PACP Committee Report

Government Response to the Seventh Report of the Standing Committee on Public Accounts

CANADA REVENUE AGENCY — COLLECTION OF TAX DEBTS

OBSERVATIONS

This response pertains to the Seventh Report of the Standing Committee on Public Accounts (Committee), which pertained to Chapter 8 of the May 2006 Report of the Auditor General of Canada (AG), entitled, “Canada Revenue Agency — Collection of Tax Debts”. Senior CRA officials and the AG discussed the AG’s report with the Committee at the June 6, 2006 Committee meeting.

The Committee’s recommendations have encouraged the CRA to identify further improvement strategies, many of which are already underway.

It is important to note that the detailed action plans requested by the Committee for December 31, 2006, have been incorporated in the responses to the Committee’s recommendations and motion.

This response also includes additional information regarding certain statements in the Committee’s report under the heading of “Other Considerations.”

DETAILED RESPONSES TO THE RECOMMENDATIONS

Recommendation 1

The Committee expressed concern that the CRA had not made sufficient progress on addressing the outstanding 1994 AG recommendations, and expressed the view that the CRA’s lack of progress has resulted in potential revenue loss that the Government could have used for other government purposes. The Committee recommended:

“That the Canada Revenue Agency develop a detailed action plan that includes timelines and performance indicators for the implementation of the outstanding recommendations contained in chapter 29 of the Auditor General’s 1994 Report and submit that action plan to the Standing Committee on Public Accounts no later than 31 December 2006.”

Response

The CRA agrees to provide the Committee with a detailed action plan that outlines its actions for implementing the outstanding 1994 AG recommendations. This action plan is described below.

The AG recognized that the CRA has taken significant steps to improve its collection program subsequent to the AG’s 1994 audit, including the introduction of an automated system for managing low-risk tax debts, a national collections call centre for intervening earlier in the collections cycle, and national pools for more effectively managing collections workloads. The AG also noted that the CRA had improved its procedures for collecting large tax debts, for documenting information used to calculate taxpayers’ ability to pay, and for capturing more detailed management information related to amounts written off. Important investments were made in risk-scoring, and many best practices from around the world and the private sector were adopted. As technology opportunities became evident, the CRA’s efforts shifted to considering state-of-the-art risk assessment approaches and methodology, coupled with a more sophisticated vision that encompassed the concept of intake avoidance and expanding risks to include outstanding returns and arrears.

Although work had already been started to resolve the outstanding 1994 AG recommendations, they remained outstanding when the AG tabled the May 2006 audit report. By 2007, the CRA will have implemented seven of the nine recommendations raised by the AG in the 1994 audit; the remaining two recommendations will be completed by March 2009 (for individual tax programs) and by 2011 (for business tax programs), as they are tied to the CRA’s new debt management technology platform.

Outstanding AG Recommendations from 1994

The AG noted that the CRA had not made satisfactory progress in addressing the following recommendations raised during that audit: developing a more comprehensive risk assessment system (including debtor profiles), monitoring danger-of-loss case referrals and determining whether relevant legislation was sufficient to shelter the Crown from loss, developing and monitoring performance standards for collection officers, developing standard collection action codes, and capturing more detailed management information related to time spent on cash-generating and non-cash-generating activities.

To resolve these items, the CRA has developed the following action plan, as requested by the Committee:

• An analysis of danger-of-loss scenarios is being conducted, and a final report will be produced by June 2007.
• Performance standards will be established at the collector level through a tailored addendum to the existing performance management products to be implemented for all collectors beginning September 1, 2007. These standards will include the nature and frequency of debtor contacts, timeframes for resolving accounts, and use of legal action and other methods to collect amounts outstanding.
• The CRA will collect information on collector actions through continued enhancement of its performance measurement systems by way of the Integrated Revenue Collections (IRC) project, which is scheduled to have its first major phase implemented by March 2009.
• In response to the AG’s recommendation to monitor time spent by collection officers in both cash-generating and non-cash-generating activities, the CRA has introduced more detailed time reporting on newly established specialty workflows, and this was implemented in April 2006.

Recommendation 2

The Committee expressed concern that the CRA still does not use a risk management framework to guide its collections activities, and this approach may cause the CRA to take inappropriate collection actions and/or result in revenue loss for the Government. It asked the CRA to develop a risk management framework, including an effective risk scoring system and debtor profiles. The Committee also expressed the opinion that the CRA’s lack of progress in addressing the AG’s recommendations regarding risk management may have led to the CRA “using inappropriate collection measures, resorting to aggressive action when dealing with taxpayers who fully intend to pay their outstanding taxes.” The Committee recommended:

“That as the Canada Revenue Agency finally moves to address outstanding recommendations from the Auditor General’s 1994 audit, it pay particular attention to the need to develop a risk management framework, an accurate, effective risk-scoring system, and debtor profiles with regard to its collections activities. This framework should deal specifically with the age of tax debts and a timeline for its implementation should be presented to the Committee by 31 December 2006.”

Response

As requested by the Committee, a detailed action plan that outlines the CRA’s actions for developing a risk management framework is set out below.

Some of the enhancements made by the CRA in the area of risk management after the 1994 audit are described in response to recommendation one, such as the measures the CRA adopted to improve its risk management of collections activities.

The 1997 introduction of the CRA Revenue Enforcement Management and Tracking System (REMITS) created risk profiles for debtors, updated collections cases, and initiated follow-up strategies—one of which was a referral to the Call Centre. REMITS was successful in starting the CRA on the path toward focusing its resources on activities where risk and potential payback are greatest. This system uses information from existing legacy systems and, as such, represented only a partial solution for the CRA. Plans are well underway to develop and implement a more robust and sophisticated risk management framework.

In response to the Committee’s recommendation, the CRA’s future risk management approach will apply sophisticated new technology to established program objectives and business knowledge, through a framework of the following interconnected factors:

• Predict behaviour — group: identifying groups of debtors whose likelihood of a positive response to different collection strategies is similar (taxpayer profiles).
• Predict behaviour — individual: building a profile of every tax debtor to include pertinent information on assets, compliance history, and third party information (e.g., credit bureaus, etc.) so that it can be matched against group predictive models.
• Risk mitigation strategies: developing a suite of collection actions that will elicit a positive response from debtors.
• Timely execution of risk strategies, based on a prioritization of risk within each strategy (risk scores).
• Program flexibility to plan and implement the most effective risk mitigation strategies possible within resource and organizational constraints.
• Monitor/evaluate function to continually challenge the effectiveness of the above elements—revising predictive models, risk mitigation strategies, and prioritization scores on an ongoing basis.
• Set performance indicators and measure progress against them.

This area has been the subject of considerable effort by the CRA. Our continuing efforts and the associated detailed plans are a principal focus of our 2010 Collections action plan, which is described below under the heading Response to Motion.

Recommendation 3

The Committee expressed the desire for the AG to audit the CRA’s collections program more frequently.

“That the Office of the Auditor General of Canada establish a timetable for external performance audits of the Taxpayer Services and Debt Management Branch of the Canada Revenue Agency that results in audits at five-year intervals.”

While this recommendation falls within the AG’s purview, the CRA is prepared to support the work of the AG for whatever timetable is established.

Recommendation 4

The Committee expressed concern that an economic recession might adversely affect the size of the tax debt and the CRA’s ability to collect it, and asked the CRA to develop a contingency plan to ensure collections success throughout the economic cycle. The Committee recommended:

“That the Canada Revenue Agency develop a plan to ensure that its collections activities and strategies are successful throughout the entire economic cycle. The Agency should provide the Standing Committee on Public Accounts with a copy of this plan no later than 31 December 2006.”

Response

Economic factors can be relevant to the operation of the CRA’s collections program. To a limited extent, such factors are already used to predict the intake of new workloads and develop appropriate debt management strategies.

Although the CRA views any commitment to contingency planning as premature until the linkages between economic conditions and taxpayer compliance are reliably established, the CRA will research this matter further as it implements the AG’s recommendation to develop a better understanding of the makeup of the tax debt through an enhanced debt management research capacity.

This area has been the subject of considerable effort by various areas within the CRA. Detailed work in this regard has been initiated as a result of the AG’s recommendation on understanding tax debt makeup, and plans are provided in the Agency 2010 strategic vision, which is described under the heading Response to Motion below.

Recommendation 5

The Committee noted that the CRA’s plan to address many of the AG’s past and present recommendations are tied to its Agency 2010 strategic vision. It echoed the AG’s concern that the CRA may have difficulty achieving the results incorporated in the vision without having developed a definitive action plan and providing regular progress reports. The Committee recommended:

“That the Canada Revenue Agency report on progress on the implementation of this plan in its annual performance report, beginning with the year ending March 31, 2007.”

Response

The CRA will provide the Committee with a plan of action for implementing its Agency 2010 strategic vision, and will report on its progress in the annual performance report beginning for the year ending March 31, 2007.

OTHER CONSIDERATIONS

In its report, the Committee advances certain comments not raised by the AG in her report. In particular, the Committee questions whether the current tax collections program may be overlooking opportunities to collect significant amounts of revenue and, in some instances, whether individual taxpayers are being mistreated. The CRA would like to address the Committee’s comments because of their potential risk to maintaining Canadians’ faith in the integrity of the tax system.

1. Risk approach does not lead to inappropriate collections actions:

   While a more sophisticated risk management framework is needed, the current framework does not result in inappropriate collections action being applied against taxpayers. While more sophisticated risk scoring may result in a case getting to a collection officer earlier, the range of actions available to resolve the case will be the same.

   The CRA has controls in place to ensure that collections actions taken on a case-by-case basis are appropriate. Unlike tax administrations in other countries, the CRA does not automatically institute legal action. Before any collection action is taken, the assigned collections officer must carefully review the facts of each case to determine what collection action is appropriate, and to confirm that the action meets stringent legislative and policy requirements. Furthermore, the CRA has established controls to ensure that any action taken is commensurate with the sensitivity of the collection action, and the respective collections officer’s delegated authority and experience.

   It should be noted that the AG’s May 2006 report did not include any reference, evidence, or information to suggest that the CRA has taken inappropriate collection actions that led to mistreatment of taxpayers.

2. Potential revenue loss

   The Committee noted the CRA must take action to prevent potential revenue loss, in the context of both addressing the outstanding 1994 recommendations and enhancing its risk assessment processes. It is important to clarify the Committee’s comments in order to ensure that accurate conclusions are drawn.

   It is true that improved efficiency and timeliness of tax debt collection could improve the Government’s fiscal position. However, it is important to clarify how tax debt collection affects the budgetary balance under accrual accounting. The fiscal position may be improved by improved tax debt collection insofar as the CRA is able to reduce bad debts through the improved management of those receivables. Under accrual accounting, the Government must take a provision for doubtful accounts. Any increase in the allowance for doubtful accounts is recorded as part of the bad debt expense. A reduction in the bad debt expense represents an improvement in the Government’s fiscal position.

   However, beyond a reduction in bad debts, simple collection of tax debt does not impact the Government’s fiscal position under accrual accounting, as the revenues associated with outstanding tax debts are already recognized as receivables in the financial statements of the Crown; collections activities affect the cash balance rather than the budgetary balance. In that sense, the Government’s fiscal position is not being limited by “large amounts of uncollected revenue”, as suggested in the Committee report.

   In summary, the Government’s fiscal position is only enhanced by the amount we are able to reduce bad debts through the improved management of those receivables. The CRA has in fact, reduced its allowance for doubtful accounts (on the accounts receivable portfolio) from 26.1% to 19.8% since March 2005, which reflects the CRA’s increased focus on the health of the accounts receivable portfolio. Furthermore, where uncollectible tax debts are written off, they are subject to rigorous controls by CRA officials. The AG noted in previous audits on uncollectible amounts that the CRA has proper controls in place to ensure that amounts have not been written off inappropriately.

Response to Motion
Agency 2010 Strategic Vision — Tax Debt Collections

Motion

The Committee moved:

“That the Canada Revenue Agency report to the Standing Committee on Public Accounts by September 30, 2006 on the status of the Agency’s 2010 vision plan ^[1] and that the Committee requests that the Agency provide a detailed action plan including performance indicators and a timetable for completing its 2010 vision and, provide the Committee with regular progress reports.”

The CRA’s strategic vision is a multi-year effort, and progress will be measured over time. The CRA is currently focussed on ensuring the successful delivery of the Integrated Revenue Collections (IRC) technology project’s first phase (individual tax collection), which represents 50% of volume and change. The CRA will conduct an evaluation of this phase once it has been completed. This evaluation will assess project achievements to date and associated costs, which will enable the CRA to assess costs and identify “lessons learned” before proceeding to implement the next phase (business tax collection: corporate tax, payroll deductions, etc.).

The CRA’s business transformation is guided by a plan that details deliverables and major milestones for each of the key pieces of risk management, file management, performance reporting and measurement, and debt management research. The plan also includes a project management component, which provides for the development of key performance indicators for every element of the project.

The Government is pleased to share more information regarding the vision and the requested action plan with the Committee, which is described below.

Context — Debt Management in the Canada Revenue Agency

The AG has recognized that “Managing and collecting tax debts is a complex activity involving more than 4,000 full-time equivalent staff and many information technology systems.” The CRA’s complex activities are closely tied to the very nature of Canada’s approach to tax administration, which is based on self-assessment and voluntary compliance, and recognizes the differences between private sector credit management and tax debt management.

The CRA’s debt management arm, the Taxpayer Services and Debt Management Branch (TSDMB), contributes significantly to the CRA’s fiscal impact. TSDMB manages an $18 billion tax receivables portfolio, which represents about 5% of the total revenues that the CRA collects on behalf of governments. Over $8 billion (or close to 45%) of the $18 billion outstanding as of March 31, 2005, relates to debts owed by individuals, while the balance relates to debts owed by businesses (mainly for corporate income taxes), GST, or payroll deductions. Every year, some 500,000 new accounts, the largest component of which involves individual tax debtors (200,000 or 40%) are received and resolved. In 2005-2006, TSDMB resolved $11.3 billion in established tax debt.

TSDMB’s accounts receivable and returns compliance program activities ensure compliance with tax laws for filing, withholding, and payment requirements, including amounts collected or withheld in trust on behalf of the Government of Canada and the provinces, territories, and First Nations. The accounts receivable function is responsible for the timely collection of overdue accounts for all taxes, levies, duties, and other amounts, and assures effective tax debt management. This function now also encompasses the collection of non-tax debts for other departments regarding overpaid CPP and EI benefits, as well as the collection of defaulted student loans. The collection activities on these programs were transferred to the CRA on August 1, 2005.

This report deals primarily with the tax debt collections program, although the Branch is also responsible for the taxpayer services dimensions as well as compliance activities tied to the filing of returns and remittance of payroll deductions and GST.

Background

In 1994, the Auditor General (AG) tabled a report recommending measures to improve collection activities. The CRA recognizes the value of such external oversight and initiated many collections re-engineering activities to address the AG’s recommendations.

This audit came at a time when Government had decided to join the Customs and Excise (GST) organization with Revenue Canada Taxation. A significant amount of effort was deployed to effectively amalgamate collection activities, which prevented the CRA from addressing the AG’s recommendations as quickly as expected.

Once the amalgamation was completed, the CRA began to re engineer its collection activities. One early result of these reengineering activities was the introduction of the National Collections Call Centre (Call Centre) in 1997. Based on the experience that earlier personal intervention would result in higher recoveries, the CRA replaced computer-generated collection reminder notices with personal “soft” collection activity earlier in the collections cycle. Using a predictive dialer system, Call Centre agents focus on client service by educating taxpayers on filing and payment requirements, attempting to bring them into compliance voluntarily instead of immediately proceeding with costly enforcement measures. Around this same time, the CRA introduced the Revenue Enforcement Management and Tracking System (REMITS), which creates risk profiles for debtors, updates collections cases, and initiates follow-up strategies—one of which is a referral to the Call Centre. REMITS was successful in helping the CRA focus its resources on activities where risk and potential payback are greatest.

To further integrate compliance activities, the CRA expanded its risk approach by regrouping the Non-Filer/Non-Registrant program with collections activities. The CRA also took bold steps toward eliminating geographical workload boundaries by creating “national pools” of accounts that could be worked by collections and compliance officers anywhere. This focus on new accounts translated into more uniformity in the treatment of all new debts, irrespective of their geographical location. As well, the CRA began exploring possibilities for a new technological platform that would provide it with enhanced capacity to deal with higher volumes and values of cases. These changes will be discussed in more detail below.

A further major structural change occurred in 2004, with the creation of the Revenue Collections Branch. Formerly a directorate within the Assessment and Collections Branch, the transformation to branch status signified the growing importance of Revenue Collections programs in the CRA’s mandate and the CRA’s increased focus on debt management.

Organizational and business changes continue today. In 2006, the Revenue Collections Branch realigned its organization once again to bring strengths and expertise together and improve its focus on core business activities. The Revenue Collections Branch became the Taxpayer Services and Debt Management Branch (TSDMB), bringing front-end taxpayer services and debt management together. This transformation signifies the CRA’s recognition that the compliance continuum starts with providing proper support to encourage voluntary taxpayer compliance. TSDMB will help taxpayers meet their tax obligations at one end of the compliance continuum, and it will take responsible enforcement measures at the other end of the continuum if they fail to do so.

In 2006, the AG completed a follow-up audit of her 1994 report, and published the results in A Status Report of the Auditor General of Canada to the House of Commons, Chapter 8, Canada Revenue Agency, Collection of Tax Debts. The recommendations made by the AG are being addressed in large measure through the strategic vision and business transformation initiatives of the Branch. TSDMB has undertaken specific initiatives that address the AG’s recommendations for improving its risk management, file management, and performance reporting, as well as for developing a debt management research capacity.

The Vision for the Future

The CRA continuously strives to improve its operations in order to meet the challenges facing it. TSDMB has made significant improvements to its operations in recent years to become more effective. It has brought collections and compliance workloads together, re-engineered workflow processes to engage taxpayers earlier in the collections cycle, offered many self serve options, introduced risk management strategies to manage workloads more strategically, and eliminated geographic boundaries to make better use of limited resources.

Despite these improvements, the environment in which TSDMB operates continues to evolve and present new challenges. TSDMB is currently challenged by the continued growth and aging of debts in its collections portfolio, the need to update its aging technology, and the commitment to expand its core business activities. Although supplementary program funding is not always available to the CRA, it has yielded excellent results when it has been provided.

To meet these new challenges, maximize revenue recovery and revenue generation potential, and minimize risk exposure and revenue loss, the CRA must continue to improve the way it conducts business. In particular, the CRA must make the best use of technological solutions and leverage those for the benefit of achieving employee and business process efficiencies. TSDMB is also seeking to leverage best practices in debt management and ensure that the strategies it uses, whether technology based or people and process based, are the most effective.

When TSDMB has completed its transformation agenda, it will have established an operational framework that will “get the right work to the right people at the right time.” TSDMB will do this by managing taxpayer collections and compliance issues holistically, using robust analytics, flexible business rules, and strategic risk management methodology.

There is a clear focus on targeting taxpayers and debtors through risk profiling and improved workload allocation and management. Performance reporting is also key to achieving the vision, by improving TSDMB’s ability to report on program activities from the national to the individual officer level. A debt management research capacity is being created to understand debtors and the makeup of the tax debt. This capacity will enable the analysis of effectiveness of strategies used on compliance with payment, registration, and filing requirements.

Recognizing that TSDMB is undertaking business transformation at the same time as it continues to deliver programs in all business lines, the Branch is taking a progressive approach for implementation. Key elements to support the implementation of new processes and deployment of technology for individual income tax compliance and collections will begin in 2006-2007 with full implementation scheduled for March 2009. Following an evaluation of the first phase of the project, TSDMB plans to implement new processes and technology for the business revenue lines — corporate income tax, GST/HST, and source deductions — by 2011.

The TSDMB Strategic Plan

The CRA’s vision speaks directly to the observations made by the AG and the Committee in 2006. TSDMB’s objective is to replace some of its legacy systems with a new technological platform that will enable and support an integrated service and debt management approach for both traditional and new workloads.

This new technological platform will allow TSDMB to migrate towards a multi-business line workload and will make full use of the CRA’s data warehouse. The CRA will also be able to better understand taxpayers, their behaviour, and the effectiveness of the tools it uses (including legislation) by investing in more debt management taxpayer behaviour research and data analysis.

Collections will benefit specifically from the next technological platform to improve its risk management, file management, and performance reporting capacity. TSDMB will start to develop the Integrated Revenue Collections (IRC) platform in order to roll out:

• individual income tax programs, currently scheduled for March 2009; and
• business programs (corporate income tax, GST, payroll deductions) progressively, currently scheduled for 2011.

It is important to note that many elements of the plan will be achieved over time. Several components, particularly those involving technology solutions, involve complex actions. The CRA has made a conscious decision to act prudently and with probity when considering, selecting, and developing strategies to improve the way it manages its debt management function. The CRA remains confident that this approach is important to maintaining the integrity of the tax system.

Key Achievements to Date

• Built a data infrastructure to support the Agency Data Warehouse and the business intelligence and decision support initiative. This data infrastructure environment will allow improved risk assessment and performance reporting analysis for TSDMB programs.
• Developed a business rules management environment. Procured a Business Rules Engine software product that will provide agility and flexibility in adapting operational business rules to meet the CRA’s strategic program vision. Also created a testing environment to assess the capacity of this software to properly interact with the CRA’s mainframe environment and other software.
• Acquired data mining software in accordance with the approved tendering process. This software will allow the CRA to detect non-compliant tax collection and non-filer cases earlier in the process. Models will determine the appropriate level of risk for each delinquent taxpayer and enable the design of appropriate resolution strategies.
• On February 28, 2006, deployed the T–1 Non-business project, which identifies CRA accounts that have an outstanding debt with an identified collections source. Under this initiative, the CRA was able to execute specific enforcement strategies using a Business Rules Engine software technology.
• Implemented a pilot project to begin evaluating the debt management concept of integrating non-filer and collections workloads for individuals. Developed two key automated applications to assist agents in preparing assessments for taxpayers who refuse to file. Designed an integrated view of the taxpayer’s non-filer and collections information.
• Built and deployed the All Revenues Table, which is a significant inventory management tool for local tax offices. This is the first step in responding to the need for more accurate and timely data, which equates to more effective program management.
• Undertook an impact analysis of using third party information (such as that used by credit bureaus) to predict bankruptcy. This information would provide the CRA with an improved ability to reliably assess insolvent taxpayers who refuse to file.
• Built a workload identification (file selection) environment and a laptop software application toolkit to assist auditors.

Detailed Plan

References throughout this section reflect the CRA’s intention to evaluate the first phase (individual income tax program) of the IRC project once it has been completed before implementing the next phase (business tax programs) of the project.

1. Risk Management:

   The CRA’s strategy to improve the risk management of its collections program will address the AG’s recommendation (8.52) that “The Canada Revenue Agency should establish a more comprehensive automated risk scoring system for tax debts, update the risk scores on an ongoing basis, and use the risk scores to prioritize workload throughout the collections process.”

   The CRA’s risk management plan includes the development of an accurate and effective risk-scoring system, debtor profiles, and a holistic taxpayer view to identify and prioritize work and tasks based on taxpayer behaviours and other risk factors. Profiles will be built using data mining and analytics. Third party information (e.g., from credit bureaus) will be considered when building stronger debtor profiles and assessing risk. The technology piece for this area of work is the data mining/risk management component of IRC: using expert business knowledge and data mining techniques, the CRA will develop and apply models to help identify risks and estimate the probability and dollar value of potential non-compliance at both the client and program levels. These first models will identify non-filer cases with good tax potential, and a predictive model will determine which collections accounts are likely to be resolved using various strategies (e.g., legal warning letters, garnishees, etc.).

   Given the context of significant volumes of work, varying client circumstances, and finite resources, the CRA’s vision for risk management encompasses the following elements:

   • sustaining a healthy accounts receivable portfolio, which is largely collectible and has as few uncollectible or bad debts as possible;
   • preventing debts from aging and becoming uncollectible through timely and appropriate collections action; and
   • writing off bad debts as soon as they are determined to be uncollectible.

   Deliverables:

   • Risk models will be built in 2006-2007 and are currently scheduled for release over 2007-2008 for testing.
   • Fully operational risk scores will be available for individual income tax accounts by March 2009 and are scheduled for business programs by 2011.

2. File Management:

   The CRA’s strategy to improve the file management of its collections program will address the AG’s recommendation (8.65) that “The Canada Revenue Agency should minimize the number of collectors who work on each account, record their actions in a more systematic way, and improve the case management tools they have at their disposal.”

   The CRA’s file management plan builds on its risk management plan to more effectively manage inventory and direct workloads to the most appropriate strategy for resolution. Strategies for resolving non-compliant collections and non-filer cases will range from letter follow-up, call centre contact, or intervention by a specialized officer, to specific legal measures. The CRA’s file management plan will provide automated tools to track, manage, and distribute workloads nationally and at the local office level. Where warranted, an integrated approach will be used to follow up on filing non-compliance or outstanding debt. This integrated approach will focus on the complete taxpayer situation, and will eventually associate all non-compliant collections and non-filer issues. The following describes the technology components that will support this area of work:

   • Integrated Taxpayer View Workbench: A prototype will be converted into a functional solution for deployment to the field supporting a taxpayer-centred approach.
   • Integrated Compliance Platform: A completely integrated compliance platform will be developed to contain all required business rules for collections and compliance issues relating to TSDMB’s mandate. These business rules will be developed based on the new risk management component, and will help employees execute predefined compliance strategies. This approach will create a responsive environment that can quickly react to change, providing flexibility and agility in changes to compliance /collections strategies and workload allocation.
   • Workload Management Component: 26 processes will migrate from the current systems to the IRC environment. These processes include compliance activities such as sending letters, establishing payment arrangements, issuing garnishees, and updating taxpayer information. Workloads will be presented to employees with clearly validated strategies for resolving outstanding compliance issues based on a risk management framework that offers the highest ranked workload to the next qualified resource, regardless of geographic location.

   Deliverables:

   • Improved file management capacity is currently scheduled for March 2009 for individual income tax collections and compliance.
   • Business programs are currently scheduled to use the same components for improvements to file and workload management in 2011.

3. Performance Reporting:

   The CRA’s strategy to improve the performance reporting of its collections program will address the AG’s recommendation (8.41) that “The Canada Revenue Agency should significantly improve its management information to make it complete and comprehensive. It should develop reliable techniques and information sources to determine on a regular basis the results of its collection efforts and use that information to guide its decision making for each of its major collection modes and actions.”

   The CRA’s performance reporting plan will enable the tracking and reporting of results based on actions taken at the national, regional, and local office levels. Results will be available for individual officers working in debt management to support employee development and improvements to overall results and processes for debt management. Building capacity in this area will enable more accurate and timely reporting of program results within and outside the CRA. Performance information will support strategic and tactical analysis, and will help CRA officials make investment decisions that will achieve optimum results. The technology piece for this area of work is IRC’s performance reporting component: on a progressive basis, IRC will provide the underlying data infrastructure required to deliver a wide variety of reports to various levels in the field and at Headquarters. This includes operational reports essential for tracking intake, production, and inventory, and regional/national roll-ups to support activities such as trend analysis and forecasting.

   The CRA acquired selected performance reporting software in accordance with the approved tendering process. Licenses have also been purchased, and employees have been trained and are now using it.

   Deliverables:

   • Improved performance reporting tools for individual income tax programs will be available beginning late in 2007, with fully operational reporting at the national, regional, local office, and individual officer levels scheduled for individual income tax programs by March 2009.
   • Performance reporting tools are currently scheduled to be progressively implemented throughout all major business revenue lines by 2011.

4. Debt Management Research:

   The CRA’s strategy to improve its debt management research will address the AG’s recommendation (8.28) that “The Canada Revenue Agency should identify and collect the data it needs to analyze the makeup of its tax debt and to develop better collection strategies.”

   The CRA’s debt management research strategy will use information from risk models and performance reports in order to better understand the makeup of the tax debt as well as taxpayer compliance. It is expected that this research will help the CRA understand the impact of various strategies for resolving situations of non-compliance, and apply it when using predictive modelling to test the impact of new strategies on taxpayer compliance (considering a variety of factors including fluctuations in the economic cycle).

   Deliverables:

   • Initial research model (to better understand the makeup of tax debt and the profile of debtors) is currently scheduled to be developed over 2006-2007 for individual income tax programs.
   • Business program research is currently scheduled to be developed in 2007, for implementation early in 2008.
   • Build enhanced analytical capacity using IRC data-analysis enhancements, currently scheduled for 2009 for individual income tax accounts, and by 2011 for business programs.

5. Project management:

   The CRA’s strategy consists of providing appropriate governance and oversight to manage the plan and achieve its objectives. These deliverables focus attention on key processes needed to improve the CRA’s debt management capacity and results and to respond to the AG’s observations regarding the collection of tax debts. With the assistance of recognized project management experts, the CRA has developed a rigorous project management plan, which encompasses project management methodology and key performance indicators that are consistent with Treasury Board guidelines. A dedicated project management office will provide overall project management expertise and administration for the multiple initiatives. This team will act as a focal point for initiatives in order to enable faster issue resolution and mitigation of risks, and to facilitate open communication between project teams, clients, senior management, and stakeholders.

Conclusion

The CRA has made many strides in improving the management of its tax debt, in the midst of significant internal and external changes. Although the program has grown and evolved, the CRA agrees with the AG that more can and should be done, and those next steps are now being taken. Although there are challenges associated with the building and implementation of new technologies, the IRC project is the right plan to make a difference in the tax debt management world, and the CRA is looking forward to sharing progress reports with both the AG and the Committee as it moves forward down this challenging path.

[1]

While the Motion calls for the status of the Agency’s 2010 strategic vision, it is clear, from both the full evidence of the June 6, 2006 Committee meeting and further comments made by the AG at her appearance before the Standing Committee on Finance on June 19, 2006, that the motion relates specifically to tax collections.