Annual Report to Parliament 2014-2015
Program: Collections and Returns Compliance
We collected $255 billion through source deductions
Trust Accounts – Compliance
Source deductions are the largest contributor to Canada's income tax revenue each year, accounting for $255 billion in 2014-2015 alone, helping to fund federal, provincial, and territorial government programs and infrastructure. To support and sustain Canada's source deduction system, the CRA makes sure taxpayers comply with their registration, withholding, remitting, reporting, and filing obligations related to payroll, GST/HST, other levies, and non-resident taxes.
Every year, millions of Canadians rely on their employers to deduct the right amount of income tax from their paycheques, and to deduct and remit their employee contributions to the Canada Pension Plan (CPP) and employment insurance (EI) along with the employer's portion of CPP contributions and EI premiums.
The CRA makes compliance easier by giving employers the information and tools they need. By expanding our knowledge and understanding of employers' needs at critical points in their business life cycles, we can tailor our approach. For example, in 2014-2015 we identified new employers and GST/HST registrants as population segments which could benefit from assistance. So, the Agency implemented automated dialing announcements to remind these groups of their filing obligations and due dates. By offering new employers and GST/HST registrants early assistance to meet their tax obligations, we aim to establish a pattern of ongoing compliance.
The CRA is always looking for new ways to use technology and risk-management techniques to increase efficiency and optimize compliance. For example, in 2014-2015, we developed the Non-Registrant Identification System, a risk-management tool which reduces our reliance on manual processes such as tracking inventory and production, takes greater advantage of the Agency's information holdings, and enhances our capacity to identify higher-risk accounts.
A legislative amendment introduced in Budget 2014 improved the CRA's efficiency and effectiveness in dealing specifically with GST/HST non-registrants. Previously, taxpayers required to register for the GST/HST had to apply to the Minister of National Revenue to do so, but the CRA could not compel them to register. The Minister now has authority to register taxpayers and assign them a GST/HST registration number if they fail to register.
- We reviewed over 585,361 payroll accounts.
- We resolved over 290,449 GST/HST files through our GST/HST delinquent filer program.
- We completed 744 employer compliance audits.
- We identified over $4.4 billion in non‐compliance, including source deductions.
Non-Filer – Compliance
Canada's tax system is based on self-assessment and willing compliance. For the system to be effective, individuals, corporations, and trusts must fill out an income tax return. Taxpayers who do not comply with this basic requirement are considered non-filers. The CRA is working to reduce this form of non-compliance.
Rapidly advancing technology and the availability of data-mining tools are helping the CRA to more quickly distinguish between lower-risk files and higher-risk files. Equipped with this knowledge, we are able to more effectively target our compliance measures.
In 2014-2015, the CRA was able to resolve low-risk, low-complexity files using a more efficient approach. Recognizing not all non-filers needed an in-depth review or face-to-face contact to encourage compliance, the Agency assigned low-complexity files from across Canada to call centre agents for follow-up. This brought in more than 25,000 returns without further intervention from the Agency.
The CRA is also working with provincial governments and other federal departments on projects to address non-compliance, with particular focus on the underground economy in high-risk sectors. In 2014-2015, the Agency surpassed its targets for the Ontario Compliance Project and the Enhanced Compliance Strategies.
- We received over 703,363 income tax and information returns as a result of our actions to prompt compliance by non‐filers.
- We identified $4 billion in non‐compliance in the non‐filer segment.
Collections – Tax and Government Programs
Canada's federal, provincial, territorial, and First Nations governments rely on tax revenues to meet their budget commitments, from building and maintaining infrastructure to supporting much-needed social programs. The CRA collects accounts receivable for tax and other government programs to support Canadian governments.
A 10-year collection limit on most tax debts took effect in March 2014. The CRA is implementing an automated system to track and resolve debts within the newly imposed time limit, and launched the first elements of the system in February 2015. It includes a central debt expiry calculator which calculates the limitation period on outstanding tax debts to help make sure the CRA only takes collection actions on legally enforceable accounts.
Better use of information
One of the collections-related priorities for the CRA in 2014-2015 was to review how well we incorporate existing research into our debt-management strategies, and to formalize a research framework which will provide easier access to existing data and research findings. Better access to research information will improve the CRA's automated collections strategies and lead to more effective targeted collections campaigns designed to positively influence payment compliance.
The CRA is constantly investigating ways to use information and advanced analytical insight to improve its non-compliance approaches and strategies. In 2014-2015, some of our major achievements included:
- the Dynamic Risk Score Framework, a new risk-assessment concept to help with the collection process
- developing three data-mining models, which are tools used to help with our GST/HST collections and compliance strategies
- incorporating the data available from the individual, business, GST/HST, non-filer, and payroll business lines into our research processes to facilitate more in-depth statistical analysis for our collection and compliance efforts
International collections strategies
The CRA is continuously improving its collections approach, including developing more specialized ways to deal with complex tax issues such as aggressive tax planning and the underground economy, both domestically and internationally. In 2014-2015, the CRA developed an aggressive tax planning and offshore non-compliance collections strategy designed to address these pervasive issues and to engage the help of national and international partners. The strategy included four main objectives:
- enhance the CRA's collections capacity
- work with other government stakeholders
- work with other countries
- leverage the private sector
Over the reporting period, the Agency enhanced partnerships with other government stakeholders and implemented file exchange processes for new initiatives related to the underground economy and aggressive tax planning. We also expanded our international partnerships, including signing the Treaty Collections agreement with the Federal Republic of Germany to allow CRA collection officers to ask for help from other countries when pursuing offshore collection activities.
The CRA's continued expansion of digital services in 2014-2015 included new options for taxpayers who need to repay debt. The Agency took several steps to build awareness of these options, such as:
- we now refer to various methods of e-payments in our collection letters
- we released a collections video to promote paying tax debt and highlight online payment options
- we now direct taxpayers toward convenient one-step payment methods through the My Payment portal or Plastiq
- we promoted payment arrangements using the My Account or My Business Account portals on the CRA's main webpage
The CRA is also exploring ways to offer financial institutions access to new digital options. For example, currently we manually send requirements to pay and requirements for information to financial institutions, and we receive manual responses. To better meet the needs of the financial community, we are exploring ways to transmit and receive documents and payments digitally. In 2014-2015, we began developing a framework for receiving documents online from multiple third parties. We also began exploring ways to allow the CRA to submit legal documents to financial institutions electronically.
The Agency is continuously evaluating new approaches to strengthen its collection activities, often piloting a new approach in one business line, such as individual collections, then expanding successful initiatives into other areas, such as business collections.
In 2014, we concluded phase two of the multi-year development of the CRA's integrated revenue collections computer system. Based on an earlier phase focused on T1 collections, phase two expanded into other business lines and has improved front-end workflow processes in the following ways:
- it reduced the percentage of calls abandoned by the caller in the Debt Management Call Centre from 15% to 1.2%
- it used the Debt Management Call Centre to handle calls from the T1 Non-Filer program
- it improved business intelligence by expanding the research, data analysis, and reporting environment
- it enhanced strategic or operational decisions, using GST/HST predictive data-mining models to support efficiency gains and better services to taxpayers.
In 2014-2015, we conducted a pilot initiative to find out if "nudging" is effective. This technique uses reinforcement messaging to achieve compliance. The pilot compared taxpayers who received nudge letters with taxpayers who received standard collection letters or who were not contacted directly by the CRA. The pilot revealed the nudge letters increased the total dollars collected by 12% compared to standard collection letters. Outcomes also showed more money was collected and more accounts were paid in full. The nudge technique is useful in encouraging compliance and the CRA will continue to use it.
- The CRA resolved over $52 billion in outstanding tax debt.
- The Agency recovered $584 million of the outstanding debt portfolio for Employment and Social Development Canada.
(Planned minus Actual)
|Collections and Returns Compliance||440,164,211||551,816,289||440,670,268||519,837,234||(79,166,966)|
|Trust Accounts – Compliance||70,092,188||96,356,362||(26,264,174)|
|Non-Filer – Compliance||62,262,599||70,288,652||(8,026,053)|
|Collections – Tax and Government Programs||308,315,481||353,192,220||(44,876,739)|
(Planned minus Actual)
|Collections and Returns Compliance||6,983||7,705||(722)|
|Trust Accounts – Compliance||1,746||1,962||(216)3|
|Non-Filer – Compliance||876||940||(64)3|
|Collections – Tax and Government Programs||4,361||4,803||(442)4|
|Expected Result||Performance Indicator||Target||Actual Result|
|Tax debt and government programs debt is resolved on a timely basis and is within targeted levels||Percentage of collections resolved compared to planned for tax programs||100%||106.5%|
|no data||Percentage of collections resolved compared to planned for Government Programs||100%||96.7%|
|Ensure compliance with registering, filing, and remitting requirements as they relate to the Income Tax Act, the Canada Pension Plan, the Employment Insurance Act, the Excise Tax Act, and other legislation||Percentage of cases resolved, returns obtained, and accounts registered compared to forecast||100%||103.3%|
|Expected Result||Performance Indicator||Target||Actual Result|
|Ensure compliance with filing, remitting, and GST/HST registration requirements as they relate to the Income Tax Act, the Canada Pension Plan, the Employment Insurance Act, and the Excise Tax Act||Percentage of dollar value of assessments and estimated assessments related to Employer, GST/HST, and Part XIII related compliance and non-registration activities compared to forecast||95%||109%|
|no data||Percentage of cases resolved and accounts registered directly associated to the value of assessments related to employer, GST/HST, and Part XIII related compliance activities compared to forecast||95%||106%|
|no data||Percentage of completed compliance activities contributing to the value of assessments related to employer, GST/HST, and Part XIII related compliance activities compared to forecast||95%||101%|
|Expected Result||Performance Indicator||Target||Actual Result|
|Ensure compliance of individuals, corporations, and trusts with filing requirements as they relate to the Income Tax Act and other legislation||Percentage of dollar value of returns assessed related to non-filer activities for individuals, trusts, and corporations compared to forecast||95%||141%5|
|no data||Percentage of returns assessed related to non-filer activities for individuals, trusts, and corporations compared to forecast||95%||116%5|
|no data||Percentage of supporting non-filer compliance activities for individuals, trusts, and corporations compared to forecast||95%||104%|
|Expected Result||Performance Indicator||Target/Forecast||Actual Result|
|The tax debt portfolio is managed for the federal and provincial or territorial governments||Percentage of tax services office tax accounts receivable aged inventory (>5 years) in dollars compared to closing tax services office inventory||18%6||13.3%|
|no data||Percentage of assessed years totalling eight years or older by fiscal year-end for T1, T2, and GST/HST accounts||10%7||3%|
|no data||Percentage of assessed years totalling five years or older by fiscal year-end for employer accounts||10%||10.8%|
|Tax debts are collected and resolved for the federal and provincial or territorial governments on a timely basis and within targeted levels||Percentage of accounts receivable dollars resolved (production) in the fiscal year compared to the dollar value of accounts receivable received (intake) in the fiscal year||90%||92.4%|
|no data||Percentage of accounts receivable under one year as a percentage of gross receipts||4%||3.7%|
1. Planned spending excludes severance payments, parental benefits, vacation credits, the one-time transition payment for implementing the pay-in-arrears model, and the carry-forward of unused funds from 2013-2014 under the CRA's two-year spending authority. This funding is received during the fiscal year and is included only in actual spending.
2. Modified cash basis, based on Parliamentary appropriations used. See Parliamentary appropriations for an explanation of how actual spending relates to results in the CRA Financial Statements – Agency Activities.
3. Increase primarily due to increased spending to implement and administer new measures to improve the fairness and integrity of the tax system and strengthen tax compliance.
4. Increase primarily due to additional collection activity to increase production and slow the growth of inventory.
5. Non-filer production and fiscal impact results reflect the strong performance in core program, and enhanced regional efforts to meet commitments under the enhanced compliance initiatives and Ontario compliance project, which are largely focused on high-yield workload selection and the underground economy.
6. Beginning in the 2016-2017 reporting period, the CRA has adjusted the target from 18% to 17%.
7. Beginning in the 2015-2016 reporting period, the CRA has adjusted the target from 10% to 5%.
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