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Final Report
Prepared by
Internal Audit and Evaluation
Department of Finance Canada

Approved by the Deputy Minister of Finance on the recommendation of the Audit and Evaluation Committee on March 1, 2013

Table of Contents

Executive Summary

1.0 Background

2.0 Evaluation Objectives and Scope

3.0 Methodology

4.0 Evaluation Findings

Case Study 1 – Ministerial Correspondence

Case Study 2 – Tax-Free Savings Account

Appendix – Management Response and Action Plan

Executive Summary

This report presents the results of the evaluation of the Tax Policy Branch of the Department of Finance Canada conducted between April 2012 and October 2012. The evaluation covered approximately $17.3 million in actual expenditures for 2011-12, and examined the relevance and performance of Tax Policy Branch operations over the fiscal years 2007-08 to 2011-12. The following summarizes the key findings of the evaluation.

Relevance

The evaluation found that the Tax Policy Branch’s objectives and activities are well aligned with the roles and responsibilities of the Government of Canada and the Department of Finance Canada. The Tax Policy Branch supports the Department of Finance Canada by developing and evaluating federal taxation policies and legislation, providing advice and recommendations to the Minister of Finance and senior Department of Finance Canada officials, negotiating tax treaties and agreements, and managing payments to provinces, territories and aboriginal governments. These activities are consistent with the authorities assigned to the Department of Finance Canada through legislation. These activities are also consistent with the Government’s priorities of promoting economic growth, raising revenue to fund government activities, and maintaining a competitive, efficient, fair and simple tax system.

Performance

The evaluation found that the Tax Policy Branch effectively achieved its outcome of ensuring that the Minister, Deputy Minister and senior officials have timely access to thorough analysis and advice on Canada’s tax system, as well as providing effective administration of tax payments to other jurisdictions. Although providing high-quality advice under tight deadlines can be a challenge, the Tax Policy Branch managed this challenge through various mitigation strategies.

During the preparation of tax measures for consideration by the Minister of Finance, the Tax Policy Branch consulted with senior Department of Finance Canada management and the Canada Revenue Agency, and benefited from the input of external stakeholders. Options for the policy measures were analyzed through economic and statistical analysis, as well as model simulations. The Tax Policy Branch used quality-control mechanisms to verify that the policy proposals and advice were reliable, and to identify opportunities for improvement. In addition, assessments of the impact of tax policies were found to be conducted on an ongoing basis.

The organizational structure of the Tax Policy Branch was found to be well-defined, and proper mechanisms were in place to promote the flow of information, horizontally and vertically, within the Tax Policy Branch. The work environment in the Tax Policy Branch was found to be professional, collegial and conducive to providing thorough, timely and objective policy advice in a fast-paced environment. Tax Policy Branch employees were found to be motivated and very engaged in their work. However, challenges related to work-life balance and succession planning were identified, which could potentially impact the retention of staff, as well as the Tax Policy Branch’s ability to continue achieving its stated outcome. For example, the high demand for tax specialists outside the Department of Finance Canada has made it challenging to recruit and retain key staff. Opportunities outside the Government have continued to offer considerably higher compensation relative to the public sector.

The Tax Policy Branch was found to have performed its key functions with efficiency and economy. Over the past five fiscal years, the Tax Policy Branch has satisfied the increasing demands for its expertise – usually without receiving additional funding. The Tax Policy Branch implemented a series of measures to improve the efficiency and economy of its operations, such as reducing hiring and curtailing the budget allocated to travel and training. Future reductions in Tax Policy Branch resources could potentially affect its capacity to deliver on certain activities and outputs. The key challenge for the Tax Policy Branch going forward will be to maintain its ability to achieve its stated outcomes in an environment of ongoing fiscal restraint, combined with staff retention challenges stemming from retirements and work-life balance issues.

Recommendations

The following three recommendations are proposed in the spirit of continuous improvement:

For consideration by Tax Policy Branch Management

Recommendation 1: Explore mechanisms and strategies to better manage workload demands to maintain the Tax Policy Branch’s ability to provide high-quality and timely advice.

(a) Revise the Tax Policy Branch’s Human Resource Plan to address issues such as retention, work-life balance and succession planning, and implement all elements of the plan.

(b) Seek efficiencies in the briefing process by establishing more realistic timelines and making more use of informal approaches, where appropriate.

Recommendation 2: Explore options for improving the efficiency of correspondence practices and reducing the backlog.

For consideration by Consultations and Communications Branch Management

Recommendation 3: Improve the database containing standard responses on the internal web site.

(a) The Departmental Correspondence Unit (DCU) should work with the Department of Finance Canada Information Management and Technology Directorate (IMTD) to enhance the search function of the database, so that keyword searches can be performed effectively both in the title and body of standard responses.

(b) DCU and the Department of Finance Canada IMTD should work with other branches to organize standard responses by branch and division, and continue to eliminate duplicate standards, where appropriate.

(c) DCU should keep outdated standards in a separate location for future reference.

1.0 Background 

1.1 Introduction 

This report presents the results of the evaluation of the Tax Policy Branch of the Department of Finance Canada. Internal Audit and Evaluation (IAE) undertook the evaluation between April 2012 and October 2012. The evaluation was slated for 2012-13 in the Department of Finance Canada’s Five-Year Evaluation Plan (2011-16), which was approved in March 2011 by the Deputy Minister. The Five-Year Evaluation Plan was developed in accordance with the Treasury Board Policy on Evaluation, which requires that all departmental direct spending be evaluated at least once every five years. Given the direction set out in the Department’s Five-Year Evaluation Plan, there was clear authority for proceeding with the evaluation at that time.[1]

1.2 Profile of the Tax Policy Branch

The Tax Policy Branch is responsible for developing and analyzing tax proposals through the lens of sound tax policy principles with the objective of maintaining a competitive, efficient, fair and simple tax system.[2] Areas of activity in the Tax Policy Branch include developing and evaluating federal taxation policies and legislation, and negotiating international tax treaties and tax information exchange agreements, as well as tax elements of comprehensive land claim and self-government agreements with aboriginal governments.[3] The Tax Policy Branch is also involved with multilateral international tax policy matters, federal-provincial tax coordination, federal-provincial tax collection and reciprocal taxation agreements, federal-aboriginal tax administration agreements, and tax policy research and evaluation.

There are five divisions in the Tax Policy Branch: Personal Income Tax, Business Income Tax, Sales Tax, Tax Legislation, and Intergovernmental Tax Policy, Evaluation and Research.[4] There were 159 people working in the Tax Policy Branch at the end of 2011-12. Actual expenditures for that fiscal year were approximately $17.3 million, with $16 million for personnel costs, and $1.3 million in other operating costs.[5]

2.0 Evaluation Objectives and Scope

The objective of the evaluation was to provide senior Tax Policy Branch management with an evidence-based assessment of the relevance and performance (effectiveness, efficiency and economy) of the Tax Policy Branch from a value-for-money perspective during the past five fiscal years (2007-08 to 2011-12). The scope of the evaluation included all aspects of the Tax Policy Branch’s activities over the past five fiscal years, particularly its core role: the provision of policy advice to the Minister of Finance. The evaluation of the Tax Policy Branch addressed the following sections of the Departmental Program Alignment Architecture (PAA): PAA 1.1.1 Taxation and PAA 1.2.2 Tax Collection and Administration Agreements. The findings from the evaluation will be used to assist the Tax Policy Branch in further improving management practices.

3.0 Methodology

3.1 Evaluation Approach

The primary responsibility of the Tax Policy Branch is the provision of policy analysis and advice to senior Department of Finance Canada management and the Minister of Finance. Since the policy analysis and advice function had not previously been evaluated, it was considered a priority and therefore formed the focus of the evaluation.

The underlying flows of inputs, activities, outputs and outcomes were mapped initially to form the logic model (see Exhibit 1). This model provided the basis for assessing whether the Tax Policy Branch achieved its expected outcomes and the extent of its effectiveness. Evaluations of a policy function pose challenges that must be considered when developing a logic model and the corresponding evaluation methodology. Establishing a direct causal link between policy function-related outputs and final outcomes is usually difficult, if not impossible. Factors unrelated to the advice provided can influence the decisions taken. As a result, it would not be valid to assess the effectiveness of the Tax Policy Branch solely on the basis of whether its policy advice was implemented. For this reason, the assessment of performance focused on the extent to which the Tax Policy Branch contributed to the achievement of the first component of its immediate outcome, which is to ensure that the Minister, Deputy Minister and senior officials have timely access to thorough analysis and advice on Canada’s tax system.  

Exhibit 1:Logic Model

For more information, refer to the previous paragraph

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[View text version]

The achievement of the second component of the Tax Policy Branch’s immediate outcome, to provide effective administration of tax payments to other jurisdictions, was examined by leveraging the audits conducted by the Office of the Auditor General of Canada (OAG) as well as IAE. [6] This evaluation reviewed the annual reports (that follow audits and specified auditing procedures) prepared by the OAG on the administration of payments to provincial, territorial and aboriginal governments. In 2011, the Tax Policy Branch was included in an audit of the federal budget process conducted by IAE. Other studies reviewed included the OAG’s audit of the processes surrounding technical (legislative) amendments to the Income Tax Act and the IAE follow-up audit conducted in 2011, which was posted to the Department of Finance Canada’s web site in January 2012.

Upon review of these reports and audits, it became apparent that the main aspects of tax payments and amendments to tax legislation had been sufficiently addressed. This evaluation leveraged the existing oversight work to avoid duplication and reduce the level of effort in these lower-risk areas.

Consequently, the evaluation approach focused on assessing whether the Tax Policy Branch was able to produce policy-focused research, analysis and advice that was relevant, evidenced-based, timely and thorough. Assessment of the “quality” of policy advice was based on the following evaluation criteria[7]: the timeliness of the policy advice, whether adequate consultations were conducted with stakeholders, whether the purpose of the advice was clearly articulated and well presented, whether implementation issues were taken into account, and whether alternative options were considered during the development process. The premise for this approach is that if the policy work was found to meet these criteria, it would be reasonable to conclude that the work was of high quality, and that it had contributed to the achievement of the Department of Finance Canada’s and the Government’s outcomes.

In order to determine whether suitable structures and processes were in place within the Tax Policy Branch to support the production of high-quality policy analysis and advice, the evaluation incorporated elements of organizational assessment inspired by the balanced scorecard[8] methodology. In particular, the evaluation examined: (1) the Tax Policy Branch’s relations with its clients and stakeholders; (2) the appropriateness of its organizational structure and internal processes; (3) the level of its financial resources; and, (4) the adequacy of its human resources.

3.2 Evaluation Issues

The evaluation issues and the relevant lines of evidence are presented in Exhibit 2.[9]

Exhibit 2: Evaluation Issues and Lines of Evidence
    Lines of Evidence
   
Evaluation Issues Evaluation Questions Document
Review
Interviews Case
Studies
Demonstrable need and alignment with government priorities, roles and responsibilities R1: In what way, and to what extent, are the activities and outcomes of the Tax Policy Branch aligned with the roles, responsibilities and priorities of the federal government and contribute to the achievement of the Government’s outcomes? X X  
Program design and implementation P1: To what extent does the existing organizational structure support the effective execution of the Tax Policy Branch role and achievement of its objectives? X X X
Human Resources P2: To what extent are the working environment and culture conducive to providing objective policy advice and helping the Tax Policy Branch to achieve its objectives? X X X
Achievement of expected outcomes P3: To what extent has the Tax Policy Branch been able to contribute to the achievement of its objectives and expected outcomes, in particular with respect to its immediate outcome? X X X
Efficiency and economy P4: To what extent has the Tax Policy Branch conducted its operations efficiently and economically? X X X
Note: “X” indicates that this line of evidence was used.

3.3 Data Collection and Analysis

IAE used a combination of quantitative and qualitative methods in this evaluation. Quantitative methods included a trend analysis of financial expenditures and an analysis of survey data from the 2011 Public Service Employee Survey (PSES). Qualitative data were collected through document reviews, interviews and case studies. The evaluation used the triangulation of data from the following three lines of evidence to validate conclusions and recommendations, and to maximize the level of rigour.

Document Review

  • External documents – reports from the OAG, reviews of tax policy measures conducted by academics and other analysts, recent publications on tax policies in Canada, and articles published in various reports and news journals.
  • Internal documents – Departmental Performance Reports, Reports on Plans and Priorities, Department of Finance Canada’s Integrated Business Plan, internal audits, memoranda to the Minister, copies of work plans, various Tax Policy Branch reports, tracking documents, resource planning documents, documents on the departmental internet and intranet web sites, as well as financial and full-time equivalent (FTE) data for the period from 2005-06 to 2011-12.

Primary Interviews

  • 33 interviews in total: eight members of senior Tax Policy Branch management (i.e., director-level and above) and one other member of senior Department of Finance Canada management; 11 members of Tax Policy Branch management (i.e., below director-level) and staff; six members of other branches and departments; and seven tax experts external to the Government.[10]
  • IAE used judgemental selection[11] of internal interviewees to ensure adequate representation of the views of staff by level, years of experience and the type of policy analysis conducted. For example, most staff interviewees selected had more than two years of experience in the Tax Policy Branch. The choice of external interviewees was based on their close affiliation with and substantial knowledge of the Tax Policy Branch. Some interviewees were identified by management, and IAE supplemented these with additional experts who were identified during the document review and the interview process. The samples selected allowed for a comprehensive perspective of the Tax Policy Branch’s performance over the past five fiscal years.

Case Studies

  • Two case studies were selected for in-depth analysis.
  • The first was a study of the management of ministerial correspondence, identified as an important and resource-intensive activity of the Tax Policy Branch. The volume of ministerial correspondence assigned to the Tax Policy Branch has been the highest among the Department of Finance Canada’s policy branches,[12] and managing this volume has been challenging. Consequently, the specific steps in processing correspondence were examined in detail, in order to determine if there was scope for improving processes.
  • The second was a descriptive study of the policy function through the lens of the Tax-Free Savings Account (TFSA), which was announced in Budget 2008 and came into effect in 2009. The study provided an in-depth understanding of the policy development, legislative and implementation processes.
  • Data were gathered from ten interviews[13] and internal documents.

3.4 Limitations 

Interviewees were selected using judgemental selection rather than random selection, to maximize the amount of information that could be obtained. Although this reduced the ability to generalize the specific interview findings, it enabled the collection of the information most pertinent to the evaluation, from individuals who were most familiar with the Tax Policy Branch. The conclusions and recommendations were supported by the triangulation of multiple lines of evidence, and thus were not affected by this limitation.

A small number of case studies were conducted due to a calibration of effort and risk. Since this was the first evaluation of the Tax Policy Branch, resources were invested to obtain a broad assessment of Tax Policy Branch activities, with a focus on the most important issues identified during preliminary discussions and analysis.

An in-depth analysis of efficiency was not undertaken, since annual quantitative data were unavailable for each output produced by the Tax Policy Branch. In addition, there was insufficient information to determine the level of effort required to produce the outputs and, therefore, to calculate cost per unit of output. IAE supplemented the output analysis with evidence obtained from the interviewees to determine the extent to which the Tax Policy Branch’s volume of work has changed.

4.0 Evaluation Findings

4.1 Relevance 

Created by an Act of Parliament in 1869, the Department of Finance Canada now operates under sections 14 to 16 of the Financial Administration Act. The Department of Finance Canada is the primary source of advice for the Government of Canada on all matters pertaining to the Canadian economic and fiscal policy framework, and it plays a central role in advising the Government on its tax policy agenda. Accordingly, among other statutes pertaining to fiscal matters, the Minister of Finance is responsible for the Income Tax Act, the Federal-Provincial Fiscal Arrangements Act, the Excise Act, 2001 and the Excise Tax Act, including related policy development and legislative amendments.

The activities of the Tax Policy Branch fall under the Taxation and Tax Collection and Administration Agreements sub-programs of the Department of Finance Canada’s Program Alignment Architecture. As such, these activities were found to be well aligned with the roles and responsibilities of the Government and the Department of Finance Canada.

Government priorities supported by the Tax Policy Branch in recent years included stimulating the economy, reducing the tax burden on individuals, families and businesses, and making progress towards the Government’s goal of returning to balanced budgets.[14] During the review period, the Tax Policy Branch’s advice played a crucial role in supporting the Department of Finance Canada’s and the Government’s priorities, while striving to enhance the competitiveness, efficiency, fairness and simplicity of the Canadian tax system.

4.2 Performance 

4.2.1 Effectiveness

This section of the evaluation examines the effectiveness of the Tax Policy Branch. It determines whether the Tax Policy Branch has achieved its expected outcome. It also reviews the appropriateness of the design and implementation processes of the Tax Policy Branch, as well as the adequacy and effectiveness of human resources in support of its activities and goals.

4.2.1.1 Achievement of the Expected Outcome

The evaluation assessed whether the Tax Policy Branch has achieved its stated outcome of ensuring that the Minister, Deputy Minister and senior officials have timely access to thorough analysis and advice on Canada’s tax system, as well as providing effective administration of tax payments to other jurisdictions. The following two sub-sections analyze the Tax Policy Branch’s effectiveness in achieving its expected outcome over the review period.

Provision of Policy Advice on Canada’s Tax System

The Tax Policy Branch provides to the Minister of Finance, through senior Branch management, policy analysis and advice in the form of verbal briefings, analytical notes, presentation decks, memoranda and budget two-pagers.[15] From the interviews, reviews of selected documents and the TFSA case study, the Tax Policy Branch’s analytical process was found to be thorough, relevant and of high quality. The following criteria were used to assess quality: the existence of a clear statement of purpose, discussion of implementation issues, timeliness of policy advice, undertaking of consultations pre- and post-policy formulation or implementation, where appropriate, and discussion of viable alternative policy options.

Purpose: Overall, policy analysis and advice, including its purpose, was found to be clearly stated in samples of written communications to the Minister of Finance and senior Department of Finance Canada management.

Implementation: The evaluation found that the Tax Policy Branch regularly discusses implementation issues in detail with the Canada Revenue Agency (CRA) before finalizing the policy development process.[16] The evaluation found that the CRA and the Tax Policy Branch have closely monitored the implementation of tax measures. The CRA regularly collects data requested by the Tax Policy Branch regarding new or modified tax measures, and then it provides these data to the Tax Policy Branch for further analysis. The collection of this type of information has been useful in evaluating the effectiveness of the tax measures and also in considering changes to these measures to increase their efficiency, fairness and simplicity.

Timeliness: The Tax Policy Branch was found, in general, to provide timely policy advice and analysis to the Minister of Finance, Deputy Minister and senior Department of Finance Canada management. Providing high-quality advice under tight deadlines can be a challenge. However, the Tax Policy Branch has managed this challenge through various mitigation strategies, such as providing e-mails or oral briefings rather than full briefing notes. Outputs produced by the Tax Policy Branch were tracked systematically through regular meetings of Branch management and division management teams, as well as through smaller meetings between supervisors and selected staff.

Consultations: Tax Policy Branch staff stated that the perspectives gained through formal and informal consultations have been essential to well-informed policy development. Overall, Tax Policy Branch staff and external stakeholders reported that consultations were collegial, informative and effective.

There is a perception on the part of some employees and external stakeholders that informal consultation prior to policy development is less frequent in recent years than in the past. However, it has been noted that consultation is central to Tax Policy Branch’s day-to-day work, and that it takes many forms – both formal and informal.

  • Informal consultations occur on a daily basis in the form of meetings, phone calls, and e-mails in which Tax Policy Branch officials at all levels interact with other federal departments and agencies, provincial government officials, tax practitioners, academics and stakeholders.
  • Consultations can also take place on an ad hoc basis on specific issues. While the scope of such meetings is more defined than the daily interactions described above and can involve major external stakeholders, these consultations are still informal in the sense that they are part of the Tax Policy Branch’s normal day-to-day business and do not fulfil an explicit Government commitment to consult.
  • An example of a more formal consultation is the process regarding legislative changes – almost all of which are released in draft form on the Department of Finance Canada web site prior to being tabled in Parliament. This gives tax practitioners and affected stakeholders an opportunity to suggest refinements to legislation after tax changes are announced but before they become law.
  • Formal consultations are also sometimes mandated by a Budget commitment to consult on a particular issue. In such cases, consultation processes are typically launched by issuing a news release and consultation paper on the Department of Finance Canada web site. Officials hold face-to-face meetings with stakeholders, and written submissions are solicited through the web site. In some instances, expert panels are created for the specific purpose of consulting on a given issue and reporting the results back to the Minister of Finance at the conclusion of the consultation period.
  • Formal consultations also take place on an annual or semi-annual basis with key stakeholders such as the Joint Committee on Taxation of the Canadian Bar Association and the Canadian Institute of Chartered Accountants.

As external stakeholders have acknowledged, a key challenge for the Tax Policy Branch is maintaining the appropriate balance between transparency and confidentiality. While stakeholder input is highly valued, it is essential to ensure that information about tax changes is communicated in a way that does not give an unfair advantage to a small number of people or create market distortions. In this regard, being selective about when to consult is essential to the integrity and functioning of the tax system.

In the case of draft legislation, members of the Joint Committee on Taxation of the Canadian Bar Association and the Canadian Institute of Chartered Accountants indicated that a longer consultation period would improve their ability to analyze policy proposals and suggest changes. In this regard, senior Tax Policy Branch management noted that the consultation period for releases of draft legislation is largely beyond the control of Branch officials. Timing of draft releases and the subsequent tabling in Parliament is the prerogative of the Government.

Alternative Options: Through the interviews and review of selected documents, it was found that alternative options for prospective tax measures were analysed when preparing the tax policy proposals. Some of the most promising alternatives were then presented in briefing notes and budget two-pagers. Descriptions and analyses of the options were supported using detailed economic, policy and statistical analysis, as well as literature reviews and input from external stakeholders.

Quality Assessments: The quality of policy analysis and advice produced by the Tax Policy Branch was found to be well-regarded by senior Department of Finance Canada management and external stakeholders. They considered the staff highly knowledgeable and dedicated. In particular, it was noted by external stakeholders that officials from the Tax Policy Branch were perceived to present an unbiased viewpoint, despite sometimes considerable pressure from lobbyists. This view was also supported by other data, such as the policy case study data, and selected samples of budget two-pagers and briefing notes.

Quality Control of Outputs: The Tax Policy Branch was found to use several quality-control mechanisms to maintain the high quality of policy proposals, to identify opportunities for improvement, and to assess the impacts of the policies being implemented.

The Tax Policy Branch has several layers of approval in place in order to promote high-quality outputs. Policy proposals prepared by Tax Policy Branch staff were reviewed by a chief, a director, and subsequently by one or both of the general directors before being reviewed by the Senior Assistant Deputy Minister. Monitoring the accuracy of the content of outputs via several stages of approval has occasionally led to delays in delivery. However, many interviewees acknowledged that this was an unavoidable element of a high-quality policy development process. At the same time, the Tax Policy Branch has developed various templates and guidelines to promote consistency and clarify expectations, and thus reduce the time required to produce high-quality outputs. The Tax Policy Branch also conducts an annual post-mortem of the budget process to gather “lessons learned” from budget coordinators, staff involved in the budget making process, and Branch management.

The Tax Policy Branch has been assessing the impacts of policy measures on an ongoing basis to determine how effectively the measures were achieving their objectives once they were implemented.[17] For instance, a formal review of one or two specific aspects of the tax system has been conducted on an annual basis and published in the Tax Expenditures and Evaluations Report. Also, throughout the year, the impacts of numerous tax measures were examined and the results were presented to senior Department of Finance Canada management and the Minister of Finance in the form of briefing notes.

Administration of Tax Payments and Tax Legislation

The administration of tax payments and the tax legislation process have been assessed several times via internal and external audits.[18] IAE leveraged the results of these studies for the purpose of this evaluation.

On an annual basis, following audits and specified auditing procedures, the OAG prepares reports on the administration of payments to provinces, territories and aboriginal governments in accordance with tax agreements. There were no outstanding issues from the reports reviewed for 2009 to 2011. Furthermore, the manner in which technical tax amendments are developed for tabling in Parliament was audited by the OAG in November 2009. In addition, IAE conducted a follow-up audit of the resulting recommendations in 2011, which was posted to the Department of Finance Canada’s web site in January 2012. This follow-up audit found that the Department of Finance Canada had fully implemented the OAG recommendation that an integrated and consistent process be used for recording, tracking, and prioritizing all technical issues for possible legislative amendment. It also found that the Department of Finance Canada had substantially implemented the OAG recommendations that a plan be developed and implemented to address the technical amendment backlog, and that draft technical amendments be developed regularly and released.

4.2.2 Organizational Structure and Information Flow

This section of the evaluation examines design and implementation issues by assessing the extent to which the organizational structure and information flow support the Tax Policy Branch’s expected outcome.

Organizational Structure: The organizational structure of the Tax Policy Branch was found to be well-defined and effective. The Tax Policy Branch includes divisions that deal with sales and excise taxes, personal income tax, business tax, income tax legislation, and intergovernmental tax policy, evaluation and research. This structure covers the different areas of tax policy that fall under the purview of the Government. Tax Policy Branch management and staff stated during the interviews that the current structure was appropriate to achieving the Branch’s expected outcome, and that there was no need to change this structure.

Flow of Information: Appropriate mechanisms were found to be in place to promote the flow of information, horizontally and vertically, within the Tax Policy Branch. The Senior Assistant Deputy Minister is informed of the Minister of Finance’s priorities through the Minister’s staff via regular meetings, ongoing communication by telephone and e-mail on urgent issues, and through meetings with the Minister of Finance. The Senior Assistant Deputy Minister, general directors and directors also meet frequently with the various assistant commissioners and other officials of the CRA as well as the Assistant Secretary to the Cabinet, Liaison Secretariat for Macroeconomic Policy of the Privy Council Office. The General Director (Analysis) of the Tax Policy Branch attends senior Departmental meetings such as the Departmental Coordinating Committee and the Management Advisory Committee. These meetings help to inform and establish the priorities of the Tax Policy Branch, and to ensure that the priorities are aligned with the Department of Finance Canada’s and the Government’s policy agenda.

Continuous guidance to divisions about Tax Policy Branch priorities is enabled through weekly Branch management meetings between the Senior Assistant Deputy Minister, general directors and directors. Following these meetings, directors hold meetings with their chiefs, who then brief their individual teams on priorities and work requirements. Another practice within the Branch is for directors to hold quarterly meetings for all staff of their respective divisions. Interviewees acknowledged that, in situations where more than one division is involved on the same file, the divisions work together and share information collaboratively. In addition, Tax Policy Branch priorities are communicated to staff during their annual retreat, which also provides an opportunity for staff to pose questions to management about work-related issues and human resource concerns.

Information sharing between Tax Policy Branch management and staff was perceived to have improved. This is evident from Public Service Employee Surveys (PSESs). In particular, the 2008 PSES found that 55 per cent of Tax Policy Branch staff and 52 per cent of the Department of Finance Canada staff felt that essential information flowed effectively from senior management to staff.[19] However, the 2011 PSES found that 59 per cent of Tax Policy Branch staff (+4 percentage points) and 60 per cent of Department of Finance Canada staff (+8 percentage points) reported effective information flow.[20]

4.2.3 Human Resources

This section of the evaluation examines the extent to which the working environment supports the achievement of the Tax Policy Branch’s objectives. More specifically, the issues of job satisfaction, overtime and work-life balance, and recruitment, training and retention are examined in some detail.

Job Satisfaction: On the whole, the evaluation found that Tax Policy Branch staff considered their work important to the Government. They seemed to be highly engaged and motivated. They reported finding the tasks interesting and challenging, and felt appreciated by their managers. The 2011 PSES[21] confirmed these findings, as evidenced by the following results.

  • The extent to which Tax Policy Branch staff felt their job was a good fit with their interests was somewhat greater than at the Department of Finance Canada and government-wide (88 per cent, 84 per cent and 78 per cent, respectively).
  • The extent to which Tax Policy Branch staff felt they had opportunities for promotion within their department given their education, skills and experience was significantly higher than at the Department of Finance Canada and government-wide (63 per cent, 56 per cent and 42 per cent, respectively).
  • Tax Policy Branch staff tended to get more satisfaction from their work, 81 per cent, compared to 76 per cent for the Department of Finance Canada, and 76 per cent government-wide.
  • Tax Policy Branch staff tended to receive more meaningful recognition for their work at 75 per cent compared to 69 per cent for the Department of Finance Canada, and 58 per cent government-wide.

Overtime and Work-Life Balance: In recent years, the demand for the Tax Policy Branch’s expertise has increased. Given the limited human resources available, the higher demand for the Tax Policy Branch’s policy work and other workload pressures have stretched resources, leading to significant levels of overtime, which has, in turn, affected work-life balance. This finding was supported by internal documents, interviews with staff members, senior Tax Policy Branch management, and external stakeholders, as well as PSES data.

The evaluation found that management was aware of the importance of the well-being of its staff and took action to address work-life balance concerns. The results of the 2008 PSES prompted management to conduct an internal Work-Life Balance Survey of the Tax Policy Branch in 2009.

The 2009 Tax Policy Branch Work-Life Balance Survey (WLBS) indicated that the majority of non-managers in the Tax Policy Branch were satisfied with their work-life balance, but there were concerns among managers. More specifically, the survey indicated that working overtime reduced job satisfaction. Indeed, 79 per cent of managers and 51 per cent of non-managers would consider working elsewhere because of the overtime.[22]

For example, the 2009 WLBS indicated the following results.

  • 54 per cent of Tax Policy Branch staff worked overtime (91 per cent of managers and 43 per cent of non-managers).
  • 43 per cent of Tax Policy Branch staff reported peak periods of two to four months, and 12 per cent reported peak periods in excess of ten months.

During peak periods, managers tended to work an average of 15 hours of overtime per week, while non-managers worked an average of eight hours. Tax Policy Branch staff also worked overtime during non-peak periods. Overall, managers tended to work an average of nine hours of overtime per week, while non-managers worked three hours.

The main tasks or processes cited in the 2009 WLBS as causing overtime were: departmental deliverables such as the budget and technical bills (79 per cent of the time); urgent ministerial requests such as briefing notes (58 per cent of the time); and the approvals or sign-off process (43 per cent of the time). The two main work practices that led to staff working overtime were excessive editing and perfectionism (51 per cent) and lack of resources (34 per cent). These results were supported by the interviews conducted with staff.

To address the recommendations that emerged from the PSES and WLBS, management developed the 2009 Human Resources Action Plan (2009 HR plan), which clearly set out the actions to be taken, the changes that had been implemented, and those that remained. Upon review of the PSES, WLBS, and the 2009 HR Plan, as well as the interviews with employees, it was clear that there are parts of the HR Plan where additional follow-up could be undertaken.

Recruitment, Training and Retention: A key recruitment mechanism used in the Tax Policy Branch has been the Department of Finance Canada’s University Recruitment program, which includes the hiring of entry-level economists and lawyers. Overall, staff and management considered this approach effective. The Tax Policy Branch also hired policy analysts and managers from other departments and agencies. For recruitment of more senior staff, a useful mechanism has been the Interchange Canada program, which enables management to hire individuals external to the Government. Senior Department of Finance Canada management was appreciative of the Interchange Canada program and considered it successful on the whole. However, it has been challenging to find individuals who have the required skills and who are interested in joining the federal public service, even on a short-term basis.

Employees prepared learning plans to guide their formal training on an annual basis. In the 2011 PSES, 67 per cent of Tax Policy Branch respondents indicated that they receive the training they need to do their job. This was slightly higher than the percentage for the Department (63 per cent) and comparable with the public service as a whole (68 per cent).[23] However, this training was usually obtained through on-the-job experience. A prevalent view among managers and staff was that several years of Tax Policy Branch experience was required to be knowledgeable in the highly specialized work of the Branch. The survey also found that managers were not always able to receive required language training due to insufficient resources or time.

Retention was also found to be challenging, as opportunities outside the Government for the specialized expertise have been plentiful and often offer considerably higher compensation relative to the public service.

Adequacy of Resources: Most interviewees, including external stakeholders, stated that more human resources were needed for the Tax Policy Branch given the volume, complexity and technical nature of the work. In the 2011 PSES, 34 per cent of Tax Policy Branch respondents indicated that the quality of their work suffered because of having to do the same or more work, but with fewer resources.[24] However, some senior managers indicated that the work was not always evenly distributed throughout the Tax Policy Branch, and efforts were being made to address this. Redistribution of certain tasks has been considered problematic because of the specialized knowledge required. A key challenge for the Tax Policy Branch going forward will be to maintain its ability to provide high-quality and timely policy analysis and advice to the Minister of Finance and to senior Department of Finance Canada management in an environment of ongoing fiscal restraint. There are risks that further staff reductions may limit the Tax Policy Branch’s ability to achieve its stated outcome. These risks include the following but are not exhaustive.

  • Diminished ability to conduct proactive policy analysis with an emphasis on medium- and long-term priorities. In an environment of ongoing fiscal restraint, the volume of short-term demands can interfere with the Tax Policy Branch’s ability to fulfill the Minister of Finance’s need for analysis and advice on longer-term policy directions.
  • Reduced work-life balance in the Tax Policy Branch. Some actions have been taken. However, if the level of resources were to be reduced further, it would be a challenge for the Tax Policy Branch to significantly improve in this respect.
  • Loss of corporate knowledge. Succession planning is challenging in an environment of ongoing fiscal restraint.
  • Reduced capacity to develop policies that would close tax loopholes. Closing tax loopholes usually increases the Government’s revenue.
  • Weakened ability to manage the backlog of technical amendments.
  • Diminished capacity for responding to the external demands on the Tax Policy Branch in a timely manner.

For consideration by Tax Policy Branch Management – Recommendation 1: Explore mechanisms and strategies to better manage workload demands to maintain the Tax Policy Branch’s ability to provide high-quality and timely advice.

(a) Revise the Tax Policy Branch’s Human Resource Plan to address issues such as retention, work-life balance and succession planning, and implement all elements of the plan.

(b) Seek efficiencies in the briefing process by establishing more realistic timelines and making more use of informal approaches, where appropriate.

4.2.4 Efficiency and Economy

4.2.4.1 Efficiency

The Tax Policy Branch was found to have performed its key functions with efficiency. According to interviews with staff and internal branch analysis, the Tax Policy Branch has been heavily involved in the development of a number of major new tax measures and tax policy initiatives for which no additional funding was provided. These include the Registered Disability Savings Plan, the Tax-Free Savings Account, the Public Transit Tax Credit, the Children’s Fitness Tax Credit, the Working Income Tax Benefit, the taxation of corporate groups, the closing of tax loopholes and introduction of integrity measures, the negotiation of Tax Information Exchange Agreements, Pooled Registered Pension Plans, the elimination of select tax expenditures, changes to the Scientific Research and Experimental Development tax incentive program, international tax measures, and the review of the Tax Collection Agreements.

The Tax Policy Branch was also responsible for the development of policies that required higher-than-normal effort and for which additional resources were approved, such as the harmonization of the retail sales tax in Ontario and British Columbia[25] with the Goods and Services Tax (GST), as well as the establishment of an agreement on the harmonization of the GST and Quebec’s value-added tax.

The production of certain outputs increased over the past few years. For example, the number of budget two-pagers[26] prepared by the Tax Policy Branch increased from 60 to 97 between fiscal years 2007-08 and 2011-12. The two-pagers prepared for the budget are among the most complex outputs of the Tax Policy Branch, as they encompass all the research and analysis that has been undertaken on a particular issue, including economic, policy and statistical analysis, simulations and a review of the relevant literature. They require a substantial amount of effort and resources, and must be completed within a very specific timeframe, as they are being considered for the annual budget process.

Interviews with Tax Policy Branch staff and comparisons of budget two-pagers produced in fiscal years 2007-08 and 2011-12 show that the level of effort required for preparing budget two-pagers has increased over time. For example, there are now additional requirements such as preparing a Gender-Based Analysis and a Strategic Environmental Assessment for inclusion in budget two-pagers. As a result, an increase in the production of budget two-pagers by 62 per cent has generated a significant increase in the workload of Tax Policy Branch staff.

4.2.4.2 Economy

The Tax Policy Branch was found to have performed its key functions economically. Under the current environment of ongoing fiscal restraint, Tax Policy Branch resources have declined in recent years, especially since fiscal year 2010-11. Budget pressures caused the Tax Policy Branch to find ways of increasing operational efficiency, such as reducing staff levels and the budget allocated to travel and training. As illustrated in Exhibit 3, from 2007-08 to 2011-12 all divisions within the Tax Policy Branch saw a decline in their FTE levels, with the exception of the Personal Income Tax and Tax Legislation divisions, which were allocated more resources to manage their respective workloads.

FTE utilization decreased from 176 to 159 (a decrease of 10 per cent) from 2010-11 to 2011-12. The Tax Policy Branch was able to reduce FTE utilization by not replacing departing staff. There was no hiring in the University Recruitment program in 2010-11 and 2011-12, even though most staff and managers recognized this process was successful in recruiting junior staff. Staff retention has also proven to be a challenge. According to the 2011 PSES, 28 per cent of Tax Policy Branch management and staff stated they intend to leave their current position in the next two years.[27]

Exhibit 3: Tax Policy Branch FTE Utilization by Functional Unit
Functional Unit 2007-08 2008-09 2009-10 2010-11 2011-12
Senior Assistant Deputy Minister’s Office 7 7 8 8 7
Personal Income Tax1 26 37 36 36 31
Tax Legislation2 25 29 33 33 32
Sales Tax 43 39 45 48 42
Business Income Tax 31 28 29 32 28
Intergovernmental Tax Policy, Evaluation and Research 21 22 20 19 19
Total 153 1663 171 176 159

Note: Totals may not add due to rounding.
Source: Financial Management Directorate of the Corporate Services Branch of the Department of Finance Canada.

1. The Tax Policy Branch created the Branch Coordination Unit to centralize certain coordination and administrative functions due to increased demands on the Tax Policy Branch. The trend in FTE utilization in this division also reflects the separation of the new Charities section (including a dedicated manager) from the Social Tax Policy section in the Personal Income Tax Division in response to increased demands resulting from the Government’s policy priorities.

2. Higher-than-normal attrition and delays in staffing resulted in a historically low number of tax policy officers and legislative drafters in 2007 and much of 2008. To compensate for this, there was a growth in Tax Legislation Division’s FTEs in subsequent years.

3. The sum of this column includes five FTEs for the establishment of a temporary Advisory Panel on Canada’s System of International Taxation, as committed in Budget 2007.

The Tax Policy Branch also reduced training and travel costs by relying more on conference calls and local meetings, and by drawing on less expensive and local training opportunities. As illustrated in Exhibit 4, the budgets allocated to travel and training were reduced by 30 per cent and 8 per cent, respectively, over the past five fiscal years. Interviews with Tax Policy Branch staff indicated that the reductions had little impact on the level of consultation with external stakeholders, or on the accessibility of training. Finally, interviewees noted that the Tax Policy Branch reduced costs associated with the purchase of data and publications, while maintaining adequate access by sharing costs with other branches and the departmental library.

Exhibit 4: Tax Policy Branch Travel and Training Costs
Type 2007-08 2008-09 2009-10 2010-11 2011-12
Travel 583,219 954,966 598,665 436,339 408,738
Training 181,245 234,301 107,382 186,844 166,989
Total 764,464 1,189,267 706,047 623,183 575,727

As a result of reduced hiring and other cost containment measures, from 2008-09 to 2011-12, the Tax Policy Branch’s overall operating budget has declined as illustrated in Exhibit 5.[28] In particular, the branch budget (i.e., personnel costs and goods and services expenditures) has declined from a peak of $17.6 million to $15.4 million (a decrease of 13 per cent). It is worth noting that the goods and services component of this budget has decreased from $3.1 million to $1.2 million (a decline of 61 per cent).

Exhibit 5: The Tax Policy Branch Total Expenses[29]

Tax Policy Branch, For more information, refer to the previous paragraph.

In summary, the increase in efficiency and economy in the Tax Policy Branch has been obtained by managing the increase in workload and reducing FTE levels. Evidence provided in section 4.2.3 (Human Resources) indicated that any further declines in Tax Policy Branch resources would likely affect its capacity to deliver on certain activities and outputs. The key challenge going forward for the Tax Policy Branch will be to maintain its ability to provide high-quality and timely advice to the Minister of Finance and senior officials in the Department of Finance Canada in this environment of ongoing fiscal restraint.

Case Study 1 – Ministerial Correspondence

The purpose of the case study on ministerial correspondence was to review and identify measures that could further help improve the correspondence processes in the Tax Policy Branch. Within the Department of Finance Canada, the Tax Policy Branch handles a much larger volume of ministerial correspondence than other policy branches. From 2007 to 2011, the Tax Policy Branch received between 38 per cent and 45 per cent[30] of the correspondence assigned to policy branches, even though the Branch represented only around 30 per cent[31] of the staff of all the policy branches. On average, the Tax Policy Branch handled 2,943 pieces of correspondence per year, or 57 per week.

The number of pieces of correspondence received by the Department of Finance Canada as a whole decreased considerably between 2009 and 2011. There was a decrease of 37 per cent in the Tax Policy Branch, a decrease of 44 per cent for all policy branches combined, and a decrease of 56 per cent for the Departmental Correspondence Unit (DCU) of the Consultations and Communications Branch. Over the same period, however, the Tax Policy Branch saw its share of correspondence among all policy branches increase from 39 per cent to 44 per cent.

The study found that the Tax Policy Branch has provided high-quality responses to correspondents. The selected responses reviewed by Internal Audit and Evaluation were well structured and detailed. In addition, the Tax Policy Branch succeeded in significantly reducing the backlog of ministerial correspondence. This was the result of increased senior Tax Policy Branch management attention and several actions implemented by the Tax Policy Branch. Specifically, the Branch Coordination Unit was created in 2007 to coordinate certain strategic and administrative functions, including the promotion of more efficient correspondence practices within the Branch. The Tax Policy Branch has also adopted a more proactive approach to triage of incoming correspondence. It has streamlined the process further by delegating sign-offs where appropriate, assigning a point-person responsible for looking after correspondence issues in divisions where the volume of correspondence was high, and assigning resources to help alleviate the workload of officers who received a disproportionate share of incoming correspondence. The Tax Policy Branch also established a weekly internal correspondence report that provided a breakdown of correspondence dockets by division and by age. This enhanced report has made it easier for management to identify bottlenecks.

The Tax Policy Branch’s efforts were complemented by those of DCU. For example, in 2008, DCU established fixed turn-around times and took over additional responsibilities such as the formatting and editing of responses. The Tax Policy Branch and DCU also worked together to create additional standard responses. These steps have helped reduce some of the backlog.

Nevertheless, meeting the internal deadlines set by the Minister’s Office has been a challenge. The Tax Policy Branch had a success rate of 54 per cent for meeting internal deadlines between October 2011 and October 2012. The average success rate for the policy branches was 58 per cent. Given the expectation of the Minister’s Office for thorough and accurate responses to incoming correspondence, sign-off authority rested with directors and their delegates. The task of reviewing high volumes of correspondence added to their considerable workload from other responsibilities.

The database containing standard letters on the internal web site was found to be cumbersome to use. For example, users were unable to search the words in the body of the standard letters. Moreover, the database has not been organized in an intuitive manner and contains duplicates and several outdated versions of standards that should not be used.

As a result, the following measures are recommended to assist the Tax Policy Branch and other policy branches in general in further improving the correspondence process.

For consideration by Tax Policy Branch Management – Recommendation 2: Explore options for improving the efficiency of correspondence practices and reducing the backlog.

For consideration by Consultations and Communications Branch Management – Recommendation 3: Improve the database containing standard responses on the internal web site.

(a) DCU should work with the Department of Finance Canada Information Management and Technology Directorate (IMTD) to enhance the search function of the database, so that keyword searches can be performed effectively both in the title and body of standard responses.

(b) DCU and the Department of Finance Canada IMTD should work with other branches to organize standard responses by branch and division, and continue to eliminate duplicate standards, where appropriate.

(c) DCU should keep outdated standards in a separate location for future reference.

Case Study 2 – Tax-Free Savings Account

The purpose of the case study on the Tax-Free Savings Account (TFSA) was to illustrate the contribution of each of the steps in the policy cycle in formulating and implementing a specific tax policy measure within the Tax Policy Branch.

The TFSA was created as a general-purpose savings vehicle allowing individuals 18 years or older to contribute up to $5,000 annually[32] in qualified investments into a tax-free account. Neither the investment income earned in the account (including capital gains) nor withdrawals are subject to income tax.

The Tax Policy Branch went through the six steps of the policy cycle during the development of the TFSA (see chart).

In this case, during the first step, a review of the economic literature identified a gap in the types of tax-assisted savings vehicles available to Canadians. Similar successful savings vehicles already existed in the United States and the United Kingdom, thereby providing examples of how the development and implementation of the new tax measure could take place effectively. In the early 2000s, the Tax Policy Branch undertook a comprehensive review of the literature including Canadian and international studies, and conducted in-depth statistical analyses of potential policy options. The Tax Policy Branch also conducted preliminary consultations on potential tax-assisted savings vehicles with an external tax expert. The Government then announced in Budget 2003 that it was going to investigate the possibility of establishing such savings vehicles for Canadians. More extensive consultations on a potential initiative followed during 2003 with academic, pension and economic experts.

For more information, refer to the previous paragraph

[View text version]

A new Government expressed interest in a possible tax-savings vehicle during fiscal year 2007-08. As a result, the Tax Policy Branch prepared more in-depth analysis. The TFSA was subsequently announced in Budget 2008, which included details on the measure as well as draft legislation.

The Canada Revenue Agency (CRA) was an active partner of the Department of Finance Canada in the implementation and delivery stages of the policy cycle. Prior to the budget announcement, Tax Policy Branch officials held discussions with CRA officials to ensure that the CRA was in a position to implement the policy and respond to public enquiries on the new savings vehicle. During the implementation phase of the TFSA, the CRA prepared a guide and web FAQs (frequently asked questions) to inform Canadians about the TFSA, undertook consultations with the financial services industry, and determined, in consultation with the industry, what data on TFSA accounts would have to be reported for monitoring, compliance, and assessment purposes.

A few months after the January 2009 implementation of the TFSA, CRA officials discovered certain tax-planning schemes involving the new savings vehicle. In particular, it was found that an extremely small number of TFSA holders were performing asset transfer transactions (or swaps) between their TFSAs and other savings accounts (such as RRSPs) on a frequent basis. These account holders were attempting to exploit small changes in asset value and ultimately shift the value of the assets from, for example, an RRSP to a TFSA without paying taxes. Following advice from the Tax Policy Branch and the CRA, the Minister of Finance proposed amendments to the TFSA legislation to prevent the use of such tax-planning schemes. This legislation was subsequently enacted by Parliament.

In addition, starting in June 2010, media reports indicated that some Canadians did not understand the rules regarding withdrawals from TFSAs, which led to a small percentage of them over-contributing to their TFSAs. To address this issue, the Tax Policy Branch and the CRA adjusted their communications materials to explain the withdrawal rules in more detail.

The Tax Policy Branch also undertook an assessment of the TFSA over its first three years of existence using data collected by the CRA. This assessment was published in the 2012 edition of the Tax Expenditures and Evaluations report.

As a result of developing the TFSA and following its implementation in recent years, the Tax Policy Branch has identified the following lessons about the policy development process.

  • Reviewing Canada’s tax system and monitoring tax policy developments abroad on an ongoing basis is key to equipping the Tax Policy Branch to respond quickly and thoroughly when the Government requests advice on tax policy options.
  • Although the CRA was consulted in advance of the Budget 2008 announcement, it could have allowed for smoother implementation of the TFSA, and better communication with the public, if the CRA had been involved earlier.
  • In addition, the experience with the implementation of the TFSA demonstrated the importance of close cooperation between the CRA and the Department of Finance Canada in order to provide detailed, accurate and timely information on new tax measures to the public. 

Appendix – Management Response and Action Plan

Management Response and Action Plan
Recommendation Management Response Planned Action Lead Target Date
For consideration by Tax Policy Branch Management

Explore mechanisms and strategies to better manage workload demands to maintain the Tax Policy Branch’s ability to provide high-quality and timely advice.

Recommendation 1a:
Revise the Tax Policy Branch’s Human Resources (HR) Plan to address issues such as retention, work-life balance and succession planning, and implement all elements of the plan.
Management agrees with this recommendation. Tax Policy Branch will review its HR Action Plan with a view to addressing areas identified. The General Director (Analysis) in consultation with the Branch Management Advisory Committee. Q4 2013-14
For consideration by Tax Policy Branch Management

Explore mechanisms and strategies to better manage workload demands to maintain the Tax Policy Branch’s ability to provide high-quality and timely advice.

Recommendation 1b:

Seek efficiencies in the briefing process by establishing more realistic timelines and making more use of informal approaches, where appropriate.  
Management agrees with this recommendation. While timelines are often beyond the Tax Policy Branch’s control, senior management will actively promote the use of informal alternatives to full briefing notes, where appropriate. Directors in consultation with Senior Assistant Deputy Minister’s Office (ADMO). Q4 2013-14
For consideration by Tax Policy Branch Management

Recommendation 2:
Explore options for improving the efficiency of correspondence practices and reducing the backlog.
Management agrees with this recommendation. Tax Policy Branch management has taken steps to improve the efficiency of correspondence practices and reduce the backlog, and will continue to identify potential improvements and implement them as appropriate. Branch Coordination Unit in consultation with Senior ADMO and Directors. Q1 2014-15
For consideration by Consultations and Communications Branch Management

Improve the database containing standard responses on the internal web site.

Recommendation 3a:
The Departmental Correspondence Unit (DCU) should work with Department of Finance Canada Information Management and Technology Directorate (IMTD) to enhance the search function of the database, so that keyword searches can be performed effectively both in the title and body of standard responses.
Management agrees with the recommendation. Consultations and Communications
(C&C) Branch will work with Department of Finance Canada IMTD to find ways to improve the search engine of the database to allow for more refined searches.

The database currently does allow for searches of the standard responses.
Consultations and Communications Branch

Information Management and Technology Directorate
Q2 2013-14
For consideration by Consultations and Communications Branch Management

Improve the database containing standard responses on the internal web site.

Recommendation 3b:
DCU and Department of Finance Canada IMTD should work with other branches to organize standard responses by branch and division and continue to eliminate duplicate standards, where appropriate.
Management agrees that organizing the responses by branch and division could be useful for policy branches.

Management agrees that duplicate standards should be eliminated.
The current database cannot support this function. C&C will work with Department of Finance Canada IMTD to find ways to improve the database structure.

DCU will continue to work with policy branches to identify and eliminate duplicate standards, where appropriate.
Consultations and Communications Branch

Information Management and Technology Directorate
Q2 2013-14
For consideration by Consultations and Communications Branch Management

Improve the database containing standard responses on the internal web site.

Recommendation 3c:
DCU should keep outdated standards in a separate location for future reference.
Management agrees and mentioned that this is already being done by DCU. DCU manages the standards database. The outdated standards are stored in a separate DCU folder for archival purposes/future reference.

DCU will work with policy branches to review and ensure that there are no outdated standards among the documents marked as current standards.
Consultations and Communications Branch Q3 2013-14

[1] The Five-Year Evaluation Plan is available from IAE of the Department of Finance Canada upon request.

[2] Department of Finance Canada 2011-12 Integrated Business Plan.

[3] The actual collection of taxes and interpretation of tax law are the responsibility of the Canada Revenue Agency.

[4] Detailed information on these divisions can be found on the Department of Finance Canada web site.

[5] This information has been obtained from the Department of Finance Canada’s Financial Management Data System.

[6] These audit reports are available on the OAG and Department of Finance Canada web sites: Report of the Auditor General of Canada to the House of Commons Chapter 3: Income Tax Legislation [PDF 357 Kb](Fall 2009); and Follow-Up Audit of the Office of the Auditor General Income Tax Legislation Audit (January 2012), and Audit of the Federal Budget Process (January 2012).

To access a Portable Document Format (PDF) file you must have a PDF reader installed. If you do not already have such a reader, there are numerous PDF readers available for free download or for purchase on the Internet.

[7] When reviewing and deciding upon the appropriate evaluation criteria for this evaluation, several papers were reviewed, including Schacter, Mark (2006). “The Worth of a Garden”. Performance Measurement and Policy Advice in the Public Service, Ottawa, and the review of policy analysis in government: Dobuzinskis, Laurent, et. al. (Eds.). (2007), Policy Analysis in Canada: The State of the Art. Toronto: University of Toronto Press.

[8] Kaplan, Robert S., et. al. (1992). “The Balanced Scorecard—Measures that Drive Performance,” Harvard Business Review, Vol. 70, No. 1.

[9] The table of related performance measurement indicators is available upon request.

[10] Three interview questionnaires were used, tailored for members of senior Tax Policy Branch management, members of management and staff, and the two other groups of interviewees external to the Tax Policy Branch. These questionnaires are available upon request.

[11] The term “judgemental selection” is used in place of “purposeful selection”, which is more commonly used in the evaluation literature.

[12] Policy branches include Tax Policy, Financial Sector Policy, Economic Development and Corporate Finance, International Trade and Finance, Federal-Provincial Relations and Social Policy, and Economic and Fiscal Policy.

[13] These interviews were conducted in addition to the 33 primary interviews. Note that information gathered from the primary interviews was also used to supplement the data gathered specifically for the case studies. Interview guides were developed for each case study and are available upon request.

[14] These three priorities have been part of annual budgets in recent years.

[15] The budget two-pager is a document containing detailed briefing information on a specific policy measure considered in the context of the annual federal budget process.

[16] The Tax Policy Branch develops tax measures and related legislation while the CRA implements and administers these measures. The CRA is also the primary point of contact for the public, in most cases.

[17] In addition, academics, tax associations and institutes, as well as other organizations periodically examine and assess various aspects of the Canadian tax system, and publish their results in the public domain. Examples include the Organisation for Economic Co-operation and Development, the Certified General Accountants Association of Canada, the Canadian Tax Foundation, and the C.D. Howe Institute.

[18] Therefore, IAE assessed these processes as low-risk.

[19] A comparison with the 2005 PSES was not possible given that the question was worded differently.

[20] These statistics represent the percentage of staff that somewhat agree and strongly agree.

[21] These statistics represent the percentage of staff that somewhat agree and strongly agree.

[22] Managers: 35 per cent agree or strongly agree, and 44 per cent somewhat agree with this statement. Non-managers: 29 per cent agree or strongly agree, and 22 per cent somewhat agree with this statement.

[23] These statistics represent the percentage of staff that somewhat agree and strongly agree.

[24] This is slightly higher than in the rest of the Department of Finance Canada (31 per cent) and somewhat lower than the federal public service response rate (42 per cent).

[25] Subsequent to a provincial referendum, British Columbia decided to transition out of the Harmonized Sales Tax and return to its former provincial sales tax.

[26] Budget “two-pagers” are often more than 10 pages in length and can often be 30 to 40 pages long, depending upon the complexity of the issue and the needs of the Minister of Finance’s office.

[27] Of the employees who stated their intention to depart, 23 per cent (i.e., about 6 per cent of all branch employees) stated that retirement was the reason they intended to leave.

[28] The dollar figures shown in this paragraph and in Exhibit 5 are in constant dollars (2005-06 as base year).

[29] Expenditures are in thousands of dollars. Operating budget information has been obtained from the Financial Management Directorate (FMD) of the Corporate Services Branch of the Department of Finance Canada as of 2011-12.

[30] As a percentage of all six policy branches, where policy branches are defined as: Tax Policy, Financial Sector Policy, Economic Development and Corporate Finance, International Trade and Finance, Federal-Provincial Relations and Social Policy, and Economic and Fiscal Policy.

[31] Financial Management Directorate data for 2011-12 indicate that the Tax Policy Branch had 159 FTEs, and the six policy branches combined had 523 FTEs.

[32] As of 2013, the annual contribution limit has been increased to $5,500 due to an inflation adjustment.