Summary of the Corporate Business Plan 2012-2013 to 2014-2015

Addressing non-compliance

Total planned spending

Footnote 1

Excludes forecasted disbursements to the provinces for the Softwood Lumber Products Export Charge Act, 2006, which are unavailable at this time ($140M in 2011-2012 and $280M in 2012-2013).

Ensuring compliance with Canada's tax and benefit legislation is essential to protecting Canada's tax revenue. Making non-compliance more difficult reduces opportunities to avoid paying taxes and lowers the overall risk of non‑compliant behaviour. Through risk-based processes and strategies that identify and address specific instances of non-compliance, we aim to change the behaviour of non-compliant taxpayers and to influence others to either remain or become compliant, ensuring taxpayers meet their obligations and Canada's revenue base is protected

The Corporate Risk Profile has identified Aggressive Tax Planning and the Underground Economy as corporate risks associated with specific types of non-compliance. To counter these risks, action plans were developed that focus on either reducing the likelihood or reducing the impact of non-compliance, for example, by increasing penalties and sharing information to enable early detection and correction.

The CRA combats non-compliance by:

• researching the drivers and mechanisms of non-compliance to develop strategies that will improve the CRA's ability to rectify this behaviour;
• conducting reviews, examinations, audits and investigations to ensure that different population segments (e.g. individual taxpayers, small and medium enterprises, and large international enterprises) adhere to Canada's tax laws;
• addressing domestic and international non-compliance activities through verification and enforcement, including the administration of international tax agreements and the exchange of information with treaty partners; and
• actively managing the receivables that arise from income tax, GST/HST, the Canada Pension Plan, Employment Insurance, and defaulted Canada student loans.

Filing and registration non-compliance

The CRA estimates that voluntary filing and registration compliance has remained consistently above target over several years. When non-filing occurs, we attempt to obtain returns at minimal cost within a specific period of time using early intervention, before the accounts enter more resource-intensive operations. Accounts that do not respond to early intervention measures are considered higher risk, require human intervention, and are referred for escalating enforcement action. The CRA also undertakes projects aimed at identifying and addressing filing and registration non‑compliance.

Reporting non-compliance

The CRA will continue to improve its use of business intelligence and risk analysis, and strengthen its partnerships with other tax jurisdictions in order to identify and exploit new ways of detecting non-compliant reporting.

Individuals

All tax returns from individuals are subject to risk assessment review by CRA systems. We have increased our focus on suspicious or willful non-compliance at both the initial processing and post assessment stages, and are incorporating more compliance activities within our core processes. We will continue to invest in areas such as risk assessment and technological systems designed to improve our analysis, identification, and management of risk in specific areas of reporting non-compliance.

Businesses

Like individuals, Canadian businesses are subject to risk assessment reviews by CRA systems. The Corporation Assessing Review Program validates the accuracy of taxpayer reporting by ensuring that corporations file accurate and complete information with the CRA.

The CRA uses tools such as examinations, audits, investigations and international verification and enforcement activities to detect and deter non-compliance within business populations.

Aggressive tax planning

Aggressive tax planning (ATP) practices are developed by taxpayers, intermediaries, tax planners and promoters. They involve transactions aimed at helping taxpayers reduce, avoid, or evade Canadian taxes. ATP is on the rise due to greater globalization and labour mobility, both of which have increased the number of international transactions and cross-border investment opportunities. Technology has also made offshore financial transfers and investments more accessible.

The CRA recognizes that the tactics and interventions required to address particular instances of ATP vary from case to case and from situation to situation. The required solutions may be stand-alone or they may utilize multiple tools as part of a more comprehensive strategy including the involvement of other countries. Our strategies include conducting compliance audits, publishing tax alerts, leveraging relationships with international and domestic partners to exchange information on ATP schemes, being active in groups that work to combat offshore abusive tax schemes, utilizing research and intelligence gathering as a means to support to development of ATP strategies, and refining risk assessment systems so that instances ofATP can be detected in a more effective manner.

Underground economy

The underground economy (UE) remains a priority for the CRA because it undermines business competitiveness, denies employees of UE operations access to social programs like employment insurance, and makes it difficult for consumers to seek recourse for poor workmanship or the use of inferior materials.

The CRA's strategy to address the UE engages the CRA's regions in research, audit and outreach projects that provide vital intelligence to identify emerging UE risks. This intelligence allows the CRA to better understand the risks, the drivers of non-compliant behaviour, and the compliance treatments that would be the most effective in addressing them. In 2012-2013, the CRA will launch 14 new regional UE projects focusing on sectors such as small wineries, scrap metal dealers, construction and service providers to the film industry. In addition each Tax Services Office TSO) must undertake and document a cluster of at least 30 audits to establish a pattern of compliance within an identified taxpayer population; a specific sector; or a specific risk-issue. The sectors they target will vary by TSO, and the information obtained will help build our collective intelligence on emerging issues and risks.

Goods and services/harmonised sales tax (GST/HST) registrants

The GST/HST represents a significant source of tax revenue for both the federal and applicable provincial governments. The CRA will continue to protect GST/HSTrevenue sources by identifying non-compliant businesses and registrants and through proactive compliance communication. The CRA will increase its knowledge of the GST/HST registrant population, will work to identify trends and patterns of non-compliance and will use this information to enhance risk assessment models so that we can more effectively manage and address compliance risks. The enhancement of risk assessment capabilities is an integral element of the CRA's ongoing strategy to address GST/HST non-compliance.

The CRA will also maintain its presence in the large business registrant community to help deter non-compliance.

Employers and goods and services/harmonized sales tax (GST/HST) registrants

Employers and GST/HST registrants are of particular interest to the CRA because of their fiduciary responsibility to collect and remit GST/HST and deductions at source for employees. The GST/HST and payroll deductions represent a significant source of tax revenue for both the federal and applicable provincial governments.

Over the planning period, we will address non-compliance with remittance, filing, and withholding requirements through improvements in our internal quality assurance process, as well as improved file selection for examinations. We will continue to increase our knowledge of the GST/HST program and maximize the risk-assessment capabilities of our compliance programs.

Administering the Scientific Research and Experimental Development Program

The CRA oversees the administration of various tax incentives designed to promote economic growth in Canada. We strive to deliver tax incentives in a timely, consistent, and reliable manner, while ensuring claims comply with tax laws, policies, and procedures.

During 2012-2013, in addition to the deliverables noted, the CRA will develop a formal SR&ED Stakeholders Engagement Strategy that will ensure that the needs and views of stakeholders continue to be considered during the planning, development, and implementation of administrative changes to the program.

Charities

The CRA is mandated to promote compliance with income tax legislation and regulations among registered charities to ensure the integrity of the charitable sector.

The CRA Charities Program will work to address identified non-compliance in a timely manner and implement the initiatives announced in Budget 2011, intended to increase the transparency and accountability of entities that are permitted to issue donation receipts for income tax purposes. In addition, the measures provide the CRA with new tools to strengthen the existing regulatory regime for charities, amateur athletic associations, and other qualified donees under the Income Tax Act.

Excise tax

The CRA is responsible for the interpretation and application of the Excise Act, the Excise Tax Act, the Importation of Intoxicating Liquors Act, the Air Travellers Security Charge Act and the Excise Act, 2001 and the regulations, policies, and administrative procedures associated with these pieces of legislation.

The CRA collects the excise duty on tobacco products manufactured domestically, while the Canada Border Services Agency collects the excise duty on imported tobacco products. The tobacco stamping regime provides the legal framework and ministerial powers for tobacco product stamping, including the authority to limit the possession of tobacco stamps to legal tobacco activities, to impose new penalties for counterfeited stamps, and for stamps that a person cannot account for as being in their possession or affixed to a tobacco product.

During 2012-2013, we will develop an accountability framework and facilitate further provincial adoption of the stamping program.

Enforcement

While the CRA has a sustained audit presence across sectors, suspected significant cases of fraudulent non-compliance are dealt with by the Criminal Investigations Program, which investigates and refers cases for prosecution to the Public Prosecution Service of Canada. These cases can result in penalties, court fines, and up to five years of incarceration. The Special Enforcement Program undertakes audits and other civil enforcement actions against taxpayers suspected of, or known to be, deriving income from illegal activities.

A program evaluation was recently conducted on the CRA's enforcement programs and the CRA is currently responding to this review and report, through the development and implementation of relevant action plans.

Remittance

Once an assessment is completed through self-assessment, or reassessed through our subsequent verification actions, taxpayers must remit any amounts due. We use various means to collect the amounts that are owed to the Government of Canada.

Payment non-compliance

The accumulation of new debt depends on factors that are outside of our control. They include domestic and international economic conditions, aggressive tax planning and strategic insolvencies, and socio-economic factors that may influence taxpayer compliance behaviour. We will continue to coordinate and reinforce CRA efforts to educate taxpayers about their obligations, and use business intelligence to collect outstanding returns and payments in an effort to positively influence taxpayer compliance behaviour. We will continue to further develop business intelligence reporting to improve our ability to identify non-compliance and evaluate the effectiveness and efficiency of our operational actions, and to match results to actions taken.

Collections

Early determination of the most effective course of action facilitates both timely and efficient debt collection. The longer a debt exists, the more difficult and expensive it is to collect. We continue to optimize the use of our Debt Management Call Centre (DMCC) which addresses high volume, low-risk tax debt at a minimal cost. Use of our DMCC allows our collection officers to focus on addressing more complex, higher risk accounts that involve the use of escalating collections measures, including legal and enforcement actions to deal with non-compliant taxpayers.

The amalgamation of our regional and national pools into a single national accounts receivable inventory enables us to address higher-risk accounts without regard to geographic boundaries. Preliminary results have indicated a positive trend in the level of recoveries. We will continue to monitor the results of this initiative and apply best practices to more complex accounts.

Our operating environment continues to evolve rapidly resulting in shifting priorities and the need to build capacity for the future. Over the planning period our primary focus will be on maintaining the sustainability of our collections program by monitoring recently implemented initiatives and identifying opportunities for efficiencies.

Our performance indicators - Addressing non-compliance

These indicators will demonstrate whether we are making measurable improvements in achieving this core business outcome.

Footnote 1a

Fiscal impact includes current and future tax revenues identified from our audit efforts, including penalties and interest, but excluding the impact of Appeals reversals and payment non-compliance.

Date modified:

2012-05-11