The Canada Revenue Agency: A Hotbed of Innovation?

For the skeptics who claim that innovation in government is an oxymoron, the notion that a tax collection agency could be innovative seems even more oxymoronic. Yet my intuition tells me that the Canada Revenue Agency indeed has bragging rights to such a claim.

Historically, it has been a rapid adopter of information technology, using it to enhance service by providing for payment online or over the telephone and to enhance compliance through aggressive data mining. Its status as a special operating agency, discussed in David Brown’s article in the most recent issue of Canadian Public Administration, has likely facilitated its innovativeness.

More recently, the Harper Government has likely become a driver of innovation, because of its use of tax credits – rather than spending programs – to implement social and economic policy. This philosophy of government tends to leave the program departments sitting on their hands but puts the onus on CRA. Some recent examples that come to mind are tax credits for child care, child fitness, disabilities, public transit use, and now home renovations.

For each such initiative, CRA has to come up with a precise definition of what is creditable, communicate the ensuing rules to the public, and ensure compliance. The latter would involve requiring taxpayers, or their income tax preparers, to keep receipts and occasionally auditing. The home renovation tax credit will be an interesting case. It has been widely advertised and tremendously popular. As the end of the eligibility period and this year’s tax filing date approach, the question that comes to mind is what sort of auditing CRA will do to ensure that taxpayers have been following the rules. Given the populist nature of this program – with a maximum permissible claim of $ 9000 in expenditures – the standard practice of auditing the few biggest users won’t work. The possibility of the program being extended in the upcoming budget underlines the importance of effective administration.

While the next federal budget is likely to involve expenditure cuts or constraints, I would be very surprised if the Harper Government didn’t extend its philosophy of populist tax credits in some other area, again calling upon CRA for implementation.

As a public management blogger and a taxpayer who has taken advantage of several of these programs (universal child care, child fitness, home renovation), what I see is the tip of the iceberg. Below the waterline is what CRA is doing to implement these initiatives. I think there is an interesting story here of innovative policy implementation for a public management researcher to explore.

3 comments

  1. interesting proposal indeed. i have some insight on the post in that i was working for a provincial ministry that focusses on children and youth sport and recreation in 2007/08 when the Feds were designing a children’s fitness tax credit.

    before even providing some insight into using a tax lever for this purpose, there was a minor jurisdictional issues that the idea created- (namely that under a FPT memorandum some 20 years old provinces were responsible for the delivery and design of their recreation systems. however, while the idea in and of itself had never been evaluated, i was interested to see if the design of the tax credit could in fact support parents to enrol their kids in out of school sport/recreation and physical activity programs. some thoughts about what was /is happening under the waterline to implement this:

    ** using the tax system to promote children’s participation in physical activity, sport and recreation was never supported by evidence- i.e i have a study that found children and youth from families with a combined income of over $100k are enrolled in 5+ hours of organized sport/rec activity/week…$50-$100k -4.2 hours/wk (which, evidence shows, is ample time). children from families under $50k….1.4 hours/wk. so you get the idea in terms of this non-refundable tax credit (i believe it is refundable now) leading to any substantive levels of activity..would only benefit those who could afford activities in the 1st place. families with an income of $40k can hardly shell out $500 in the first place for an activity. only $100 and less (based on my experience in low-income communities sport and rec)

    *** crafting the right definition of physical activity. all depends on age of child, nature of activity, etc. this was a key difficulty the design panel had…and thus did not developed an inclusive definition that supported a whole range of recreation (as opposed to strictly physical activity) -arts and crafts, reading clubs, painting, chess etc. these are all valuable activities that engage children and youth -may not engage them in an active fashion, but certain active in most ways professionals from all disciplines focussed on children and youth development would consider to be ‘active’

    ***tracking-impossible with 100,000 organizations in canada (most grassroots) non profit-based who provide the receipts. also orgs required to show what % of their programming is ‘physical activity’ based. well i coach youth basketball and while we have 2 practices a week (1.5 hrs each)…we are only physically active (intensively) for 30 mins in each session. but i’d easily qualify -while a child who is enrolled in a scouts club may be moderately active for 2 hrs, twice a week

    – lastly, using CRA is not building capacity in a financially and volunteer-strapped sector (in terms of supporting sport and recreation providers enhance the availability or quality of programs) but directly supporting parents. so implementing the tax initiative should also be examining the quality of programs provided. not just a quantitative review

    -the program costs $140M/yr nationally. i would estimate that the combined operating budget of all 100,000 not-for profits would be less than that.

  2. If you really want introduce the innovation to Revenue Canada please ask them to implement the idea from the following US patent application which can save the country around $25 billion dollars every year. One source revenue for all levels of government. No tax returns for businesses and individuals. Retaining current levelof taxation at the time of implementation. No property taxes. No capital gain taxes. No ineterest income taxes. Automatic distribution of funds. Increased appeal for international business. Easy to implement. Increases personal freedom and resources. Guaranties steady and stable stream of revenues for government. Easy to calculate level of Business Levy by subdividing sum of all the budgets of governments at all levels by Gross Domestic Product. Good luck everybody.

    Ryszard.

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