Our 2006-2007 Results

Our Program Activities

Assessment of Returns and Payment Processing (PA2)

We believe that providing taxpayers with increased convenience and accessibility through electronic filing and payment technology encourages their voluntary compliance and helps them comply with their tax obligations, thereby ensuring that Canada’s revenue base is protected. For this reason, our Assessment of Returns and Payment Processing program activity has two expected results.

As demonstrated in our Performance Report Card, we achieved our first expected result by meeting the returns processing targets for our key indicators. These results speak to our success in positively influencing taxpayers to participate in Canada’s tax system, thereby promoting compliance.

In addition, the recovery rates in our tax review programs during 2006-2007 provide the basis for our assessment that we also met our expectations related to the identification and addressing of non-compliance. These results demonstrate the vital role played by third-party information reporting in maintaining compliance among the 25 million Canadian individual taxpayers.

Our Measure: Timely processing

We met the majority of our most important processing service standards involving high-impact or high-volume activities in 2006-2007. Our results against our key external service standards were as follows:

• 12.4 million T1 paper returns were processed on average in 27 days, which is within our standard of four to six weeks;
• 12.8 million T1 electronic returns were processed on average in 11 days, which is within our standard of two weeks;
• we met our target of 95% by processing over 98% of 6.3 million GST/HST returns within 21 days;
• we processed more than 1.6 million T2 paper returns, 90% within 50 days, meeting our 75% target, and 97% within 90 days, meeting our 90% target;
• we processed all 1.9 million statements of arrears on time, meeting our 95% target; and
• we issued 100% of almost 2.7 million statements of interim payments on time, meeting our target of 95%.

Further details regarding our performance against our external service standards, including results for previous years, can be found on .

Our results against our key internal performance standards for timeliness in 2006-2007 were as follows:

• we handled over 34.8 million payments, depositing over 99% of payments (based on value) within 24 hours, including almost 96% of non-electronic payments (based on value);
• by mid-June, we processed almost 100% of on-time T1 returns filed by April 30, meeting our target of 98%;
• we processed 86.6% of over 935,000 T4 returns (received between January 1 and March 31, 2007) by April 30, mostly meeting our target of 90%; and
• we processed almost 46% of over 288,000 T5 returns (received between January 1 and March 31, 2007) by May 31, not meeting our 90% target.

The decline in performance for processing T4 and T5 returns was largely due to two significant systems problems in January and March 2007 which we do not expect to recur. The processing delays did not impact service to taxpayers.

As discussed in Achieving Our Tax Services Strategic Outcome, an important part of our approach to improve the timeliness--as well as the accuracy and efficiency--of returns processing is to encourage greater participation by taxpayers in our electronic filing options. In 2006-2007, our electronic filing take-up for our key workloads was as follows:

• 50.6% of individual tax returns;
• over 15% of eligible corporate tax returns;
• almost 9.8% of T4 returns; and
• 14.2% of GST/HST returns.

Our Measure: Accurate processing

The primary tool for determining if we assess returns accurately is our T1 Quality Evaluation Program, which reviews initial assessments of individual tax returns for each year. Our review for 2006-2007[Footnote 1] indicates processing errors with an impact on a taxpayer’s refund or balance due were approximately 1%, meeting our 98% target for accuracy. From 1999 to 2006, the amounts involved were on average $225-$355 per error.

Commencing with the 2005 filing season (2004 tax year), we introduced two-dimensional (2D) bar code technology for computer-generated paper returns filed on behalf of individuals. In 2006-2007, this was expanded to all current-year and some prior-year computer-generated returns as well as introduced for Corporation Income Tax (T2) returns. Bar codes contain all of the taxpayer identification and financial data necessary for the assessment of the return and virtually assures the accurate capture of taxpayer data. In 2006-2007, we processed almost four million 2D bar-coded returns.

Our Measure: Identifying non-compliance

The need for effective processes to identify non-compliance is essential for ensuring that individuals pay their required taxes. We subject selected returns to further review under our post-assessment programs, devoting resources to areas where our assessments indicate that the risk and potential revenue consequences of non-compliance are higher. Our strategy is designed to make administration of the tax system more equitable, recover more revenue for the federal, provincial, and territorial governments, and impose less burden on compliant taxpayers. Our review programs also promote taxpayer education by identifying common areas of misunderstanding.

The success of our risk assessment approach is demonstrated when recoveries for targeted reviews exceed those for random reviews. In 2005 (the last year of available results),[Footnote 2] we assessed additional tax on 24% of targeted reviews and 15% of random reviews, a ratio of 1.6 to 1. We do not regard the slight decline from the results achieved in prior years as a drop in our performance on targeted reviews. This decline is mainly due to additional tax being assessed in an increasing percentage of random reviews. The average additional amounts assessed per review were $178 for targeted reviews and $55 for random reviews, a ratio of 3.2 to 1. These results suggest we have effective criteria for selecting accounts for review.

Our Measure: Addressing non-compliance

Pre-Assessment Tax Review Programs - Our Confidence Validity Program, under which we conduct pre-assessment reviews, identified an average amount of $359 of additional tax assessed per review, for a total of almost $107.4 million in additional tax assessed in 2006-2007.

Post-Assessment Tax Review Programs - 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 2006-2007, almost 820,000 corrective actions generated additional tax assessments of $448.8 million.

A second post-assessment program--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 2006-2007, this program recovered over $142.5 million in additional taxes.

Figure 11 shows that almost $699 million of additional tax was assessed through the three T1 review programs in 2006-2007.

Figure 11 Additional Taxes Assessed through T1 Reviews

A Snapshot of Assessment of Returns and Payment Processing (PA2)

Figure 12 Resource Spending	Description
	In 2006-2007, spending for this program activity totalled $801.8 million (8,428 FTEs) or 23.5% of the CRA’s overall expenditures (Figure 12).[Footnote 1] Of this $801.8 million, $553.9 million was for net program expenditures and $247.9 million was allocated to this program activity for Corporate Services.

Performance Report Card

Timely Processing

Accurate Processing

Identifying Non-Compliance

Addressing Non-Compliance

[Footnote 1] Period of review was March 2, 2006, to June 29, 2006.

[Footnote 2] Due to data availability, information is always from the prior fiscal year.

Date modified:

2007-11-01