I call this meeting to order.
This is meeting 38 of the Standing Committee on Finance. Our orders of the day, pursuant to Standing Order 81(4), are to study the main estimates for 2014-15, specifically votes 1 and 5 under Canada Revenue Agency, referred to the committee on Thursday, February 27, 2014.
I want to welcome our three officials from the Canada Revenue Agency this afternoon.
First of all, we have Monsieur Roch Huppé.
We have Mr. Brian McCauley, the assistant commissioner. Welcome back. We also welcome Mr. Richard Montroy to the committee.
I believe you have an opening statement to present, and then we'll hear questions from members.
Mr. Huppé, the floor is yours.
Good afternoon. Thank you for the opportunity to appear before the committee to present the following and to answer any questions you may have on the Canada Revenue Agency’s 2014-15 main estimates.
Mr. Chair, as you are aware, the CRA is responsible for the administration of federal and certain provincial and territorial tax programs, as well as the delivery of a number of benefit payment programs.
Each year, the CRA collects hundreds of billions of dollars of tax revenue for the Government of Canada, and distributes timely and accurate benefit payments to millions of Canadians.
In order to fulfill its mandate, the CRA is seeking the approval of just under $3.9 billion through these 2014-15 main estimates. Of this amount, close to $3 billion requires approval from Parliament, whereas the remaining $900 million represents statutory forecasts that are already approved under separate legislation.
The statutory items include the softwood lumber disbursements to the provinces, children’s special allowance payments, employee benefit plan costs, and the spending of revenues received through the conduct of CRA operations pursuant to section 60 of the CRA Act for administered activities on behalf of the provinces and other government departments.
These 2014-15 main estimates represent a net decrease of $415.6 million, or 9.7%, when compared with the 2013-14 main estimates authorities.
The largest component of this decrease is a $203-million reduction in the projected statutory disbursements to the provinces under the Softwood Lumber Products Export Charge Act. This decrease is to reflect a revised forecast provided by the Department of Finance, which is based on changing prices and volumes in the Canada-United States lumber market.
Other decreases to the agency’s budget include savings of $119 million as a result of the budget 2012 spending review. Most of these savings can be categorized under two broad categories, namely, making it easier for Canadians and businesses to deal with their government, particularly through the provision of faster, more efficient online services, and modernizing and reducing the agency's back office.
There's a reduction of $57.6 million as a result of savings identified as part of the budget 2013 targeted review of CRA's headquarters operations. These savings do not affect services to Canadians and will be achieved by streamlining our internal services, optimizing our IT resources, and improving our organizational alignment.
A $19.7-million adjustment in the transfer from Public Works and Government Services Canada to the CRA, reflecting a decrease in accommodation and real property services.
There's a transfer of $18.7 million to Shared Services Canada, representing the transfer of responsibility for the procurement of end-user software as well as an adjustment to the base funding previously transferred to Shared Services Canada when it was first created.
These decreases are partially offset by new funding approved in a number of areas. This includes $22.3 million to fund salary increases attributable to collective agreements that came into effect in 2011 prior to the recently announced operating budget freeze for 2014-15 and 2015-16.
An additional $17 million in 2014-15 as part of the multi-year upgrade of CRA's personal income tax processing system. These upgrades will leave the CRA in a better position to address increased numbers of tax filers, respond to new tax policy measures, and implement new partnership agreements with provinces, territories and other government departments and agencies.
Finally, there's an increase of $5.4 million for the implementation and administration of various measures affecting individuals, businesses, and charities, announced as part of budget 2012, including the one-year extension of the hiring credit for small businesses, enhancing transparency and accountability for charities, and the introduction of pooled registered pension plans.
In closing, Mr. Chair, the resources sought through these estimates will allow the agency to continue to provide quality services to Canadians by ensuring that taxpayers meet their obligations, Canada’s revenue base is protected, and eligible families and individuals receive timely and correct benefit payments.
Thank you, Mr. Chair.
At this time, my colleagues and I will be pleased to respond to any questions you or the committee members may have on the CRA's 2014-15 main estimates.
Welcome to our witnesses, and thank you for the answer to Mr. Rankin's last question. I think it's important that Canadians know, because they expect charitable dollars that are raised for charitable purposes to be spent on charitable purposes and not on something else. I don't think you can make any more out of it than that, quite frankly.
We didn't have a chance in your discussion to bring up the voluntary disclosures program, but I do have two questions on it. It's administered by CRA. It promotes compliance with Canada's tax laws, both domestically and internationally. For Canadians who have not been, let's say, entirely truthful in their tax returns, it gives them a chance to comply.
Can you expand on how the program works, and why it is obviously prudent for Canadians who may not have been entirely truthful on their tax returns to take advantage of it?
Thank you for the question, Mr. Chair.
The voluntary disclosures program has existed for years within the agency. In a nutshell, it's a program that allows people who have not been fully compliant with their tax affairs to come forward, and as long as they pay the tax and the interest, they won't be subject to any penalties. There are various conditions, obviously, in the program; they have to come clean and give us all the information we need to assess their returns.
Over the last number of years, our numbers in VDP have been going up steadily. There are many reasons for this. I'd like to think.... One of the major reasons is that there are fewer and fewer places for people to hide their money. Canada has a number of information exchange agreements with various countries. Our tax treaties have been updated. In the last few years a number of measures have been brought in to help us on the offshore front. The CRA has invested heavily in the offshore area. Because of all these items, we're seeing that people are deciding it would be better for them to come in on VDP. A term we like to use is “come see us first before we come see you”.
Some hon. members: Oh, oh!
Mr. Richard Montroy: These are probably the reasons the VDP has been successful.
Finally, I just want to revisit for a moment the cheque that was recalled. I think it needs to be stated clearly at committee that it was never cashed. It was an administrative error through automation. It was recovered, and a full investigation was begun.
Do you have anything to add to that, for clarity? In any huge organization, you have to be constantly vigilant, but the accusation that there's some type of rampant corruption is not fair to you and it's not fair to a group that's out there working on behalf of Canadians every day.
To re-emphasize, the investigation was conducted and clearly showed at the time it happened that system controls were not operating in the way they operate today, the best practices we have today to flag certain payments. I'm not going to go into details, obviously, on the taxpayer situation. It was not flagged.
Also, clearly, as we revealed in our investigation and as we published, there was a situation where.... There is a process flow, obviously, before a cheque is released from our system. There are different checks and balances as part of that, and there was, in the later portion of these checks, poor performance on the part of an employee. That employee has now retired, but clearly there was a performance issue around that employee and the process to release that particular payment.
As I said, there was no.... Through their lawyer, the family contacted the CRA to advise that they had received the cheque by mistake.
It's hard to manage what you don't measure, and it's helpful to have good data when making public policy decisions.
A lot of Canadians, especially from Atlantic Canada, work in other regions or in different provinces sometimes for weeks on end, but keep their families and file taxes in their home province. I'd like to get a better understanding of how many Atlantic Canadians travel west to work but continue to pay taxes in Atlantic Canada. We've looked at Statistics Canada interprovincial workforce data. Their most recent data appears to be around 2009, but there's been a lot of development in, for instance, the resource sector since 2009.
Does the CRA track how many Canadians work in a different province from where they live and file their taxes?
With the trend, we've seen a considerable increase since 2010, when we were at about 60% of returns being sent electronically. With the filing season that we just terminated, we're up near 81%. There's a drastic increase from that perspective. Last year we were around 77%. It's still a considerable increase even from last year.
I would say that yes, we're still anticipating an increase to that nearly 81%. Obviously, there's still room for growth there.
On the first part of the question, around the $17 million that I referred to for the redesign of the T1 system, the system for individuals, the agency actually received $251 million over a period of nine years to complete the redesign, and that's basically to ensure sustainability of that system. Obviously, it's a very important system. It was also pointed out in a previous OAG audit on large systems that the system would need to be looked at, so we received the funding for it.
The $17 million you're actually seeing is a cashflow variance from last year. Last year in the main estimates there was $23 million earmarked to be spent in 2013-14 in relation to that system. We have $40 million earmarked this year to be spent on the upgrade of that system. We still have a way to go, but we're in the initial stage of that redesign.
Thank you, Mr. Chair. I am going to split my time with Mr. Cullen.
I'd like to discuss an article that came out yesterday in La Presse about the tax debt, in other words, unpaid taxes. You probably read it.
Last year, the tax debt was $31 billion, and $29 billion the year before. That represents a $2-billion increase. A CRA spokesperson attributed the increase to the harmononization of the GST and population growth. But the amount owing in 2005-06 was $18.5 billion, which means the tax debt has gone up nearly 80% over 8 or 9 years.
Are the harmonization of the GST and population growth really the only reasons for the increase? Hasn't a staffing shortage made it difficult to stay on top of recovering unpaid taxes before the 10-year limit expires, after which point the money can no longer be collected?
Thank you for the question.
I don't know all the details or the reasons. But what I can say is that the overall increase in income is obviously one of those reasons, and the tax debt has gone up as a result.
I can assure you that, every year for the past few years, the CRA has been reallocating funding to strengthen its recovery capacity.
I'd also like to point out that, according to an international study of 10 major countries conducted by Capgemini, the Canada Revenue Agency is among the top two organizations in terms of its ability to recover tax debt as a percentage of income and the cost of collecting every unpaid dollar. The CRA's recovery costs are among the lowest.
We also responded to a debt recovery audit by the Auditor General by changing certain procedures to ensure the portfolio remains at acceptable levels.
Thank you, witnesses, for being here today.
I want to correct the record on something that was said earlier in terms of the floating tax debt. The number of $29 billion was referred to. It's important to note, however, that, as you know, $40 billion in tax debt was resolved and brought in. It's important to make that distinction. It's not as negative as it appears; in fact, it is quite positive.
Canada certainly has one of the highest tax compliance records in the world. Is that not the case? Yes.
Our government has certainly been at the forefront of promoting the fact that everyone has to pay their fair share of taxes. Since 2006 we've passed more than 85 measures to improve the integrity of our tax system, 85 measures which, I should add, were each singularly voted against by both the Liberals and the NDP.
I would also like to say that in terms of tax collection improvements, the amount of taxes recovered has grown between 2006 and 2013 by 75%. That's correct, right? Roughly?
We'd appreciate that very much.
Thank you, Mr. Adler and Mr. Van Kesteren.
I want to thank our three officials for being with us and for responding to our questions. It was a very informative session.
Colleagues, I'd like to quickly do the votes.
||Vote 1—Operating expenditures..........$2,877,504,675
||Vote 5—Capital expenditures..........$72,447,985
(Votes 1 and 5 agreed to on division)
The Chair: Shall I report the votes under Canada Revenue Agency to the House?
Some hon. members: Agreed.
An hon. member: On division.
The Chair: I'll do that on Friday.
Thank you so much, colleagues.
The meeting is adjourned.