Prepared for the:
Canada Revenue Agency
February 2012
Contract # 46558-125747/001/CY
POR 006-11
Contract Award Date: 2011-07-25

Prepared by:
Ipsos Reid

Media Enquiries:
Media Relations
Canada Revenue Agency
4th Floor 555 MacKenzie Avenue
Ottawa ON K1A 0L5
media.relations@cra-arc.gc.ca

Executive Summary

Research Purpose & Objectives

The CRA’s ability to protect Canada’s revenue base is strongly influenced by public confidence in how the agency administers Canada’s tax laws. One of the ways in which the CRA strives to earn this trust is through the Voluntary Disclosures Program (VDP).

The VDP promotes compliance with Canada’s tax laws by encouraging taxpayers to voluntarily come forward and correct previous omissions in their dealings with the CRA. Through the VDP, taxpayers who make a valid disclosure pay outstanding taxes and interest and can avoid penalty or prosecution. The VDP is not intended as a vehicle for taxpayers to intentionally avoid their legal obligations under the acts administered by the CRA.

There is a growing need for heightened awareness of the VDP in the context of increased media and parliamentary interest in aggressive tax planning and an apparent public perception that VDP lets tax evaders off the hook (the program is often confused with amnesty).

This research was designed to support the Agency priority of building trust to promote compliance. Through this research, the ability to measure and improve public awareness and understanding of the VDP will benefit taxpayers by helping them better meet their obligations while protecting Canada's revenue base.

Results from this research will guide modifications to key VDP messaging and will be incorporated into the VDP communications strategy. This would support the CRA’s compliance goals and would provide CRA spokespersons and the Minister with opportunities to discuss action relating to international tax issues, including tax havens. The research findings will enhance the VDP’s role as a part of the overall CRA compliance strategy as the CRA moves forward in aggressively dealing with taxpayers who are not paying their fair share of taxes. The quantitative portion of this research is intended to target taxpayers in order to determine the level of knowledge or awareness of the CRA VDP and to identify the level of support for providing benefits such as relief from penalty and prosecution to taxpayers who have been non-compliant in the filing or reporting of income.

This research will address the following two objectives:

1. To determine the level of awareness regarding the VDP.
   • gauge public awareness of the VDP;
   • gauge VDP name recognition;
   • gauge public attitudes towards the VDP; and
   • gauge awareness and understanding of the 4 basic requirements for VDP eligibility.
2. To identify suitable and effective communications approaches the CRA can use to develop future VDP-related awareness campaigns and improve outreach initiatives.
   • assess current VDP information available to the public, including but not limited to: the Voluntary Disclosures Program Web page available through the CRA Web site, and two specific VDP tools; a draft pamphlet and the RC199 – Voluntary Disclosures Program (VDP) Taxpayer Agreement form.

The cost for this project was $42,200, excluding HST.

Methodological Summary

Please note that a full description of the methodological approaches used during the qualitative and quantitative phases of research are provided at Appendix A .

Qualitative Methodology

A series of six focus groups were conducted among the general public in Montreal, Oshawa and Edmonton between September 20 and September 27, 2011, with two groups conducted in each location. Each group included between six and eight participants and lasted approximately two hours. The groups were segmented into groups of those expressing more favourable compliance attitudes, hereby referred to as "compliance attitudes" group, and those expressing less favourable compliance-type attitudes, hereby referred to as "non-compliance attitudes" group. Groups were identified on the basis of agreement or disagreement with several statements asked as part of the screener (detailed at Appendix D).

Quantitative Methodology

Questions were added as part of the October wave of the Ipsos Reid Express telephone omnibus poll, which interviewed 1,002 Canadian adults between October 4 and 6, 2011. A sample of this size obtains a ±3.1 percentage point margin of error (calculated at a 95% confidence interval). The margins of error are higher within regional and demographic subgroups.

Key Findings

Qualitative Research

Nearly all focus group participants said they were unaware of the VDP when told only the name of the program. However, the existence of the program came as no surprise to participants when they learned more about it. The name of the program was self-explanatory for English participants but more difficult for French participants because not all understood the meaning of the word ‘divulgation.’

Intuitively, before being told anything about the program, several participants assumed that approaching the government to correct one’s taxes would show good faith and result in more favourable treatment in return, as compared to the treatment accorded to a person whose underpayment is discovered by a CRA-initiated compliance action.

Views towards the VDP were quite positive in the focus groups. Participants generally recognized the program as a good way to allow taxpayers to correct errors without fear of penalties or other punishment. They also recognized (and generally approved of) the motivation of the government to collect unpaid taxes more easily and efficiently than by conducting investigations and audits.

The VDP was seen by most as a program intended for any taxpayer (or taxpaying entity) interested in correcting mistakes and paying unpaid taxes without penalty. Some participants felt the program would not be widely used, as ordinary people would not generally discover honest mistakes on their own; or, if they did, might be inclined to just do nothing, for fear of drawing unwanted attention or because ‘it was an honest mistake.’ In this light, they felt the program might be oriented more towards those who deliberately underpaid their taxes and were therefore aware of an underpayment, rather than those who had made an honest error. Some also felt that the program would likely be one that taxpayers accessed through a third party, such as a lawyer or accountant, who knew about the program and how to make use of it. In this light, the program was seen, by a very few participants after much consideration, as one intended for people with the wherewithal to employ accountants and lawyers.

A draft brochure tested during the groups, was seen as informative, but could be improved in two key ways:

1. The tone, particularly in the brochure’s title, "Become compliant with your tax obligations," was often seen as officious and accusatory, when participants felt it should take a more helpful or collaborative tone (as in the suggested alternative title, "Made a mistake on your taxes? We can help."). In a similar vein, using the term "enforcement" on the Web site was also seen as off-putting and inconsistent with participants’ view of the program as one intended to be helpful.
2. The language was seen as ambiguous, using phrases such as "taxpayers may avoid penalties or prosecution," which imply that some who approach the government might indeed face penalties or prosecution. As a result of this conditional language, many said they would be reluctant to make use of the program. The language on the Web site was seen as more clear (unconditionally stating that the VDP is a program which allows taxpayers to correct inaccuracies "without penalties or prosecution").

When asked about the medium they would use to contact the CRA to correct an underpayment on their taxes, participants most often said they would call the CRA (if, indeed, they would contact the CRA at all). Participants said they would only use the internet to get contact information, and perhaps other basic information, but not as the primary means of interaction. Since the matter involves a mistake, these participants felt that person-to-person communications would provide a better way for them to present their side of the story. Because of this preference, there is a high expectation that calls placed to the CRA to correct an underpayment would be directed to the VDP if their circumstances fit the criteria of the program.

When asked how they would search the internet for more information, most searches for information about the program – even after participants learned more about it – were unsuccessful. Suggested search strings, such as "correcting a tax error," "ixing a mistake on a tax return," etc., did not lead participants to the VDP or, in most cases, to any clear information from the CRA on how to correct a problem. The location of the VDP section on the Web site (through the "Enforcement and Disclosures" section) was not easily found. Moreover, the language on the Enforcement and Disclosures page was seen as concerning and off-putting and did not align with perceptions of the program.

Some participants expressed significant concern that coming forward with a voluntary disclosure would raise a red flag and incite the CRA to audit them.

Quantitative Findings

Just over one in four telephone survey respondents (26%) said they have heard of a government program allowing taxpayers to possibly avoid penalties and prosecution if they came forward to report errors and omissions in their tax affairs. Meanwhile, one in five respondents (21%) said they have heard of the Voluntary Disclosures Program.

The quantitative result seems to be related more to an assumption by Canadians that a program like the VDP exists (which came through during the focus group) than it does to an active level of awareness or familiarity with the program.

The survey results found a high degree of favourability towards the program. On the basis of a description of the Voluntary Disclosures Program, over four in five respondents (85%) said they support the VDP, including over two in five (45%) who said they strongly support it. Just over one in ten (12%) said they oppose it.

Also, consistent with the focus group findings, majorities of Canadians agreed with statements describing the VDP as a program meant to provide a break to people who have made honest mistakes on their taxes (93%), a program designed to encourage those who have not fully disclosed their tax information to do so (90%), and also that the VDP is a good way for the government to collect unpaid taxes it might otherwise not know about (83%).

Respondents were divided as to whether the VDP "allows cheaters to avoid penalties they should be paying." Just over half (54%) agreed (19% strongly agree) with this idea, while over two in five (42%) disagreed. This also appears consistent with the focus groups, during which views of the program tended to focus on the program being meant for people who have made honest mistakes rather than as one designed to be a way for cheaters to get off easy.

Conclusions and Recommendations

• The tone and message of communications should be helpful and collaborative.
• Where possible, communications should be less conditional and use more specific terms with respect to the core benefits of the program (avoiding penalties and prosecution).
• Communications should convey information about the benefits and consequences of using the VDP and should also suggest alternative CRA programs should the taxpayer not qualify under the VDP.
• Improvements to the site and search function could be helpful.