Discussing Our Performance by Anticipated Result

We assess our performance for the Appeals business line against six anticipated results as they relate to our expected outcome: Canadians receive an impartial and timely review of contested decisions through our redress system.

Ratings are provided for each anticipated result. They show whether our performance met (green), mostly met (yellow), or did not meet (red) the results. We provide a separate rating on the quality of the information upon which we based the assessment. As with other business lines, we assess our performance against two themes: managing the compliance continuum and innovating for the future.

* Note: To report on timeliness more clearly and meaningfully, we have divided last year's first anticipated result into two parts (see Anticipated Result 2). We have adjusted last year's performance rating for transparent, accessible, and consistent redress mechanisms from “not met” to “met”, to reflect what performance would have been like in this area without considering timeliness.

Highlights

We strive to provide a dispute resolution process that is transparent, accessible, and consistent. These attributes help to promote the fair and impartial treatment of our clients, and are assessed through the following indicators:

• the inclusion of information about client redress options in our publications and forms,

• our confirming with clients the receipt of their disputes,

• discussions with clients of the final decisions on their files,

• the results of periodic surveys of client satisfaction with the overall redress process, and

• the consistency of case outcomes over time, including the percentage of cases resolved in the client's favour.

Management believes that transparency has been achieved, both for clients involved in the dispute process and the public at large, a conclusion supported by the significant efforts we make in this area ( Exhibit 70 ).

Exhibit 70: How Transparency Is Achieved

The public is informed of the dispute resolution process through the CCRA Web site, which links to Appeals, through an information brochure, and through publications such as this report. Furthermore, individuals who file disputes have access to most information in their files that relates to the issues in dispute (information such as third-party reports and personal information related to another person may be protected and not accessible). In addition, a personal phone call is made by an Appeals officer before a final decision is made, allowing clients another opportunity to provide input into the decision process. Clients are also informed formally of final decisions when they are made.

To enhance transparency, a new service standard was introduced to contact 75% of all clients who filed disputes with a meaningful status update within 30 days of filing. We substantially exceeded this standard across all program areas (see Exhibit 71 ). Overall, we notified 82% of clients within this timeframe. Consequently, we have raised our standard from 75% across all program areas to 85% for each program area in 2002-2003.

Exhibit 71: Performance Against Service Standard – Percentage of Clients Contacted Within 30 Days

Periodic surveys of client satisfaction with Appeals services tell us whether the information we provide helps make the process sufficiently transparent and whether it enables clients to access our services if they want to do so. The last survey of most business lines was conducted in 1998, and was reported on in last year's annual report. Estimates based on the survey suggest that about 85% of respondents were satisfied with the ease of filing a dispute. Trade administration clients were surveyed for the first time this year, as that area was not part of Appeals at the time of the 1998 survey. Approximately 70% of trade administration clients indicated that they were satisfied with the written and oral explanations they received. Ease of filing a dispute was not polled. The next branch-wide survey of clients, originally planned for 2002-2003, has been postponed for one year to allow for the implementation of recommendations to improve turnaround times (see Anticipated Result 2), and to be able to evaluate the subsequent impact on client perceptions of Appeals. It is expected that the results of the new survey will be at least as positive as those of the 1998 survey.

It is our expectation that all potential clients are notified of their right to redress, and how to access Appeals' services. To achieve this goal, we proactively advise potential clients of the appeals process and their appeal rights through our major tax, customs, and benefits forms (see Exhibit 72 ). For example, notices of assessment contain a standard paragraph informing the recipients of how to file a dispute if they disagree with the decision contained in the notice. Our CCRA Annual Survey indicates that the majority of Canadians (71%) continue to be aware of their right to file a dispute should they disagree with our decision.

Exhibit 72:

In 2001-2002, our efforts to improve access were focused on developing and implementing an option for the filing of certain disputes over the Internet. This initiative will offer clients a new and speedy dispute filing option, while improving our responsiveness and our clients' accessibility to the redress process. Our review determined that there are no technical obstacles to proceeding to offer the new e-service, and funding has been requested from the Government. We are planning to make Internet filing of disputes operational as of 2003-2004 for the income tax and GST/HST/excise tax programs, when we anticipate that the computer systems required to support this option will be in place.

To facilitate access to redress and align the process for Customs with other program areas, changes to the redress provisions of customs legislation were passed in 2001-2002. In particular, the time allowed to file a request for a review of an enforcement action was increased significantly, and a provision was added to allow for an extension of the time to request a review for both trade and enforcement decisions. The law was also amended to enable a party with an interest in seized or detained goods to request an administrative review, rather than having to apply to the courts. This change should lower legal costs for these third-party applicants and the CCRA, by reducing the number of cases that go to court. Taken together, these legislative amendments have the effect of increasing access to Appeals services.

While overall performance on accessibility is strong, we recognize that in some cases the appearance of accessibility may be impacted by the length of time it currently takes to resolve disputes (see Anticipated Result 2) and the perceived cost of filing disputes.

An indicator of our consistency in providing fair and impartial redress is year-over-year stability in the percentage of disputes that Appeals resolves in favour of clients (see Exhibit 73 ). While we decide each case on its own merits and base our decision on the facts of the particular case, we nevertheless believe that this stability is indicative of our balance in decision-making and reflects a fair and impartial process. During 2001-2002, the branch resolved between 43% and 58% of disputes (depending on the program) in favour of clients, either in whole or in part. While there are minor variances from 2000-2001 in all program areas, and while the trade administration area had an increase of 10 percentage points in the number of cases where the CCRA's initial decision was confirmed by Appeals, the proportion of cases resolved in favour of clients at the administrative level is generally stable over time. For instance, the percentage of disputes resolved wholly or partly in favour of taxpayers in the highest volume program, income tax, has fluctuated no more than 1% a year over the last three years. We believe this is a reflection of our fair and consistent treatment of disputes over time.

Exhibit 73: Outcome of All Disputes at the Administrative Level

Dispute allowed in full – The client is allowed 100% of the issues in dispute.

Dispute allowed in part – The client is allowed a portion of the issues in dispute.

Original decision confirmed – The client is not successful in any of the issues in dispute.

Another indicator of consistency, and indirectly of fairness and impartiality, is the number of clients who agree with the resolution of their disputes. This agreement is determined from personal phone conversations we have with clients just before we render our final decision on their file. In 2001-2002, 62% of our clients in the income tax and GST/HST/excise tax programs (which account for the vast majority of cases) agreed with the resolution of their disputes, including a fairly high percentage of clients whose disputes are either not at all or only partially successful (see Exhibit 74 ). In addition, of the 72,826 disputes completed, only 7% were pursued to the courts, a slight reduction from the previous year. To the extent that this indicates clients are generally satisfied with the resolution of their disputes, the reduction may suggest a small improvement in perceived fairness and impartiality.

Exhibit 74: Percentage of Clients Who Agree With the Resolution of Their Dispute

* Note: To report on timeliness more clearly and meaningfully, we have divided last year's first anticipated result into two parts. While last year's performance rating has been adjusted for transparent, accessible, and consistent redress mechanisms (see Anticipated Result 1), the rating for timeliness remains unchanged at “not met.”

Highlights

One of our main objectives is to handle disputes as expeditiously as possible, because timeliness makes a significant contribution to the perceived fairness and accessibility of the redress process. On the other hand, we are cognizant of the balance between improving timeliness and not compromising the accuracy or fairness of our decisions.

A key indicator of timely redress is the average processing time it takes for Appeals to resolve cases when they are in workable status. A file is in “workable” status, for instance in the income tax area, when it does not require work to be performed by someone external to the tax services office (TSO) handling the dispute before the dispute can be resolved. A file will be workable even if we are awaiting information from the client. A file is considered to be “non-workable” if a court decision on it or a related file is pending; if the file is awaiting an opinion from Appeals at Headquarters; or sometimes for CPP/EI files, if a file has been referred to a specialized CPP/EI group in Appeals for an opinion.

While we reduced turnaround times in the majority of program areas between 1999-2000 and 2001-2002, disputes continue to be resolved too slowly. In fact, turnaround times deteriorated in two program areas, and improved only modestly in the other three. Appeals Branch takes, on average, 102 to 304 days to complete its review of disputes when in workable status (see Exhibit 75 ). With respect to specific program areas, improved timeliness on CPP/EI disputes is largely attributable to the concerted efforts being made through the Program Renewal Initiative. CPP/EI processing times might have been lower than last year in any event this year, as changes were made to standardize the way various offices count units in that program. In Customs Adjudications and Trade Administration disputes, the increase in the average number of days for processing was mainly due to the clearing of a large backlog of aging files that moved from non-workable to workable status. As a result of efforts to clear out these files, inventories of workable files dropped in these programs. We believe that modest improvements made in the last year are due in large part to the more efficient allocation of workloads, and this improved trend appears to be continuing into 2002-2003, suggesting that we are well positioned to achieve our targeted performance.

A comprehensive review of our processes, practices, and procedures to determine the underlying factors contributing to slow turnaround times was completed in 2001-2002. The study confirmed that in all program areas improvements in inventory and turnaround times are possible. Approximately 130 potential opportunities to improve timeliness were identified, such as implementing case completion targets and revising procedures to enhance processes for handling the workload. The implementation of an action plan based on this review will begin in 2002-2003 and will continue over a three-year period.

Progressively more aggressive file completion targets were developed in 2001-2002 for all but two program areas (Customs Adjudications and Trade Administration), where targets were established by summer 2002. If met, these targets will result in a significant reduction of turnaround times in most programs areas by 2004-2005. In 2004-2005, the targets will be reviewed again to determine if any adjustment is necessary. Similarly, targets to control inventories were developed in the Customs Adjudications and Trade Administration areas. It is hoped that through a combination of implementing some of the timeliness improvement opportunities, linking these targets to managers' accountability agreements, monthly monitoring of timeliness, and further reducing the staffing shortfall we will be able to meet our new targets for timeliness. These targets address timeliness as far as it is in our control; they cannot address any delays we experience in getting necessary information from clients. We are working to make clients and their representatives more aware of how our turnaround times are affected by the time they take to provide information in support of their dispute.

For 2001-2002 we had only one specific service standard impacting timeliness. As noted in Anticipated Result 1, a new service standard was introduced to contact 75% of all clients who filed disputes with a meaningful status update within 30 days of filing. We substantially exceeded this standard by notifying 82% of clients within this timeframe (see Exhibit 71 ). Consequently, we have raised our standard from 75% across all program areas to 85% for each program area in 2002-2003.

Exhibit 75: Processing Times in Average Number of Workable Days 1 for Disputes 2

The total number of disputes received in 2001-2002 increased by 29%, due primarily to a large number of income tax disputes (14,453) filed by former and current public servants relating to the taxability of interest received on the federal government's retroactive pay equity settlement. This led to a 22% increase in our combined workable and non-workable inventory to 69,481 files (see Exhibit 77 ). In fact, inventories actually decreased in all program areas except income tax, where the increase was so substantial as to increase inventories overall. However, we resolved 6% more disputes than in 2000-2001 (see Exhibit 76 ).

Exhibit 76: Dispute Intakes and Disposals

Due to factors beyond our control, primarily the litigation-bound status of the pay equity disputes, the percentage of workable files decreased to 31% of the total inventory (69,481) on March 31, 2002, down from 40% on the same date the previous year (see Exhibit 77 ). This growing proportion of non-workable files represents a problem in the sense that processing of these files is stalled. This adds to the length of time it takes to resolve a dispute and has a negative impact on our clients' perception of the redress process. Little can be done by the Agency to remedy this problem, however, as non-workable files are mostly outside the CCRA's control and in the hands of others, such as the courts.

Exhibit 77: Percentage of Workable and Non-workable Files in Inventory 3

Aside from turnaround times, the age of our case load also remains an issue. We did, however, make progress in reducing the average age of our workable inventory ( Exhibit 78 ). Most of our files are in the first three categories (up to one year old.) The total number of workable files aged one year or less dropped 7% in 2001-2002. The number of workable files more than one year old has decreased by over 6% since 1999-2000, positively impacting on overall timeliness of case resolution.

Exhibit 78: Dispute Inventory by Age – Number of Workable Files 3

The dollar value of taxes in dispute in workable files decreased by $303 million in 2001-2002. This resulted from the combination this year of a $644 million drop in the value of workable cases, with a $341 million increase in the value of non-workable files. The value of amounts in dispute in non-workable cases at the end of the year constituted 80% ($6.5 billion) of the total tax dollars involved, representing an increase of 35% over 1999-2000, when it was $4.8 billion. Exhibit 79 shows the distribution of workable files in terms of tax dollars.

Exhibit 79: Dispute Inventory by Age – Tax Dollars In Workable Files ($ million)

Work also continued on our complexity factors initiative, to more precisely evaluate the required financial and human resources to handle specific types of workloads based on their complexity. Some 42 potential factors have been identified, and 18 are being considered for a pilot test of income tax and GST workloads in the second half of 2002-2003.

Highlights

Administering the fairness provisions is an increasingly important part of CCRA operations, especially given rapid growth in the number of requests. Our administration of these provisions must itself be fair. This depends heavily on ensuring the application of guidelines for determining whether relief from penalties and interest should be awarded is consistent across cases, program areas, and regions.

In 2001-2002, the CCRA provided relief in 75,960 out of the 108,158 cases where clients requested it under the fairness provisions (see Exhibit 80 ). In addition, relief from penalties and interest was granted automatically in another approximately 1.8 million cases.

Exhibit 80: Requests and Relief Under the Fairness Provisions

The total value of interest and penalties forgiven (including waivers) in 2001-2002 increased significantly to an estimated $288 million (see Exhibit 81 ). This figure includes an estimated $97 million in automatic waivers. The increase in requests and the value of interest and penalties waived or cancelled reflects the higher profile that the program has achieved over time. Nevertheless, the overall proportion of requests granted to requests processed remained stable from last year.

Exhibit 81: Total Value of Interest and Penalties Forgiven ($ million)

Exhibit 82 illustrates how the value of penalties and interest forgiven per request has increased substantially in the last three years.

Exhibit 82: Penalties and Interest Forgiven per Request Granted

A reference guide was issued to field office staff in 2001-2002 to promote consistency and accuracy in the processing of fairness requests at service points throughout Canada. While helpful, by itself this tool is inadequate given rapid growth in the number of fairness requests and the dollar value involved. A review of the Fairness Registry, our system for tracking requests and decisions relating to cancellations of interest and penalty assessments, was initiated in 2001-2002. The Registry does not currently capture all information relating to fairness requests (such as amounts waived), a shortcoming noted by the Office of the Auditor General. To ensure consistency in dealing with fairness requests, the existing request approval procedures and tracking systems must be enhanced, monitoring of the consistency of decisions expanded, and additional records kept in the Registry. The review of the Fairness Registry is about half completed and is expected to conclude by mid 2002-2003. Subsequent transformation of the Registry will take until 2004-2005 to complete. It is expected that this transformation will address the concerns of the Office of the Auditor General.

New quality assurance and monitoring programs were successfully piloted in one tax services office during 2001-2002, and full implementation in the other offices is beginning in 2002-2003. These programs will enable us to better determine the level of consistency in Appeals decisions, including application of the fairness provisions, and our adherence to guidelines and policies. Deciding cases consistently means that we are applying the applicable legislation, policies, and jurisprudence consistently in arriving at our decisions; it does not mean that all cases will be decided equally on varying facts. We are now considering options for implementing systematic fairness monitoring in an efficient and effective way. As lead branch on fairness issues, Appeals will co-ordinate the implementation of this monitoring across all business lines.

When the fairness legislation was first implemented, no additional resources were dedicated to the initiative. The growth of the program has consumed an increasing share of our resources, contributing to delays in processing disputes. A roll-up of the costs of this program has been completed, and the results will be examined.

Highlights

Risk management is essential to promoting the consistent and fair resolution of disputes and litigation within a reasonable time. Our key goals are: resolving most cases at the administrative level; pursuing appropriate cases to the courts; prevailing in a majority of those cases that do go to court; monitoring the consistency and fairness of our decisions; and identifying desirable legislative changes arising from court decisions. As well, we seek to minimize the potential impact of those cases that could lead to a broader, unintentional erosion of the tax base, or to other societal implications, through early identification and proposals to the departments of Finance and Justice to address needed clarifications.

In general, we believe that our risk management is largely effective in relation to these goals. As promised, we introduced a risk management framework to bring coherence to our practices. The framework included developing an orientation manual for Appeals managers and designating a senior Appeals manager in each region to act as a risk management “champion” to help co-ordinate risk management from a regional perspective. The framework is intended to allow us to better identify risk at an early stage, and therefore to better manage risk throughout the process.

The percentage of cases resolved administratively is already very high (above 90%) for all programs except CPP/EI (see Exhibit 83 ); the unique role of the CCRA in CPP/EI disputes makes comparisons with these other programs difficult.

Exhibit 83: Administrative Resolution Rates

In 2001-2002, 5,109 appeals were filed in all levels of court (see Exhibit 84 ). Of those income tax and GST/HST/excise tax disputes that were appealed to the courts, which represent the majority of our litigation business, about 64% were withdrawn or were settled before a hearing. This represents an improvement of 5% compared to 2000-2001.

Exhibit 84: Litigation Intakes and Completions

Our success rate for the year at the first level of court dropped slightly for the year (by 6 percentage points). Approximately 59% of appeals that proceeded to the first level of court were decided in favour of the Crown, compared to 65% in 2000-2001 (see Exhibit 85 ). We operate on the understanding that in a responsive and fair system, there will always be some cases ruled against the Crown. Nevertheless, the majority of cases have historically been decided in the Crown's favour, and slight fluctuations in case outcomes are not indicative of performance on litigation management issues.

New programs addressing quality assurance and monitoring of consistency in case decisions were successfully piloted at one tax services office. Implementation of these programs will begin in 2002-2003. Once they are fully implemented, we will be able to confirm the actual level of consistency overall in our appeals case decisions. We regularly review cases in dispute and court decisions to identify possible areas for legislative change. For example, during 2001-2002 a legislative amendment that we proposed regarding the goods and services tax credit was enacted. This legislative change clarified issues surrounding the awarding of the credit when couples separate or divorce, and should reduce the number of disputes and appeals in this area.

Exhibit 85: Outcome of Clients' Disputes and Appeals in 2001-2002

The costs of our work in court litigation and at the Canadian International Trade Tribunal are largely outside our control. In recent years, the cost of retaining private-sector expert witnesses to defend the Crown's position in court appeals has risen dramatically, affecting our overall ability to manage risk. Costs grew from $374,000 in 1995-1996 to about $2.5 million in 2000-2001. In 2001-2002 they decreased to $1.8 million. Accurately predicting expert witness costs is particularly challenging, as the requirement for experts depends entirely on the nature and complexity of the issues being litigated, and these vary from year to year.

Highlights

Having a knowledgeable and skilled workforce in the right place at the right time is key to providing an impartial and timely review of contested decisions.

In 2001-2002, all Appeals staff positions were reviewed and profiles of required competencies were established as part of the move towards the CCRA's new competency-based human resources management regime. In addition, a new position of branch learning agent was established and staffed at Headquarters to co-ordinate Appeals training and to identify current and future learning needs. These initiatives are expected to help ensure that the workforce we have is knowledgeable and skilled . To allow for a branch reorganization, completion of the training framework begun last year was delayed until 2002-2003.

Our primary difficulty continues to be having sufficient staff in the right place at the right time. Recruitment and retention are major, ongoing challenges. Given these pressures, field offices are frequently forced to operate with fewer staff than funding would otherwise allow, hampering our efforts to have staff in the right place at the right time.

We were again unsuccessful in staffing at planned levels in 2001-2002, which had a somewhat negative impact on our ability to provide timely dispute resolution. A more aggressive approach to human resources management, consisting largely of strategic increases in staffing levels, nevertheless enabled us to reduce our staffing shortfall from 10% in 2000-2001 to 7% this year (see Exhibit 86 ).

Exhibit 86: Staffing Shortfall Compared to Authorized Funding

In an attempt to improve turnaround times despite the staffing shortfall, some workloads were transferred both inter-regionally and intra-regionally. As anticipated, processing times for income tax files improved following this change. Long term solutions to improving processing times are being evaluated now (see Anticipated Result 2). Also, we plan to review our corporate structure and our staff positions with a view to enhancing the profile of the work done by Appeals staff.

Highlights

One of the main innovation goals of the CCRA over the last few years has been to integrate and apply the principles of fairness across all of our programs and business lines. This goal has generally been achieved. However, at present we have no formal framework in place to measure and assess whether the principles are being applied and integrated in all program areas across our operations, therefore we are relying on informal management assessments. The CCRA needs this monitoring framework to prevent possible slippage in the application of the principles in the future, as our business changes and our attention shifts to address new, emerging priorities.

The 7-Point Plan for Fairness, begun in February 1999, describes the actions that were taken to achieve greater fairness in the CCRA's dealings with Canadians (see Exhibit 87 ). This plan is now implemented agency-wide. In accordance with this plan, major publications across all business lines communicate the fundamental right to appeal to potential clients, and the Voluntary Disclosures Program provides clients with an opportunity to correct past errors and omissions without penalty. Continued efforts are made in areas requiring the use of discretion, such as in the application of the fairness provisions. These efforts demonstrate our commitment to the application and integration of fairness principles throughout the Agency.

A shift from implementation to monitoring fairness as a corporate value is now required. The Balanced Scorecard that is being developed may be one way in which to measure and assess our performance in applying the fairness principles, and ensuring they are integrated into our day-to-day business operations to manage the compliance continuum and encourage voluntary compliance.

Exhibit 87: The 7-Point Plan for Fairness

In 2001-2002, our focus was on strengthening the CCRA's fairness culture and practices. To this end, we produced an information guide for employees containing an overview of the Fairness Initiative and its implementation. We also produced a handbook about fairness as a corporate value, distributing 35,000 copies to managers and supervisors across the country to be forwarded to employees. The handbook gives employees basic information and tools to help them better understand what fairness means at the CCRA, and identifies ways they can incorporate the principles of fairness into their daily work environment.

A key element in the 7-Point Plan for Fairness—the Voluntary Disclosures Program for income tax and GST/HST/excise tax cases—continued to expand in 2001-2002, spurred by additional promotion through field outreach activities and advisory committees, and by the fact that the responsibility for co-ordinating the program was moved from the audit area to Appeals. This strengthened its perceived impartiality and fairness. The number of cases completed under the Voluntary Disclosures Program almost doubled, to 4,732 cases from 2,562 the previous year (see Exhibit 88 ), and revenues to the Crown increased by 61% to an estimated $230 million, compared to $143 million last year (see Exhibit 89 ).

Exhibit 88: Voluntary Disclosures Program – Cases Completed and Inventory

This increase in workload has resulted in a growing inventory of voluntary disclosure applications carried over from one year to the next. Inventories in 2001-2002 increased to 2,459 files, an increase of 28% over the year before. Appeals has recognized the growing inventory to be a problem and is working on an action plan to reduce it. This will become an increasingly important initiative, as a 40% growth in intakes is expected in 2002-2003 and a 10% growth in subsequent years. Nevertheless, the proportion of cases in inventory to cases completed fell from last year's levels. A stable source of dedicated funding to adequately support the program is being sought, so that resources are not taken away from vital areas such as dispute resolution.

The above initiatives demonstrate our commitment to the application and integration of the fairness principles throughout the Agency.

Exhibit 89: Related Assessments for Completed Voluntary Disclosure Cases

The estimated average additional tax revenue per voluntary disclosure file for GST/HST/excise tax has increased over the past few years, while for income tax, it has decreased (see Exhibit 90 ). As shown previously, GST/HST/excise tax files form only a small percentage of all voluntary disclosure files received (see Exhibit 88 ).

Exhibit 90: Estimated Average $ Value of Related Assessments per Completed Voluntary Disclosure File

1 Processing time means the average number of calendar days between the date of mailing of the Notice of Objection and the date the client was notified of a final CCRA decision, excluding the number of days the file was in non-workable status.

2 These statistics represent average processing times; it is important to recognize that cases with complex issues in dispute can often take up to several years to resolve, especially if appealed to court.

3 Inventories are calculated at the end of each fiscal year, as of March 31.

Date modified:

2002-11-07