CRA Annual Report to Parliament 2008-2009 - Appeals
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Appeals
Overview
Our ability to protect Canada’s revenue base is strongly influenced by public confidence in how we administer Canada’s tax laws. We strive to earn this trust by making fair and timely dispute resolution available to taxpayers and benefit recipients. Taxpayers can dispute assessments and determinations pertaining to income tax and commodity taxes, as well as CPP/EI assessments and rulings. If taxpayers are not satisfied with the results of our review process, they can then appeal to the courts.
Our service complaints framework has recently made redress more comprehensive. This framework has at its foundation the Taxpayer Bill of Rights, which includes eight service rights. Furthermore, it includes our Service Complaints Program, which provides taxpayers with a formal resolution process for complaints about mistakes, undue delays, and other issues related to service. We also administer the taxpayer relief provisions, which help taxpayers who are unable to meet their tax obligations because of extraordinary circumstances.
In 2008-2009, our goal was to demonstrate timeliness, impartiality, and consistency, while responding to a changing enforcement environment characterized by high volumes of disputes and those who challenge acceptable tax planning methods.
Our performance in 2008-2009 demonstrated that we achieved our targets related to impartiality, consistency, and quality. However, we were able to meet or mostly meet only three of our seven timeliness commitments.
We must accommodate the rising volume and changing nature of appeals in an environment where an increasing number of taxpayers benefit from not seeking a timely resolution of their tax disputes.
1. Taxpayers receive an impartial and timely review of contested decisions.
2. Service complaints and the taxpayer relief provisions are administered consistently.
Spending Profile (in thousands of dollars)
In 2008-2009, spending for this program activity totalled $169 million (1,521 FTE s) , or 4.0% of the CRA ’s overall expenditures . Of this $169 million, $132 million were net program expenditures and $37 million was allocated to this program activity for internal services .
2008-2009 priorities
In support of the overarching theme of achieving excellence in program delivery, we committed to undertake a number of initiatives that focused on strengthening service and reinforcing trust.
Strengthening service
During 2008-2009, we completed the national implementation of centres of expertise for our large-file activities. This step enabled us to streamline our appeals processing activities and contributed to improved workload management, productivity, and consistency in the treatment of files. In addition, we implemented a CPP/EI national resource bank on our intranet to help resolve key dispute resolution issues. We believe that this enriched work tool contributed to the 5% decrease in the number of workable days to complete a CPP/EI case.
Taxpayers’ accessibility to their redress entitlements was made easier this year through enhancements to our Web site. The “Register My Formal Dispute” sub-application of My Account now enables electronic dispute submissions from self-employed individuals.
We took steps in 2008-2009 to improve our performance related to CRA Service Complaints. We began the development of quarterly reports to enable us to better understand complaint issues and deal with them effectively, as well as a national complaint quality assurance program to enable us to establish service complaints standards. We also initiated the integration of our Problem Resolution Program into our Service Complaints area so that we can make the best use of our infrastructure.
Priority: Review and strengthen core business processes and operations
Achievement: We believe the steps we took in 2008-2009 to streamline our appeals activities contributed to the 1.5% increase in the number of dispute disposals this past year.
With the appointment of the Taxpayers’ Ombudsman, taxpayers can now receive an independent and impartial review of service complaints that are not resolved to their satisfaction by the Service Complaints Program. The Ombudsman is mandated to uphold the service rights in the Taxpayer Bill of Rights, review individual service complaints, and report on systemic issues that negatively affect taxpayers.
Reinforcing trust
A key aspect of our commitment to fairness is our mandate to consider relief to taxpayers through the taxpayer relief provisions contained in the various acts we administer. This year, we completed system enhancements that are intended to complement the program’s fairness and consistency attributes. We also improved data capture and program reporting of emerging trends to enhance our monitoring and identification of issues relating to taxpayer provisions. We expect these measures will translate into increased consistency of service for taxpayers.
Priority: Improve consistency in the agency-wide administration of the Taxpayer Relief Provisions program
Achievement: We have put in place a registry system that allows:
We believe that these priority initiatives contributed to improvements in the areas of productivity, consistency, and accessibility. Though we fell short in meeting all of our timeliness performance targets, we will continue to identify opportunities to respond to the evolving disputes and service complaints environment.
Expected results
Our expected results are the criteria by which we measure and report the effectiveness of our activities to Canadians. We carry out our Appeals activities to achieve two expected results:
Taxpayers receive an impartial and timely review of contested decisions
Performance Rating: Mostly Met
Our aim is to ensure that all taxpayers have access to impartial redress. An impartial and timely process fosters trust in the integrity of our tax system, which helps promote voluntary compliance. To achieve impartiality, we believe our dispute resolution process must demonstrate high levels of transparency, consistency, and accessibility.
Quality Assurance Review – Using sampling methods, our quality assurance review examines our dispute resolution activities across Canada to assess our performance against our targets for consistency and transparency.
Our measures of transparency confirm whether all relevant information supporting issues under dispute—including auditor records, but excluding information held in confidence under governing legislation—were made available to the taxpayer. As noted in our Performance Report Card, we exceeded our 98% transparency targets for both income and commodity tax cases.
Our consistency measures confirm whether we reviewed, researched, and addressed issues under dispute; applied the law correctly and impartially; provided taxpayers with an opportunity to respond to our decisions; and arrived at an acceptable resolution. During 2008-2009, we exceeded our consistency targets for income tax and CPP/EI, but fell short of our target in commodity taxes. We have put in place an action plan to address this gap with the expectation of achieving improved results over the coming months.
When taxpayers file a notice of dispute, our Appeals timeliness service standard aims to ensure that we notify them within 30 days that we received their dispute at least 85% of the time. In 2008-2009, we achieved our performance standard of 85% just 68% of the time, a decline from 2007-2008. This variance was caused by the high intake volume and the extensive work required before an acknowledgement of receipt of the dispute is sent to the taxpayer. We have recently completed a review of our intake centres and are implementing several recommendations to improve the efficiency and effectiveness of our screening activities, including a temporary reallocation of resources during peak periods of dispute intake.
Total disposals of all file types, including income tax, commodity tax, and CPP/EI disputes, increased by about 1.5% over 2007-2008. However, the average age of workable inventories increased over last year.
Figure 16 Aggressive Tax Planning Cases Received
Income tax files comprised most of our intake files at about 90% of the total. As shown in Figure 16, in 2008-2009, the intake of disputed aggressive income tax planning files increased by about 34% over 2007-2008 and a 233% increase over 2006-2007. The significant increase in aggressive income tax planning objections resulted from income tax reassessments sent out after our identification of aggressive tax planning schemes. Our success in detecting a significantly higher level of reporting non-compliance, coupled with the complex nature of the disputes that arose from this activity, increased the average time it took us to resolve the resulting tax disputes.
The delays in the front-end file review process had the effect of raising the age of the inventory that entered processing, which contributed to the increase in workable days before the cases were completed.
Despite achieving a 3% increase in the number of income tax disposals in 2008-2009, our closing inventory of workable income tax files increased by 21% over 2007-2008. This includes the new volume derived from the recent assumption of work related to the Corporate Tax Administration for Ontario initiative. Non-workable inventory increased substantially, reflecting the large number of aggressive income tax planning files held in abeyance pending decisions from the judicial system. Although we reallocated resources internally to increase our processing capacity in specific areas, this proved inadequate to meet the high volume.
Commodity tax disputes include primarily GST/HST issues, as well as issues concerning other excise taxes, levies, and rebates.
Workable files are those that are awaiting our action.
Non-workable files are awaiting a court decision or action from others.
In 2008-2009, we achieved a 6.1% increase in the number of commodity tax disposals over 2007-2008. Combined with a slight decrease in intake, we were able to retain our level of ending workable and non-workable inventories at about the same level as the year before.
We believe that the improvement in our commodity tax file disposals performance was largely due to the enhancements we made to our processing of GST/HST files. Last year, the implementation of the GST/HST redesign project caused delays that prevented the timely processing and disposal of these files. Since the inventory could not be processed during the period of system change, this led to an increase in the age of the inventory. In 2008-2009, we took 214 workable days to resolve disputes for commodity taxes, a decline in performance from the 169 days achieved in 2007-2008.
The average time to resolve CPP/EI files decreased from 123 days in 2007-2008 to 117 days in 2008-2009. Our CPP/EI dispute resolution results benefited from both the 3.9% reduction in intake from 2007-2008 and improved productivity.
Service complaints and the taxpayer relief provisions are administered consistently
Performance Rating: Mostly Met
Our administration of service complaints helps us identify service problems and propose solutions while upholding the eight service rights outlined in the Taxpayer Bill of Rights. As part of our service complaints program, we established two internal service standards that reinforce our commitment to service. Meeting these performance standards, combined with the commitments made in our first service complaints annual report, demonstrates our commitment to provide taxpayers with a consistent and effective service complaints process. We aim to send the taxpayer a complaint acknowledgement letter within two business days of receipt of the complaint 90% of the time and, in 2008-2009, we achieved this target 93.8% of the time. Every 15 days thereafter, we are committed to updating the taxpayer on the status of the complaint and the expected time the complaint will be resolved. While our target is 90%, we achieved 86.7%. As a result, we are continuing to revise our procedures to adjust to emerging realities of the program. Overall, we believe we have made substantial progress in managing service complaints, and we will pursue further opportunities for improvement.
Service complaints – When taxpayers are not satisfied with the service received from us, they have the right to make a formal complaint.
We use a set of quality assurance measures to gauge our administration of the taxpayer relief provisions. Our measures of performance include the quality of the first and second review; the completeness of the taxpayer relief request; the timeliness of the review; the quality of the taxpayer relief decision report; and the quality of communications with the taxpayer. Altogether, there are 29 points examined in the quality assurance program associated with the taxpayer relief provisions, and we achieved our 95% performance target against the aggregate of these measures. Based on these results, we believe that we have met the performance criteria for the taxpayer relief provisions program.
Taxpayer relief provisions – Taxpayer relief provisions give us some flexibility and permit us to be more responsive to circumstances where it would be unreasonable or unfair to penalize the taxpayer.
Performance Report Card
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- Date modified:
- 2009-11-05