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37th PARLIAMENT, 2nd SESSION

Standing Committee on Public Accounts

EVIDENCE

CONTENTS

Wednesday, March 19, 2003

1530

The Chair (Mr. John Williams (St. Albert, Canadian Alliance))

1535

Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General of Canada)

1540

The Chair

Hon. Elinor Caplan (Minister of National Revenue)

1545

1550

The Chair

Mr. Stephen Rigby (Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Customs and Revenue Agency)

The Chair

Ms. Elinor Caplan

The Chair

Ms. Elinor Caplan

1555

The Chair

Ms. Elinor Caplan

The Chair

Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance)

The Chair

Mr. Stephen Rigby

Ms. Val Meredith

1600

Ms. Elinor Caplan

Mr. Stephen Rigby

Ms. Val Meredith

Mr. Stephen Rigby

Ms. Val Meredith

Ms. Elinor Caplan

Mr. Stephen Rigby

Ms. Val Meredith

The Chair

Mr. Stephen Rigby

The Chair

Mr. Steve Mahoney (Mississauga West, Lib.)

The Chair

Mr. Steve Mahoney

The Chair

Mr. Steve Mahoney

The Chair

1605

Mr. Steve Mahoney

The Chair

Mr. Steve Mahoney

The Chair

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ)

Ms. Elinor Caplan

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Sheila Fraser

Mr. Odina Desrochers

Ms. Elinor Caplan

1610

Mr. Odina Desrochers

Ms. Elinor Caplan

Mr. Rob Wright (Commissioner, Canada Customs and Revenue Agency)

Ms. Elinor Caplan

Mr. Odina Desrochers

Ms. Elinor Caplan

The Chair

Mr. Odina Desrochers

The Chair

Mr. Odina Desrochers

The Chair

Mr. Steve Mahoney

Ms. Sheila Fraser

Mr. Steve Mahoney

Ms. Sheila Fraser

Mr. Steve Mahoney

Ms. Val Meredith

Mr. Steve Mahoney

The Chair

1615

Mr. Steve Mahoney

Ms. Elinor Caplan

Mr. Stephen Rigby

Mr. Steve Mahoney

Ms. Sheila Fraser

Mr. Steve Mahoney

Ms. Sheila Fraser

1620

Mr. Steve Mahoney

Ms. Elinor Caplan

Mr. Steve Mahoney

Ms. Elinor Caplan

Mr. Steve Mahoney

Ms. Elinor Caplan

The Chair

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

Ms. Elinor Caplan

1625

Ms. Judy Wasylycia-Leis

Ms. Sheila Fraser

Ms. Judy Wasylycia-Leis

Ms. Elinor Caplan

1630

Mr. David Miller (Assistant Commissioner, Assessment and Collections Branch, Canada Customs and Revenue Agency)

The Chair

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance)

Ms. Elinor Caplan

Mr. Rahim Jaffer

Ms. Elinor Caplan

Mr. Rahim Jaffer

Ms. Elinor Caplan

Mr. Rahim Jaffer

Ms. Elinor Caplan

1635

The Chair

Mr. Roger Gaudet (Berthier—Montcalm, BQ)

Ms. Elinor Caplan

Mr. Roger Gaudet

Ms. Elinor Caplan

Mr. Roger Gaudet

Ms. Elinor Caplan

Mr. Rob Wright

Ms. Elinor Caplan

1640

The Chair

Ms. Beth Phinney (Hamilton Mountain, Lib.)

Ms. Elinor Caplan

Ms. Beth Phinney

Ms. Elinor Caplan

Ms. Beth Phinney

Ms. Elinor Caplan

Mr. Rob Wright

The Chair

Ms. Judy Wasylycia-Leis

1645

Ms. Elinor Caplan

Ms. Judy Wasylycia-Leis

Ms. Elinor Caplan

The Chair

1650

Mr. John Morgan (Executive Director, Financial Management and Accounting Policy Directorate, Comptrollership Branch, Treasury Board of Canada Secretariat)

The Chair

Mr. John Morgan

The Chair

Mr. John Morgan

The Chair

Mr. Rob Wright

The Chair

Mr. David Miller

The Chair

Mr. David Miller

The Chair

Mr. David Miller

The Chair

Mr. Stephen Rigby

The Chair

Mr. Stephen Rigby

1655

The Chair

Ms. Sheila Fraser

The Chair

Ms. Sheila Fraser

The Chair

Mr. Stephen Rigby

The Chair

Mr. Steve Mahoney

The Chair

Ms. Val Meredith

Ms. Elinor Caplan

Ms. Val Meredith

Ms. Elinor Caplan

Ms. Val Meredith

Ms. Elinor Caplan

Ms. Val Meredith

Ms. Elinor Caplan

Ms. Val Meredith

1700

Ms. Elinor Caplan

Ms. Val Meredith

Ms. Elinor Caplan

The Chair

Mr. Stephen Rigby

The Chair

Ms. Val Meredith

Ms. Elinor Caplan

The Chair

Ms. Sheila Fraser

The Chair

Ms. Elinor Caplan

The Chair

Mr. Odina Desrochers

Ms. Elinor Caplan

1705

Mr. Odina Desrochers

Mr. Rob Wright

Ms. Elinor Caplan

Mr. Odina Desrochers

Ms. Elinor Caplan

Mr. Odina Desrochers

Ms. Elinor Caplan

The Chair

Mr. Steve Mahoney

Ms. Elinor Caplan

1710

The Chair

Mr. Rahim Jaffer

Ms. Elinor Caplan

Mr. Rob Wright

Ms. Elinor Caplan

Mr. Rahim Jaffer

Ms. Elinor Caplan

1715

The Chair

Mr. Rob Wright

Ms. Elinor Caplan

Mr. Rahim Jaffer

Ms. Elinor Caplan

Mr. Rahim Jaffer

Ms. Elinor Caplan

Mr. Rob Wright

The Chair

Ms. Judy Wasylycia-Leis

Ms. Elinor Caplan

Ms. Judy Wasylycia-Leis

Ms. Elinor Caplan

Ms. Judy Wasylycia-Leis

Ms. Elinor Caplan

Ms. Judy Wasylycia-Leis

Ms. Elinor Caplan

Ms. Judy Wasylycia-Leis

Ms. Elinor Caplan

1720

Ms. Judy Wasylycia-Leis

Ms. Elinor Caplan

The Chair

Ms. Sheila Fraser

The Chair

Mr. Stephen Rigby

The Chair

Mr. Stephen Rigby

The Chair

Mr. Stephen Rigby

The Chair

Mr. Stephen Rigby

The Chair

Mr. Stephen Rigby

The Chair

1725

Mr. Rob Wright

The Chair

Ms. Elinor Caplan

The Chair

Ms. Elinor Caplan

Mr. Stephen Rigby

Ms. Elinor Caplan

The Chair

Ms. Elinor Caplan

Mr. Rob Wright

The Chair

Ms. Elinor Caplan

1730

The Chair

Mr. Steve Mahoney

Ms. Elinor Caplan

Mr. Steve Mahoney

The Chair

Mr. Steve Mahoney

The Chair

Mr. Steve Mahoney

The Chair

Ms. Sheila Fraser

The Chair

CANADA

Standing Committee on Public Accounts

NUMBER 020

2nd SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, March 19, 2003

[Recorded by Electronic Apparatus]

¹ (1530)

[English]

The Chair (Mr. John Williams (St. Albert, Canadian Alliance)): Good afternoon, everybody.

The order of the day is, pursuant to Standing Order 108(3)(e) and a motion of the committee dated February 12, 2003, consideration of the Public Accounts of Canada 2001-2002, volume II, part II, section 3, “Losses of public money and property”.

Today our witnesses are the Honourable Elinor Caplan,the Minister of National Revenue; from Canada Customs and Revenue Agency, Mr. Rob Wright,the commissioner, and Mr. Stephen Rigby,chief financial officer and assistant commissioner of the Finance and Administration Branch; from the Treasury Board of Canada Secretariat, Mr. John Morgan,the executive director of the financial management and accounting policy directorate,Comptrollership Branch; from the Office of the Auditor General of Canada, Ms. Sheila Fraser,the Auditor General of Canada, Mr. James Hood,principal with the office, and Mr. Andrew Lennox,also a principal of the office.

I was having a short discussion with Mr. Wright, the commissioner, before the meeting started. He tells me 56% of returns so far have been electronically filed. He tells me it's simple, and he recommends that all taxpayers think about electronic filing of their tax return. So there's the advertisement for today, Mr. Wright.

I also had the clerk distribute to all committee members certain documents: the ruling by the Speaker on the point of order raised by the member for Vancouver--Sunshine Coast on December 9; a one-page document that was tabled by the CCRA in support of their position prior to the Speaker's ruling; a letter from the Auditor General of Canada addressed to me as the chair of the Standing Committee on Public Accounts dated January 24, 2003; copies of some pages from section 3 of volume II of the public accounts of Canada; the Treasury Board of Canada Secretariat policy on losses of money, offences, and other illegal acts against the Crown; Receiver General directive 2003-01 on the public accounts instruction manual for the fiscal year 2002-2003. These documents were prepared by the clerk at my instruction, so that all the committee members could be informed of the issue that is before us today. Therefore, they're tabled with the committee and public documents, and they are deposited with the clerk for anybody who would like a copy.

Now we will turn to the opening statements.

Madam Fraser.

¹ (1535)

Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General of Canada): Thank you, Mr. Chair.

We thank you for the invitation to appear before the committee today to discuss the issue of GST fraud. As you mentioned, joining me are Jamie Hood and Andrew Lennox, the principals responsible for our work at the Canada Customs and Revenue Agency.

We have produced two reports that look at the capacity of the agency to detect and deter GST errors, fraud, and abuse. In chapter 16 of our 1999 report we reviewed the processing of GST returns and the auditing of GST registrants. In 2001 we reported on our follow-up of that audit. We have provided appendices that give the major points of those two reports. We have not done any work since then in this area.

[Translation]

In these reports, we noted certain controls related to GST fraud which might be of interest to the Committee.

First of all, with respect to registration review, in our 2001 follow-up, we noted that the Agency had initiated an enhanced registration review pilot project. The purpose of the project was to identify high-risk registrants early in the process. Ensuring that new GST registrants are legitimate would help to prevent cheques being issued on fraudulent claims.

The second control is the pre-payment audit. Normally, GST registrants charge GST on their domestic sales and pay GST on their purchases. If the GST charged to customers during the month exceeds the GST paid on purchases, the registrant owes the difference to the Agency. If, however, the GST paid on purchases exceeds the GST charged to customers, the Agency pays the difference to the registrant. These are called credit returns.

The Agency's pre-payment audit program, which includes computerized validity checks of all credit returns, is designed to prevent registrants from receiving payments when fraud or gross error is suspected. In 1999, we noted that the validity checks rejected about 30 per cent of the credit returns. However, only 3 per cent of those returns were examined in-depth.

We were concerned about the effectiveness of the validity checks in detecting non-compliance and fraud. During our 2001 follow-up, we noted that the Agency had revised some of its automated validity checks and that additional changes were expected in 2003 and 2004. As well, the Agency drafted new guidelines for managing pre-payment audits, including plans to establish dedicated GST audit teams. The committee may wish to explore progress in this area with the Agency.

[English]

Another control is the post-payment audit. The agency also conducts such audits on registrants who represent a high risk of non-compliance. Our work revealed that the agency needed to do a better job of selecting registrants for audit. We also found that many audits took too long. At the time of our follow-up the agency was working to address these deficiencies.

Let me now turn to the question of reporting GST fraud. Information on losses due to fraud is reported in volume II of the public accounts. As we indicate in our observations, we do not audit this section of the the public accounts. It appears to us that all types of GST fraud were initially reported in the public accounts. However, in 1993-1994 Revenue Canada-Taxation said that its systems could not provide information on revenue losses due to fraud. Since 1994-1995 Revenue Canada and now the agency have reported only employee fraud in volume II of the public accounts.

The chair of the committee asked me to comment on the reporting of GST fraud in the public accounts. In my response of January 24 of this year I said that although the government has not reported all types of GST fraud in the public accounts, we do not believe it has contravened the provisions of the Financial Administration Act. At the same time, Treasury Board policy and the public accounts instructions manual require the reporting of such losses in the public accounts. In a one-page document provided to the clerk of the committee the agency said GST fraud does not meet the intent for reporting in the public accounts, because losses due to fraud cannot normally be reported in the year in which they are detected. Court decisions confirming fraud are not made until months or years later. While we agree that GST fraud cases can take years to settle, we note that the Treasury Board policy and the public accounts instructions manual provide guidance for these types of situations. The guidance states that such losses should be reported as soon as possible, but can be reported in a year subsequent to the one in which they were first discovered.

Therefore, we believe cases of fraud being pursued through the court system could be reported in the public accounts in accordance with this guideline. However, there is a cost to producing this information. Members may wish to discuss with the agency the ease with which they can produce this information from existing systems and what modifications, if any, would be necessary. It would be then up to members of Parliament to determine, in consultation with the agency, the type and level of information they need.

Mr. Chair, that concludes my opening statement. We would be pleased to answer any questions the committee may have.

¹ (1540)

The Chair: Thank you.

Minister Caplan.

Hon. Elinor Caplan (Minister of National Revenue): Merci beaucoup. Good afternoon.

I'm pleased to be here today to address recent concerns about CCRA's procedures in reporting GST losses to Parliament and the issue of GST fraud. It is time to set the record straight. For some time now some journalists and opposition members have thrown around unfounded allegations. Some have even dared to bandy about the phrase “creative bookkeeping” in the House of Commons. Allegations such as those wilt under any fair scrutiny.

The CCRA employs 5,000 auditors. There are also 1,000 people in the investigations program. They are top professionals, they are excellent at what they do. In 2001-2002 the CCRA received an additional $959 million over a five-year period, and we will be hiring more auditors, investigators, collectors, and other professionals to ensure compliance with our tax laws. In fact, Mr. Chair and members of the committee, you should know that our auditors and investigators work with allies in the police and crown attorney offices, and they helped recoup $63.5 million in taxes last year from drug dealers and other members of organized crime. That's not called creative, it's called due diligence and professionalism.

But let's talk about GST fraud and put it in some perspective. After all, since 1991 about $500 billion in GST has been collected. The courts have confirmed that close to $60 million was indeed recognized as GST fraud. As you can see on page 2 of the attached deck, that represents 0.012% of the total amount of GST collected. While this amount is only a fraction of a percent, the matter of GST fraud does exist and is a problem. With courts recognizing $60 million in fraud and another 186 cases before the courts putting about $94 million potentially in play, it presents a total of $154 million in fraud. While that is the worst case scenario, it's certainly far below any number that may have been alluded to in the media.

We will remain vigilant in pursuing those who attempt to defraud the government, but we cannot seal our GST initiatives in barbed wire or red tape, because it would do untold damage to Canadian businesses. Many of you might have heard the chief economist for the Canadian Manufacturers and Exporters Association say a lot of companies use GST tax credits as an important part of their cashflow. Anything we do to hold that up can hurt the bottom line.

Second, I'd like to clarify the issue of resources dedicated to GST fraud. In 1995 GST and income tax investigation units were combined to form a larger, more multifunctional team. I think it's important to understand that while we no longer label distinct teams, we still possess the expertise and resources necessary to investigate all tax fraud, including GST fraud, because--and this is important--the fraud is often interrelated and often overlaps.

¹ (1545)

As a result of modernizing investigative techniques, as is demonstrated on page 3, we have been able to take on twice as many cases, which has led to increased prosecutions of attempted GST fraud. With a prosecution success rate of 96%, I can tell you we're doing our job and doing it well. Page 4 gives you the numbers. As I noted, there are 186 cases of alleged GST fraud before the courts, representing a potential of $94 million. As you can see from the last slide on page 5, last year we recovered $846 million due to reassessments for non-compliance in GST. But let's not confuse reassessment with criminal activity. There is a world of difference between errors in addition and criminal intent.

As to the future, we are continually developing ways to improve our systems and processes to prevent the possibility of fraud, and I appreciate that acknowledgement by the Auditor General. Our approach involves a variety of initiatives at all stages of the process, which we adapt in light of changing circumstances. For example, over the last year and a half we have been conducting a pilot project to review newly created accounts within five days of registration, in order to validate the information supplied and to initiate follow-up action where necessary. This process, as a result of the success of the pilot project, will become a national standard within the next few months. At the same time, we do not want to penalize legitimate new businesses, so we are taking further measures to help them better understand the information we will require when they register. For example, within the next few weeks we will be posting a business start-up check list on our website.

Finally, I'd like to bring the focus back to why we are here. The CCRA has respected the Financial Administration Act and has always aimed at disclosing information in accordance with Treasury Board policy. The policy on reporting losses of public funds to public accounts gives departments and agencies the flexibility to develop reporting practices appropriate to their business circumstances. When tax and customs operations merged, the information appearing the public accounts was re-examined, and as a result, reporting losses from GST fraud as a separate item in the public accounts was discontinued. Over the past few months I've recognized that our reporting practices can and must change. CCRA officials have worked with Treasury Board Secretariat, taken the Auditor General's comments into consideration, and developed a proposal for the reporting of GST fraud annually in the public accounts.

Stephen Rigby, the assistant commissioner of the Finance and Administration Branch, can elaborate on the proposals for reporting GST fraud in the public accounts as soon as I conclude this statement.

Mr. Chair, let me be clear, the CCRA is committed to fairness, equity, and accountability in its administration of tax services. I trust that this committee now understands this, and I look forward to your questions, as well as your comments.

¹ (1550)

The Chair: We'll find out in a minute whether the committee understands that, Ms. Caplan, but now I understand Mr. Rigby has about a two-minute presentation.

Mr. Stephen Rigby (Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Customs and Revenue Agency): Thank you, Mr. Chairman.

The proposal we have before you today, ladies and gentlemen, is based on the public accounts requirement that departments and agencies report on revenue lost through fraud or wilful misrepresentation. We propose proceeding based on the basic layout prescribed for public accounts. As the key principle underlying our presentation, fraud losses will be first recognized when criminal charges are laid and will be confirmed when convictions are obtained. Accordingly, we've proposed to present information in three parts, which I'll describe one after the other, and we will be presenting information henceforth in public accounts for all revenue streams. That includes income tax, GST, excise duties and taxes, and customs duties.

To go to the first of three plates before you, we will present a table showing convictions for GST fraud and other revenue fraud during the current year. The amount shown in that plate as the loss will be the amount of tax evaded or the amount of refund fraudulently obtained. Any interest or punitive charges will not be reported in that plate, as they do not technically represent a loss.

With the next plate, we would be presenting a table showing cases that are before the courts at the end of the current year, and to the extent that convictions are eventually obtained from these cases, they will again be reported in subsequent years in the first table I've just described to you. Again, the amount of the loss will be our estimate of the tax evaded or the refund fraudulently obtained.

Finally, we would be following up in public accounts on recovery of loss amounts as determined by the courts and reported on in previous years. No tracking of recovery under this proposal will be commenced until a conviction has been obtained, and tracking will continue until the particular balance for that account or those accounts has been recovered or written off as unrecoverable.

I would say in closing, Mr. Chairman, that we have consulted with our colleagues at Treasury Board and with the OAG on this proposal before bringing it to you today.

The Chair: Thank you very much, Mr. Rigby.

I just have one point for clarification, Ms. Caplan, in your report. I'm looking at the first page, where you're talking about the amount of money that has been lost, and you say it presents a total of $154 million in fraud. In the House of Commons today at question period we were talking about a gentlemen called Mr. Lam, who is currently involved in an extradition attempt, and you're trying to recover the funds. Would that kind of case be included in “before the courts”, or has that not yet got to the courts?

Ms. Elinor Caplan: It's very important that we be clear about our ability to talk about old cases, cases before the courts, and cases that are under investigation. If there is a case before the court, I can't speak about it, because it would jeopardize the court action. If there is a case that has been completed, that information is public information and can be made available to the committee. If there is a case under investigation, if the committee can obtain consent from the individual, we can discuss the details of the case. If it's a case where the investigation is not completed or it hasn't gone to court, again, we would need to have consent before we could discuss the case.

The Chair: Therefore, because you were talking about that particular case as being part of the extradition process and so on in the House just an hour ago, I can presume that it's not before the courts.

Ms. Elinor Caplan: In fact, that case would be considered before the courts, because there has not yet been a final determination.

¹ (1555)

The Chair: Is it, therefore, part of that $154 million?

Ms. Elinor Caplan: It would be included.

The Chair: Okay. I now understand.

Ms. Meredith, first round, eight minutes.

Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance): Thank you, Mr. Chair, and thank you, Madam Minister and Auditor General, for appearing.

I would like to start by suggesting, Mr. Rigby, that you go back to the drawing board and start all over again, because what you're proposing is not, I would suggest, going to meet the concerns of parliamentarians or Canadians. It's quite clear in the information I have before me that losses include any public money, and when somebody collects GST, they are collecting it on behalf of the government and putting it in trust until they remit it to the government. It then becomes property of the government. Any time there's a lack of remittance of that money, it is a loss. For your clarification, it's section 3, “Supplementary Information Required by the Financial Administration Act”. I see Human Resources Development list all those things they consider to be fraud, and you can't tell me that all of these have gone through the court process and criminal charges have been laid before they itemize what they consider to be a loss. I would like to know why CCRA doesn't use the same premise. If you consider it to be wilful misrepresentation you are investigating, that should be reported as a loss. Why do you not use the same standard of reporting to parliamentarians as Human Resources Development does?

The Chair: Mr. Rigby.

Mr. Stephen Rigby: Thank you very much.

What we have done is interpret the public accounts guidelines referring to losses of revenue due to fraud and wilful misrepresentation as those losses that have been confirmed by the courts. There are other actions we take in our process and programs that do result in reassessments of tax etc. That kind of activity falls across a very broad spectrum, from tax planning, where we reassess, to situations where we take civil action to make a reassessment as a result of other activities of taxpayers. It's our interpretation, Ms. Meredith, that it's a reasonable position to take that a fraud is a fraud as determined by the courts, and until the courts have made that determination and confirmed our understanding of it, it would be unreasonable of us to make estimates in that regard.

Ms. Val Meredith: I beg to differ. I'm not talking about fraud, and I'm not going to argue whether somebody should be charged criminally with fraud before you record it. What I'm talking about is reporting to Parliament, through the public accounts, that these moneys are not available to the government to use, because they have not been collected. I don't care whether the person's been convicted of fraud or not, that is a loss of tax dollars that are supposed to be in the system. Other departments report that loss of money, they don't wait until it goes before a court, and I think it's unreasonable for CCRA to wait until a court decision has been made as to whether or not a criminal act has been committed before it records it as a loss.

The Speaker in his judgment indicated that he was “troubled that although Revenue Canada recognized that it had a reporting difficulty and rightly sought the advice and approval of Treasury Board as to how best to rectify the situation, no effort was made to consult Parliament.” That's what concerns me, that this loss of money is not being recorded appropriately enough in the public accounts that parliamentarians are aware of what's going on. This is our only ability to be a watchdog. We were accused the other day of not doing our job, of not picking up things in public accounts and in main estimates and in supplementary estimates. This is our only way of getting this information, and I think it's negligent on the department's part not to provide information as to the loss of revenue, not fraud, to the government through CCRA.

º (1600)

Ms. Elinor Caplan: Remember to be very careful in the use of language such as negligence. I'm very proud of the professionalism and integrity of the officials who work for CCRA. There have been no findings that they have done anything that is not in accordance with the Financial Administration Act. In the public accounts reporting I believe you will find there is a reporting on an annual basis of the reassessments that have been levied in any particular year. Mr. Rigby, is that correct?

Mr. Stephen Rigby: There is a full reporting of our accounts receivable, and so as to your concern about what moneys are not available to the Crown, we do give a full disclosure of--

Ms. Val Meredith: With all due respect, I'm looking at Human Resources Development in this document, and it points out the year in which the loss is reported, the amount of the original loss, the amount recovered in previous years, the amount recovered in 2001-2002, the amount not expected to be recovered, and then the amount expected to be recovered in subsequent years. That's a full accounting of the processes. Why is it that CCRA cannot do it? If 56% of taxpayers are using electronic filing, obviously, we have systems in place that could be giving us this kind of information from CCRA.

Mr. Stephen Rigby: With the greatest respect, Ms. Meredith, that's exactly the information we're proposing to give for the types of convictions and guidance for the courts.

Ms. Val Meredith: But I am suggesting to you that reporting after court convictions is not good enough. We should be getting this information when the loss is on the record. When you've noticed, when you have reported to your minister that this has not come in, that's when you should be putting it in the public accounts. You can let us know by putting the amount expected to be recovered in subsequent years as an anticipation of being successful in court or not. To say you're going to wait until a court decision I feel is not adequate for us as parliamentarians.

Ms. Elinor Caplan: That's the reason I made mention of reassessment. It is extremely important that we not confuse fraud with reassessment. I'm going to ask Mr. Rigby to explain the difference in how we report reassessments and the importance of the difference in language, because we do report the reassessments as part of accounts receivable.

Mr. Stephen Rigby: The problem we face is that there are billions and billions of dollars every year reassessed for Canadians, and as I said before, they represent the product of a range of activities and reactions to Canadian tax practices. That will include legitimate tax planning and positions Canadians take where we might not agree, and we might reassess as a consequence. A little further along the compliance continuum we do have extensive systems, obviously, for delivering all these programs, but making the distinction within all those reassessments between what might be a fairly legitimate action on the part of Canadians and other matters is not as easy as you might think.

Ms. Val Meredith: But at some point you make the decision.

The Chair: I'm sorry, your time is up.

I do need a point of clarification for the chair, Mr. Rigby, when you talk about these reassessments. There are occasions when you do go to court, and there may be someone who owes GST legitimately and some you're trying to recover because it was illegitimate. Obviously, you can differentiate between the two there, so why can't you do that on a macro basis?

Mr. Stephen Rigby: I guess, Mr. Chair, that is something we could examine, but my suspicion is that there would be a fairly significant cost associated with looking in our systems.

The Chair: Computer programs are fairly cheap today, I think, but now we're going to Mr. Durocher.

Mr. Steve Mahoney (Mississauga West, Lib.): On a point of order, after every question are we going to have you follow up with more questions, or are we going to follow the normal procedure around here?

The Chair: It wasn't a question.

Mr. Steve Mahoney: I realize that you actually generated this entire issue with a request to the Auditor General to investigate the matter.

The Chair: I beg to differ, Mr. Mahoney. It was a motion by Ms. Meredith.

Mr. Steve Mahoney: Can we not stick to the process around here?

The Chair: The chair wanted some edification on the question and answer from Mr. Rigby.

º (1605)

Mr. Steve Mahoney: It's highly unusual for you to intervene after every question, and then to lead off the questions with questions. There are other members of this committee who would like an opportunity to ask questions other than the chair, who is supposed to be independent or unbiased or whatever the word may be.

The Chair: I'm always unbiased, Mr. Mahoney.

Mr. Steve Mahoney: It doesn't appear so, that's for sure.

[Translation]

The Chair: You have the floor for eight minutes, Mr. Desrochers.

Mr. Odina Desrochers (Lotbinière—L'Érable, BQ): You're doing a fine job, Mr. Chairman. At times, we hear some unacceptable partisan comments, particularly from Mr. Mahoney. Keep up the good work, Mr. Chairman.

Good day, Ms. Fraser, Madam Minister.

I have a question for the Minister. When was the Canada Customs and Revenue Agency created?

[English]

Ms. Elinor Caplan: November 1, 1999. We just celebrated the third anniversary of the creation of the agency.

[Translation]

Mr. Odina Desrochers: You may recall, Madam Minister, that the Bloc Québécois had some serious reservations about the creation of this agency. We suspected that it might be difficult once again to extract information of any kind.

Ms. Fraser, your predecessor did business with Revenue Canada, as do you today. Have the methods utilized for collecting information changed since the Agency was created?

Ms. Sheila Fraser: Mr. Chairman, I think that question should be directed to the Agency, because as I mentioned in the Public Accounts, we do not audit this information. Tables are not subject to an audit.

To my knowledge, the same methods are generally used. Agency representatives would, however, be able to confirm that.

Mr. Odina Desrochers: Therefore, you're receiving the same kind of information from the Agency as you did when the department was overseeing this work.

Ms. Sheila Fraser: Mr. Chairman, I'd appreciate it if the question could be more specific. Obviously, there are a number of additional requirements and the Agency must provide additional information. For instance, financial statements and performance reports are considerably more complex than in the past. The creation of the Agency has resulted in additional requirements and we verify this information. I would even say that the quality of the information has improved since the Agency's inception.

Mr. Odina Desrochers: I understand. Getting back to the process, how to do go about identifying defrauders?

[English]

Ms. Elinor Caplan: That is a good question, and I will spend a few minutes on the process, but for those people who are interested, I would bring to your attention the CCRA performance report. It is the annual report to Parliament for the year 2001-2002. It contains, I think in a very comprehensive way, information that is readily understandable by the average Canadian, because of our desire to be as transparent as possible in relaying information on what we do and how we do it.

As to your question, I think I'm going to ask my officials to confirm, and even add to, what I'm about to tell you. We have an audit function, we have 5,000 auditors, and they have the responsibility to audit on the basis of risk assessment, what we would call a red flag, but we also do some at random. When the auditors are out looking at all aspects of the obligations of taxpayers, if they see something they are concerned about that goes beyond what would normally be a reassessment, if they are concerned about a practice that may not be legitimate, a fraud, a scam, that file is referred to our investigations unit, and we have 1,000 experts who then gather the evidence.

º (1610)

[Translation]

Mr. Odina Desrochers: Thank you.

[English]

Ms. Elinor Caplan: Did I miss anything?

Mr. Rob Wright (Commissioner, Canada Customs and Revenue Agency): No, I think that's fine.

[Translation]

We are also fortunate to receive reports from persons who have done a particular study. Often, these can prove very useful to us.

[English]

Concerning our performance report, Ms. Meredith and all committee members, unlike a departmental report on our outcomes, this entire report on our measures of progress is audited by the Auditor General, so it is definitely an improvement from pre-agency times, and it does include all reassessments. And I appreciate the AG's recognition, because we worked hard with them to get a better report to Parliament.

Ms. Elinor Caplan: And we're very proud of it.

[Translation]

Mr. Odina Desrochers: Madam Minister, you stated that you had recovered $60 million in fraudulent claims. Could you break that down for us? What does this figure represent exactly? You say that half -a-trillion million in GST has been collected since 1991 and that close to $60 million has been recognized as GST fraud. Could you give some idea of the amount involved from 1991 until the present day? Then we could follow...

[English]

Ms. Elinor Caplan: Last year alone, I believe, $840 million was collected as a result of reassessment. That's just GST. You heard there are billions of dollars in reassessments annually, and that is correct. If we were to go back to 1991, we could total all the reassessments collected since that time, and I can ask my officials to get out the calculator to do that. The $60 million is a result of the court cases. We would be happy to give you a list of all the court actions that have resulted in the total of $60 million.

I also want to take this opportunity, as I've just received a note from staff, to say the case I talked about is in abeyance, because of the length of time and the amount we're going after. It was not included in the total. I wanted to correct that, Mr. Chair.

The Chair: Thank you very much, Minister.

[Translation]

Mr. Odina Desrochers: Is my time up, Mr. Chairman?

[English]

The Chair: Thirty seconds.

[Translation]

Mr. Odina Desrochers: Then I'll turn the floor over now to my NDP colleague.

[English]

The Chair: We now go to Mr. Mahoney for eight minutes.

Mr. Steve Mahoney: Thank you very much, Mr. Chair.

Auditor General, in your letter your conclusion basically says the government has not contravened the provisions of the FAA in not reporting the fraud, so I assume you basically agree with the department's position. Do I understand that correctly? I'm a little fuzzy on that.

Ms. Sheila Fraser: The FAA makes reference to regulations; there can be more specification given in regulations, and there are no regulations. So it's a very permissive kind of ruling, and in fact, there is no contravention, because of the kinds of information being given. It's not so specific within the FAA that the information the agency's been given to date would contravene it. I don't know if I'm making myself clear.

Mr. Steve Mahoney: What has me a little confused is the part where you say, in the early part of your letter, “Public Accounts of Canada on losses of public money is not audited by my Office.” So was this an audit, or is this just an opinion letter?

Ms. Sheila Fraser: This is an opinion letter. We do not audit that section of the public accounts. It was a request from the chair that we look at the issue.

Mr. Steve Mahoney: Was it a request from the chair or the committee?

Ms. Val Meredith: The committee.

Mr. Steve Mahoney: The letter says it was you, Mr. Chair.

The Chair: I put together a whole package, which you have, based on Ms. Meredith's motion. The committee agreed to investigate this issue, and since it wasn't a specific chapter of the Auditor General, I put together relevant information.

º (1615)

Mr. Steve Mahoney: The information is helpful and interesting. I'm sorry I wasn't here for the Auditor General's presentation, I had to attend another committee for some votes, but when I arrived and I first saw this hand-out showing a total revenue of $537 billion, 0.012% being the amount of GST fraud estimates, I almost felt like putting a motion to adjourn the committee. It doesn't strike me that we're dealing with a huge problem here.

Perhaps I could get both the minister and the Auditor General to respond to this. Is the reason these GST losses are not reported in current year public accounts that they're part of the judicial process, they're in court, and to write them off at this stage would be inappropriate?

Ms. Elinor Caplan: I think it's a little more complicated than that. Even when we write off, we don't consider the money lost until such time as we believe it's absolutely uncollectable. If somebody leaves the country and there's a bad debt, we can put a watch list out, so that if they ever come back into Canada, we can collect that debt, even if it's an old debt, as long as we have been current with the notices to let them know we are going after that. When the courts make a determination, we do everything we can to recover based on the court order, which includes the amount and the penalties. We also know, to be very clear, sometimes that money has gone offshore and is very difficult to collect, but we pursue it. One of the things we're doing with international partners is trying to go after that money.

Mr. Rigby, do you want to add anything?

Mr. Stephen Rigby: That's essentially it, Minister. At the time of a court finding we immediately issue a reassessment for the money in question. In some cases that money would be paid immediately, in other cases it would enter our collections or accounts receivable processes. Only after a fairly considerable effort on our part would it actually be written off, as the minister has said.

Mr. Steve Mahoney: In your letter, Ms. Fraser, in an underlined section on page 3, you say:

Any loss discovered in a previous year, but not reported in the Public Accounts of Canada in the year of its discovery, must be reported in the current year's Public Accounts of Canada as if it had been discovered in the current year.

Accordingly, while we agree with CCRA's view that the types of GTS fraud cases described by the National Post can take years to settle through the courts system, the TB policy does provide for reporting when “practicable”.

In essence, what we're saying here is that there are suspected losses, there is a judicial process involved, and that process can take years. I think that's what I'm reading, Ms. Fraser. Is that what your position is?

Ms. Sheila Fraser: To go back a minute, the Financial Administration Act is not specific. This comes from the public accounts instructions manual, so it is, if you will, guidance and procedures for the department. So it has nothing to do with the act per se, but is how to fill out the public accounts. As we have said, in our reading of this, the department could present cases of suspected fraud earlier than final resolution, which is what they are proposing to do. The proposal that has been presented to the committee we believe respects what is being requested in this manual.

Mr. Steve Mahoney: But that would be, I suspect, a non-specific publication. If it's subject to court, you wouldn't want to name names, for sure.

Ms. Sheila Fraser: I believe in all cases it would be simply totals or summaries. You could obviously not give confidential information like that.

º (1620)

Mr. Steve Mahoney: Minister, how did you arrive at the decision that you would attempt to publish a broad figure for potential losses, as I presume you would call them, that you're pursuing through the courts? When did you make that decision?

Ms. Elinor Caplan: We take very seriously the desire to be accountable and to report. In fact, it's in our interest to let people know how seriously we take these issues of fraud. We're very proud of our 96% success rate in court.

Mr. Steve Mahoney: I was going to ask you about that. That's a pretty good number.

Ms. Elinor Caplan: We publicize that, we put out press releases, we hope the media will cover it, because it lets people know we're after them, we're not going to let them get away with defrauding the Government of Canada, because that hurts all taxpayers. We also think it's important for members of Parliament to have the facts.

Mr. Steve Mahoney: He just said “15 seconds” to me. Could you take a minute and expand upon the negative impact to Canadian business you referred to in your presentation?

Ms. Elinor Caplan: That is extremely important as well. There are two issues I'd like to address. The first is the importance of letting people know when we have been successful in a prosecution and that the court has been actually increasing the amount of fines, penalties, and jail time for people who are convicted of GST fraud and scams. We post these on our website, because we want people, again, to know. And when we realized that it was possible, in the aggregate, to give greater information, so that the committee could talk about it and help us to publicize the good work we're doing, we came up with a proposal that we thought would meet the committee's needs.

The other important part of this is the impact on business. I have met with businesses who are very aware of the very low 0.012% of actual fraud. What they said is, if you tighten this up too much on the front end or attempt to change the system, you're going to seriously hurt business.

The Chair: Thank you very much, Madam Minister.

Now we're going to turn to Ms. Wasylycia-Leis, eight minutes.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you, Mr. Chairperson.

I want to follow up on Steve Mahoney's comments, which border on cheerleading for the government, and try to get at an understanding of this issue. I'm new to this committee, so I don't have all the facts, but it seems to me that fraud is fraud is fraud, and if there is an incidence of fraud, whether we're talking about $25 million or $1 billion of GST, and given the full range of what's been speculated about with reports through court cases and the media, and given the fact that we don't really know the full extent of the fraud happening with respect to GST, we're trying to find out as a committee what's changing with the whole system, so that we will know as soon as possible and so that we've got some way to be accountable for what is happening.

Ms. Elinor Caplan: Let me be really sincere in giving you this answer, because I think it is extremely important. The only place I have seen a billion dollar number is in the amount of reassessments we collected last year, $846 million. We work very hard to identify where we suspect, gather the information, and go to the courts, but unless the courts have identified the fraud, it's not fraud, and even though we have a very successful record of prosecutions at 96%, in the 4% of our losses the courts have said it's not fraud, those people were not guilty. When you look all the way back to 1991 with the GST, the total fraud loss is $60 million. I think it's a lot of money, but it is not anywhere near the numbers that have been bandied about. That's where the 0.012% number comes from.

The other point I wanted to make on this is that CCRA has a very good record of compliance, one of the best of any tax administration in the world. In the area of GST we have a relationship with the MRQ from Quebec. The figures that have been presented before the committee include this experience, because the MRQ delivered the GST program on behalf of CCRA. Because the court cases are ongoing, the investigations are ongoing, and court decisions come forth, the numbers do change, but I think it is very important for us, on an ongoing annual basis, to let you see the importance of that record, so that there is no misunderstanding. In the past--and I'm not at this point suggesting motives--in reporting I think the information has sometimes misrepresented the facts. Mr. Mahoney asked when we made the decision. I said it was very important for us to be able to give to public accounts accurate information, so that they could see the trend, and not then be open to this kind of misinformation. It's important that taxpayers know the good CCRA is doing. I put it this way: we don't want anyone to pay more than their fair share.

º (1625)

Ms. Judy Wasylycia-Leis: Obviously, if there are court cases pending, we don't know the extent of GST fraud at this moment, but whatever the amount, it seems to me that this issue is a bit like the gun registry fiasco. The government is ill prepared to take action until the Auditor General reports on something or until court cases are reported on by the media, and then there seems to be a plan. It seems to me that we're still running to catch up and we're not getting all the information on a timely basis, so I'm still wondering whether or not systems are in place, as the Auditor General has recommended, to actually address all those concerns. I'm wondering if the Auditor General could indicate whether or not she feels the agency has taken the kinds of actions necessary to help us deal with GST fraud and to ensure accountability to Parliament.

Ms. Sheila Fraser: As I mentioned in the opening statement, the last complete audit was in 1999, so it is somewhat dated. We did a follow-up in 2001. In 1999 we did have concerns, which I have outlined, about the level of compliance. One of the concerns we had was that the number of files being selected for audit had been decreasing, and the agency itself, I think to their credit, in its performance report indicates that it is not meeting its targeted levels for audit. I think they should be commended for noting an area where they believe they have not met their own target and where improvements are necessary. I think the minister has indicated that new funding is going in there.

But there were many issues that we raised. In our 2001 follow-up we saw the department was beginning to address many of them. There are pilot projects. It might actually be interesting for the committee to ask the agency what some of these new initiatives are, what they are doing in the compliance area to increase the coverage.

Ms. Judy Wasylycia-Leis: Let me, then, start with some of the recommendations made by the Auditor General, until my time runs out. Under the registration review process the Auditor General says, “Ensuring that new GST registrants are legitimate would help to prevent cheques being issued on fraudulent claims.” Could you give us your plan of action on that one?

Ms. Elinor Caplan: This pilot project I referred to has been in place for about 18 months, and in the next few months it will become the national standard. I'm going to call on David Miller, assistant commissioner, assessment and collections. He'll give you the details of how this program functions and operates. As I say, we try in this program to recognize that we don't want to place too onerous a burden on new legitimate businesses, and that's why we established it as a pilot project, so that we could be able within five days to do the checks where we had concerns.

Mr. Miller.

º (1630)

Mr. David Miller (Assistant Commissioner, Assessment and Collections Branch, Canada Customs and Revenue Agency): Thank you very much.

Enhanced registration review is one of the major initiatives we have. With registrations of between 250,000 and 300,000 new businesses every year, as the minister mentioned, we have to be very careful to ensure that we do not do something that is somehow detrimental to the number of businesses out there that are legitimate and need the cashflow associated with the input tax credit, as opposed to those few that may have other motives. So we've structured our pilot in such a way as to identify the highest risk new registrants. We have a group reviewing each applicant within five days to ensure that all the proper information is there. If there's information missing, we then report to an audit group for follow-up, and if that information has not been provided by the registrant within 45 days, we will not proceed with that particular registration.

Registration itself is one element we can tighten up to prevent the possibility of fraud, but there are several other initiatives, including education of legitimate businesses, again as the minister mentioned, and various other things we can do after registration to ensure that those people or organizations or companies are valid and understand their rights and obligations under the current tax laws.

The Chair: Thank you very much.

I was really trying to understand the annual report of the CCRA, but now we're going to the second round.

Mr. Jaffer, four minutes.

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Thank you, Mr. Chairman.

I want to go back to one point in the minister's statement: “I think it's important to understand that while we no longer label distinct teams,” and I believe that's for the GST fraud, “we still possess the expertise and resources necessary to investigate all tax fraud, including GST fraud, because--and this is important--the fraud is often interrelated and often overlaps.” Senior people in your department have told us you have no ability, no surveillance capability, no fixed cameras, no stake-outs, no wiretaps, to have real investigations on this fraud. As you disbanded the unit, it seems you're not giving the proper attention to this fraud. I just don't know how you can say you have the expertise and the resources when the work that was being done by the GST investigations unit prior to 1995 is not being done any longer.

Ms. Elinor Caplan: Maybe I can explain it to you this way. Remember when the Reform Party first came along, and then they changed their name and became the Alliance? They still exist, they weren't disbanded. What we did--

Mr. Rahim Jaffer: I just need clarification on this.

Ms. Elinor Caplan: I'm trying to clarify for you.

Mr. Rahim Jaffer: Do you in fact have cameras, security, and wiretaps? That's what I'm asking. It used to be done prior to this.

Ms. Elinor Caplan: The investigation unit still exists. We have excellent relations with the RCMP and local police, as I said in my statement, and when we require their professional assistance and support, they do that for us. Not only did we not disband, we are more effective in our approach, and the proof is on slide 3. During the time you're referring to we had 22 cases per year--that was pre-amalgamation--and now we have 44. So by bringing together the greater expertise in a larger and expanded and better unit, we now have twice the investigative and prosecutorial capacity we had before. I know that's hard to understand. That's why I wanted to do it in the context of the name change of Reform to the Alliance. They didn't disband, we didn't disband. The CCRA is bigger and better, and we're doing twice as many cases in prosecution with our improved multidisciplinary approach and the support we have from the police when we need them.

Mr. Rahim Jaffer: That's for all cases, though, it's not just strictly GST. The fact is that the GST unit was disbanded, because you're not doing specifically GST fraud investigation with that group. It's all types of losses that are being investigated under CCRA now as one whole group. So in fact, your analogy is not correct.

Ms. Elinor Caplan: I've been trying to explain this to you. We have double the number of GST cases, greater capacity in our investigations unit, and the proof is in the number of convictions we're getting in court. I would say to you, there are some people who look backwards, and we look backwards to say have we improved, we are making progress in doing better, and I think any objective observer would say we're doing a really good job.

º (1635)

The Chair: Mr. Gaudet, four minutes.

[Translation]

Mr. Roger Gaudet (Berthier—Montcalm, BQ): Thank you, Mr. Chairman.

Madam Minister, you stated the following in your presentation:

After all, since 1991, about half-a-trillion dollars in GST has been collected and the courts have confirmed that close to sixty million dollars was indeed recognized as GST fraud.

All of which means that since 1991, you have managed to recover $500 million.

[English]

Ms. Elinor Caplan: Last year in reassessment we collected $846 million additional because of the audit and reassessment practices in the agency. Since 1991, when GST began, we have identified through the courts $60 million in GST fraud. We have other cases before the courts now, the MRQ has some cases, and while we're confident, until the court says it's fraud, those people are not guilty of fraud.

[Translation]

Mr. Roger Gaudet: That wasn't my question. You say that since 1991, you have collected half-a-trillion dollars. That's $500 million, is it not?

[English]

Ms. Elinor Caplan: It's slide number 2. We have collected $537 billion in gross GST since 1991, and the GST fraud, as confirmed by the court convictions, is $59 million, which represents 0.012%. We collect $1.2 billion every day.

[Translation]

Mr. Roger Gaudet: So, if I understand correctly, out of a total of half-a-trillion dollars, only $60 million was recognized as fraud. Correct?

[English]

Ms. Elinor Caplan: Yes.

[Translation]

Mr. Rob Wright: We also do some reassessments.

[English]

About 3% of our revenue is secured from reassessment. So although it's not criminal fraud, we do reassess $6.5 billion a year in our whole audit program.

Ms. Elinor Caplan: That's why I say we have one of the best performance records of any tax administration in the world when it comes to compliance, not just with GST, but overall. And if we were to attempt to be stricter in our compliance approach, businesses would suffer. That's been the experience internationally.

º (1640)

The Chair: Thank you.

Next we're going to Madam Phinney for four minutes.

Ms. Beth Phinney (Hamilton Mountain, Lib.): Thank you, Mr. Chair.

I have two questions. I'll give both, and then you can divvy out the time.

The Auditor General mentioned that you had drafted new guidelines for managing prepayment audits. What percentage of the work you do is prepayment audit?

The other question I have is really down to the grassroots and things that come up in the constituency office. When somebody has been audited and they appeal, do you feel the appeal process has been improved, is it satisfactory, and is it distant enough from the original audit that was done?

Ms. Elinor Caplan: One of the things I've become very aware of since my arrival at CCRA is the fairness procedures and the appeal procedures. I think it would be a fair criticism to say many people believe they're too slow, and one of the things we're trying to do is to make them faster. I'll give you an example, as someone who had an issue that did relate to GST investigation in my constituency office, which is where I first learned about this, as all members of Parliament do. I had a company come to me and say, they put a hold on my GST rebate. With this company, we were talking hundreds of thousands of dollars every month, yet they were a very small company, with fewer than 50 employees. They said, we will have to lay off people. We need to have that cheque for our cashflow. We expect it every month. We do everything properly, but they have come in to audit us, and while they're doing it, they've put a stop on the cheque. That's the sort of concern we have to balance.

Ms. Beth Phinney: And are you doing that?

Ms. Elinor Caplan: That's exactly what we're doing. Whenever we have a suspicion, we put a stop on the cheque until we've investigated, but we try to do the investigation quickly. If we believe something improper is happening, we take appropriate action, but there is an appeal and a fairness provision and appeal procedures all the way through the courts, till the court ultimately makes that decision.

Ms. Beth Phinney: Have you shortened the time?

Ms. Elinor Caplan: It's not only shortening the time. I've had complaints that the penalties and the assessments are too tough.

It's really on behalf of Canadian taxpayers. That's why I say we don't want anyone to pay more than their fair share. They can apply for fairness and appeals and so forth, and given the resources we have, we're doing the very best we can to find that balance. If people need to be audited and checked, that's in the interest of taxpayers, but we want to make sure of our support for the business community. Giving them information in advance about what the expectation is, posting things on our website, holding seminars and forums around the country, working with associations and business groups are ways to give business the information they need to have confidence that what we're doing is not only in accordance with the law, but is fair.

Commissioner, did you want to add something?

Mr. Rob Wright: We also have an appeals branch that is very distinct from the audit program. There's a non-court-based appeal of taxes that are in dispute, and we have a high degree of success in managing that. We did identify in our last annual report to Parliament that the Auditor General audited that in that program we have timeliness issues, and we're working hard to improve our record on timeliness this year. It's a key objective for this year.

The Chair: Okay.

Ms. Wasylycia-Leis, four minutes.

Ms. Judy Wasylycia-Leis: Thank you very much.

I need some clarification on the whole issue of reporting GST fraud. I'm going through the Auditor General's statement, and she makes several points: “it appears that all types of GST fraud were initially reported in public accounts”; “the agency is not in contravention of the Financial Administration Act, but Treasury Board policy and Public Accounts guidelines require the reporting of such losses.” The agency is saying GST fraud does not meet the intent of those guidelines, the Auditor General is acknowledging that while GST fraud cases can take years to settle, they ought to still be, according to the guidelines, reported as soon as possible. And she concludes by saying, “we believe that cases of fraud being pursued to the court system could be reported in the Public Accounts in accordance with this guidline.”

First, I want to ask the minister if that's happening, and then I want to ask the Auditor General if the answer meets her recommendations.

º (1645)

Ms. Elinor Caplan: In fact, one the things I am very pleased with is the proposal we have put forward to improve that kind of reporting, so that the public accounts committee will have that information available to it and will be able to look at the trends. The proposal that was presented today the Auditor General has said meets all those tests.

We take the recommendations of the Auditor General very seriously. She and her officials spend a lot of time in our agency, because of its importance to taxpayers, to ensure that we are doing things as well as we can. I believe in the theory of continuous improvement, and I'm pleased to say, whenever we get advice from the Auditor General, we not only take it seriously, but we look to take action in those directions, because there are always areas where we can learn from past practice and move forward. With the last report of the Auditor General, we have taken action to respond on all the items that were recommended to the agency. Often, the way we do that is through pilot projects, so that we can test and evaluate, see what is working, and look at what the outcome and the impact are, because we are concerned that we not be an impediment to business. We know it's in everybody's interest to see the economy grow, to see businesses prosper, to have people pay their fair share of taxes, and we want to do that in a way that supports the voluntary compliance system that Canada is, I would say, lauded internationally for.

Ms. Judy Wasylycia-Leis: So with this new approach, how would Parliament hear about a court case involving GST fraud? Would that be reported as it goes through the courts, along with the amounts at stake?

Ms. Elinor Caplan: I think it's important again that the tax laws of Canada are very clear on the importance of confidentiality. We do not report names of any individuals or companies until such time as there has been a conviction, and then the information specific to the individual or company is made public. However, in the proposal under tab 11 there are documents in the aggregate that we have proposed so that you can see the numbers as they relate specifically to each of the different tax lines. What we're saying is that we not only want to do this for GST, we want to do it for all the different tax lines, so that you can monitor how well we are achieving our objectives.

The Chair: Thank you very much.

I a few items for you, Madam Minister, but first I have a question for Mr. Morgan.

On the policy on losses of money and offences and other illegal acts against the Crown, which is Treasury Board policy, I'm looking at page 13 under “Losses”. They say, for the purpose of reporting in the public accounts, “losses include any loss resulting from an incident referred to above”, which is employee theft etc., and “public money that is paid out by a public officer or other person fraudulently”, and further, “an overpayment or an erroneous payment that is issued...”. With overpayment or erroneous payment, has it to be taken to court and confirmed before it's required to be reported in the public accounts under that category?

º (1650)

Mr. John Morgan (Executive Director, Financial Management and Accounting Policy Directorate, Comptrollership Branch, Treasury Board of Canada Secretariat): We require reporting of suspected cases of fraud, and the question then is, how strong is the evidence of this being an illegal act?

The Chair: I didn't say illegal act. The GST is where the government writes cheques to certain Canadians or other people who are, perhaps not appropriately, GST registrants. With or without a court conviction, does it fall under that criterion?

Mr. John Morgan: Of an offence?

The Chair: No, not of an offence. Does it fall under that criterion as being required to be reported in the Public Accounts of Canada?

Mr. John Morgan: Yes, as was mentioned by the Auditor General.

The Chair: Thank you.

I'd like to thank the minister for wanting to be open and transparent, and I'm going to turn to the CCRA 2001-02 performance report on 1-49 There are a few tables here. In table 4.3 you deal with tax services offices collection activity, and you show intake and production, new accounts receivable, and so on. My first question is, Mr. Wright, now that the minister says she's going to report to Parliament according to the tax service, income tax, corporate tax, GST, and so on, can we get these tables in your annual report on the same basis, corporate tax, GST, income tax, and so on?

Mr. Rob Wright: That may be in there already, sir. I would like to make an examination of that. Clearly, when we identify the accounts, we do segment that by tax line. The question is how long we sustain those. I can ask Mr. Miller, who is responsible for our collections function, to help clarify this issue? That wasn't the focus we were geared up for.

The Chair: Right.

Mr. Miller.

Mr. David Miller: Thank you, Mr. Chair.

All our collection activity is broken down by the various tax lines, corporate tax, GST, personal income tax, excise tax. What this table represents is the amount that goes to our tax services office for ultimate collection.

The Chair: I know. I asked if it can be broken into different tax lines.

Mr. David Miller: Yes, we can do that.

The Chair: Thank you.

Also, with the aging of accounts receivable, the next one, 4.4 on the same page, can they be broken down by individual line as well in future reports?

Mr. David Miller: Yes, that's how we operate. We start out with individual amounts and aggregate them for purposes of reporting.

The Chair: Okay.

Mr. Rigby, I notice on table 4.3 you show the write-offs as in 1999 $0.9 billion, in 2000 $0.6 billion, in 2001 $1.1 billion, in 2002 $1 billion. You did indicate to me earlier that on an individual basis, when you take someone to court, you can differentiate between what are legitimate taxes owing, involving normal collection activity, and fraudulent activity you would like to prosecute.

Mr. Stephen Rigby: On the basis of the evidence we have.

The Chair: On the basis of the evidence you have in front of you. Is it not possible to aggregate that evidence so that you can tell how much was write-offs and how much was fraudulent losses where you went to court and achieved a conviction, or if you can't find the guy, but you're still thinking it can be fraud, and report it on that basis?

Mr. Stephen Rigby: If I understand your question, Mr. Williams, that's what we're proposing to do. We would indicate the amounts we would recover.

º (1655)

The Chair: I know, but it seems to me that you only intend to report fraud when it is a conviction you have received. The analogy, to me, is, nobody is dead until he or she is certified as such. Fraud is fraud, and you know there's fraud, and if you can't find the fraudster and you can't prosecute, because you can't find him, it is still fraud, and you can report it as such, surely.

Ms. Fraser.

Ms. Sheila Fraser: Mr. Chair, I don't like to do this, but I think you may not be correct. The model that's presented indicates suspected cases of fraud, which I think would cover the issues you're dealing with. When the agency suspects that there may be fraud, it is clearly indicated in the model, it is not only those cases where there has been a conviction.

The Chair: Thank you, Ms. Fraser. I didn't have time to study that properly. So suspected cases, even though you don't have a conviction, will be reported as losses, not as write-offs.

Ms. Sheila Fraser: Yes.

The Chair: And we're going to see it by business line, GST, income tax, corporate tax, duties.

Mr. Stephen Rigby: By revenue line, yes.

The Chair: I think we're actually making progress here, Mr. Mahoney.

Mr. Steve Mahoney: We knew that before, Mr. Chairman. I'm just glad that you've finally arrived.

The Chair: Well, there we go.

We will now pass the floor to Ms. Meredith.

Ms. Val Meredith: With all due respect, I'm going to complain, like Mr. Mahoney, because you asked my questions. I was going to ask if you didn't distinguish between a disagreement on numbers with clients and somebody who is deliberately misrepresenting or trying to defraud the government, and I think that's probably in line with what the chair asked. So I just want to confirm in my own mind that you will be giving that information to Parliament through your reporting mechanisms, so we don't read press releases and find out that information.

Ms. Elinor Caplan: In fact, you'll have both. You'll have press releases, you'll have the website, and each year at the public accounts committee you'll have a reporting of the year's activities.

Ms. Val Meredith: I would like to see a commitment that it's in the reporting mechanisms of the main estimates, the supplementary estimates, and the public accounts. As I mentioned before, we were accused in committee, yesterday or the day before, of not doing our job. We can't do our job unless the information is available to us in the documents we use. So there is a commitment that the changes you're making in your reporting will come to us through public accounts, estimates, supplementary estimates, all of these sorts of things?

Ms. Elinor Caplan: That's the proposal we've put forth today, so that we can give you the information we think will help you to track year by year the activity on compliance.

Ms. Val Meredith: So for the reassessment amounts of money that are out there, where you're reassessing the accounts--

Ms. Elinor Caplan: That's already reported.

Ms. Val Meredith: But where you're reassessing amounts, that report will be broken down, so that we know in this year this amount of money is being reassessed and you expect to receive that amount of money in these years or next year or whenever?

Ms. Elinor Caplan: That's already available in our annual report. That's the point I was trying to make before. What we're attempting to do is enhance the information you have on those things that take numbers of years to complete. The difficulty we have had is that with the cases that ultimately end in court because of a fraud or a scam, the amount of time it takes to gather the evidence and work through the court can be so long from the time it began until we actually get a conviction, so that it's a question of how we give you that information in a way that is relevant. The proposal we put forward today, which I'm pleased to say the Auditor General has approved, we think will give you that information year by year, so that you can see the trend in a meaningful way. We don't want to give you information that isn't going to be meaningful. That's why we have the business plan, the performance report, the annual report, plus this procedure at public accounts, so that you can have accurate useful information.

Ms. Val Meredith: I appreciate that, Madam Minister, but in what Human Resources Development Canada provides to us they talk about the original loss, the amount recovered in previous years, the amount recovered this year, and when they expect to recover it. That's useful information for us to have. So I'm wondering if you are also going to go back into last year or the year before or previous years and bring it into line with this, so that an amount that was in the books three years and you haven't received yet, but you do expect to receive, would be somehow accounted for.

» (1700)

Ms. Elinor Caplan: That I think is the reassessment, and each year that has been reported in--

Ms. Val Meredith: It might not necessarily be reassessment. I assume reassessment is when you're renegotiating the numbers that are subject to disagreement, as opposed to where you suspect something misrepresented or fraud.

Ms. Elinor Caplan: I see.

The Chair: You're running out of time, but I'll ask Mr. Rigby to tell us exactly what a notice of assessment is, for the clarification of the committee.

The Chair: Oh, okay.

Mr. Stephen Rigby: We are going to give the same information you've just cited, Ms. Meredith, for the subsequent recoveries we described to you earlier. We would report the year the loss was reported in public accounts, the amount of the original loss, the amount recovered in previous years, the amount recovered in the current year, the amount estimated not to be recovered, and the amount expected to be recovered subsequently.

The Chair: Does that cover it off?

Ms. Val Meredith: Pretty much, yes.

Ms. Elinor Caplan: Would you like to have the number of years in jail time?

The Chair: No, I'm sure that'll be in the press release, Madam Minister.

Ms. Fraser has a point.

Ms. Sheila Fraser: I'd just like to make one point of clarification. When we talked about cases of suspected fraud in the model being presented, it's cases pending before the courts.

The Chair: The concern I have is with this very narrow definition of what constitutes fraud. As I said, a person may be dead even though they're not certified as such. You have 5,000 auditors and investigators, and when you uncover fraud or what you believe to be fraud, it is not taxes owing, it is a loss to the Government of Canada, because you've paid the money out and you're trying to recover it. As Mr. Morgan said, that is a loss, be it fraudulent or otherwise, and should be reported as a loss to the Government of Canada in the public accounts. If you have paid this money out that should not have been paid out, whether you commence an investigation or not, it should, by Mr. Morgan's definition and confirmation, be reported as a loss that may be recovered in a future year.

Ms. Elinor Caplan: As an accountant, Mr. Williams, you should be satisfied with the fact that the proposal we have put forward meets the test of the Auditor General, who believes we will be giving you information in a form that will fully reflect the accurate situation.

The Chair: I'm skeptical.

[Translation]

You have the floor for four minutes, Mr. Desrochers.

Mr. Odina Desrochers: Thank you very much, Mr. Chairman.

Madam Minister, you stated earlier that CCRA employs 5,000 auditors and has 1,000 people in the Investigations Program.

You also stated that CCRA received an additional $950 million over a five-year period, which represents $190 million a year. You report that from 1991 to the present, CCRA has collected $60 million. Don't you find it a little much to have spent $190 million to recover $60 million?

[English]

Ms. Elinor Caplan: The $60 million was the amount identified in the court as fraud. Just last year alone and just in GST, because of the audit expertise, through reassessment we recovered $837 million. When you look at the amounts that come in because of the audit function, I think you'll come to the same conclusion, that Canadian taxpayers are getting very good value for the money we invest in the audit function at CCRA. That business case is the reason we were able to receive additional resources, and also because it's important in compliance to send the message that we expect everyone to pay their fair share, no more than their fair share, and we do that with an audit function that not only identifies those we think are of high risk, but also has the capacity, on a random basis, to do the kind of checking Canadians would expect.

Having said that, I don't know about you, but I think the average Canadian, particularly the average Canadian businessperson, isn't overly thrilled and excited when they get a knock on the door from CCRA to perform an audit. They should be, because we're very reasonable, we're very fair, we don't want them to pay more than their fair share, but I know not everybody is happy to see us when we arrive.

Do you want to add something? Do you think they're happy?

» (1705)

[Translation]

Mr. Odina Desrochers: Could you keep your answers brief, otherwise I'm merely wasting my time. I have the release. I don't need to hear it a second time. Go ahead, I'm listening.

Mr. Rob Wright: We have a team of 5,000 auditors and the work they do has a major impact. Our reassessments amount to $6.5 billion every year.

[English]

So it's very important that the audit and investigation team is responsible not just for fraud, but particularly for expanding our reassessments, which amount to $6.5 billion every year. It's a very productive use of our resources.

Ms. Elinor Caplan: And that's all the tax lines, but because we were talking GST specifically today, I was referring to the smaller number.

[Translation]

Mr. Odina Desrochers: Getting back to your method of calculating alleged fraudulent claims, when someone is charged with fraud, do you proceed immediately to calculate the amount involved, or do you wait until the courts have formally found that person guilty of fraud?

[English]

Ms. Elinor Caplan: We gather the evidence, charges are laid, and the court decides whether we've made the case that a person is guilty. If we haven't sufficient proof, they're found not guilty and there's no fraud.

[Translation]

Mr. Odina Desrochers: That's not what I asked you. To arrive at your figure of $60 million, did you proceed with your calculations as soon as persons were charged with fraud, or did you wait until these persons were actually found guilty?

[English]

Ms. Elinor Caplan: Where the courts have said they are guilty.

The Chair: Mr. Mahoney, four minutes.

Mr. Steve Mahoney: Thank you.

Some members opposite said I sounded like a cheerleader for the government. Rather than my leading the chair, I'd like to ask the minister to respond to the points in the Auditor General's report, where it says:

We found that Revenue Canada's Summerside Tax Centre, until recently its sole GST processing centre, has steadily become more efficient. It has streamlined several processes, enhanced its error correction procedures, reduced unit costs and improved the timeliness of its processing operations. As a prelude to decentralizing the processing of GST returns, Revenue Canada further simplified its processing procedures. The results of a pilot test point to further efficiency gains.

I'm reading from appendix A of the Auditor General's report here this morning, and it's the report of the Auditor General of Canada 1999, chapter 16, on GST returns processing. So there's some pretty positive stuff there, but in fairness, it goes on to say that there are certain standards on quality, accuracy, timeliness, etc. that could be improved, and it particularly focuses on the validity checks, stating that they're “the cornerstone of its pre-payment audit program” etc.

Maybe you could expand and tell us in response to what I would call the cheerleading of the Auditor General--I always appreciate that--in this report, though there are also some legitimate points, how you might improve certain processes there.

Ms. Elinor Caplan: I think it's important for everyone to know that in an administration as large as CCRA, while we are a model and other tax administrations come to us for benchmarking and examples of what we do and how we do it, we do subscribe to the theory that perfection is an elusive goal. We always try to improve, there are things we can learn from other tax administrations, and we take the advice of the Auditor General of Canada very seriously. We have responded to suggestions with pilot tests and by changing practice to the point where many of the practices that have been established by the Canada Customs and Revenue Agency are considered best practices internationally. When I say we have one of the best compliance records, we also, as a tax administration, should be very proud in Canada of the international reputation the CCRA has, the good relationship we have in working with provinces, the fact that we're entering into agreements with those provinces, so that we can reduce the burden on individual taxpayers in having to deal with more than one administration, and therefore live up to our mandate of trying to eliminate duplication and cost to the provinces. In order to achieve all these objectives, we are always looking at how we can improve efficiency, ensure compliance, and at the same time ensure fairness for Canadians.

We're a values-based organization. Integrity, respect, competence, professionalism, fairness are the values we try to live and work by. As I said, I'd like to say we're perfect. We are, I think, getting a little more perfect every day. We look forward to having the opportunity to come to this committee and share with you the progress we are making as we strive for perfection.

» (1710)

The Chair: You're out of time, Mr. Mahoney, but I would like to thank the minister for bringing the committee up to date on the progress CCRA is making in an important job. I think the committee does recognize the difficult work Mr. Wright and his officials do and congratulate them on it. I do think, on behalf of the entire committee, this should be on the record.

Mr. Jaffer, four minutes.

Mr. Rahim Jaffer: Thanks, Mr. Chairman.

I just need one clarification. Minister, you talked about the $60 million being actual convictions, and then there was $94 million in the courts, and the total was $154 million. I believe someone asked you whether the money in the Lam case, for instance, would be included in that total. You initially said yes, but then you said, no, it's in abeyance, I believe. What exactly does that mean, and where would that be reported currently in the public accounts?

Ms. Elinor Caplan: I'm being informed by my officials that because this case is technically still before the courts, I can't, without consent from the individual, share any details of the case. What I did correct for the record was the question of where it was included. There are some cases that are very old, and this goes back to 1992.

Mr. Rob Wright: That case, under the new reporting scheme, would be seen in there, and if it were in abeyance, we would have an allowance for that. So under the new proposal--and we do have a considerable amount of work to get that thing operational--it would be caught and not just disappear.

Ms. Elinor Caplan: The entire regime came in in 1991, and we've learned a lot and improved a lot of our practices since then. When we went back to the beginning of 1991 to identify the total fraud convictions, we came up with the number of $60 million. We then went to the cases actively before the court.

Mr. Rahim Jaffer: Madam Minister, what exactly does abeyance mean? Is it attributed as a loss in the public accounts, or is it just sort of floating somewhere? There is money attributed to that case, clearly, but I don't understand where it's listed, and that's what I think the problem is here.

Ms. Elinor Caplan: Perhaps what might be most helpful would be to offer a technical briefing at another time on how these particular situations are dealt with by the agency, so that you can understand how we approach these very old cases where we are still going after them.

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The Chair: We're talking here about collection activity, and you were showing your accounts receivable in the table at 1-49. So can we assume that it's just buried in there?

Mr. Rob Wright: It would be in the stream of accounts receivable, but depending on the date of that file, it could be written off as well, it could be an allowance for bad debt at that point. But in the proposal we've made it's important that we would table with Parliament that there's something before the courts, whether it was active or not, and if it were in abeyance, there would be a reference to what was in abeyance. It would be in there.

Ms. Elinor Caplan: The important point to remember is, as I said at the very beginning, that even when we have written off, if there's an opportunity to continue action to recover at some future date, our goal is to do that.

Mr. Rahim Jaffer: In the case of someone like Mr. Lam, who we expect will never come back, do we just leave that hanging, or would we finally say it's lost, it's a write-off, or something?

Ms. Elinor Caplan: Again, I can't speak to individual cases by name, but I can tell you that where we have the opportunity through extradition treaty, we pursue the ability to extradite and bring back to Canada those individuals we have a claim with. We also put a watch list on our borders, so that if someone has left Canada to avoid prosecution, if they come back as a visitor, they will be identified when they reach our border points, and they can be arrested at that time at the border. So--and this is why I mentioned a technical briefing, because these are technicalities-- even where something has been written off, we can reactivate a file that is in abeyance if we feel there's an opportunity to retrieve the money that is owing to the Government of Canada.

Mr. Rahim Jaffer: Specifically in relation to GST fraud, the issue of car flipping has come up in a number of cases. If I understand correctly, there was a conference in 1994 that warned the past Minister of Finance about this particular problem and said the government should do something about it at that time. It's difficult to find any information from that particular conference and about any of the recommendations that were made. Is there anything the department can table pertaining to this particular problem, which was identified by some as being rampant?

Ms. Elinor Caplan: I can ask them to look through the archives, if anyone was here in 1994.

Mr. Rob Wright: I'm not aware of a conference on that. It's recognized that it was an issue, and we've worked with a number of stakeholders, including provincial governments and car associations in key areas, particularly the Atlantic provinces, but I'm not aware of a policy conference about that particular aspect, sir.

The Chair: If you find something, you can send us a letter, that would be appreciated.

Two minutes, Ms. Wasylycia-Leis.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chairperson.

I may have missed this, but could you tell us the total value of proven and suspected cases of fraud?

Ms. Elinor Caplan: Going back to 1991, $60 million.

Ms. Judy Wasylycia-Leis: No, that includes just the convictions, but there are also the--

Ms. Elinor Caplan: You said proven.

Ms. Judy Wasylycia-Leis: And suspected.

Ms. Elinor Caplan: As in my opening remarks, $154 million is the worse case scenario for GST.

Ms. Judy Wasylycia-Leis: Since 1991?

Ms. Elinor Caplan: Since 1991, and that includes both CCRA and the MRQ.

Ms. Judy Wasylycia-Leis: Okay.

I want to quickly touch on one other recommendation area from the Auditor General's statement. It has to do with the effectiveness of validity checks and detecting non-compliance and fraud. In the statement today the Auditor General indicates her previous concerns and does not indicate whether or not you've put a plan in place that's working and proving to be effective with respect to that recommendation. Can you give us some tangible evidence of what's working, how it's working, and what you're doing?

Ms. Elinor Caplan: That's the pilot project I referred to, where within five days of registration we are validating. We had a pilot project for 18 months, it proved to be effective, and within a few months that will become a national standard. I can ask Mr. Rigby to give you more details of that program if you want.

» (1720)

Ms. Judy Wasylycia-Leis: No, that's okay. I'm making the connections. I know we can't talk about individual cases, but with that most recently reported case in the newspapers coming out of British Columbia, would that pilot project have detected fraud much earlier, so that we would have been able to save that much money?

Ms. Elinor Caplan: We've learned a lot since the program first came in, in 1991. We've learned about the different scams. We've also learned that at the time of registration, additional information can be gathered. That's why I've referred to this as continually improving base for the evaluations we do. We are always looking at how we can improve the information we require to give us the ability to identify the high risks, because this is all part of a risk management approach, trying to only identify those where you think there's a risk, while at the same time not placing an onerous and unfair burden on new legitimate businesses.

The Chair: Thank you very much.

Ms. Fraser, I'm looking at the deck Mr. Rigby gave us at the committee. There are three decks. One is “Loss of revenue: court convictions by product line”; one is “Loss of revenue: cases before the courts by product line”; one is “Loss of revenue: court convictions--prior years by product line”. I'm quite concerned, because Mr. Morgan confirmed that losses can be losses, especially with the GST, where we write cheques to people who perhaps were not entitled to them, or whatever the definition is under the Treasury Board's guidelines. I'm quite concerned that we will not get the information where they haven't commenced court action, and yet there was a significant loss. If a person has fled the country and we can't find them, they're not going to initiate a court action. Therefore, will we know, under these circumstances, according to this criterion in the deck they've given us, that there have been these kinds of losses?

Ms. Sheila Fraser: These three schedules deal with the reporting of fraud in the public accounts, and as you mentioned, there's a separate schedule that deals with losses. I presume that under the accounting the agency does of accounts receivable and write-offs, the write-off information would be presented in another schedule and would include the kinds of information you are requesting, but they may want to confirm that.

The Chair: The Public Accounts of Canada has losses by fraud, losses, and write-offs. When you write a cheque as a GST refund and that is not a legitimate refund, it is a cheque written by the Government of Canada according to policy of the Treasury Board, funds paid out by a public officer, and it meets the definition, according to Mr. Morgan, of an overpayment or erroneous payment. Parliament wants to know the amount of these erroneous payments, whether or not you commence a court action. I don't think your deck, Mr. Rigby, is going to give us that information. Is it?

Mr. Stephen Rigby: I concur with the Auditor General. The information you're referring to I think does appear in the schedules covering both accounts receivable and write-offs.

The Chair: Then perhaps you can write the committee a letter explaining how you can assure me and this committee that this information will show up. Is that possible?

Mr. Stephen Rigby: We can certainly write to you, Mr. Williams, yes.

The Chair: Confirming that the information will show up.

Mr. Stephen Rigby: That it shows up today in the aggregate in the information we put in public accounts for accounts receivable and for write-offs.

The Chair: I'm not worried about fraud, I'm worried about erroneous cheques written by the Government of Canada.

Mr. Stephen Rigby: I understand what you're saying, Mr. Williams. If I can make sure the record is clear here, you're asking for a sub-amount within both our write-offs and our accounts receivable numbers?

The Chair: That's correct.

Mr. Stephen Rigby: That I think we'd have to look into.

The Chair: Well, I think you should look into it.

My next question is perhaps to Mr. Wright. It was reported, when the CBC broke this story, that the Auditor General had advised CCRA about a fraud case--I believe it was somewhere in the lower mainland of Vancouver--and that CCRA had not acted on the tip from the Auditor General. Is that correct, Mr. Wright?

» (1725)

Mr. Rob Wright: I'm not aware of that, Mr. Williams.

The Chair: Okay.

Ms. Elinor Caplan: My understanding is that we do act on tips, and further, that the reason these stories have been out there is our success in getting these cases before the court. That's why I referred to the CBC court reporting. The cases they have been reporting are the ones that are before the courts because of the excellent work that's been done by CCRA.

The Chair: I appreciate your willingness to be open and transparent and provide Parliament with the information we require, but to use the Auditor General's phrase in another circumstance, we seem to have been kept in the dark these last few years. Perhaps you could write the committee a letter giving us the information of previous years in accordance with the information you intend to give us for the subsequent years, so you can fill in the gap from 1993 to 2003.

Ms. Elinor Caplan: We're looking now in our computer systems to see whether or not we can generate that.

Mr. Rigby.

Mr. Stephen Rigby: Certainly, we will make every effort to produce information for years since 1991. I'd just like to put in a rider that some of it may not be available.

Ms. Elinor Caplan: Some of it would come from the MRQ in Quebec. As I said, they deliver the program in Quebec for CCRA. We can't say whether or not they will have that information available for past years either.

The Chair: Okay. I did note that the Auditor General in her letter to me and the committee pointed out that CCRA--back in those days it was Revenue Canada--ceased reporting the information into public accounts because your systems weren't up to par.

Ms. Elinor Caplan: Not quite. It was when these systems came together at that time, and as you know, we have been upgrading on a regular basis because of changes in technology. One of the things I'm particularly proud of, Mr. Chair and committee members, is the information technology division of CCRA, which does its very best to ensure that our systems are functioning as best they can, given the challenges of ever-changing tax laws.

Mr. Rigby, Mr. Wright, did you want to comment on that?

Mr. Rob Wright: I think we did note that at the time of amalgamation we were integrating our systems, which was a major task. That may be what you're referring to.

The Chair: In the January 24, 2003, letter from the Auditor General, the last paragraph on page 3, it says:

In 1993-94 Public Accounts, Revenue Canada-Taxation said in a footnote that its systems could not provide the information on revenue losses due to fraud.

The Financial Administration Act does require that you report that information, so I'm rather disappointed that you just say, well, our systems can't handle it, so you're not getting the information.

Ms. Elinor Caplan: That's not exactly accurate. There were discussions that went on at that time. I guess you can decide, Mr. Chair, if you want to spend a whole lot of time looking backwards or look at the proposal we put forward today. Since we want to share that information with you, we think the proposal that's been put forward is one that, on a go-forward basis, should provide the committee with the information. As well, we've gone back to 1991, so that you can see the scope, which is 0.012% of total collections.

We do subscribe to wanting to continually improve, and the challenges when this agency came together just three short years ago in the amalgamation of our systems was huge. I don't think anyone should underestimate for a minute the difficulty in the creation of an agency while not missing a beat in ensuring that we were providing service to Canadians, collecting taxes and administering the Tax Act of the country. Looking backwards, I'm actually very proud of the progress this agency has made in three years in handling what I think was an enormous task extremely well.

» (1730)

The Chair: Thank you, Madam Minister, and again, we do appreciate the the complex and huge job that CCRA does. If you are sending a newsletter out to the staff of CCRA, Mr. Wright, I think I'm speaking on behalf of the whole committee, so please pass on our appreciation for the hard work and the diligence. As part of the accountability of the organization, you report to the public accounts periodically for us to take a look at issues that come before the committee. In general, we appreciate what you do.

Mr. Steve Mahoney: Mr. Chairman, can I, just for clarification, make a point? This letter, which I have just read in full, refers to a footnote that was in the 1993-1994 public accounts from Revenue Canada-Taxation. We're talking about two years or three years after the GST was introduced in the first place.

Ms. Elinor Caplan: Right, and before the agency was created.

Mr. Steve Mahoney: Then it goes on to say in the current Auditor General's letter:

We should note that we have not examined the CCRA's systems to determine their ability to report losses due to fraud; the Committee may wish to seek more detailed comments from the CCRA on this.

I thought that's what we were doing here. We heard that the difficulty in reporting fraud is being addressed, because under the other system, if a matter was in the courts, they didn't feel comfortable doing it. They're now going to give us a separate line. Isn't that what I heard here today? So I think you've addressed the questions both in the Auditor General's report and in this letter, which I might add is to the chair--as a recycled member of this committee, I may not have been here when this committee voted to instruct the chair to seek such a letter, if indeed that happened. I just want to be clear that while I appreciate your comments back to the staff at CCRA, these concerns are over 10 years old and have been addressed.

The Chair: The concern, Mr. Mahoney, was that--

Mr. Steve Mahoney: I just wanted to clarify that it's a 10-year-old concern that has been addressed. You don't need to respond. You've been responding all day, not acting like an impartial chairman.

The Chair: Thank you, Mr. Mahoney. I'm always an impartial chairman.

Mr. Steve Mahoney: You're not acting like it today.

The Chair: We will have some closing comments from the Auditor General, as we always do.

Ms. Sheila Fraser: Thank you.

We believe the model being proposed by the agency does meet the requirements of the Treasury Board policy and the public accounts instructions manual. Any other information or detail should be determined by parliamentarians in consultation with the agency, taking into account the difficulty and the cost of producing that information.

The Chair: Thank you very much, Ms. Fraser.

The meeting is adjourned.