Appeals

Expected Outcome

Performance Summary – We have mostly met our Anticipated Result, as demonstrated by the following performance against expectations:

• commenced work on updating staff training and guidelines to promote the consistent application of the fairness provisions
• conducted a review of the fairness registry and initiated steps leading to systems changes to improve its information capabilities
• increased completion of cases under the Voluntary Disclosures Program (VDP), although we still need to make progress in stabilizing the inventory
• however, limited progress was made in instituting monitoring programs to confirm that the fairness provisions are being applied consistently across programs and regions

In 2001-2002, we issued the 7-Point Plan for Fairness to integrate the principles of fairness across the CCRA. Fairness is applied across the Agency in two major ways: through the Voluntary Disclosures Program (VDP) and through the application of fairness provisions.

Our VDP promotes voluntary compliance with the accounting and payment of duty and tax provisions under the laws that CCRA administers, by providing clients with an opportunity to correct past omissions, without penalty, thus rendering them compliant.

In 2002-2003, the VDP continued its significant expansion. We increased the number of voluntary disclosures cases we completed from 4,732 in 2001-2002 to 5,097 in 2002-2003. This increase in participation shows that communications promoting voluntary disclosures remain effective.

3-1 Voluntary Disclosures Program – Cases Completed and Inventory

The VDP cases we processed this year have related assessments totalling an estimated $277 million in taxes, split between $105 million for income tax files and $172 million for GST/HST and excise tax files, reflecting an increase of 20%, from $230 million in 2001-2002.

3-2 Related Assessments for Completed Voluntary Disclosures Cases: Income Tax, GST/HST, and Excise Tax

The increase in the use of the program has resulted in a growing inventory, which rose 10% in 2002-2003 from 2,459 to 2,706 files. As we now have a secure and stable funding source for the program, we expect to begin reducing inventories in future years.

As for the application of the fairness provisions, sections of the Income Tax Act and other Acts the CCRA administers permit the CCRA to cancel or waive penalties and interest payable by taxpayers who have faced extenuating circumstances.

Interest and penalties are cancelled in cases where they have already been assessed. They are waived when they have not been assessed. For example, minor amounts are not charged if the CCRA caused a delay in processing an adjustment.

While much of the day-to-day administration of the fairness provisions is conducted within various Tax Services programs, Appeals Branch coordinates the Fairness initiative across the Agency.

For 2002-2003, clients' requests decreased significantly under the fairness provisions. Fig. 3-3 shows that they fell to 63,600 in 2002-2003 from over 78,000 in 2001-2002. This is the first volume decrease in several years. Out of the estimated 63,600 cases CCRA-wide, relief was provided in about 41,100 (almost 65%) cases. The value of interest and penalties cancelled or waived declined from $191 million in 2001-2002 to $166 million in 2002-2003, for an average estimated amount forgiven of $4,031 per client.

3-3 Requests and Relief Under the Fairness Provisions

Note: The figures shown for 2001-2002 are restated from last year's Annual Report to correct an error in our Statistical Tracking Analysis and Reporting System (STARS).

We also automatically cancelled or waived an additional $155 million in penalties and interest for almost 1.9 million taxpayers, for an average estimated amount forgiven of $81 per client this year.

In total, an estimated $321 million was cancelled or waived by the CCRA across all business lines, including $257 million pertaining to Tax Services.

We are making progress in the consistent application of the fairness provisions throughout the CCRA. One Appeals Branch study revealed that Appeals officers are administering the fairness provisions well, and also identified areas that are necessary to further improve the application of the guidelines.

Some progress has also been made in instituting Agency-wide monitoring. Appeals, as the lead branch, co-ordinated the development of monitoring plans for all program areas that are involved with the administration of the fairness provisions. We also commenced work on revising and updating the reference guide on fairness provisions for field office staff training that we issued last year. The guide will be used to promote greater consistency and accuracy in the processing of requests at service points throughout Canada.

We continue to face challenges with the fairness registry for tracking fairness requests and decisions relating to the cancellation of interest and penalty assessments. We conducted a review of the registry to improve its information capabilities and to better track client information. As a result of the review, recommendations have been issued to initiate systems changes we plan to complete in 2005.

Date modified:

2003-10-29