Introduction

The CRA developed the Performance Measurement Framework for Compliance Burden Reduction to measure the compliance burden faced by small businesses and our progress towards reducing this burden. The framework analyses performance against a predetermined series of indicators. In developing the framework, the CRA adopted two types of measures that are frequently used by other tax administrations to assess the compliance burden. These measures relate to the time and money expended by small businesses to comply with their tax obligations, and are divided into two categories:

• direct measures: measures of the direct impact of time and money spent by small businesses; and
• indirect or proxy measures: measures of factors that indirectly affect time and money spent.

There are many factors affecting the compliance burden, such as taxpayer behaviour and tax law, over which the CRA has little control or influence. However, since the CRA is responsible for the administration of tax legislation, it does have control over interaction with the taxpayer. It is, therefore, important that the CRA understand and address the administrative practices which impose the greatest burden on small businesses.

• Understanding the Burden

The CRA is committed to understanding the compliance burden, taking action to reduce it, and reporting on the results of these actions. It is important to recognize that a certain degree of burden is necessary to ensure that the tax system is fair for all Canadians and to protect Canada's revenue base. A certain degree of burden is also necessary in running a successful business. For example, accurate books and records are required for shareholders and financial institutions. This benchmark exercise helps in identifying how best to reduce the compliance burden without putting Canada's social and economic well-being at risk.

The issue of reducing the compliance burden is not unique to Canada. A number of jurisdictions around the world have developed, or are in the process of developing, similar performance measurement frameworks.

• Data Sources

The results of a 2005 Statistics Canada survey further emphasize the need to measure the CRA's part in the compliance burden. The Survey of Regulatory Compliance Costs indicates that employment and tax-related information obligations imposed on small and medium-sized businesses by various levels of government make up approximately 90 percent of their required submissions. The CRA is responsible for the administration of the most frequent of these requirements, such as payroll remittances, and the filing of corporation income tax returns.

This benchmark report provides baseline data from a variety of sources to assist the CRA in obtaining a better measure of the compliance burden faced by small businesses over time. This information will also help the CRA to understand the burden, and set up a point of reference against which it can measure the progress in reducing the compliance burden in the future.

The data used to establish the benchmarks cited in this report have been collected and managed through the Performance Measurement Program System (PMPS). PMPS is the CRA's automated system already in use to support the Annual Report to Parliament and other corporate reports. Use of PMPS ensures alignment in CRA corporate reporting and the integrity of data used in multiple reports.

Two surveys, Prosperity Restricted by Red Tape (2005) and Canada Revenue Agency Report Card-A Small Business Audit of the CRA (2008), conducted by the Canadian Federation of Independent Business support the findings of Statistics Canada. They identify the Goods and services tax (GST/HST), payroll taxes, and income taxes as creating the greatest administrative burden for small businesses.

A 2007 Organisation for Economic Co-operation and Development (OECD) report, titled Programs to Reduce the Administrative Burden of Tax Regulations in Selected Countries, states that “while the measurement of administrative burden is not a precise science, the methods used nevertheless provide a broad order of magnitude of the problem, as well as insights as to its key components.”

• Methodology

For further information about the methodologies used in the various surveys and reports, please refer to Appendix B where all sources are listed along with their Web site information.