Summary of the Corporate Business Plan 2015-2016 to 2017-2018

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Compliance

By error or intent, a small but significant minority of taxpayers do not accurately report their activities. Inaccurate reporting of tax and benefit information often results from errors or a lack of knowledge about what is required. However, some taxpayers engage in aggressive tax planning to take advantage of perceived legislative weaknesses or loopholes. Others attempt to evade their tax responsibilities by participating in the underground economy. The first two chapters of this corporate business plan described CRA services to help taxpayers get it right from the start. The goal of CRA reporting compliance programs is to protect the integrity and fairness of Canada's self-assessment tax system by identifying, addressing, and deterring those who do not accurately report their activities or taxable income.

Taxpayers are required by law to report correct information to the CRA, and the Agency uses this information to determine taxpayers' obligations. To enforce reporting requirements, the CRA conducts audits and investigations. The CRA complements enforcement activities with early interventions to encourage self-correction and prevent non-compliance. Advanced data analysis supports these complementary approaches by helping to determine where and when early intervention is most needed. For example, the Agency is proactively helping small and medium sized businesses at critical points in their business cycle with interventions such as educational products and reminder letters to address specific types of non-compliance. The Agency also provides an avenue for taxpayers to voluntarily come forward and correct their tax affairs through the CRA's increasingly successful Voluntary Disclosures Program. Each year, thousands of taxpayers take advantage of this program and work cooperatively with the CRA to correct their tax filings.

Approximately 70% of individuals and business taxpayers use the services of a tax intermediary. The Agency's complementary approaches include working closely with tax intermediaries to promote compliance and reduce common errors. In 2013-2014, the CRA undertook extensive consultations on a proposed tax preparer registration program to help the Agency engage directly with tax preparers to improve service and compliance. During the planning period, the CRA will move ahead with a registration program that takes into account feedback received from a wide range of stakeholders including the Canadian Federation of Independent Business, the Canadian Tax Foundation, the Certified General Accountants Association of Canada, the Chartered Professional Accountants of Canada, the EFILE Association of Canada, and the Association de la planification fiscale et financière.

The CRA is continuously strengthening the integrity of its programs. Business intelligence teams have been established in each region to combine advanced data analysis with established risk assessment processes and local knowledge, so the taxpayers with the highest risk of non-compliance are identified and addressed. This also reinforces the integrity of the workload selection process by separating the decision of who will be audited from the audit itself. At the same time as improving workload selection, the CRA has introduced more rigorous quality assurance standards and set up separate regional teams to independently review auditors' work prior to a file being closed. The Business Intelligence and Quality Assurance teams report to the regional Assistant Commissioners. These measures are important demonstrations of the CRA's commitment to quality, consistency, and integrity in program activities.

Addressing offshore compliance and aggressive tax planning is a top priority for the CRA. The increasing volume of global business and financial transactions has created new challenges for tax administrations internationally. The CRA's ability to effectively tackle offshore compliance and aggressive tax planning was strengthened by a range of measures introduced in the Government of Canada's Economic Action Plan (EAP) 2013.

The measures introduced in EAP 2013 have enhanced the CRA's ability to monitor the electronic transfer of funds, and collect data from domestic sources to effectively counter international tax avoidance and evasion threats. The Government's renewal and expansion of tax treaties with other countries also contribute to the CRA's efforts to combat international tax evasion and aggressive tax planning. The Agency continues to expand its relationships with domestic and international government partners to share information and best practices, and is actively contributing to Organisation for Economic Co-operation and Development (OECD) work on international tax avoidance, such as the Common Reporting Standard for the automatic exchange of tax information between governments

The CRA is engaging with key stakeholders such as the Chartered Professional Accountants of Canada (CPA Canada) to improve compliance, promote greater co-operation, and reduce errors or misunderstandings. An historic new agreement between the CRA and CPA Canada formalizes this important partnership which will contribute to improving the tax system.

The CRA works closely with the Department of Finance Canada and the Department of Justice Canada to identify legislative weaknesses, close tax loopholes, and develop new legislative tools to deal with emerging threats. Through referrals of criminal investigations to the Public Prosecution Service of Canada for criminal prosecution, the CRA is ensuring the most serious cases of non-compliance are met with significant consequences.

The CRA recognizes that the underground economy (UE) poses a threat to Canada's revenue base, and makes it difficult for Canadian small businesses to compete on a level playing field. In response, in November 2014, the Minister of National Revenue tabled in Parliament an enhanced UE strategy. The updated UE strategy focuses on refining the Agency's understanding of the UE, reducing the social acceptability of participating in the UE, and deploying a range of initiatives to encourage compliance and reduce participation in the UE. The CRA's ongoing efforts to address the UE will also be guided by the newly created Ministerial Underground Economy Advisory Committee.

Small and medium enterprises

Canada's population of small and medium enterprises (SMEs) is large and includes approximately three million individual filers and two million corporate filers. The CRA enforces the compliance of SMEs through a program of reviews, examinations and audits. In 2013-2014, the CRA performed almost 40,000 reviews and audits on the returns filed by SMEs. These activities generated over $1 billion in fiscal impact annually. SME compliance is supported through education, outreach, extensive stakeholder engagement, and in-person support designed to help taxpayers comply with their tax obligations.

Because many SMEs work in sectors of the economy characterized by cash transactions, they are at a higher risk of participation in the Underground Economy (UE). For this reason, the CRA focuses a large portion of its UE audit resources on SMEs. Audits are the primary tool used by the Agency to detect and address UE activity. As a complement to these audit activities, UE-related outreach activities are underway in collaboration with a number of industry associations.

In addressing underground activity in the SME population, the CRA will:

• Implement the three-year strategy "Reducing Participation in the Underground Economy" announced by the Minister of National Revenue in November 2014.
• Continue utilizing UE specialist teams, focusing on specific files and sectors which have an elevated risk of UE activity. These teams employ audit techniques which are specifically designed to detect unreported income.
• Continue to address electronic suppression of sales through the use of specialized teams, audit techniques, and the application of new penalty provisions.
• Employ compliance projects which test the rate of non-compliance within specified industries and with regard to specific issues or business practises. Where required, these projects will be expanded in scope.
• Use the confidential informant leads program, coordinated through the National Leads Centre, to identify taxpayers that are not fully compliant in their reporting of income, deductions, and expenditures.
• Work to identify and audit taxpayers who are at an increased risk of repeated UE-related non-compliance. Where warranted, repeat offenders will be referred for potential criminal prosecution.

In January of 2014, the CRA announced a new three-point plan to help small and medium enterprises more easily meet their tax obligations and reduce red tape. The three elements of the plan are:

• The Liaison Officer Initiative to provide in-person support to small businesses at key points in their establishment and growth.
• The Registration of Tax Preparers Program to enable the CRA to work directly with tax preparers to address common and recurring errors before tax returns are filed.
• An enhanced focus on high-risk files through advanced business intelligence, specialized audit teams, and the use of approaches like letter writing campaigns to address specific non-compliance risks, to complement the CRA's traditional audit approaches.

Planning highlights

• Following a successful pilot project, the Liaison Officer Initiative (LOI) was expanded to all regions of the country in 2014-2015. Over the next three years the CRA will evaluate the impact of the LOI on voluntary compliance.
• The CRA will move forward with the Registration of Tax Preparers Program by 2016-2017. This program will allow the Agency to more easily identify and address recurring errors before tax returns are filed.
• In collaboration with industry associations, the CRA will expand the use of targeted communications, including letter-writing campaigns and the use of social media to promote compliance throughout 2015-2016.
• Effectiveness measures will be developed by 2017-2018 to assess the impact of traditional audit activities and non-audit compliance activities such as targeted communications, education and assistance.

GST/HST

The CRA's GST/HST compliance programs are designed to ensure GST/HST registrants comply with reporting requirements, and to identify and address non-compliance. The CRA's GST/HST compliance activities protect Canada's revenue base by aggressively pursuing those taxpayers who participate in the UE and in aggressive GST/HST planning schemes. Annually, almost 80,000 GST/HST audits are completed, generating more than $1.5 billion in fiscal impact.^{Footnote 1}

The Agency's risk-based and balanced approach includes audits of high-risk filings, examinations, education, and outreach activities.

Planning highlights

• The CRA will work to improve audit quality assurance by expanding the audit quality review program to include other GST/HST programs by 2017-2018.
• The aggressive GST/HST planning program will improve its capacity to identify false claims and detect suspicious patterns of behaviour by 2017-2018 by improving the risk profiles and models it uses to identify files for audit and review.
• The CRA will increase engagement with key stakeholders through to 2017-2018 to identify ways to discuss GST/HST matters of common concern to improve compliance, promote greater co-operation, and reduce unnecessary errors and misunderstandings.
• Working through the Framework Agreement between the CRA and Chartered Professional Accountants of Canada (CPA), the CRA will promote regular dialogue between the two organizations on tax-related matters of common interest.
• The CRA will improve the industry sector profiles used by its field auditors and examiners by 2017-2018. These profiles include information on known GST/HST risks within specific industry sectors and the audit techniques used to address them.
• The GST/HST research audit program for small and medium business registrants will continue through to 2016-2017. Results of this research will be used to develop new risk assessment criteria and to provide an accurate baseline for monitoring future compliance trends.

International and large business

The CRA verifies and enforces international and large business compliance through a risk-based program of audit measures and legislative reviews. The CRA works collaboratively with businesses and their representatives to find new ways to reduce the compliance burden and support compliance.

The quality of CRA's audits is critical to the CRA's reputation for integrity. The Agency assures the quality of audits through on-going quality assurance monitoring, professional training, and the strategic recruitment of the auditors and specialists required to meet future needs.

The CRA employs over 2,000 audit resources who are dedicated to reviewing and auditing the tax affairs of Canada's largest corporate entities. These auditors and specialists also work to ensure offshore and aggressive tax planning issues and risks are identified and addressed. The international and large business program generates a fiscal impact^{Footnote 1} of over $6 billion annually.

Planning highlights:

• The CRA will create enhanced integrated large business audit teams in 2016-2017. These teams will include Domestic Large, International and Aggressive Tax Planning auditors, and will increase technical capacity and help streamline large-case audits.
• To better identify and prioritize large business files for audit, the CRA will be implementing a new Integrated Risk Assessment System in 2015-2016. This new risk assessment system is an enhancement of the existing National Risk Assessment Model introduced in 2011.
• The CRA will improve the way it provides technical expertise to audit staff in the field through the creation of centres of expertise and specialty teams in 2016-2017, and through utilization of industry specialty services and industry coordinating offices.
• The CRA will support efforts to deal with international tax issues through to 2017-2018 by participating in international forums and initiatives such as the Organisation for Economic Co-operation and Development (OECD) Forum on Tax Administration and the Base Erosion and Profit Shifting Project. In addition, the CRA will move to implement the Common Reporting Standard, an approach endorsed by the OECD and the G20 to support the automatic exchange of information between tax authorities.

Criminal investigations

The Criminal Investigations Program investigates serious cases of tax evasion and fraud, and makes referrals to the Public Prosecution Service of Canada (PPSC) for criminal prosecution. The high visibility of these prosecutions help to increase public awareness of the work the CRA does to safeguard Canada's tax system, and deter others who might be contemplating tax evasion or fraud. In recent years, the program has undergone a transformational change in order to better leverage resources and investigative expertise, and to strengthen key relationships with other law enforcement agencies and the PPSC.

CRA criminal investigators work closely with other federal law enforcement agencies to make sure the most serious cases of tax evasion and fraud are thoroughly investigated and referred for prosecution. Each year, more than 95% of the CRAcases criminally prosecuted by the PPSC result in convictions.

Planning highlights:

• The CRA will improve its ability to select and prioritize high-risk files for criminal investigations during 2015-2016.
• The CRA will work with internal and external partners during 2015-2016 to increase awareness of the CRA's Criminal Investigations Program and encourage the referrals of potential tax evasion cases.
• During 2015-2016, the CRA will implement an enhanced quality assurance program, with a renewed focus on real-time reviews of active investigations.
• The CRA will develop dedicated training, learning, mentoring and coaching products during 2015-2016 to help its investigators meet the challenge of increasingly complex criminal investigations.
• In 2015-2016, forensic and informatics capabilities will be enhanced through the acquisition of the tools and technological expertise needed for complex investigations and through the provision of on-going technical training.
• The CRA will use all communication channels to publicize successful prosecutions and investigative actions during 2015-2016. In addition, the CRA will continue to warn Canadians about the dangers of fraudulent tax schemes through tax alerts, news releases, and media advisories.

Scientific research and experimental development

Through the Scientific Research and Experimental Development (SR&ED) Program, the federal government provides tax assistance and investment tax credits to Canadian businesses as an incentive to conduct industrial research and development activities in Canada. The CRA is responsible for verifying the correctness of tax credit claims, and for making sure businesses are well informed about the requirements they must meet to receive credits in a timely and predictable manner.

The CRA employs hundreds of scientists and auditors to review the research conducted by Canadian businesses applying for SR&ED tax incentives. The work of these employees protects the integrity of the programs. Each year, the Agency processes almost 25,000 SR&ED claims and delivers more than $3 billion in tax credits for Canadian industrial research and development.

Planning highlights:

• The CRA will review the results of a recent pilot project which provided claimants with a formal pre-approval of their SR&ED claims. During 2015-2016, the CRA will evaluate the feasibility of implementing a full national rollout of this service.
• The CRA will work to increase business awareness of the SR&ED program through industry and sector-specific engagement during 2015-2016.

Voluntary disclosures

The CRA's Voluntary Disclosures Program (VDP) supports our voluntary self-reporting tax system by encouraging taxpayers to voluntarily self-correct their tax affairs. For taxpayers who realize their previous tax filings are inaccurate, or those who have not previously filed or reported, the program provides a safe way for them to come forward and relieve themselves of worrying about a future audit or investigation which might result in significant fines or imprisonment.

The VDP also allows the CRA to identify millions of dollars in unreported income each year which otherwise might be lost, or identified at much greater expense through compliance enforcement action. Over the past two years, close to 30,000 voluntary disclosures were processed, representing unreported income in excess of $2 billion. The Agency's efforts to improve program awareness have helped to encourage taxpayers to come forward to take advantage of the VDP and correct their tax affairs.

Every year the CRA is contacted by thousands of taxpayers wishing to make a voluntary disclosure. Each application for voluntary disclosure is carefully reviewed before it is accepted to make sure it meets the conditions for the Program and has not been triggered by a taxpayer who is aware of CRA compliance action started against them. Once compliance action has begun, taxpayers are no longer eligible for the VDP. The information gathered through the VDP provides the CRA with an important source of intelligence on emerging tax issues and trends and helps inform the Agency's Offshore Compliance and Underground Economy strategies.

Planning highlight:

• The CRA will emphasize the importance of self-disclosure in promoting awareness of the VDP through the CRA's website, and through the use of online videos and social media tools through to March 2016. Once compliance action has begun, taxpayers are no longer eligible for the VDP.

Budgetary financial information

(dollars)

	2015-2016 Main Estimates	2015-2016 planned spendingFootnote 2	2016-2017 planned spendingFootnote 2	2017-2018 planned spendingFootnote 2
Program
Compliance	1,045,193,249	1,045,193,249	1,031,278,872	1,032,337,340
Sub-programs
Small and medium enterprisesFootnote 3	-	590,150,971	578,374,697	579,687,956
International and large business	-	287,499,724	285,875,050	285,606,354
Criminal investigations program	-	77,130,430	76,912,695	76,909,788
Scientific research and experimental development	-	85,356,423	85,075,612	85,092,152
Voluntary disclosures program	-	5,055,701	5,040,818	5,041,090

(full-time equivalents)

	2015-2016	2016-2017	2017-2018
Program
Compliance	9,807	9,656	9,651
Sub-programs
Small and medium enterprises	6,068	5,931	5,930
International and large business	2,333	2,326	2,322
Criminal investigations program	599	599	599
Scientific research and experimental development	731	724	724
Voluntary disclosures program	76	76	76

Performance measurements

The CRA performance measures for compliance are set out on page 96. These measures indicate the Agency:

• Uses effective risk assessment systems and audit processes to detect and correct non-compliance. Success in selecting non-compliant accounts for audit is measured by the percentage of audited accounts which require change. Success in criminal investigations is measured in the conviction rate for files prosecuted.
• Manages the voluntary disclosures workload effectively. The CRA sets a target for the percentage of new voluntary disclosure files which will be completed within a year. Targets are established based on resourcing, intake trends, and the CRA's commitment to a thorough review.
• Meets its service commitments to Canadians 100% of the time. The CRA has 47 service standards. For activities described in this chapter, 6 service standards apply.

Footnotes

Footnote 1

Fiscal impact consists of tax assessed, tax refunds reduced, interest and penalties, and present value of future federal tax assessable arising from compliance actions. It excludes the impact of appeals reversals and uncollectable amounts.

Return to footnote 1 referrer

Footnote 2

Planned spending refers to those amounts for which a Treasury Board submission approval has been received by no later than February 1, 2015. This cut–off date differs from the Main Estimates process. While in any given year planned spending may include amounts incremental to planned expenditure levels presented in the Main Estimates, this year it does not.

Return to footnote 2 referrer

Footnote 3

The decrease in planned spending from 2015-2016 to 2017-2018 under the small and medium enterprises subprogram results from the Agency's implementation of initiatives to improve efficiency.

Return to footnote 3 referrer

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Date modified:

2015-04-01