Our 2007-2008 Results

Our Program Activities

Assessment of Returns and Payment Processing (PA2)

Overview

We undertake a wide range of activities to process individual and business tax returns and payments, including the use of risk assessment, third-party data matching, and information validation to detect and address non-compliance. Our programs contribute to individuals and businesses meeting their filing and payment obligations.

We carry out our Assessment of Returns and Payment Processing program activity to achieve two expected results:

• assessment and payment processing are timely and accurate; and
• non-compliance is detected and addressed.

Our Measure: Timely processing

In 2007-2008, we met most of our service standards for our high-volume processing activities. We processed 11.4 million T1 paper returns, 13.7 million T1 electronic returns, and almost 1.8 million T2 returns. In addition to the returns processing activities, we processed 80% of almost 3.2 million statements of interim payments on time, not meeting our target of 95%. This decline in performance was related to the challenges we experienced with our redeveloped GST/HST system and the consolidation of the sites where we print these statements.

We met all of our key performance standards for timeliness. Of 36 million payments, we deposited 99% within our standard of 24 hours, and by mid-June, we processed 99.8% of the individual returns that were filed on time (by April 30). We also met our targets for T4 and T5 returns processing.

The GST/HST redesign system release, which involved the implementation of a number of new systems and major revisions to existing systems, is designed to simplify tax compliance for businesses by harmonizing various accounting, penalty and interest system processes. With this harmonization, we are now able to offset debts in one business line against credits in another.

The new GST/HST returns processing system and the changes made to electronic services in 2007-2008 allow GST/HST filers to review accounts, request changes, search for payment status, and transfer credits between accounts. In addition, changes to GST/HST NETFILE and TELEFILE options now allow registrants to file debit returns electronically.

Over the course of the year, we discovered that the depth and breadth of changes introduced in 2007-2008 have also resulted in a more complex processing environment for GST/HST transactions and have posed significant challenges to our new systems. As a result of these system changes, we could not evaluate our standard of processing all GST/HST returns within 21 days. We are reviewing current production and service standards, and have planned additional system enhancements to address the problems we encountered this year.

As discussed on in Achieving Our Tax Services Strategic Outcome, we continue to make improvements to our electronic service offerings to make it easier, and provide more options, for Canadians to interact with the CRA. Our new GST/HST processing environment and ongoing improvements to our electronic services are good examples of how we are leveraging technology to enhance service.

In February 2008, we launched Quick Access, a new complementary online service to My Account that enables individuals to view basic tax related information. This service gives individuals certain personal tax and benefit account information currently available in My Account without having to register for a Government of Canada epass. This feature provides taxpayers with quicker access to more common queries such as tax return status, GST/HST credit payment status, Registered Retirement Savings Plan deduction limits, and the status of benefit payments.

We enhanced My Account, our secure portal that provides individuals an online view of their tax information and account history as well as transactional services. As of July 2007, individuals can apply for child benefits, view disability tax credit (DTC) information and set up a pre-authorized payment plan for instalments. As of February 2008, individuals can view advanced payments for the Working Income Tax Benefit (WITB), view a list of children for which they are the primary caregiver, and change multiple years at once using the Change my return service. Successful log-ins to My Account for Individuals have increased 26% this fiscal year over last and individual My Account enrolments have surpassed one million.

Since February 2006, our Represent a client service has provided tax representatives with access to online services. In October 2007, this service was expanded to provide representatives, including employees of a business, with more services and information. Represent a client gives representatives a secure, single point of access to multiple clients’ information.

We expanded our online services to meet the growing expectation of business owners for convenient and secure online services. In response to action items identified in the March 2007 Report of the Canada Revenue Agency’s Action Task Force on Small Business Issues, we made enhancements to My Business Account to ensure that businesses have access to personalized tax account information to suit their needs. My Business Account now includes options for businesses to authorize, update, or delete a representative’s authorization, which provides the representative with the tools to manage online their authorized taxpayer’s business accounts.

In 2007-2008, My Business Account registered over 117,000 successful log-ins, as compared with just over 17,000 in its inaugural year of 2006-2007. We expect this upward trend to continue as more representatives are authorized for online access and begin utilizing My Business Account features. As part of our commitment to maintain effective partnerships with other federal, provincial, and territorial organizations, as well as certain First Nations, we have sought to expand the use of the Business Number as a common client identifier for businesses to securely interact and simplify their dealings with various levels of government.

In addition to the latest three agreements, we have established Business Number partnership agreements with four provinces, covering 48 provincial business programs. We are also working with Service Ontario to develop a joint Business Number process for some of the province’s business programs.

Our ability to maintain our standards for timely processing allows us to gauge our overall effectiveness in meeting the needs of taxpayers, thereby contributing to meeting their obligations and helping to protect Canada’s revenue base.

Our Measure: Accurate processing

The T1 Quality Evaluation Program, which reviews initial assessments of individual tax returns each year, is our primary tool for determining the accuracy of our assessed returns. Our review for 2007-2008 indicates processing errors with an impact on a taxpayer’s refund or balance due were less than 1%. From 1999 through 2007, the amounts involved were, on average, $250 to $350 per error.

We also ensure accuracy by using two-dimensional (2-D) bar code technology for computer-generated paper returns. A 2-D bar code contains all of the taxpayer identification and financial data necessary for the assessment of the return, and virtually assures the accurate capture of taxpayer data. At the end of 2007-2008, 37% of all individual paper returns had been processed using this technology. In total, we processed almost 4.3 million 2-D bar-coded individual returns, a year-over-year increase of 7%.

This was also the first full year that we processed bar coded Corporation Income Tax (T2) returns. By year-end, 80% of all paper corporation income tax returns filed used 2-D bar codes.

We believe our results from our quality evaluation program, and the continued use of 2-D bar coding to facilitate accurate data capture, demonstrate our commitment to ensuring accuracy in our processing activities.

Our Measure: Detecting non-compliance

Effective processes to detect and address non-compliance are essential to managing compliance risk and ensuring that individuals pay their required taxes. We subject selected returns to further review under our post-assessment programs, devoting resources to areas where we have identified that the risk and potential revenue consequences of non-compliance are higher.

The success of our risk assessment approach is demonstrated when recoveries for targeted reviews exceed those for random reviews. Targeted reviews focus on claims where the risk and potential revenue consequences of non-compliance are higher. During 2007-2008, we made adjustments on 27% of targeted reviews and 16% of random reviews. The average additional amounts recovered per review were $221 for targeted reviews and $62 for random reviews (see Figure 11).

Figure 11 Targeted vs Random Reviews – Average Additional Value Assessed ($) by Review Type

Our Measure: Addressing non-compliance

We have three main types of T1 tax review programs: the Pre-assessment Review Program, the Processing Review Program, and the T1 Matching Program.

One of our pre-assessment review programs is the Confidence Validity Program. Through this program, various deductions and credits on returns are reviewed and corrected before a notice of assessment is issued. We identified an average amount of $467 of additional tax assessed per review, for a total of more than $126 million, an increase of 18% over the previous year.

Our Processing Review Program promotes compliance and helps maintain confidence in the fairness of our programs through increased education, effective risk-scoring systems, and a balanced approach to our file selection process. In 2007-2008, this program recovered $190 million in additional taxes, an increase of 34% over the previous year.

Our T1 Matching Program compares information on an individual’s tax return with information provided by third-party sources, such as employers or financial institutions. In 2007-2008, this program generated additional tax assessments totalling $573.2 million. These results demonstrate the vital role played by third-party information reporting in promoting compliance among individual taxpayers.

Figure 12 Additional Taxes Assessed Through T1 Reviews

An integral part of our overall review program is our Beneficial Client Adjustments initiative. By comparing an individual’s return to third-party information, we identify areas where the taxpayer may have under-claimed credits relating to tax deducted at source or Canada Pension Plan contributions. We adjust these returns and allow amounts to which the taxpayer is entitled and, if applicable, issue a refund. In 2007-2008, we identified and corrected almost 218,000 individual returns, resulting in an average beneficial adjustment of $355 per return.

As demonstrated in Figure 12, in 2007-2008, the recovery rates throughout our T1 tax review programs resulted in a total of $889.6 million in additional taxes assessed. Although some of these additional assessments may be uncollectable, we believe these results demonstrate that we have effective processes in place to detect and address non-compliance. This enables us to manage the compliance risk and ensure that individuals pay their required taxes.

Performance Report Card

Timely Processing

Accurate Processing

Detecting Non-Compliance

Addressing Non-Compliance

Date modified:

2009-01-29