Tax Law Services Portfolio Evaluation
2. Profile of the Tax Law Services Portfolio
Created in 1995, the TLS Portfolio provides legal services to the CRA. A Memorandum of Understanding between Justice and the CRA establishes the governance, funding and performance regimes that guide the relationship between the CRA and Justice in respect of the demand for and provision of legal services. The mandate of the Portfolio is to provide high-quality legal services to the CRA in a cost-effective manner. In performing its mandate, the Portfolio supports the CRA and the federal government in collecting taxes owing. Whereas most other areas of legal services focus primarily on reducing the legal liability of the Crown, TLS Portfolio legal services are unique in that they contribute to an important government revenue source.
The Portfolio is headed by the Assistant Deputy Attorney General (ADAG), Tax Law Services, who is supported by two Associate ADAGs in the key subject areas of the Portfolio, i.e. Tax Assessment, and Collections and Civil Matters. In the headquarters region, the Portfolio also has an LSU providing legal advisory services to the CRA.
In addition to the ADAG office and the TLS Section in Ottawa, the Portfolio has TLS Sections located in five of the six regional offices, i.e. Atlantic (Halifax), Quebec (Montreal and Ottawa), Ontario (Toronto), Prairies (Calgary, Winnipeg, Saskatoon and Edmonton), and British Columbia (Vancouver) Footnote 1. About 75 percent of TLS Portfolio counsel are located in the regional offices outside of the National Capital Region. The Directors of the regional TLS Sections report directly to their Regional Directors General and functionally to the ADAG, Tax Law Services.
Figure 1 provides the organizational structure for the Portfolio.
Figure 1: TLS Portfolio organizational chart Assistant Deputy Attorney General (ADAG)
Figure 1 - Text equivalent
Line 1 (top)
-reporting to the Associate ADAG – HQ Law Group
-reporting to this ADAG, National Training Coordinator
Assistant Deputy Attorney General (ADAG)
Although geographically dispersed, the TLS Portfolio works like a large law firm with counsel working collaboratively across offices. Cases are assigned based on cost effectiveness, workload and expertise rather than only on the location of the file. Supporting this national law firm model, the TLS Portfolio has structures that are intended to coordinate the Portfolio's work. The National Tax Law Board of Directors (BOD) considers operational and strategic issues for the Portfolio and ensures that regional perspectives are considered in Portfolio decision making. The BOD comprises members from all areas of the Portfolio, i.e. the ADAG, two Associate ADAGs, the Directors and Deputy Directors of the TLS Sections, the Senior General Counsel of the LSU, the Director, Business Management, and the Senior Advisor to the ADAG. Examples of issues considered by the BOD include strategic planning, budget allocation, national training, service standards, workload and priorities, and national coordination of legal positions.
Other structures support the operational and strategic decisions of the BOD:
- The National Coordination Committees have a mandate to enhance the quality and effective delivery of tax law services by coordinating specific areas of the law. The Committees are tasked with providing timely updates on legal developments, conducting structured review and approval of important facta, and ensuring consistency of legal positions nationally. Coordinated legal areas are added and deleted as necessary. Currently, they include Projects, Goods and Services Tax, Tax Avoidance International Taxation, Aboriginal Taxation, Collections, Employment Insurance, Requirements, Practices and Communications, Taxpayer Relief and Voluntary Disclosure, and the Charter. The Committees' primary communication tool with the Portfolio is the Justice intranet, or the Fiscal Path.
- The Good Practices and Communication Committee shares experiences and exchanges ideas on good practices in the TLS Portfolio. Its mandate is to improve the efficiency and effectiveness of the Portfolio's legal work through the development of best practices. The Committee includes representatives from all areas of the Portfolio.
- The TLS Portfolio Professional Development Coordinator is charged with developing and implementing the National Training and Development Program and liaises with the CRA's branches to coordinate professional development and training. According to the terms of the Memorandum of Understanding, while respecting a professional development partnership between the CRA (Compliance Programs Branch) and the Department, Justice will assist in the delivery of legal-based courses to the CRA, and the Agency will offer TLS Portfolio counsel access to its training products.
The Portfolio provides the CRA with a full array of legal services, including legal advice, litigation services, training, drafting support services, legal issue coordination, and legal risk management (LRM). TLS Portfolio counsel have expertise in all types of tax law matters, as well as other practice areas relevant to the Agency, such as administrative law, corporate governance and civil litigation. Legal services support the CRA to administer tax and benefit programs and ensure compliance across Canada. Legal support is also provided to the CRA Board of Management, the Commissioner, and the Agency Management Committee to enable the CRA to achieve its mandate, policy and program objectives, and management priorities. Legal services are also provided to support the CRA's unique authorities in the area of human resources and procurement. The Portfolio identifies and manages legal risk, and it assists the CRA in this task by participating in its tri-departmental Footnote 2 and regional risk-management committees.
The work of the Portfolio is roughly distributed as follows:
- The majority (an estimated 80 percent) of the Portfolio's work is in litigation services. TLS Portfolio counsel represent the CRA in litigation matters before all levels of court, including tax appeals, collection matters, and civil lawsuits. In addition, counsel provide advice to the CRA for early resolution and avoidance of disputes, and on litigation strategies for ongoing cases, as well as potential litigation. This advice can include litigation management, dispute prevention and resolution, coordination of national issues, and management of legal risk.
- Legal advisory services account for the balance of the Portfolio's work and include a wide range of activities, such as providing legal advice, negotiating and drafting documents, providing legislative and regulatory drafting support, and providing litigation support. The legal advice provided by TLS Portfolio counsel covers a variety of tax law issues in addition to non-tax legal issues regarding human resources and staffing, contracts, procurement, benefit programs, the CRA's partnerships and new business, and collection of debts, to name a few.
The TLS regional sections conduct litigation and handle regional legal advisory work, while the LSU provides tax law advice to the CRA, as well as legal advice in non-tax areas. TLS counsel serve on various CRA committees and working groups, such as the CRA Policy Committee, and the General Anti-Avoidance Rule Committee. As necessary, counsel also provide litigation support on tax cases, working with litigation counsel.
The TLS Portfolio consults as necessary with other areas within Justice on legal issues. Although the TLS Portfolio specializes in tax law matters, its work can also involve other legal areas. As needed, the TLS Portfolio draws on the expertise of other specialized areas within Justice, such as the Central Agencies Portfolio and the Public Law Sector (PLS).
The TLS Portfolio also shares responsibility and accountability for managing the demand for legal services with the CRA. For example, decisions on litigation strategy or alignment of legal services to government priorities are made in consultation with the CRA. The Memorandum of Understanding between Justice and the CRA outlines areas of shared responsibility. In particular, these include forecasting and responding to the demand for legal services, developing and implementing practices to manage legal risk, cooperating on dispute prevention and resolution to efficiently handle disputes, and establishing collaborative mechanisms for providing information and resolving issues on mega and multi-department files.
Finally, all Portfolio legal services are guided by the rule of law and the Department of Justice Act. This means that in providing legal advice and developing litigation strategies, counsel cannot just comply with client demands but must also respond in accordance with these legal obligations.
The Portfolio manages both the national budget that is used by TLS Sections for their operations (Table 1, which includes A-base and Net Vote Authority); and the national revenue forecasting and cost recovery process with the CRA (Table 2, which includes full-time equivalent [FTE] and hourly rate charges).
Table 1 presents the actual expenditures of the Portfolio for its operations over the last four fiscal years.
|Salary before employee benefit planTable note b||$39,508,863||$48,377,163||$51,190,337||$51,918,815|
|Employee benefit plan @ 20%||$7,901,773||$9,675,433||$10,238,067||$10,383,763|
|Subtotal: Salary expenditures||$47,410,636||$58,052,596||$61,428,404||$62,302,578|
|Operating and Maintenance (O&M)Table note c||$4,266,793||$4,953,735||$4,918,321||$5,096,265|
|Total annual expendituresTable note a||$51,677,429||$63,006,331||$66,346,725||$67,398,843|
Source: TLS Portfolio Financial Situation Reports (FSR) for 2008/09, 2009/10, 2010/11, and 2011/12.
- Table note a
Above figures include employee benefit plan, exclude expenditures related to Tobacco Litigation (RJR et al.) from the Departmental Reserve, as this is a temporary Justice priority initiative, and exclude the cost of disbursements over $200.
- Table note b
Salary costs comprise spending in Fund 10, as presented in the FSR.
- Table note c
O&M costs comprise spending in Fund 15, 20 and 26, as presented in the FSR.
Table 2 presents the cost of services provided to the CRA by Justice over the last four fiscal years. Footnote 3
|Cost of legal services||$55,107,208||$58,664,323||$70,844,150||$76,466,443|
|Disbursements over $200||$2,524,535||$2,521,590||$2,691,908||$2,256,826|
|Fixed costs: ADAG Group||$2,077,393||$3,053,258||$3,228,681||$3,353,569|
|Total cost of services provided to the CRA||$59,709,136||$64,239,171||$76,764,739||$82,076,838|
|Total cost recovery charged to the CRA||$30,772,581||$35,887,500||$47,765,225||$53,912,952|
|Total collected from the CRA|
Source: Cost of legal services based on cost recovery MOU tables for 2008/09, 2009/10, 2010/11, and 2011/12.
Disbursements over $200 and collection information based on year-end cost recovery reports.
2.4. Tax Law Services Portfolio Program Logic
A logic model is a systematic and visual way to illustrate the relationship between the planned activities of a program, in this case legal services and their expected results. In other words, a logic model is a depiction of how a program or service is intended to work and what it is trying to achieve. A basic logic model has the following key elements:
- The processes, tools, events and actions that are part of the implementation of the program or services. The activities should lead to the intended results.
- The direct product of the identified activities.
- The impacts of the program/services. These are results/changes/benefits/ consequences. They are usually presented in stages, as change is incremental over time: immediate outcomes should support and lead to the intermediate outcomes, and intermediate outcomes to long-term ones.
This section provides a logic model for the TLS Portfolio, including a visual diagram (see next page) and text descriptions of the key elements. The descriptions in this section represent the theory behind the TLS Portfolio. As such, they provide an account of expected results of Portfolio activities. The evaluation findings in Section 4 explore whether TLS Portfolio activities are being implemented as planned and whether expected outcomes are, in fact, being achieved.
Logic model - Text equivalent
The activities for TLSP are:
- Litigation services
- National Coordination and Management
- Legal Advisory Services
The outputs for Litigation Services include:
- Advising on and developing litigation strategy
- Conducting litigation
- Consulting with TLS and Justice
- Consulting with CRA
- Consulting with other departments when appropriate
- Providing updates to CRA
The immediate outcomes for Litigation Services are:
Timely, responsive, and high quality litigation services
The intermediate outcomes for Litigation Services are:
- Appropriate resolution of litigation cases in a timely, cost-effective manner
- The interest of the Crown is protected
The Outputs for National Coordination and Management are:
- Legal Risk Management, including:
- Identifying, assessing, mitigating and managing legal risk
(note: managing legal risk is indicated as a shared responsibility with CRA)
- Consulting with CRA
- Consulting with TLS and Justice
- Developing tools and processes for managing legal risk
- Reporting to client on legal risks
- Training CRA officials on legal topics
- Identifying, assessing, mitigating and managing legal risk
And the second output for National Coordination and Management is:
- Tax law practice management, including
- Reviewing and streamlining processes
- Instituting quality control and assurance mechanisms
- Developing mechanisms for national coordination of TLS law practice
- Technical training of counsel and legal support
- Sharing lessons learned and best practices and work products
- Managing the financial and human resources to respond to the demand for legal services
The Immediate outcomes for National Coordination and Management are:
- Under Legal Risk Management:
- legal risks are identified and assessed in a timely and consistent manner
- enhances understanding of legal issues, their implications and potential risks by CRA
- Under Tax Law Practice Management:
- counsel have appropriate competencies, tools, structures, and resources to support delivery of tax law services
- strategic management of legal issues
The Intermediate outcomes for National Coordination and Management are:
- Legal risks are managed and mitigated effectively
- Demand for tax law services is met in a responsive and cost-effective manner
The Ultimate Outcome for the TLS Logic Model is:
TLS contributes to a federal government that is supported by effective and responsive legal services
The Logic Model depicts that the degree of influence diminishes from Control at the Activity Level to one of Influence at the Ultimate Outcome level
2.4.1. Activities and Outputs
The Portfolio conducts numerous activities that can be grouped into three main areas:
- national coordination and management includes activities that support the Portfolio's approach to LRM as well as tax law practice management;
- litigation services involve legal representation for disputes that are before the courts; and
- legal advisory services provide legal opinions and advice on matters with legal implications.
Each of these areas of activity is described below, including the expected results.
National coordination and management
TLS has a number of activities that, combined, reflect its national "one-stop" approach to providing tax law services. For the purposes of the logic model, these activities fall under two categories:
Legal risk management:
To reduce the CRA's exposure to legal risk, the Portfolio engages in LRM by using Justice LRM tools, processes and procedures, and by supporting LRM through its participation in CRA risk management processes.
LRM includes identifying the legal risk in situations involving the CRA that could have a negative impact on the federal government and/or the CRA's ability to deliver its services and implement its programs and policies. Legal risk is assessed on all files as part of the delivery of legal services. This assessment is made in consultation with appropriate individuals within the Portfolio, Justice and the CRA. The appropriate course of action to handle the potential impact of high legal risk files is then determined. This can include strategies for the prevention, mitigation or management of the risk. Strategies for handling legal risk are developed in consultation with the appropriate individuals and National Coordination Committees within the Portfolio, as well as with Justice and the CRA. Justice and the Portfolio have tools and processes for managing legal risk that counsel use during all stages of LRM. In addition, TLS provides training to CRA officials to increase their understanding of legal topics, as this will facilitate effective LRM.
Tax law practice management:
In managing the Portfolio's legal practice, TLS undertakes many activities that are intended to ensure its ability to meet the demand for efficient, cost-effective, quality legal services. Those activities include streamlining processes to improve efficiency; instituting quality control and assurance tools and processes; sharing work products on iCase and the Fiscal Path to increase quality and efficiency; providing professional development opportunities and training for counsel and legal support; developing mechanisms for coordinating the Portfolio's law practice; and managing the Portfolio's human and financial resources in terms of forecasting demand for legal services, aligning legal personnel with files in terms of capacity and expertise, and planning the allocation of resources.
The logic model reflects that the activity area of national coordination and management has its own outcomes, but also supports the achievement of outcomes in the other two activity areas (litigation services and legal advisory services).
As noted in Section 2.2, litigation services comprise the majority of the Portfolio's work. Most of this litigation work requires TLS to respond to claims initiated by taxpayers. In providing litigation services, TLS counsel develop strategies that include settling a matter prior to a final court decision as well as proceeding to litigate the matter before a court. Strategies are formulated with input from the relevant CRA Branch. In addition, when legal issues require expertise in other areas of the law, counsel consult with the specialized sections within Justice. Counsel also consult with other government departments, Portfolio offices and LSUs, as appropriate. In addition, TLS works with the CRA to manage the volume of litigation through early settlement, national issue coordination, and LRM.
Legal advisory services
Legal advisory services include the provision of legal opinions and advice on the CRA's corporate and program matters. In addition to providing advice on various tax law issues with which the CRA needs assistance, Portfolio lawyers provide advice in non-tax areas related to corporate matters. They also provide legal advice on policy development and assistance with drafting instructions, and review of CRA publications (tax forms and tax guides). In providing legal advisory services, TLS works closely with the CRA to ensure strong functional ties and a firm understanding of the CRA's business lines and operational environment. This is accomplished, in part, through serving on various CRA committees, including the Agency Management Committee. As with litigation services, TLS counsel also consult with specialized sections within Justice and other federal departments, as appropriate.
2.4.2. Immediate Outcomes
Timely, responsive and high-quality litigation services
It is expected that the TLS Portfolio will ensure timely, responsive and high-quality litigation services by complying with Justice service standards in the Memorandum of Understanding with the CRA. This will include responding in a timely manner to client requests for litigation services; meeting mutually agreed-upon deadlines; providing regular progress reports; and providing clear and practical guidance, including for the prevention, containment or early resolution of contentious issues. The resulting litigation strategy will respond to the CRA's priorities and objectives, while ensuring that the strategy is guided by the rule of law and the Portfolio's responsibilities under the Department of Justice Act. Moreover, the litigation strategies should be commensurate with the available resources and should be appropriate given the complexity of the file.
Timely, responsive and high-quality legal advice
As subject matter experts, TLS counsel must provide timely, responsive and high-quality legal advice that addresses problems, presents options, and offers solutions. Their legal opinions will need to be clear and serve their intended purpose, including the provision of advice at early stages of significant files that have been identified by the CRA. The TLS Portfolio is well integrated with CRA operations, which enables it to have an understanding and appreciation of the Agency's business lines and operational environment. Although the CRA's priorities will be considered, the legal advice is developed so that it addresses the Portfolio's responsibilities under the Department of Justice Act and will be guided by the rule of law. The Portfolio should also provide its legal advice in a timely manner, so that CRA officials can consider the advice during their decision-making process.
Legal risks are identified and assessed in a timely and consistent manner
The TLS Portfolio is expected to consider legal risks in the course of providing forward-looking legal advice and assisting the Agency to respond proactively to prevent, mitigate or manage the legal risk. The Portfolio will assess the legal risk for all its files as part of the delivery of legal services. The processes for assessing legal risk ensure that the risk is accurately determined and communicated in a consistent and timely manner.
Enhanced understanding of legal issues, their implications, and potential risks by the CRA
The TLS Portfolio will communicate the potential legal risks of litigation files, as well as legal risks that could arise through the implementation of CRA policies and programs. The Portfolio also provides training to CRA officials to enhance their understanding of legal topics. This communication and training will provide the CRA with the information, advice and support they need to be aware of legal risks and to make informed decisions to support effective LRM.
Counsel have the appropriate competencies, tools, structures and resources to support the delivery of tax law services
The TLS Portfolio should provide counsel with the information, tools, training and resources needed to deliver high-quality tax law services. This includes information sharing on best practices, practice directives and training opportunities to improve technical tax knowledge and to further develop counsel legal skills, and alerting counsel to important developments in the law, primarily through the Fiscal Path. Structures must also be in place to maximize the effective delivery of legal services. At the regional level, these structures will include teams and team leaders, the National Coordination Committee, the Good Practices and Communication Committee, and the Professional Development Coordination Committee.
Strategic management of legal issues
Through coordination and management at the national level, the TLS Portfolio will manage legal issues strategically, including providing guidance to counsel to ensure a national and consistent approach to legal issues. By eliminating inconsistent or contradictory legal positions, the Portfolio will ensure that the CRA's priorities are maintained, regardless of the TLS office or counsel handling the file, and will minimize legal risks that could arise from inconsistent legal positions/advice. This approach should also enable the Portfolio to be strategic about influencing tax law. For example, the Portfolio may determine to take a case to court rather than to settle in order to obtain clarity on a legal issue of importance, or it may advocate for amendments to the Income Tax Act or changes to the Tax Court of Canada rules.
2.4.3. Intermediate Outcomes
Appropriate resolution of litigation cases in a timely, cost-effective manner
The TLS Portfolio must monitor litigation results. Appropriate resolution of litigation cases means, on a principled basis, settling cases that should be settled and taking cases to court where there is the desire to advance the state of the law by obtaining legal clarity or to protect the Canadian tax base. Appropriate resolution of litigation cases can include early settlement of litigation cases, dismissal of civil suits filed against the CRA, and court decisions that support the federal government's position. The Portfolio should provide cost-effective services relative to the file outcome, impact and tax amount (if any). Hours spent per file and the experience levels of counsel involved in files will be proportionate to the complexity and/or legal risk of the matter.
The interest of the Crown is protected
Under the Department of Justice Act, the TLS Portfolio must ensure that the interests of the Crown in the proper administration of justice are protected through its litigation and legal advisory services. As with all areas of Justice, the Portfolio is responsible for taking an integrated, whole-of-government approach where its legal advice and litigation positions are consistent across government. This measure is accomplished by consulting within Justice and, where appropriate, with other federal departments/agencies. When conflicting positions arise, the TLS Portfolio will try to resolve the conflict and, when necessary, the ADAG office will provide appropriate briefing within Justice to ensure that senior management is aware of the issue.
Legal advice is considered in program and policy development and decision making
By providing responsive, high-quality legal advice that considers options and suggests solutions, the TLS Portfolio will assist the CRA in making its decisions.
Legal risks are managed and mitigated effectively
The TLS Portfolio will provide the CRA with legal advice/information on legal issues, including its assessment of the legal risk. TLS counsel should consult and communicate with CRA officials, and together they may review strategies to prevent, mitigate or manage legal risk.
Demand for tax law services is met in a responsive and cost-effective manner
The demand for tax law services is affected by changing circumstances, such as new tax and benefit policies and legislation, shifting operational and program-related priorities of the CRA, new technology, and the state of the economy. The TLS Portfolio's ability to meet demand is also affected by its own evolving dynamics, such as changes in workforce demographics. In addition, the Portfolio must manage its resources within the broader context of the Department of Justice Canada staffing policies. Moreover, the staffing of litigators is largely the responsibility of regional offices. Within the complexities of its working environment, the Portfolio should take a strategic approach to the allocation and management of financial and human resources, so that it can plan for and respond to the emerging or forecasted future need for legal services.
Meeting this demand means that the TLS Portfolio must be responsive to the priorities and objectives of the CRA, caseload complexity and volume, and other issues that affect its legal practice. The Portfolio must forecast demand for legal services in consultation with the CRA to enable it to have the resources and expertise necessary to address the Agency's legal needs. In addition, the Portfolio will respond to the complexity of files by allocating resources — that is, by having sufficient numbers of counsel for files, counsel with the necessary experience/expertise to handle the legal matter, and the appropriate mix of senior counsel, junior counsel and paralegals given the complexity of the file in order to provide cost-effective legal services. Complex, high-risk files will receive a greater share of resources, including senior counsel time, to ensure that legal risks are effectively managed.
2.4.4. Ultimate Outcome
The TLS Portfolio contributes to a federal government that is supported by effective and responsive legal services.
By providing high-quality, cost-effective legal services that minimize legal risk, the TLS Portfolio will support Justice's strategic outcome of providing effective and responsive legal services to the federal government. Footnote 4
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