Section 3 – Introduction to the Canada Revenue Agency

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COMPLIANCE

OVERVIEW

Maintaining the integrity of Canada's tax system

• Canada's tax system is based on voluntary compliance and self-assessment.
• The CRA's compliance activities protect the integrity of our self-assessment tax system through responsible enforcement by identifying, addressing, and deterring non-compliance with Canada's tax laws.
• By pursuing those who are non-compliant, the CRA helps to maintain Canadians' trust in the fairness and integrity of our tax system.

Compliance Outcomes

• 95% of GST/HST registrants registered when required.
• 93% of individuals filed their taxes on time.
• 86% of businesses filed on time.
• 93% of individuals paid their outstanding amounts on time.
• Almost 87% of businesses paid on time.

COMPLIANCE AND VERIFICATION

Compliance Programs Branch (CPB)

The mandate of the Compliance Programs Branch is to ensure compliance with the reporting requirements of the Acts administered by the Agency.

• CPB activities include:
  • Supporting compliance through outreach, service and education for those who need extra help and through measures to reduce the red tape burden and make compliance easier.
  • Collaborating with tax professionals, provincial and territorial governments, internal and external partners and stakeholders to clarify rules and ensure efficient administration.
  • Developing business intelligence, gathering data and risk scoring to select the optimal files.
  • Conducting audits and delivering an expanding range of non-audit treatments including industry campaigns, support visits, and criminal investigations to correct non-compliance.
  • Delivering broader coverage to international and large taxpayers, offshore non-compliance, the underground economy sectors and aggressive tax planning schemes.
  • Collaborating with the Department of Finance(legislation and policy development) and international partners in response to the Organization for Economic Co-operation and Development (OECD), G20 and G8 tax and fiscal priorities.

Collections and Verification Branch (CVB)

The mandate of the Collections and Verification Branch is to promote and enforce compliance with Canada's tax laws for filing, withholding, registering, and debt obligations.

• CVB activities include:
  • Facilitating compliance through taxpayer education.
  • Performing statistical analysis, data mining and research to identify compliance risks and deploy innovative strategies to more effectively and efficiently address compliance.
  • Validating information contained in returns and reassessment requests through the review of income amounts, deductions, and credits to ensure correct reporting.
  • Examining the books and records of employers and GST/HST registrants to ensure the correct amounts are calculated and remitted.
  • Using risk-based approaches to identify non-filers and deployment of appropriate compliance treatments to effectively and efficiently support and enforce filing compliance.
  • Collecting outstanding debts through the application of progressive and targeted enforcement action.

THE COMPLIANCE PYRAMID

• Compliance research, such as the Agency's 2011 Taxpayer Attitudinal Segmentation Research Report, confirms the validity of the compliance pyramid model. This model is used to help guide the development of more effective and efficient compliance strategies.
• The CRA's approach to compliance is to identify non-compliance as early as possible, intervene as quickly as possible, and take the most appropriate corrective action to efficiently correct non-compliance and to prevent future non-compliant behaviour.

Image description

The image depicts a triangle divided into four rows. Words appear outside the triangle and beside each row.

First row: the left side says: Have decided not to comply. The right side says: Use the full force of the law.

Second row: the left side says: Don't want to comply. The right side says: Deter by detection.

Third row: the left side says: Try to, but don't always succeed. The right side says: Assist to comply.

Fourth row: the left side says: Willing to do the right thing. The right side says: Make it easy.

Inside the triangle, an arrow points down. Below the arrow appear the words: Create pressure down.

Outside the right side of the triangle an arrow points down and is labelled: Level of compliance costs. At the top of the arrow is the word: High. At the bottom of the arrow is the word: Low.

RISK TREATMENT

• When it comes to enforcing compliance, the CRA ensures the right treatment is used for the right level of risk.

Risk Treatment

Risk Group	Treatment
Low	Influence compliance behaviours by increasing taxpayers' understanding of their tax obligations through targeted outreach, accessible taxpayer services, and education.
Medium	Provide information and in‐person support to reduce the necessity for direct compliance intervention. Utilize lighter touch compliance approaches such as nudge techniques and reminders by mail and phone designed to encourage and support taxpayer compliance.
High	Initiate progressively intensive compliance treatments such as examinations, audits, collection actions, legal actions, investigations, and prosecutions to ensure and enforce compliance with the Acts administered by the CRA.

THE RIGHT TREATMENT FOR THE RIGHT RISK

Priorities moving forward

Initiative	Description
Small and Medium Strategy	Further develop non-audit approaches with emphasis on innovation such as nudge techniques. Continue to shift audit focus to medium sized businesses and UE activities. Formalize the approach to micro-enterprises.
The Underground Economy (UE)	Support stakeholders working to reduce the social acceptability of participation in the UE. Demonstrate tangible results against the UE work plan.
Aggressive Tax Planning (ATP)	Implement the recommendations contained in the Office of the Auditor General of Canada's Spring 2014 report and other measures to strengthen the ATP program.
Criminal Investigations	Continue to improve the selection and prioritization of high-risk files for criminal investigations, including a new Memorandum of Understanding and enhanced collaboration with the RCMP.
Offshore Compliance	Use new information sources to expand and focus audits and investigations on taxpayers who participate in aggressive tax avoidance or attempt to conceal income and assets offshore.
Base Erosion and Profit Sharing (BEPS)	Continue to ensure that Canada plays a central role in establishing the global standards approach.
Simplify Compliance Interactions	Simplify compliance correspondence and expand electronic services to businesses and third parties to help them resolve tax issues more quickly and easily.
Facilitate Employer Compliance	Expand webinars, educational visits and work with stakeholders to help employers understand and manage compliance responsibilities.
Enhanced Compliance Initiative	Continue to apply new investments and achieve objectives in addressing specific non-compliance.
Nudge to Action	Apply behavioural economics to improve responsiveness to large-scale compliance interventions such as letter campaigns.

RECENT INVESTMENTS

• Budget 2013

  • $30 million over five years in support of new measures to combat international tax evasion and aggressive tax avoidance.
    • $15 million to implement the Electronic Funds Transfer (EFT) reporting.
    • $15 million in to focus on offshore compliance activities and programs.

• Budget 2015

  • $25.3 million over five years for the CRA to expand its offshore compliance activities through the use of improved risk assessment systems and business intelligence and by hiring additional auditors.
  • $58.2 million over five years was proposed to combat aggressive tax avoidance in Canada by the largest and most complex business entities.
  • $118.2 million over five years to provide support to the CRA's efforts to combat the underground economy in Canada.

RECENT MEASURES

• The Offshore Tax Informant Program (OTIP)
  • OTIP allows the CRA to make financial rewards to individuals who provide specific and credible details about major international tax non-compliance that leads to the assessment and collection of additional federal taxes.
• The International Electronic Funds Transfers (EFT) Initiative
  • Certain financial intermediaries, including banks, reporting international Electronic Funds Transfers (EFT) of $10,000 and over to the CRA.
• Automatic exchange of information
  • The common reporting standard and intergovernmental agreements (i.e. the Foreign Account Tax Compliance Act (FATCA)).
• Voluntary Disclosure Program (VDP)
  • Increased submissions by taxpayers voluntarily reporting income – suggesting a reduction in non-compliance.
• Underground Economy Specialist Teams (UEST)
  • Focusing on methods to identify and address significant non-compliance in high risk sectors.

International cooperation

• Base Erosion and Profit Sharing (BEPS)
  • The Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) project will require some legislative change to support country-by-country reporting (CbC). In addition, some multinational enterprises will be required to provide governments with information on their global allocation of revenues (sales), profits, taxes paid and other activity indicators.

COMPLIANCE PROGRAMS BRANCH RESULTS 2014-2015

• The Compliance Programs Branch conducted 127,504 audits and examinations during the 2014-2015 fiscal year which resulted in a fiscal impact amounting to $11.7 billion.
• Fiscal impact consists of tax earned by audit (TEBA), provincial taxes, interest and penalties not included in TEBA. It excludes the impact of appeals reversals and uncollectable amounts.
  • TEBA is comprised of federal income tax adjustments for the years audited plus future years' adjustments discounted to the net present value, the value of GST/HST recoveries, third-party, transfer pricing and gross negligence penalties.
• The Compliance Programs Branch workforce includes 5,391 auditors (April 2015).

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Date modified:

2016-03-08