Enhancing Tax Data Usage for Improved Economic Surveys

1. Administrative Data at Statistics Canada – Current Uses and the Way Forward 27thVoorburg Group Meeting Warsaw, Poland André Loranger October 4, 2012

2. Outline • Introduction • Tax Data • Goods and Service Tax (GST) • Annual Tax • Increased use of GST data • Monthly Food Services Survey • Quarterly Services Indicators • Increased use of Annual Tax data • Summary and Future Work Statistics Canada • Statistique Canada

3. Introduction • Statistics Canada has a long history of using administrative data • Direct tabulation – Trade statistics • Frame maintenance – Business Register • Survey evaluation – Data confrontation • More recently, in business surveys program • Take none estimation • ‘Replacing’ survey data Statistics Canada • Statistique Canada

4. Introduction, cont. • Benefits realized • Reduced collection costs • Increased data quality • Reduction of respondent burden • Current uses somewhat constrained until recently • Will discuss two recent methodologies that significantly increase use of tax data and some future uses Statistics Canada • Statistique Canada

5. Tax Data • Tax data collected by Canadian Revenue Agency (CRA) • Monthly Goods and Services Tax (GST) data • Annual tax (T1 and T2) data • Goal of CRA is non-statistical, so very little verification of data performed • Statistics Canada receives data from CRA and ‘processes’ the data Statistics Canada • Statistique Canada

6. Tax Data – GST • A tax of 5% levied on all goods and services • Similar to Value Added Tax in other countries • Depending on size of business, data remitted monthly, quarterly or annually • Data provided to Statistics Canada 7 to 8 weeks after reference month • Processing at Statistics Canada comprises outlier detection, imputation and calendarization Statistics Canada • Statistique Canada

7. Tax Data – GST, cont. • Database containing monthly sales for all businesses produced • GST data used by three mission critical monthly surveys • Survey data ‘replaced’ by GST data for a portion of ‘simple’ units and for take none • Model needed to account for conceptual differences and timeliness issues • Once replaced, modified GST data treated as survey data Statistics Canada • Statistique Canada

8. Tax data – GST, cont. • TA TS Survey Tax Data TN Note: Simples only Statistics Canada • Statistique Canada

9. Tax data – Annual tax Two types: T1 – Unincorporated businesses (individuals) T2 – Incorporated businesses For T1, have electronic filers (~80% of universe) plus 2 variables for entire universe Produce calibrated estimates at aggregated levels For T2, Statistics Canada receives universe from CRA ‘Processing’ done at Statistics Canada (outlier detection, imputation, allocation to details…) Statistics Canada • Statistique Canada

10. Tax data – Annual, cont. T2 data used in Unified Enterprise Survey (UES) The UES Consists of over 60 annual business surveys Uses common concepts and methodology Collects financial and non-financial data T2 information linked to survey variables through COA (financial variables only) No model needed Statistics Canada • Statistique Canada

11. Tax data – Annual, cont. T2 information used to replace survey data for a portion of simple units and take none units Several different implementations 55% of sampled simples replaced 100% of simples replaced (financial data). Sample for non-financial data 100% of non-sampled simples replaced. Non-financial estimates calibrated Statistics Canada • Statistique Canada

12. TS TA TS TA Survey Tax Data TN TN Tax data – Annual, cont Statistics Canada • Statistique Canada

13. Increased use of GST data • Current use of GST data restricted due to operational constraints • Use of existing systems • Trust in tax data • Two sub-annual surveys recently redesigned/developed • Opportunity to significantly increase use of GST data • Monthly Food Services Survey (MFSS) • Quarterly Services Indicators (QSI) Statistics Canada • Statistique Canada

14. Increased use of GST data – MFSS • Estimates sales and number of locations of restaurants, caterers and drinking places • Combines typical business survey design with a strategy that takes full advantage of tax data • In certain strata, use GST data as auxiliary data for simple businesses and typical survey for complex ones • Estimate based on small sample of simples improved by use of tax data • In other strata, use typical survey design Statistics Canada • Statistique Canada

15. Increased use of GST data – MFSS, cont. • GST data used as auxiliary data for: • ~25,000 businesses based on sample of ~500 for model building • ~40,000 businesses in take none • Resulted in • Significant improvement in precision for sample of ~500 units • Reduction in respondent burden Statistics Canada • Statistique Canada

16. Increased use of GST data – QSI • Need to improve availability of sub-annual services industries data • Goals of QSI • Produce quarter-to-quarter movements • Levels less important ? • Economical • GST data used for all simple businesses, with traditional survey of complex ones • No sample of simple businesses to build model • Universe of simple businesses defined by GST data Statistics Canada • Statistique Canada

17. Increased use of GST data – Challenges • Business status • Deaths in GST data identified based on remittance or not • MFSS based on business register, so not severely affected by deaths in GST data • QSI based on GST data, so estimates affected by deaths in GST data Statistics Canada • Statistique Canada

18. Increased use of GST data – Challenges, cont. • Updating of GST data • Monthly updates received from CRA • Late remittances and corrections • Full processing performed to produce another ‘vintage’ of data for particular reference month. • Better information? • Both MFSS and QSI publish revised estimates • Some of the revision coming from ‘reprocessed’ GST data (imputation and calendarization) • Not a true reflection of economy Statistics Canada • Statistique Canada

19. Increased use of Annual Tax Data • UES is now over ten years old and is starting to show its age • A major redesign is being planned and increasing the use of tax data is one goal • One possible option • Complex businesses continue to be surveyed • Covers both financial and non-financial data • ‘Optimized’ for financial data Statistics Canada • Statistique Canada

20. Increased use of Annual Tax Data, cont. • For simple businesses, tax data becomes source of financial information Can tax be used for small complex businesses? • Survey simple businesses only to respond to specific program/data needs Commodities for example ‘Optimized’ for data needs since financial information coming from tax data Statistics Canada • Statistique Canada

21. Increased use of Annual Tax Data, cont. • For simple businesses, tax data becomes source of financial information Can tax be used for small complex businesses? • Survey simple businesses only to respond to specific program/data needs Commodities for example ‘Optimized’ for data needs since financial information coming from tax data Statistics Canada • Statistique Canada

22. TA TS Complex Full questionnaire (financial and commodities) Simple Commodities only Tax Data TN Increased use of Annual Tax Data, cont. Statistics Canada • Statistique Canada

23. Increased use of Annual Tax Data - Challenges • Business status and industry coding • Many updates come from survey feedback • Nature of business report? Combine with commodity questions? • Close co-operation with CRA to obtain this information? • Acceptance by users • Possible break in series Statistics Canada • Statistique Canada

24. Summary and Future Work • Use of GST data in MFSS and QSI step in right direction but still some challenges • Plans discussed to increase use of annual tax data but some work still to do • Statistics Canada also looking at broadening and deepening use of tax data • Tax schedules • Uses outside business survey program Statistics Canada • Statistique Canada

25. Discussion Statistics Canada • Statistique Canada