1. The Information Systems and the New Organization How Far Should Integration Go? Inter-American Center of Tax Administrations CIAT Technical Conference 2010 Paris, France

2. 2 Information Technology Integration Part 1 – Tax and Customs Infrastructure Integration Introduction Difference Between Tax and Customs Benefits of Shared Infrastructure Services Lessons Learned Challenges Key Success Factors Part 2 - IT Application Integration Between Tax Types Introduction IT Application Integration Evolution Current Approach to Tax Services Integration - The IT Services Reference Model Benefits of Tax Services Integration Lessons Learned Challenges and Constraints Key Consideration for Success

3. 3 Tax and Customs Infrastructure Integration The Canada Revenue Agency (CRA) and the Canada Border Services Agency (CBSA) were brought together into one department 1994, integrated their infrastructure and some applications, and then separated in 2003 but still share IT infrastructure. Sharing a centralized internal IT infrastructure service provides both agencies many advantages in the areas of quality of service, network and security and costs Infrastructure Service Sharing:  Is cost effective and provides efficiencies and economies of scale for both agencies  Demands a mature governance and relationship management regime  Depends upon mature infrastructure management processes

4. 4 Differences between Tax and Customs  Capacity to handle large volumes of tax and benefit transactions accurately and execute large scale batch processing  Heavy reliance on electronic service delivery in order to facilitate compliance by tax filers and decrease return processing time and costs.  Scalable IT infrastructure to meet both peak periods and month ends / year ends Requires highly available 7X24, recoverable services in support of 15,000 CBSA employees performing critical border and immigration services. For Individual Travellers  Unique technologies (e.g. License Plate Readers, Smartcards, specialized printers, cameras, Livescan kiosks, Nexus kiosks)  Use of Biometric devices, Border Guard Units For Trade Facilitation  Commercial, Air Cargo, Marine Cargo, Truck Cargo, Rail Cargo  Committed to E-Manifest Portal Canada Revenue Agency Canada Border Services Agency (CRA)(CBSA)

5. 5 CRA-CBSA IT Resources (As of June 2009) Total Budget – Approximately $500 million – In 08/09, CRA (ITB) recovered $147.72Million from CBSA for the provision of IT Services 2 Data Centres – 4.5 million transactions per hour with storage capacity of 5,878 terabytes 700 Servers – In two Data Centres and over 2,000 servers across Canada 460 National CRA Line of Business Applications – 51 CBSA mission critical applications hosted on shared IT infrastructure Human Resources – 4,100 CRA IT resources (3,000 headquarters and 1,100 IT support) 61,205 PC’s – 46,818 CRA and 14,387 CBSA 23,860 Laptops – 20,298 CRA and 3,562 CBSA 3,000 BlackBerry Devices – 1,650 CRA and 1,350 CBSA 4 Mainframes – 24,824 million instructions per second

6. 6 CRA – CBSA at a Glance Canada Revenue Agency (CRA)Canada Border Services Agency (CBSA) Major Programs  Tax Services  Benefits Programs  Border Security  Travel Facilitation  Trade Facilitation Employees 1 44,00015,000 Service Points  50 Tax Services and Taxation Centres.  1,200 points across Canada and 39 locations abroad. Business Enablers  Internet Service Channels eFile, NetFile My Account Portal My Business Account Portal  Advance Information (EDI).  Document Readers (passports, driver's licenses).  Biometrics (fingerprint and iris).  Radiation Detection. Volumetrics  $346 Billion revenues collected averaging over $1.3 billion every working day.  $50 Billion in Goods and Services Tax (GST)/Harmonized Sales tax (HST) collected from over three million registrants.  $15.2 Billion benefits and credit payments distributed to over 11 million entitled Canadians.  96 Million travellers processed yearly averaging 266,000 per day.  18,200 trucks enter Canada daily.  75,736 - courier shipments processed daily  $9.1 billion import duties, $63.7 billion in GST/HST,$8.2 billion in tobacco and alcohol taxes, and $156,000 sales tax collected daily 1 The two Agencies represent 24% of the public service employees.

7. 7 The Benefits of Shared Infrastructure Services Advantages: Sharing of expertise - That support the common infrastructure. Instead of each Agency hiring their own, they can share skilled human resources in security, architecture, disaster recovery, etc Economies of scale - Better balancing of workloads. One business unit's peak load may occur at a time when other business units are slow. Thus, total demand is less than the sum of each other's peaks [CRA – March to April, CBSA – July – August] Procurement – buying power- Some vendor licenses can be shared at a lower unit cost. Almost always, a bigger organization can drive a better deal with major vendors Eliminate Redundancies – Cost savings are realized when redundancies are eliminated. A shared-services organization can eliminate parallel training, product R&D, policy formulation, and support functions. It can even reuse work products – common components e.g. Revenue Ledger

8. 8 The Benefits of Shared Infrastructure Services (continued) Advantages: Improved quality of service - A larger shared service organization can support a broader, more diverse product line. It can support its products better globally, 24 X 7 (Incident Management) Staff specialization - a consolidated organization can support this. Greater specialization leads to performance improvements such as greater speed, lower cost, higher quality, and more innovation Security – Shared Security Operations Centre, S/W upgrades Network – Band width, network upgrades Data Centre Recovery – Both agencies have recovery capability at either of the two Data Centres The bottom line is a shared Infrastructure Services arrangement can offer better internal products and services at a lower cost than individual business units can afford to make for themselves

9. 9 Lessons Learned  Within the shared infrastructure - businesses should be physically separated but logically connected  Defining Service Level Agreements and a Memorandum of Understanding are key to evolving Governance  Costs are incurred when you separate responsibilities  A significant investment of senior executive time is required to manage the relationship to be responsive, agile, and provide value for money  Overhead required to manage a shared relationship is greater than anticipated on both organizations  Organizational awareness that you are in a shared services relationship is key at all levels

10. 10 Challenges  Changing nature and growth of the business of both Agencies  Balancing the need for IT operational efficiencies, discipline, and standardization with the need for more responsiveness, flexibility and rapid change  Managing expectations and risks  Overlapping roles and responsibilities  Alignment of Technology Architecture standards.  Detailed cost accounting  IT Asset Ownership and Licensing  Prioritization, funding, and decision-making cycles not always aligned

11. 11  Operational Excellence  Openness, good communications and trust  Strong foundation and partnership. We understand each others business  Governance  Continuous process improvements and information sharing  Dedicated relationship management function  Use of standardized technology architectures and Best Practices as applicable  Memorandum of Understanding (MOU)  Use of Service Level Agreements to manage the provision and availability of key services. Focus is on delivery of services to Canadians  Use of a Governance Framework to document the mechanics of the relationship Key Success Factors

12. 12 PART 2 IT Application Integration

13. 13 IT Application Integration Between Tax Types The Application Integration component addresses the opportunities to be leveraged by integrating various tax functions or services in support of multiple tax types as opposed to having stand alone application solution for each  Integration has many benefits both to the taxpayer and the tax organization  It brings many challenges, but business rule clarity and collaboration are key for success  Legislative and Privacy constraints impose limits on integration Over the years, the Canada Revenue Agency has integrated many tax applications (i.e. Payment Processing, Individual Identification, Benefits and Payment delivery and others) and it continues to do so

14. 14 Current Approach to Tax Services Integration: The IT Services Reference Model  Model based on the Service Oriented Architecture (SOA) principles of interoperability, modularity and reusability  Offers a classification scheme and definitions for IT-Services  Includes both program-facing services providing a business perspective and foundation-facing services that provide IT infrastructure and data perspectives  Purpose is to:  Provide a common, simplified and business-centric vocabulary to facilitate understanding between the IT staff and tax administrators  Facilitate the development of business requirements through alignment of IT-Services to known business needs early in the development life cycle, by providing business stakeholders with guidance on how to segment the gathering and documentation of requirements  Facilitate the alignment of IT strategies and solutions to business needs, including opportunities to leverage COTS (Commercial off the Shelf) products where appropriate  Provide a frame of reference to help identify redundancies and gaps in IT-Services

15. 15 IT Service Reference Model 4. Infrastructure Optimize throughput, availability, performance & security IT Security, Workspace Computing, Application/Database Development and Maintenance, Production and Operation Computing, Telecommunications (Data and Voice), & Optimize Throughput, Availability and Performance 2. User Interaction Enable direct interactions between users & CRA IT Services Multi-Channel Presentation (Internal Facing & External Facing) Web/GOL, Integrated Desktop 9. Administrative Functions Supporting other IT Service Domains Planning, Inter-government Affairs, Administration, Finances, HR, Real Property, Resource Mgmt, Security Mgmt, Strategic Mgmt, Internal Audit, Legal Services, Policy, Public Affairs, & Information Technology 3. Services Management & Support Develop, Manage & secure services, application s & resources Manage the Incident, Manage the Service & Application Management Enable interaction / collaboration between partner & Agency business processes External Data Exchange {Web/GOL} 1. Extended Enterprise 5. Business Innovation & Optimization Facilitate better decision-making with real-time business information Business Rules Mgmt, Risk Mgmt, & Business Intelligence and Decision Support 7. Information Manage diverse data & content in a unified manner Enterprise Content Mgmt, BIDS Data, Taxpayer View, Metadata, Reference Data Master Data Mgmt, & Knowledge Mgmt, {ECM, Taxpayer View} CRA Internal User Taxpayers, Individuals Businesses 3 rd Parties Private Sector OGD (Other Government Departments) IT perspective – not vetted through business IT Services = automated IT Services. No 1 to 1 mapping of reference models to domains 6. Process Orchestrate and automate business processes Work Mgmt, Workflow Mgmt, Workload Mgmt & Work Allocation 10. Service Integration Facilitates communication between services Service Integration & Internal Data Exchange 8. Core Business Functions Build on a robust, scaleable and secure services environment Client Management (Ident), Accounting, Appeals, Client Services, Assessing, Collections, Compliance, Disbursement, Payment Processing, Client Communication, {Client Communication} Domains Group IT Service Domain(s) {Reference Model(s)}

16. 16 Benefits of Tax Services Integration  Shared infrastructure costs (including future improvement to applications and technologies)  Increased coherence in the administration of multiple taxes including the potential to administer taxes and benefits across jurisdictions or levels of government resulting in fewer interactions and overhead for business and individuals  Data Sharing with other government partners (across domains) and across revenue types improves risk profiling for compliance and enforcement, allows third party matching and financial setoffs (where legislation and privacy rules permit)  Corporate and common services sharing allows for business process alignment and rules harmonization for all tax and revenue types:  use of a common identifier reduces the overall compliance burden for Businesses and Individuals and provides the ability to provide a single enquiry point of contact to make enquiries easier  consolidated and standardized client communications and self-service options  common collection and compliance activities and audit capabilities of multiple revenue lines at once  common workflow management system  one common Revenue Ledger function used by all system

17. 17 Benefits of Tax Services Integration (continued)  Other benefits include:  Facilitates ongoing increases in productivity, transparency and agility  Makes system development more complex, but there are fewer systems to change  Reduces overlap and duplication with respect to development or enhancement activities, communications, and workload management  Standardizes release, communication, issue, risks and changes management processes  Standards developed for public facing applications allow for common look and feel and makes it easier to navigate, find information, make payments, etc

18. 18 Lessons Learned  Situate your strategy  Strategies do not exist in isolation  Ensure alignment with corporate strategies, the Corporate Business Plan and other enterprise documents  Focus on the change agenda  Where are we now? Where do we want to be? How are we going to get there?  Be inclusive  Involve rather than impose projects on people  Inclusion leads to strengthened sense of engagement and support among all stakeholders  Use a structured, realistic approach to examine the organization and its environment  Consult experts for advice and support

19. 19 Challenges and Constraints  Assign functional ownership to shared components  Integration requires longer lead times, more planning, coordination and communication to successfully implement changes  Adapt/Align redesigned revenue type with existing common business processes and system architecture  Integration requires buy-in of all stakeholders  Competing pressures on resources maintaining the current system while redesigning the new one  Limited integration opportunities exists for Assessing, Accounting, Enquiries, and Audit where functions may only partially be merged due to the complexity of tax law, the uniqueness of the process, or the differences in identity management. This applies where the solutions are bought or built by your organization Example: Business accounting can be integrated across revenue types, however individual accounting cannot be included in that integration

20. 20 Challenges and Constraints (continued)  Legislative Constraints  Lack of harmonization between statutes makes integration more complex, examples include filing and payment due dates and mandatory bank remitting  Privacy Constraints on data accumulation and sharing  Canada’s Income Tax Act specifically authorizes the situations for which usage and exchange of taxpayer information is permitted between the Agency and other departments  The information cannot be used for any other purposes than the administration or enforcement of the Income Tax Act  For example: you need an account number match to set off a debt against any sum of money that may be due or payable by Her Majesty in right of Canada. However, an account number (Individual or Business) may be communicated only if authorized by the Income Tax Act

21. 21 Key Considerations for Success  Allows all lines of business to benefit from future improvements in business processes, legislation and technology  Manage the scope of change through phased implementation  Integrate less complex functions first (consolidated collections and compliance workflows, single tax identification number, workflow case management system, and other less complex functions)  Harmonization of legislation/business rules is key to maximizing benefits  Early engagement of Architecture required to ensure proper alignment  Develop standard interfaces to make use of services simple (to react to events such as new account creates, new debts, call centre referrals, and so forth)

22. 22 Conclusion Tax and Customs Infrastructure Integration More immediate and achievable cost reduction Requires a mature IT infrastructure service provider with sound infrastructure management practices May aid government agencies in competing for skilled IT human resources Tax Application Integration Improves data quality in support of compliance risk profiling in addition to potential application construction and maintenance cost savings Can simplify taxpayer compliance burden Requires strong collaboration between tax administrators and application engineers to ensure integration is done well and does not reduce agility