Our 2005-2006 Results

Our Program Activities

Filing and Remittance Compliance (PA3)

Within our Filing and Remittance Compliance program activity, we aim to ensure compliance with tax laws for filing, withholding, and remittance requirements, including amounts collected or withheld in trust on behalf of the Government of Canada. We undertake this work through our National Collections Call Centre and at 46 Tax Services Offices across Canada. This program activity controls the level of tax debt and identifies and addresses non-compliance, thereby protecting Canada's revenue base.

In 2005-2006, spending for this program activity totalled $651.9 million (9,169 FTEs) or 17.6% of the CRA's overall expenditures ¹ . Of this $651.9 million, $406 million was for net program expenditures and $245.9 million was allocated to this program activity for Corporate Services.

Figure 20 Resource Spending

• Accounts Receivable – responsible for the timely collection of overdue accounts and assuring the effective control of existing tax debt:
  • spending of $262 million (4,309 FTEs);
  • TSO cash collections $9.5 billion;
  • resolved 99.8% of the dollar value of new debt intake during the fiscal year;
  • the National Collections Call Centre made payment arrangements for a total of $2.1 billion; and
  • our National Pools collected a total of $887 million for individuals and $366 million for GST accounts.
• CPP/EI Eligibility – provides rulings and determinations related to the Canada Pension Plan and Employment Insurance:
  • spending of $7.3 million (340 FTEs).

Note: the results for CPP/EI Eligibility are reported in the Client Assistance (PA1) section.

• Trust Accounts – promotes compliance with the filing, registration, and remitting requirements of the Income Tax Act and the Excise Tax Act, including our non-filer and non-registrant activities as well as activities that involve compliance work with employers. Through these activities, we obtain missing returns and remittances and conduct examinations to ensure the validity and accuracy of deductions as well as the remittance and reporting of source deductions and GST/HST by employers and registrants:
  • spending of $136.7 million (2,522 FTEs);
  • obtained a total of 934,671 returns from individuals and corporate taxpayers who had not filed their returns;
  • found 4,283 GST/HST non-registrants that did not comply with the registration requirements of the Excise Tax Act;
  • a total of 47,888 additional individual and corporate tax returns filed as a result of our Contract Payment Reporting Initiative;
  • identified fiscal impact of $2.3 billion for non-filers and non-registrants; $2.3 billion for GST/HST and Employer Compliance; and over $300 million for the Contract Payment Reporting Initiative.
• Allocation of Corporate Services spending:
  • total of $245.9 million allocated to this program activity (1,996 FTEs).

Performance Report Card

Performance Discussion

Our Filing and Remittance Compliance program activity has two expected results:

• Tax debt is resolved on a timely basis and is within targeted levels, and
• Non-compliance is identified and addressed.

With respect to our first expected result, we have met this objective in 2005-2006 by meeting our goals with the following results:

• we met our timely resolution targets by resolving 62.4% of new intake; lowering the proportion of tax debt under one year old to 32%; and maintaining the proportion of aged tax debt between one and five years to approximately 50%; and
• we kept tax debt within targeted levels by stemming the growth in inventory to $18.5 billion, collecting $900 million more than our commitment to Parliament, and resolving the dollar value of accounts at a rate almost equivalent to new debt intake.

We did not, however, achieve our commitment to Parliament to reduce the proportion of tax debt greater than five years of age to less than 16%.

We met our second expected result in 2005-2006 by achieving the following:

• our Non-Filer and Non-Registrant programs showed increased results over the past year, including actions that led to convictions and fines;
• $4.9 billion in fiscal impact was identified by our Filing and Remittance program activities, exceeding our commitment to Parliament; and
• our work led to the conviction of 1,286 taxpayers, resulting in more than $1.4 million in fines and 29 prison sentences.

The results achieved within this program activity contribute to our tax services strategic outcome by helping to protect Canada's revenue base by identifying, addressing, and deterring taxpayer non-compliance.

As noted on , non-compliance with taxpayers' remittance obligations occurs when taxes owed are not paid when they become due. To facilitate the timely resolution of routine tax debt, we balance our efforts between resolving aging inventories of receivables and resolving intake of new debt.

Percentage of intake resolved in year of intake – We direct newly-assessed, high-volume, low-risk tax debt (individual and corporate income tax plus GST/HST) to our National Collections Call Centre. In addition, we use our National Pools to resolve low complexity individual income tax and GST/HST accounts. Our strategy is to resolve routine tax debt with minimal enforcement action within a specified period of time to allow our Tax Services Office (TSO) collections agents to concentrate on more complex accounts. In many cases, our Call Centre and National Pool are the first points of contact with taxpayers.

Overall, we resolved 62.4% of new intake in 2005-2006—a one percent increase over the previous year—demonstrating our ongoing success in meeting our target of 60% of new intake dollars resolved. This result had a positive influence on the proportion of tax debt under one year of age in our inventory, which fell in 2005-2006 to 32%, one percentage point lower than last year (Figure 22). We also matched our accomplishment of 2004-2005 by maintaining the proportion of tax debt between one and five years of age at slightly less than 50% of the total inventory.

Commitment on level of tax debt – As noted on , tax debt levels have risen over the past number of years. In 2001, we requested and received additional funding from Parliament to manage the growing level of tax debt. At that time, we had estimated that, with the level of resources then available, the gross tax debt would climb to $34 billion in 2005-2006. We committed to a level of tax debt that would not exceed $24 billion.

Through the implementation of our strategic initiatives, however, we have achieved a tax debt balance at the end of 2005-2006 of $18.5 billion, considerably below the maximum level to which we committed (Figure 21).

Figure 21 Projected Growth in Tax Debt

Given the resources available, these results demonstrate our success in stemming the growth in the tax debt balance.

At the same time, the tax debt continues to grow faster than we can collect it. Initiatives were put in place in 2005-2006 to better position the CRA to conduct its core business and integrate the collections workloads of other government organizations.

In addition to our commitment concerning the level of tax debt, we had targets in place for 2005-2006 because of our commitment to Parliament to collect $8.6 billion and reduce the proportion of tax debt in excess of five years old. We also had an internal target to resolve accounts at a rate equivalent to 91% of the total value of new intake.

Dollar amount of cash collected – Our TSO cash collections in 2005-2006 totalled $9.5 billion (Figure 23), exceeding our $8.6 billion commitment to Parliament. This represents a significant increase over the $8.8 billion collected last year; these results were accomplished through increased efforts to address new debt.

Tax debt in excess of 5 years of age – Our target for 2005-2006 was to reduce to less than 16% the proportion of tax debt older than five years of age in our closing TSO inventory. We were unsuccessful in meeting this target. In 2005-2006, the proportion of tax debt over five years of age within our total TSO inventory increased slightly, from 17% to just over 18% (Figure 22).

Figure 22 Tax Services Offices – Aging of Tax Debt

In 2004-2005, a special, one-time internal reallocation of resources allowed us to focus on write-offs, resulting in a significant increase compared to previous years. In 2005-2006, without this special funding, total write-offs returned to historical levels, which contributed to the increase in the proportion of older accounts.

Production compared to new intake – In 2005-2006, total dollars resolved fell slightly below the level of new debt intake to a proportion of 99.8% (Figure 23). This far exceeded our 91% target. This achievement of our production matching the intake should contribute significantly, over time, to slowing the growth of the tax debt.

Figure 23 Tax Services Offices – Intake, Production, and Cash Collections

Non-Filers and Non-Registrants – In 2005-2006, our Non-Filer Program generated 727,361 returns from individuals and 207,310 returns from corporate taxpayers that had not met their filing requirements (Figure 24). When compared to our results in 2004-2005, our Non-Filer Program showed an increase of over 139,000 returns from individuals and corporate taxpayers filed. Our Non-Registrant Program identified 4,283 entities that did not comply with GST/HST legislation as required. This figure is a slight increase from the 4,123 non-registrants identified in 2004-2005.

Figure 24 Non-Filer Program Results

Fiscal Impact – Along with our request for additional resources to support our tax debt activities mentioned on , we requested additional resources to address filing and remittance non-compliance. As a result, we made commitments concerning the total fiscal impact to be achieved in each year covered by funding.

In 2005-2006, our Filing and Remittance Compliance activities identified a total fiscal impact of close to $4.9 billion ² (Figure 25). This result far exceeded our $1.8 billion commitment to Parliament.

Our Contract Payment Reporting Initiative resulted in the filing of a total of 47,888 additional individual and corporate tax returns in 2005-2006 and almost $317 million in federal and provincial/territorial assessments. We also registered or reactivated 855 GST/HST accounts. These results were a significant improvement over 2004-2005, when over 33,000 additional returns were filed, $233 million in additional assessments were raised, and 565 GST/HST accounts were registered or reactivated.

Figure 25 Fiscal Impact – Filing and Remittance Compliance Activities

Convictions and Fines – Our non-filer and non-registrant work initiated legal action that led to the conviction of 1,286 taxpayers; more than $1.4 million in fines; and 29 prison sentences.

¹ Spending and FTE figures for sub-activities may not add up to this total due to rounding.

² A portion of these fiscal impact results will be subject to appeals and/or will be uncollectible.

Unaudited

Date modified:

2006-11-23