Supporting Institutional Reforms in Tax and Customs: Integrating Tax and Customs



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Canada


Pre-merger status

Before the merger, tax and customs had its own hierarchical structure and administrative overhead. Staff were federal employees, with established terms and conditions of employment, but with separate union representation in the public service union.


The agencies also had independent statutes, which included an array of non-standardized requirements, e.g., assessment of penalties and interest rates for delinquent payments. Organizational cultures were also distinct, so that taxpayers dealt with tax and customs agencies in entirely different ways. Tax rebates in one department could not offset taxes owed in the other. Inquiries about income tax and value-added tax were made to separate agencies.
The merger

The merger began with the appointment of one person to serve as both Deputy Minister of Taxation and Deputy Minister of Customs and Excise. The first item on the reform agenda was to determine how best to integrate the two agencies. Among the obstacles were:




  • The legislation administered by each agency was explicit about the duties of officers, so it appeared doubtful that staff functions could be integrated easily.

  • Legislation also prescribed regimes for assessment, collection, penalties, and appeals that were quite different and complicated the ultimate objective of seamless administration by a staff trained in all aspects of the new agency’s work.

  • The cultures of the agencies differed, especially with regard to Customs and Excise, where a distinct culture existed in the largely uniformed service of the Customs Inspection Branch.

The sheer size of the two organizations presented a major restructuring challenge, as there were some 500 offices across the country, with concomitant management structures in the regions and at headquarters in the capital, Ottawa. The departments of tax and customs and excise had maintained two separate headquarters structures and three regional ones. The third regional structure reflected the unique nature of the Customs Inspection Service, which operated separately from its parent department regarding excise, trade, and value-added tax activities. The consequence was that the two directorates had a total of 23 overlapping regions.


The process of combining Tax and Customs and Excise agencies had begun in 1992, when legislation was passed to create the new department in May 1994. By 1996 the department put a new management structure in place and clients began to experience changes in interactions with the agency. Between 1996 and 1999, the new organization integrated all front-line services and its back-office operations. Today, the Tax and Custom Administrations are fully integrated at central and regional levels.


The Canada Customs and Revenue Agency provides both taxation and customs and trade services. The Minister of Finance is responsible to Parliament for all aspects of tax policy, including tariff and trade policy. Tax administration falls under the responsibility of the Minister of National Revenue.


The Administration is organized into a series of business lines supported by corporate services. By 2001, the structure had five substantive branches:

  • Policy and Legislation.

  • Assessment and Collection.

  • Compliance Programs.

  • Appeals.

  • Customs.

These are supported by corporate services for:



  • Legal Services

  • Communications

  • Finance and Administration

  • Human Resources

  • Information Technology

  • Corporate Affairs

The substantive work of the Canada Customs and Revenue Agency is carried out in six regions. The heads of these regions report directly to the Commissioner of the Agency. The headquarters branches provide functional support to the regional offices; however, they have no administrative line control over the regions. The Customs function is also integrated into the regional structures, though Customs Border Services are separate entities reporting to each regional Assistant Commissioner.



Effects of the merger

Canada successfully integrated its tax and customs and excise agencies. The process took nearly 10 years, although effective integration occurred within seven years. The success of the initiative may be ascribed to a series of factors, the most important of which were:



  • Strong and sustained leadership by the deputy minister.

  • Use of management and specialist teams (e.g., auditors) to work out the highly complex details of implementation served to both calm fears and provide a sense of ownership of the integrated organization

  • Involvement of staff at all levels ensured the ownership to the process.

  • The new agency was exempted from reductions in staff, and management assured employees that advantage would not be taken of the consolidation to cut staff.

  • The unions and their structures (separate components for each agency) were left untouched until the departments disappeared and were replaced by the Canadian Customs and Revenue Agency (CCRA).

  • The management of the new agency consulted widely using representative groups of clients to determine how best to develop new unified services.

  • The introduction of the business tax number and the single window for businesses in 1996 provided proof of the benefits of administrative consolidation.

  • Behind the scenes sustained programs were developed to ensure the new single window approach would be backed up by redesigned programs that would permit integration.

  • Their involvement in and responsibility for the design of the new agency structure and its internal re-engineering provided an opportunity for staff to put their own stamp on the new organization.

What did not work, or might have worked better? Some would have preferred to see progress more quickly. On the other hand, given the political upheaval in Canada in 1993 and the subsequent decision of the new government dramatically to accelerate retrenchment, it is remarkable that the new agency was legislated into being during 1994, and that results of the merger manifested inside and outside the department as early as 1996.




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