Canada Revenue Agency Audited Financial Statements - Administered Activities

Canada Revenue Agency Audited Financial Statements - Administered Activities

INDEPENDENT AUDITOR'S REPORT

To the Board of Management of the Canada Revenue Agency and the Minister of National Revenue

I have audited the accompanying statement of administered assets and liabilities of the Canada Revenue Agency as at 31 March 2013, and the statement of administered revenues and pension contributions, statement of administered expenses and recoveries and statement of administered cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information (together "the financial information"). The financial information has been prepared by management using the basis of accounting described in Note 2.

Management's Responsibility for the Financial Information

Management is responsible for the preparation and fair presentation of this financial information in accordance with the basis of accounting described in Note 2; this includes determining that the basis of accounting is an acceptable basis for the preparation of the financial information in the circumstances, and for such internal control as management determines is necessary to enable the preparation of the financial information that is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

My responsibility is to express an opinion on the financial information based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial information is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial information. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial information, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial information.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

In my opinion, the financial information presents fairly, in all material respects, the administered assets and liabilities of the Canada Revenue Agency as at 31 March 2013, and the results of its administered operations and its administered cash flows for the year then ended in accordance with the basis of accounting described in Note 2.

Emphasis of Matter

Without modifying my opinion, I draw attention to Note 2 to the financial information, which describes the purpose and basis of accounting for reporting activities administered by the Canada Revenue Agency on behalf of others. This financial information may not be suitable for another purpose. Management prepares a separate set of financial statements to report the operational revenues and expenses of the Canada Revenue Agency.

Michael Ferguson, CPA, CA
FCA (New Brunswick)
Auditor General of Canada

26 August 2013
Ottawa, Canada

Canada Revenue Agency
Statement of Administered Assets and Liabilities

as at March 31
(in thousands of dollars)

	2013	2012
Administered assets
Cash on hand	6,474,930	5,228,267
Amounts receivable from taxpayers (note 4)	88,959,530	84,270,615
Amounts receivable under the tobacco civil settlements (note 5)	462,917	526,532
Total assets	95,897,377	90,025,414
Administered liabilities
Amounts payable to taxpayers (note 6)	54,888,038	50,956,269
Amounts payable to provinces (note 7)	536,642	657,763
Deposit accounts (note 8)	149,450	128,552
	55,574,130	51,742,584
Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada and others (note 9)	40,323,247	38,282,830
Total liabilities	95,897,377	90,025,414
Contingent liabilities (note 10)

The accompanying notes form an integral part of these financial statements.

Approved by:

Andrew Treusch
Commissioner of Revenue and Chief Executive Officer

Fauzia Lalani, P. Eng.
Director and Interim Chair, Board of Management

Canada Revenue Agency
Statement of Administered Revenues and Pension Contributions

for the year ended March 31
(in thousands of dollars)

	2013	2012
		Restated (note 3)
Federal administered revenues
Income tax revenues
Individuals and Trusts (note 11)	125,817,451	120,741,070
Corporate	34,985,855	33,641,067
Non-resident tax withholdings	5,072,674	5,300,928
	165,875,980	159,683,065
Other taxes, duties and charges
Goods and services tax (note 12)	10,343,005	10,372,547
Energy taxes	5,324,250	5,268,716
Other excise taxes and duties	3,328,525	3,342,813
Miscellaneous charges (note 13)	795,723	865,274
	19,791,503	19,849,350
Employment insurance premiums	20,795,737	19,030,411
Interest, penalties, and other revenues (note 14)	3,802,556	3,663,901
Revenues administered on behalf of the Government of Canada	210,265,776	202,226,727
Provincial and territorial governments and First Nations administered revenues
Income tax revenues
Individuals and trusts	54,702,467	53,514,838
Corporate	13,046,291	14,783,024
	67,748,758	68,297,862
Provincial portion of harmonized sales tax (note 15)	27,021,435	25,151,959
Other revenues (note 16)	59,383	28,380
Revenues administered on behalf of provincial and territorial governments and First Nations	94,829,576	93,478,201
Pension contributions, interest, and penalties administered on behalf of the Canada Pension Plan (note 17)	41,742,977	39,026,598
Total administered revenues and pension contributions	346,838,329	334,731,526

The accompanying notes form an integral part of these financial statements.

Canada Revenue Agency
Statement of Administered Expenses and Recoveries

for the year ended March 31
(in thousands of dollars)

	2013	2012
		Restated (note 3)
Federal administered expenses
Transfers to individuals
Child tax benefits	10,265,789	10,048,991
Universal child care benefits	2,709,407	2,677,419
Working income tax benefit	1,146,416	1,131,989
Children's special allowances	238,007	223,546
Refundable medical expense supplement	135,863	135,631
	14,495,482	14,217,576
Transfers to corporations
Refundable investment tax credit	1,542,917	1,580,706
Film and video tax credits	327,012	358,504
	1,869,929	1,939,210
Other federal expenses
Provision for doubtful accounts (note 4)	3,215,136	3,711,275
Interest expense	550,533	696,654
Transfers to provinces for softwood lumber products export charge	136,913	213,871
	3,902,582	4,621,800
Total	20,267,993	20,778,586
Federal administered recoveries
Old age security benefits	(1,214,065)	(1,159,270)
Employment insurance benefits	(224,036)	(235,619)
	(1,438,101)	(1,394,889)
Net expenses and recoveries administered for the Government of Canada	18,829,892	19,383,697
Provincial and territorial administered expenses
Transfers to individuals
Ontario energy and property tax credit	1,259,221	794,966
Family benefit programs	1,060,368	1,068,375
British Columbia low-income climate action tax credit	194,160	184,590
Ontario senior homeowners' property tax grant	188,411	219,682
Other property tax credits	143,905	279,235
Other transfers	304,251	317,173
	3,150,316	2,864,021
Transfers to corporations
Refundable investment tax credits	847,238	786,108
Film and television production services tax credits	711,141	673,537
	1,558,379	1,459,645
Expenses administered for provinces and territories	4,708,695	4,323,666
Provision for doubtful accounts administered for the Canada Pension Plan (note 4)	87,762	102,339
Total net administered expenses and recoveries	23,626,349	23,809,702

The accompanying notes form an integral part of these financial statements.

Canada Revenue Agency
Statement of Administered Cash Flows

for the year ended March 31
(in thousands of dollars)

	2013	2012
		Restated (note 3)
Total administered revenues and pension contributions	346,838,329	334,731,526
Total net administered expenses and recoveries	(23,626,349)	(23,809,702)
Revenues paid or payable directly to a province	(22,011)	-
Changes in administered assets and liabilities:
Cash on hand	(1,246,663)	1,190,105
Amounts receivable from taxpayers	(4,688,915)	(7,311,465)
Amounts receivable under the tobacco civil settlements	63,615	61,695
Amounts payable to taxpayers	3,931,769	2,309,146
Amounts payable to provinces	(121,121)	7,275
Deposit accounts	20,898	20,910
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada (note 9)	321,149,552	307,199,490
Consisting of:
Cash deposits to the Consolidated Revenue Fund	436,106,648	419,114,545
Cash refunds/payments from the Consolidated Revenue Fund	(114,957,096)	(111,915,055)
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada (note 9)	321,149,552	307,199,490

The accompanying notes form an integral part of these financial statements.

Notes to the Financial Statements – Administered Activities

1. Authority and objectives

The Canada Revenue Agency (CRA) is an agent of Her Majesty in right of Canada under the Canada Revenue Agency Act. The CRA is a departmental corporation named in Schedule II of the Financial Administration Act and reports to Parliament through the Minister of National Revenue.

The mandate of the CRA is to support the administration and enforcement of tax legislation and other related legislation. The CRA provides support, advice and services by:

(a) supporting the administration and enforcement of the program legislation;

(b) implementing agreements between the Government of Canada or the CRA and the government of a province, territory, or other public body performing a function of government in Canada to carry out an activity or administer a tax or program;

(c) implementing agreements or arrangements between the CRA and departments or agencies of the Government of Canada to carry out an activity or administer a program; and

(d) implementing agreements between the Government of Canada and First Nations governments to administer a tax.

The CRA administers revenues, including income and sales taxes and employment insurance premiums, administers tax legislation, delivers a number of social benefit programs to Canadians for the federal, provincial, territorial, and First Nations governments, and administers other amounts, including Canada Pension Plan contributions, for other groups or organizations. It is responsible for administering and enforcing the following acts or parts of acts: the Air Travellers Security Charge Act, the Canada Revenue Agency Act, the Children's Special Allowances Act, Part V.1 of the Customs Act, section 2 of the Energy Costs Assistance Measures Act, the Excise Act, the Excise Tax Act (including the goods and services tax ( GST ) and the harmonized sales tax (HST) except for GST /HST on imported goods), the Excise Act, 2001, the Income Tax Act, the Softwood Lumber Products Export Charge Act, 2006, the Universal Child Care Benefit Act, and others including various provincial acts.

In the province of Quebec, Revenu Québec (RQ) acts as an agent of the CRA in administering and enforcing the GST. The CRA monitors cash transfers made by RQ, reports the GST revenues administered on its behalf, and transfers funds out of the Consolidated Revenue Fund to RQ so it can issue refunds.

Under an agreement with the province of Nova Scotia, the CRA receives worker's compensation payments and transfers these to the province. The CRA's mandate for administering customs legislation is limited to the collection functions noted under Part V.1 of the Customs Act. The CRA also provides collection services to Human Resources and Skills Development Canada for certain accounts receivable under various acts.

2. Summary of significant accounting policies

For financial reporting purposes, the CRA's activities have been divided into two sets of financial statements: agency activities and administered activities. The purpose of these administered activities statements is to give information about the tax-related revenues, expenses, assets, and liabilities that the CRA administers on behalf of the federal, provincial, and territorial governments, First Nations, and other organizations. The CRA administers individual income tax for all provinces except Quebec, and corporate income tax for all provinces except Quebec and Alberta. The Financial Statements - Agency Activities include the operational revenues and expenses that the CRA manages and uses to run the organization.

The Canada Revenue Agency Act requires the CRA to prepare financial statements in accordance with accounting principles consistent with those applied in preparing the financial statements of the Government of Canada. As a result, CRA follows those accounting principles to account for the federal administered activities. In addition, activities administered for the provincial and territorial governments, First Nations and other organizations are accounted for on the same basis as those administered for the federal government, and may differ from the accounting principles used by those provincial and territorial governments, First Nations and other organizations. These stated accounting policies are based on Canadian public sector accounting standards.

A summary of the significant accounting policies follows:

(a) Revenue and pension contributions recognition

Revenues and pension contributions are recognized in the year in which the event that generates the revenue or the pension contribution occurs and when the effective date of the related legislation has passed and either the legislation, regulation or by-laws have been approved by the legislature or the ability to assess and collect tax has been provided through legislative convention. Revenues are reported net of tax concessions. As foregone revenue, tax concessions do not give rise to assets or expenses of the taxing government. Refundable tax credits, deductions, or exemptions provided by the federal, provincial, territorial or First Nations governments are considered tax concessions when they provide tax relief to taxpayers and relate to the types of taxes that are a revenue source administered by CRA. When the CRA does not administer the related tax revenue, these refundable tax credits, deductions, or exemptions are accounted for as transfers made through the tax system. The following policies are applied for specific streams:

(i) Income taxes, Canada Pension Plan contributions, and employment insurance premiums:

Income tax revenues are recognized when the taxpayer has earned income that is subject to tax. Income is calculated net of tax deductions and credits allowed under the Income Tax Act, including refundable taxes resulting from current-year activity. Canada Pension Plan (CPP) contributions are recognized when the employee or the self-employed person has earned pensionable income. Employment insurance (EI) premiums are recognized as revenue when the employee has earned insurable earnings. For non-resident taxpayers (individuals and corporations), revenues are recognized when the taxpayers receive income from which tax is withheld on active and inactive income they earned in Canada.

These revenues and pension contributions are measured from amounts assessed/reassessed and from estimates of amounts not yet assessed/reassessed based on cash received that relates to the fiscal year ended March 31. Revenues and pension contributions for the fiscal year also include adjustments between the estimated revenues of previous years and actual amounts, as well as revenues from reassessments relating to prior years. An additional estimate of future reassessments is only recorded when it can be reliably determined. This is limited to assessments under objection or appealed to various courts.

(ii) Other taxes, duties and charges:

Goods and services tax (GST) and harmonized sales tax (HST) revenues on domestic goods and services are recognized at the time the goods are sold or the services provided. Revenues are reported net of input tax credits, GST/HST rebates, and the GST quarterly tax credits in the case of GST revenues. Input tax credits are the recovery of GST/HST paid or owed on purchases related to domestic and imported commercial activities of the taxpayer. Rebates are granted in various circumstances, for example to relieve the tax burden in areas where the cost of housing is very high, or to allow for the recovery of taxes on purchases where the purchaser cannot claim an input tax credit. The GST quarterly tax credit for low-income individuals and families is recorded in the period it relates to. It is intended to offset the cost of the tax for low-income individuals and families.

For excise taxes, revenue is recognized when a taxpayer sells goods taxable under the Excise Tax Act. For excise duties, revenue is recognized when the taxpayer manufactures goods taxable under the Excise Act and the Excise Act, 2001.

These revenues are measured from amounts assessed, and from estimates of amounts not yet assessed based on cash received or historical information, that relate to the fiscal year ended March 31. Miscellaneous charges are recognized as revenue when they are earned.

(iii) Interest, penalties, and other revenues:

Interest, penalties, and other revenues are recorded when they are earned. All interest and penalty revenues are reported as revenues administered for the federal government as stated in the terms of the tax collection agreements with the provinces and territories. Interest and penalties are recorded net of amounts waived under the various tax acts.

(iv) Assessment – definition:

An assessment (or reassessment) of tax includes all decisions and other steps made or taken by the Minister of National Revenue and officials of the CRA under the federal, provincial, and territorial acts or sections of the acts the CRA administers to calculate tax payable by taxpayers. When verifying a taxpayer's return, the CRA uses the various tax acts it administers and other criteria it developed that are designed to substantially meet the provisions of these acts.

Reassessments include changes to previously assessed taxes payable at the request of the taxpayer, for example to claim a subsequent loss carry-back, or changes the CRA initiated as a result of applying procedures to verify reporting compliance, such as taxpayer audits.

(v) Completeness of tax revenues:

The Canadian tax system is based on self-assessment, so taxpayers are expected to understand the tax laws and comply with them. This has an impact on the completeness of tax revenues when taxpayers fail to comply with tax laws, for example, if they do not report all of their income. The CRA has implemented systems and controls to detect and correct situations where taxpayers are not complying with the various acts it administers. These systems and controls include audits of taxpayer records when the CRA decides they are necessary, but these procedures cannot be expected to identify all sources of unreported income or other cases of non-compliance with tax laws. The CRA is unable to estimate the amount of unreported tax.

(b) Expenses

(i) Transfers:

Transfers are recognized in the year during which the events giving rise to them occur, provided that the transfer is authorized and all eligibility criteria have been met by the recipient, and a reasonable estimate of the amounts can be made. Transfers made through a tax system are considered authorized when the related tax measures are authorized. Transfers to provinces for the softwood lumber products export charge are recorded as an expense in the same year that the related softwood lumber products export charge revenues are recognized.

(ii) Interest expense:

Refunds may arise late, largely from the resolution of long-standing corporate tax files in favour of the taxpayer. Interest is accrued on refunds from the date that the tax instalment was initially paid to the date that the case is resolved. The CRA records the interest expense in the fiscal year it relates to.

(iii) Administered recoveries:

Recoveries of old age security and EI benefits are recognized when assessed. Amounts not yet assessed are estimated. The CRA reports only recoveries assessed through the individual income tax system. Recoveries determined by other federal government departments are not reported in these financial statements.

(c) Cash on hand

Cash on hand refers to amounts received in the CRA's offices or by its agents up to March 31 but not yet deposited to the credit of the Consolidated Revenue Fund of the Government of Canada. CRA or its agents deposit funds to the Consolidated Revenue Fund on a daily basis.

(d) Amounts receivable from taxpayers

Amounts receivable from taxpayers include taxes, interest, penalties, and other revenues assessed or estimated by the CRA but not yet collected. A significant portion of the receivable balance results from recording accrued receivables that relate to the current fiscal year but are not due to be paid by taxpayers until the next fiscal year.

(e) Allowance for doubtful accounts

The allowance for doubtful accounts is management's best estimate of the collectability of amounts that have been assessed, including the related interest and penalties, but not yet paid. The allowance for doubtful accounts has two components. A general allowance is calculated based on the age and type of tax accounts using rates based on historical collection experience. A specific allowance is calculated based on an annual review of all accounts over $10 million.

The allowance for doubtful accounts is adjusted every year through a provision for doubtful accounts and is reduced by amounts written off as uncollectible during the year. The annual provision is reported in the Statement of Administered Expenses and Recoveries. Except for the portion related to CPP contributions, which is charged to the CPP account, the provision is charged to expenses administered for the federal government because it assumes all collection risks, as stated in the terms of the tax collection agreements with the provinces, territories, and First Nations.

(f) Amounts payable to taxpayers

Amounts payable to taxpayers include refunds and related interest assessed or estimated by the CRA that were not paid up to March 31. A significant portion of the amount payable results from recording accrued payables that relate to the current year but are not due for payment until the next fiscal year. They include refunds resulting from assessments completed after March 31, and estimates of refunds for individual and trust income tax and corporate income tax not yet assessed.

(g) Contingent liabilities

Contingent liabilities are potential liabilities resulting from, for example, previously assessed taxes recorded as revenue that might become actual liabilities if one or more future events occurs or does not occur. If the future event is likely to occur or does not occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and the revenues are reduced. If the likelihood cannot be determined or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(h) Measurement uncertainty

To prepare these statements, management has to make estimates and assumptions that affect the amounts of assets, liabilities, revenues, expenses, and recoveries reported. For these financial statements items, measurement uncertainty is inherent but inestimable. Estimates are used to record unassessed tax revenues and the related amounts receivable and payable, as well as the allowance for doubtful accounts. In particular, estimates are made to determine individual and trust income tax revenues, corporate income tax revenues, non-resident tax withholdings, GST/HST revenues, energy taxes, other excise tax and duty revenues, EI premiums, CPP contributions, and the related amounts receivable and payable.

A key assumption used in estimating tax revenues is that tax installments and historical information on refund rates, payments received upon filing tax returns and amounts receivable assessed are good indicators of the amount of tax revenue earned to March 31 that has not yet been assessed. Another assumption is that historical tax assessment information is a good basis to allocate tax revenues between their various components (for example, between federal, provincial and territorial tax revenues). Relevant factors such as new administered activities, legislative changes and economic factors may also be considered. Finally, the key assumption used to estimate the general allowance for doubtful accounts is that historical collection information is a good indicator of future uncollectible receivables.

Estimates are based on the best information available at the time of preparation of these statements and management believes these estimates and assumptions to be reasonable. Actual results could differ significantly from the estimates and any differences are recorded in the year the actual amounts are determined. Management monitors the accuracy of the estimates and the underlying assumptions through annual validation procedures and adjusts its estimation models as required.

3. Adoption of Public Sector Accounting Standard - PS 3510 Tax Revenues

A new accounting standard issued by the Public Sector Accounting Board - Section PS 3510 on Tax Revenues - became effective on April 1, 2012, it affects mainly the classification of expenses. In general, CRA previously accounted for expenses based on the form of their payment. Except for the GST quarterly tax credit for low-income individuals and families, when a separate cheque was issued to a taxpayer, a separate expense was reported in the Statement of Administered Expenses and Recoveries (such as sales tax credits).

The main impact of adopting the standard is that expenses are now classified based on their substance. If an expense provides a financial benefit other than a relief of taxes, it is now classified as transfer made through the tax system such as the corporate refundable investment tax credit, where in the past, it was netted against the related administered revenues. Alternatively, if an expense provides tax relief to a taxpayer and relates to revenue administered by CRA, this expense is considered a tax concession and is now being netted against tax revenues. For example, most provincial sales tax credits are considered forgone revenues and are netted against the related provincial portion of HST administered by CRA. When CRA does not administer the related tax revenue, these expenses are accounted for as transfers made through the tax system (such as the Ontario energy and property tax credit). When classified as transfers made through the tax system, these expenses have been presented under Transfers to individuals or Transfers to corporations in the Statement of Administered Expenses and Recoveries.

The CRA has applied the changes retroactively and has restated the comparative figures accordingly. The impact is as follows:

(in thousands of dollars)

		2012
	As previously stated	Effect of change	Restated amounts
Statement of Administered Revenues and Pension Contributions
Federal administered revenues
Individuals and trusts	119,473,450	1,267,620	120,741,070
Corporate	31,701,857	1,939,210	33,641,067
Provincial and territorial governments and First Nations administered revenues
Individuals and trusts	52,980,312	534,526	53,514,838
Corporate	13,323,379	1,459,645	14,783,024
Provincial portion of harmonized sales tax (note 15)	28,029,190	(2,877,231)	25,151,959
Other revenues (note 16)	276,567	(248,187)	28,380
Other revenues administered by the CRA and paid or payable directly to the province (note 16)	(248,187)	248,187	-
Statement of Administered Expenses and Recoveries
Federal administered expenses
Transfers to individuals
Working income tax benefit	-	1,131,989	1,131,989
Refundable medical expense supplement	-	135,631	135,631
Transfers to corporations
Refundable investment tax credit	-	1,580,706	1,580,706
Film and video tax credits	-	358,504	358,504
Provincial and territorial administered expenses
Transfers to individuals
Family benefit programs	1,047,658	20,717	1,068,375
Other property tax credits	-	279,235	279,235
Other transfers to individuals	-	317,173	317,173
Ontario sales tax transition benefit	1,372,014	(1,372,014)	-
Sales tax credits	1,587,816	(1,587,816)	-
Transfers to corporations
Refundable investment tax credits	-	786,108	786,108
Film and television production services tax credits	-	673,537	673,537

Nova Scotia worker's compensation payments ($246,684 thousands in 2012) were previously reported as other revenues because collection activities, for which the cash flow was going through the Consolidated Revenue Fund, were recognized as revenues. Per the new standard, collection activities are no longer meeting the revenue recognition criteria because CRA does not assess nor administer those payments. However, CRA still has accountability for the related cash flow so they are disclosed in note 7 Amounts payable to the provinces. These cash flow activities are still reported as part of the Statement of Administered Cash Flows.

4. Amounts receivable from taxpayers

Amounts receivable from taxpayers include taxes, interest, penalties, and other revenues assessed or estimated by the CRA but not yet collected. A significant portion of the receivable balance results from recording accrued receivables that relate to the current fiscal year but are not due to be paid by taxpayers until the next fiscal year.

The following table shows details of the amounts receivable from taxpayers as reported in the Statement of Administered Assets and Liabilities. Amounts receivable from individuals and employers include Canada Pension Plan contributions and employment insurance premiums as applicable.

(in thousands of dollars)

		2013		2012
	Gross	Allowance for doubtful accounts	Net	Net
Income taxes
Individuals	49,082,127	(6,488,468)	42,593,659	39,800,503
Employers	17,015,514	(1,078,471)	15,937,043	16,399,058
Corporations	13,753,844	(1,869,359)	11,884,485	10,735,024
Non-residents	1,208,659	(134,327)	1,074,332	1,059,781
GST/HST	18,199,542	(2,622,996)	15,576,546	14,468,984
Excise taxes and duties and miscellaneous charges	1,945,092	(51,627)	1,893,465	1,807,265
Total	101,204,778	(12,245,248)	88,959,530	84,270,615

Changes in the allowance for doubtful accounts include the following:

(in thousands of dollars)

	Allowance for doubtful accounts March 31, 2012	Provision for doubtful accounts	Write-offs	Allowance for doubtful accounts March 31, 2013
Income taxes
Individuals	(6,096,866)	(1,714,557)	1,322,955	(6,488,468)
Employers	(1,039,038)	(379,946)	340,513	(1,078,471)
Corporations	(1,785,710)	(489,397)	405,748	(1,869,359)
Non-residents	(113,939)	(89,133)	68,745	(134,327)
GST/HST	(2,841,349)	(613,197)	831,550	(2,622,996)
Excise taxes and duties and miscellaneous charges	(45,430)	(16,667)	10,470	(51,627)
Total	(11,922,332)	(3,302,897)	2,979,981	(12,245,248)

The provision of $3,303 million ($3,813 million in 2012) reported above includes an amount of $3,215 million ($3,711 million in 2012) recorded as an expense administered on behalf of the federal government (see note 2(e)) and $88 million ($102 million in 2012) charged against expenses administered on behalf of the Canada Pension Plan.

5. Amounts receivable under the tobacco civil settlements

On July 31, 2008, the federal and provincial governments entered into civil settlement agreements with two tobacco companies to resolve potential civil claims. Under the terms of the agreements, payments totalling $850 million are to be made to Canada, for Canada and the provinces. The federal government's share is $325 million and the provincial governments' share is $525 million. The settlement agreements state that the amounts will be fully paid by 2023. Up to $800 million is expected to be received in the first 10 years of the agreements and about $50 million in the following five years. These amounts are recorded at the nominal value.

The following table gives details of the amounts receivable related to the tobacco civil settlement agreements:

(in thousands of dollars)

	2013				2012
	Government of Canada share	Provincial share	Total	Government of Canada share	Provincial share	Total
Balance, beginning of year	264,000	262,532	526,532	279,000	309,227	588,227
Amounts received during the year	(34,000)	(29,615)	(63,615)	(15,000)	(46,695)	(61,695)
Balance, end of year	230,000	232,917	462,917	264,000	262,532	526,532

6. Amounts payable to taxpayers

The following table gives details of the amounts payable to taxpayers as reported in the Statement of Administered Assets and Liabilities:

(in thousands of dollars)

	2013	2012
Individuals	31,991,799	30,261,028
Corporations	11,512,693	9,860,976
GST/HST	11,028,436	10,535,003
Employers and non-residents	296,423	248,396
Excise taxes and duties and miscellaneous charges	58,687	50,866
Total	54,888,038	50,956,269

7. Amounts payable to provinces

The following table gives details of amounts payable to provinces as reported in the Statement of Administered Assets and Liabilities:

(in thousands of dollars)

	2013	2012
Provincial share of the tobacco civil settlements (note 4)	232,917	262,532
Amounts payable to Quebec:
Individual income tax witholdings	195,876	218,860
GST refunds issued by Quebec	83,438	113,483
Quebec sales tax applicable to selected listed financial institutions	18,417	-
Nova Scotia worker's compensation	2,765	1,503
Ontario corporate tax and opportunities fund	2,738	1,709
Softwood lumber products export charge net of costs incurred by the federal government	491	59,676
Total	536,642	657,763

The CRA is acting as an agent for the provinces under the tobacco civil settlements. The CRA's liability to the provinces for their expected share of the settlement amounts is limited to the amounts that will ultimately be collected from the tobacco companies.

Amounts payable to provinces, territories, and other organizations, which are settled by other departments such as the Department of Finance for provincial, territorial, and First Nations taxes, are not recorded in these financial statements because these amounts are outside the CRA's responsibility.

The CRA received $249 million in Nova Scotia worker's compensation payments during the year ($247 million in 2012), these payments are transferred directly to the province. Since this is a flow through arrangement, it is not reported as administered revenues.

8. Deposit accounts

Deposit accounts are established to record cash and securities required to guarantee payment of GST for non-resident registrants and certain licensees for excise taxes, which are both payable pursuant to the Excise Tax Act. The following table shows activity on the deposit accounts as reported in the Statement of Administered Assets and Liabilities:

(in thousands of dollars)

	2013	2012
Balance, beginning of year	128,692	107,892
Receipts and other credits	52,474	52,173
Payments and other charges	(31,576)	(31,373)
Balance, end of year	149,590	128,692
Securities held in trust	(140)	(140)
Net deposit accounts	149,450	128,552

9. Net amount due to the Consolidated Revenue Fund

The net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada and others is the difference between administered assets (taxes not yet received and/or deposited in the fund) and other administered liabilities payable by the CRA out of the fund.

The net cash deposited in the Consolidated Revenue Fund of the Government of Canada includes amounts the CRA receives on behalf of the federal government, provinces, territories, and other organizations and deposits in the fund, less refunds and payments issued from the fund during the year.

The following table shows the change in the net amount due to the Consolidated Revenue Fund during the fiscal year:

(in thousands of dollars)

	2013	2012
		Restated (note 3)
 Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada and others at the beginning of the year	38,282,830	34,560,496
Total administered revenues and pension contributions	346,838,329	334,731,526
Total net administered expenses and recoveries	(23,626,349)	(23,809,702)
Revenues paid or payable directly to a province	(22,011)	-
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada	(321,149,552)	(307,199,490)
Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada and others at the end of the year	40,323,247	38,282,830

10. Contingent liabilities

Contingent liabilities include previously assessed taxes where amounts are under objection or are being appealed to the Tax Court of Canada, the Federal Court of Canada, or the Supreme Court of Canada. As of March 31, 2013, $20,566 million was under objection at the CRA level ($19,944 million for 2012) and $5,080 million was being appealed to the courts ($4,840 million for 2012). The CRA has recorded, in the amounts payable to taxpayers or in reduction of the amounts receivable from taxpayers, as applicable, the estimated amount of objections or appeals that are considered likely to be lost and that can be reasonably estimated.

11. Quebec abatement

The Quebec abatement is provided to Quebec residents under the Income Tax Act (ITA) and the Federal-Provincial Fiscal Arrangement Act. Residents of Quebec subtract 16.5 per cent of the Basic Federal Tax owed to the Government of Canada when compiling their taxes while the government of Quebec receives additional tax room. In accordance with the Federal-Provincial Fiscal Revision Act, 1964 and the Federal-Provincial Fiscal Arrangement Act, the Government of Quebec pays the federal government the value of the Quebec Abatement through an equivalent reduction in transfer payments to the province of Quebec for programs delivered by the federal government.

The Quebec Abatement reduces the federal tax payable under the Income Tax Act and is therefore accounted for as a tax concession netted against individual income tax revenues. For the fiscal year ended March 31, 2013, the Quebec abatement assessed by CRA was $3,998 million ($3,892 million for 2012).

12. Goods and services tax revenues

The GST reported on the Statement of Administered Revenues and Pension Contributions includes the federal portion of HST. It is net of input tax credits (ITC), rebates, and the GST quarterly tax credit for low income individuals and families that the CRA administers. It does not include GST revenues on imported goods, which are administered and reported by the Canada Border Services Agency. The CRA has sole responsibility for administering all ITC, including those claimed on imported goods. ITC relating to GST on imports are not accounted for separately from ITC relating to GST on domestic transactions.

The following table shows details of the GST revenues that the CRA administers for the Government of Canada as reported in the Statement of Administered Revenues and Pension Contributions:

(in thousands of dollars)

	2013	2012
Gross GST revenues	137,259,616	134,594,967
ITC	(117,530,871)	(114,752,785)
GST revenues net of ITC	19,728,745	19,842,182
GST rebates	(5,355,266)	(5,575,571)
GST quarterly tax credits for low-income individuals and families	(4,030,474)	(3,894,064)
GST net revenues	10,343,005	10,372,547

13. Miscellaneous charges

The following table details the miscellaneous charges that the CRA administers for the federal government as reported in the Statement of Administered Revenues and Pension Contributions:

(in thousands of dollars)

	2013	2012
Softwood lumber products export charge	160,147	234,271
Air travellers security charge	635,576	631,003
Total	795,723	865,274

14. Interest, penalties, and other revenues

Various tax legislations give the CRA the authority, under certain conditions, to assess interest and penalties related to taxes due and regulations that taxpayers have not complied with. The CRA has the authority to waive the interest and penalties that would normally be charged under certain circumstances such as processing delays caused by the CRA, financial hardship experienced by taxpayers, or other extraordinary circumstances.

Other revenues consist of miscellaneous fees and charges such as court fines and administration charges for dishonoured payments.

The following table gives details on interest, penalties, and other revenues that the CRA administers for the federal government as reported in the Statement of Administered Revenues and Pension Contributions:

(in thousands of dollars)

	2013	2012
Gross interest and penalties	4,064,285	3,787,379
Interest and penalties waived under authority of the Income Tax Act	(270,333)	(135,986)
Net interest and penalties	3,793,952	3,651,393
Fines imposed under various acts	12,346	10,981
Other (expenses) revenues	(3,742)	1,527
Interest, penalties, and other revenues	3,802,556	3,663,901

15. Provincial portion of harmonized sales tax

During the year, CRA administered the provincial portion of the HST for the provinces of Ontario, British Columbia, Nova Scotia, New Brunswick, and Newfoundland and Labrador. CRA recorded these revenues in accordance with the accounting policies described in note 2.

On April 18, 2012, the province of Prince Edward Island announced that it has entered into an agreement with the government of Canada in order to bring Prince Edward Island (PEI) into the HST revenue allocation framework effective April 1, 2013. On August 26, 2011, British Columbia announced that it will return to the provincial sales tax. These changes will be effective April 1, 2013.

The provincial portion of HST reported on the Statement of Administered Revenues and Pension Contributions is net of input tax credits (ITC), rebates and credits accounted as tax concessions. It includes the recaptured ITC, which applies to certain types of supplies purchased by large businesses. It does not include ITC that importers claim for the GST they paid on commercial imports and it does not include the provincial portion of HST collected on imported goods, which is administered and reported by the Canada Border Services Agency.

The following table details the provincial portion of HST revenues as reported in the Statement of Administered Revenues and Pension Contributions:

(in thousands of dollars)

	2013	2012
		Restated (note 3)
Provincial portion of gross HST revenues	120,582,358	118,618,771
Provincial portion of ITC	(87,107,526)	(85,981,374)
Provincial portion of HST rebates	(1,146,346)	(1,062,070)
Recaptured ITC	629,225	700,099
Transitional tax	47,226	77,747
HST provincial rebates	(4,310,690)	(4,323,983)
Provincial portion of HST net revenues before credits	28,694,247	28,029,190
Provincial sales tax credits
Ontario sales tax credit	(1,233,577)	(1,088,523)
British Columbia harmonized sales tax credit	(317,790)	(313,194)
Nova Scotia affordable living tax credit	(66,936)	(65,472)
Newfoundland and Labrador harmonized sales tax credit	(39,193)	(38,028)
Ontario sales tax transition benefit	(15,316)	(1,372,014)
Total provincial sales tax credits	(1,672,812)	(2,877,231)
Net Provincial portion of HST	27,021,435	25,151,959

16. Other revenues

The following table gives details of other revenues the CRA administers for provincial and territorial governments and First Nations as reported in the Statement of Administered Revenues and Pension Contributions. As provided under an agreement reached with the Government of Canada on March 28, 2012, the CRA started to administer the Quebec sales tax applicable to a selected list of financial institutions (SLFI) as of January 1, 2013.

(in thousands of dollars)

	2013	2012
		Restated (note 3)
Quebec sales tax applicable to selected listed financial institutions	22,011	-
First Nations sales tax and GST	21,893	18,515
First Nations income tax	15,479	9,865
Total	59,383	28,380

17. Pension contributions, interest, and penalties administered on behalf of the Canada Pension Plan

The following table shows details of the transactions the CRA administers on behalf of the Canada Pension Plan as reported in the Statement of Administered Revenues and Pension Contributions:

(in thousands of dollars)

	2013	2012
Pension contributions	41,578,539	38,862,030
Interest and penalties	164,438	164,568
Total	41,742,977	39,026,598

18. Related-party transactions

The CRA is related in terms of common ownership to all Government of Canada departments, agencies, and Crown corporations. The CRA deposits all monies received to the Consolidated Revenue Fund (CRF), and the Department of Finance makes payments out of the CRF to provinces, territories, and other organizations for amounts such as provincial, territorial, and First Nations taxes, for which the CRA administers the revenue. Old age security benefit recoveries, Canada Pension Plan contributions (net of overpayments refunded by the CRA), and employment insurance premiums are credited to Human Resources and Skills Development Canada, which administers the Old Age Security program, the Canada Pension Plan, and the Employment Insurance Operating Account. The CRA also administers a refund set-off program that can use individuals' tax refunds to pay debts they owe under federal, provincial, or territorial programs.

The CRA provides collection services to the Canada Border Services Agency under Part V.I of the Customs Act. It also provides collection services to Human Resources and Skills Development Canada for certain accounts receivable under the Canada Education Savings Act, the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Canada Pension Plan, and the Old Age Security Act. The related payments are made directly to either the Canada Border Services Agency or Human Resources and Skills Development Canada, who are responsible for their deposits to the CRF, as well as their accounting and reporting. These payments are not recorded in the CRA's accounts.

Employment insurance premiums administered on behalf of the federal government include the employer's share that the federal government pays. The GST declared to the CRA includes the GST the federal government pays to its suppliers on domestic purchases. The GST that other federal government departments collect is deposited to the CRF, declared to the CRA, and included in the GST domestic revenues.

19. Comparative figures

Certain comparative figures have been reclassified to conform to the presentation used in the current year, particularly as it relates to the application of the Public Sector Accounting Standard Board Section PS 3510 as discussed in note 3.

Date modified:

2013-11-06