Finance Committee on Nov. 15th, 2007

[James Ralston]

First of all, with respect to crown-owned facilities, it's not really an issue. We're talking largely about our taxation centres, which are purpose-built facilities. With respect to leases in the—

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I asked the question because I know a lot of service counters were closed, or sometimes you tend to go closer to a certain area, and I'm wondering if there's a cost related to that. Or is this all planned ahead of time?

[James Ralston]

I think the answer would be that whenever we change whatever use we're making of a particular amount of space, we continue to be the renters of that space and we would continue to pay the landlord for it. We may change the use we make of the floor space, but we would still be utilizing it in some way.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you.

Looking at some of the appropriations where it's money that goes directly to the taxpayer and there was some.... Let's take the major amount of...was it $45 million for the working income tax benefit, the new child tax credit? Why is that there? Why wouldn't it have been...? Explain to me the cut-off again.

[James Ralston]

The amount you refer to has many, many components. You've cited the biggest single one, which is the working income tax benefit. The costs we're talking about here are our costs in administering the benefit. So it's any additional staff we might have needed to have hired, devoted to things like programming our computers, writing new publications, handling public inquiries, that sort of thing. So it's basically the costs to the CRA of administering the benefit. It doesn't reflect a payment to anyone; it reflects an operating expense.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Internal costs. So there's more to come, I would imagine, because the 2007 implementation is not going to happen until April 2008.

[James Ralston]

Actually I was listening to the earlier questions about the relationship of supplementary estimates to main estimates and other things. This represents only the cost for 2007-08. It does not represent a permanent adjustment to the agency's base funding. Permanent adjustments of that nature can only be made during the main estimates. So at some future date we will see and have another discussion where this item will appear again but in the context of the main estimates. At that time we will be talking about the amount needed to do a permanent base adjustment.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Are you comfortable that the $45 million will carry us to March 31, 2008?

[James Ralston]

Yes.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you.

Thank you, Mr. Chairman.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Now we'll move on to Mr. St-Cyr for seven minutes.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Thank you, Mr. Chairman.

Thank you for being with us today.

I would like to have some additional details with respect to one item in the Estimates that is not clear to me. It is the item relating to an initiative to address interprovincial tax avoidance. I'm sure you are aware that I am very concerned about any and all issues relating to tax avoidance. I referred earlier to problems occurring in Barbados and elsewhere in the world. However, I see that here and I am just wondering what interprovincial tax avoidance involves. I am not asking you to give a course that could help people interested in trying it. What kind of scheme do these individuals use and how do you combat this kind of activity?

[James Ralston]

This pertains to our administration of the tax collection agreements. A certain number of provinces and territories have basically engaged the CRA to administer their personal or corporate income taxes. There is a concern because not all provinces have the same tax rates. There is a concern that businesses in particular will arrange their affairs to have income earned in lower-tax versus higher-tax provinces.

The provinces are concerned that we are vigilant to ensure that income allocation is occurring to the right provinces. To address that concern we were given some additional funding to increase our efforts to monitor that kind of activity. I think it's something we were always doing, but because of a concern expressed by certain provinces, we have committed to step up our level of effort.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

In concrete terms, I suppose that it means auditing business information as frequently as possible and focusing on that particular aspect of the audit, namely, in what provinces the income was earned.

[James Ralston]

I think that's a fair summary, yes.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

The other piece of information I am seeking is this: with respect to the monies provided for the Canada-U.S. Softwood Lumber Agreement, can you tell us what the $15 million is for? What kind of expenditures does it generate for the Agency?

[James Ralston]

With the softwood lumber agreement there were two activities given to the Canada Revenue Agency. One activity relates to something called a softwood lumber product export charge. The other one refers to a charge on duty deposit refunds. I'll deal with each one.

With the softwood export charges it's simply that. When an exporter is exporting the lumber there is going to be a tax levied. We will collect that tax and we will also share the revenue with the provinces in accordance with the terms of the agreement. And of course this is an entirely new charge, so all of the costs that we see here are associated with setting up the systems and procedures and the staff necessary to do that.

There is also a second aspect of the administration, which is that in the years prior to the agreement, the U.S. government had collected a certain amount of duty from Canadian companies. They were returning it to these Canadian companies. Again, there's a role for CRA. When the U.S. government made these refunds there was a portion of it that was to be directed to the federal government and a portion directed to the companies involved. Again, the CRA had to set up a system to collect that portion.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

I have one final question. It is on a completely different subject—namely, electronic filing of tax returns. I come back to this because I have put this question to Canada Revenue Agency officials in the past. As things now stand, if an individual wants to file his tax return electronically, he has to purchase private software.

Is the Canada Revenue Agency currently working to produce a reliable software program, which would be available free of charge to Canadians, to allow them to file their tax returns electronically, just as they have free access to the tax return forms made available by the Canada Revenue Agency?

[James Ralston]

To the best of my knowledge, it is not. However, that's not really my area of expertise. It would be perhaps better for me to suggest that we get back to you with the absolutely correct answer to that. It is my belief that we're not.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now go to the Conservative side.

Mr. Wallace, you're just like the Eveready bunny.

[Mike Wallace, Conservative, Burlington, ON]

Thank you for answering the question that I asked the other group before.

I only have a few questions, and hopefully you can answer them. I looked at your main budgets and then at what the supplementaries are here. When I looked at other departments, the difference.... When you looked at their main estimates and the number in thousands of dollars...so it's $2.607 billion in the main estimates. But when I looked at the supplementaries it had authorities, to date, at $2.775 billion. You're the only one that had a difference from what was in the main estimates I had looked at to what was on the authorities to date.

What caused that additional $167 million between the main estimates in here? It's not really listed that I see.

[James Ralston]

I'm glad you asked that question because I was scratching my head on that one, too, but the answer is pretty obvious, once I think about it.

The CRA has a provision in the act to carry forward.... Basically, our appropriations cover a two-year period instead of a one-year period. So unused amounts from one year carry forward. The amount in question, the $167.724 million--that was my computation—is basically the unused portion of our 2006-07 appropriations that now become available in 2007-08.

[Mike Wallace, Conservative, Burlington, ON]

I'm just wondering if maybe in the future you could make a little note to that. Now, I might be the only one here ever looking at it, but it was of interest because based on what you had put in your main estimates and what you're asking for here, there isn't any significant difference, other than....

I did want to ask you about it, and I think you've answered Massimo, but you probably have to do it for me again so that I clearly understand. The change has been because you're now looking after real estate that used to be the responsibility of Public Works.

I'm still confused. Are you looking after just the dollars and cents, not at the management of the leases and all that baloney?

[James Ralston]

Operationally, very little has changed.

What has changed is that the parliamentary appropriation to finance accommodations costs, instead of appearing in the PWGSC appropriations, will now appear in our appropriations. The amount hasn't really changed. As we say, the transfer has been cost neutral.

Our interest in doing this was partly to reflect the way the CRA Act is written. It shows us as having that authority, and yet we weren't really exercising it, in a sense. It places the accountability for those funds. It aligns that accountability with the mandate of the act. And we also believe that it will be an incentive for us to manage our demand a little more carefully.

It's no longer going to have the appearance of a free good. It's going to have the appearance of something we pay for. Our sense is that once you change that perspective on things, it might cause you to examine a little more closely how you're demanding the space you're occupying.

[Mike Wallace, Conservative, Burlington, ON]

Okay.

Because I didn't see any change in the numbers from the supplementary to the main estimates, I'm assuming that if the government of the day changes.... Let's take a look at your workload. In a sense, because of the changes in the budget that have happened with Whitby, as the minister likes to call it, and some other changes that we have made, the same bodies can handle the.... Have you had growth in the actual number of people in the department?