CRA Annual Report to Parliament 2011-2012 (PDF - Agence du ...

(iv) Assessment – definition:
An assessment (or reassessment) of tax includes all decisions and other steps made or taken by the Minister of
National Revenue and officials of the CRA under the federal, provincial, and territorial acts or sections of the acts the
CRA administers to calculate tax payable by taxpayers. When verifying a taxpayer’s return, the CRA uses the various
tax acts it administers and other criteria it developed that are designed to substantially meet the provisions of these
acts.
Reassessments include changes to previously assessed taxes payable at the request of the taxpayer, for example to
claim a subsequent loss carry-back, or changes the CRA initiated as a result of applying procedures to verify
reporting compliance, such as taxpayer audits.
(v) Completeness of tax revenues:
The Canadian tax system is based on self-assessment, so taxpayers are expected to understand the tax laws and
comply with them. This has an impact on the completeness of tax revenues when taxpayers fail to comply with tax
laws, for example, if they do not report all of their income. The CRA has implemented systems and controls to
detect and correct situations where taxpayers are not complying with the various acts it administers. These systems
and controls include audits of taxpayer records when the CRA decides they are necessary, but these procedures
cannot be expected to identify all sources of unreported income or other cases of non-compliance with tax laws.
The CRA is unable to estimate the amount of unreported tax.
(b) Expenses
(i) Interest expense:
The CRA has to pay interest when it pays refunds late. These refunds arise largely from the resolution of longstanding
corporate tax files in favour of the taxpayer. Interest is accrued from the date that the tax instalment was
initially paid to the date that the case is resolved. The CRA records the interest expense in the fiscal year it relates to.
(ii) Administered expenses:
Expenses relating to child tax benefits, universal child care benefits, children’s special allowances, and provincial
and territorial administered expenses are recorded in the year they relate to, based on when the recipients were
entitled to receive the benefit or the allowance. Transfers to provinces for the softwood lumber products export
charge are recorded as an expense in the same year that the related softwood lumber products export charge
revenues are recognized.
(iii) Administered recoveries:
Recoveries of old age security and EI benefits are recognized when assessed. Amounts not yet assessed are
estimated. The CRA reports only recoveries assessed through the individual income tax system. Recoveries
determined by other federal government departments are not reported in these financial statements.
(c) Cash on hand
Cash on hand refers to amounts received in the CRA’s offices or by its agents up to March 31 but not yet deposited to the
credit of the Consolidated Revenue Fund of the Government of Canada.
(d) Amounts receivable from taxpayers
Amounts receivable from taxpayers include taxes, interest, penalties, and other revenues assessed or estimated by the
CRA but not yet collected. A significant portion of the receivable balance results from recording accrued receivables that
relate to the current fiscal year but are not due to be paid by taxpayers until the next fiscal year.
(e) Allowance for doubtful accounts
The allowance for doubtful accounts is management’s best estimate of the collectability of amounts that have been
assessed, including the related interest and penalties, but not yet paid. The allowance for doubtful accounts has two
components. A general allowance is calculated based on the age of the accounts. A specific allowance is calculated
based on an annual review of all accounts over $10 million.
The allowance for doubtful accounts is adjusted every year through a provision for doubtful accounts and is reduced by
amounts written off as uncollectible during the year. The annual provision is reported in the Statement of Administered
ANNUAL REPORT
2011-2012
CANADA REVENUE AGENCY