On a point of order, Mr. Chairman, it's impossible for us now to proceed, knowing exactly what we'll be discussing next week, when we'll be discussing it, in order for us to make determinations about witnesses. Many of them have been contacted. They are waiting for some instruction from the committee as to when they should be coming here to appear and make their travel plans. When we're dealing with people in positions of considerable influence in our society and in our corporate world, it is very difficult for them to understand why they wouldn't at least get some notice.
It is now Thursday afternoon. If we're going to be having meetings on Tuesday, what is the subject of our meeting on Tuesday? Is it going to be a pre-budget submission? Is it going to be the impact of the high dollar?
We have to have some determination of what's going on in the meetings next week and the week following for us to make some determination as to who is actually going to come here. We just run roughshod over this.
I know you're in a big hurry here, but you just have to slow down, Mr. Chairman, so we can understand exactly what we're doing so that we, this committee, can reach out and have some credibility with the wider corporate community.
It is completely essential that we know now what we're doing in at least the meetings coming up next week. Are we dealing with pre-budget submissions? Are we dealing with the high dollar? Are we going to have the opportunity to get back to witnesses whom many of us have talked to, based upon the motion that we thought was passed in the last meeting, that there be x number of meetings coming forward within the next two weeks for us to discuss the impact of the high dollar on Canadian society? Can you please clarify?
Let me help you out, Mr. Turner, and the rest of the committee.
My sense of the motion, in interpreting the motion, was that we wanted to do as thorough an investigation on pre-budget consultation as well as on the impact of the dollar on the economy of Canada. That was the intent of the motion, and it will all be part of the pre-budget consultation. We hope that every witness who comes forward will be able to speak on both of those issues and will be prepared to do so. We're hoping that will happen. That's what we hope will happen, and we'll indicate to those who are coming forward on those pre-budget consultations to make that happen. That is how I'd interpret the motion. If I'm wrong on that, please let me know.
Go ahead, Paul.
I have several departmental colleagues with me here today who will assist in responding to your questions. They are Paul Rochon, Barbara Anderson, Louise Levonian, Brian Ernewein, and Serge Dupont. We are all with the Department of Finance. There's also a representative from FINTRAC with us.
It's our understanding that the committee has called us here today to focus on the Department of Finance and FINTRAC supplementary estimates (A) for 2007-08.
The Department of Finance's estimates reflect its responsibilities which, as I am sure you are aware, include preparing the federal budget, developing tax and tariff policy and legislation, managing federal borrowing on financial markets, administering major transfers of funds to provinces and territories, developing regulatory policy for the country's financial sector and representing Canada in international financial institutions and fora.
The Financial Transactions and Analysis Centre, or FINTRAC, is responsible for producing financial intelligence that contributes to the detection and deterrence of money laundering and terrorist financing in Canada and abroad.
The Supplementary Estimates that have been tabled in the House for the Department of Finance are only requesting the approval of $272,000 that will be included in the proposed Appropriation Bill supporting these Supplementary Estimates (A).
In total, these supplementary estimates (A) have identified adjustments to appropriations of over $5 billion. This is in addition to the approximately $76 billion identified in the main estimates for this fiscal year. It is important to note that the remaining adjustments to appropriations of over $5 billion have already been approved by Parliament through various pieces of legislation, including the recent Budget Implementation Act. The same is true for the $76 billion previously identified in main estimates. Over 99% of this amount relates to statutory votes for items that have already been approved by Parliament through enabling legislation. These include items like the payment of public debt charges, Canada health and social transfer, and equalization payments.
These statutory votes are displayed in the estimates document for information purposes and they're not included in the appropriation bill. The gross increases to these statutory items in these supplementary estimates amount to $5.9 billion, but they are offset by declining interest in other debt servicing costs, for the net increase of approximately $5 billion.
The increases are mainly attributable to revised forecasts for transfer payments to provincial and territorial governments, including increases to fiscal equalization payments of $1.2 billion, a new $1.5 billion clean air and climate change trust fund, and increases to the Canada social transfer of $794 million.
The non-statutory votes of the Department of Finance are requesting an additional $272,000 in this fiscal year. This funding is part of an overall envelope that has been provided to departments to facilitate the evaluation of grant and contribution payments and to meet the Federal Accountability Act commitment to evaluate these programs for relevance and effectiveness on a five-year cycle.
FINTRAC has requested $5.4 million in their supplementary estimates to bolster the combat against the laundering of proceeds of crime and the financing of terrorist activities in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Specifically, FINTRAC's funding in the supplementary estimates will be used for staff costs to implement significant new functions resulting from Bill C-25, such as a money services business registry as well as an administrative monetary penalty system, to enhance FINTRAC's financial intelligence products and to meet the investigative demands from domestic law enforcement, national security agencies, and foreign financial intelligence units. The funding will also be used to renew FINTRAC's IT systems and assets, and to implement and support the business continuity plan, which includes securing an alternate operating site.
We would be pleased to address any questions the committee may have on these estimates.
Thank you, Chair. Thank you, witnesses.
As you know, this briefing on the Nova Scotia accords has been on again, off again, on again, off again. I know it's a great frustration to Mr. Casey. It's rather a pity that he's not able to be here.
You put into your schedule (S), “Fiscal Equalization (Part I – Federal-Provincial Fiscal Arrangements Act)”, $1.2 billion, which I assume reflects the costs that are associated with Nova Scotia's new money. For the purposes of this hearing, can you outline to us in rounded numbers, if you will, what Nova Scotia was going to get under the original accord, what Nova Scotia is now going to receive under this clarifying agreement, and what are the assumptions, if any, underlying both agreements?
If you're referring to two streams of revenue, Nova Scotia has released forecasts of what they think they might get, but the Department of Finance has not, because we don't have reliable forecasts beyond next year. Equalization is just heavily data driven and changes, so we do not forecast it with that kind of accuracy, for obvious reasons.
What the October 10 agreement gives Nova Scotia is a guarantee that they would be no worse off by coming into the new equalization formula than they would have been if they had stayed under the previous equalization formula. That was the choice that was provided them in Budget 2007, and on October 10, the government committed to ensuring, once they'd made the decision to come into the new equalization formula, that they would not lose money compared to what they would have got under the other one.
That comparison will be made and calculated year after year.
Thank you, Mr. Chairman. Greetings to all of you. We saw each other not so long ago.
At our last meeting, I asked a number of questions with respect to tax evasion. We also had discussions in committee with respect to the use of tax havens, like Barbados, which allow people to patriate, tax-free, profits realized in Barbados on which very low tax rates were levied in Barbados. We're talking about 2%. These individuals bring that money back to Canada, tax-free. We also talked about taxes that can be saved by deducting interest paid abroad. We discussed double dipping and other similar matters as well.
I asked you how one could go about estimating what that would represent if all those monies were taxed. In committee, you were unable to provide a precise answer and you sent along additional information subsequently, saying that you did not have the numbers from tax returns. In other words, you did not have enough detail to be in a position to answer that question.
Could you tell me what steps you have taken since then to be able to accurately assess foregone tax revenues associated with these tax exemptions, so that parliamentarians are able to determine how much money would be involved if, for example, it was decided to no longer allow people to patriate tax-free profits to Canada from Barbados? What steps have you taken to obtain these figures?
Thank you for the question.
The honourable member mentioned that the question had come up before and that we'd provided an answer before. I think that's the correct recollection, and therefore my answer will very much track what I said before when we were here.
We don't have a breakdown of the numbers that will be deducted....
Sorry, let me start again. With respect to the rules that exempt business income earned offshore by foreign subsidiaries of Canadian companies, they are a deliberate policy decision by Parliament.
The comment I made the last time, and abide by still, is that you can't measure the revenue loss by applying the Canadian tax rate to that foreign income and contend that is the amount of Canadian tax that is lost. In fact, one of the arguments that commentators would make quite strongly, I believe, is that it's as a result of the exemption for the foreign business earnings of foreign affiliates of Canadian companies that we do have the business conducted offshore. It's not appropriate to measures losses by, as I say, applying a tax rate to that foreign income.
I would appreciate it if you could send that information along to committee members.
I would also like to talk about the transfers that appear under the item entitled “Fiscal Equalization”. I guess this has to do with resolving the fiscal imbalance.
It talks about fiscal transfers but, in my opinion, we are really talking about cash transfers. When the Minister came to meet with us, he did, in fact, confirm that this represented a cash transfer from the federal government to provincial governments, and that there were never any real fiscal transfers.
Could you tell me whether the Minister was correct in saying that this settlement represented a cash transfer to the provinces or, as the name seems to suggest, are we instead talking about a transfer of tax room to a specific province?
I want to thank everybody for coming. I have a number of questions. I actually enjoy looking at these things.
This is mostly for clarification, just so I understand. Right now, we're looking at supps (A), as I like to call them. There is another supplementary period that comes, at least one more. Is that not correct? When would that be expected? When would we see those numbers?
It is sometime in March. Okay.
Can we turn to page 149, if that's okay, in the supps? So I have an understanding, could you explain some things to me? When you say a transfer, when I'm looking at a transfer...where is that coming from, and what triggered that? It is not the adjustment column but the transfer column. I'm trying to learn the process here.
I understand. The reason we have supplementaries is because the decisions made and the strategic outcomes you wanted to accomplish when you produced this book may have changed, based on budgetary changes that have been passed in the House, and they're all represented in this supplementary book.
If there were no other changes in financing, from a budgetary point of view, between now and the end of March, what would we need supps (B) for? When do we say to a department—I'm being a little bit of a devil's advocate here—look, you put in your money, you get to spend it, but quit asking for more? When does that happen?
On the books we get on how you perform, I have two questions. We got this recently for March 31, 2007. This is really for the fiscal year 2006-07, and by the time I get it, it's seven months old, plus what happened the year before.
I have two questions. When you are doing your work, I know there are budget changes every year and so on, but how far do you do your planning and projections? Is it a two-year plan, a five-year plan, or an annual plan, just because of the nature of the business? I know things will change, but in terms of planning purposes, what is your policy as a department? What do you want to accomplish?
Just to finish up on my comments, my experience has been that for organizations I have dealt with, including those at the municipal level, we set up performance evaluations or performance guidelines and were able to evaluate them a lot more quickly, to see how we did that year.
I have no complaints about the finance department. Here, we're so far away from it. But when I look at the supplementary estimates and the actual budget that's here, how much of it is the cost of actually running Finance, the staffing of Finance? What is the number here?
When I look at vote 1(a) in the supps, I see it talks about operating expenditures, but it talks about supporting ministries and so forth. I can't see where to see how much the Department of Finance is actually spending.
I want to thank you for coming in and answering the questions of the committee, and I thank the committee for the questions.
Now we'll invite the Canada Revenue Agency individuals to come forward.
Mr. Ralston, I believe you're doing the presentation. We thank you for coming. We'll entertain your testimony. The floor is yours.
Thank you, Mr. Chairman.
My name is Jim Ralston, and I'm the chief financial officer. With me is Richard Case, a director in our resource management directorate.
The CRA welcomes the opportunity to appear once again before this committee, this time in consideration of supplementary estimates (A) for 2007-08.
For the CRA, supplementary estimates (A) comprise a number of separate adjustments to the agency's spending authorities, totalling just over $311.6 million. The largest single adjustment represents the transfer from Public Works and Government Services of $257.1 million to permit the CRA to manage its accommodation and real property services. The Treasury Board minister has approved this transfer of resources, putting into effect a quasi-market-based reimbursing regime designed in cooperation with PWGSC.
Other funding increases are being sought for a number of legislative, policy, and operational initiatives announced in the 2006 and 2007 federal budgets. Also included in these estimates, funding is being sought to implement and administer the 2006 Canada-U.S. softwood lumber agreement and to implement a national initiative to address interprovincial tax avoidance by corporations.
Certain items were previously also dealt with in supplementary estimates (B) of 2006-07.
The $311 million represents an 8.7% increase in the authorities granted through the main estimates. With the inclusion of supplementary estimates (A), the agency's total estimates to date will amount to $3.859 billion.
I'd now be happy to respond to any questions.
With the softwood lumber agreement there were two activities given to the Canada Revenue Agency. One activity relates to something called a softwood lumber product export charge. The other one refers to a charge on duty deposit refunds. I'll deal with each one.
With the softwood export charges it's simply that. When an exporter is exporting the lumber there is going to be a tax levied. We will collect that tax and we will also share the revenue with the provinces in accordance with the terms of the agreement. And of course this is an entirely new charge, so all of the costs that we see here are associated with setting up the systems and procedures and the staff necessary to do that.
There is also a second aspect of the administration, which is that in the years prior to the agreement, the U.S. government had collected a certain amount of duty from Canadian companies. They were returning it to these Canadian companies. Again, there's a role for CRA. When the U.S. government made these refunds there was a portion of it that was to be directed to the federal government and a portion directed to the companies involved. Again, the CRA had to set up a system to collect that portion.
Thank you for answering the question that I asked the other group before.
I only have a few questions, and hopefully you can answer them. I looked at your main budgets and then at what the supplementaries are here. When I looked at other departments, the difference.... When you looked at their main estimates and the number in thousands of dollars...so it's $2.607 billion in the main estimates. But when I looked at the supplementaries it had authorities, to date, at $2.775 billion. You're the only one that had a difference from what was in the main estimates I had looked at to what was on the authorities to date.
What caused that additional $167 million between the main estimates in here? It's not really listed that I see.
I'm just wondering if maybe in the future you could make a little note to that. Now, I might be the only one here ever looking at it, but it was of interest because based on what you had put in your main estimates and what you're asking for here, there isn't any significant difference, other than....
I did want to ask you about it, and I think you've answered Massimo, but you probably have to do it for me again so that I clearly understand. The change has been because you're now looking after real estate that used to be the responsibility of Public Works.
I'm still confused. Are you looking after just the dollars and cents, not at the management of the leases and all that baloney?
Operationally, very little has changed.
What has changed is that the parliamentary appropriation to finance accommodations costs, instead of appearing in the PWGSC appropriations, will now appear in our appropriations. The amount hasn't really changed. As we say, the transfer has been cost neutral.
Our interest in doing this was partly to reflect the way the CRA Act is written. It shows us as having that authority, and yet we weren't really exercising it, in a sense. It places the accountability for those funds. It aligns that accountability with the mandate of the act. And we also believe that it will be an incentive for us to manage our demand a little more carefully.
It's no longer going to have the appearance of a free good. It's going to have the appearance of something we pay for. Our sense is that once you change that perspective on things, it might cause you to examine a little more closely how you're demanding the space you're occupying.
Because I didn't see any change in the numbers from the supplementary to the main estimates, I'm assuming that if the government of the day changes.... Let's take a look at your workload. In a sense, because of the changes in the budget that have happened with Whitby, as the minister likes to call it, and some other changes that we have made, the same bodies can handle the.... Have you had growth in the actual number of people in the department?
Thank you, Mr. Chairman.
I just want to thank the witness. In the past, every time you've come before the committee and we have asked you for additional information, you have provided it to us. I want to put that on the record and thank you for that. It comes in quite quickly and is quite detailed. Thank you for that, and I hope you continue to do that. It helps our work a little bit.
I have just two quick questions. One is a follow-up to what Mr. Wallace was asking.
I pulled out, for example, the auditor's report and the comments regarding internal taxation. One of your comments.... I remember speaking about it when we had the review as well. We were looking to hire more professionals and expertise. Perhaps the money is not there. But do you not think there is any need for more money to get specialized staff? Is your budget sufficient?
Thank you, Mr. Chairman. Thank you for being with us today.
Deputy Commissioner, the Auditor General's Report makes reference to the fact that auditors working for the Canada Revenue Agency are well trained, and that everything seems to work well and be perfectly adequate. However, she makes an important point with respect to experienced auditors. Her report states that there is a lot of movement amongst staff, that many employees leave the Canada Revenue Agency and that training could be improved as regards experienced auditors.
So, my question is: has the Canada Revenue Agency made any assessment of the money the federal government could recover if it had more experienced auditors or auditors who are better trained or better able to comply with its own standards?
I would like to move on now to my second question, which is addressed to you, Deputy Commissioner.
I regularly hear it said in some regions of Quebec that you are cutting back your staff. For example, there is a Taxation Data Centre in my region of Saguenay—Lac-Saint-Jean. I am told that there have been cutbacks in staff, and I am hearing the same thing in other communities, such as Sherbrooke and Shawinigan. Moreover, certain services have been centralized in Ottawa or in larger cities. In addition, taxpayers, some of whom are in other ridings in Quebec—have told me about certain changes, such as the fact that taxpayers have to make an appointment in order to speak with an employee of the Canada Revenue Agency.
I assume that if this is occurring in a number of different regions in Quebec, it is likely to be occurring elsewhere in Canada as well. That suggests that the Canada Revenue Agency has a certain amount of flexibility. If there are cutbacks occurring in the regions, not only in Quebec but elsewhere as well in all likelihood, that means there is more money. So, I am surprised that you are asking for a Supplementary Budget.
I'd be interested in hearing your comments on that. Does that really give you any flexibility? Is there anything to be gained from cutting back your staff in certain regions—it is certainly the case in my area that there have been staff and even service cutbacks? If so, what is that money used for?
I invite your comments.
In terms of these supplementary estimates, the funds that are requested are very targeted to particular measures that emanate from the budget or other policy statements. As I indicated, we're trying to represent the additional costs to the agency of implementing those particular measures. They're not related to the kind of broader issue you've alluded to. These ones are very specific to identifiable policy initiatives.
In terms of your broader question, all I can say is that the agency is constantly trying to improve its operations. There may be staffing level adjustments from time to time. It's usually motivated by our need to try to optimize our budget around the many different activities we have to conduct.
WIth respect to specific kinds of operations, my position is basically that of the chief financial officer. I'm not really in the best position to talk about particular operational decisions. If you have a specific query, I can ask my operational colleagues to provide answers that we could get back to the committee with.