1. Overview of CRA Compliance Regime
December 2012

2. What Constitutes Compliance
Taxpayers comply with tax laws when they:
Register when required to do so (businesses)
File the required returns on time
Report complete and accurate information
Remit the amounts owing when due
Non-compliance occurs when any of these obligations are not met
Registration – GST more than $30,000 must register

3. Compliance is Everybody’s Business
Taxpayer Responsibility
Canada’s tax system is built on the concept of voluntary compliance and self-assessment. Taxpayers are responsible for reporting their own assessment of income, expenses, and taxes owing prior to being reviewed by the Agency.
CRA Responsibility
Compliance is an Agency-wide responsibility that requires a horizontal approach to the facilitation of taxpayer compliance. The role of the Agency is to ensure that non-compliance is detected and addressed. Our role is also to ensure that taxpayers voluntarily comply without the need for Agency intervention.
This slide lays out the responsibilities of both taxpayers and the CRA.
Read slide
End with:
Compliance is everybody’s business – a shared responsibility
Compliance is everybody’s business – a shared responsibility

4. Business Context / Operating Environment
THE MISSION OF THE CRA - COMPLIANCE
Legislative framework with scope for different interpretations of tax laws
Increasingly complex tax arrangements requiring new staff skills
Advanced in computer technology
Strategic partnership opportunities
International
Domestic
Public expectation that everyone pays fair share
Business practices moving to globalization and electronic commerce
Global and Canadian economy influences compliance
Public attitudes to government and acceptance of underground economy
CRA’s ability to control or influence these factors

5. CRA’s Approach to Compliance
In order to properly carry out our mandate, the Agency must understand the taxpayer and must have a responsive approach to promoting compliance and deterring non-compliance.
This approach includes the following:
Understanding taxpayers - Segmentation
The CRA has a sophisticated approach to defining and understanding the taxpaying public – we segment our taxpaying population in a variety ways. For example:
Type of tax return (T1, T2, T3, GST/HST, etc.)
Size of business (based on revenue)
Industry sector
Geography (provincial, domestic, international)
Taxpayer filing history
Research
We conduct in depth research to update and improve our understanding of the drivers and mechanisms of non-compliant behaviour using the following:
Experts – UE specialists, centres of expertise, economists
Research – random audit program, compliance review studies, UE projects
Data mining – internal/external data to develop predictive models
Our approach to compliance begins with understanding the taxpayer.
Read slide
The research around the segmentation process clearly identifies that not all taxpayers approach their tax obligations in the same way. For example, the construction industry represents a much higher risk of non-compliance than the T4/T1 population who have their taxes taken at source, which we categorize this segment as lowest risk segment.
Finish slide with final sentence Therefore, the CRA has developed different approaches to compliance that ensure taxpayers understand and comply with their obligations under the self assessment system.

6. CRA’s Approach to Compliance (continued)
Once we understand the taxpayer’s behaviour and the associated risks, we develop tools and apply the appropriate measures to the four basic taxpayer compliance types:
Compliers
Assisted Compliers
Contingent non-Compliers
Non-Compliers
Depending on where the taxpayer falls on what we refer to as the Compliance Continuum, determines the appropriate level of intervention.
Our goal is to identify intervention early on and take appropriate action to prevent taxpayers from becoming non-compliers. It’s much cheaper to promote compliance than it is to combat non-compliance.
The great majority of taxpayers are compliant.
What we call Assisted compliers sometimes require minor intervention.
As an example: a taxpayer that has failed to include a tax slip in their return
Contingent non-compliers require more targeted intervention such as post assessment, audits and communication messages to warn of the consequences of non-compliance. Our compliance focus is on moving the contingent non-compliers and assisted compliers into the realm of full compliance.
Non-Compliers there is approximately 8% of the tax base that we refer to as non-compliers who regardless of the intervention, will remain non-compliant, which falls inline with other tax administrations.

7. The Compliance Continuum
Cost of Treatment
Taxpayer Behaviour
-The compliance continuum illustrates that as taxpayer behaviour becomes more non-compliant, the associated cost of treatment rises. Facilitation and service are low cost interventions whereas audit, investigations, prosecutions are high cost treatments.
-This also represents the various branches of the agency that focus on compliance activities.
- Post assessing – example we ask for receipts to verify expenses
Agency
Taxpayer Population
Contingent Non-Compliers
Compliers
Assisted Compliers
Non-Compliers
Service
Filing options
Enquiries
Outreach
Easily available information
Matching
Post Assessing
Direct Assistance
Audit
Communications
Tax alerts with consequences of non-compliance
Compliance results and actions
Investigation
Prosecution
Fines / Penalties

8. Contingent Non-Compliers
Compliance Programs Branch
The mandate of the Compliance Programs Branch (CPB) is to detect and deter non‑compliance.
Core program areas include:
International and Large Business
Aggressive Tax Planning
Transfer Pricing
Large business
Small and Medium Enterprises
Underground Economy
Small and Medium Business
Specialty Audit
Enforcement and Disclosures
Voluntary Disclosure Program
Criminal Investigation Program
Special Enforcement Program
Goods and Services Tax/Harmonized Sales Tax
Scientific Research and Experimental Development
Key activities include:
Examinations
Audits and investigations aimed at ensuring compliance
International level verification and enforcement activities
Non-Compliers
(Rebels)
Prosecutions
Contingent Non-Compliers
Investigations
Audits
Assisted Compliers
Examinations
Outreach activities
Services
Compliers
-Mandate:
-Identify and address non-compliance with tax laws
-We use risk management to identify emerging compliance risks and assess their potential effect on the tax base
-Resources for headquarters and the regions:
-Budget: $819M || FTE’s: 9,753
-Talk about where our core programs predominantly fall on the triangle
-On the other side of the continuum, we investigate egregious violations of the income tax act including tax evasion and will prosecute where appropriate
Small / Medium Business Threshold:
Small Business – gross less than $1M
Medium Business – gross less then $50M
Large Business Threshold:
Basic – annual revenue between $20M - $250M
Large – annual revenue over $250M
Education

9. Applying our Tools - 16,445 volunteers
Promoting Compliance (2010/11)
Handled more than 13.8 million agent assisted public enquiries
The Voluntary Disclosures Program processed more than 13,000 disclosures
More than $22.3 billion of federal, provincial, and territorial benefit and credit payments issued
Comprehensive outreach strategy targeting:
Seniors
New businesses
New Canadians
Deterring Non-compliance (2010/11)
Conducted more than 294,000 examinations, and audits
Nearly 27 million individual and trust tax returns and over 1.96 million corporate tax returns processed identified cash collections of nearly $15.7 billion
More than 722,487 returns obtained from individuals and corporations who had not filed
Conducted 3,388 enforcement actions
Resolved more than 72,000 disputes by Appeals
Over $10.6 billion in non-compliance identified
- 16,445 volunteers
- employees train volunteers to work with low income taxpayers to assist in completing returns
- they may not have taxes owing, but have returns are necessary for benefit entitlement
Outreach:
Seniors
- New businesses – seminars on books & records
- New Canadians – publishing communications in many languages
- $12.4 billion cash collections is the amount of dollars collected in 2009/10
- $14.2 billion is the amount of fiscal impact identified as a result of compliance actions from 2009/10

10. Investigations
The Criminal Investigations Program’s (CIP) mandate is to conduct investigations into, and to refer for prosecution, significant suspected cases of fraudulent non-compliance with the various Acts administered by the CRA. When a conviction is obtained,, CIP will publicize each case. The major Acts being administered by the CIP are the Excise Tax Act (ETA) and the Income Tax Act (ITA).
The key priorities for the CIP are to investigate cases with significant impact such as:
promoters of large scale tax fraud schemes;
investigate egregious cases of tax evasion; and
publicize our actions in order to promote voluntary compliance.
The national priorities are as follows:
Promoters of schemes, including but not limited to Tax Protestors, Tax Preparers, and Tax Planners, involved in fraudulent claims of income tax credits, refunds, and tax shelters
Aggressive international tax cases involving unreported offshore income
Underground Economy
GST / HST

11. Investigations Auditing Criminals (2011/12)
952 Audits of criminals completed
Resulted in $67,000,000 in additional tax (Cdn.)
Obtained over 1600 tax returns from non-filing criminals resulting in an additional $7,000,000 in taxes
Criminal Tax Evasion(2011/12)
Completed 139 tax evasion cases
Over $30,000,000 of income was unreported
Court imposed fines of $6,400,000
24 individuals were sentenced to jail time
The average prison time was three (3) years
Convictions obtained in 92% of cases in which charges were laid (the previous year we obtained convictions in 100% of the cases!!!)

12. Investigations Source of Cases Investigators Powers Audit referrals
Law Enforcement
FINTRAC
Publicly available sources – newspapers , internet etc.
Leads from the public (informants)
Investigators Powers
Search Warrants
Limited surveillance
Witness Interviews
Order to banks and 3rd parties to produce documents
NO GUNS!!!

13. Compliance Programs Branch Priorities
Aggressive Tax Planning (ATP)
Development of a new Approach to Large Business Compliance
Increased identification of offshore non-compliance
The Underground Economy (UE)
Stocktaking of the UE Compliance Strategy
Electronic Suppression of Sales (ESS) Strategy
OECD Cash Economy Project
GST/HST Audit and Examination Program
Increased risks related to non-compliance
In-depth analysis of high risk credit returns
The Voluntary Disclosures Program
Enhancing out risk assessment systems through intelligence
Continuing to promote the program through education and outreach activities
Enforcement
Working with key stakeholders to strengthen our capacity to pursue both criminal non-compliance and non-compliance in the criminal economy 13

14. Voluntary Disclosures Program (VDP)
The Voluntary Disclosures Program is designed to encourage taxpayers to voluntarily come forward to correct inaccurate or incomplete information, or to disclose information not previously reported.
As long as the taxpayer comes to us before they become aware of any compliance action being initiated by the CRA, they may avoid being penalized or prosecuted if they make a full disclosure and pay taxes and interest owing.
We share intelligence gathered from completed disclosures with other program areas to enhance and assist in compliance actions.
CRA’s strategy is to continue to promote this program as an effective method of deterring non-compliance.
-A number of initiatives are currently underway in the VDP such as:
-Streamlining administrative processes to improve processing time
-Ensuring intelligence gathered from voluntary disclosures is utilized in risk profiling of AITP and other areas of the agency as appropriate
Disclosures Received
9,011
9,137
10,639
12,128
12,811
Unreported Income
$614M
$777M
$766M
$1.8B
$773M