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EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 1, 1996

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[Translation]

The Chairman: Good afternoon all.

[English]

First of all, I would like to say welcome to a delegation of clerks from the Ghana government who are with Ms Ellen Savage. Welcome to the public accounts committee.

[Translation]

I think Mr. Hopkins wants to amend the agenda.

Mr. Hopkins (Renfrew - Nipissing - Pembroke): Mr. Chairman,

[English]

I want to suggest that we move to the report of the subcommittee on agenda and procedure first as opposed to proceeding with the Auditor General first, because some of the people here want to meet later with the Olympians.

The Chairman: I agree.

[Translation]

As Mr. Hopkins' motion is in order, we'll immediately go to the second item on the agenda.

I believe all colleagues have in hand a copy of the sixth report. I'll just give an overview.

We've already settled the first item. Today we'll deal with the second item in the presence of the Auditor General.

Here are the other items:

That's to see whether the question is totally settled.

This has been done and apparently the memorandum is on its way.

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[English]

Mrs. Barnes.

Mrs. Barnes (London West): I have just one question. When you read number 5, you added a few words indicating that the subcommittee on agenda and procedure would meet after the committee meeting of today's date, and then you said to see whether it had been settled.

The Chairman: It's not today's date; it's tomorrow's.

Mrs. Barnes: It's October 2. Is the purpose of that meeting to have more future meetings? You added some other words.

The Chairman: Yes. I said we will discuss other business. If we decide to hold only one meeting on family trusts.... We will decide whether we will deal with the remaining chapters of the May report and we will discuss what subject we recommend studying later this fall.

Mrs. Barnes: I'm very clear then about what you're saying, which is that tomorrow is for future business of the committee. That's fine.

The Chairman: Thank you.

Mr. Hopkins: Mr. Chairman, number 6 is one that was raised by our researcher. I don't think I have a problem with it, because it's not a full-fledged document in the sense that it is in.

The Chairman: Do you want me to change the wording? Do we want to add that our researchers are doing a very good job in suggesting this subject to me? We can change the wording if you prefer.

You have no problem with number 6, Mr. Hopkins?

Mr. Hopkins: I don't, but I just want to point out that I didn't object to it at the time, because we're having only one meeting. But I do want to point out that it was indeed the researcher who raised this particular point.

The Chairman: Mr. de Savoye.

[Translation]

Mr. de Savoye (Portneuf): Mr. Chairman, I see that my motion will be made irrelevant because of item 7 of your report if, of course, it carries.

On the other hand, you will understand, Mr. Chairman, that the role of the Official Opposition is to act as a watchdog for the interests of the population. In this case, I'm not convinced that a single meeting will allow us to clarify those circumstances we're interested in.

I consider that the motion I moved offered a better guarantee to the Standing Committee on Public Accounts and the population at large that we would proceed with an in-depth examination. That's why I will vote against item 7 even though I know the Liberal majority will see that it is followed up.

However, if I were to find my fears to be founded after tomorrow's meeting on the matter of the family trusts, that the matter is being brushed under the carpet and that the Canadian public's interest demands that I move my motion again, then I will do so. Thank you.

[English]

Ms Bethel (Edmonton East): Mr. Chair, my point was a simple amendment from ``he'' to ``she'' when you're referring to the revenue minister.

Mrs. Barnes: It's the deputy revenue minister who is male.

Ms Bethel: I'm sorry. I take it back. All is well.

Mrs. Barnes: I understand from our vice-chair that this is what the report is, and now it is up to us to vote on it. Once we have voted on it, I would suggest to the honourable member opposite that the vote has been taken on this subject. He's mentioned what he wants. I just want to make sure that we don't revote and revote and revote on it. So I'm ready for the vote, and I don't see any problems with this report.

The Chairman: Is it possible to receive a motion that -

Mr. Silye (Calgary Centre): I move that the report of the subcommittee on agenda and procedure, the sixth report, be adopted as read.

[Translation]

The Sixth Report of the Sub-Committee on Agenda and the Procedure carries [See Minutes]

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Second item on the agenda: pursuant to Standing Order 108(3)(d), consideration of the September 1996 Report of the Auditor General. We have before us Canada's Auditor General,Mr. Desautels, whose competence is well know to our committee.

Welcome to our committee. Could we ask you to introduce the people with you?

Mr. Denis Desautels (Auditor General of Canada): Thank you, Mr. Chairman.

Mr. Chairman, I am of course pleased to be here today to talk about my second report for 1996 and in particular to discuss the subjects suggested for priority consideration by your committee in my letter of September 26.

With me today are two of my colleagues, Ms Maria Barrados responsible for chapters 13 and 14 and Mr. Shahid Minto responsible for chapters 18, 19 and 20.

At the outset, I'll say a few words about each one of my chapters, if you don't mind. I'll begin with chapter 13 entitled ``Study of accountability practices from the perspective of First Nations'' which is a study of accountability from their perspective. This study describes the views of selected First Nations on their interaction with the government. Aspects of current practices that could and should work better were identified.

Participants recognized the importance of effective accountability and articulated a clear sense of essential accountability factors such as clear and commonly held objectives and a focus on results. Despite these common views of accountability, the overall view of participants is that factors discussed are not working well for them. Participants indicated the need to review some of the accountability practices to better suit their particular needs and strongly emphasized a two-way perspective - accountability as partners - as an essential ingredient in the relationship.

Although participants felt the current situation was unsatisfactory, many were optimistic and felt that progress could be made.

[English]

Chapter 14, entitled ``Service Quality'', provides our assessment of the government's progress in publishing client-oriented service standards and using performance information to improve service. The audit examined 13 commonly used services that are delivered directly to the public and that most Canadians use at some time during their lives. Although some delivery targets have been developed, there is a significant gap between repeated government commitments made since 1990 and the progress today.

Some of the weaknesses relate to a lack of knowledge about clients' needs and setting priorities to improve delivery of high-quality and affordable service. Surveys of Canadians show their dissatisfaction with government services, and we noted the need to improve the quality of the government's telephone services and of reporting to Parliament the progress of the service standards initiatives. We believe that more systematic analysis of data could identify root causes of the problems and suitable solutions.

There is a growing awareness for quality service standards. In some cases, departments are using them with new technology to improve services to the public. However, more sustained effort is required to speed up the implementation of service standards, and a hearing by your committee would help the momentum for departments' publications, implementation of service standards, and reporting their performance.

Chapter 15, ``Federal Science and Technology Activities'', reports actions taken by the federal government in response to chapters 9 and 11 of our 1994 report and to your committee's sixteenth report of November 1995. We reviewed the government's federal strategy for science and technology, the framework for the human resources management of the federal science and technology community issued in March 1996, and other actions to determine whether it's likely to address concerns.

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We made a preliminary assessment of progress made to date. The strategy and the framework represent important steps in the right direction. The initiatives represent a serious effort in resolving long-identified issues in the overall management of science and technology activities and the management of scientific personnel.

Nonetheless, many challenges remain. Initiatives under way will require leadership and perseverance at all levels of government and continued oversight by Parliament. Some of these initiatives are far-reaching and deal with complex issues, and will take time to resolve. We intend to continue our follow-up work in this area on a regular basis.

[Translation]

Chapter 16 deals with renewing government services using information technology. The federal government spends more than $3 billion a year on information technology and it represents an important blueprint for renewing government services. The audit reviewed the management of the implementation of the government's ``blueprint'' for using information technology. The chapter reports on the development of a government-wide electronic infrastructure, the use of technology funds and the progress of the shared systems initiatives.

The ``blueprint'' implementation is starting to gain momentum across government and work is underway for departments to share administrative systems. Under the leadership of the Treasury Board's Secretariat, synergy and cooperation are being generated among departments to address issues and seek common solutions.

We also found several areas needing improvement and noted challenges that remained to be met for the government to benefit more fully from the use of information technology. The Treasury Board's Secretariat needs to play an oversight role and intervene at a strategic level to emphasize implementation and to produce measurable results.

Chapter 17 deals with the management of disability benefits under the Canada Pension Plan which over the past decade have more than tripled to almost $3 billion. We examined management systems and practices related to disability benefits. The significance of our conclusions have led me to include this chapter in my letter on priorities for the committee's consideration.

We found several weaknesses in management practices which put the system at risk. Management information is incomplete and not sufficiently relevant to enable the department to manage CPP eligibility with due regard to economy and to account for the use of its resources. Information sharing with other public and private plans is limited, leading to duplication of effort and increased costs.

We indicate our concern about changes to eligibility practices which have been introduced in the past without a proper assessment of projected long-term costs or actuarial impact analysis. Finally, we noted differences between CPP and QPP disability benefits which have evolved over the years. These differences have yet to be analyzed or evaluated. In our opinion, there is a need for a comprehensive plan of action to address our concerns.

[English]

Chapter 18 is the first of three chapters dealing with Revenue Canada. Chapter 18, which is on excise duties and taxes on selected commodities, also includes some observations directed at the Department of Finance. Excise duties and taxes generated some $6.9 billion in 1994-95 in tax revenue from tobacco, alcohol, motor fuels and jewellery. We examined how Revenue Canada combats evasion on these taxes, monitors compliance and performance, and manages audits of excise licensees. We looked at Finance's monitoring of the results of the commodity tax measures and duties.

Enhanced enforcement efforts by Revenue Canada and the RCMP, together with decreases in tax rates for tobacco products, have reduced the level of evasion to $500 million from the previous estimated level of $1.5 billion. The department needs to gather, we think, relevant data and analyse the inherent nature and causes of evasion more regularly to find ways to further contain this problem.

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Revenue Canada has only done one excise audit of major tobacco and oil companies over the past five years. Both Revenue Canada and the Department of Finance have recognized the need to revise the excise tax, but the legislative review begun in 1993 is still not completed. Quicker action is needed on the legislative review to bring the required improvements to the act and to enhance the administration of these duties and taxes.

Chapter 19 deals with the child tax benefit and goods and services tax credit programs, which represent an $8 billion annual share of Canada's safety net and reach more than 8 million families, primarily those with low or modest incomes.

The launch of both programs was carried out under short lead times to meet statutory deadlines, and the post-launch administration of both programs has shown weaknesses that expose the public purse to unnecessary risk. Controls need strengthening to ensure eligibility and payment of the correct amounts. Furthermore, a strategy is needed for fraud detection and prevention, and better monitoring of the programs is required.

In addition, we observed that the department has not been able to cope with the tens of millions of telephone calls it receives from Canadians. Last year it received some 45 million calls about these programs, and during peak periods some 90% of calls got a busy signal.

This is a significant problem, as beneficiaries of the two programs prefer to ask questions and seek reassurance about their benefits on the telephone. Some of these calls arise from the fact that there are long delays in processing their child tax benefit application.

[Translation]

Your committee, Mr. Chairman, can play an important role in reviewing Revenue Canada's action plan and ensuring that Finance carries out an evaluation of the programs on a timely basis.

The last chapter reports on the administrative consolidation of Customs and Excise and Taxation which were formerly separate organizations. The consolidation into one department began in 1992.

Over all this is a fairly positive chapter. Many good practices can be adopted by other departments facing consolidation and reorganization. For the most part, the Department is managing this challenging task well and meeting the objectives it set for itself. The consolidation has provided a solid foundation for streamlined operations, and has enabled the elimination of major duplication in functions in both headquarters and field operations.

The successful consolidation resulted from using management practices including a clear vision and principles to guide the process; as strong commitment from senior management; good communication with all stakeholders and good project management. The Department is off to a good start. The key to its continued success is to continue managing the risks that present themselves along the way.

The consolidation is not yet complete and there are areas needing improvement. Conversion to a single business number for clients is ongoing but some significant conversion backlogs are anticipated in early 1997. Issues dealing with low levels of telephone services and delays in the classification of business windows staff also need to be resolved.

Mr. Chairman, in addition to the priorities identified for the September report, the Committee may also wish to consider the following chapters from the May report which I had identified in the May priority letter. These are, chapter 3, evaluation in the federal government, and chapter 5, the reform of classification and job evaluation in the public service.

Thank you Mr. Chairman. We are now ready to answer your questions.

The Chairman: Thank you, Mr. Desautels. Before moving on to the 10-minute question period, I have a brief comment to make.

You refer to your May priority letter. I would like to refer you to the letter you sent us on the 26 of September, outlining your priorities.

Mr. Desautels: The 26 of September.

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The Chairman: You mentioned various chapters, including chapters 14, 17 and 19. I must admit that I was surprised that chapter 18 wasn't included. I'm sure you might answer that it is not because you don't mention chapters in your letter that they are not important. In your letter's preamble, you state quite clearly:

I was surprised to see that you had not identified chapter 18 of being a priority chapter, especially given that in your press release you mention tax avoidance and excise duties and taxes. You know that everyone is terrified of tax avoidance these days, because they are literally sick of paying. Taxpayers feel that these means of tax avoidance are abnormal.

You mention approximately $500 million. Yet in paragraph 18.46, you mention another figure of around $425 to $630 million. I don't know if $500 million is meant to be the median between $425 and $630 million... I haven't calculated that. I would like to know why you haven't included chapter 18 in your priority letter.

Mr. Desautels: Mr. Chairman, I realize that the committee may have very different feelings regarding what is a priority. As I said in the introduction to my letter, I believe that all eight chapters that we provided are important. Out of the eight, there are of course two that, overall, give good news. For example, the last chapter on Revenue Canada, on the consolidation of the Department. Members of the committee and members of the House will be pleased to know that this project is moving in the right direction. The same can be said for chapter 15, that covers science and technology. In our report, we have stated that they also seem to be moving in the right direction.

As far as the other chapters go, I felt that in terms of the need to act, chapter 17 and 19 were two chapters where time was important. The faster the problems that we raised in those two chapters can be dealt with, the better.

Quality of service to the public is also important for everyone. However, that is a topic that has been around for a while now; the government has been trying to act on this since 1990.

To come back to your specific question regarding chapter 18, the reason why we did not identify it as a priority is mainly because even though it is a problem, there has been some movement in the right direction. The main message of this chapter is that it is still a significant problem and that the department must in no way slow its efforts in that area.

The only reason why it is not identified as a priority is because the scope of the problems seems to be slightly decreasing. I agree with you that it is still a significant problem.

The Chairman: I appreciate the fact that you used the word ``seems''. Your proverbial caution follows you everywhere.

On that note, I now give the floor to Mr. de Savoye for 10 minutes.

Mr. de Savoye: Mr. Auditor General, it is always very interesting to read your reports. You put your finger on relatively important problems in the government's operations that obviously have an impact on the taxpayer, the citizen who deals with the government.

I have several questions to ask you. I have chosen to start with a question that does not concern money, but rather service to people. You mentioned that approximately 90% of people who call the revenue department get a busy signal.

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Obviously, that has consequences for the average citizen. We know quite well that if someone calls, it is because they have a concern, they need information, or they need to verify a piece of information. One would expect then that the Department of Revenue would be committed to increasing its ability to respond to telephone calls.

There is, however, another aspect to this issue. Why was it that 45 million calls were made regarding programs? Why is it that so much information is required? Is that an indication of something? That's my question. Is it an indication that the system has become too complex for the average citizen? And would the solution to providing good service to people not lie in simplifying the system rather than increasing the capacity to respond? I ask you for your opinion because you have looked into these matters. I would like to be able to put the causes of this problem in some perspective.

In fact, my question is very simple. Is our tax system suffocating because of its own complexity?

Mr. Desautels: Mr. Chairman, I will ask Mr. Minto to help me answer Mr. de Savoye's question. Clearly, the problem cannot be solved by simply increasing capacity or by introducing more technology, because there is a limit to how much we can do that.

I think that part of the answer would be to improve how some things are done and to provide better quality information on government programs. This would reduce the bottleneck of telephone calls because citizens would feel less of a need to call for explanations.

To come back to the first part of your question, I think that things can be done differently. In our report on family allowances, we noted that there are times when the number of telephone calls increases and this usually corresponds to when monthly cheques are sent out.

With the computer systems that we now have, we could spread the sent-out of cheques over the month and thus reduce the peaks that we point out in our report.

There are therefore ways to reduce the number of calls that occur at certain times of the mouth.

Perhaps Mr. Minto would like to add something.

[English]

Mr. Shahid Minto (Assistant Auditor General, Office of the Auditor General of Canada): Thank you, Mr. Chairman. The issue raised by the member is very significant. When you get 45 million telephone calls about a program, I guess a solution doesn't just lie in improving the technology to answer the call. You also have to ask some questions about the program itself and the design of the structure.

One of the things we did in this chapter was to look at the ways Revenue Canada communicates with the beneficiaries of this particular program. I just draw your attention to paragraphs 19.27, 19.30 and our recommendation in 19.33. Our concern here is that Revenue Canada is basically using the same means of communication for this program as it uses for the tax programs, but the clients for this program are significantly different.

A survey done by the department itself indicated that most of the clients of this program prefer to deal with a person on the line. They cannot write to them, so they tried to communicate on the telephones. We were concerned that even though the department is making a lot of effort in facilitation, the effort is not sufficiently responsive to the needs of the people there. Our recommendation on this is in 19.33, where we ask them to review their communication strategy.

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The other thing we deal with in this chapter is the delays in processing applications. In some cases people have to wait four months. These cheques are bread money for a lot of people, not just extra spending money, so when there are delays of that nature.... At various times, we've mentioned in the chapter, before government started the program and later when they started a new system, the delays got longer than four months. They went up to six months in some cases. At those times people do get concerned and do call in.

I also want to mention that a lot of steps are under way. The department has an action plan to deal with some of these issues. We've dealt with it in two or three places. We think that if they looked at the communication, did some re-engineering of the kind of program this is, and also looked at how they respond, that would help.

[Translation]

Mr. de Savoye: If I have understood correctly, in a way it is the system itself that generates these problems that are the reason for this high number of calls. All one would have to do then is reorganize our systems and greatly improve them so that the users require less information.

I'm now going to move on to chapter 17, on the Canada Pension Plan. Mr. Auditor General, you always use a very respectful, and yet incisive, style when you talk about the responsibilities and responsible people in these institutions, but I am trying to understand what is really happening with the Canada Pension Plan.

You stated that the CPP had tripled its payments, up to $3 billion. At the same time, the number of recipients has doubled. I see that you've compared the Canada Pension Plan results to the Quebec Pension Plan. You mentioned that the Quebec Pension Plan is in a relatively similar situation but not an identical one to the Canada Pension Plan. I believe I understood that, despite that, you found unexplained and, it seems to me, significant differences.

How big are the differences between the Canada Pension Plan and the Quebec Pension Plan, in terms of numbers?

Mr. Desautels: Mr. Chairman, in our report, we provide a few reasons why there are a few differences between the two plans, Canada's and Quebec's. I can give you two examples right now.

We have different definitions of the word disability, and therefore the results are very different. Furthermore, the Quebec Pension Plan has reached agreements with other programs which are the first payers whereas the Canada Pension Plan does not have those kinds of agreements, to my knowledge, which means that it's the Canada Pension Plan that is the first payer. These are all factors that explain the differences between both systems.

Without going into detail, the chapter provides some statistics on the impact that that can have on the increase in benefits paid by both plans. We mentioned that within the past 10 years, the Canada Pension Plan has tripled the amount of payments it has made and the number of beneficiaries has doubled. I apologize for not having the figures before me, but the increase in the Quebec Pension Plan is much less.

Mr. de Savoye: Is it less than 10%, 25%? Could you give us an idea?

Mr. Desautels: If you give me a moment, I'll find the figure.

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We do have a statistics that give you an idea. For the Canada Pension Plan, disability benefits represent 18.7% of all benefits. For the Quebec Pension Plan, disability payments represent 9.2% of all benefits. So there is a difference, when you look at the situation in that light.

Mr. de Savoye: Thank you, Mr. Auditor General. Thank you, Mr. Chairman.

[English]

The Chairman: Mr. Silye, for a ten-minute round.

Mr. Silye: Thank you, Mr. Chairman.

Good afternoon, Mr. Desautels. I welcome you and your co-workers to the Standing Committee on Public Accounts.

The scope of questioning today is just intended to be general, to get an overview as to which one of these chapters we might want to look into more specifically and delve into in more detail. In the ten minutes available to me, I would like to just touch on a few of the chapters, ask you a question, and get a brief response. I don't want to get into a big essay-type discussion.

Chapter 13 is regarding the accountability practices from the perspective of first nations. In my first study of accountability from their perspective, my first look at this back in the lock-up when this was presented to us last Thursday, you didn't audit any numbers. You didn't do either a cost-benefit analysis or look at where the money is going or how it was getting there, etc. Who did you interview? Was it just the band council members, or was it the rank and file native Indians as well? Was this under the condition of anonymity, or was it an open-questioning audit?

Ms Maria Barrados (Assistant Auditor General, Office of the Auditor General of Canada): Just to summarize briefly, we started with a list of 50 and worked down to a group of 10. We went to the communities and met with the chief, administrators and band members. It was a question of talking to as many people as we could in those discussions. We ended up with a group of five, who acted as advisers. Those five are happy to be identified. Do you want me to list them?

Mr. Silye: No, not right now.

Ms Barrados: There are five who would be happy to speak to this personally.

Mr. Silye: Where were the 50 and 10 from - the first 50?

Ms Barrados: They were on a list we drew up together in discussions with Indian and Northern Affairs and other people who know them. We went to get a list of people who were considered well managed. We went for a group here who were well managed.

Mr. Silye: Are these the elite of -

Ms Barrados: They're the better-run first nations groups.

Mr. Silye: Thank you.

Chapter 17 deals with the management of disability benefits under the Canada Pension Plan. I like the earlier question of the Bloc member, Pierre de Savoye, which was that a lot of the problem comes from the definition of disability. I find it surprising to learn the difference of the percentage of claimants between Quebec and the rest of Canada. They're only at 9%, while the rest of Canada is 18.7%.

There was one example I read, which was about Karen Selick, who does a lot of work in Brockville and the area in legal aid. She talks about how one of the ways an individual can get CPP disability is through chronic depression. That's one of the acceptable disabilities. When the person was interviewed as to why he was chronically depressed, he said it was because he hated the thought of getting up and going to work every morning. How many other Canadians can claim that? This is an important chapter.

My question is this. CPP was supposed to be a supplement to one's retirement, or in fact a retirement payment itself if you were not able to put away for your retirement. Now disability is becoming such a big component of it. Are we not trying to make CPP, in your assessment, more than what it should be? We could have disability as a separate program to help people who are disabled.

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Mr. Desautels: Mr. Chairman, we did not question, I guess, the presence of a disability program within the CPP. The CPP was conceived that way, and has been that way from the beginning. So we feel it represents the wishes of parliamentarians over the years.

If parliamentarians wish to question that, I think that's up to them. We were simply trying to determine how well the program was being run in keeping with the structure that was put in place by previous Parliaments.

Mr. Silye: Thank you.

In chapter 18 you deal with the excise duties and taxes on selected commodities. I know that smuggling is, and has been, a big issue, from tobacco to guns to jewellery to alcohol. Certainly now, tobacco is more of an interprovincial problem than it is a north-south problem.

Alcohol is also big. I was shocked to see the size of the value of it. If the excise revenue from alcohol is $300 million - I'm just rounding up a little bit - then what you're losing to smuggling is roughly the equivalent. So it's almost one for one.

Then you measure the value of the revenue lost. You indicate in your report even today that the level of evasion has gone from $1.5 billion down to $500 million. In a way, that's a huge turnaround. That's a tremendous recovery.

You would think that's a compliment and continue to do what you're doing because it seems to be working. But you turn it into a criticism, as if it hasn't been successful. The Minister of Revenue turned it around into a positive.

How did you measure the level of evasion? Is it the value of the underground economy, or is it just that excise revenues have increased related to those products?

Mr. Desautels: I'll ask Mr. Minto to answer that question.

Mr. Minto: Just dealing with the numbers to begin with, we're dealing with ranges of numbers, so we're taking midpoints of ranges here.

It is true that the estimates show that evasion has gone down to $500 million from $1.5 billion in that range. Early indications are that the anti-smuggling initiative the government has started is taking hold and has had some success, but it would appear from the numbers we have seen with Finance and Revenue that most of this reduction has happened as a result of the decrease in taxes on tobacco. Remember that taxes on tobacco went down by a tremendous amount. When that went down, your definition of how much was being evaded went down too. So that ceiling of what could have been collected went down. So when you say $500 million, it's under a different definition now.

Mr. Silye: So the increase in tobacco sales that are legal now in Ontario and Quebec probably amount to what the difference is between the $500 million and the $1.5 billion.

Mr. Minto: Well, the real concern that we raised in the chapter, and the criticism, was not of the amounts going down; it really was about the fact that neither Finance nor Revenue has analysed the situation to say what has resulted in the decline. They just made sure everybody was on the right track. It's the cost-benefit thing.

Mr. Silye: Right.

Mr. Minto: So the criticism was of that particular issue.

Mr. Silye: Chapter 19 deals with the child tax benefit and the goods and services tax credit programs. I had asked you a question on Thursday about how these programs are administered. Both of them go through a rebate system through another department, but it's still based on your income tax return.

What I find interesting about this section is in the abuses you point out. There are abuses by individuals. Perhaps the error set up initially in this is in terms of the 6,000 babies who were incorrectly registered into the program. These are serious concerns, because both here and under CPP disability, we know of examples in which some people are abusing the system.

The government, in its attempt to be more efficient and effective, has to look for ways to (a) improve its delivery of the program, and (b), see that the persons who need the assistance get it, not the people who don't need it.

You have one statement here that's very, very strong. It's about weaknesses that expose the public purse to unnecessary risks. What are those unnecessary risks?

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Mr. Minto: Mr. Chairman, when we looked at this program we found that some of the fundamental controls that should have been in place were not there. The programs were prepared in a rush and they got going under very tight deadlines. We would have expected that once those deadlines were met and the programs were in place, certain fundamental checks and balances would be put in place.

For example, you raised the issue of eligibility. The people who are eligible already are the ones on the rolls there. Checks on payments, checks on parentage, and all the other controls you would need in a program like this are not there.

To deal with your example, our very cursory high-level review revealed that between 6,000 and 34,000 extra children may be on the rolls. The cost of that is between $5.9 million and $31.6 million a year. That's only for one year and that's only for the CTB program. We think the risks for the GST are higher, but we could not do a similar analysis because the information was not there.

Mr. Silye: I've heard of some very wealthy individuals getting a GST rebate because the year before they just happened to live off shareholders' loans or whatever and they had income below the threshold for which you qualify to get it.

I believe my time is just about up. Certainly once we establish the priorities through our steering committee, I'll be looking forward to reviewing some of these chapters in further detail. Thank you very much.

[Translation]

The Chairman: Mr. Paradis.

Mr. Paradis (Brome-Missisquoi): I would first like to talk about the chapter on the First Nations accounts. Mr. Desautels, even after having read your report I am still wondering whether the money is going to the true recipients.

One has the impression that a lot of money is being provided to the First Nations. I am speaking to you as a member. If I look at the figures provided, I get the impression that everyone is just as poor and even, in the end, much poorer.

Everybody needs education, health care, and all the housing services and other services seem to need money. Even though our impression is that significant amounts of money are being provided to the First Nations, what we see on the reserves would have us believe that the money is not going where it should. That is the question I have about this chapter, Mr. Desautels.

You mentioned earlier that you went to see those who were most organized. I think that these are also the people who accepted to speak to you. I wonder how you assess the use of money provided to that sampling of reserves compared to the total amount that is provided to the First Nations, under the programs of all departments.

My first question would then be this: what do you do about the ones you didn't see, those who didn't speak to you, those who have administrative problems? We've already seen those who do collaborate, who are willing to speak to you, who are willing to sit down, have reservations regarding mutual accountability. When I read that, I wondered what it really meant. Did they expect the federal government to also be accountable? Should the First Nations be accountable before the federal government and vice-versa, like two business partners who are accountable to each other? That is my first question. My other question is about the others?

Furthermore, I understand that certain sums of money are provided under treaties or agreements with aboriginal groups. But it should be pointed out, and correct me if I'm wrong, that a lot of money is also provided to aboriginal bands and organizations under programs and not treaties.

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All the federal departments, or almost all of them, have an area devoted to aboriginal people, whether that be under the Department of Human Resources or under any other department.

I have a problem with that. If many were being administered independently under treaties I would perhaps be more sympathetic. But when money is provided to administer a job creation program, a labour program or other program, I imagine that there should be some kind of accountability or goals that should be reached. I do not think that the report makes that distinction. Do notion such as budget approval ever cross their minds? That is my other question.

My next comment should have perhaps been my first. As I've already mentioned two or three times, the Department of Indian and Northern Affairs has a budget of a few billion dollars and other departments also have large programs. The total of the budgets of all these programs under these departments, to my knowledge, is at least equal to that of the Department of Indian and Northern Affairs, which adds up to several billion dollars.

How many billions of dollars does this represent in total? As an auditor, did you examine the programs offered by each department, and if not, would it be possible to do so?

In examining the details of public accounts, which lists the government commitments by programs that are over a $100,000, we note that the Department of Human Resource Development pays $100,000, $150,000 and $200,000 to such and such a band, a reserve and so forth. We see the same figures in other programs. Are these the same amounts that reoccur, or are they different?

Does the accumulated of total by association or organization mean that at some point we end up with groups that are richer than others and to get back to my initial question, do the funds necessarily reach those they were truly intended for in order to eliminate their hardship, so they will benefit from them and not the administrators?

Mr. Desautels: Mr. Chairman, I will try to answer the three major questions raised byMr. Paradis as succinctly as possible. His first question dealt with blockage, to use his expression. Does the money reach the beneficiaries?

Of course, this was not the purpose of the chapter we presented in this latest report. The last report deals with what we can call the best accountability practices that we can see in action among the First Nations that appear to us to be the best administered.

The purpose was to try to advance the debate or discussion on the implementation of satisfactory arrangements, both for the government and Parliament and for the First Nations themselves. We've produced reports in the past that criticize accountability, that is the way the department assumed its responsibilities. This time, we have attempted to be more constructive and try to point in a direction that could bring about longer term solutions.

This does not mean that we are not concerned about the questions you have raised. If you analyze our reports to date and those that are upcoming, I think you will see that we have touched on many programs that are aimed at beneficiaries at one point or another.

Last November, we spoke of the management of the infrastructure within the First Nations, the way the federal government budgets are managed to implement acceptable infrastructures in the First nations.

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In a previous report, we discussed the way social services were managed. In another report, we broached the subject of health care services provided by Health Canada and, as a matter of fact, we will be coming back to that program in a report you will be receiving soon.

I would encourage the committee to examine some of the chapters that we produced in the past, particularly the last one which is still fresh, on the issue of the infrastructure.

That answers your second question in part, when you asked if we only examine transfers that are done under treaties or if we are also concerned with other programs administered by various departments and which target an aboriginal clientele.

As I've just told you, in the past, we've examined the delivery of health care services. We also looked at job creation and labour force development services. Indeed, over the years, we examined the range of programs targeting First Nations, be they under treaty obligations or other governmental programs.

To answer your third question concerning disclosure of all budgets that apply the First Nations, I can tell you that we intend to present another chapter on First Nations in November. In that chapter, we intend to present an overall picture of the various programs that apply to our First Nations.

On a preliminary basis, I can tell you that these budgets represent close to $6 billion. If you take all the money spent by the Department of Indian Affairs and Northern Development, Health Canada and other departments, I think that in total it would be some $6 billion.

We will therefore get back to that in another chapter that we anticipate tabling in November.

Mr. Paradis: Supplementary perhaps, Mr. Chairman?

The Chairman: Your time is expired.

Five minutes, Mr. de Savoye.

Mr. de Savoye: Earlier, my colleague Mr. Silye referred to the excise tax. If I understand correctly, while the reduction in evasion has gone from $1,5 billion to $500 million - we understand that the figures are approximate estimates, because no one would present a report admitting that they are guilty of evasion and thus this cannot be calculated to the penny - it may not be because Department of Revenue had collected $1 billion more, but possible because there was a billion dollars less to be collected. I understand that there's been a reduction in taxes on tobacco and that the amount to be collected has therefore declined.

I also understand that the RCMP has made efforts that led delinquent to pay their dues and that Revenue Canada may have implemented measures to ensure that the amounts due were paid.

What is the contribution of each measure in that $1 billion reduction? What proportion can be attributed to a reduction in taxes, to RCMP efficiency or that of Revenue Canada? I would like the answer to this question so that I would know whom to thank.

[English]

Mr. Minto: Mr. Chairman, by way of background, there is absolutely no doubt that the coordination between Revenue Canada customs people and the RCMP and other related parties has improved over the years.

We came to you with a chapter some years ago, when we were dealing with cross-border shopping and smuggling. At that time we said the coordination between the RCMP and Revenue Canada could improve. Certainly we've seen that it has improved. There's a much better understanding. Certainly the department has a lot of initiatives, such as the anti-smuggling initiative, under way to look at things.

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I draw your attention to paragraph 18.46. The fact of the matter is that while the dollars have gone down, and we say that in the chapter, we also say that the decline was largely due to the tobacco tax reduction and the consequent decline in cross-border smuggling of cigarettes. Revenue Canada itself estimates that the federal revenue loss from cigarette evasion alone fell from a high of $1.2 billion to $200 million in 1994.

The question you raised is exactly the question we went back with to Revenue Canada and Finance. We said everybody is putting in these efforts and the government has some very high-profile programs. We asked whether they had evaluated what each component of this program was contributing to the reduction of evasion and the answer was ``not yet''. We asked whether they had some very high-level estimates of what was happening with the different activities they had undertaken and how they were working together. The answer was ``no, not yet''.

I really cannot give you a better answer than that.

[Translation]

Mr. de Savoye: I appreciate this direct answer and I hope that Revenue Canada will not adopt a policy of improving its performance by completely eliminating taxes, in which case evasion would no longer be possible since there would be no more taxes to pay.

My second question is about the excise tax. You mention that Revenue Canada audited only one of the major tobacco producers and major oil companies in the past five years. I don't remember how it was drafted in the English text, but first of all, what is the tobacco producer or the oil company that was visited by Revenue Canada?

Secondly, in the past, Revenue Canada audits of these industries brought in considerable sums over the years, and the fact that Revenue Canada no longer conducts such audits in the past few years deprives the government of significant amounts of money. We're looking at something like $500 million. That's half a billion dollars. It's a significant proportion of our deficit which is of the order of $20 some odd billion. That's a few percentage points of our deficit. It would therefore be in Revenue Canada's interest to invest effort into recovering this money.

Why haven't such efforts been made in the past few years? Why has the practice changed? One certainly cannot claim that this is a cost-saving measure when no attempt is being made to recover such large sums. Has any legislation been amended? Where's the problem, sir?

[English]

Mr. Minto: Mr. Chairman, let me start by saying that this didn't happen because of negligence; they weren't conscious of the fact that this was going on. What really happened is that the department made a decision to move its audit resources from excise audits to GST audits. That was deemed to be a high priority for them.

We do know that prior to the decision - for example, I have some numbers. We looked at three of the excise audits they did and they had raised $12.8 million. Subsequent to our report being tabled, I know they did a couple of excise audits. In one of them of a large company, I think the audit took 19 days and the audit resulted in $9.4 million of additional assessments. That's a pretty good rate of return for us.

Mr. de Savoye: You bet.

Mr. Minto: What we are saying is that perhaps the decision was right...immediately when the GST came out. We don't even say right, but maybe you took a lot of things into consideration. But perhaps the time has come to reconsider it.

The good news, of course, is that the department agrees. What they're saying is that from now on they will audit all the big companies every two years. That's why we are back. We thought there was good money on the table to be had.

[Translation]

Mr. de Savoye: What you've just told me leads me to ask you if you intend to produce a report on that eventually?

The Chairman: You don't have to answer, sir. Your time has expired, Mr. de Savoye. I have to be fair. I don't want the Liberal colleagues who voted for me as chairman to throw tomatoes at me.

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Ms Bethel.

[English]

Ms Bethel: Thank you.

I have three quick questions for quick answers. I'm really interested in chapter 14, ``Service Quality''. I was quite surprised to see that this initiative was from 1990 but that there seems to have been little or no progress at all. Yet it makes so much difference, I think, to constituents in our ridings.

I guess my questions to you are simply: what does it take, short of a stick of dynamite, to get some movement on this, and what has been the response of Treasury Board, which is charged with this responsibility, to your report?

Ms Barrados: I'll answer the easy question first. Treasury Board's response has been very positive, in the sense of saying that this is important and we continue to try. The more difficult question is how do you move this agenda. What occurs is that the responsibility is at one level, with the Treasury Board, in terms of the overall policy. At the next level it's with the deputy ministers, the heads of -

Ms Bethel: Would it be helpful if we looked into it and heard from all in terms of the difficulties they're having? Would that be the stick of dynamite?

Ms Barrados: I think it would be very helpful. The deputy ministers are preoccupied with many other issues, and it tends to fall off their priority list because it's day-to-day operational....

Ms Bethel: Second, I found the part on the legislation very interesting. In Alberta we do have the Government Accountability Act. There is other legislation with codes of accountability and performance; there is some legislation in Minnesota, Texas, and Oregon, and there is the citizens charter in New Zealand.

What processes did they use to develop that legislation, and how effective is the legislation? Is it worth pursuing?

Ms Barrados: It's hard to judge from this distance how effective things in other countries are, but the key element of these things is that there is a process by which a target is set, performance is measured, and it is reported. Everyone can see what the nature of the contract and the commitments are. That's what's lacking. That's what the government is trying to do here. They haven't succeeded in doing that part of it.

Ms Bethel: Mr. Chairman, I think that would probably be of interest. I'm hoping it would be of interest for this committee to pursue some of these things.

My last question relates to the need to determine the full cost of output.

I don't even know how you could begin a program review if you don't have those kinds of data. From what you say, the quality of data available to make the kinds of decisions our ministers and deputy ministers are having to make...it's pretty tough. How do you see our moving this one? How do we get actual cost output on federal service functions?

Ms Barrados: We think this is something that's achievable, and some of the specific programs have tried to do it. This will be achieved only by asking. People have to ask for these things.

Ms Bethel: I find it interesting that in our ridings when we talk to the users, the customers, of our programs and services, they can tell you in a minute how good the program is, how effective it is, if it works, if it doesn't work. It's always a surprise to me that oftentimes our departments don't ask them those questions. They would know which programs should go and which should stay and actually be enhanced.

Thank you. I do hope we can pursue some of these.

[Translation]

The Chairman: Mr. de Savoye, I interrupted you. Do you want the floor?

Mr. de Savoye: I would like to address the question of quality of service. Quality of service does not apply only to government business. That applies to all types of business. As we know, for a number of years now principles of overall quality and standards such as those of the ISO have been implemented by many businesses seeking to achieve their goals and satisfy their customers.

Obviously, in the public sector the problem is trickier. I would just like to point out here that the first municipality in the world to adopt ISO 9002 is the municipality of Saint-Augustin-de-Desmaures in my riding.

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When I saw the work they've done, I realized that it would perhaps be good for our departments and Crown corporations to constrain themselves to comply with the ISO process. You have to force yourself to do that. I won't just happen automatically at no costs, and follow-up is needed. The bottom line is that you improve your performance, efficiency and level of customer satisfaction.

In the public sector, the government, there could be certain benefits to this. I would be interested in knowing how the Auditor General might respond to this. Is it a possibility? How could it adapt to the points you made in Chapter 14?

Mr. Desautels: Yes, it is possible. That does in fact apply to public administrations such as the federal government. I would even add that the government policy, which is intended to lead eventually to the publication of standards and performance measurement regarding those particular standards, is based on ISO standards. Therefore, in this area and others of government administration, such an approach is quite compatible. For example, a report was drawn up last year on environmental management systems. It was stated that that particular area of public administration could easily be based on ISO standards.

Therefore, not only is it feasible, but government policy is based on such standards.

Mr. de Savoye: What is the implementation timeframe and to what degree will that subsequently facilitate your work?

Mr. Desautels: The timeframes for implementation are quite significant. The government decided in 1990 to introduce a quality of service system. A timeframe was set for the development and publication of service standards. The dates in question were gradually pushed back. It was supposed to be done by the end of 1995 but they missed the target date. That's all I can tell you. I don't know when that will come out, but like you I hope it will be very soon.

Mr. de Savoye: M. Desautels, you know that there are certain businesses which deal only with suppliers who have ISO certification. If the suppliers don't have such a certification, the businesses concerned will not deal with them because the quality of service or of the product is not sufficiently reliable to meet the requirements of the purchaser himself or herself.

Our government agencies do not yet have ISO certification. Does that mean we should stop dealing with them until they can assure us of the quality to which we are entitled?

Mr. Desautels: All I can tell you is that the government has a monopoly for certain services. Therefore, it would be difficult to tell the taxpayer to stop dealing with the government.

I think that is a very important question. As Ms Bethel said earlier, if the committee were to study that issue, I am confident that it would move things along quite quickly.

Mr. de Savoye: Thank you, Mr. Desautels.

[English]

The Chairman: Mrs. Barnes.

Mrs. Barnes: I have one question that I think would be helpful. I think nobody knows more than a parliamentarian that when the cheques don't arrive on time, if they get a busy signal with the government phone lines, they call the MP phone lines. They're very concerned about this. Eight billion dollars of our social safety net is being delivered through these two systems alone. It's a big number.

One of the things that interests me, and it surprises me too, is why more people don't have direct deposit. We know from our phone answering systems that a lot of those calls asking whether the cheque has come or whether it's been mailed come in at the same time every month. We also know that a lot of the people get a busy signal. The same people hit the repeat dial button. It adds to the volume of calls calculated as unanswered calls when that can happen all day long from the same phone number.

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I know you did some analysis of the take-up on direct deposit for both the child tax benefit and the goods and services tax credit programs. I want you to tell me whether you think this is part of the telephone problem, how we can encourage more take-up on this, what we could do better to get more people involved, and - I don't know whether you delved into this aspect - how much it would save the federal government if we could get people buying into direct deposit.

Most of these people do have a bank account. They're getting that cheque, they're going to have to cash it. If we could skip the middle man, the delivery of a document, it would appear that we would save with the processing of the cheque and the time for everyone.

Obviously we're not there yet. We don't have 100% of our recipients of these benefits using this service. I'm serious about this. How do we get people to buy into this program? I think it does step down some of the other problems at the same time.

Mr. Desautels: I'll ask Mr. Minto to answer your question.

Mr. Minto: Thank you.

Perhaps I can direct Mrs. Barnes' attention to page 19.22, chapter 19, of the English version of the report.

We present two charts, two exhibits that show the take-up rate for direct deposits. For the child tax benefit the recipients have doubled the use of direct deposit; it's gone from 24% to 48%. For the GST direct deposit it has gone up from 2% to 22%.

That's very significant success. It's a good story and shows we're going in the right direction. Keep in mind that a lot of the beneficiaries of these programs may not have bank accounts. A lot of this money is bread money. Some people may be transients, and there may be other situations. I know the department has been trying to target these people for direct deposit.

If you look at the charts and if you look at the numbers, certainly they're going in the right direction. Some of those efforts are paying off.

The next step is for the department to analyse and ask what it intends to do next. It's not an issue that's gone unnoticed, and they've had some success.

Mrs. Barnes: But it's still pretty minor.

Mr. Minto: It is.

Mrs. Barnes: Although you say they don't have bank accounts, they still have to cash that cheque and most people still need a bank account to cash the cheque. I know there are some cheque-cashing services, but I would think the majority.... To me it would be a big win if we could get from 22% or wherever it stands now to 82%, and we would certainly address some of the other problems that all tie in. Do you agree with that statement?

Mr. Minto: I absolutely agree. If you look at paragraph 19.69, you will see that we even put in some of the dollars. There is $7 million in annual savings in postage, banking, and paper costs for the government alone by doing this, not to mention the convenience to the beneficiary. In addition to that you won't have as many phone calls.

Yes, I think the department is the party to talk with about this a little bit more, to find out what specifics they have in mind. Surely it's a decision to be made by management. We've just highlighted the issue.

Mrs. Barnes: Okay.

The Chairman: Mr. Hubbard.

Mr. Hubbard (Miramichi): I have several quick points.

Under the Canada Pension Plan there is indication of an escalating cost to the disability portion of it. We hear concerns that certain private providers are utilizing the Canada Pension Plan as the first part of any benefits that a person might have. Has this been reviewed, and is it a problem that has been created in the last five years or so?

Mr. Desautels: Mr. Chairman, we do raise this issue in our report. It became quite obvious to us early in our work that in fact certain private insurers in particular were reducing what they would otherwise pay by the amount the beneficiaries were collecting from CPP disability, which meant the CPP was becoming the first payer. I think it's an issue that we've brought to your attention in our report. What you do about it is another issue, but I think it's something the administrators of the CPP should review and respond to in due course. But it is a recognized fact.

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Mr. Hubbard: And it raises a significant amount of concern.

With regard to the services aspect, I'm from a rural area and we have a lot of long distance. When we talk about telephones and being answered and making contact, certainly that's one part of your review and part of this report. But we also have major criticisms of what we call the bells and whistles - you call and it's press 1 if you want one thing, press 2 if you want something else. It's not just government. With Air Canada the other night I spent about 30 minutes going through this procedure of where I might fly to and all the benefits they have. All I was trying to do was pick up an airline ticket.

Has this also been a concern of your review - that people are paying for long distance calls and somebody is giving them all sorts of information they don't need. Would it not be better to have a busy signal or something rather than these tunes about ``fly to Florida tomorrow with a special rate'', or ``there is a tremendous system on our new DC-something-or-other''?

Was there much concern about what I call the bells and whistles and the abuse of time? It seems that in many parts of the economy today it's the person ordering something who pays the cost the business may have in terms of having a secretary or somebody at the other end of the line. We do the waiting instead of them waiting on us.

Ms Barrados: There's a general concern and it takes many forms, including some of the forms you describe. People are concerned about not getting the information they want in a timely fashion, and then they're concerned that it's not the right information. So it's actually a little more complicated. With the material we looked at, most people will be flexible on how they receive the information as long as they get it in a timely, accurate manner.

Part of that then means that it's really important that part of this exercise is dealing with the people you're trying to serve and seeing how it is they want the information. Those are general kinds of statements, but it means that if you have a particular group living in a particular place, you'd better keep that in mind when you're providing that service.

So it's a big problem.

Mr. Hubbard: In the area of information technology, you mentioned different departments trying to coordinate and develop. We hear about DND and the problems they have with their software and equipment. It's something we apparently have to work towards, but are there concerns in terms of your review of the Privacy Act and the secrecy of information? Are there problems across the system about who has access to confidential information in terms of people or government departments? Was there any concern or evidence that there is a problem with this?

Mr. Desautels: Mr. Chairman, in our recent work on the information technology front, we have not brought out major problems regarding security, confidentiality and issues around those. To go back a few years, I think we did make comments about the security of computer systems, but I think the government responded. I'm going back six years or so to when this was done. Since then the government has responded to those concerns, so we have not recently raised concerns around these particular issues.

Mr. Hubbard: Thank you, Mr. Chairman.

The Chairman: Before I move to Mr. Hopkins, about those voice mail charges.... You're a young guy. It's easy for you to use, but what about my 88-year-old mother-in-law in Gaspé Peninsula trying to get information from the federal government? When you are 88, we can discuss that. So I agree with you.

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Mr. Hubbard: Mark that down, Mr. Chairman.

The Chairman: Mr. Hopkins.

Mr. Hopkins: Thank you, Mr. Chairman.

With regard to the delivery of services to the public, and I'm speaking here mainly of telephones, are the people on the other end of the line given public relations training before being put on that job? Who supervises those public relations?

Ms Barrados: I'm not sure I can answer your question directly in terms of the amount or type of training they are given. We can check and get back to you if you want to pursue that. I do know that part of the dissatisfaction Canadians have with the service they get is that they feel they are not being treated with courtesy.

Some of the studies the public opinion poll people have done show that they are more satisfied with the banks than they are with Canadian government services, so there is an issue with courtesy. We can check and see what form of training they actually receive.

Mr. Hopkins: We should take a look at the banking system. They're making lots of money and we might make more if we used their system. Using my own constituency office as an example, my staff call and often they are treated discourteously. I find this intolerable and on a couple of occasions I've called those people back myself. Half the time you may not know who you're talking to, because different people pick up the phone on different calls. So I think there's room for improvement there.

Under the Canada Pension Plan, each region of the country used to have a particular centre to call. The person on the other end was specialized in that they knew the area, and they knew the people they were dealing with from our offices. We could make calls and a really good rapport was built up between the constituency offices and those people on the other end of the line.

Recently that system has become more decentralized, and I think that's one reason your telephone calls have ballooned up the way they have. Sometimes you have to back up in order to arrive at the future. In your investigation of the delivery of services, have you looked at the previous services and how they delivered goods as compared to what we have today?

As Mr. Hubbard pointed out, you sometimes get all the bells and whistles and very poor and expensive service, but when you're dealing with a central office, the person knows who they're working with every day, and you work up a rapport and you get three times as much done.

The other day a director phoned my staff back to start telling them what they should and should not expect. They're dealing with people whose cases - the Canada Pension Plan is backed up eight months to a year. I think this is the sort of thing you are referring to here.

The system seems to be stalled. The more you stall the system, the more the number of telephone calls increases and the more expensive the system gets, but you're still not getting efficiency. Have you looked at previous systems and tried to compare them with the present?

Ms Barrados: We did look back. In the 1970s you already found statements about people wishing service from government was better. We had trouble making some of the direct comparisons that you're suggesting because you're never quite sure what you are comparing. There is a lot of personal experience in cases. In some instances we found improvement - depending on how far back you go - and in some instances we found no improvement. So it was hard for us to generalize.

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Mr. Hopkins: Thank you.

[Translation]

The Chairman: Mr. Paradis.

Mr. Paradis: First, I would like to focus on Chapter 18 which deals with excise duties and taxes on selected commodities.

First I would like to congratulate the Auditor General for his work in these reports, as I have done in the past for previous reports. I would like to extend again my congratulations for his previous reports and also commend him for these reports.

Chapter 18 focusses on excise duties and taxes and tax evasion. It deals specifically with four products: tobacco, alcohol, motive fuels and jewellery.

I might perhaps place the first three products in a separate category since they are subject to more federal and provincial taxes and regulations. There are federal and provincial regulations governing tobacco, alcohol and motive fuels. From what I have learned, jewellery may perhaps be placed in a different category from the three other products.

Paragraph 18.48 reads as follows:

I know you have to begin somewhere when you do a study, but I wonder why when looking at tax evasion, the study was limited to excise tax or excise duties.

I'll come back to this in my supplementary questions on commodity taxes as a whole, which are referred to on the top of page 18-11, under the heading ``Summary of observations on each commodity tax''. I would like to deal most specifically with the GST and the way it is administered, which is not the main point of the chapter in question, but is nevertheless a commodity tax.

I regularly have public meetings with the constituents in my riding. The main concern they express to me is the level of taxes they have to pay. Very often, these people are completely fed up of paying taxes.

I would like to ask you a question about the GST and the way this legislation is applied. What ever you do, don't raise your hand! Is there anyone among you who, over the last week, month or two or three months, has asked somebody how much he or she would charge you if you did not ask for an invoice and were willing to pay cash? Whatever you do, don't raise your hand!

I think that, generally speaking, few people would raise their hands. I mention this example to illustrate the general perception people have when you talk about tax evasion on cigarettes, alcohol, motive fuels and jewellery. I think the list could be extended. You are right to specify that point. We are not dealing here with excise taxes, but the list of tax evasions could be extended, particularly as regards the GST.

We are of course obliged to obey the law, even if it is sometimes more difficult because of the collection system itself. I am interested in the GST collection system policy, the way it is implemented and the tax collected. On the basis of my consultations with people in my own riding, I have the impression that many people don't want an invoice and they pay cash. That is what is happening.

In view of that situation, would it not be advisable for you, as the Auditor General, to carry out a more exhaustive analysis of commodity tax evasion?

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The perverse effect of this is that if someone does not pay the GST on a product, it would be surprising if the person selling it does in fact report the sale. If he does not report it, it will not appear in his profits and therefore income tax is lost.

Therefore, we lose on more than one level, we lose in terms of taxes, then in terms of the tax on sales and profits, whether you are dealing with a company or an individual. That has a significant cumulative impact.

In our society, not only do we need laws but those laws, procedures and regulations must be designed in such a way that they are socially accepted. It is not necessary for everyone or every individual to say that he or she accepts them, but the community as a whole must be able to say that it believes in the legislation and is willing to go along with it. If something is unlawful, the community will refuse to do it. It is essential that people feel that way.

In paragraph 18.54, the Auditor General states:

In paragraph 18.54, you cover therefore the other points which I mentioned. As Auditor General, are you able, unless I am mistaken, to show to what degree the GST fails to bring in as much as it should?

[English]

Mr. Minto: I'll try to answer this in sequence. The essential point here, sir, is that Revenue Canada is in various lines of business, such as income tax, commodity taxes, and the GST, and then we've looked at a fourth line of business in this chapter, which is benefit programs.

What we try to do for parliamentarians is to visit individual lines of business and write chapters about them within those lines of business. When we write a chapter on evasion under excise, it's not that we think evasion is a problem exclusively in excise, but that is the product line we're concentrating on this time.

If you recall, sir, we came back to you with chapter 11 earlier this year. We talked about the Income Tax Act and the tax avoidance order. We've talked about the GST previously and we've talked about collection of income taxes.

Each one of the issues mentioned by Mr. Paradis is very worthy of consideration. We've tried to do them in chewable chunks here so the committee can deal with the issue and the department can respond on the issue. We've tried to go with the way the department manages its operations. That's not to say that any of the other items are not important.

You mentioned 18.54, but let me just go to 18.53 first. In 18.53 we say there are many initiatives going on in various parts of the department and somebody has to pull them together. We didn't see that somebody when we were there. We do see that the department is now saying it's going to set up this committee and this will look different. I think this would be an excellent official discussion to have with the department at some stage. We should look at how this is going to work. We would go back in the future and follow up on your behalf.

The Chairman: Considering that we have a vote....

[Translation]

Mr. de Savoye, you have three minutes since we will have to go and vote.

Mr. de Savoye: I will try to be brief.

Mr. Desautels: I would like to add something to an answer I gave to an earlier question on telephone services.

[English]

Mr. Minto: Mr. Chairman, Mrs. Barnes asked me the question about direct payments. I'll just go into the chapter of my colleague Ms Barrados. We have a whole page in chapter 14 dedicated to saying that it is essential to reduce the number of unnecessary calls. She's put that in her exhibit, and I'll just read a couple of lines from there.

The heading of the exhibit is ``Direct Deposit Payments Can Reduce Unnecessary Calls''.

Certainly we are behind this initiative as an office, and we've dealt with it in both chapters.

.1730

[Translation]

Mr. de Savoye: I will continue along the same lines by telling you a story.

One beautiful afternoon, in my riding office,

[English]

someone phones and says he had a bank account, but unfortunately he wrote a rubber cheque and the bank manager decided to close his account. His GST is coming in either today or tomorrow, and if this bank account is not reopened he won't get his refund. He says he has a gun and he's going down there; tell the bank manager he must do something.

That's just to end this on a humourous note.

[Translation]

The Chairman: Do you have any concluding comments, Mr. Desautels?

Mr. Desautels: No, that's fine, Mr. Chairman.

The Chairman: On behalf of the committee I would like to thank you for your report and also commend the many auditors here present whose teamwork has made it possible for each of these chapters to be published.

Also, on a humorous note, I would like to say that I am convinced that the Chair of the Standing Committee on Finance, Mr. Peterson, will agree with us that you are doing a very good job.

Thank you and we look forward to seeing you again.

Mr. Desautels: Thank you, Mr. Chairman.

The Chairman: The meeting is adjourned.

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