Our Overall Performance
In 2002-2003, the CCRA met its two strategic outcomes—compliance and innovation. We delivered on most of the commitments set out in our Corporate Business Plan and, overall, met our expected outcomes and anticipated results in each business line. We made good progress in implementing performance improvement plans for each business line to fill performance gaps identified in last year's Annual Report. In some cases, however, our ability to take corrective action was constrained by the need to deploy resources against immediate risks and to maintain the integrity of our core programs. Exhibits 5 and 6 provide more information on the CCRA's performance against these two strategic outcomes.
Assessment of Compliance
In terms of our performance against the first strategic outcome, we are proud of the high overall level of voluntary compliance that exists in Canada today. About 94% of all the cash receipts that are remitted to the CCRA are reported and paid without any audit or collection activities. Moreover, as illustrated in Exhibit 4, we find that compliance is reasonably high for each of the five key compliance indicators: filing, registration, border and trade, remittance, and reporting. Many of our measures show improvement this year, although filing and remittance compliance by corporations appears to have declined somewhat. Although some variation from year to year is to be expected, we continue to monitor compliance trends and take action as appropriate.
Our indicators have been expanded this year to include measures of filing and remittance compliance for the some 1.4 million employers who collect and remit source deductions for about 18.5 million individuals, representing 84.6% of personal income tax receipts. The results show that the vast majority of employers file their T4 information slips without any intervention by the CCRA and over 90% of employers remit on time. We are not aware of any reliable and accurate method for estimating the overall level of reporting compliance. Our assessment of reporting compliance is therefore more qualitative and relies on information from our compliance programs and other indirect measures. Our judgement, based on our experience, available evidence, and estimates, is that while reporting non-compliance is certainly material, it remains at relatively low levels—in line with prior years and compared to other countries. Much of our assurance is derived from our comprehensive system of checks and balances (described under Assisted Compliance) that promotes accurate reporting of income and trade data and facilitates the early detection of reporting errors. As our Compliance Measurement Framework and our Compliance Improvement Plan mature, we anticipate that our assessment will be guided by a more comprehensive set of compliance indicators.
Exhibit 5: Strategic Outcome Statement – Compliance
Strategic Outcome:
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Canadians comply with tax, trade, and border legislation.
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Actual Results
for 2002-2003:
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Overall levels of compliance continue to be high, as compared to 2001-2002 and as further demonstrated by our performance against expected outcomes for our business lines.
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As demonstrated by:
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- Filing Compliance – Our most recent analyses indicate that most Canadian individuals (18 years and older) and businesses file their tax returns on time, without any direct intervention by the CCRA. For instance, we estimate that 94.3% of all Canadians (18 years and older) filed a timely, individual income tax return, up from a revised estimate of 93.9% for the prior year. As well, 87.2% of all taxable incorporated businesses filed their income tax returns on time, down somewhat from a revised estimate of 88.9% for the prior year. Further, 91.6% of all CCRA-registered Canadian businesses (excluding Quebec) filed their GST/HST 1 returns on time, up from 90.3% the previous year. A new measure of employer filing compliance shows that 96.4% of employers filed their T4 returns without any direct intervention from the CCRA in each of the past two years.
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- Registration Compliance – An estimated 84.6% of all Canadian businesses (including Quebec) were registered for GST/HST1, up from 83.2% the previous year. This represents a reasonably high degree of registration compliance since many businesses are not required to participate.
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- Border and Trade Compliance – Overall compliance with border requirements has remained stable at reasonably high levels over the past three years, averaging over 90% across all modes of entry into Canada. Similarly, an internal study suggests that compliance is reasonably high (well over 90% based on further analysis of 2000-2001 data) with respect to duty requirements in the trade community; however, the analysis does point to some issues about the proper classification of certain commodities. We anticipate that our new Administrative Monetary Penalty System (AMPS) will help to promote compliance over time.
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- Remittance Compliance – 93.1% of taxable individual filers paid their reported taxes on time (compared with 90.3% in the previous year). Although a significant number of corporations do not pay their full balance by their due date, over 93% of total reported income taxes are paid on time (compared to a revised 95% for last year). About 2.5 million businesses1 (including Quebec) collected over $66 billion in GST/HST on taxable sales of goods and services and remitted the net amount that was due to the CCRA. A new measure of remittance compliance indicates that 90.1% of employers forwarded source deductions on behalf of their employees without CCRA intervention, up slightly from 89.9% in the prior year.
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- Reporting Compliance – Non-compliance with reporting requirements takes many forms, from errors and unintentional omissions to smuggling and wilful tax evasion. Rather than attempt to estimate the overall levels of reporting non-compliance, such as the “tax gap” or the total amount of smuggling activity, we rely on information from our compliance programs and other indirect measures to make a qualitative assessment. Our judgement, based on our experience, available evidence and estimates, is that while non-compliance is material, it remains at relatively low levels—in line with prior years and comparable to other OECD countries. Much of our assurance is derived from a robust system of checks and balances that promotes accurate reporting of income and trade data, and facilitates the early detection of reporting errors.
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1 Businesses residing in Quebec register with the ministère du Revenu du Québec which administers GST on behalf of the CCRA and remits the net amount due to the CCRA.
- Date modified:
- 2003-10-29
