Section II: Analysis of program activities by strategic outcome

Strategic outcome

Taxpayers meet their obligations and Canada's revenue base is protected.

Program activity 5: Appeals

Program activity description

• Providing a timely and impartial dispute resolution process for taxpayers who disagree with decisions made by the CRA, by actively engaging in dialogue with the taxpayer and exploring alternative processes to resolve disputes when appropriate, as well as assisting the Department of Justice in handling appeals to the courts.

2011-2012 financial resources
(thousands of dollars)

Planned spending	Total authorities Footnote 1	Actual spending Footnote 1
131,819	182,837	175,064

2011-2012 human resources
(full-time equivalents)

Planned	Actual	Difference
1,377	1,434	(57)

Program activity performance summary

Expected result	Performance indicator	Target	Actual result
Taxpayers receive a timely and impartial review of contested decisions made under legislation administered by the CRA and the handling of service complaints is timely and consistent	Targeted levels of timeliness, transparency, consistency, impartiality, and accuracy for Income Tax and Commodity Tax objections, CPP/EI appeals to the Minister and Service Complaints are met	98%	Mostly Met

Performance summary and analysis of program activity

Services

Service complaints

Our Service Complaints Program helps identify problems and propose solutions, and it provides taxpayers with a formal avenue of redress related to the services they have received. If taxpayers are not satisfied with how we resolved their service complaint, they can then go to the next step and notify the Taxpayers' Ombudsman.

During 2011-2012, the CRA:

• resolved 2,347 service complaints; and
• resolved taxpayers' complaints within 30 business days 94.5% of the time.

We conduct analysis and track trends on service issues so that we continue to improve service and fix the root cause of these complaints. Using public opinion research, we discovered that not many people know about the CRA Service Complaints Program. We took the following actions to address this during 2011-2012:

• developed and promoted aCRA brochure on service complaints;
• updated the complaints and disputes pages on the CRA Web site with improved information and easier navigation to make information easier to access by taxpayers, tax intermediaries, and benefit recipients;
• delivered webinars to members of Parliament and their staff about the Taxpayer Bill of Rights and the CRA service complaints process; and
• developed a new CRA brochure about complaints and disputes that will be available in 2012-2013.

Disputes

The CRA manages a function that provides a timely, impartial, and consistent review process to resolve disputes arising from decisions we have made under the laws we administer. We deal with disputes that arise from assessments of income tax, excise tax, goods and services tax, harmonized sales tax, benefit programs, softwood lumber products export, air traveller security, and charities.

During 2011-2012:

• we resolved almost 77,000 disputes; and
• we received 15.6% fewer income tax disputes.

We conduct these reviews by actively engaging in dialogue with the taxpayer. Decisions must be in keeping with applicable legislation and must result in a fair and equitable treatment of taxpayers. To ensure impartiality, when taxpayers file a notice of objection, their review is completed by an appeals officer who was not involved in the original assessment or reassessment.

Reviews

The regular redress workload includes objections to income tax and GST/HST assessments from single taxpayers, whether individuals or businesses, corporations, or other entities, that disagree with an initial assessment. We generally receive between 55,000 and 65,000 regular objections a year, and we close a similar number. This workload includes some of CRA's most complex files, and may involve issues such as international transfer pricing and the application of the General Anti-Avoidance Rule.

Although intake of regular objections involving income tax assessments continue to rise, recent additional investments in this program have resulted in a reduction of the workload inventory, and file completions have exceeded intake for the first time in several years.

• For our least complex files, we closed 11% more files (from 20,006 to 22,319) and we improved the timeliness of our decision-making.

The CRA sends an acknowledgement letter to taxpayers who use our redress services. The service standard is for the CRA to mail the acknowledgement letter within 30 days 85% of the time. In 2011-2012, we met the standard only 54.7% of the time. We are now considering the feasibility of this standard, given that we have not met the target for this indicator over the past three years.

Objections relating to taxpayers involved in aggressive tax planning activities account for over 70% of our objections workload. We have kept most of these objections on hold until legal cases involving aggressive tax planning are resolved. Only a few lead cases have been resolved by the courts so far.

• Although we continue to receive a steady number of disputes relating to aggressive tax planning, the rate of increase in inventory levels has slowed from 26% in the previous year to 12.5% this year.

Over the past few years, we have taken the following actions to manage this work and optimize our redress programs:

• we consolidated intake of the income tax and GST/HST objections to enhance efficiency;
• we treated all lower-complexity income tax and GST/HST workload as national workload, allowing it to be assigned to any office that has capacity; and
• we centralized all redress workload relating to large case files in each region.

Additional resources were strategically dedicated to the resolution of high volume, low complexity workloads, resulting in an increase of 8.4% of objections resolved compared to the previous year. The CRA will continue to add to its resources to resolve the regular objection workload over the next few years.

The CRA is responsible for the administrative review processes in the Canada Pension Plan ( CPP ) and the Employment Insurance Act (EI) pertaining to insurability and pensionable employment.

• The average time to resolve a CPP/EI appeal to the Minister of National Revenue fell to 135 days in 2011-2012, an improvement over the 155 days it took during the previous year.

Litigation

If a matter is not resolved to the taxpayer's satisfaction at the administrative review level, the taxpayer can appeal to the Tax Court of Canada. This level of review is referred to as litigation and is subject to the rules of the Tax Court.

The issues that the Tax Court hears range from the application of the General Anti-Avoidance Rule, to transfer pricing issues, to Aboriginal taxation. In certain circumstances, taxpayers can appeal to the Federal Court of Appeal and Supreme Court of Canada. Among other significant court cases, this year the Supreme Court of Canada upheld the CRA's position on applying the General Anti-Avoidance Rule to corporate amalgamations, and it provided guidance on the scope of tax exemptions under the Indian Act.

The Federal Court of Appeal confirmed our Minister's statutory duty to assess GST under the Excise Tax Act and resolved the gifting intent that is needed to claim donation tax credits.

In addition to these judicial developments, the CRA collaborated with the Department of Justice on cases before the Supreme Court of Canada involving the residency of trusts under the Income Tax Act, the legal test applicable to farming losses under the Act, and the application of transfer pricing provisions under the Act and the guidelines of the Organisation for Economic Co-operation and Development.

Taxpayer relief

Taxpayer relief provisions allow the CRA to cancel penalties and interest; accept late-filed, amended, or revoked income tax elections; and provide income tax refunds beyond the three-year period normally allowed. These provisions are intended to help taxpayers who are not able to meet their tax obligations because of extraordinary circumstances such as financial hardship, disasters such as floods or fire, or an error in a CRA publication.

In 2011-2012, we raised awareness of our taxpayer fairness instruments by improving our Web site; providing information to tax intermediaries; and reviewing guides, pamphlets, and other publications so that information is clear and consistent for all Canadians.

Taxpayer relief provisions give us some flexibility and allow us to be more responsive in situations where it would be unreasonable or unfair to penalize the taxpayer.

The total value of the relief provided to 204,740 taxpayers amounted to more than $362 million in 2011-2012.

Lessons learned

The CRA is continuing to improve on the time it takes to process disputes. The actions we have taken to centralize the workload distribution of the least complex disputes improved both our timeliness and age of inventory. The number of disputes received decreased last year largely because of the lower number of aggressive tax planning files that we received. Our strategic actions show improvements in the delivery of recourse services. Although we continue to have challenges with processing disputes quickly, we feel that we mostly met this core business outcome.

Performance report card

Indicators	Target	2009-2010	2010-2011	2011-2012	Rating
First contact letter for disputes within 30 days	85%	50%	50.5%	54.7%	Not met
Service complaints – acknowledged within 48 hours	95%	97.9%	96.6%	97%	Met
Service complaints – taxpayers contacted within 15 days	90%	94.5%	93.1%	96%	Met
Average age of Appeals workable inventory (in days) – income tax files	Neutral or downward trend	215	228	238	Not met
Appeals activities that met standards for consistency – income tax files	97%	98.6%	98.7%	99%	Met
Appeals activities that met standards for transparency – income tax files	98%	99.7%	98.7%	99%	Met
Taxpayer relief provisions –consistent application (per Quality Assurance Program) Footnote 1	95%	95%	97%	97%	Met

Date modified:

2012-11-08