Annual Report to Parliament 2014-2015

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Section 1: Organizational Expenditure Overview

Organizational profile

Appropriate Minister: The Honourable Diane Lebouthillier, P.C., M.P.

Institutional head: Andrew Treusch

Ministerial portfolio: National Revenue

Enabling instrument: Canada Revenue Agency Act www.laws-lois.justice.gc.ca/eng/acts/C-10.11/ ⁱⁱ

Year of commencement: 1999

Organizational context

Raison d'être

The Minister of National Revenue is responsible for the Canada Revenue Agency (CRA). The CRA is responsible for administering, assessing, and collecting hundreds of billions of dollars in taxes annually. The tax revenue it collects is used by federal, provincial, territorial and First Nations governments to fund the programs and services that contribute to the quality of life of Canadians. The CRA also uses its federal infrastructure to deliver billions of dollars in benefits, tax credits, and other services that support the economic and social well-being of Canadian families, children and persons with disabilities.

In carrying out its mandate, the CRA strives 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 contested decisions.

Responsibilities

The Agency has a broad range of responsibilities. In addition to administering the Income Tax Act and the Excise Tax Act, the CRA administers legislation relating to the Canada Pension Plan and the employment insurance program. It also enforces legislation governing charities, collects tobacco taxes and duties, administers registered plans, and collects debts for the federal government.

Serving taxpayers:

The CRA gives taxpayers the accurate and timely information they need to comply with Canada's tax laws through its website, call centres, publications, and technical interpretations and rulings. The Agency regulates charities and monitors and administers deferred income and savings plans to make sure they meet legal requirements. It assesses and processes tax returns and payments for individuals and businesses as quickly and accurately as possible.

Promoting and enforcing tax compliance:

The CRA identifies, addresses, and deters non-compliance with Canada's tax laws by promoting and enforcing compliance. It conducts outreach activities, provides targeted taxpayer assistance, and educates taxpayers of their tax responsibilities. It undertakes domestic and international examinations, audits, and criminal investigations. It helps to resolve tax debt quickly and it enforces compliance with tax laws for registering, filing, withholding, and paying debt obligations.

Facilitating redress:

The CRA provides a fair and impartial redress process to resolve disputes and requests for relief arising from decisions the CRA made. 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 goods and services tax/harmonized sales tax credit and the universal child care benefit. The Agency makes sure the right benefit payment goes to the right individual at the right time and gives recipients accessible information and timely responses to their enquiries.

Strategic outcomes and program alignment architecture

Organizational priorities

The CRA helps sustain the economic and social well-being of Canadians. It collects tax revenues to support the important social programs and essential services delivered by Canada's federal, provincial, territorial, and Aboriginal governments. In 2014-2015, the CRA interacted with more than 31 million individuals and businesses processed over $469 billion in taxes and duties, and issued almost $22 billion in benefits payments to approximately 12 million recipients. While many of our initiatives this past year focused on change and continuous improvement, we have not changed the fundamental elements which shape and define our business: service, compliance, integrity and security, innovation, and people.

Service: Information and digital services aid compliance

The CRA's approach to service transformation is fully aligned with government of Canada priorities, and aims to improve the way we serve Canadians, increasing the number and uptake of digital services, and reducing red tape. We focus on making it easier for those who want to comply with their tax obligations and difficult for those who do not, while meeting the highest standards of integrity and security. In 2014-2015, the Agency concentrated on using technology to expand digital services and keep pace with the evolving needs of Canadians.

Cutting red tape for small and medium businesses

We also continued to streamline filing and reporting processes and reduce red tape. In the fall of 2014, the Agency held a second round of red tape reduction consultations with small and medium businesses, bookkeepers, accountants, and stakeholder associations. We included in-person, online, and written consultations to make sure everyone in the business community could be heard. Participants welcomed the progress we have made so far and gave valuable feedback on what should be our new priorities.

Focus on non-compliance

Canada enjoys a high level of compliance, with 93% of individuals filing their tax returns and paying on time without CRA intervention. This lets the CRA focus on addressing non-compliance in all its forms, including failure to file or register, failure to report a business activity or income, failure to report employment income, or failure to pay taxes owing.

In 2014-2015, new technology, advanced data analysis, and improved risk-management techniques gave us a better look at behaviours and trends among corporate taxpayers, from small and medium enterprises to large, complex companies. This insight allowed us to more effectively address ongoing issues such as the underground economy and aggressive tax planning.

In 2014-2015, the CRA advanced each of its five strategic priorities and delivered on its commitments to the Government of Canada and our Board of Management. Our accomplishments for our strategic priorities are summarized in the following tables. Each priority and the Agency's accomplishments for this fiscal year are detailed in the later chapters on our programs.

Our priorities contributed to progress towards achieving our strategic outcomes:

• Taxpayers meet their obligations and Canada's revenue base is protected
• Eligible families and individuals receive timely and accurate benefit payments

Risk analysis

The CRA's commitment to enterprise risk management and demonstrated ability to manage risk helps to maintain the trust and confidence of its partners, stakeholders, and all Canadians, and contributes to the Agency's effective administration of tax and benefits.

To support the use of enterprise risk management in corporate decision-making, the CRA produces an annual corporate risk profile which identifies and analyzes the risks with the potential to prevent the CRA from achieving its mandate.

In 2014-2015 the top three enterprise risks were aggressive tax planning, the underground economy, and protection of information. The prioritization of these three risks reflects their potential impact on the CRA's commitment to service, compliance, integrity, security and innovation. By making sure its risks are properly identified and managed, the CRA continues to make certain it is well positioned to achieve its mandate.

Aggressive tax planning and underground economy risk

A small but significant minority of taxpayers willingly participates in aggressive tax planning or in the underground economy. Participating in these activities undermines the integrity of the Canadian tax system, negatively affects the economy, and creates an uneven playing field for individuals and businesses.

For 2014-2015, the CRA implemented several measures to deter aggressive tax planning and reduce participation in the underground economy. The Agency also identified new compliance risks related to evolving technologies, platforms, and shifting business models.

Protection of information

Protecting the information of taxpayers and benefit recipients remains a key priority for the CRA. Canadians trust the CRA to safeguard their information and carry out its duties with the highest level of integrity and security. Because the Canadian tax system is based primarily on voluntary compliance, upholding public trust is critical to the CRA's mandate. In 2014-2015, we made significant progress on a number of fronts, as the CRA dedicates itself to vigorously keeping pace with the changing environment related to protecting information.

Actual expenditures

Budgetary performance summary for strategic outcomes and programs

Alignment of spending with the whole–of–government framework

CRA spending trend (dollars)

The planned spending trend figure shows all parliamentary appropriations (Main Estimates and Supplementary Estimates) and revenue sources provided to the CRA for 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, disbursements under the Softwood Lumber Agreement, responsibilities related to the harmonization of sales tax in Ontario and British Columbia, the children's special allowance payments, and initiatives to improve efficiency.

Total spending for fiscal years 2012-2013 to 2014-2015 also includes technical adjustments such as the CRA's carry-forward from the previous year and funding for maternity and severance benefits. The 2014-2015 fiscal year also includes funding for the one-time transition payment for implementing the pay-in-arrears model.

Over the period 2012-2013 to 2017-2018, the CRA's appropriations show a decline. Funding received for upgrading of the individual income tax processing system and various wage settlements were more than offset by decreases due to the following:

• initiatives to improve efficiency
• the fluctuation in the CRA's Statutory Authorities for disbursements to the provinces under the Softwood Lumber Products Export Charge Act, 2006 and the rates of the contributions to employee benefit plans
• the planned decrease in funding for implementing the harmonized sales tax for Ontario and British Columbia and the Affordable Living Tax Credit for Nova Scotia and the administration of the Softwood Lumber Agreement
• other miscellaneous reductions such as the transfer to Public Works and Government Services Canada for accommodation and real property services, adjustment to funding previously transferred to Shared Services Canada, and the transfer of CRA training programs to the Canada School of Public Service

The following table details the additional authorities approved for the CRA after the Main Estimates were tabled in Parliament and reconciles with the total authorities shown in the budgetary performance summary for strategic outcomes and programs.

Estimates by vote

For information on the CRA's organizational votes and statutory expenditures, see the Public Accounts of Canada 2015^vi on the Public Works and Government Services Canada website.

Taxpayer Bill of Rights

1. You have the right to receive entitlements and to pay no more and no less than what is required by law.
2. You have the right to service in both official languages.
3. You have the right to privacy and confidentiality.
4. You have the right to a formal review and a subsequent appeal.
5. You have the right to be treated professionally, courteously, and fairly.
6. You have the right to complete, accurate, clear, and timely information.
7. You have the right, unless otherwise provided by law, not to pay income tax amounts in dispute before you have had an impartial review.
8. You have the right to have the law applied consistently.
9. You have the right to lodge a service complaint and to be provided with an explanation of our findings.
10. You have the right to have the costs of compliance taken into account when administering tax legislation.
11. You have the right to expect us to be accountable.
12. You have the right to relief from penalties and interest under tax legislation because of extraordinary circumstances.
13. You have the right to expect us to publish our service standards and report annually.
14. You have the right to expect us to warn you about questionable tax schemes in a timely manner.
15. You have the right to be represented by a person of your choice.
16. You have the right to lodge a service complaint and request a formal review without fear of reprisal.

Commitment to small business

1. The Canada Revenue Agency (CRA) is committed to administering the tax system while minimizing the costs of compliance for small businesses.
2. The CRA is committed to working with all governments to streamline service, minimize cost, and reduce the compliance burden.
3. The CRA is committed to providing service offerings which meet the needs of small businesses.
4. The CRA is committed to conducting outreach activities which help small businesses comply with the legislation we administer.
5. The CRA is committed to explaining how we conduct our business with small businesses.

Table Notes

1. The CRA's total authorities increased by $455.6 million, or 11.8% over the planned spending identified in the Report on Plans and Priorities. This is mainly due to increases for the carry-forward of funds from 2013-2014, severance payments, parental benefits, vacation credits, the one-time transition payment for implementing the pay-in-arrears model, and enhancements to non-audit compliance programs. The increases are offset by reductions in the statutory authority for the disbursement of softwood lumber export charges to the provinces and the children's special allowance payments. For more information, see table "authorities approved after Main Estimates".

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. 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.

4. Includes the disbursements to the provinces under the Softwood Lumber Products Export Charge Act, 2006 ($80 million in 2014-2015; $283 million in 2013-2014; and $280 million in 2012-2013); actual spending includes the following softwood lumber statutory disbursements: -$15.1 million in 2014-2015; $42.3 million in 2013-2014; and $136.9 million in 2012-2013.

5. Includes payments to Agence du revenu du Québec for administering of the goods and services tax in the province (actual spending is $142.1 million in 2014-2015; $142.8 million in 2013-2014; and $142.2 million in 2012-2013).

6. Includes statutory children's special allowance payments (actual spending is $214.8 million in 2014-2015; $235.4 million in 2013-2014; and $238 million in 2012-2013).

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