Why NetFile Users Can’t Resist Cheating! :CRA SOTW
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This week’s Tax Tale will not come as a surprise to reader’s of the Tax Collector’s Bible as this very situation was indicated by same way back in 2001. It is only surprising that it took the Canadian media so long to verify it!
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Usually the most you can count on getting back from the Canada Revenue Agency is a miserly refund, but the contents of an internal report that were publicized this week may have identified the most important thing IT managers need to learn about digitizing business processes.
Thanks to the efforts of the Canadian Press, we now know that users of the online tax submission system NetFile are more likely to try cheating on their taxes. Even those who use other tax software tend to fib to Canada Revenue Agency (CRA), according to the report. We’re talking about more than $500 million in undeclared tax revenue. The government can no more afford such losses as any other business. To think this came from an online application which, despite some kinds, is working as promised must add insult to injury.
You could argue the CRA is a unique case. After all, tax filing is a consumer activity, but not something that can be immediately scanned for accuracy as, for example, an online payment to a retail store. It’s a process almost everyone (unless they are assured of a getting something back) hates to do in the first place. Even the CRA stressed that rejection of a claim does not mean the Netfile or tax software user was deliberately attempting to cheat. This is a government thing, and governments are notorious for inefficient or ineffective processes.
That said, the work being done by the CRA is little different from that of many enterprises who have either taken or are in the process of taking paper-based workflows and turning them into something that can be performed through a browser. The level of online transactions is probably nowhere near what the average bank experiences over the course of a week. And people hate doing a lot of the routine chores associated with their daily jobs, too.
Like a lot of processes, Netfile removed some steps involved in the more manual workflow, including the submission of receipts. That probably doesn’t help matters, because it also means less of a trial for followup later on, which can be important from a governance and compliance perspective. Focus group research by the CRA also found that in some cases users gave too much of the process over to the software – if it tended to over-calculate their refund, they allowed it to make small lies by omission. We find similar ways to cut corners with many other applications, whether it’s bypassing a field that isn’t required or having our computers remember passwords on shared computers.
There’s a difference between negligent and malicious, of course. You could also say that with filing taxes, users have a degree of self-interest that just isn’t there in enterprise digital processes. But if you think the system will allow you to fudge your annual income, why wouldn’t you allow the system you use at work to track time and attendance add a little overtime? The number of customer prospects called, even the number of sales generated – authenticating such things often requires extra work (which no one in the organization is dedicated to doing) because the company places trust in its employees and because there is occasionally a trade-off between feature sets and risk exposure. Digitizing processes is a way for organizations, whether it’s the CRA or a commercial business, to cut corners. Sometimes once those corners are cut, it’s becomes a bit easier to bend the truth around them.
by Shane Schick
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Online tax filers more likely to cheat: report
Updated Mon. Aug. 11 2008 3:04 PM ET
CTV.ca News Staff
Canadians who file their income-tax returns online are more likely to cheat, suggests a recently uncovered Canada Revenue Agency report.
The department studied a random selection of Internet returns for the 2005 tax year and found about 15 per cent of them were non-compliant, translating into an estimated $569 million in outstanding taxes.
The agency found that people filing online using Netfile, a service advertised by Ottawa as a quick and efficient way to file, were more likely to deceive the taxman by understating the amount of taxes owed. No physical receipts are required when filing using the online software. The system does require receipts to be available upon request in the event of audit.
"The participants demonstrated a perception that not having to attach receipts to the return creates a temptation for electronic filers to overstate their claims for deductions and credits," says the document dated in September and obtained by The Canadian Press under the Access to Information Act.
"There is no need to supply receipts, so sometimes (people) may think they can get away with it without getting caught," Cleo Hamel, a senior tax analyst with H&R Block, told CTV Newsnet on Monday.
Hamel says people filing close to deadline are more likely to rush through their return and make mistakes.
"They are not necessarily cheating," said Hamel. "The underestimating part could be more forgetting or not adding things up properly or maybe (they're) not sure they have all their information," she said.
The agency's focus-group also revealed the software's ability to calculate tax refunds quickly with the click of a mouse fueled the temptation for filers to fudge the numbers.
"They believed they would not be caught as long as the overstatements were relatively small," said the report.
"I would recommend people who think they can get away with this, (to) not try it," said Hamel.
The agency also found that Canadians who sent in their tax information the traditional way -- using paper forms and manually attaching their receipts -- were more likely to comply with tax laws.
"When you file a paper return there is a process you have to follow, but when you file online you push a button and it goes," said Hamel.
Roughly 4.2 million Canadians filed their 2007 returns over the Internet as of this past May, almost five per cent more than the year before.
With files from The Canadian Press
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Miss a Tax Tale Miss a lot!
Pop the link below into your browser to view the entire CRA SOTW Library!
http://canada.revenue.agency.angelfire.com
-------------------------------------------------------------------------------------------------------
Alan Baggett – Tax Collector’s Bible
-------------------------
This week’s Tax Tale will not come as a surprise to reader’s of the Tax Collector’s Bible as this very situation was indicated by same way back in 2001. It is only surprising that it took the Canadian media so long to verify it!
-------------------------
Usually the most you can count on getting back from the Canada Revenue Agency is a miserly refund, but the contents of an internal report that were publicized this week may have identified the most important thing IT managers need to learn about digitizing business processes.
Thanks to the efforts of the Canadian Press, we now know that users of the online tax submission system NetFile are more likely to try cheating on their taxes. Even those who use other tax software tend to fib to Canada Revenue Agency (CRA), according to the report. We’re talking about more than $500 million in undeclared tax revenue. The government can no more afford such losses as any other business. To think this came from an online application which, despite some kinds, is working as promised must add insult to injury.
You could argue the CRA is a unique case. After all, tax filing is a consumer activity, but not something that can be immediately scanned for accuracy as, for example, an online payment to a retail store. It’s a process almost everyone (unless they are assured of a getting something back) hates to do in the first place. Even the CRA stressed that rejection of a claim does not mean the Netfile or tax software user was deliberately attempting to cheat. This is a government thing, and governments are notorious for inefficient or ineffective processes.
That said, the work being done by the CRA is little different from that of many enterprises who have either taken or are in the process of taking paper-based workflows and turning them into something that can be performed through a browser. The level of online transactions is probably nowhere near what the average bank experiences over the course of a week. And people hate doing a lot of the routine chores associated with their daily jobs, too.
Like a lot of processes, Netfile removed some steps involved in the more manual workflow, including the submission of receipts. That probably doesn’t help matters, because it also means less of a trial for followup later on, which can be important from a governance and compliance perspective. Focus group research by the CRA also found that in some cases users gave too much of the process over to the software – if it tended to over-calculate their refund, they allowed it to make small lies by omission. We find similar ways to cut corners with many other applications, whether it’s bypassing a field that isn’t required or having our computers remember passwords on shared computers.
There’s a difference between negligent and malicious, of course. You could also say that with filing taxes, users have a degree of self-interest that just isn’t there in enterprise digital processes. But if you think the system will allow you to fudge your annual income, why wouldn’t you allow the system you use at work to track time and attendance add a little overtime? The number of customer prospects called, even the number of sales generated – authenticating such things often requires extra work (which no one in the organization is dedicated to doing) because the company places trust in its employees and because there is occasionally a trade-off between feature sets and risk exposure. Digitizing processes is a way for organizations, whether it’s the CRA or a commercial business, to cut corners. Sometimes once those corners are cut, it’s becomes a bit easier to bend the truth around them.
by Shane Schick
----------------------------------------
Online tax filers more likely to cheat: report
Updated Mon. Aug. 11 2008 3:04 PM ET
CTV.ca News Staff
Canadians who file their income-tax returns online are more likely to cheat, suggests a recently uncovered Canada Revenue Agency report.
The department studied a random selection of Internet returns for the 2005 tax year and found about 15 per cent of them were non-compliant, translating into an estimated $569 million in outstanding taxes.
The agency found that people filing online using Netfile, a service advertised by Ottawa as a quick and efficient way to file, were more likely to deceive the taxman by understating the amount of taxes owed. No physical receipts are required when filing using the online software. The system does require receipts to be available upon request in the event of audit.
"The participants demonstrated a perception that not having to attach receipts to the return creates a temptation for electronic filers to overstate their claims for deductions and credits," says the document dated in September and obtained by The Canadian Press under the Access to Information Act.
"There is no need to supply receipts, so sometimes (people) may think they can get away with it without getting caught," Cleo Hamel, a senior tax analyst with H&R Block, told CTV Newsnet on Monday.
Hamel says people filing close to deadline are more likely to rush through their return and make mistakes.
"They are not necessarily cheating," said Hamel. "The underestimating part could be more forgetting or not adding things up properly or maybe (they're) not sure they have all their information," she said.
The agency's focus-group also revealed the software's ability to calculate tax refunds quickly with the click of a mouse fueled the temptation for filers to fudge the numbers.
"They believed they would not be caught as long as the overstatements were relatively small," said the report.
"I would recommend people who think they can get away with this, (to) not try it," said Hamel.
The agency also found that Canadians who sent in their tax information the traditional way -- using paper forms and manually attaching their receipts -- were more likely to comply with tax laws.
"When you file a paper return there is a process you have to follow, but when you file online you push a button and it goes," said Hamel.
Roughly 4.2 million Canadians filed their 2007 returns over the Internet as of this past May, almost five per cent more than the year before.
With files from The Canadian Press
-----------------------------------------------------------------------------------------------------
Miss a Tax Tale Miss a lot!
Pop the link below into your browser to view the entire CRA SOTW Library!
http://canada.revenue.agency.angelfire.com
-------------------------------------------------------------------------------------------------------
Alan Baggett – Tax Collector’s Bible