The Future of Administrative Data ICES III End Panel Discussion Don Royce Statistics Canada June 2007

Outline Basic issues in the use of tax data A short history of the use of tax data in business surveys at Statistics Canada Future challenges

Uses of tax data (Brackstone 1987) Direct tabulation Indirect estimation Survey frames and sample design Survey evaluation

Issues in using tax data (ibid) Coverage Content Concepts/definitions Small domain estimates/sampling Quality control Cost Frequency Timeliness Stability Respondent burden

A short history of tax data usage at Statistics Canada Pre-1985: Tax data used to build sample frames (no centralized Business Register) Trade statistics based on administrative data Tax data program based on capturing two-phase samples of paper forms : The Business Survey Redesign Project (BSRP) Creation of centralized Business Register (BR) based on profiling, payroll deduction data and annual income tax data Redesign of annual and sub-annual surveys Enhanced use of tax data by survey programs – but still based on paper forms

A short history (cont’d) : Two new data sources Federal government introduced the Goods and Services Tax (GST) - a form of VAT Two new variables available from payroll data - facilitated the redesign of the monthly Survey of Employment, Payrolls and Hours 1997 – the Big Bang: Project to Improve Provincial Economic Statistics (PIPES) to allocate new Harmonized Sales Tax Infusion of $42M in new funds Provincial dimension implied additional response burden, so enhanced use of tax data became crucial

A short history (cont’d) 1997 – the Big Bang (cont’d): Introduction of a single Business Number (BN) by Canada Revenue Agency Introduction of mandatory filing in a standard format (GIFI) for corporations Introduction of North American Industry Classification System (NAICS) Conversion of the BR to a BN basis, coded to NAICS Creation of a new Tax Data Division (TDD) Completion of many of the goals of the BSRP

Today: Infrastructure Most business surveys use the Business Register as their frame Unified Enterprise Survey collects annual statistics Common “Chart of Accounts” connecting annual income tax data, survey data and SNA concepts A wide range of data (GST, payroll deduction, annual tax data) is available in (mostly) electronic form and linkable via the BN Tax data are obtained and processed by TDD on an increasingly timely basis

Today: Uses GST data replace significant portions of existing sub- annual samples for simple units (with ratio adjustment for delayed reporting) Annual tax data replace significant portions of annual samples of simple units (straight substitution) Payroll deduction data in combination with survey data produce estimates of average weekly earnings, etc. Tax data are used exclusively for very small “Take-None” units Tax data are used for editing and imputation of survey data Extensive use of tax data by the System of National Accounts (e.g., benchmarking of labour income)

Future challenges Moving from retrofitting existing samples to an integrated survey/tax data design Increasing the use of tax data for complex businesses Use of tax data for specialized populations Measuring data quality Modeling/imputation – how much is too much?

Moving to an integrated survey / tax data design Current approach (mostly) is to replace survey data with tax data for existing samples of simple units Can we use tax data for the entire universe, in combination with a small sample survey to adjust for differences? Much more data to process, change of culture for subject matter analysts

Tax data for complex businesses Complex structures must often be broken down into their components, e.g., industry, province Tax data are often only available for legal entities, not operational units How well can we allocate tax data to industry and province levels?

Specialized populations Canada Revenue Agency creates numerous files which we have not yet fully explored, for example: Files covering the non-profit sector Files covering trusts Audit files, which may be useful for measuring the underground economy Work is just beginning on this

Measuring Quality Need to recognize the particular characteristics of administrative data, for example: Methods for calculating response rates for surveys combining survey and tax data Methods for measuring the variance due to imputation Methods that take into account the use of modeling Difficult or impossible to follow up respondents to validate administrative data

Modeling and imputation - how much is too much? Modeling is used in calendarization, estimation, imputation, allocation of tax data to adjust for various deficiencies (e.g., timeliness, coverage issues) We often conduct studies, conclude that the results are not much different, then assume that modeling is okay – different paradigm than survey sampling We need to make sure that assumptions are explicit, the models are robust, and that they are checked on a regular basis

Conclusion Tremendous progress in using tax data in business surveys in the past 20 years The need to use tax data will increase as pressures to reduce costs and response burden continue Many exciting methodological challenges ahead

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