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ARCHIVED - RPP 2007-2008
Canada Revenue Agency


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Chapter 2 – Our Operating Environment

As part of our strategic planning process, we conduct regular environmental scans, and assess corporate risks to identify and manage key challenges and opportunities. With representatives from across Canada, our Board of Management brings a broad public- and private-sector perspective to this process. This chapter addresses key risks and challenges in our operating environment.

Government Environment

The government’s long-term economic plan, entitled Advantage Canada, identified five areas for improvements. The first of these areas is reducing taxes for Canadians. Areas under review include a deferral of taxes on capital gains that are reinvested, and other additional reductions in personal and corporate income tax.

Focusing government is one of the core principles of Advantage Canada. All new and existing government programs will be subject to ongoing reviews through the revamped expenditure management system.

The Economy

Canada’s economy is expected to continue to perform reasonably well in the foreseeable future. There has been a solid 2% growth in employment and wages are ahead of inflation. The Bank of Canada expects the growth in the GDP to be 2.5% in 2007 and 2.8% in 2008. The Organisation for Economic Co-operation and Development (OECD) projections show Canada’s GDP at 2.7% in 2007 and 3.1% in 2008.

The overall financial climate is reflected in the statistics for tax revenues. Net individual and trust taxes assessed over the past three years have climbed from $93.1 billion to $103.8 billion. Over the same period, corporate taxes climbed from $27.4 billion to $31.7 billion. Pre-tax corporate profits are expected to remain healthy in 2007. Looking forward, in his November 2006 Economic and Fiscal Update, the Minister of Finance projected that total tax revenues would climb from $186 billion in 2005-2006 to $235 billion in 2011-2012.

Compliance Challenges

The evolving international economy, increasing business integration across borders, electronic commerce and changing demographics are examples of the many factors that present compliance challenges to the CRA. The CRA’s risk-assessment systems and procedures enable us to target compliance and enforcement activities toward the areas of highest risk, and to shift resources to these areas.

The Agency continues to address the four areas determined to be of greatest risk to our tax base: the underground economy; aggressive tax planning; GST/HST fraud; and non-filers, non-registrants and collections. Recent government announcements of plans to address tax havens, combined with the government’s focus on maximizing tax debt collections, confirm that these are key areas to address. This report identifies the steps that the Agency will take to address these risks to compliance.

Trust, Transparency and Accountability

The Agency works hard to maintain Canadians’ trust in the CRA, placing continued emphasis on our four corporate values. The CRA continues to have a positive image with Canadians, largely because the Agency is seen as operating consistently with its corporate values. According to the CRA’s 2006 Annual Corporate Survey, about 85% of respondents agreed that “the CRA treats taxpayer information with complete confidentiality.”

Strengthening its accountability to all client governments is a key element in the CRA’s Agency 2010 initiative. The effective implementation of the recently announced agreement with the Province of Ontario to administer Ontario’s corporate tax is a key challenge for this planning period.

Demographic Trends

According to a 2005 Statistics Canada Study, it is projected that, within 10 years, visible minorities will constitute the majority of the population of Canada’s three largest cities. Since self-assessment is at the core of our tax system, the CRA must be able to communicate effectively with new Canadians who may be unfamiliar with our tax and benefit systems. The CRA must also deal with the effects that our aging population has on tax sectors (e.g. the shift from employee to pension recipient status).

Internally, the CRA needs to ensure that professional skills are in place in critical areas. We must compete vigorously with the private sector to attract the most talented workers. Supported by focused investments, the CRA will offer staff more rewarding work, as the balance of jobs shifts from traditional activities to work requiring more technical, analytical and client relationship competencies. This is in line with the government-wide strategy to ensure that the public service is renewed, innovative and dynamic, and that it reflects Canadian diversity.

Technological Change

Canadians demand electronic service options that are fast, efficient and convenient, and that protect the privacy of confidential information. The effective implementation of technology offers the opportunity to improve service and increase productivity. The CRA is a leader in government in using information technology (IT).

Our key challenge is to maintain the right balance of effort and investment between addressing existing program commitments and creating additional capacity. Our strategies must enhance the continuity of IT services, modernize security, and facilitate information and knowledge management. For those Canadians who do not have a computer, we will continue to offer traditional forms of service. IT solutions will demand new skill sets in the CRA workplace, and the resulting impact on training and staffing must be managed carefully to maintain and enhance the strategic advantage that technology provides to this organization.