FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Monday, November 23, 1998

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here this afternoon.

As everyone knows, the finance committee's order of the day is Bill C-43, an act to establish the Canada Customs and Revenue Agency and to amend and repeal other acts as a consequence.

We will begin this afternoon's session with Mr. Walter Robinson, national director of the Canadian Taxpayers Federation.

Welcome.

Mr. Walter Robinson (National Director, Canadian Taxpayers Federation): Thank you, Mr. Chairman. I appreciate the committee's wait for me this afternoon as I was dealing with some day care responsibilities.

Allow me to say what I did not get a chance to say at my earlier appearance last week. I commend this committee for the work it has been doing this fall on Bill C-43, pre-budget, the MacKay task force, and whatever other pieces of legislation are thrown at you. You have really done yeoperson's service in terms of studying legislation before you this fall.

[Translation]

We are very pleased to be here this afternoon to discuss our position on Bill C-43, which creates the Canada Customs and Revenue Agency. As usual, my presentation will be in English, but I will try to answer your questions in the language of your choice.

[English]

My remarks will be extremely brief this afternoon.

The notion of a super tax collection and administration agency, from a conceptual point of view, is a positive one. The goal to simplify administration and reduce overlap and duplication is one we support. We also support the government's desire to operate in a more businesslike fashion. The apparent move to an agency structure that reflects our long-standing demands for alternate service delivery is laudable. However, I appear before you this afternoon to lay out several of our concerns.

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Before embarking on my current career as an advocate for taxpayer emancipation, I worked in the private sector, in a business development and program management capacity, for an international outsourcing contractor. In this capacity I counselled governments on the three main criteria to be upheld in any move toward alternate service delivery: one, to demonstrate a value, usually cost savings and/or better service, for taxpayers; two, to ensure continuity of service; and three, to always consider affected staff interests.

In our view, the value in terms of cost savings of this agency as presently proposed is extremely tenuous. To date, to the best of our knowledge, not a single province has signed on to this agency or even communicated a public desire, through memoranda of intent, to seriously consider the merits of the CCRA. The Canadian Tax Foundation has noted that Alberta and Ontario are extremely suspicious, given the federal government's objections to adopting a less progressive personal income tax structure.

While the department has produced an impressive study that points to impressive savings arising from the Canada Customs and Revenue Agency, especially in the realm of reduced compliance costs, this study, as far as we're concerned, is based on complete provincial buy-in to the CCRA concept. I reiterate that to the best of our knowledge, no provinces have signed on to date.

With respect to continuity of service, our offices across the country are receiving increasing numbers of letters of complaint from taxpayers who perceive that they have been dealt with in an unfair or arbitrary manner by Revenue Canada. To deal with this, we support the creation of an office of taxpayer protection, as outlined by the official opposition, to alleviate taxpayer concerns about an unresponsive and behemoth tax agency.

Finally, when it comes to staff interests—and I know you've heard from them—I would urge the members of this committee to seriously consider the objections raised by the various employee groups at Revenue Canada. To move with the agency proposal in the context of a serious employee concern that presently exists would be a mistake. The tone and level of this concern are much greater than what many of us saw with the Nav Canada proposal or the move to create the Canadian Food Inspection Agency.

I must reiterate that the idea of an arm's-length revenue collection agency has some merit. We urge the government to do a little more homework with respect to provincial buy-in and assuaging taxpayer concerns through the adoption of the opposition's proposal for an office of taxpayer protection, and to spend more time working with the various employee groups to secure their cooperation with and understanding of the government's stated policy directions.

To proceed at this point in time represents bad public policy. The goals of saving taxpayers' money, operating in a more businesslike fashion, and providing one point of contact for tax filers remain laudable. However, we feel that Bill C-43 as presently structured will not achieve these goals.

[Translation]

Thank you for your attention. I'm eager to answer your questions.

[English]

The Chairman: Thank you, Mr. Robinson.

We'll now proceed to the question-and-answer session. We'll begin with Mr. Kenney.

Mr. Jason Kenney (Calgary Southeast, Ref.): Thank you, Mr. Chairman. I'd like to thank the witness from an organization that I have some passing familiarity with.

Ms. Paddy Torsney (Burlington, Lib.): More than passing, I hope.

Voices: Oh, oh!

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Careful; he's going to run for the Reform Party.

Mr. Jason Kenney: Not likely.

I would like to ask Mr. Robinson particularly about the issue of accountability, which really hasn't come up much in the hearings to date. He raises concerns that we in the opposition have given voice to about the potential for diminished accountability.

I wonder if he could comment on whether he thinks Revenue Canada agents operate with complete accountability as it is, or whether he thinks there are occasions when they overstep the bounds of prudent and reasonable collection procedures—whether sometimes they harass taxpayers and get a little out of hand. Does he think there's a need for some kind of independent authority, such as a taxpayer ombudsman, to ensure that overly zealous tax agents are kept in check?

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Mr. Walter Robinson: Thank you, Mr. Kenney.

I would echo Ms. Torsney's comment that I hope you have more than a passing knowledge of the organization I represent. And with respect to Mr. Discepola's comment, actually I was thinking of running for the Liberal nomination in Vaudreuil—Soulanges.

Voices: Oh, oh!

Mr. Walter Robinson: With that, I would answer your question in a couple of manners.

First of all, with respect to the impartiality and how Revenue Canada tax collectors go about their job, no one will doubt that Revenue Canada and our system work on a self-compliance mode. We assume that everyone is honest in filing their returns. When people run afoul of that honesty, Revenue Canada has a duty to go after money that is owed to the Government of Canada. However, as I noted in my presentation, we are receiving increasing numbers of letters from various taxpayers on various matters where they believe they've been dealt with in an unfair or arbitrary manner.

I'll be the first one to tell you that 50% of the time, it's just a question of interpretation, and indeed Revenue Canada is trying to apply things in a fair and equitable manner. So there's confusion there on behalf of the tax filer.

But on the other hand, we can speak to some of the letters and some of the anecdotal cases that have been brought up by people, such as the case of a Calgary woman who, I believe, was a quadriplegic and had four people attending to her. Revenue Canada looked at those people as employees and noted that she was to be charged for withholding taxes that should have paid on her employer remittances. There is an example of where an overzealous application of the law stayed away from the spirit of the law and read it literally.

An independent office, as proposed by the official opposition, would be a positive step in moving forward and ensuring taxpayer confidence—I'm not going to say “restoring”, but ensuring taxpayer confidence—in the fact that there is an office of resort to move to when people think they've been dealt with in an arbitrary manner.

It should be noted that the Declaration of Taxpayer Rights arose from perceived injustices of the early 1980s. The then revenue minister, the Honourable Perrin Beatty, brought that in as the first step. The opposition proposal would go a step further to ensuring confidence that people are dealt with in a fair and equitable manner.

The Chairman: We have Mr. Lippert here.

We'll let you make your opening remarks, and then we'll go back to the question-and-answer session. Everybody will get more time for questions and answers.

Thank you.

Mr. Owen Lippert (Senior Policy Analyst, Fraser Institute): Thank you very much for this opportunity to appear. I apologize that my remarks, which I've handed out, are not in Canada's other official language. That reflects the speed with which this was put together.

My remarks are not going to deal with what you might usually assume to be the interest of the Fraser Institute, which is the size of the tax bite in Canada. Rather I'm going to concentrate on the procedural fairness of tax collection in Canada and a reflection of how that procedural fairness may or may not be influenced by the new proposal for a Canada Customs and Revenue Agency.

I begin my remarks by saying that within the legislation, there ought to be an explicit statutory definition of “procedural fairness”. In the absence of such a statutory definition, common-law definitions of “procedural fairness” would apply. It is unlikely that the Charter of Rights and Freedoms would apply, except in the most egregious of circumstances, because it would have to be some measure of taxation that injured the person under section 7, and those are untested waters.

For this committee, I would think there is a decided advantage in having an explicit statement of procedural fairness in the legislation, because that would ensure that you, as legislators, would control the definition of “procedural fairness”, rather than that control going to the courts and having them interpret what “procedural fairness” meant.

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Within that, you may also want to consider explicitly recognizing a civil right of action, not over the amount of taxes, as they already do, but in terms of how they were dealt with by this new agency. There is a slight model for this in the Canadian Environmental Protection Act, in which individuals may, with the concordance of the minister, bring civil actions against people or companies who they claim have violated the environmental protection laws. As the CCRA would be an arm's-length agency, there is a question about whether in fact that might not be applicable as well.

That's really my main point about what I think many people would like to see in this legislation. I have some follow-up points on the implementation as proposed in the legislation.

One is to simply say that procedural fairness is best achieved with a simplified and harmonized tax system. In that regard, the best model of course, at least from our perspective and our research, would be a flat tax in which everyone paid a certain amount. The flat tax is still being debated in the United States and of course in this country.

There are other steps to take, short of a flat tax. One of them, which I would think the new CCRA would be very anxious to pursue, is more federal-provincial tax harmonization, particularly in the collection of personal income tax. Right now we have a system described as “a tax on a tax”; the provinces are collecting a portion of the federal tax. There are proposals for a tax on base, where the federal and provincial governments would get together and ensure a consistent rate. The advantage to this is that often what we've seen when the federal government offers a tax break is that provincial governments will step up and raise their rates in order to capture that revenue. So the taxpayer really doesn't see a benefit, and it's simply a shifting between the two.

For more on that issue, I point you to the back of my sheet of paper. This is a table from a book by Thomas Courchene, Social Canada in the Millennium. He explains some of this. I would think that would be something you would instruct the CCRA to pursue.

The other issue of course is the harmonization of the GST, which again is, as I understand it, one of the objects of a new CCRA. I would underscore, as many have, the importance of harmonizing the GST in order to avoid the cascading effect.

In order for the CCRA to be a force for harmonization, it has to be attractive to the provinces as a low-cost provider of collection services. If you look at the supporting material, it would seem the minister is arguing in favour of CCRA, because it gives the flexibility needed to retain skilled accountants, so that they don't just spend their time in Revenue Canada in order to go off and work for one of the big accounting firms at a much higher salary, and to be able to rearrange its resources in order to reduce costs. Indeed, in the claims made as to cost savings, perhaps this committee would ask the CCRA to actually provide benchmarks as to its claims, so that within certain periods of time, it would have to come back to report on its progress.

This is complicated by the arrangement the CCRA appears to be having with the Public Service Commission. I don't believe there is adequate independence from it. As well, it would appear that as a result, and retaining that 19th century industrial relations model upon which the federal civil service is presently organized, in fact there are losses in that, particularly when you think of Revenue Canada or the new CCRA as a knowledge organization, rather than producing some kind of government widget.

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In that, the key principle is contractual freedom. The drafters of legislation appear to be striving for that, though there are sufficient checks so that one wonders whether they will achieve their goal of greater contractual freedom.

A final note on making the CCRA attractive to provinces is that failure to deal with those labour rigidities in the CCRA simply is an invitation to the provinces not to themselves undergo the same sorts of difficulties, if they chose to contract with the CCRA for tax collection rather than doing it themselves. Indeed, this may be a missed opportunity. If the CCRA, with the support of the legislature, were to undergo a different and, I would say, a very exciting new model of how government services are to be run, that would provide a model to the provinces to do the same.

The final point is that the collection of taxes is an expensive undertaking, and it's important to send a signal to taxpayers that governments are taking as much care in collecting taxes as they can, and in as low-cost a way as possible, in order to, right up front, send a signal on the guardianship and stewardship of taxes.

That said, I have put at the top of my proposal some quotations on taxation that occasionally inspire me when I'm sitting around doing my work.

I thank you again for this opportunity to present, and with Walter, I am open for questions.

The Chairman: Thank you.

Now we'll go back to the question-and-answer session.

We'll give you one five-minute round, Mr. Kenney.

Mr. Jason Kenney: Thank you, Mr. Chairman.

Thank you, Mr. Lippert, for your thoughtful presentation.

I think you're familiar with the fact that the opposition plans to move some amendments to this bill that would try to incorporate into a single statute the right to due process for taxpayers in the tax collection process. Mr. Robinson earlier mentioned that this was initiated originally in about 1985 by the then Conservative government. In fact what was introduced then was not a taxpayer bill of rights, but rather a declaration of rights, which really didn't have statutory effect. It was simply a statement of intent, which nevertheless was an incremental improvement over the status quo ante.

In framing our amendments for this taxpayer bill of rights, do you think it would be advisable for us to explicitly recognize that taxpayers could have the right to litigate against Revenue Canada if they could demonstrate damages for inappropriate tax collection procedures? Do you think that kind of right to litigation would be appropriate in our tax collection system?

Mr. Owen Lippert: Yes, I do believe it's right, and it's within the thinking of many people on different topics.

I mentioned the environmental part of it. Certainly the whole charter is based on the fact that the government is accountable for how it provides services and for its actions. Given the nature of taxation, as I said, it's unclear whether the charter covers it, but certainly we would say that the collection of taxes is vitally important to people and that those protections ought to be made.

I would argue that the effect of such a civil right of action would be more of a deterrent. I believe you wouldn't see wholesale litigation; what you would see is deterrent litigation. In that sense, it would send a very strong signal that the government, as a provider of services in a democratic society, is accountable for its actions and is willing to put its accountability to legal test. That, I would think, would send a very positive message as to accountability.

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Mr. Jason Kenney: I take it that you agree with the government's objective of removing some of the labour rigidities that exist under the current Treasury Board public sector human resource regulations, but you'd like to ensure that there is greater accountability in the system.

Have you looked at all at the experience of other jurisdictions that have adopted this model of special operating agencies, such as the United Kingdon or New Zealand, and seen whether or not there's been a diminishment of accountability there as a result of moving to this kind of model of management?

Mr. Owen Lippert: The two countries we have looked at most closely—“we” being the Fraser Institute—are New Zealand and Australia. There's been some movement in this regard in England as well. We've found that there is a period of transition—it becomes a new way of doing things—but in fact accountability is increased in a number of ways.

One, the relationship between certainly senior managers and the government becomes one of a contract to fulfil certain stated goals that are written right up front. That's increased accountability.

It also means a more direct relationship between the legislature and the service-providers. Less of an intermediary role is played by the interest of the permanent civil service. So in that sense, it has increased accountability to the legislature. As one would think the legislature is that body closest to the individual voter, that has a very beneficial effect.

There are savings to be had, though one would have to say you shouldn't overdramatize them in the short run. Those savings will be more apparent in the long run. For many of these experiments, we're still in relatively early days.

The Chairman: Thank you, Mr. Kenney.

Monsieur Perron.

[Translation]

Mr. Gilles-A. Perron (Rivière-des-Mille-Îles, BQ): Like you, most of the provincial governments are perhaps in agreement with the principle behind this agency, but they have many concerns, as you appear to as well, about its application and everything that pertains to this aspect. What specific recommendations do you have for the federal government? For instance, would you recommend to the government that it postpone creating this agency and conduct another study?

[English]

Mr. Owen Lippert: As strategic advice, I would say reaching an agreement with the provinces would be a long-term goal. Many provinces are not just possessive of their right to tax, but they have yet to see exactly how this new agency would improve, in terms of efficiency and cost, the collection of taxes. In that sense, the CCRA will make its case by how it performs.

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So I don't think there is necessarily anything to be gained by delaying at this point, provided that some things are added to the bill. But if it does go ahead—and this is really well beyond my ability to control—immediately it should set targets to show its efficiency and its ability to perform at a low cost. It has to sell itself to the provinces, not on the strength of the federal government, but on the strength of its performance.

[Translation]

The Chairman: Thank you, Mr. Perron.

[English]

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chair.

Thank you to both of you for being here today.

Mr. Robinson, specifically your identification of the issue of cost and the concern that in fact this agency would not save the government money is very significant. As the taxpayers' watchdog, your organization identifies government waste on an ongoing basis. The government is promoting this as a cost saving, so it's a very significant criticism that you have made of this.

The issue of accountability, fairness, and reasonableness on the enforcement side of it is the one I'm hearing from people that resonates most with me. How would you say currently Revenue Canada stacks up against the IRS in the U.S. in terms of fairness and reasonableness?

Mr. Walter Robinson: With respect to the cost issue first, Mr. Brison, in my opening remarks I noted that the savings articulated in the Public Policy Forum report that was done for Revenue Canada by Bob Plamondon, a CA I know and respect very much, are impressive. It's $171 million to $285 million on compliance and maybe another $97 million to $162 million in administrative costs. Those are impressive, and if they could be demonstrated up front, many of my concerns would be moot. But again, those assumptions and that model are built on all of the provinces opting into the system.

As Mr. Lippert has stated, in many of these things, regardless of the public policy purpose, the savings are usually overstated. When you factor in everything else, such as transition costs, they're not as big. Those are our concerns on savings.

With respect to comparing Revenue Canada to the IRS, some people have made that comparison. Many of us witnessed the IRS hearings that happened down in the United States, and I don't think we're at that stage of rampant abuse of power.

Earlier, in response to Mr. Kenney's question, I brought up the concerns taxpayers are raising with us about the reasonableness and fairness of Revenue Canada. I say that having had a positive experience in dealing with Revenue Canada in the administration of my father's own estate. I found Revenue Canada to be very reasonable and fair in dealing with taxes that were owed. So I say that with some respect for those people I dealt with.

But again, the incidence of the letters is increasing. I think we had 50,000 or 53,000 complaints last year, if I'm not mistaken. That's still a small number compared to 22 million returns filed and 14 million taxpayers. But we support a taxpayers' ombudsman or office of protection to ensure that the integrity and reasonableness of the system are not called into repute.

Mr. Scott Brison: Do you think this agency could potentially move us towards a more IRS-like approach in terms of enforcement, or would it have that risk?

Mr. Walter Robinson: To be fair, the agency could have that potential or risk. To be equally fair, to maintain the status quo could also give us that risk. So I can't really make that comment.

Mr. Scott Brison: Mr. Lippert, the Mintz report on business taxation that came out in June made specific recommendations about the competitiveness of the Canadian tax system relative to the U.S.'s. It was trying to align Canadian business taxes with those in the U.S. I'd like your feedback on the Mintz report. Also, would you suggest a similar evaluation and process for personal taxes in Canada?

Mr. Owen Lippert: Yes, and I'll put it in the context of a conference I attended last week in Vancouver, the Brain Drain conference put on by the institute.

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We had there several chief executive officers of companies, particularly the kinds of companies that always seem to be very positive, high-tech companies getting started. Repeatedly they said that part—not all, but part—of the reason they were leaving Canada to set up headquarters in the United States was the tax situation, not only the degree of taxes, but the particular mix of taxes.

For instance, there's a very high capital gains tax. If you're a start-up company, you're going to make your money at that initial IPO, and if that's being taken away by capital gains tax, then you'll be reluctant to actually launch that IPO in Canada, even though you may have been nurtured there. That was certainly brought out in the Mintz report, as were several other taxes in which there is disparity between Canada and the United States.

This also needs to be addressed within the broader context of the North American Free Trade Agreement, where you now have TN visas, which make it very easy for a Canadian businessman to work in the United States and set up an operation in the United States.

I would think that in terms of Canada and our competitive situation, we would like to be as close to the United States as we possibly can, but recognizing that there are certain advantages in Canada for which people are willing to pay a premium. Just the peace, order, and good government that usually reigns around here is a very attractive commodity, but do we want to have to put a price on it? No, we'd like that to stand on its own, and therefore have at least the mix of taxes reasonably the same.

The Chairman: Thank you, Mr. Brison.

Mr. Discepola.

Mr. Nick Discepola: Thank you, Chair.

I'd like to address two recurring themes that seem to be coming up with our witnesses. One is the question of accountability and the other is the fact that none of the provinces have signed on, thereby giving the impression that just because none of the provinces have signed on, it must be bad legislation. I'd like to address both of those.

I believe it was you, Mr. Robinson, who stated that the idea of an agency like the Food Inspection Agency doesn't bother you per se, if the economies of scale and the savings can occur and if better service levels can be provided to Canadians.

I think you would agree with me, Mr. Robinson, that the small business community stands to benefit greatly from the savings in compliance costs. With the food inspection, as a small business person, when you were confronted with an inspector at the federal level, another inspector at the municipal level, and then another inspector at the provincial level, that was bad for business.

I understand that none of the provinces have signed on, but I'd like to quote from the minister. When he was here last week, he categorically stated—and I think I'm quoting him correctly—“We have to earn their business”, meaning the provinces' business. So he's quite prepared to put in place the mechanisms for a single agency and he's prepared to put his ministry's reputation on the line by earning the business from the provinces.

If you look at medicare, for example, there was nobody on board when medicare was first implemented; it was only one single province. Today we have everybody.

I'd like an answer to that, and then I'll come back on the accountability issue.

Mr. Walter Robinson: Mr. Discepola, you're right in characterizing our desire to see not only economies of scale but economies of scope. “Economies of scale”, as Mr. Lippert pointed out in his presentation, is very much an industrial term, whereas “scope” would deal more with the 21st century size, speed, and flexibility of any government agency to deliver its services to its ultimate clients: the taxpayers and the citizens of the country.

So I agree with you. We are not in opposition to that sort of move to the type of alternate service delivery that the government seems to be moving to.

If I may, I will offer one caveat to that, which I did not get a chance to raise in my presentation. Contrary to the alternate service delivery measures we saw in Australia, New Zealand, and the United Kingdom, we are seeing no political oversight or political champion of the ASD initiatives that this government is undertaking. They seem to be driven from the bureaucracy and from a personal point of view. We'd much rather see them driven from a political level, as Michael Heseltine did in the United Kingdom and as Sir Roger Douglas did in a socialist government in New Zealand. That's where we'd like to see some of the impetus for that drive happening. That being said, nonetheless it is happening.

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Concerning your comments on small business owners, absolutely, yes, they'd rather deal with one point of contact. As I said in our recommendations, one point is better than three, in terms of just the simplicity of dealing with one person.

With respect to earning the provinces' trust, though, I would point you to the Canadian Tax Journal and the Canadian Tax Foundation's study, where they pointed out that the provinces, especially Alberta, and Ontario to a certain extent... It's going to be pretty hard to earn the provinces' trust when you have steadfastly argued against or turned down their initiatives for, as Mr. Lippert argued in his presentation as well, moving away from or decoupling the “tax upon a tax” regime that we have currently in this country.

In terms of the trust, as Stockwell Day, the treasurer of Alberta, has said, they're worried that if they buy into this super-agency and fold their systems into it, they will have less leverage in asking for a cooperative approach to tax policy. They're not seeing that cooperative approach now—

Mr. Nick Discepola: But you're referring there to tax policy. This is tax administration.

Mr. Walter Robinson: Can I finish answering the question, Mr. Discepola?

They're looking to see where that would go, because they want to have that in a cooperative federal-provincial framework. How can you earn their trust in a new agency when you have not earned their trust in the current federal-provincial arrangement? That's the question I would pose back.

Mr. Nick Discepola: You're referring to the priorities of provinces to establish their own tax policies. This has nothing to do with tax policy. This has to do with the administration of taxes on behalf of the provinces. The provinces would still have the flexibility.

My question directly is, do we really have to wait until we get one, two, three, or four provinces on board before we should even entertain such legislation? If you believe it's good, then what's wrong with the minister's approach? I believe there will be cost savings no matter how many provinces are on board. What's wrong with the minister's approach of saying, “Let's go ahead, and if we can get the provinces to come on board slowly and gradually, all the better for it”?

I don't believe we should just shove the legislation aside and say that just because we don't have one or two provinces on board, we shouldn't go ahead. That's where I'm coming from.

Mr. Walter Robinson: I appreciate that question, and the counter-response to that would be this. Given the fact that this legislation has been delayed two times already, because of certain concerns about accountability, which the government has addressed—it went back and reworked the legislation—would it not be advisable for the government to go back and rework it a little more?

If you're going to set up something that is going to last not for one or two years but presumably for generations to come, why not wait, as the four opposition parties demanded? Why not give it another six months or another year, instead of invoking time allocation on this and ramming it through the House? Why not wait and ensure that you can engage in those discussions with the provinces—?

Mr. Nick Discepola: It's very difficult to get all the provinces on board at the same time. That's where I'm coming from. They all have their political agendas. Quebec is never going to come on board. Ontario is going to have a provincial election next year.

Let me get to my second point, because I know the chair is going to cut me off.

The Chairman: I have no intention of doing that, Mr. Discepola.

Mr. Nick Discepola: No? Thank you.

On the question of accountability, the big difference between this bill as now presented and the first drafted version was because of our concern about the lack of accountability at the ministerial level. There are five or six clauses in the bill right now... For example, clause 6 says the minister remains accountable, clause 87 says the Auditor General continues to be the agency's auditor of record, clause 89 says there's a five-year mandatory legislative review, clause 59 provides for a mandatory review of recourse mechanisms by a third party after three years, and under clause 49 there's also the obligation to provide the minister with a business plan for Treasury Board and cabinet approval.

So I see an awful lot of accountability built into the different clauses of the bill. Why doesn't that reassure you or comfort you in any way?

Mr. Owen Lippert: The point I'd make is that's the accountability of the agency to the minister. That's important, but the larger concern is accountability to the taxpayer, because it's not the Minister of National Revenue who elects people; it's the taxpayers.

I would think, given that at this moment you're shifting from a line ministry to a stand-alone agency, that this would be a wonderful opportunity to reassure the public that in fact the accountability is to them as taxpayers. Yes, it's important that the minister be clearly identified as the person responsible for the agency, but there is a greater accountability there that hasn't necessarily been identified and made explicit.

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Mr. Nick Discepola: For example, what kind of accountability would you be looking for?

Mr. Owen Lippert: I believe it's laid out in the opposition amendments, but there are a great number of procedural—

Mr. Nick Discepola: We don't have those amendments yet, so I'm asking you.

Mr. Owen Lippert: Oh, well.

Mr. Gary Pillitteri (Niagara Falls, Lib.): Oh, I see. They gave it to them beforehand so that they could make their points.

Mr. Owen Lippert: No, I'm not privy to anything.

Some examples are the right of appeal and some commitment for the timely resolution of disputes. Remember, within the criminal law, you are now guaranteed a trial within six months. Why are we not seeing that same kind of benchmarking in something as important as the collection of taxes?

Mr. Nick Discepola: Why would that change under the agency structure? I don't understand why Canadians wouldn't be able to appeal.

Mr. Owen Lippert: It's a matter of coincidence that this is happening, and those principles of procedural fairness should be explicitly laid out and incorporated. You'd gain the advantage of reassuring the public at a time when perhaps they are not understanding what is going on with the creation of this CCRA. In fact it is an opportunity that would actually help. I believe it would make it more palatable to the voter, who always wonders what goes on in this city.

Mr. Nick Discepola: I eagerly await the amendments, Mr. Chairman.

The Chairman: Thank you, Mr. Discepola.

Mr. Robinson, I want to go back to your first page, where you say the goal to simplify administration and reduce overlap and duplication is one you support, and that you support the government's desire to operate in a more businesslike fashion. More and more Canadians are calling for that.

In any business, when you start out, one thing you're certain of is your market, right? I don't think too many businesses start out with a written contract. They have potential customers—they have a potential market—but very few start with contracts. I think anybody who's been in business would recognize that. If you're lucky, you do have some contracts, but very few have those.

That's pretty consistent, right? If you believe this agency should be run more like a business, then you also have to accept the reality of market forces and the fact that the provinces can be part of the “business” of this agency.

Mr. Walter Robinson: Yes, I would agree with that, but there's a difference here. When we refer to the businesslike manner, we're referring to a general move across the public service. The program reporting of departments this year is in a business line and service delivery mode. They've done the matrices, as opposed to the old line items and the appropriations received from Parliament—what was votable and what was non-votable. So that's a more businesslike fashion. That's what I'm referring to there.

With respect to your comments, this agency does start in a very privileged position, as opposed to many other new businesses, in that it has, in a sense, a captive market. And many people could take “a captive market” to mean more than one thing when we deal with Revenue Canada. So it has, in a sense, contracts. By compulsion, we pay our taxes. We give that right to the sovereign to collect them. So it's starting with its base market.

Many new businesses will start with very nebulous markets—whether you be Microsoft or Netscape, you don't know where it's going to go—and there's an element of the unknown here. In responding to Mr. Discepola's comments, I'd ask, why not take a little more time to see if you can make that universe of the future a little more well known, to see if you can have those memoranda of intent from provinces to buy in, to see if you can deal with the fundamental problems?

As I also recommended in my presentation, the third thing you need to consider is staff interests when you move towards any sort of alternative service delivery framework or a change in business focus or structure. From the stuff I've seen from the Union of Taxation Employees and the Professional Institute of the Public Service of Canada, there is vehement opposition to this proposal on a number of fronts. We didn't see that with some of the other agency models, whether it be the CFIA, the Food Inspection Agency, or Nav Canada, when Nav Canada was structured differently, because employees had an actual role in the formulation of the board of directors.

• 1620

If you want to start a business, you don't want to start a business with all your employees ready to strike. That's how I would answer that question.

The Chairman: But I'm not so sure that you responded to the fact that this agency may in fact have the provinces as some of their clients. Don't you think that if you start with one or two provinces and other provinces see that in fact that service is efficient and is reducing overlap and duplication, then other provinces will sign on? Isn't that the way—?

Mr. Jason Kenney: What about the HST?

The Chairman: Well, that's a...

Mr. Jason Kenney: That's a different issue.

The Chairman: That's another story, but I do have that question for you. Don't you think that's the natural course of how things evolve?

Mr. Walter Robinson: That is the natural course of how things evolve, but they don't have one or two provinces yet, and earning that trust I think will be quite difficult, given some of the objections outlined by Stockwell Day, and Mr. Eves has said similar things in the past.

I come back to that same objection: why ram it through? Yes, in one sense your customers are known; they're your 22 million tax filers. But your other potential customers—those 10 big-ticket customers, the provinces—are not known. Why don't you take a little more time to do a little more, in the vernacular of business, market research? Determine their needs, determine what would bring them on board, and take a step back, because without them, we don't think there are going to be a lot of those cost savings, which are criteria number one: value for taxpayers in terms of better service and/or cost savings.

The Chairman: But it is an evolving world, is it not? You have introduction of technology and the entire service we get through globalization. Don't you think government agencies ought to modernize themselves?

Mr. Walter Robinson: Absolutely, Mr. Bevilacqua, and they can do that within the context of their present structure. One good thing that Revenue Canada could do to ensure that taxpayers have greater trust is really open up the e-file regime to taxpayers across this country, and not make them go through third-party middlemen who suck value out of the economy by charging them a fee to file. There's something that application of technology at Revenue Canada could do today or tomorrow, for the next taxation year, without the CCRA as the enabling mechanism to do that.

Revenue Canada can go back, put CCRA aside—not kill it, but put it aside, forestall it for six months—and then turn and ask, “How can we address your concerns?” Especially to get some of your provinces on board, you want to get some of your major players in terms of tax collection, because they would probably have the major concerns.

Again, we're not against the idea; it's a question of implementation. If you're going to do it right, don't go two steps forward and figure out that you screwed up and have to go four steps back. Take your time and do it properly.

The Chairman: So I guess you don't have much confidence, then.

You're in favour of the concept. You said that the notion of a super tax collection and administration agency, from a conceptual point of view, is a positive one. Ideas from a conceptual point of view become a reality through action. That's how life works. You can't just sit there and think about the concept all your life. You have to move forward.

Mr. Walter Robinson: Yes.

The Chairman: And you move forward by getting moving along legislative lines and doing what it takes to make sure you have this concept that you endorse.

Mr. Walter Robinson: Yes, I agree with you again, Mr. Bevilacqua. You move from vision through a plan to reality. We see a vision. The plan, if you want to call the instrument of Bill C-43 the plan, I don't think gets you to that reality. I have great confidence in the future, but that plan doesn't get you to that reality that I think we'd both like to see the revenue agency get to. That's our point of contention.

The Chairman: You're in favour of the concept and the major idea, though.

Mr. Walter Robinson: I'm in favour of the concept of reducing the cost.

The Chairman: That's the toughest part, by the way. Coming up with the idea and the concept is the toughest part. Figuring it out working backwards is easier than people may think.

• 1625

Mr. Walter Robinson: I wouldn't make that generalization. It depends. The devil is in the details on this one. I wouldn't make that generalization on anything.

The Chairman: Okay.

Ms. Phinney.

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

I have a letter here from Mr. Dhaliwal. When he was here as a witness last week, he said he would table notes on the costs for development of the CCRA proposal and related costs of human resources design and development. I'd like to table that now.

The Chairman: Thank you.

Ms. Beth Phinney: And I'd like to make a brief comment about the same topic that the last two speakers have been talking about.

Although everybody's been saying no provinces have signed on, there are also no provinces who've said they wouldn't sign on. As somebody has already mentioned, I think Mr. Lippert, when the agency comes into existence—and it isn't there yet; just the idea is there—it will be a step-by-step process, and it has to earn confidence. But it will give the provinces a say in running the tax collection system that they are part of, and this is something they do appreciate.

I'd like to quote from a letter written by Ernie Eves:

The CCRA could benefit Ontario and Ontario taxpayers if it is able to administer its taxes cheaply and efficiently and improve services available to Ontario taxpayers.

So he certainly hasn't said he won't do it. He's saying exactly what we are suggesting: that if the agency can prove itself, then Ontario will see that there is a benefit. That's all I'd like to suggest.

Mr. Owen Lippert: I'd like to give my perspective on it in the long-term sense and not get into the actual tactical question of when this happens.

In this country, you have the public sector basically appropriating close to 50% of the gross domestic product. You have overbuilt civil services at both the federal and provincial levels. As the tax burden becomes onerous and cutbacks have to be made, not all bureaucracies are going to survive like they did.

I would say that in many cases the reluctance of the provinces to sign on is precisely because they want to avoid the fight that's now brewing over this, where the unions and various other organizations are protesting it because they fear there's some job insecurity here. Actually, a dose of job insecurity might do a great deal in terms of performance of this new CCRA.

The provincial ministers, seeing the fight that's brewing here, want to avoid as long as possible that same fight with their own workers in the revenue area. This is a case where, rather than running from that, perhaps the federal government should say they're going to step up to the bat.

We actually believe government can be run differently. We actually believe we can break out of the mould that led us to the point where we now have some of highest taxes in the world. If the CCRA can send a clear signal that new principles are at work, the provinces are going to say to themselves: “They did it, and we can do it too.”

Both sets of bureaucracies are not going to survive into the next century at their present levels.

Ms. Beth Phinney: Thank you.

The Chairman: Are there any further questions?

Ms. Redman.

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairman.

Mr. Lippert, one of your lines under point 3 fascinated me, and that is:

Union rules do not make sense for what should be a “knowledge organization.”

Can you flesh that thought out, please?

Mr. Owen Lippert: As I understand it, never having worked as a member of the civil service, tremendous rules govern how this is all done, from holiday pay to breaks and all these sorts of things. Perhaps at one time that made sense, because essentially the business of government was fairly static.

With something like Revenue Canada, it's no longer just stamping files that's important; it's the knowledge and the interpretation of the tax code, which is a very valuable commodity. Why not have the flexibility to say, “Okay, it's March 31. We're going to need everybody in here, and we're going to have to take a different approach to it”? That kind of flexibility is going to be particularly important to keep your top accountants.

• 1630

Your top accountants now are getting opportunities, not just in Toronto, but in New York, Hong Kong, and Geneva. You've invested a great deal in those people to bring them up to speed. Is it enough to say, “Well, because we have this fear of tall poppies, we're not going to pay our star performers what they're worth in the private sector”? Without that, there's a diminution of the really talented people who do work there.

Mrs. Karen Redman: I'd like to thank you very much.

A member of my local Chamber of Commerce is very active in government affairs, and she happens to be a chartered accountant in her real life. She stood up and asked Minister Dhaliwal exactly that question when he was in my riding this past summer; she said if we want the best and brightest, we're going to have to compete with the business world.

Mr. Owen Lippert: That's true with other departments as well. If you want the top people, they have options that perhaps were not available 10 or 15 years ago.

Mrs. Karen Redman: Thank you.

The Chairman: Thank you, Mrs. Redman.

We'll have a final question from Mr. Szabo.

Mr. Paul Szabo (Mississauga South, Lib.): I find it interesting that everybody has all kinds of interesting subject matter about how we can change the Income Tax Act and how many rules we can put in there. I don't imagine that anything we're dealing with right now is going to change our opportunity to do that.

Mr. Lippert made a point about taxpayers' rights, particularly to having a timely disposition of a tax matter. I can tell you of a number of cases, but let me give you a simple example.

A taxpayer was claiming a business investment loss and Revenue Canada challenged it, because it wanted some supporting documentation. It turned out it was from a joint venture investment. Some 2,000 taxpayers were involved in this broad-based scheme. It ultimately turned out that there were no books, there were no legitimate supports for any expenses, and the losses ultimately were not even dealt with.

My question to you is this. Are you suggesting that every taxpayer should have a timely disposition of assessed matters, based on some arbitrary number—I think you were suggesting within six months—or should it be from the point at which all relevant information necessary for Revenue Canada to do its job properly is received in their hands and properly analyzed so that they can dispose of an assessment?

Mr. Owen Lippert: I don't suppose there's any magic number one could throw out, such as six months or a year, but it does focus it. Even if you take the example you've given me, if in fact these people were engaged in some kind of fraudulent behaviour—

Mr. Paul Szabo: No, it wasn't fraud. They were investors, and it turned out that there was no bookkeeping. It was a U.S.-based land development, blah, blah, blah. They were just taken in, and they were claiming losses that they were told they could claim.

It took over two years, and they all got burned. They all complained to Revenue Canada and they probably all complained to Mr. Robinson here about how terrible Revenue Canada was, because they didn't allow them to write off stuff that was not in fact properly supportable under the Income Tax Act.

Mr. Owen Lippert: What you can do—and there's now some new literature on this in terms of default rules—is say, “Look, we are going to have a deadline before which these facts are going to be brought to bear and there will be a resolution. If there are extenuating circumstances, we can sit down and negotiate that this is not going to be able to be done in a year; this is going to take two years.”

We want to avoid Jarndyce v. Jarndyce, Bleak House situations where these tax matters roll on. I just saw a case that's been going on for 30 years. I don't think the public is served, and certainly neither the parties nor the government is served, by that kind of long-drawn-out thing.

That was not just the fault of Revenue Canada—there were problems within the court system and other things—but a deadline focuses attention.

The Chairman: Thank you, Mr. Szabo.

Mr. Robinson and Mr. Lippert, thank you very much for your comments. As always, they're appreciated, and we'll certainly bear them in mind as we continue the study of this particular bill.

I'd like to take this opportunity now to welcome Mr. Jehad Haymour from Fraser Milner.

Welcome. You may begin.

• 1635

Mr. Jehad Haymour (Individual Presentation): I believe I've lost my brief somewhere along the way here. It was taken and being photocopied. Unfortunately I don't have a copy to provide all members here, but I have prepared a brief opening statement.

The Chairman: I'm going to suspend just for two minutes so that we can retrieve your brief.

Mr. Jehad Haymour: Thank you.

• 1636

• 1641

The Chairman: I'd like to call the meeting back to order and welcome Mr. Jehad Haymour.

You may begin.

Mr. Jehad Haymour: Honourable members, ladies and gentlemen, thank you very much for giving me this opportunity to testify before you today. I am a tax lawyer with the law firm of Fraser Milner and I practise in the area of tax litigation and Revenue Canada dispute resolution.

I've practised on both sides of these types of disputes. I spent a number of years representing Her Majesty the Queen, in right of the Minister of National Revenue, in such matters, and currently I represent individual and corporate Canadian taxpayers in disputes with Revenue Canada.

I've had the opportunity to review Bill C-43, the bill introducing the act to establish the Canada Customs and Revenue Agency. Like other taxpayers, I am in support of any changes in government systems and structures that result in administrative efficiencies and cost savings. These types of efficiencies enhance the processes under which we operate, they reduce the tax burden, and they reduce the bureaucracy we must tolerate in dealing with various matters, including taxation matters.

I would suggest that if those goals are to be achieved, the Canada Customs and Revenue Agency Act should be implemented and the agency should be established, because its goal is to improve the manner in which the taxing authorities interact with the Canadian public. I do, however, have some concerns with the structure forwarded, which I would respectfully request that you consider.

One of the first concerns I have relates to the performance-based incentives outlined in the bill, specifically in paragraph 51(1)(e) of the bill. The structure proposed for the agency seems to be one that can best be described as a cross between a profit centre and a cost centre. When I refer to a profit centre, I'm referring to a structure where performance is pegged to profitability of a certain unit or centre. A cost centre is where performance is pegged to certain costs or expense elements of that unit.

While the agency wouldn't be a true profit centre, it is required, pursuant to clause 47 of the bill, to state its objectives and provide operational and financial plans to be implemented to achieve these objectives. In addition, as part of the mandate indicated in paragraph 51(1)(e), it has the power to provide for awards to employees to reward outstanding performance. I would suggest that these types of systems are normal and required in business. My concern, however, is with ensuring that liberties are not taken, at the expense of particular Canadian taxpayers, in meeting these pegged objectives.

In my experience, Revenue Canada employees generally have the difficult and unenviable task of enforcing income tax, GST, and customs legislation at a time when we all know and believe that we are overtaxed. For the most part, these employees make a valiant effort to carry out these duties.

• 1645

However, I have also seen lack of compassion and liberties being taken when none should have been taken, in law or in practice. I have seen a lack of compassion in dealing with a non-verbal quadriplegic, where a $1,200-per-month disability pension was garnisheed to the point where she could not afford to support herself.

I've also experienced situations where Revenue Canada has raised incredibly tenuous GST assessments and aggressively proceeded to collection, even though these assessments were being appealed. If one hand had paid attention to what the other was doing, it would have been clear that no collection action should have been taken in the circumstances, as the assessment was going to be substantially vacated.

In that second example that I provided, I was advised by Revenue Canada that their mandate is to collect the debt using all means possible. In this instance, they were trying to collect a debt against a shareholder and a director of the corporation when it was a corporate debt, without adhering to the specific requirements of the Excise Tax Act—an action that in my opinion was taken without clear legal foundation.

Without belabouring these points and without going into every specific example, I bring these examples forward to merely ask certain questions. If we move towards an agency format where we have performance-based incentives, how do we safeguard against certain actions?

Revenue Canada is the largest collection agency in the country, I would assume. If a collection officer's bonus and advancement are pegged to outstanding performance, do you in essence tell the collection officer that it's okay to show no compassion and take whatever action is needed to collect the debt, regardless of the appropriateness in certain circumstances? Do you tell an agency auditor that his or her performance should be based upon dollar amount of assessments raised, as compared to the time it takes to perform a task, so that in essence, to justify his time, he has to find something, even though something may not be there? My concern is in respect of those types of matters.

In looking at the performance-based incentives, we need to ensure that these benchmarks are appropriate and no injustices result. I would not say it can't work; it's just that I believe careful consideration has to be given to the benchmarks against which you assess performance. Those benchmarks have to be objective, and in some respects they cannot be pegged to a monetary element.

In addition, one of the considerations might be granting an independent third party the right to evaluate certain actions and certain circumstances. This will be useful as long as the structure itself doesn't create additional layers of bureaucracy and slow down the process.

One structure that has been recommended by the official opposition party is the establishment of an office of taxpayer protection, where they give an independent third party, the office of the chief advocate, the right to review complaints and the actions of the agency. This office would in essence carry out an ombudsman function, reporting to Parliament in the same manner that the Auditor General does.

I find this recommendation interesting. I would suggest restrictions have to be placed upon such an office, because it would find itself overwhelmed with requests for intervention, given the personal nature of taxes. Taxes are a very personal matter. Regardless of the actions taken, a taxpayer equates an audit to Revenue Canada accusing the taxpayer of being a tax cheat, no matter how far from the truth that may be. Therefore, if you have an office for taxpayer protection, there has to be clear delineation of what is to go to that office, because you may be inundating it with requests for intervention. In essence what you'd be doing is creating a bigger bureaucracy than the one that's already there.

• 1650

Another option to consider is whether the Tax Court of Canada should be granted some sort of equitable jurisdiction in dealing with certain matters. As it stands, any appeal of a decision of the Minister of National Revenue or of a Revenue Canada assessment goes to the Tax Court of Canada, and they are very familiar with dealing with these assessments. What transpires is you have a trial with witnesses who give evidence, and other evidence is tendered. However, the Tax Court of Canada has no equitable jurisdiction and can only apply the Income Tax Act as it reads it and as it's interpreted.

I would suggest that perhaps consideration should be given to providing the taxpayer with more authority to deal with certain matters, and that a watchdog or a safeguard should be provided for some of the actions that may be closer to the line.

Another concern I have—and I'll be brief—is whether we're merely adding a layer of bureaucracy. The structure of the agency is such that it will be managed by the commissioner and a board of management made up of 15 directors who will oversee the management of the agency. The commissioner's function is similar to the function currently being carried out by the deputy minister. Under the agency proposal, the commissioner will report to a board of management, which will take some direction from the Minister of National Revenue and account to Parliament. In that sense, one would think we're merely adding a layer between the minister and the agency.

However, it can work as long as administrative efficiencies are created and redundancy is reduced. Here, when I look at redundancy, I look at the internal redundancies and also the redundancies in federal-provincial overlap. If these goals are met, then perhaps the bureaucracy can be reduced in that manner.

I come here as an individual who has represented taxpayers in various matters, and not as someone who is representative of a specific group or organization, other than the people I deal with on a continuous basis.

I wish to thank you for allowing me to testify here today, and I'd invite any questions you may have.

The Chairman: Thank you very much, Mr. Haymour.

We'll now proceed to the question-and-answer session, and we'll begin with Mr. Kenney.

Mr. Jason Kenney: Thank you, Mr. Chairman.

I want to thank Mr. Haymour for having come all the way to Ottawa from Calgary to testify and for his presentation.

Mr. Haymour, I understand that prior to going into private practice, you were in Revenue Canada as an employee at some point recently?

Mr. Jehad Haymour: I worked with the Department of Justice, representing Revenue Canada in various capacities.

Mr. Jason Kenney: I see. So you're familiar with both sides of the equation.

Mr. Jehad Haymour: Yes.

Mr. Jason Kenney: You mentioned some of the cases with which you have dealt in practice as demonstrative of a lack of compassion on the part of Revenue Canada, one in particular relating to a quadriplegic client of yours. I wonder if you could just explain a little bit how that particular case demonstrates how sometimes personnel at Revenue Canada can get carried away and ignore standards of due process and compassion in the collection process.

Mr. Jehad Haymour: That was a case where the individual was being assessed for Canada Pension Plan and, at that time, unemployment insurance contributions to caregivers that she was required to employ, whether on a contract basis or on an employment basis. Revenue Canada took the position that these individuals were her employees.

All the money that she was receiving was coming under provincial government grant. The assessment itself was raised. We went to court. We were successful in establishing that these individuals were not employees of the individual but were independent contractors.

• 1655

At the same time, under the Employment Insurance Act—or the Unemployment Insurance Act at that time—and the Canada Pension Plan Act, there's no requirement to cease collection of the underlying assessment while an appeal is ongoing in the courts. As a result, the taxpayer had an assessment that would be considered small to some but was an incredible burden to her, and it was being collected by Revenue Canada.

She was receiving a disability pension, out of which she was paying her rent, her Handy Bus, and her various necessities of daily living. The pension was $1,200, and it was garnisheed to the tune of, I believe, $350—such a significant amount that it made it nearly impossible for her to support herself. She needed assistance from family and friends in that regard.

Though it's understandable that, yes, equality tells us you should treat all people the same, I believe that would be a circumstance where, in light of the hardship it created, Revenue Canada would have been better suited not to have taken collection action, but to have held off on collection action to deal with the matter in another manner. I believe the Financial Administration Act even provides for dealing with such hardship, as well.

Mr. Jason Kenney: You talked about recourse in the tax system for people such as that client. I assume that, given her limited means, you represented her pro bono or something to that effect.

Mr. Jehad Haymour: Essentially, yes.

Mr. Jason Kenney: Without the good fortune of having run into a charitable practitioner such as you, somebody like this taxpayer would have been high and dry. This low-income quadriplegic would have been essentially driven into poverty by the overzealous tactics of these collection agents.

Would you not therefore agree that there is need for some kind of alternative recourse—such as an office of taxpayer protection, which we have suggested as one alternative mechanism—to allow people of limited means like that, who simply don't have the resources to fight the 45,000 bureaucrats and $2.3 billion of Revenue Canada, a separate avenue of recourse?

Mr. Jehad Haymour: Yes, having an advocate would definitely be beneficial for individuals like that. There are many instances where individuals are not familiar with the court process and cannot proceed as a result of that, or cannot comprehend the court process. And there are many instances where they just do not have the resources to properly dispute something.

You have to keep in mind that in every case before the tax courts, Revenue Canada is represented by counsel. So regardless of us saying that there's equality in the system, in some instances it is difficult for an individual to fight a mechanism that they consider overwhelming. So yes, I can see that, and I've seen that on both sides.

The Chairman: Thank you, Mr. Haymour.

[Translation]

Mr. Perron, do you have a question?

Mr. Gilles Perron: Yes, I do.

Sir, based on your experience at the Department of Revenue, namely your experience within the department or outside it, would it be possible to improve the tax collection methods without necessarily having to create a new revenue agency?

[English]

Mr. Jehad Haymour: Yes, I believe collection methods can be improved without creating a new agency. Having said that, though, it's a matter of how zealous the collectors are.

When we talk about improving the collection methods, we talk about basically raising the benchmark—saying that instead of collecting on 70% of the debt, we want to collect on 90% of the debt. My concern is that we are, in those circumstances, creating more of a problem, rather than less of a problem.

• 1700

In improving the collection, we have to improve it by removing some of the rigidity, by allowing for compassion, by allowing for situations where clearly the circumstances would dictate changing the manner in which the debt is collected.

One example I'd give is a situation that I dealt with recently where we had to go to the regional direction level before we could actually deal with the collection matter. What the representatives of Revenue Canada could not appreciate in those circumstances is why my client, with an overwhelming tax debt, would not merely go bankrupt. He kept on coming back and saying, “No, I want to deal with this. I'm not going away from this. I want to deal with this.” It ended up taking approximately five meetings before we were able to resolve it and get Revenue Canada to agree to a collection means that he could live with.

So when you talk about improving the collection, I would say you do that by reducing the rigidity and in some respects reducing the policies that are being taken in that regard.

[Translation]

The Chairman: Thank you, Mr. Perron.

[English]

Mr. Brison.

Mr. Scott Brison: Thank you, Mr. Chair.

Thank you, Mr. Haymour, for your presentation today.

Do you find it a little ironic that there seems to be almost an inordinate focus on the process, on the administration and collection side, when in fact there really hasn't been much effort on the whole notion of simplifying the tax code to begin with? It strikes me as being almost a truism that for a lot of the people who end up in trouble with Revenue Canada, it's not because they're trying to do something that's dishonest, but because they unwittingly do something that puts them on the wrong side of Revenue Canada.

I'd appreciate your feedback on the complexity of the tax code and the Pavlovian nature of our tax code. I recognize that this is not specifically on the agency, but I'd appreciate your feedback on where you would like to see taxes, in terms of whether a fairer and flatter and simplified tax code would serve Canadians better.

Mr. Jehad Haymour: I'm very much for simplification of the tax system we're under. We have a tax code in which we are dealing with changes in legislation on a continual basis. As someone who practises in the field, I can advise you that I am on my computer every morning, trying to find out what's new in terms of not only the act but also the manner in which it has been interpreted by the court and by the legislative branches as well as the policy branches.

I would suggest that a more simplified system and a flatter system would definitely provide some benefit in the sense that it avoids ambiguity. As for whether it's something that can be done overnight, my initial comment is it can't be done overnight. As you can see, this is a relatively thick piece of legislation, and that is just one part of it. We still deal with the Excise Tax Act, which is equally thick. We deal with the various treaties, which don't necessarily form part of that. We deal with various elements that form part of the legislation.

So yes, a flatter tax and a more simplified tax system would be appropriate, and it would also avoid some of the confusion that taxpayers have at times as well.

Mr. Scott Brison: Thank you very much.

The Chairman: Thank you, Mr. Brison.

Mr. Szabo.

Mr. Paul Szabo: Thank you.

For demonstrative purposes, if you look at the Income Tax Act, it's about 3 inches thick, or maybe about 9 centimetres. If I were a taxpayer with a T-4 slip, a charitable donation, maybe an RRSP, and some medical expenses, of that 3 inches, how much would be applicable to my tax return?

Mr. Jehad Haymour: Of that, I would say probably approximately 5 to 10 pages, after all was said and done.

• 1705

Mr. Paul Szabo: Yes, it's kind of interesting. For the vast majority of ordinary Canadians, when you consider that only 15% of Canadians make more than about $60,000 a year, the Income Tax Act is...

But there are some things in there, I agree... Something simple, such as the section on stand-by charge on automobiles, has to be worth, on its own, more than all the rest of the stuff to do with basic personal returns.

Interestingly enough, you raise this issue of the flat tax. It seems to me that if you assume revenue neutrality, a flat tax approach ostensibly shifts a more significant burden of income tax from higher-income earners to low. They've had this argument in the States, and I'm curious about why you would even raise it as something we should pursue.

Mr. Jehad Haymour: As I recall, when they brought in the three-tier system for taxation, they brought it in with the view of creating certain exceptions and creating a base for the lower incomes that would be less flat and less income-sensitive, and that would provide some relief for lower-income taxpayers. In some respects I don't know if that's been done, because you end up having situations where some higher-income taxpayers are in business, and they can utilize various deductions.

You can never have a perfect system. If you were going to go with the flat tax, I wouldn't suggest you should go with a flat tax system that is completely insensitive to that.

Mr. Paul Szabo: As a chartered accountant, I can tell you I am in favour of pursuing tax reform that's meaningful, and there are some areas to be cleaned up.

But I wanted to ask you more specifically about the revenue agency. It seems to me, based on what I've heard from the labour representation and from some of the other witnesses, that one of the big fears here is that there's going to be downsizing, job loss, and cherry-picking or creaming or whatever it is—that the best and the brightest are the ones who are going to survive in the new agency. When you look at the parallels to business, where it's moving forward in a knowledge-based or high-tech conversion or transition, whether it be banks or some other industry, it does happen. That's very logical.

In your assessment and your knowledge of Revenue Canada, would you have an opinion as to whether the current structure or systemic problems that they have are reasonably rectifiable within the current shell? Or would it be preferable to have a new agency that provides a fresh start, as it were—no pun intended—and the opportunity to build in a more high-tech, computer-driven agency, which could offer those expanded services to the provinces, if they felt it was then sufficiently reliable for them to generate savings? Do we have a vehicle that can't be fixed, and maybe we're better off looking to a new instrument?

Mr. Jehad Haymour: I'd hate to think that anything we have in government can't be fixed. As for whether it can be done internally or not, I really don't know. Interest groups have appeared before you today and have expressed their concerns and interests at other times. When you look at the Union of Taxation Employees, they obviously have an interest in ensuring that none of their employees are affected by an agency.

I believe starting the agency is a good idea.

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Mr. Paul Szabo: My last question is this. Attitudinally there seems to be an issue, at least for one witness we had this morning, who suggested obliquely, I think, that if there were bonuses or incentives for performance, some would do a better job, but in the absence of those, they tend not to do the job. In your experience, is there an attitudinal situation that in fact people are not sufficiently motivated by their current circumstances of compensation?

Mr. Jehad Haymour: For the most part I would say no. But having said that, I have seen situations where actions were taken perhaps for wrong reasons in dealing with matters.

One such matter recently arose and in some respects reared it ugly head, because I was advised that perhaps the action was taken as a work-to-rule campaign where an assessment was raised. That suggestion was made to me by a collections officer who had to deal with the matter after the assessment was raised.

So I would say generally no. People do their jobs.

When I look at Revenue Canada employees, I don't look at people who are monsters or ogres. These are people who have a difficult task; it's an unenviable task. You're always dealing with the negative side of a matter. I've dealt with that side of the matter by representing Revenue Canada and also dealing with the Canadian public in that regard.

But having said that, there are times when perhaps individuals are overzealous and perhaps a little misguided in their approach to the matter. So when you talk about performance incentives, I'd just say be very careful in how those guidelines are set, because if those guidelines are set purely on a profitability or an assessment basis, then you do create a system that perhaps rewards abuses in those circumstances.

Mr. Paul Szabo: Okay, thank you.

The Chairman: Thank you, Mr. Szabo.

Mr. Haymour, thank you very much for your presentation. We certainly appreciate the thoughts and ideas you've expressed to us, and we'll keep them in mind as we study this particular bill. Thank you.

We're awaiting the arrival of Mr. Frank Balics, but since we do have a break in time, we can perhaps deal with Bill S-16 and go through that.

I call Mr. Brian Ernewein, director of the tax legislation division of the tax policy branch of the Department of Finance.

Mr. Valeri, will you be joining him up front? Thank you.

Just for the record, in accordance with the order of reference of the House of Commons of Thursday, September 24, 1998, the committee is commencing consideration of Bill S-16, the Income Tax Conventions Implementation Act, 1998.

Mr. Ernewein, welcome. We look forward to your comments.

Mr. Brian Ernewein (Director, Tax Legislation Division, Tax Policy Branch, Department of Finance): Thank you.

The Chairman: You may begin, Mr. Valeri.

Mr. Tony Valeri (Parliamentary Secretary to the Minister of Finance): Thank you, Mr. Chairman. I'll have some opening remarks, and then the officials from the department will entertain any questions the members may have.

Essentially the purpose of this bill is to implement the income tax conventions that Canada signed with Chile, Croatia, and Vietnam. Canada has been building and updating its network of tax conventions since 1971, and the bill that the committee is examining today is part of that ongoing maintenance of Canada's system of tax treaties. Currently we have tax treaties in force with 64 countries.

As foreign economies open up, as individuals become more mobile, and as the pace of international trade and investment accelerates, tax treaties are becoming increasingly important to investors and entrepreneurs who are looking for those new opportunities worldwide.

Like all of the other tax conventions that Canada and its trading partners have implemented over the years, Bill S-16 has two overriding objectives. One is to avoid double taxation, and the other is to prevent income tax evasion.

The potential for double taxation arises when a taxpayer who is a resident of one country earns income in another. In the absence of a tax convention, both the country of residence and the country that is the source of the income would be justified in claiming tax on that income.

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Tax treaties address the problem of double taxation in one of two ways. Either the treaty allocates exclusive taxing rights to the taxpayer's country of residence or to the country that is the source of the income, or if the income would be taxable in both countries, the treaty requires the country of residence to give credit for the tax paid in the source country.

Measures that reduce double taxation also serve the purpose of preventing tax evasion. Laws that limit the potential for double taxation normally include provisions that encourage the exchange of information between the participating jurisdictions. This sharing of information helps revenue authorities in their respective jurisdictions to identify cases of tax evasion and act on them. In addition, there will be a reduced compliance burden for Canadian taxpayers with investments or business interests in Chile, Croatia, or Vietnam.

As a key part of any tax treaty bill, the withholding tax rate reductions are important, and in this regard Bill S-16 is no exception. I'd like to say a few words about the withholding taxes.

Canada and other countries generally impose withholding taxes on various types of income paid to non-residents. In the absence of a bilateral tax treaty or a unilateral exemption from withholding tax, Canada's statutory non-resident withholding tax is 25%.

Under our network of tax treaties, however, there are several rate reductions in effect, and these reductions apply on a reciprocal basis. Where such a tax treaty is in effect, the country in which the taxpayer resides can withhold tax. However, the rate is usually limited to 5%, 10%, or 15% on dividends and branch profits; the rate on interest and royalties is usually limited to 10%; and in some cases, royalties on copyright, computer software, patents, and know-how are exempt at source.

I'd like to give the committee a country-by-country rundown with respect to withholding taxes.

For Vietnam, for instance, there will be a reduced 5% rate on dividends paid to a company with at least 70% of voting power, and a 10% rate for a company that controls between 25% and 70%. A rate of 15% will apply in all other cases. There will be a reduced branch tax rate of 5%; a reduced 10% rate on interest and royalties; a 7.5% rate will apply in the case of fees for technical services; and while there is no immediate exemption for royalties on copyright, computer software, patents, and know-how, Canadians will automatically receive the benefit of any future exemptions Vietnam agrees to with other OECD countries.

With respect to the agreement with Croatia, withholding tax will apply at a rate of 5% on dividends if a company controls at least 10% of the voting power or holds at least 25% of the capital. In all other cases the rate will be 15%. In addition, the branch tax rate and the rate on interest and royalties will be reduced to 5% and 10% respectively, and again, there will be no exemption for interest or royalties on copyright, computer software, patents, and know-how.

Under the agreement with Chile, a reduced rate of 10% will apply to dividends if a company holds at least 25% of the voting power—and that's a Canadian company—and the rate of the branch tax will be 10%. However, in the event that Chile agrees to a 5% rate with any other OECD country, this lower rate will automatically also apply to Canada. All other dividends will be subject to a withholding tax rate of 15%. A 15% rate will also apply on interest and royalties, but no exemption will exist for interest or royalties paid on copyright, computer software, patents, and know-how.

Bill S-16 also addresses Canada's right to tax pensions and annuities paid to non-residents. The agreements with Vietnam and Croatia provide for pension payments to be taxed in both countries, with the source country collecting no more than 50% of the total payment. In both Vietnam and Croatia, social security benefits will be taxable in the source country, with no limitation. Under the Canada-Chile Income Tax Convention, pension and social security payments will be taxed by the country from which the payments are made.

Another issue addressed by Bill S-16 is the treatment of capital gains realized by non-residents. In these cases, the source country will retain its right to tax capital gains on the sale of real property, business assets, and shares in real estate companies or interest in real estate partnerships or trusts.

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The provisions of Bill S-16 are tailored to meet the realities of international commerce. Reduced withholding taxes and the other benefits of this legislation are reciprocal in nature. This tax convention entails no revenue loss whatsoever, not for Canada and not for any of the other signatories.

At second reading in the House of Commons, this bill received support from members of all parties. It's certainly well understood among honourable members that this legislation will facilitate trade. As a nation, almost 40% of our wealth depends on exports, foreign commerce, and direct foreign investment.

Canada's network of tax treaties increases our ability to compete and to harness the opportunities of a vibrant and modern economy. I submit to you that we cannot allow Canada to miss out on these opportunities. I therefore urge honourable members to expedite the passage of this bill.

Thank you, Mr. Chairman.

The Chairman: Thank you very much, Mr. Valeri, for a very thorough presentation on this bill.

We'll now move to the question-and-answer session.

Mr. Kenney.

Mr. Jason Kenney: Thank you, Mr. Chairman. I do have several detailed questions. I really don't want to hold this up, but I do want to explore a few areas, as I have nothing approaching expertise on tax treaties of this nature.

My first question relates to the provisions regarding pension income and social security payments. Could either Mr. Valeri or Mr. Ernewein explain in greater detail how these treaties will change the tax treatment of pension and social security income contrary to the status quo?

Mr. Brian Ernewein: Thank you.

These are all new treaties, and therefore, in both countries' cases, we're starting from the proposition that their own domestic rules apply. Therefore it's probably good to start by looking at what our domestic rules would be in the absence of those treaties. In the absence of those treaties, Canada would have a 25% maximum withholding tax rate—our normal, statutory withholding tax rate—on pensions and on social security.

The effect of the treaties on the taxation of pensions and social security is as follows. With respect to pensions that are not social security, under the treaties with Vietnam and Croatia, we limit and they limit respective rights to tax to a maximum rate of 15% of payments made by each of those countries.

Mr. Jason Kenney: Assuming 100% inclusion?

Mr. Brian Ernewein: The inclusion rate in the other country wouldn't matter. It's the effective rate on the gross amount being paid out.

Mr. Jason Kenney: On the gross amount, okay.

Mr. Brian Ernewein: Yes. And those payments—that is, pension payments—remain fully taxable in the country of residence.

With respect to the tax treaty with the Government of Chile, the maximum tax rate of 25% applies for Canada, and Chile also has the right to tax pension income at its domestic tax rates.

With respect to social security, we have in all three cases the same rule: exclusive source taxation, meaning the country that pays the benefits has the exclusive right to tax the benefits. They are not taxable in the country of residence.

Mr. Jason Kenney: My next question relates to the issue of corporate taxation. I understand that currently the Government of Chile imposes a double standard for corporate taxes on foreign-owned corporations that operate in Chile. The effective tax rate for foreign-owned corporations is roughly twice that of domestic corporations in Chile. Does this treaty address that and does it provide a level playing field for foreign investors, such as Canadian companies, operating in Chile? Does it correct that current discriminatory tax practice on the part of Chile?

• 1725

Mr. Brian Ernewein: It's possible that the issue you raise, while having an effect on business, may not be strictly within the taxation sphere. I understand Chile does have some system whereby, through a reserve mechanism, they require the retention of profits by foreign-owned firms in Chile. And if I'm not mistaken, the free trade agreement signed with Chile last year limits the extent to which those reserves are required to be maintained.

With respect to our own tax rules, we adopt largely the OECD model for the Chile convention as well as for those with Vietnam and Croatia. That does allow the establishment of tax rates for Chilean enterprises that may differ from those applying to foreign-owned enterprises, but I confess to not being aware of a direct tax differential under the Chilean system.

Mr. Jason Kenney: I raise this issue because I've received representations from Canadian-owned companies. Many operate, of course, in Chile, particularly in the mining sector, and they're quite concerned that Canadian investment is being inhibited there because of the higher rates imposed on foreign-owned companies. So to your knowledge, this treaty does not rectify that inequity.

Mr. Brian Ernewein: Well, I'm not aware of the differential as you've described it. I can tell you, although I was not the negotiator on this particular treaty negotiation, that we understand that the proposed treaty has substantial support from the Canadian business community. I know that doesn't answer directly your question as to whether or not it leaves issues to be resolved.

Mr. Jason Kenney: All right. I just have one more detailed question right now with respect to Vietnam.

In reviewing the transcript of your appearance on this bill before the Senate committee on foreign affairs in May of this year, I see there was some lengthy discussion about privacy matters related to taxation information. Particularly given the nature of the regime in Vietnam, there was some concern that confidential tax information shared between Revenue Canada and the Vietnamese tax collection agency could potentially be compromised. I wonder if you would care to comment on that issue.

Actually, I don't think it was you appearing before the Senate committee, right?

Mr. Brian Ernewein: No, it was not.

Mr. Jason Kenney: No, it was Mr.—

Mr. Brian Ernewein: Presumably it was Jean-Marc Déry.

Mr. Jason Kenney: Yes.

Mr. Brian Ernewein: Once again, these three treaties follow the OECD model tax convention, with some modifications, none of which, as far as I'm aware, bear on the exchange of information provisions.

The exchange of information provisions in our tax treaties, including these, allow Canada to provide information to the revenue authorities in the other jurisdiction, exclusively for the sake of the administration of the foreign government's tax system. And of course the converse is true: we are entitled to ask the foreign government—in your question, Vietnam—for that information for our own purposes.

Again, I'm not aware of any issues with respect to, if you will, abuse of information by the Vietnamese authorities. There have been some concerns, of which I'm aware, with respect to Vietnam's application of transfer pricing principles and other concepts that are meant to apply under the OECD standards. But if there were such issues, Revenue Canada would have the ability to withhold the information, because of the concern that it wasn't being used exclusively for the purpose of the administration of the Vietnamese tax system.

The Chairman: Thank you very much, Mr. Kenney.

Seeing no further questions, I'd like to thank you very much for your presentation. We are going to proceed now to clause-by-clause consideration, so if you could stay there, I'd appreciate it.

Pursuant to Standing Order 75(1), consideration of clause 1 is postponed.

I'd like unanimous consent from the committee members to deal with clauses 2 to 19 as a package. Is that okay?

Some hon. members: Agreed.

(Clauses 2 to 19 inclusive agreed to)

(Schedules 1 to 3 inclusive agreed to)

(Clause 1 agreed to)

• 1730

The Chairman: Shall the title carry?

Some hon. members: Agreed.

The Chairman: Shall the bill carry?

Some hon. members: Agreed.

The Chairman: Shall I report the bill to the House?

Some hon. members: Agreed.

The Chairman: Thank you.

Now we're going to revert back to Bill C-43.

Ms. Paddy Torsney: Can we carry that one too?

The Chairman: That can't be done. We follow certain procedures.

I'd like to invite Mr. Frank Balics, if he is in the room, to kindly come forward, and we will hear his thoughts on Bill C-43.

Mr. Balics, as you know, you have approximately 10 minutes to make your presentation, and thereafter we will engage in a question-and-answer session.

We'll take a short break.

• 1731

• 1733

The Chairman: I'd like to call the meeting back to order and take this opportunity to once again welcome Mr. Frank Balics.

We look forward to your comments.

Mr. Frank Balics (Individual Presentation): I'm glad to be here. Thank you very much for waiting. I'm sorry I was detained. Actually I'm on time, but I understand your business had finished, so you could have heard from me earlier.

Honourable Chairman and honourable members of the Standing Committee on Finance, my name is Frank Balics, and although I'm an auditor at Revenue Canada, I appear before you as a private citizen on a matter that is of grave concern to me, and that is Bill C-43.

I have read on the Internet the first and second debates in the House, on October 1 and 27, 1998. I will not duplicate the arguments made there. I would request honourable members to review those particular issues of Hansard.

Nor will I complicate matters by being overly technical or placating. If it seems that I rise on self-serving principles, you are right. From the perspective from which I speak, it is self-serving. I hope all legislation is serving the people of Canada. If I did not feel thwarted or intimidated by its implications, I would not be here.

My concern is about clause 57 of Bill C-43, which states:

Sections 32 to 34 of the Public Service Employment Act apply to the Commissioner, Deputy Commissioner and employees of the Agency. For the purposes of those sections, the Commissioner and Deputy Commissioner are deemed to be deputy heads and the employees of the Agency are deemed to be employees as defined in section 2 of that Act.

• 1735

It is my belief that any activity in a political party would be grounds for dismissal. I refer you to paragraph 51(1)(g), which states:

(g) provide for the termination of employment or the demotion to a position at a lower maximum rate of pay, for reasons other than breaches of discipline or misconduct, of persons employed by the Agency and establish the circumstances and manner in which and the authority by which or by whom those measures may be taken or may be varied or rescinded in whole or in part;

How many members have read Osborne v. Canada (Treasury Board), or at least have heard about it? Generally speaking, the Supreme Court of Canada case concluded that to prevent all civil servants from being politically active was overkill and that restrictions, based on the then Public Service Employment Act as it applied to deputies, were reasonable. However, Bill C-43 expands that definition, at clause 57 and subclause 176(1), by redefining “employee” so as to have it fall outside the dictum of the Supreme Court ruling. I quote from the summation:

Per Wilson, La Forest, L'Heureux-Dubé, Sopinka, Cory and McLachlin JJ.: Section 33 of the Act (The Public Service Employment Act) is not saved by s. 1 of the Charter. While the legislative objective of maintaining the neutrality of the public service is of sufficient importance to justify a limitation on freedom of expression, the impugned legislation fails to meet the proportionality test. The restriction of political activity is rationally connected to the objective but s. 33 does not constitute a measure carefully designed to impair freedom of expression as little as reasonably possible. The section bans all partisan-related work by all public servants, without distinction either as to the type of work, or as to their relative role, level or importance in the public service hierarchy. The result of the broad general language of s. 33 is that the restrictions apply to a great number of public servants who in modern government are completely divorced from the exercise of any discretion that could be in any manner affected by political considerations. The need for impartiality and indeed for the appearance thereof does not remain constant throughout the civil service hierarchy. Section 33, therefore, is over-inclusive and, in many of its applications, goes beyond what is necessary to achieve the objective of an impartial and loyal civil service.

It is my contention that this clause could be used to try to prevent all agency employees, including the janitor, from exercising their charter right. This is overkill. I have many friends who are members of various political parties and are Revenue Canada employees. They lend their expertise to their communities. They dialogue with other Canadians at conventions, meetings, etc.

I ask that you consider amending clause 57 of Bill C-43 to state clearly that nothing in it derogates from an employee's right to be politically active. I leave the exact wording to your expertise.

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Please ensure that the hard-fought principles confirmed in the Osborne decision are not open to challenge by loosely worded legislation.

Thank you for the opportunity to speak. Canada is truly a great country, where even a roofer's son can address an assembly such as this.

The Chairman: Thank you very much, Mr. Balics.

Now we'll go to the question-and-answer session, beginning with Mr. Kenney.

Mr. Jason Kenney: Thank you, Mr. Chairman.

Thank you very much, Mr. Balics, for your thoughtful presentation here.

I'm just looking at clause 57 for the first time in detail, and I don't follow your concern that all employees of the agency could be covered by this clause. It seems to apply strictly to the commissioner and deputy commissioner, who will be deemed to be deputy heads. It says all employees of the agency are deemed to be employees as defined...

How would your status change? You would go from being employees currently to being employees with the agency. How would that change?

Mr. Frank Balics: I would be going as an employee to the agency presumably. There's a mechanism whereby you are terminated from one employment and then rehired by the agency for a two-year term.

Definitely you've hit right on the wording, “employee”. By redefining that clause to say everyone in the agency fits into that, deputies, employees, legal personalities, etc. are all affected and will be considered in that definition.

Mr. Jason Kenney: So you'd like to see just this one simple amendment to clarify that, then?

Mr. Frank Balics: Yes, sir, that's correct—to reinstate the Osborne decision, where the learned justice concluded that it really was overkill to bar everyone from political activity.

Mr. Jason Kenney: All right.

I don't have any further questions.

The Chairman: Thank you, Mr. Kenney.

[Translation]

Mr. Perron, do you have another question? No?

[English]

Mr. Brison.

Mr. Scott Brison: I'd like to thank you for your presentation. It's important that this kind of dialogue can exist, because sometimes it's possible that at legislative tables, we miss this kind of thing. Thank you for your concern and your presentation.

The Chairman: Thank you, Mr. Brison.

Ms. Torsney, go ahead.

Ms. Paddy Torsney: Through you, Mr. Chair, to Mr. Balics, is the proposed legislation any different from the current legislation?

Mr. Frank Balics: I'm sorry; I don't understand.

Ms. Paddy Torsney: Well, in this proposal, you're concerned that we're going to move forward with something, but aren't the rules actually very similar to the rules that currently exist? Isn't it that your main restrictions are on fundraising, but you can be involved?

Mr. Frank Balics: Oh, no, quite the contrary. I've watched this very carefully over the years. In the Federal Court, Trial Division, it went the other way—I don't want to mention that—but in the Federal Court of Appeal, the rights of the... Actually it was Osborne and Murray, I believe, two civil servants in the Kingston area at the time of the litre versus the gallon. They were indifferent to this and went out and ran for public office.

I firmly believe that if it weren't for that case and the delineation by the justices, political activity would be severely curtailed. That's my humble belief. I'm a realist.

But you're absolutely right. It would be a little bit impugning to go out and raise funds and say, “Hey, here I am. Because I'm this and that, you have to contribute.” I agree with you, that is totally wrong.

Ms. Paddy Torsney: I do know of Revenue Canada employees who currently do help out in a variety of political parties. It's just that the case for not being involved in politics might be a little overstated. I guess that's my question.

Mr. Frank Balics: I'm sorry; I don't understand what you mean by “overstated”.

• 1745

Ms. Paddy Torsney: Well, I think your presentation basically suggests that this would be a severe limitation on the agency employees being involved. Correct me if I'm wrong, but I think you might have suggested that they couldn't be involved at all. My understanding of the way things are currently is that in fact Revenue Canada employees can get involved, but within certain guidelines—one clear one, as you mentioned, being fundraising, because that could be very problematic.

Mr. Frank Balics: I'm not here to set the guidelines or the rules, ma'am.

I'm sorry; are you Madam Pratt?

Ms. Paddy Torsney: It's okay, not to worry. I'm Ms. Torsney.

Mr. Frank Balics: I didn't recognize you. Forgive me.

Ms. Paddy Torsney: Mr. Brison is going to start a rumour now.

Voices: Oh, oh!

Mr. Frank Balics: The way the legislation as proposed is worded, it would suggest that someone has gone to great lengths to specifically put employees at the same level as deputy ministers. I would like that very much.

Ms. Paddy Torsney: Only the pay.

Mr. Frank Balics: Well, I think I would like it for both the pay and the responsibilities.

Ms. Paddy Torsney: Okay.

Mr. Frank Balics: There's no doubt that there is responsibility there. But that's not what I'm speaking to here.

What I'm speaking to here is that the legislation could possibly be loosely worded in the sense that employees are being included with deputy ministers in that regard to prevent them from any political activity. “Partisanship” is the word used in the bill. That in itself taints it, the word “partisanship”, and that's why I rise here.

If you would like me to report back to you on the other levels of activity, any activity that's done with distaste and with malintent should be banned.

Ms. Paddy Torsney: Thank you.

The Chairman: Thank you, Ms. Torsney.

Mr. Pillitteri would like to ask a question.

Mr. Gary Pillitteri: Thank you, Mr. Chairman.

What you're saying, in other words, Mr. Balics, is that you want to see a change that does not put you in the same place as deputy ministers. Would you like to see total changes? I want you to be more specific. Do you want to see the total change that one could take active political part and be an employee of the agency?

Mr. Frank Balics: Thank you for that question.

I'm making a humble request. I'm greatly outnumbered; however, I would just like to see the principles in the Osborne case reflected in this bill at clause 57, in relation to the principles enumerated in the Supreme Court ruling.

Supreme Court rulings sometimes may carry the weight of law without being made into legislation—as debates, discussions, and arguments. I'm not a lawyer, but this is what I've been reading and understanding. If you have judges on your side in a Supreme Court ruling in certain issues, your argument carries more weight. All I'm asking for is to receive the treatment that is embodied in the Supreme Court ruling in Osborne v. Canada (Treasury Board), 1991. I think I gave the reference.

Mr. Gary Pillitteri: Thank you.

The Chairman: Thank you.

Mr. Kenney.

Mr. Jason Kenney: I assume that when we go through clause-by-clause with the assistance of the departmental officials, we can seek an opinion from them on how this clause relates to that decision and how an amendment might be appropriate.

The Chairman: And Mr. Kenney, you'll bring that up? Thank you.

Mr. Balics, on behalf of the committee, I'd like to sincerely thank you for your input. We really count on Canadians' views and opinions as we study this particular bill and any other bill that appears in front of the finance committee. For your input, we're very grateful. Thank you.

The meeting is adjourned. We'll be back here at 3.30 p.m., same place.