Management Discussion and Analysis – Administered Activities

Introduction

This section of the Financial Statements provides unaudited supplementary information on Administered Activities, as reported in the audited Statement of Operations – Administered Activities.

Summary

The Statement of Operations – Administered Activities reflects the total revenues and expenditures administered by the CCRA on behalf of the Government of Canada, provincial and territorial governments and First Nations. As per Note 3 of the financial statements, the CCRA collects and then refunds certain amounts to taxpayers. The amounts for which analysis is provided in the following narrative are net of refunds, as reflected in the Statement of Operations.

Gross revenues, including non-tax revenue and net of refunds amounted to $240.6 billion in 2001-2002, an increase of $0.4 billion, or 0.2%, over 2000-2001.

In addition, transfers are made either directly to the party on whose behalf the CCRA collects the taxes, such as Human Resources Development Canada for the Canada Pension Plan and Employment Insurance Account, or to a liability account from which the federal Department of Finance makes transfers to the party for whom the tax is administered. Transfers to the provinces/territories and First Nations are handled in the latter manner.

Transfers increased 3.8%, to $82.0 billion in 2001-2002. This includes a $1.0 billion restatement from 2000-2001 to 2001-2002 related to Tax Collection Agreements overpayments to a number of provinces.

The resulting total revenue administered on behalf of the Government of Canada amounted to $158.6 billion, which was $2.6 billion, or 1.6%, lower than in 2000-2001.

Details on the major components of revenues are presented in the sections that follow.

Exhibit 2: Composition of Gross Revenues for 2001-2002

Personal income tax

Personal income tax receipts include source deductions such as federal and provincial personal income tax, payments on filing, instalments, collection of arrears, Canada Pension Plan contributions, and Employment Insurance premiums.

Net personal income taxes before transfers for 2001-2002 were higher than in 2000-2001 by $3.7 billion, or 2.3%.

Gross receipts were higher in 2001-2002 by $4.8 billion, or 2.7%. Growth in gross receipts would have been stronger in 2001-2002 if it were not for the tax relief measures announced in the February 2000 Budget and October 2000 Economic Statement and Budget Update, which had a dampening effect on personal income tax revenue growth.

Within personal income tax:

• Statistics Canada data indicated that full-time and part-time labour employment increased by 1.1%, wage settlements were up by 3.2%, and overall labour income rose by 4.4% in 2001. However, source deductions increased by 0.1%, or $0.2 billion, due to the impact of the tax relief measures discussed above.

• Payments on filing increased by $2.7 billion, or 29.2%, in 2001-2002. The number of returns assessed where tax monies were owed to the government increased by 13.0%. Capital gains, employment equity, and CPP for self-employed individuals were major contributors to the increase.

• Instalment payments increased by $712 million, or 5.0%, in 2001-2002 as the number of instalment remitters increased 4.4% over last year and the average amount to be paid was up $412 per reminder.

• Refunds increased by 6.6%, or $1.1 billion, in 2001-2002. The processing of T1 returns was subject to accelerated processing, while the total credit returns assessed increased by 9.8%.

• CPP contributions were up $2.2 billion, or 10.4%, due predominantly to an increase in the pension ceiling from $37,600 in 2000 to $38,300 in 2001 and in the employer-employee contribution rate from 3.9% to 4.3% over the same time period.

• EI premiums for 2001-2002 were down $645.0 million, or 3.4%, from 2000-2001 as the increases in employment and average wages were largely offset by a reduction in the employee premium rate from 2.4% to 2.3% per $100 of insurable earnings beginning January 2001.

Transfers to provinces/territories and Child Tax Benefit payments are determined by the Department of Finance.

Corporate, non-resident, and other

Net corporate revenues before transfers decreased $4.1 billion, or 13.2%, in 2001-2002, while net non-resident and other revenues before transfers decreased by $163 million, or 3.8%.

Gross receipts for corporate taxes were $1.8 billion, or 4.8%, lower than 2000-2001. Statistics Canada data indicated that 2001 corporate profits decreased 20.7%. Tax relief measures announced in the February 2000 Budget and October 2000 Economic Statement and Budget Update also contributed to the decline in receipts.

Refunds for corporate taxes increased $2.3 billion, or 32.2%, over the previous year. During the period April 2001 to December 2001, 222,680 refunds were issued, while 104,594 refunds were issued during the same period in the previous year.

Gross non-resident and other taxes decreased by $188 million, or 4.2%.

Transfers to provinces/territories are determined by the Department of Finance.

GST (including GST on imports) and HST

2001-2002 net revenues for GST/HST before transfers were $365 million, or 1.2%, more than they were in 2000-2001.

Gross GST/HST receipts for 2001-2002 were $1.4 billion, or 2.3%, higher than for the previous year. Statistics Canada data indicated that retail sales in 2001 were 4.4% higher than in 2000. GST/HST refunds increased $1.1 billion, or 3.4%, over 2000-2001.

Customs duties

Net customs receipts were $209 million, or 7.5% greater than the 2000-2001 levels.

Gross customs receipts increased $260 million, or 8.6 %, in 2001-2002 over 2000-2001, due largely to the end of the Auto Pact.

Refunds and drawbacks increased by $50 million, or 25.3%.

Excise duties and taxes

Gross excise taxes and duties increased $527 million, or 6.3%, due in large part to tobacco tax increases on April 6, 2001, and November 2, 2001. After taking into account refunds, net excise taxes and duties increased by $391 million, or 4.7%

Non-tax revenues

The reduction in non-tax revenues is due mainly to a decision to take into consideration a provision for uncollectible accounts related to certain customs seizures.

Federal expenditures

Federal expenditures decreased by $757 million, or 7.0%. An increase in child tax benefits was offset by the elimination of the one-time payments to individuals, which occurred in 2000-2001, related to the Government program to provide relief for higher heating expenses. Some remaining payments were made in 2001-2002.

Date modified:

2002-11-07