The redesign of corporate tax administration for Ontario is a major modernization initiative that transferred Ontario’s corporate income tax administration from the Ontario Ministry of Revenue (OMoR) to the Canada Revenue Agency (CRA).
For over 50 years, the OMoR administered its own provincial corporate income tax program, which meant Ontario businesses had to file two tax returns and work with two separate tax administrators. Under the single harmonized system starting in 2009, Ontario businesses are benefiting from one set of rules, one tax return and one corporate income tax administration – and saving up to $190 million annually in reduced compliance costs and tax savings.
The genesis for the project was the May 2004 Memorandum of Agreement on Collaboration in the Delivery of Public Service, which committed the Ontario and federal governments to work together to improve public service delivery. It culminated in the Memorandum of Agreement on Corporate Tax Administration in October 2006.
Providing a smooth and seamless transition to federal administration presented challenges. The size of the Ontario program ($11 billion) meant that the CRA would more than double its corporate tax collection in its first ever upload of such a program. It was also the first upload of any Ontario program to the federal government. Everyone was working in uncharted waters.
The corporations tax program affected approximately 750 Ontario employees in 10 locations and has spin-off effects on the rest of the ministry. At the same time, staff productivity and quality customer service to taxpayers had to be maintained throughout the lengthy negotiation and implementation period.
Finally, the change required a 300-page Bill from the Ministry of Finance to iron out the complexities of the harmonized system so that Ontario businesses would see the 50 percent reduction in compliance requirements as a result of one form and the one set of rules.
This was based on four principles:
- achieving service and compliance improvements for Ontario businesses;
- reducing the total administration costs for the government;
- ensuring that Ontario’s fiscal interests are achieved and enable Ontario to promote adequately its economic interests; and
- respecting the national objective of building a more integrated tax system.
The focus on principles also helped steady the process through a change in government at the federal level.
Both the CRA and the OMoR utilized similar internal governance structures with a single executive lead reporting directly to the respective commissioners/deputy ministers and supported by executive committees including all related program heads. It reinforced the role of commissioners as champions and also engaged the other leaders.
A joint senior level steering committee provided oversight to the integrated transition plan and structure to the myriad of internal working level committees. The relationship was built on trust and respect in a professional environment and a real “can-do” mentality. The shared, single objective of a seamless transition regularly trumped the individual program obstacles that popped up within each organization.
In both jurisdictions, the working level committees reported through a strong central project office with robust project planning and monitoring processes. Milestones, deliverables, timelines and budget controls were closely monitored and reported. Both organizations utilized their respective Internal Audit functions to validate the project methodology, governance structure, and risk management strategies.
Twice during the project, OMoR conducted a “health check” on the project management for continuous productivity. In Ontario’s case, all functional team leads reported monthly to each other and senior management on the progress of “closing files” before the transfer – audit, appeals, tax advisory services as well as the operations and human resource teams. An element of “peer competition” in this very open forum spurred the teams to greater productivity and success.
Early on, a core team from OMoR, Ontario Ministry of Finance, CRA and the federal Department of Finance (the Gang of Four) laid the groundwork to keep the policy discussions aligned with the operational decisions. In Ontario, a joint policy/operations steering committee met regularly to “connect the dots” between policy strategies and operational realities. The regular Commissioners’ Forums brought all the diverse players together for full joint reporting sessions on progress and challenges. The forums focused the teams on the whole forest and not simply their own trees.
“This governance structure was unique in the history of the Canada Revenue Agency,” said Susan Bowen, CRA’s assistant commissioner. “Working together with the province on establishing and implementing a single project plan ensured that Agency staff were well aware of provincial processes and concerns and engaged in joint problem-solving to arrive at a seamless transition for business.”
Effective change management
One of the keys to success was open communication between senior management and staff to help dispel some of the anxiety that comes with change.
Both organizations employed change agents in local sites to keep managers and employees up to date on the transition and its implications for staff. The OMoR and the CRA also provided regular updates to all staff through a series of special Update Bulletins and frequent manager and staff meetings. Every opportunity was taken to address “negative noise” that popped up. The bargaining agents were engaged early and frequently.
The final Human Resource Agreement (HRA) was viewed on all sides as a success and the take-up on job offers was over 80 percent. Ontario also strongly encouraged the CRA to consider an office in the Durham Region; CRA established a rulings office to provide a rulings presence outside of Ottawa, which had a huge impact on the job offer take-up.
The CRA and OMoR jointly developed learning products for the transfer of Ontario corporate tax knowledge. The CRA instituted individual learning plans for the Ontario staff who transferred April 2008.
Behind the scene
To prepare for the electronic transfer of files in April 2008, the Ontario Records Imaging Centre processed over 2.5 million pages of audit working papers – more than double their normal yearly amount. By transfer day, they had processed a record 15 million pages. The Client Accounts and Services branch handled more than 106,000 calls and processed more than 90,000 refunds in the months leading up to transfer day. Another project team cleaned up data and cut in the single business number for over one million Ontario corporation tax accounts.
All this occurred in OMoR at the same time that the Ministry was launching its own tax modernization project – ONT-TAXS – which established a single tax phone number and an online tax registration and payment system for all its other tax programs.
Finally, OMoR created a new relationship management branch to facilitate the ongoing relationship with the CRA and support Ontario’s fiscal and economic interests in the harmonized system.
Journey from outside
Early in the planning, the teams identified the need for early win-win-win milestones for taxpayers/Ontario/CRA to keep the end goal alive and demonstrate progress. Early compliance gains were executed. The most significant was a dramatic increase in the number of concurrent large taxpayers’ audits during 2007-08, which reduced the overall compliance burden for large corporations and accelerated the knowledge transfer between the organizations.
On the external front, frequent