FINA Committee Report

4. Human Resource Authorities

   1. What the Witnesses Said

      In his appearance before the Committee, the Commissioner of the CRA said he would “like to think [the Agency has] an excellent relationship with both unions of employees. … We’ve been working very hard on all sides to develop that relationship … .” He also said that “(s)taffing in the [Canada Customs and Revenue Agency Act] was recognized and preserved as a management right, as it is in the [federal] public service generally. This is not something that is at the negotiating table. For the time being, it has led [the Agency] to the implementation of a very different staffing system. That has its problems, but it is also at the forefront of staffing systems in public sectors. [The Agency] is working with the unions … to improve it. But in the end, in the (A)ct, it is the prerogative of management to decide which system will be put in place.”

      An official of the Agency noted that “[the Agency] starts and ends with people. The authorities [the Agency] now [has] allow [it] considerable latitude in the way [it classifies its employees], in the way [it structures itself], and in the way [it treats its] employees.” Another official noted that “[the Agency] continue[s] to work very actively in order to put in place the competency-based human resource management system. … (S)ince [its] implementation …, [the Agency has] taken a number of steps to bring improvements to [its] whole human resources regime. This includes things like building capacity, in terms of having people who can do evaluations, and bringing managers into the process of evaluating the competencies of their staff.”

      In speaking about the human resource authorities granted to the CRA under the Canada Customs and Revenue Agency Act, the Auditor General told the Committee that “in terms of the benefits anticipated from the (A)gency’s new human resource management and administrative authorities, there are indications that progress has been slower than anticipated.” Particular comments were made about the description of competencies, which she had expected would have been under way but that seemed to be occurring only when there was a competition, and staffing actions. She indicated that, when her office originally contemplated an audit of the Agency’s human resource management, “neither the job descriptions nor competency profiles were completed. Nor was validation of the profiles. For staffing, there was a pool of prequalified staff. This system seems a bit mixed up.” The Auditor General also indicated that concerns had been shared about some staff apparently having been “transferred within the (A)gency without competition or posting. The way all of that worked was not clear … .”

      The Auditor General informed the Committee that her office has “not yet completed any performance audits that look specifically at the new authorities granted to the (A)gency. In 2004 [the Office of the Auditor General] began an audit that was designed to assess the new competency-based human resources management regime being put in place. However, [the Office] found that progress was not sufficient to warrant an audit at the time. [The Office] felt, and other (A)gency internal studies confirmed, that the (A)gency had tried to do too much, too soon, without a full understanding of the cost, scope, and complexity of the task. … [The Office] … anticipate[s] beginning an audit of human resources management in the fall of [2006], with another human resources audit tentatively scheduled to begin about a year later.”

      As noted earlier, the PSAC commented on the need to continue to make progress in a number of areas of human resource management, with particular mention of job classification. The Committee was informed that the classification review was well under way, “but once [the federal government] … took the customs offices out [of the Canada Customs and Revenue Agency] and put them in the [Canada Border Services Agency], [the classification review process was] stopped … .”

      According to the Union of Taxation Employees of the PSAC, “the most important area where the CRA has failed to live up to its employer-of-choice model is in the area of staffing and staffing recourse. … (T)he CRA staffing directives fall far short of providing transparency in appointments and do not provide any real recourse. … (T)he CRA has refused to implement some of the findings of the independent third party reviewers … . … When an [independent third party reviewer] interprets a directive in a way that expands employees’ rights, the employer amends the directive to limit that right once again.” The Committee was told that these reviewers are chosen by the CRA. The PSAC noted that “(n)o other employer in the country gets to set the rules.”

      In the view of the Union of Taxation Employees, “the staffing and staffing recourse need to be included in the collective bargaining process so that the interests of the CRA workforce as well as [of the] employer are addressed. … (W)ithout the ability to negotiate, the employer, the CRA, has the unilateral and unfettered right to set the rules. As [the union goes] to [the Agency’s] stages of recourse — where union representation is not allowed at the first two levels — and [the union] make[s] some inroads, the (A)gency has the unfettered authority, with the stroke of a pen, to change the policy once again. Without the ability to bargain the rules at the table and to have rules we all must live by, or to negotiate those changes, [the] employees are left with a really futile sense of recourse. They have no real recourse.” The Committee was told that the union is “spending the time of the Federal Court Trial Division and the Federal Court of Appeal arguing staffing issues of the public service. … [The union is] left with no other alternative than to fight [its] battles in the courts.”

      The PSAC expressed a similar position regarding collective bargaining of staffing and recourse issues, noting that “(w)hen you bargain, you don’t necessarily get what you want. But the fact of the matter is that once you do get the pieces in the collective agreement, you have the right to address mechanisms that flow from the collective agreement.” The Union of Taxation Employees commented on the process that existed when the Agency was a department, and told the Committee that while staffing was not bargained because it was covered by the Public Service Employment Act, the union “had the watchdog [ — the Public Service Commission — ] when there were problems. Now the (A)gency gets to act as accused, judge, and jury under their own process. [The Agency] create[s] [its] own process; [it is its] own watchdog; the complaints about [its] processes are heard and decided by [its] managers, or [by] the reviewer [that] is appointed by [the Agency].”

      In the view of the PSAC, “(t)he problem is that the [CRA] tends to link itself far too directly … with the Treasury Board. So they send their people to the negotiating table with [the union], and the problem … is they have no mandate. Each time [collective agreements have been negotiated] with them in the past, it’s had to involve the president of the PSAC meeting with the (C)ommissioner and other officials to conclude a collective agreement, because they don’t seem to want to give the mandate to the people they put at the table. [The union] believe[s] that’s where the agreement should be started and finished, without having to go into a discussion between the head of the (A)gency and the head of the union.”

      The issue of staffing and recourse was also discussed by the Professional Institute of the Public Service of Canada (PIPS), which said: “[The Agency] has awarded itself very high marks in the report [it prepared in anticipation of the five-year statutory review]. … [The PIPS] entirely disagree[s] with [the Agency] on this point. … (T)he most crying need in human resource management that must be satisfied is the whole issue of staffing and recourse. … The feeling is that [the Agency] put the cart before the horse in establishing [its] staffing and recourse mechanisms at the (A)gency. It’s poisoned everybody’s life ever since. … (S)taffing and recourse at [the] CRA are in dire need of fixing.”

      According to the PIPS, “(t)he CRA pride[s] [itself] on being [a] trendsetter because [it] brought forward a new staffing regime, a new recourse regime, a new entity distinct from [the] Treasury Board … . [It] did make strides in establishing forums for consultation for employee representatives. [It has] tried to make the staffing more efficient, and it doesn’t work. … If [the Agency] want[s] to continue with [the] impression of [itself] … [as a] trendsetter [it] could go a step further and say, ‘Yes, [the Agency is] a separate employer; why [doesn’t the Agency] establish a process by which [staffing recourse could be bargained]?’” It also told the Committee that “(a)n internal review by the (A)gency shows that 75 per cent of employees believe that the selection process needs improvement, because it is neither fair nor transparent. The system should be quicker and more efficient … .”

      In the view of the PIPS, “recourse must be provided in a manner allowing for the cancellation or modification of the staffing action. Any recourse system that has any backbone must be consistent with the principle of natural justice, the most important principle being the right to representation.” The PIPS urged Parliament to “direct the Canada Revenue Agency to meet its obligations under section 54,” which deals with appointments and recourse. The Union of Taxation Employees urged an amendment to the section in order to ensure that staffing and recourse issues can be bargained, rather than deleting the section and having the Act remain silent on the issue.

      The PIPS also told the Committee that its members have concerns about “the disclosure of information, which occurs inconsistently and on a largely untimely basis. After six years of [the union] raising concerns related to disclosure, [the union does] recognize that [the] CRA has finally agreed to show some opening in principle, which may lead to improved methods for disclosure of information. Time will tell whether the principle will be followed by an equally open practice. [The Committee] will understand and pardon [the union’s] skepticism, given the (A)gency’s overall record on recourse.”

      Finally, the Union of Taxation Employees commented on the centralization of compensation service delivery, and informed the Committee that “before [compensation delivery services were] centralized, each office did have compensation service people on site. You could see them and talk about your impending retirement, discuss some of the things you will need to do, how much your pension will be when you leave, and that sort of thing. That is gone. Now you’re on the phone and you deal with either Ottawa or Winnipeg. [The union was] told that [it] used to have a Cadillac service and [the Agency is] not prepared to give a Cadillac service to the membership any longer.”

   2. What the Committee Believes

      The Committee was somewhat disturbed by the extent to which relatively little progress appears to have been made in the area of human resource management since Bill C–43 was enacted. Consequently, as the CRA moves forward, we strongly believe that this area is one of three areas that should be a priority for progress.

      The Committee fails to comprehend why, given the CRA’s status as a separate employer, the Treasury Board is involved — to the extent that it appears to be — in negotiations between the Agency and the unions representing its employees. Quite apart from any inefficiency associated with having parties sit at the bargaining table who have no authority to conclude a collective agreement, we believe that the Treasury Board’s involvement undermines the Agency’s separate employer status as well as the extent to which private sector principles are being adopted by the Agency. For this reason, the Committee recommends that:

      Recommendation 5

      the Treasury Board play no role in negotiations between the Canada Revenue Agency and the bargaining agents representing the Agency’s unionized employees.

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5. Other Issues: Tax Compliance and Protecting the Tax Base

   1. What the Witnesses Said

      In her appearance before the Committee, the Minister of National Revenue told us that in order to “be the best Agency that it can be, the CRA must maintain the integrity of the federal and provincial tax bases. It can best achieve this by building on the high levels of voluntary compliance within Canada’s tax system. These compliance levels are forged and rooted in the confidence that Canadians place in the Agency by virtue of its fairness, accountability and integrity.”

      One of the areas identified by the Commissioner of the CRA as requiring some work and improvement is tax compliance. He indicated that a major responsibility for the Agency is maintaining the integrity of the tax base on behalf of the federal and provincial/territorial governments as well as First Nations. According to the Commissioner, “the end objective is to ensure that the (A)gency is able to put a constant pressure on the compliance side to ensure the integrity of [the] tax base on an ongoing basis.”

      On the issue of tax havens, the Commissioner said that the “[Agency] see[s] the issue of the tax haven as part of a much broader tax compliance issue.” He cautioned that foreign investment should not be linked to tax evasion, and suggested that “(t)his is an issue of foreign investment policy; it may turn out to be a very good sign for the Canadian economy that people have money to invest throughout the world.” The Commissioner recognized, however, that “a portion of (the money that constitutes foreign investment by Canadians) is part of larger tax avoidance schemes and measures that involve tax havens and channeling money through foreign countries that offer a different tax system. The principle of Canadian investors taking advantage of an advantageous … tax system in another country is something that all countries are competing against, but it’s not necessarily tax evasion … .”

      The Auditor General told the Committee that “the (A)gency has limited resources and cannot be everywhere at once. It must make trade-offs in deciding where to deploy resources to deal with competing threats to the tax base.” In her view, while “the individual compliance programs are generally well designed, … the (A)gency needs to improve its overall risk management framework and the manner in which it allocates its resources.” She said that the Agency is not “paying enough attention to which collection methods are the most efficient. [The Agency has] various methods that [it] could use. [It] need[s] to have better information, too, to identify the higher-risk taxpayers earlier, and, if necessary, take action more quickly on those. … [The Agency] could do better by having better information both on the taxpayers who owe the money and on the composition of the amount, and by having better information on which types of collection are the most efficient in what case. Basically there needs to be more attention paid to collections.”

      According to a report by the Auditor General of Canada, “(t)he Canada Revenue Agency does not have a consistent and integrated approach to identifying threats to the tax base to ensure its resources are allocated most effectively.” Moreover, the Auditor General has said that the Agency’s “approach to assessing files for risk continues to lack sophistication and has major weaknesses that impede the timely collection of tax debts. Further, the Agency still lacks information needed to manage its collection of the tax debt effectively. … The automatic risk scoring of delinquent accounts was ineffective because the risk assessment was limited mainly to the outstanding balance and the age of the account; other important risk factors either were not considered or did not weigh heavily in the risk scoring. The risk scores were rarely updated or used to prioritize workload. There were no profiles of tax debtors for use in modifying basic collection strategies to improve recoveries from debtors who posed a high risk of non-payment.” The point was also made that “the Agency does not have a full understanding of the composition of the tax debt and why it is growing.”

      The Commissioner of the CRA informed the Committee that the Agency “did not disagree with any of the recommendations in the [Auditor General’s] last report, and in fact [the Agency is] already gearing up to implement everything [that the Auditor General] suggested. These kinds of reports are extremely helpful.” An official of the CRA said that the Agency acknowledges that it “needs far more refined and developed information systems to help [it]. The business of tax administration is the business of managing risk, and the same applies to tax collection. … (S)ome development work [is] under way in the (A)gency to get [it] to the point where [it is] more capable. It’ll take time and money.”

      That being said, another official of the CRA informed the Committee that the Agency “risk assess[es] and risk score[s] each and every one of the some 24 million individual returns that are filed, each of the [2] million business returns that are filed, and all [5] million to [6] million GST returns that are filed.”

      In its comments on tax compliance, the CFIB indicated that “(t)he overwhelming amount of paperwork involved in complying with a tax system is the number one factor contributing to compliance burden, as identified by both tax practitioners and business owners. The average cost for tax compliance for a small firm is $3,000 per employee.” According to the CFIB’s survey of its members and tax practitioners, “71% of tax practitioners said that compliance costs on small firms have increased during the past five years. One of the mandates of [the] CRA is to improve service and compliance costs.” The CFIB also indicated that the top four most burdensome federal regulations are related to the CRA.

   2. What the Committee Believes

      The Committee agrees that ensuring tax compliance and the integrity of the tax base should be key responsibilities of the CRA. In our pre-budget report for 2006, entitled Canada: Competing to Win, we commented on tax havens and on tax fairness. We look forward to the next federal budget, and hope that the Minister of Finance will act on our recommendation. We also made a recommendation in our pre-budget report on regulations and their costs. Bearing in mind the comments made to us about the cost of tax compliance, we are also hopeful that the Minister of Finance will adopt the recommendation made by us in the area of regulation, and that he will take actions to reduce tax compliance costs within Canada. Regarding tax compliance, we urge the Canada Revenue Agency to ease the burden of complying with taxes through broader implementation of electronic filing for more individuals and businesses as well as for more types of taxes.

      Ensuring a high level of tax compliance and the integrity of our tax base sends the signal that taxpayers who fail to abide by tax legislation will face consequences for their non-compliance. It also helps to ensure that the federal government has the resources that are needed to fund the tax, program and other spending measures that have been identified as priorities for Canadians. The Committee recognizes that the CRA — like virtually all other organizations — faces limited resources and competing priorities. Nevertheless, we believe that tax compliance is the second of three areas that should be a priority area for action as the CRA moves forward. It must enhance its risk assessment efforts and must devote more resources to identifying the composition of, and reasons for the growth in, the tax debt. For these reasons, the Committee recommends that:

      Recommendation 6

      the Canada Revenue Agency, in order to ensure a high level of tax compliance and the integrity of the tax base, allocate adequate resources to tax compliance. The Agency should allocate resources to the most efficient collection methods and to those taxpayers who pose a higher risk for non-compliance.

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6. Other Issues: The Underground Economy

   1. What the Witnesses Said

      Witnesses also spoke about the underground economy. An official of the CRA indicated that the Agency has a fairly comprehensive approach to the underground economy; it tries to promote voluntary compliance and works with the provinces/territories and key industry associations. Matching databases and third-party sources, seminars, community visits, presentations at trade schools, educational tools, audits, investigations, a federal-provincial/territorial working group and a focus on high non-compliance areas were also noted.

      In commenting on the compliance aspect of the one percentage point reduction in the Goods and Services Tax rate, an official of the CRA told the Committee that “a change in the tax rate doesn’t immediately lead to a change in compliance behaviour, because people who choose to not comply for whatever reason are not going to be immediately motivated by a reduction in taxes. It’s a culture of non-compliance … .”

   2. What the Committee Believes

      The Committee is also concerned about the existence of the underground economy, and the extent to which its existence undermines our tax base and encourages taxpayers to avoid the payment of taxes. From this perspective, the Committee recommends that:

      Recommendation 7

      the Canada Revenue Agency, in its Annual Report, comment on the extent to which it believes its efforts directed toward elimination of the underground economy are successful. In doing so, the Agency should provide objective evidence that forms the basis for its belief.

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7. Other Issues: Service to Canadians

   1. What the Witnesses Said

      A number of comments about the service provided by the CRA were brought to the Committee’s attention, with some making positive statements and others identifying areas where service improvements should occur. The Minister of National Revenue, who supports the agency model but realizes that work must continue, commented on the need for improved service: “While I am a big supporter of the Agency model, I recognize it is not perfect. And sometimes [the] CRA’s own strengths can highlight a weakness. … [The] CRA’s taxpayers are well-served. But sometimes in our haste to meet these objectives, some dimensions of our interactions with them can be overlooked. What may be overlooked in the Agency model is an independent channel for the average person — or the ordinary business — to access when they feel the Agency has not fully responded to their needs.”

      The Minister of National Revenue told the Committee that inquiries by taxpayers with respect to an appeal or an adjustment are processed by Agency employees. In her view, “the public may perceive this appeal mechanism to be somehow slanted in favour of the CRA.” She informed us that Agency officials have been asked to provide “a blueprint to improve the current avenues of rights and appeals that provide taxpayers and benefit recipients with an additional level of confidence in their dealings with the CRA.”

      The Commissioner of the CRA said that “Canadians are now receiving better, faster and higher quality tax and benefit administration.” He also indicated that the Agency has “made a number of [its] core documents available in different languages, to different groups in Canada. [The Agency also has] a record of [its] employees’ language abilities so that [it] can arrange to converse with a taxpayer in the language of his or her choice on an appointment basis. … [The Agency also has] different outreach programs with different communities to make sure they’re getting the service they need.”

      The CFIB shared with the Committee the results of a survey it conducted among its members and tax service providers about changes in the level of service during the Agency’s first five years of operation. The results of the CFIB’s survey identified improved service in the areas of accessibility of staff, knowledge of staff, promptness of replies, and speed in processing refunds. The CFIB told the Committee, however, that “even if [the Agency has] improved, [it is] still not very good.” Moreover, it indicated that while responses to enquiries may be very rapid, “it’s not necessarily the same people you’re dealing with all the time.” The CFIB also informed us that its survey results revealed reduced performance in the areas of availability of information, simplicity of information, willingness to provide interpretations, and levels of penalties.

      The audit process was identified as an area in which service has improved. The CFIB told the Committee that CRA auditors are “more knowledgeable, their professionalism is good, and their courtesy has improved. But the time spent complying with audits has increased from 6.6 days to almost 9 days.”

      In the view of the CFIB, the CRA “should make service a big priority. [As well, the Agency] should make reduction of compliance costs a top priority. [The Agency] should measure the compliance and paperwork burdens and set real targets, and report to [the House of Commons Standing Committee on Finance] annually on [its] progress. [The CFIB thinks the Agency] should set customer service standards … . … [As well, the CFIB thinks] there should be a more proactive approach to communicating tax changes.”

      The need for a focus on service was also identified by the CGA in its appearance before the Committee. It told us that “a focus on improving service and reducing costs to the taxpaying public is the best catalyst for thinking about future directions. In its bid to better serve Canadians by becoming a customer-driven organization, [the CGA] suggest[s] that the (A)gency focus its performance in four key areas.” The four areas identified by the CGA are: rendering consistent, predictable decisions; delivering expertise and well-informed counsel; communicating effectively with Canadians; and treating Canadians fairly and respectfully.

      Regarding these four areas, the CGA said that “(c)onsistent decision-making is critical to a just and defensible application of tax laws and regulations. … The reliability of information and that of its sources is a make-or-break issue for professional accountants. … (T)he implication of cutting-edge, web-based information systems is undermined by the requirement to maintain antiquated paper-based records for auditing purposes … . … (T)he CRA’s approach to risk assessment ought to better reflect that, in the real world, honest mistakes can and do happen.” The CGA supported equivalency of electronic and paper records, and argued that “(w)hen given a similar set of circumstances, you would expect that the decision would be similar no matter where you live. … [The CGA has] seen, based on similar circumstances, … different decisions in Calgary, Toronto, Halifax, and Montreal.”

      The CGA also spoke about telephone service, and told the Committee that “service from the front-line people when you call the 1-800 number is worse than it was before. But from a district manager level on up, it has perhaps become better … .”

      Witnesses commented on the closure of service counters and the introduction of and appointment process at CRA. The Commissioner of the CRA informed the Committee that “an appointment system … allows people to sit down with someone who knows what questions will be asked and is able to serve [them] well.” He suggested that “(a) taxpayer who goes into an office to discuss a problem and has to wait 30 minutes to see someone who cannot help him because he’s not familiar with the particular area at issue, is badly served in [the Agency’s] view. A taxpayer who telephones, explains his or her problem, makes an appointment to talk to an officer who can provide proper service is better served.”

      In the view of the Union of Taxation Employees, “[the union] is opposed to appointment only, but [is] not opposed to appointments. [It] feel[s] that the clients, the taxpayers who pay their taxes, should still be allowed to walk in and get the service they pay for with their taxes. One of the worst examples … is a farmer anywhere in rural Canada. It will be very difficult for [him or her] to make an appointment, because [he or she is] only available when the weather’s bad; otherwise, [he or she is] in [the] fields and working. It’s going to be hard for [him or her] to make an appointment to come in to meet with [the] CRA. Last year [he or she] could walk in anytime [he or she] happened to be in town.”

      The PIPS told the Committee that “[it] often hear[s] [employees] say that they are being prevented from providing services that they were previously able to offer. This clearly shows that there is a real risk of a decline in service standard. … [The union’s] members want to provide services to Canadians … .”

      Regarding service outside of Ottawa, the Commissioner of the CRA told the Committee that “if the (A)gency grows, … it will grow outside of Ottawa.”

      The appeal process was noted by a number of witnesses. An official of the CRA informed the Committee that the Agency has “a very elaborate appeal system that is independent and looks into any problem a taxpayer may have when he or she feels that the amount collected or the amount under collection is not the right one. … [The appeal] can be brought from there to the court.” The Commissioner of the CRA noted the existence of the Taxpayers’ Bill of Rights, the elements of which are being examined by the Agency and the Minister of National Revenue.

      The CGA shared its experience that “issues of objections and appeals that used to take [3] or [4] months, and then the taxpayer could move on, are now taking 18 and 24 months. It doesn’t put the taxpayer in a position where [he or she] can even really comply with the current year, because it depends on the decision rendered on a previous appeal.”

   2. What the Committee Believes

      In the Committee’s view, improved service does not necessarily imply that service is good. Nor does it imply that service is as good as it can — or should — be. It is also the case that good — or better — service cannot be legislated. In our opinion, good service begins with a corporate culture that values and rewards the service that is provided by employees. While we believe that service to Canadians — at least in some respects — may have improved since Bill C–43 was enacted and the CRA began operations as the Canada Customs and Revenue Agency, we feel that — regardless of the level of service that is now being provided — there is scope for improved service to Canadians. Improved service is the third area for priority action.

      The Committee feels that one aspect of good service to Canadians is access to an appeal process that is timely, independent and binding, except in cases where the rules of natural justice have been violated. From this perspective, we look forward to an early announcement by the Minister of National Revenue about a revised appeal process. We also feel that taxpayers must continue to have recourse to the tax court, hopefully to be used only in extraordinary cases rather than as a routine matter. In this regard, the Committee recommends that:

      Recommendation 8

      the Minister of National Revenue consider the appointment of an ombudsperson as one means by which Canadians might be better served by the Canada Revenue Agency. Moreover, prior to implementing any changes to the appeal process, the Minister should refer the proposed process to the House of Commons Standing Committee on Finance in order that the Committee can provide its views on the proposed process.

      In the Committee’s view, another aspect of good service to Canadians is accessibility to CRA staff. While we recognize the merits of the appointment process, we are reminded of the example of the farmer provided to us by a witness. There will be some Canadians for whom the appointment process is not the best method by which to access CRA staff and for them, as well as perhaps for others, consultations with CRA staff must not occur only through such a process. We believe that the Agency should meet with key stakeholder groups in order to identify the best means by which Canadians might access CRA staff and by which they might be well-served by the Agency. Consequently, the Committee recommends that:

      Recommendation 9

      the Canada Revenue Agency ensure that Canadians are able to consult with Agency staff in a manner that is appropriate to their needs, in full recognition that the Agency should provide high-quality service to Canadians as a key priority. Components of high-quality service include ethical interaction with taxpayers, consistency in the information provided to them, and timely provision of service. The service provided to Canadians by the Agency should be measured by a third-party agency on an ongoing basis, in both a quantitative and a qualitative manner, and this information should be included in the Agency’s Annual Report.

      The Committee also feels that the CRA is able to provide better service to Canadians when it has a clear understanding of Canadian views and priorities regarding tax collection and benefit disbursement. In our view, an important means for attaining this goal are advisory committees. From this perspective, the Committee recommends that:

      Recommendation 10

      the Canada Revenue Agency provide the House of Commons Standing Committee on Finance with a comprehensive explanation of why its Advisory Committees are no longer seen as valuable.

      The Committee believes that our small and medium-sized businesses are the engines of growth in Canada. Consequently, we believe that their productivity and prosperity — and, in fact, the productivity and prosperity of our large businesses as well — must be nurtured and supported, rather than undermined. We were struck by the testimony indicating that the time taken to complete CRA audits has increased, and feel that this time represents reduced productivity for businesses. It is for this reason that the Committee recommends that:

      Recommendation 11

      the Canada Revenue Agency undertake its audits in a manner that minimizes disruption to the normal functioning of the business that is the subject of the audit. Moreover, the frequency and duration of the audit should reflect the business’ risk or history of non-compliance.

      Like many Canadians, the Committee believes that the work undertaken by the Office of the Auditor General of Canada, and the recommendations made by the Auditor General, are well-considered and are designed to ensure that Canadians are well-served and receive value for the taxpayer dollars that are spent. For this reason, the Committee recommends that:

      Recommendation 12

      the Canada Revenue Agency fully implement any recommendations made by the Auditor General of Canada with respect to its administration, operation and procedures. These recommendations should be implemented on a timely basis.

      Finally, the Committee was pleased to undertake this statutory review of the Canada Customs and Revenue Agency Act, since we believe that these types of reviews are important. As legislators, it is not enough for us to pass laws: we must also review these laws, on an ongoing basis, in order to ensure that they are having the intended effect. Consequently, the Committee recommends that:

      Recommendation 13

      the federal government amend section 89 of the Canada Customs and Revenue Agency Act to require Parliamentary review of the Act every five years.

Having completed the Committee’s hearings on the statutory five-year Parliamentary review of the Canada Customs and Revenue Agency Act, we are now in a position to answer the question posed in the title of this report. Is the CRA a value proposition, or is it a failed experiment? We believe that the CRA is a value proposition, but that greater efforts are required in a number of key areas.

The Committee agrees with our witnesses that, in many ways, the agency model has been successful. We also agree, however, that there are a number of important areas in which priority action is needed. The three most important, in our view, are its relationships with its employees and the unions that represent them, efforts to enhance the extent to which taxpayers comply with the nation’s tax laws, and the Agency’s service relationship with Canadians.

The Committee is pleased that Canada is among the Organisation for Economic Co-operation and Development (OECD) countries that have agreed to work together on ways in which tax administration might be improved and in which the significant and growing problem of international non-compliance with national tax requirements might be addressed. In our view, the OECD Forum on Tax Administration could provide valuable information as we seek to ensure that our tax base is secure and that tax compliance in Canada is high.

The Committee recognizes the particular problems faced by many nations in light of global trade, capital liberalization and mobility, and ongoing advances in information and communication technology. Going forward, we will monitor announcements made by the OECD Forum on Tax Administration about co-operation between revenue bodies and law enforcement, the role of tax intermediaries and other financial professionals regarding non-compliance, and emerging financial instruments and their potential concerns for revenue bodies.

The Committee looks forward to reviewing the progress made by the Canada Revenue Agency in the areas we have identified in this report.