Section 2 – Planned results

Tax

Core responsibility

Service

The CRA recognizes the importance of helping Canadians get it right the first time no matter what channel they choose to use to interact with us. Our aim is to provide high quality services to Canadians in ways that best meet their needs regardless of what leads them to come into contact with the Agency. This means proactively sharing information so taxpayers are aware of changes affecting them, understand their options, and receive the information and support they need to meet their tax obligations. In pursuit of constant improvement of our services, we are seeking out and analyzing feedback from individuals, businesses, and the charitable sector. The Agency has made major investments in advanced analytics and technology to develop and implement innovative, flexible, and strategic approaches to simplify access to our services and minimize the administrative burden on taxpayers.

As our use of technology and analytics becomes more sophisticated, the Agency is increasingly targeting its services to taxpayers who may need a helping hand, like new Canadians, Indigenous peoples, small businesses, students, and seniors. We are also seeking to increase taxpayers' understanding of their tax obligations through more outreach activities that are targeted directly to Canadians—often through partnerships with other government departments—to provide the early certainty taxpayers need to help manage their tax affairs with greater confidence and comply with Canada's tax laws.

Providing timely and accurate information

Timely and accurate information are critical to the success of our tax system, which relies on self-assessment. We strive to make it easier for individuals and businesses to access clear, timely, and accurate information through our website, social media, written communication, and call centres. In each case, the Agency works hard to keep our paper and electronic publications updated and our officers equipped with the training and tools they need to provide current, relevant information.

To support the Government of Canada's priority for an open and transparent government, the CRA works closely with stakeholders, such as industry associations and the Minister's Underground Economy Advisory Committee members, to better target our communication products and improve their clarity. Taxpayers and tax professionals with more complex information needs have access to CRA expertise through a number of channels, including technical publications on Canada.ca and by requesting rulings or interpretations.

Written correspondence

One of the most important ways the CRA serves Canadians is by clearly communicating tax-related information in plain language and telling them about any action they should take. The CRA has already simplified 75% of the millions of notices and letters we send annually. Over the planning period, we will simplify more of our notices, statements and letters to make it easier for Canadians to understand their tax obligations. We will also simplify tax and benefit forms so it will be easier for Canadians to complete and send these forms to the CRA. In addition, the Agency is responding to feedback about how we process clearance certificates^{Footnote 1} by developing measures to reduce the time to process these requests.

Telephone services

In July 2017, the Agency launched a pilot of a telephone service for income tax professionals, who complete the majority of individual and corporate income tax returns in Canada. These dedicated phone lines provide a limited number of these professionals with access to CRA rulings officers, who can assist with complex income tax questions that may involve interpretation of tax law. We will operate this pilot through December 2018 before deciding whether to implement the service fully.

The CRA's call centres answer enquiries and provide taxpayer-specific information, subject to identity authentication. The 2017 Fall Report of the Office of the Auditor General included results from a recent audit of Agency call centres that drew three conclusions:

• the Agency's call centres did not provide taxpayers with timely access to call centre agents
• our agents gave taxpayers information that was not accurate almost 30 percent of the time
• our telephone performance measures were incomplete, and reported results were overstated

We agree with all recommendations issued in this report and see this as an opportunity to improve overall service in our call centres. The Agency has launched a three-point action plan to modernize CRA call centres to help us to address the Auditor General's recommendations.

• Callers will see notable improvements when we implement new call centre technology that will connect Canadians with agents more efficiently. The Agency's call centre technology and infrastructure will be modernized, enabling us to offer new features for callers, such as wait-time information, and improve the overall service we provide to taxpayers. In partnership with Shared Services Canada and other government organizations, we are actively evaluating and developing new call centre technology for our individual enquiries and business enquiries call centres.
• We will enhance agent training and support, and adopt a new approach for routing calls to agents.
• We will also update our reporting and service standards to provide Canadians with clearer information about the service they can expect from our call centres and how we are performing.

The CRA will report on its progress in implementing this action plan in its annual Departmental Results Report beginning in 2019.

Planning highlights

• Redesign existing guides and publications to make them easier to use by separating general tax information from "how to" instructions specific to completing forms
• Apply user-experience design principles to tailor publications to the information needs of different audiences and simplify technical content for those who need only general information

Expected results

• In partnership with Shared Services Canada and other government organizations, actively evaluate and develop new call centre technology for our individual enquiries and business enquiries call centres
• Establish service standards for the processing of clearance certificate requests, by April 2019
• Improve the design, style, clarity, and tone of 95% of our written correspondence to Canadians, by May 2019

Making it easy to comply with tax obligations

Targeted outreach

The CRA takes a proactive approach to education and outreach. We identify and work with those taxpayers who are most likely to benefit from more targeted interaction, ranging from individuals—including Indigenous peoples, seniors, newcomers to Canada, and youth—to small and medium-sized businesses through various webinars. The Agency also makes teaching material available to school boards across the country for use in teaching high school and post-secondary students the basics of taxation, how to complete a tax return, and the relationship between taxes and our quality of life in Canada.

Building on past success and lessons learned, the Agency will be working with trusted service providers over the planning period to reach vulnerable populations. Through our regional and local tax services offices, the CRA will foster community leadership and ownership to eliminate, wherever possible, unnecessary barriers that prevent greater participation in Canada's tax and benefits system. As part of the CRA's action plan for northern residents, we are committed to expanding our outreach and partnerships in northern communities, improving services for people in these communities, and helping them better understand how to claim deductions available to eligible northern residents.

Our Liaison Officer service promotes compliance through in-person visits with taxpayers at key stages of their business's life cycle, an approach that has been well-received by taxpayers. We will build on the success of this initiative and, using feedback from taxpayers, will work to increase the level and type of services offered to Canadians. In 2019, we will expand the initiative to include services for small corporations.

Digital services

Each year, the CRA handles large volumes of tax and benefit transactions accurately, on time, efficiently, and cost-effectively using modern tools, systems, and information technology solutions. The Agency's capacity to process returns and payments received electronically has increased and is less costly than paper alternatives. Often, electronic services result in fewer errors because there are fewer manual steps. That said, it is our responsibility to make sure that taxpayers are provided with the services they need to comply and we recognize that not all Canadians prefer online service options. We will maintain traditional alternatives for those who choose to use them, and develop tailored support for groups like seniors, first time filers, and new Canadians, who may have unique needs.

The goal of our Digital Services Modernization Strategy is to create a service experience that is user-centric, secure, and digital from end-to-end for Canadians who wish to use these services. We are making a range of enhancements in 2018 to help those filing individual income tax and benefit returns, including:

• allowing individual taxpayers to submit adjustments to T1 returns with NETFILE software to reduce the time and cost burden of paper T1 adjustments
• delivering an express notice of assessment in near real-time and allowing tax preparers using EFILE and taxpayers using NETFILE to receive the notice of assessment almost immediately
• enhancing our Auto-fill my return service to allow individuals (via NETFILE) and authorized representatives (via EFILE) to retrieve tax information from two prior years to automatically fill in parts of a 2017, 2016 and 2015 income tax and benefit return with the information that the CRA has available at the time of filing the return

Account alerts provide taxpayers with near real-time email alerts when there have been changes to their address or direct deposit information, or when mail has been returned to the CRA. Over the planning period, we will expand our online mail and account alerts services, and develop strategies to encourage more people to use online mail.

Canadians are spending more time on smartphones and tablets and less time on personal computers. The CRA is responding to this trend by ensuring that our digital services and content remain accessible to all devices without compromising the security of taxpayer information. Over the planning period, we will make our secure online portals (My Account, My Business Account, and Represent a Client) easier for taxpayers and their representatives to use. For example, we will:

• implement data sharing between services so that logical navigation from one service to another is achieved (e.g., when viewing their account balances, taxpayers will be able to access our payment service, and their balance information will automatically populate in the payment fields for them)
• design and implement a Common User Interface Architecture that will ensure consistency in user experiences in our three current portals and that the content of our portals displays correctly on any device (desktop, tablet, mobile phone, etc.), giving users more flexibility in how they interact with us

The Agency's approach to mobile development will ensure any new mobile service is designed according to established principles and uses a consistent approach, including a strong focus on user-centric services and design.

Voluntary disclosures

The Agency provides an avenue for taxpayers to voluntarily come forward and correct their tax affairs through the CRA's Voluntary Disclosures Program. This program is an integral part of the Agency's broader compliance strategy. We carefully review each application for voluntary disclosure before it is accepted to make sure it meets the conditions for this program. For complex offshore files, we are also adding expert resources to review disclosures for completeness, to identify all offshore issues and sources of reportable income, and to ensure that the relevant intelligence from the disclosure is captured and synthesized.

We recently completed a comprehensive review of our Voluntary Disclosures Program in response to the recommended actions set out in the Sixth Report of the Standing Committee on Finance, entitled "The Canada Revenue Agency, Tax Avoidance and Tax Evasion". As a result of our review, we have implemented measures to strengthen the Program. The tools and processes we have introduced will make it more difficult for taxpayers to benefit from the Program when they have wilfully used complex and aggressive tax planning schemes to evade or aggressively avoid their tax obligations. Those taxpayers, however, who have legitimately made mistakes in their tax affairs will continue to be able to seek the relief from prosecution and/or penalties provided for under the Program.

Planning highlights

• Enhance and maintain our mobile apps, including Business Tax Reminders, CRA BizApp, MyCRA, and MyBenefits CRA

Expected results

• Allow authorized representatives to use commercial software to file an authorization request online that allows immediate access to client accounts with no signature required, by May 2018
• Expand our Account Alerts service to include alert triggers for businesses, by May 2018
• Allow taxpayers who use goods and services tax/harmonized sales tax (GST/HST) Internet File Transfer software to register for online mail, by December 2018
• Increase digital filing options for GST/HST new housing rebates, by May 2019
• Allow employers undergoing desk examination to submit their books and records electronically through My Business Account, by March 2020

Collaboration

The CRA works closely with other federal government departments and agencies to deliver on Government of Canada priorities. We also partner with industry associations and community organizations to make voluntary compliance as easy as possible. These collaborative arrangements help us enhance our services for Canadians, improve our programs, and reduce the administrative burden on taxpayers.

The Agency has been working with Innovation, Science and Economic Development Canada to advance the Government of Canada's goal that all business-facing services use the business number as their primary identifier by 2020. This will allow our business clients to manage one identifier when interacting with the Government of Canada rather than having separate numbers for each business-facing program.

The Tell-Us-Once service enhancement project between the CRA and Employment and Social Development Canada allows Canadians to give either department their direct deposit and address information and ensures the information is updated simultaneously to the other department, resulting in a tell-us-once environment. A phased-in approach is being taken to ensure alignment with departmental plans and capacities.

In consultation with the Chartered Professional Accountants of Canada, we launched a post-audit survey in March 2017 to seek voluntary and anonymous feedback from businesses that have undergone a CRA income tax or GST/HST audit. We are analyzing this feedback to identify opportunities to improve our audit process.

Canadians have access to many in-person and digital options to make a payment to the CRA. By the end of the planning period, the Agency will reduce its reliance on paper remittance vouchers. We will also make the payment experience easier by:

• allowing taxpayers to make a secure, in-person payment through Canada Post
• partnering with financial institutions to simplify direct deposit enrolment
• supporting direct deposit information-sharing with Employment and Social Development Canada

We are committed to acting on all opportunities to expand our collaboration with our federal partners in order to enhance service delivery to citizens and businesses.

Cannabis

As announced in Budget 2017, a taxation framework will be implemented when recreational cannabis is legalized in 2018. The CRA will work closely with Health Canada and the Department of Finance to implement a program to assess and collect taxes on the sale of cannabis products.

Carbon levy

In Budget 2017, the Government of Canada reiterated that it will put in place a federal carbon pricing system. The CRA has been mandated to implement and administer the proposed federal carbon levy program. To do so, we will work with Environment and Climate Change Canada and the Department of Finance.

Registered charities

The CRA takes an education-first approach with the approximately 86,000 registered charities in Canada, providing them with all the information and tools they need to comply voluntarily. When an organization is not meeting the legislative requirements to maintain charitable status, the Agency provides the organization with further information and opportunities to amend the situation.

After extensive online and in-person consultations were held with public and charitable sector representatives across the country in 2016, a consultation panel reviewed the feedback and presented its report to the Minister of National Revenue in March 2017. The Agency is carefully reviewing the report to help inform its future regulation of charities under the Income Tax Act.

Planning highlights

• Clarify the rules governing the involvement of registered charities in political activities
• Modernize our information technology systems to reduce administrative burden on charities and offer online services to the charitable sector
• Develop new educational resources and use new and existing channels to communicate information to the charitable sector and the public that will explain and facilitate compliance with the requirements of registration

Expected results

• Implement a program to assess and collect taxes on the sale of cannabis products, by July 2018
• Launch our new online filing service for registered charities, by November 2018
• Implement consent to share direct deposit and address information related to the Old Age Security and the Canada Pension Plan between the CRA and Employment and Social Development Canada by February 2019 and, by February 2020, consent to share employment insurance direct deposit and address information between the CRA and Employment and Social Development Canada

Providing fair and impartial review

When taxpayers are not satisfied with a service or a decision they have received from the CRA, they have the option of a fair and impartial redress process. The Agency resolves disputes and requests for relief that arise from decisions made under the legislation and programs we administer and services we provide. Every taxpayer who disagrees with an assessment, determination, or decision has the right to register a formal dispute. The CRA ensures each objection is treated in accordance with applicable laws. A responsive redress process promotes voluntary compliance and fosters trust in the integrity of the CRA.

The 2016 Fall Report of the Office of the Auditor General focused on how efficiently the CRA manages income tax objections in terms of timeliness of decisions^{Footnote 2}. The report also examined whether our performance indicators related to the objections process were developed and reported, and whether the Agency studied and analyzed objections and appeals decisions and shared the analyses internally. The Agency agreed with the recommendations issued in the report and saw this as a good opportunity to further strengthen how we manage objections. We have already established a service standard to resolve low-complexity objections within 180 days, 80% of the time and, to emphasize our commitment to service, will be implementing an additional service standard in 2018 to resolve medium-complexity objections within 365 days, 80% of the time. As our backlog of these types of objections declines, we will seek opportunities to improve the timeliness commitments of these service standards. Timely resolution of objections gives Canadians the certainty they need about their tax affairs to make decisions for themselves, their families and their businesses.

The CRA also administers legislative provisions under which the Minister of National Revenue may grant relief to taxpayers from penalties and interest arising from an inability to pay through no fault of their own or due to circumstances beyond their control. Requests for relief can arise in any number of circumstances, ranging from widespread disaster to individual hardship. In addition, the Agency offers a process to resolve service-related issues resulting from mistakes, undue delays, the behaviour of our employees, and poor or misleading information. Taxpayers can file unresolved service complaints and requests for relief online through My Account.

Planning highlights

• Increase our capacity to resolve objections quickly, to improve service, and provide early certainty of tax obligations
• Further enhance our digital services to allow taxpayers to receive a more timely response to their service complaints
• Report improved performance indicators, related targets, and results to Parliament concerning our timeliness in processing objections and communicate this performance information to taxpayers
• Communicate objections and appeals decisions, and identify opportunities for improvement in the service provided to Canadians

Expected results

• Implement digital delivery of responses to service complaints through the My Account and My Business Account secure portals, by December 2018
• Address recommendations made in the Office of the Auditor General Report by:
  • implementing our action plan pertaining to income tax objections during 2018
  • establishing a new service standard for the resolution of medium-complexity objections, by June 2018
  • revising Form RC4288, Request for Taxpayer Relief — Cancel or Waive Penalties or Interest, to ensure that the necessary information and documentation is submitted with the request, by March 2019
• Renew Agency processes, improve tools, and improve workload management to enhance efficiency for Canada Pension Plan and employment insurance disputes, by December 2020

Planning highlights

• Increase our capacity to resolve objections quickly, to improve service, and provide early certainty of tax obligations
• Further enhance our digital services to allow taxpayers to receive a more timely response to their service complaints
• Report improved performance indicators, related targets, and results to Parliament concerning our timeliness in processing objections and communicate this performance information to taxpayers
• Communicate objections and appeals decisions, and identify opportunities for improvement in the service provided to Canadians

Expected results

• Implement digital delivery of responses to service complaints through the My Account and My Business Account secure portals, by December 2018
• Address recommendations made in the Office of the Auditor General Report by:
  • implementing our action plan pertaining to income tax objections during 2018
  • establishing a new service standard for the resolution of medium-complexity objections, by June 2018
  • revising Form RC4288, Request for Taxpayer Relief — Cancel or Waive Penalties or Interest, to ensure that the necessary information and documentation is submitted with the request, by March 2019
• Renew Agency processes, improve tools, and improve workload management to enhance efficiency for Canada Pension Plan and employment insurance disputes, by December 2020

Compliance

Our services are aimed at making voluntary compliance as easy as possible, and we provide proactive support when it is needed. However, there will always be those who, by error or intent, do not meet their obligations. The CRA seeks to protect the integrity of Canada's voluntary compliance system by identifying filing non-compliance and pursuing individuals, corporations or trusts that do not file tax returns despite a legal obligation to do so. In addition, the Agency devotes significant resources to identifying and addressing the small segment of the population that does not report the correct amounts. The Agency's compliance activities follow an escalating approach, moving from influencing compliance to enforcing it, with a focus on early detection and correction of failure to comply with the federal and provincial tax legislation we administer.

Business intelligence

Gathering business intelligence gives us better insight into taxpayer behaviour and allows us to more precisely and rapidly target non-compliance, whether it stems from unintentional errors or deliberate non-compliance. By gaining access to better data and improving our information technology and tools we can more effectively guide our operational and strategic decisions. By complementing this with advanced data analysis techniques, the Agency is taking a more targeted and risk-based approach to promoting, supporting, and enforcing all aspects of compliance.

Access to better data, used more effectively

The CRA has access to a very large volume of data from multiple sources^{Footnote 3}, especially as it relates to our work to identify offshore and aggressive tax planning non-compliance. It is crucial that we effectively use this increasing volume and variety of data to guide our operational and strategic decisions. To more effectively identify those taxpayers at highest risk of being non-compliant, we will implement an automated system that accurately matches taxpayers to electronic funds transfer records and integrates this data with existing CRA data. In addition, the Agency will expand our use of taxpayer information to further enhance our risk assessment systems and business intelligence tools, including the Integrated Risk Assessment System, to increase our ability to detect significant non-compliance within the large business population segment, and optimize the allocation of resources to address these compliance risks.

Advanced analytics

The CRA is advancing its analytics capability by developing and testing predictive models that allow us to identify individual and business taxpayers with an increased risk of non-compliance and determine specific actions to apply. These predictive models will enable the Agency to make fact-based decisions that lead to better identification of non-compliant accounts and support re-directing our resources toward resolving the highest risk accounts—at the right time and at the lowest cost—thereby reducing the burden on the larger population of taxpayers. The application of advanced analytics will improve our decision-making and help us tailor and time our interventions for maximum impact. Over the planning period, we will test predictive models on individual taxpayers and develop new predictive models for individual and business taxpayers.

Planning highlights

• Maximize the use of third-party data to support operational and strategic decision-making and to conduct pilot projects using advanced analytics to enhance risk assessment

Expected results

• Using advanced analytics, develop new predictive models for detecting non-compliance related to corporate income tax, and complete audits of individual taxpayers selected from current predictive models, by March 2019
• Automate the process of matching and risk assessing electronic funds transfer records, which do not contain a taxpayer identifier, with existing CRA taxpayer data, by March 2020

International collaboration

The CRA's approach to compliance takes the Agency beyond Canada's borders to work with other countries to improve global tax transparency and address aggressive international tax avoidance and evasion. We do this by engaging both bilaterally and multilaterally with a range of partner administrations and organizations. Our engagement at the Organisation for Economic Co-operation and Development (OECD) is particularly vital, including our work with the OECD Forum on Tax Administration.

The Forum on Tax Administration brings together the Tax Commissioners of the most advanced tax administrations worldwide, including OECD and G20 members, to work collaboratively to address common tax administration challenges and take collective action to achieve common goals. Through the Forum on Tax Administration, the Agency is participating in a pilot project to identify large multinationals exhibiting low risk of tax avoidance. This project, called the International Compliance Assurance Program, has been established as a coordinated, multi-jurisdictional tool for assuring that certain multinational enterprise groups are in compliance with applicable tax legislation. By participating in this pilot the Agency and our international partners are able to identify those corporations that do not need to be considered for any compliance activities associated with tax evasion or aggressive tax avoidance. It helps us to quickly isolate any areas of risk that might require further attention and better target our resources to where compliance action may be most needed.

The Commissioner of the Canada Revenue Agency leads the Forum on Tax Administration's Large Business and International Programme, where the CRA, together with other tax administrations, is leading the development and delivery of a work plan to support the OECD and G20 base erosion and profit-shifting project. This is a global project that seeks to prevent multinational corporations from inappropriately minimizing their taxes. This initiative is being undertaken to support other potential projects and will help with the compliance management of large businesses.

The CRA also engages in bilateral and multilateral cooperation and collaboration on taxpayer-specific issues, risks and compliance practices through its work with the Joint International Taskforce on Shared Intelligence and Collaboration. Working within the legal framework of effective bilateral and multilateral conventions and tax information exchange agreements, this tax force offers a platform for its members to actively collaborate and share their experience, resources, and expertise to tackle the common issues they face. Our participation in this network of tax administrations from over 37 countries makes it easier to share information and helps increase our understanding of intergroup transactions. Over the planning period, the Agency will lead the working group on High Net Worth Individuals and actively participate in other expert working groups.

The CRA also plays a leading role in building capacity for developing countries by providing advice and support in the administration of their taxation regimes, either bilaterally or multilaterally through our participation in various initiatives. For example, Agency employees provide training at the OECD International Academy for Tax Crime Investigators, and serve as subject matter experts for OECD Global Relations Programme learning events related to tax administration. Our Commissioner co-sponsors, with China, the Forum on Tax Administration's Capacity Building Network. This network is focused on identifying how member jurisdictions can address the increasing demand for capacity-building by working together to improve coordination, reduce duplication, and generate efficiencies in how assistance is provided.

In addition, the Agency is developing an online tool, called the Knowledge Sharing Platform for Tax Administrations. Currently a prototype being deployed through early adopters, this tool is designed to foster the sharing of practical knowledge and expertise concerning tax administration in a cost-effective and sustainable way.

Combatting base erosion and profit sharing

There are tax planning strategies implemented by multinational enterprises that exploit gaps and mismatches in tax rules to artificially shift profits to low-tax or no-tax jurisdictions where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The G20 asked the OECD to address this growing problem by creating an action plan to address base erosion and profit shifting. This plan, endorsed and adopted by Canada, identifies a series of domestic and international measures to address the problem and sets timelines for the implementation. The CRA will extend its cooperation on base erosion and profit shifting through to 2020.

Country-by-country reporting

The objective of country-by-country reporting is to provide transparency to tax administrations of the global operations of multinational enterprises, including information about their economic activity, how they allocate their income across the globe, and any taxes paid among participating countries. These reports are usually filed in the jurisdiction of tax residence of the ultimate parent entity of the multinational enterprise group, then shared between participating jurisdictions.

As of June 2017, a total of 64 countries signed on to exchange country-by-country reports. Automated exchanges pursuant to government-to-government agreements will begin in June 2018. The Agency has also been exchanging advanced income tax rulings; those we receive are given consideration as we work to identify new tax schemes and potential non-compliance in Canada.

As part of the OECD base erosion and profit-shifting action plan, Canada is committed to implementing measures to make dispute resolution mechanisms more effective. In accordance with mutually agreed procedures, the CRA will put in place monitoring mechanisms by March 2019 to ensure that settlements are implemented, there is clarity in related guidance, and that taxpayers understand access and timeframes for resolving disputes.

Common reporting standard

For many years, tax authorities have expressed a heightened interest in developing a standard for the automatic exchange of information. On July 15, 2014, the OECD approved the new global Standard for Automatic Exchange of Financial Account Information in Tax Matters, referred to as the Common Reporting Standard. To increase global transparency, each jurisdiction will annually collect and automatically exchange information, including details such as taxpayer names, addresses, birth information, tax identification numbers, and account balances, with partner jurisdictions for all reportable accounts. Canada will undertake its first exchanges in 2018.

As of July 1, 2017, financial institutions have had to start identifying certain accounts held by or for non-residents, and to report these accounts to the CRA. Financial institutions will file information with the CRA in accordance with the Common Reporting Standard for the first time by May 2018, which will allow for Canada's first exchanges with other countries in September 2018. The Agency has developed a transmission platform for the initiative that we will leverage for other exchanges, including country-by-country reporting and exchanges of rulings.

Planning highlights

• Play an active role with the Joint International Taskforce on Shared Intelligence and Collaboration network concerning new projects to ensure tax compliance and participate in joint collaborative sessions with other member countries
• Collaborate with international partners to address global tax evasion and financial crimes, specifically in the areas of beneficial ownership intelligence, money laundering, bribery, corruption, terrorism financing, and capacity building

Expected results

• Complete the first exchanges of information under the Common Reporting Standard, by September 2018
• Begin the automatic exchange of country-by-country information and integrate the information into existing transfer pricing risk assessment processes by March 2019
• Deploy the end-state Knowledge Sharing Platform for Tax Administrations by March 2019

Tax evasion and aggressive tax avoidance

Aggressive tax planning arrangements involve a transaction or a series of transactions designed primarily to avoid paying taxes. Such tax arrangements often go against the object and spirit of tax legislation and represent a significant threat to the revenue base of industrialized countries around the globe. With recent budget investments, the Agency is developing better tools and better approaches—and will achieve better results.

Addressing offshore compliance and aggressive tax planning is a top priority for the CRA, as demonstrated by our work on the Panama Papers. On April 3, 2016, the CBC published a story concerning the leak of 11.5 million documents from a Panamanian law firm, Mossack Fonseca, relating to the offshore financial affairs of numerous prominent individuals worldwide. From this information, we have been able to identify over 3,140 offshore entities with over 2,360 possible beneficial owners that have some link to Canada. The Agency has reviewed and risk assessed over 1,350 of these possible beneficial owners. This project involves collaboration with Revenu Québec to exchange information linked to Quebec, share tools, and coordinate audits. In addition, using the foundation we have established in addressing the Panama Papers, we will review the more recent Paradise Papers. In both circumstances, we will share information related to non-residents of Canada with our treaty partners and take compliance action, including completing audits and making referrals for further investigation. Where appropriate, we refer cases to the Public Prosecution Service of Canada for possible criminal prosecution.

Since January 1, 2015, financial institutions have been required to report to the CRA all international electronic funds transfers of $10,000 or more. This information is invaluable in helping the Agency identify international non-compliance, monitor potentially unreported income, and target jurisdictions and financial institutions of concern. Over the planning period, we will review all of the electronic funds transfers in four jurisdictions or financial institutions of concern and focus our audit efforts on high-risk taxpayers.

For medium- and low-risk taxpayers identified through the review of electronic funds transfers in the jurisdictions or financial institutions of concern, we will conduct desk audits or send out letters to nudge compliance. This approach reduces the compliance burden on taxpayers because the desk audit approach does not require a visit to the taxpayers' premises. It does not replace field audits; rather, it provides an alternative method of reviewing files with certain risk profiles and helps taxpayers comply where appropriate. We plan to implement a desk audit pilot project for the medium-risk segment during the planning period.

Wealthy individuals

Some wealthy individuals (and related parties) use private corporations or complex schemes, including involvement in complex offshore structures and transactions. Using new risk assessment strategies and additional audit teams, the Agency plans to expand the scope of our initiative to address non-compliance among these taxpayers. By March 2021, we will have in place a number of new measures, including an increase in the number of high net worth individuals^{Footnote 4} within the Related Party Initiative program identified for potential audit and the number of audits undertaken, plus we will be leveraging information gathered through new risk assessment tools and increasing Agency cooperation with tax administrations in other countries.

Aggressive GST/HST planning

The CRA's approach to GST/HST compliance is designed to ensure GST/HST registrants comply with their reporting requirements and that we identify and address non-compliance, especially by those who knowingly and aggressively avoid paying GST/HST. Annually, the Agency receives two million refund and rebate claims, some of which are false, totalling about $47 billion. Over the next three years, as part of the Government of Canada's Budget 2016 commitment, we will be developing processes to improve our ability to identify and profile various schemes in the GST/HST registrant population. We will put in place a fully integrated automated system to help us detect fictitious entities, preventing us from issuing unwarranted GST/HST refunds. This will also allow the Agency to respond to emerging abusive tax schemes by updating and modifying our risk assessment models and profiles in a timely manner.

Tax scheme promoters

The CRA is actively cracking down on promoter schemes that promise large refunds and tax-free income, or that devise other creative ways to pay less tax owing. The Agency has the authority to apply third-party penalties against tax preparers, promoters, and other third parties who misrepresent tax matters that could result in other persons making false statements or omissions on their tax returns. Those who counsel others to file their tax returns based on false or misleading information, or who knowingly accept false information provided by their clients for tax purposes, can face penalties under the law and criminal prosecution that can lead to court-imposed fines and jail time. Over the planning period, we will increase audits of promoters of tax schemes and apply appropriate compliance actions; improve information gathering and business intelligence on emerging schemes; maintain a database on all identified promoters; pursue additional legislative tools to discourage investment in abusive schemes; and improve communication to taxpayers to warn them about such schemes.

Underground economy

Combatting the underground economy (UE) is one of the top compliance priorities for the CRA. The UE poses a threat to Canada's revenue base and makes it difficult for Canadian businesses, particularly small businesses, to compete on a level playing field. In 2013, the last year for which the UE was estimated, UE activity totalled $45.6 billion in Canada, or about 2.4% of gross domestic product. The UE includes both unreported and under-reported sales or income, which may involve failure to:

• file or register
• report a business activity
• report part of a business activity or income
• report income ancillary to employment income, such as tips and gratuities

If left unchallenged, the UE can erode the integrity of Canada's tax system.

Our work to combat the underground economy is aimed at ensuring a fair tax system and a level playing field for all businesses and taxpayers. Through the successes and challenges learned in our previous strategy, the Agency is building a better understanding of the UE in Canada, and we are continuing to enhance our approaches to reduce UE participation. Beginning in 2018-2019, the CRA will implement an updated, fulsome and relevant UE strategy with the following three themes.

• Social responsibility and engaged citizenship: The aim of this theme is to raise awareness of the risks and consequences of participating in the UE to reduce its social acceptability. Through external partnerships, we will increase the reach of our UE messaging, which will address both those who create the demand for UE services and the individuals and businesses who supply the UE.
• Use of third party data: The CRA intends to obtain additional third party data from our partners—mainly other federal departments, the provinces and territories as well as municipalities. The CRA will also obtain information from third parties through the use of legal requirements when it has reason to believe this data will help detect and deter non-compliance.
• Emerging business models and transacting in the digital age: The CRA will strengthen its understanding of the tax attributes of those who are using business models that monetize assets or labour in non-traditional ways, such as online intermediaries that facilitate the sharing and gig economy and those that use digital payment systems like Bitcoin. Test audits, research, and education sessions will be conducted to ensure taxpayer compliance in these rapidly expanding areas of Canada's economy.

In addition, the CRA will continue its important work on all aspects of the UE, including education, detecting non-filers, improving its audit techniques to detect unreported income, enhancing our business intelligence, and improving our risk assessment to help us focus our efforts in the areas where non-compliance is most prevalent.

Criminal investigations

The CRA's 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 to the Public Prosecution Service of Canada for criminal prosecution. We have taken steps to enhance the efficiency of our criminal investigations, to identify egregious tax evasion cases more effectively. To improve our forensic informatics capabilities for complex investigations, we are investing in advanced technological tools, and researching the use of the Dark Web as a means to commit tax evasion to help us better identify sophisticated and well-organized schemes. To help us better measure our success, we will introduce new performance measures.

Over the planning period, we will set up a free subscription service to help interested Canadians stay current on our enforcement efforts. These enforcement notifications will include information on tax evasion convictions, non-filer convictions, and, in some instances, searches executed and the criminal charges laid. In addition, the Agency will update its results throughout the year in a series of newly created webpages dedicated to describing its offshore activities. We will also seek opportunities to report results through various media and on canada.ca.

Other ways we are improving compliance

Sharing economy

The sharing economy connects individuals or businesses that are looking for a particular product or service to those that have it. Many participants in the sharing economy do not follow traditional small business practices—and the number of non-traditional small businesses participating in this sharing economy is growing—so it is important to ensure that they are aware of and comply with their tax obligations, namely collecting and remitting GST/HST. Until now, the Agency's approach to promoting compliance within this sector has largely been focused on a mix of education, outreach, and nudge techniques to help registrants better understand their tax obligations and encourage them to correct any inaccuracies on their past returns and in their future filings. The CRA will focus its efforts over the planning period on conducting compliance activity on commercial operators within the sharing economy. Following completion of these audits, we will further develop associated data and risk models.

SR&ED claims

Through the Scientific Research and Experimental Development (SR&ED) Program, the Government of Canada 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. Over the planning period, the Agency will monitor, support, and enhance its new suite of services to ensure they meet the needs of SR&ED program claimants. We will also apply the elements of our SR&ED Large Claim Strategy in reviewing claims to other claimant populations to improve compliance.

Planning highlights

• Monitor adherence to newly established national investigative standards to streamline the investigative process and ensure the timely referral of cases to the Public Prosecution Service of Canada for criminal prosecution
• Engage industry associations, specifically targeting those with the broadest reach and impact to raise awareness of the requirements of the SR&ED program

Expected results

• Review and risk assess the remaining approximately one thousand Panama Papers records, by March 2019
• Introduce a new reporting measure for criminal investigations, by March 2019
• Research and explore the use of the Dark Web as a means to commit tax evasion, by March 2020
• Implement an applied intelligence solution to identify abusive GST/HST schemes, by May 2020

Collections

The CRA collects tax debts on behalf of federal, provincial, and territorial governments. We also collect debts for such government programs as defaulted Canada Student Loans, employment insurance overpayments, and Canada Pension Plan overpayments. Managing tax debt^{Footnote 5} is critical to protecting Canada's revenue base and providing governments across Canada with the revenue needed to support programs and priorities.

To be fully compliant, individual and business taxpayers must pay all taxes on time. Due to a variety of factors, not all taxpayers are willing or able to pay all tax owing once their assessments have been raised, including after any disputes or appeals have been resolved. To address these tax debts in the most effective way possible, the Agency has implemented three distinct strategic approaches that are based on the circumstances of non-compliant taxpayers.

• In the case of those who want to pay, we seek to avoid delays and the accumulation of interest and penalties by encouraging compliance and assisting these taxpayers to quickly resolve all tax owing through self-resolution tools.
• For those who cannot immediately pay all amounts outstanding, we work with taxpayers to resolve their debts through collection tools, such as payment arrangements that take into account their ability to pay, while avoiding any undue financial hardship.
• In those relatively few instances where taxpayers have the means but are unwilling to pay what they owe, the Agency uses available enforcement tools to compel compliance with Canada's tax laws.

The Agency's collections activities are guided by two main goals: avoiding new debt and resolving existing debt quickly. Over the past number of years, our collections work has been evolving to address a tax debt portfolio that has been growing at a 10-year average of 7.8%. Through investments from federal budgets, the CRA has transformed its business processes for addressing tax debt and reduced the growth of the tax debt to 5% in fiscal year 2016-2017. With this enhanced capacity to address tax debt, the Agency will continue to leverage technology and business intelligence over the planning period to manage new amounts owing and the growth in tax debt inventory. In addition, this will help improve our ability to deliver the right account to the right level of collection in a timely manner to increase opportunities for debt resolution.

In the almost two decades since their launch, the Agency's Debt Management Call Centres have proven to be critical to faster resolution of tax debt. Agents from these centres call taxpayers to seek payment of taxes owing and they receive calls from those who were notified that they have a tax debt. In some instances, our Debt Management Call Centre agents have been unable to resolve more complex tax debt issues, requiring the taxpayer to make an additional call to another collections officer. To improve our level of service, the CRA will be piloting a project where these calls are transferred directly from the call centre agent to a more senior collections officer to resolve the account. We are limiting this pilot to a select group of taxpayers in order to measure the effectiveness of this initiative before deciding to expand this service in the future.

To improve the accessibility of the Agency to taxpayers at a time when they are available to discuss resolving a debt, we have implemented a SMARTLINKS tool. This tool allows taxpayers to arrange for a call from a Debt Management Call Centre agent at a time that is convenient for them. Adding a service like this one contributes to achieving our goal to improve service and encourage taxpayers to resolve their tax debts in a timely manner.

The CRA is focusing on aggressive tax planning to promote both reporting and payment compliance. Using funding from Budget 2016, we are now in a better position to have specialized collections officers focus on collecting the tax owing from the high-risk reassessments from all types of targeted audits, such as those related to offshore tax schemes.

Planning highlights

• Leverage new data mining models to enhance our use of automation to direct files to the proper workload in a timely manner to improve collection potential
• Improve the research that we undertake both to gain a better understanding of trends in payment non-compliance and to identify the risks involved
• Increase our focus on the collection of files identified as being higher risk in order to reduce the likelihood of these debts becoming uncollectable

Expected results

• As a result of the Government of Canada investments announced in Budget 2016, we will collect an additional
• $3 billion in tax debt—plus $210 million from high-risk reassessments—by March 2019
• $5 billion in tax debt—plus $280 million from high-risk reassessments—by March 2020
• $7 billion in tax debt—plus $350 million from high-risk reassessments—by March 2021^{Footnote 6}

Tax planned results

The CRA's Departmental Results Framework demonstrates how CRA's work contributes both to government priorities and overall well-being of Canadians. The framework identifies the indicators that are used to assess overall progress towards the outcomes we are striving to achieve and provides a foundation for accuracy and transparency in reporting our results to Parliamentarians and Canadians.

Tax budgetary financial (dollars) and human resources (full-time equivalents)

Tax budgetary financial (dollars) and human resources (full-time equivalents)

Financial, human resources and performance information for the CRA's Program Inventory is available in the GC InfoBaseⁱⁱⁱ.