position to capitalize on opportunities for improvement and innovation. The three highest risks identified in our CRP 2012-2013 were the underground economy, aggressive tax planning, and objections. These risks represent a significant threat to the successful fulfilment of our mandate.

[underground economy risk and aggressive tax planning risk]

The underground economy (UE) refers to income and transactions that are not declared or reported. The existence of the UE undermines the integrity of our self-assessment tax system, distorts the competitive playing field for business, and represents a significant loss of revenue for the Government of Canada. The underground economy includes unreported income and business activity, and the under-reporting of business transactions.

Aggressive tax planning (ATP) refers to a complex set of non-compliance behaviours. ATP is generally facilitated through schemes that involve very complex financial structures with both domestic and international components that are designed for the sole purpose of avoiding the payment of taxes. They are often arranged by tax planners and promoters whose operations include connections in countries that are known to be tax havens.

The CRA has identified the UE and ATP as its two highest risks. They directly threaten the CRA's ability to protect the Government of Canada's revenue base. These risks are strongly influenced by external factors such as taxpayer behaviour, the state of the economy, and the actions of ATP scheme promoters who gain financially from designing, marketing, and promoting ATP schemes. Consequently, while the CRA continues to dedicate significant efforts to mitigate the immediate risks represented by the UE and ATP, it is implementing longer term strategies to ensure that it has the administrative tools and powers to mitigate the unknown future level of risk that is driven by emerging domestic and external influences.

The CRA continues to work closely with the Department of Finance, the Department of Justice, and other government partners to develop the legislative tools needed to effectively deal with ATP. This includes legislation to get better and faster access to information, close tax loopholes, and impose stronger sanctions on those who promote or participate in ATP schemes.

Budget 2013 proposed a number of measures that will further build the CRA's capacity to combat international tax evasion and aggressive tax planning, including an initiative to pay individuals with knowledge of major international tax non-compliance and new reporting requirements for Canadian taxpayers with foreign income or properties.
The CRA is further increasing its ability to combat UE and ATP by contributing to efforts to strengthen the legislative framework for international taxation and by sharing intelligence and best practices in international forums like the Organisation for Economic Co-operation and Development (OECD).

The CRA plays a leadership role in several multilateral and bilateral tax forums and working groups to develop a greater understanding of UE and ATP and more effective strategies to deal with them.

[objections risk]

Providing taxpayers with a timely, impartial, and consistent review process to resolve disputes supports the integrity of the tax system and promotes the CRA's reputation as a fair and trusted tax administrator. Ensuring that the objections workflow is managed efficiently and effectively is important for the CRA.

The CRA's focus on aggressive tax planning over the last few years, and the successful identification of a large number of tax schemes, has resulted in an increase in the number of disputes filed with the CRA. We are responding to these operational pressures by streamlining our processes and improving our management of files awaiting legal decisions on leading court cases. Despite the fact we are facing increasing workload pressures, we are maintaining a high quality standard in the processing of these disputes.

[risk summary]

Risk Risk response strategy Link to program alignment architecture Link to organizational priorities
Underground economy
  • As identified in the 2012-13 Report on Plans and Priorities, mitigating the risk posed by the UE is one of the CRA's top priorities.
  • In 2012-2013, the CRA continued to build on its understanding of the factors that drive businesses and individuals to participate in the UE. Through our work with other federal agencies and departments, international organizations, and tax administrations in other countries we have shared best practices and advanced innovative compliance risk treatments to address the UE. The CRA's strategy to address the UE employs a multi-faceted approach that leverages third-party research in addition to inhouse analytics to direct resource allocation to identified emerging UE risks. To counter regional UE risks, the CRA is also engages in targeted audits and outreach initiatives. As the UE is constantly evolving, the CRA continually adapts its UE compliance strategy. To this end, the CRA recently completed a CRA-wide stocktaking exercise of the activities and initiatives in place to address the UE. The CRA will analyze this information to measure its progress and identify gaps that could be addressed in a refreshed UE strategy.
Reporting compliance Compliance
Aggressive tax planning
  • In 2012-2013, ATP continued to be one of the CRA's top risk priorities.
  • The CRA has in place a comprehensive strategy to address ATP. This includes targeted compliance efforts aimed at addressing identified schemes such as offshore abusive tax schemes. This included the leveraging of domestic and international partnerships to improve the exchange of information and learn from the experiences of other countries. As well, we have worked with the Department of Finance to develop legislative amendments to close existing loop holes and strengthen our administrative tools for dealing with ATP. These legislative amendments were announced in the 2012 and 2013 budgets.
Reporting compliance Compliance
Objections
  • The objections risk was identified as one of the top CRA risks in 2012-2013.
  • During 2012-2013, several steps were taken to optimize and streamline our dispute resolution and redress programs. This included the centralization of the physical storage and upkeep for ATP objection files awaiting legal decisions on leading court cases. This will more effectively control administrative costs related to these files. Work was completed on the development of a web-based information management system to coordinate the processing of ATP files. This system will be implemented in 2013-2014 and will standardize and streamline the processing of all documentation required to manage objections involving large groups of files. We also piloted changes in our resolution process, such as fast tracking and segmentation of objections, to identify cost savings and ensure the quality of decisions. In 2012-2013, legislation was introduced to formally bind the result of groups of objections to court decisions to reduce the cost of litigation.
Appeals Service and integrity in our core business operations

[summary of performance]

2012-2013 financial resources (thousands of dollars)

Total budgetary expenditures Planned spending Total authorities (Footnote 1) Actual spending (Footnote 2) Difference
4,374,952 4,374,952 4,673,395 4,318,468 56,484

Number may not add due to rounding.

(Footnote 1): The Canada Revenue Agency's total authorities increased by $63.3 million from $4,610.1 million in 2011-2012 to $4,673.4 million in 2012-2013, a growth of 1.4%. This is attributable to a number of specific changes including incremental funding related to the implementation of the harmonized sales tax for Ontario and British Columbia and the affordable living tax credit for Nova Scotia, tax measures introduced in previous federal budgets, the personal income tax processing system project, real property and accommodations services, and adjustments to statutory authorities. These increases were offset by the transfer to Shared Services Canada for information technology services.

(Footnote 2): This figure represents the actual spending for the CRA on a modified cash basis. Please refer to page 156 for an explanation of how this figure relates to the CRA Financial Statements - Agency Activities.

2012-2013 human resources (full-time equivalents)

Planned Actual Difference
40,388 39,521 867

[performance summary table]

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

(in thousands of dollars)
Programs Total
budgetary
expenditures
Planned
spending
(Footnote 1) 
Total
authorities
Actual
spending
2012-13 2012-13 2013-14 2014-15 2012-13 2012-13 2011-12 2010-11
Assessment of returns
and payment processing
(Footnote 2)
Alignment to
Government of Canada outcomes:
Well-managed and efficient
government operations
617,948 660,575 638,796 602,762 709,447 643,800 642,057 683,036
Taxpayer and
business assistance
(Footnote 3)
Alignment to
Government of Canada outcomes:
A transparent, accountable, and
responsive federal government
543,025 583,128 579,366 286,322 467,240 453,280 530,542 551,883
Accounts receivable
and returns
compliance
Alignment to
Government of Canada outcomes:
Well-managed and efficient
government operations
432,277 495,786 492,184 477,194 541,527 512,218 521,505 511,567
Reporting compliance Alignment to
Government of Canada outcomes:
Well-managed and efficient
government operations
985,132 1,074,885 1,106,011 1,078,912 1,233,061 1,170,474 1,055,758 1,071,359
Appeals Alignment to
Government of Canada outcomes:
A transparent, accountable,
and responsive
federal government
153,855 171,830 196,783 191,306 212,453 192,046 175,064 164,065
Strategic outcome
sub total
2,732,237 2,986,204 3,013,140 2,636,496 3,163,728 2,971,818 2,924,926 2,981,910

Number may
not add due
to rounding.

(Footnote 1): Planned spending has been restated from what was shown in the Canada Revenue Agency 2012-2013 Report on Plans and Priorities in order to distribute the real property accommodations funding (previously centralized in the internal services program) to all applicable programs. It should also be noted that planned spending excludes severance payments, parental benefits and vacation credits, as this funding is received during the fiscal year and is only included in actual spending.

(Footnote 2): Includes payments to Revenu Québec for the administration of the goods and services tax in that province (actual spending is $142.2 million in 2012-2013; $141.1 million in 2011-2012, and $142.2 million in 2010-2011).

(Footnote 3): Planned spending in 2014-2015 does not yet include a forecast of disbursements to the provinces under the Softwood Lumber Products Export Charge Act, 2006 (which amounted to $283 million in 2013-2014 and $280 million in 2012-2013); Actual spending does include the following Softwood Lumber statutory disbursements ($136.9 million in 2012-2013; $213.9 million in 2011-2012, and $220.7 million in 2010-2011).

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

Program Total
budgetary
expenditures
Planned
spending
(Footnote 1)
Total
authorities
Actual
spending
2012-13  2012-13 2013-14 2014-15 2012-13 2012-13 2011-12 2010-11
Benefit programs
(Footnote 2)
Alignment to
Government
of Canada
outcomes:

Income security
and
employment
for Canadians
 
367,546 377,590 392,655 392,459 393,742 383,719 369,783 369,838
Strategic outcome
sub total
367,546 377,590 392,655 392,459 393,742 383,719 369,783 369,838

(Footnote 1): Planned spending has been restated from what was shown in the Canada Revenue Agency 2012-2013 Report on Plans and Priorities in order to distribute the real property accommodations funding (previously centralized in the internal services program) to all applicable programs. It should also be noted that planned spending excludes severance payments, parental benefits and vacation credits, as this funding is received during the fiscal year and is only included in actual spending.

(Footnote 2): Includes statutory Children’s Special Allowance payments (actual spending is $238.0 million in 2012-2013; $223.5 million in 2011-2012, and $222.4 million in 2010-2011).

Strategic outcome: Taxpayers and benefit recipients receive an independent and impartial review of their service-related complaints

Program Total
budgetary
expenditures
Planned
spending
(Footnote 1)
Total
authorities
Actual
spending
2012-13 2012-13 2013-14 2014-15 2012-13 2012-13 2011-12 2010-11
Taxpayers'
ombudsman
(Footnote 2)
Alignment to
Government of Canada outcomes:
A transparent, accountable,
and responsive
federal government
3,232 3,458 3,098 2,967 3,437 2,623 2,731 2,730

Strategic outcome
sub total

3,232 3,458 3,098 2,967 3,437 2,623 2,731 2,730

(Footnote 1): Planned spending has been restated from what was shown in the Canada Revenue Agency 2012-2013 Report on Plans and Priorities in order to distribute the real property accommodations funding (previously centralized in the internal services program) to all applicable programs. It should also be noted that planned spending excludes severance payments, parental benefits and vacation credits, as this funding is received during the fiscal year and is only included in actual spending.

(Footnote 2): Since the Taxpayers’ Ombudsman operates at arms-length from the CRA, this Departmental Performance Report does not report on the performance results of that office.

[performance summary table for internal services]

The following program supports all strategic outcomes within this organization

(in thousands of dollars)
Program Total
budgetary
expenditures
  Planned
spending (Footnote 1)
Total
authorities
Actual
spending
2012-13 2012-13 2013-14 2014-15 2012-13 2012-13 2011-12 2010-11
Internal services 1,271,936 1,007,700 861,670 833,085 1,112,486 960,309 1,053,851 1,064,087
Sub total    1,271,936 1,007,700 861,670 833,085 1,112,486 960,309 1,053,851 1,064,087

(Footnote 1): Planned spending has been restated from what was shown in the Canada Revenue Agency 2012-2013 Report on Plans and Priorities in order to distribute the real property accommodations funding (previously centralized in the internal services program) to all applicable programs. It should also be noted that planned spending excludes severance payments, parental benefits and vacation credits, as this funding is received during the fiscal year and is only included in actual spending.

[total performance summary table]

(in thousands of dollars)
Strategic
outcomes
and
internal
services
Total
budgetary
expenditures
Planned
spending
Total
authorities
Actual
spending
2012-13 2012-13 2013-14 2014-15 2012-13 2012-13 2011-12 2010-11
Total
(Footnote 1) 
4,374,952 4,374,952 4,270,563 3,865,007 4,673,395 4,318,468 4,351,292 4,418,566
Less:
Respendable non-tax
revenue -
Pursuant to
Section 60
of the
Canada
Revenue
Agency Act
206,769 206,769 193,779 190,792 166,977 166,977 245,459 245,118
Plus: Cost
of services
received
without
charge
N/A 279,294 421,532 412,199 N/A 448,298 321,788 261,489
Net cost
of the
CRA
(Footnote 2)
N/A 4,447,477 4,498,316 4,086,414 N/A 4,599,789 4,427,620 4,434,937

Number may not add due to rounding.

(Footnote 1): The reduction in planned spending of $510 million over the planning period (from $4.375 billion in 2012-2013 to $3.865 billion in 2014-2015) is primarily attributable to the gradual implementation of savings measures arising from the Budget 2012 spending review and the forecasts for softwood lumber statutory disbursements for 2014-2015 that are not yet available (amount was $280 millions in 2012-2013).

(Footnote 2): Following a modification to the Treasury Board Accounting Standard 1.2 issued in March 2011, non-respendable non-tax revenues, which were shown in previous reports, cannot be used to discharge the CRA's liabilities. As a result, non-respendable non-tax revenues are considered to be earned on behalf of the Government of Canada. Therefore, commencing in 2010-2011, the net cost of operations will not be reduced by the non-respendable non-tax revenues.

[variance analysis for 2012-2013]

An explanation of variances between planned and actuals of +/- 5% by program can be found in the table below.

Program
Taxpayer and business assistance
  • The variance between planned and actual spending is primarily the result of lower than planned statutory payments related to the Canada/US softwood lumber agreement (planned spending is $280M and actual spending is $137M resulting in a difference of $143M), which was partially offset by severance payments, parental benefits, and vacation credits included in actual spending but not reflected in planned spending.
Reporting compliance
  • The variance between planned and actual spending is primarily the result of severance payments, parental benefits, and vacation credits included in actual spending but not reflected in planned spending.
Appeals
  • The variance between planned and actual spending is primarily the result of:
  • legal services expenditures, which was reflected in internal services as part of the Main Estimates and transferred to the appeals program during the 2012-2013 fiscal year; and
  • severance payments, parental benefits, and vacation credits included in actual spending but not reflected in planned spending.

[expenditure profile]

(in millions of dollars)
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Main Estimates  3,737.4 4,388.0 4,476.4 4,293.0 4,375.0
Planned Spending   3,875.2 4,388.0 4,523.5 4,293.8 4,375.0
Total Authorities  4,370.7 4,586.2 4,596.7 4,610.1 4,673.4
Actual Spending   4,198.7 4,406.5 4,418.6 4,351.3 4,318.5

    
For the period 2008-2009 to 2012-2013, total spending amounts include all parliamentary appropriations and revenue sources: Main Estimates, Supplementary Estimates, funding associated with the increased personnel costs of collective agreements, severance payments, parental benefits and vacation credits, as well as funding to implement Federal Budget initiatives and the CRA's carryforward adjustments from the prior year. It also includes spending of revenues received through the conduct of the CRA's operations pursuant to Section 60 of the Canada Revenue Agency Act, payments to private collection agencies pursuant to Section 17.1 of the Financial Administration Act, Children's Special Allowance payments, and disbursements to the provinces under the Softwood Lumber Products Export Charge Act, 2006.

Since 2008-2009, the Canada Revenue Agency's reference levels have changed primarily as a result of: collective agreements/contract awards; policy and operational initiatives arising from various federal budgets and economic statements; transfers from the Department of Public Works and Government Services Canada for accommodations and real property services; the commencement of responsibilities related to the administration of corporate tax in Ontario and the harmonization of sales tax in Ontario and British Columbia, and the creation of Shared Services Canada.

The CRA's Statutory Authorities have fluctuated over the course of the 2008-2009 to 2012-2013 period as a result of: adjustments to the Children's Special Allowance payments for eligible children in the care of specialized institutions; adjustments to the rates for the contributions to employee benefit plans; increases to the spending of revenues received through the conduct of operations pursuant to Section 60 of the Canada Revenue Agency Act; the introduction from 2007-2008 to 2009-2010 of payments to private collection agencies pursuant to Section 17.1 of the Financial Administration Act; and finally, the introduction in 2006, and annual adjustments to, disbursements to the provinces under the Softwood Lumber Products Export Charge Act, 2006.

In 2012-2013, of the $4,673.4 million total authority, the CRA's actual spending totalled $4,318.5 million resulting in $354.9 million remaining unexpended at year-end. After deducting unused resources related primarily to British Columbia's decision to revert to a provincial sales tax model, proposed Foreign Investment Entities and Non-Resident Trusts, Budget 2012 Spending Review, government advertising campaigns, accommodation and real property services as well as employee benefit plans associated with the conversion of non-personnel to personnel costs, the remaining $299.8 million is available for use by the CRA in 2013-2014 under its statutory two year spending authority. This amount represents 6.4% of the total authority.

[authorities approved after Main Estimates]

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 18.

(in thousands of dollars)
2012-2013 Main Estimates 4,374,952
Planned spending (as reported in the 2012-13 Report on Plans and Priorities) 4,374,952
Carryforward from 2011-2012 248,318
Severance payments, parental benefits, and vacation credits 215,792
Transfer from Public Works and Government Services Canada - Reduction in accommodation requirements 7,600
Transfer to Shared Services Canada - Adjustment to initial transfer to Shared Services Canada (4,261)
Year-end adjustments to statutory authorities:
  • Increased employee benefit plans costs
7,164
  • Increased Children's Special Allowance payments
5,007
  • Court awards
1,561
  • Crown assets disposals
133
  • Decreased respendable revenue mainly for the provision of services to Canada Border Services Agency
(39,792)
  • Decreased disbursements to provinces under the Softwood Lumber Products Export Charge Act, 2006
(143,087)
Other minor adjustments 10
Total Authorities at year-end 4,673,395

Number may not add due to rounding.

[estimates by vote]

For information on Canada Revenue Agency organizational Votes and/or statutory expenditures, please see the Public Accounts of Canada 2013 (volume II). An electronic version of the Public Accounts is available at: www.tpsgc-pwgsc.gc.ca/recgen/txt/72-eng.html.

[contribution to the federal sustainable development strategy]

The Federal Sustainable Development Strategy outlines the Government of Canada's commitment to improving the transparency of environmental decision-making by articulating its key strategic environmental goals and targets.

The CRA ensures that consideration of these outcomes is an integral part of its decision-making processes. The CRA contributes to the following Federal Sustainable Development Strategy 2010-2013 themes as denoted by the visual identifier and associated program below.

Theme IV Shrimking the environmental footprint beginning with government - Internal services

For additional details on the CRA's activities to support sustainable development, please see page 78 and www.cra-arc.gc.ca/gncy/sstnbl/menu-eng.html. For complete details on the Federal Sustainable Development Strategy, please visit www.ec.gc.ca/dd-sd/default.asp?lang=En&n=CD30F295-1.

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