Summary of the Corporate Business Plan 2014-2015 to 2016-2017
Disclaimer
We do not guarantee the accuracy of this copy of the CRA website.
Scraped Page Content
Summary of the Corporate Business Plan 2014-2015 to 2016-2017
Reporting compliance
Program description
The CRA's reporting compliance activities identify and address the segment of the population that does not report or under-reports. Our compliance interventions take a graduated approach that moves from influencing compliance to enforcement. We seek to influence compliance behaviour and attitudes through the audit of returns, by increasing taxpayers' understanding of their tax obligations, and through targeted outreach activities, client service, and education. Our examinations, audits, and investigations at the domestic and international level ensure and enforce compliance with Canada's tax laws.
| 2014-15 Main Estimates |
2014-15 planned spending Footnote 1 |
2015-16 planned spending Footnote 1 |
2016-17 planned spending Footnote 1 |
|---|---|---|---|
| 1,054,502,522 | 1,062,102,673 | 1,052,259,656 | 1,041,278,958 |
| 2014-15 | 2015-16 | 2016-17 |
|---|---|---|
| 9,942 | 9,729 | 9,602 |
What we want to achieve
To provide direct assistance to taxpayers and businesses to make sure they get it right from the start. To conduct examinations, audits, and investigations in order to identify and correct non-compliance.
Strategic context
Our reporting compliance programs check that taxpayers have correctly reported information that determines their tax obligations. Audit of taxpayers' books and records is one of the main tools we use to detect non-compliance. To reduce red tape for small business and continually improve service to Canadians, we are introducing services to help taxpayers get it right from the start and minimize the need for more costly follow-up audits. By introducing new tools and support, like the Liaison Officer Initiative, we will provide all taxpayers with the information and help they need to report accurately. By building our understanding of why and when taxpayers are most likely not to comply, we will be able to proactively support compliance through tailored communications with taxpayers and to focus our audit and review efforts on those instances where non-compliance is most likely.
Aggressive tax planning poses a risk to Canada's revenue base. We are implementing new tools, like the Offshore Tax Informant Program, that will provide us with more information to identify and combat aggressive tax planning schemes and uphold offshore compliance. We are aligning our workforce so that we have specialist auditors with the high level skills necessary to deal with complex international business transactions.
Small and medium enterprises
| 2014-15 planned spending |
2015-16 planned spending |
2016-17 planned spending |
|---|---|---|
| 572,394,171 | 563,377,058 | 554,132,079 |
| 2014-15 | 2015-16 | 2016-17 |
|---|---|---|
| 5,916 | 5,699 | 5,590 |
INTEGRITY: Audit quality assurance
The integrity of CRA audit programs is assured by maintaining a system of strong internal controls. We continually monitor and review our audits and review processes to assure quality, reduce the burden we place on taxpayers and improve our processes.
The integrity of our small and medium enterprise and GST/HST audits are assured by our Business Intelligence and Quality Assurance (BIQA) review process. This process randomly selects completed audit files for review. The continuous and random nature of our quality assurance reviews ensures audit steps are fully documented and conducted in conformity with legislation, and national policies and procedures. The BIQA process also delivers timely and valuable feedback on the quality of completed audits to senior management, field offices, and individual auditors, as well as, helping to identify training needs and emerging compliance issues.
Our Continuous Program Integrity Review (CPIR) process is used to strengthen the integrity of our international and large business audits. The CPIR process reviews completed audits to assess general quality and adherence with legislation, policy, procedures and program quality objectives. These reviews often identify opportunities for program improvement and the individual results are communicated back to senior management in the programs and regions for follow-up. On an annual basis, the findings and general trends identified by the CPIR process are summarized and discussed in a comprehensive report that recommends best practices and identifies opportunities for program improvement.
SERVICE EXCELLENCE: Getting it right from the start
The best way to ensure reporting compliance is to help taxpayers get it right from the start. This is why we are moving forward with our liaison officer initiative pilot. This initiative will provide one-on-one assistance to businesses at critical points in their life cycle, such as when they start-up or when employees are hired for the first time. This provides an opportunity to engage with taxpayers and correct potential errors before they occur. It will also create a unique opportunity to better understand the needs of small businesses. We hope to use these insights to improve the services and information we provide.
This approach will be complemented with tailored online assistance through videos and webinars. This more graduated approach to ensuring reporting compliance should deliver long-term program savings by reducing the need for audit-based compliance interventions.
The use of audits will always be an important component in the CRA's approach to enforcing the reporting compliance of small and medium enterprises (SME). We are enhancing the effectiveness of our SME audits in a number of important ways. Advanced analytics are increasingly being used to guide our file selection and help to identify and select the files and taxpayer segments at the highest risk of reporting non-compliance.
Audits are powerful and effective compliance tools, but we realize they need to be complemented by other tools that reach out to a greater number of taxpayers at an earlier point in the reporting process. The use of these more tailored approaches is the most cost-effective way to reduce the compliance burden on taxpayers. It is about using the right tool at the right time to reach out to larger groups of taxpayers and effectively manage moderate reporting non-compliance risks and reduce the need for audits. By finding the right mix of compliance enforcement tools we will be able to improve reporting compliance outcomes and meet our program efficiency objectives.
Canada has a large population of SMEs. Approximately 3 million individual filers and 2 million corporate filers are considered SMEs. Many of these businesses are very small operations and may require assistance to meet their reporting requirements. Our Liaison Officer Initiative pilot is one example of how we are actively working to support small business compliance at key stages in the life cycle of these businesses.
We are pursuing and developing more graduated compliance interventions, such as tailored taxpayer messaging. Over the planning period we will expand our use of these more graduated approaches to better support, promote and encourage self-correction when moderate compliance risks have been identified.
Over the planning period, the CRA will:
- use tailored messaging to prompt taxpayers with a poor compliance record or business performance that is out of step with industry norms to reconsider what they have reported and filed
- engage industry associations to help guide our compliance messaging and outreach activities
- strengthen audit quality and identify training needs and best practices
- pilot one to many approaches such as focused messaging, benchmarking, industry engagement, and remote reviews to educate and encourage individuals and businesses to comply with their tax obligations
- focus on "soft" skills development to ensure we communicate effectively with taxpayers at every stage of the audit process
- support small businesses at key points in their life cycle through our Liaison Officer Initiative
EFFECTIVE COMPLIANCE: Dealing with the Underground Economy
The Underground Economy (UE) includes any business activity that is unreported and/or underÂreported for tax purposes. To address this significant risk to Canada's revenue base, we dedicate specific audit resources. We are engaged in compliance research, education, and outreach. The CRA participates in international forums and organizations to share best practices, conduct research and coordinate international UE initiatives. Domestically, we are working with other levels of government to coordinate efforts to deal with the UE.
Working with our partners in the Department of Finance and the Department of Justice, we are making recommendations to strengthen legislation and craft new administrative tools to deal with emerging UE threats. For example, the 2013 federal budget included proposals for new sanctions to address those who use, possess, and acquire suppression of sales software, including fines of up to $1,000,000 and jail terms of up to five years. These proposals will allow the CRA to take strong action against those who develop, manufacture, and make available suppression of sales software.
Over the planning period, the CRA will:
- conduct research on the regional and economic factors that increase the risk of UE activity
- increase our focus on emerging UE risks through the increased use of UE specialized teams
- launch an awareness campaign to make Canadians aware of the new measures to counter the use of suppression of sales software introduced in Budget 2013
GST/HST
The GST/HST is a significant source of revenue for the federal and participating provincial governments. The priorities for the GST/HST Program include mitigating risks such as, the underground economy, registrations of false entities to obtain refunds, and identifying new GST/HST schemes.
We will improve our file selection capability through better risk-assessment and by implementing a team audit approach using subject matter experts from across the country.
We are strengthening our Aggressive GST/HST Planning Program by improving our ability to identify false claims and persons participating in suspicious patterns of behaviour.
In our Refund Integrity Program, we will continue to enhance and modify our risk management model to detect and prevent the overpayment of GST/HST refunds.
Over the planning period, the CRA will:
- develop new risk assessment models in the SME segment to improve the selection of high-risk files
- implement a regional inventory approach to the non-resident workload and explore initiatives to allocate workloads based on industry sectors
- strengthen audit quality and identify training needs and best practices
- further optimize the use of existing and new technology in the Refund Integrity Program
- detect and mitigate abusive tax arrangements and tax shelters through our new Aggressive GST/HST Planning Program
International and large business
| 2014-15 planned spending |
2015-16 planned spending |
2016-17 planned spending |
|---|---|---|
| 320,135,923 | 319,547,809 | 317,848,859 |
| 2014-15 | 2015-16 | 2016-17 |
|---|---|---|
| 2,630 | 2,630 | 2,614 |
The CRA is responsible for auditing the largest and most complex corporate taxpayers to ensure they comply with their reporting requirements. This includes taking measures to prevent Aggressive Tax Planning.
Ongoing improvements to audit selection are allowing us to focus on the businesses and industry segments most likely to be non-compliant.
By 2015-2016, our goal is to be able to conduct audits sooner after the filing date. This will provide earlier tax certainty for businesses, reduce the compliance burden and provide the CRA with better insights on emerging trends and issues. In addition, the CRA is looking at ways to make better use of our existing audit resources based on risk, work plans, and by leveraging technical capacity at the national level.
Over the planning period these measures will allow the CRA to deliver on its Economic Action Plan commitments by generating additional revenues and deliver greater program efficiencies.
Over the planning period, the CRA will:
- automate its National Risk Assessment Model to enhance the risk assessment of files and develop national work plans
- refine our automated National Basic File Risk Assessment Template to better target the highest risk files
EFFECTIVE COMPLIANCE: International engagement
The CRA's international engagement helps ensure the integrity and fairness of Canada's tax system and improve the efficiency and effectiveness of its administration. The global context in which tax administrations operate has been changing at an unprecedented pace, creating an environment that presents both challenges and opportunities for tax policy experts and tax administrators.
Over the planning period, the CRA will continue to strengthen strategic partnerships with individual countries and international organizations and extend our network of influence with developing and emerging economies to:
- promote and influence the development and application of international tax rules and standards to strengthen bilateral economic relationships, reduce tax barriers, create enhanced opportunities for Canadian businesses, and increase transparency
- collaborate and coordinate actions with other tax administrations to promote compliance and address issues of non-compliance such as, international tax evasion, aggressive international tax planning/tax avoidance, and offshore compliance
Aggressive tax planning
Aggressive tax planning arrangements can involve either domestic or international complex elements and are designed for the sole purpose of avoiding the payment of tax. Like the Underground Economy, Aggressive Tax Planning represents a significant threat to the tax base of industrialized countries around the globe, and the CRA has identified it as a key enterprise risk.
The maintenance of a strong legislative framework is a key element in our long-term strategy to protect the tax base. The CRA works with the Department of Finance Canada and the Department of Justice Canada. For example, Budget 2013 contained a number of proposals designed to address these arrangements. The measures announced in Budget 2013 will protect over $4 billion of tax revenues over the next 5 years, starting in 2013-2014. Moreover, these measures will help provide crucial and timely business intelligence and enrich our Aggressive Tax Planning risk assessment and workload selection processes.
Among our top priorities is the Related Party Initiative, which involves using the new rules on non-resident trusts and foreign investment entities to better address the compliance risk posed by high-risk taxpayer segments, including high net worth individuals. The CRA is able to learn more about these arrangements through our auditors and through our specialized compliance programs and to gain valuable insights into the evolving nature of Aggressive Tax Planning schemes. We are developing a more systematic approach to collecting and disseminating this intelligence to our audit community. In addition, these insights help us develop recommendations for new tools to mitigate emerging risks.
The CRA will continue to participate in international forums, such as the Organization for Economic Cooperation and Development (OECD), and work closely with our tax treaty partners to identify emerging international and aggressive tax planning risks, promote best practices, and develop policy recommendations. The CRA is playing an important role in the global effort to counter the threat of aggressive international tax planning schemes through its support of important initiatives like the OECD's Action Plan on Base Erosion and Profit Shifting, and the Joint International Tax Shelter Information Centre. As well, we will continue to explore new ways of enforcing compliance, such as the use of joint audits. Our first joint audit with the Internal Revenue Service was completed in 2013.
EFFECTIVE COMPLIANCE: Addressing offshore compliance
The Economic Action Plan 2013 (EAP) introduced new measures to help the CRA combat international tax evasion and aggressive tax avoidance. The Canadian government has committed $30 million over five years to support the implementation of these measures, which include:
- the Offshore Tax Informant Program (OTIP)
- the mandatory reporting of international electronic funds transfers over $10,000 to the CRA by certain financial intermediaries effective January 1, 2015
- a streamlined process for the CRA to obtain information concerning unnamed persons from third parties, such as banks
- revising the Foreign Income Verification Statement (Form T1135) to require reporting of more detailed information and extending the reassessment period for taxpayers who have failed to report income from a specified foreign property on their annual income tax return and failed to properly file a T1135
The CRA has established the Offshore Compliance Program to ensure the successful implementation of these important EAP measures. The program will identify, select and coordinate high-risk offshore non-compliance cases for audit, and implement a robust accountability framework and performance measurement system for CRA offshore compliance activities.
Criminal investigations program
| 2014-15 planned spending |
2015-16 planned spending |
2016-17 planned spending |
|---|---|---|
| 79,239,560 | 79,177,161 | 79,122,543 |
| 2014-15 | 2015-16 | 2016-17 |
|---|---|---|
| 598 | 601 | 601 |
Our Criminal Investigations Program represents the extreme end of the compliance enforcement continuum. Its mandate is to conduct criminal investigations into suspected cases of tax evasion and fraud with respect to the various tax Acts administered by the CRA. When sufficient evidence is obtained to support a conviction for tax evasion or fraud, the case is referred to the Public Prosecution Service of Canada (PPSC) for criminal prosecution.
The program has been transformed to focus more specifically on gathering evidence to support criminal charges. We have consolidated the program into six offices physically located close to our key partners, the RCMP and PPSC, to further improve our ability to address complex cases of tax evasion and fraud. This new approach will provide us with the critical mass of investigators needed to effectively tackle the growing complexity of these files and support our effort to deliver better outcomes.
Deterrence will continue to play a crucial role and the CRA will seek publicity on all tax evasion and fraud convictions to maintain confidence in the integrity of our self-assessment tax system and to increase compliance.
Over the planning period, the CRA will:
- use a new national workload selection process to improve file selection
- promote a more cohesive approach to criminal investigations through the creation of liaison positions to enhance cooperation with internal and external partners
- implement a National Criminal Investigations Quality Assurance Program
Scientific research and experimental development
| 2014-15 planned spending |
2015-16 planned spending |
2016-17 planned spending |
|---|---|---|
| 83,838,508 | 83,667,112 | 83,688,896 |
| 2014-15 | 2015-16 | 2016-17 |
|---|---|---|
| 721 | 721 | 721 |
The Scientific Research and Experimental Development (SR&ED) Program is the largest single source of federal government support for industrial research and development, providing more than $3.6 billion in tax assistance in 2012. Industrial research and development helps drive innovation and allows Canadian businesses to successfully compete in the global marketplace. We are taking steps to make it easier for businesses to access the SR&ED program and meet its requirements.
The main objectives of our strategy are to simplify the SR&ED program to increase accessibility, improve predictability for those claiming SR&ED tax incentives, and quickly address overly aggressive positions being taken by some tax preparers and claimants. We want our SR&ED program to be more cost-effective and to provide faster access to tax incentives for claimants.
In September 2012, we launched a feasibility study, which included a pilot of a Formal Pre-approval Process. This process provides greater certainty to claimants on the eligibility of their research and development work and expenditures for SR&ED tax incentives. Our pre-approval service will help businesses make informed investment decisions. It will also help them determine what supporting evidence they should keep as work progresses. This service is intended to allow businesses to receive a determination on the eligibility of their proposed SR&ED claim before it is filed. By eliminating the need for the CRA to conduct an on-site review after the claim is filed, businesses with pre-approved claims will get their tax incentives faster and we will increase the cost effectiveness of our administration of these claims.
Over the planning period, the CRA will:
- launch the Self-Assessment and Learning Tool for SR&ED applicants
- monitor the results of our Formal Pre-approval Process pilot for SR&ED claims
SERVICE EXCELLENCE: Making sure SR&ED claimants get the right support when they need it
The CRA is working to ensure new SR&ED claimants have the right support, when they need it most. We will implement a new direct outreach service to make sure new claimants have access to information about the SR&ED program eligibility requirements. Our in-person support will be complemented by Web-based information videos, which will be available in 2014. Businesses, and the tax practitioners who help them, will also soon be able to access a new online self-assessment and learning tool. This new tool will contain tips to help businesses complete their SR&ED claim form. We expect the learning tool to reduce the need for audit-based compliance interventions, which will save costs over time.
Voluntary Disclosures Program
| 2014-15 planned spending |
2015-16 planned spending |
2016-17 planned spending |
|---|---|---|
| 6,494,511 | 6,490,516 | 6,486,581 |
| 2014-15 | 2015-16 | 2016-17 |
|---|---|---|
| 77 | 77 | 78 |
The Voluntary Disclosures Program (VDP) is a cost-effective way for the CRA to obtain compliance. It supports voluntary compliance by allowing taxpayers to come forward and self-correct inaccurate or incomplete information and disclose new information not previously reported to the CRA. The VDP is not intended to serve as a vehicle for taxpayers to intentionally avoid their obligations. Taxpayers who make valid disclosures must still pay the taxes they owe with interest. However, by accessing the program, taxpayers may avoid penalties on the information accepted under the program's criteria and possible prosecution.
The program is now administered through two tax centres. The creation of these centres should provide greater quality assurance and increase the cost effectiveness of our administration of these disclosures.
Over the planning period, the CRA will:
- improve our risk management of the VDP workload and promote greater awareness of the program
Conclusion
Making sure taxpayers correctly report their tax obligations is central to the fairness and integrity of our tax system. We will reduce red tape and improve service to Canadians by introducing new tools and approaches that help taxpayers to get it right from the start. Audit will continue to be our core tool for checking that taxpayers have correctly reported. Increased use of compliance research and advanced data analysis will help us to more precisely identify and address taxpayers who may be at higher risk of non-compliance and select the best tool, including audit, to address the risk.
Through our active participation in international forums, the CRA will continue to share knowledge and develop new solutions for shared challenges like the Underground Economy and Aggressive Tax Planning. We will work with federal and provincial government partners to develop and implement effective responses to reporting compliance issues.
It is essential that the CRA's compliance activities are seen as fair and our reassessments, when we find reporting non-compliance, are of the highest quality and defensible. Our rigorous quality assurance processes will make sure that our reporting compliance activities demonstrate the highest integrity and quality.
Strategic outcome: taxpayers meet their obligations and Canada's revenue base is protected
We use the following expected results and performance indicators to assess whether we are meeting our overall strategic outcome.
| Performance indicators | Targets | Date to be achieved |
|---|---|---|
| Change rate (percentage of risk-assessed audit activities that result in detecting non-compliance by individuals and corporations) | 75% | March 2015 |
| Performance indicators | Targets | Date to be achieved |
|---|---|---|
| Change rate for ILB audits - income tax (percentage of risk-assessed audit activities that result in detecting non-compliance) | 75% | March 2015 |
| Performance indicators | Targets | Date to be achieved |
|---|---|---|
| Change rate for SME audits - income tax (percentage of risk-assessed audit activities that result in detecting non-compliance) | 75% | March 2015 |
| Performance indicators | Targets | Date to be achieved |
|---|---|---|
| Change rate for GST/HST audits (percentage of risk assessed audit activities that result in detecting non-compliance) | 75% | March 2015 |
| Performance indicators | Targets | Date to be achieved |
|---|---|---|
| Claims - SR&ED tax incentives - refundable claims processed within 120 calendar days | 90% | March 2015 |
| Claims - SR&ED tax incentives - non-refundable claims processed within 365 calendar days | 90% | March 2015 |
| Claims - SR&ED tax incentives - claimant- requested adjustments to refundable claims processed within 240 calendar days | 90% | March 2015 |
| Claims - SR&ED tax incentives - claimant- requested adjustments to non-refundable claims processed within 365 calendar days | 90% | March 2015 |
| Performance indicators | Targets | Date to be achieved |
|---|---|---|
| Change rate for SR&ED audits (percentage of risk-assessed audit activities that result in detecting non-compliance) | 75% | March 2015 |
| Performance indicators | Targets | Date to be achieved |
|---|---|---|
| Percentage of files accepted by the PPSC that result in a conviction | 80% | March 2015 |
| Performance indicators | Targets | Date to be achieved |
|---|---|---|
| Percentage of files completed vs. intake | 80% | March 2015 |
Footnotes
- Footnote 1
-
Planned spending refers to those amounts for which a Treasury Board submission approval has been received by no later than February 1, 2014. This cut-off date differs from the Main Estimates process. Therefore, planned spending may include amounts incremental to planned expenditure levels presented in the 2014–2015 Main Estimates.
- Date modified:
- 2014-03-05