Finance Committee on March 1st, 2011

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Szabo.

Monsieur Carrier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you.

Good morning, sir.

Your presentation was quite short. It's quite difficult to get a quick overall idea of the $57 million you're referring to in vote 1c. You link that mainly to the additional cost of harmonizing the taxes. The document I have states the following with regard to vote 1c: "Operating expenditures, contributions and recoverable expenditures on behalf of the Canada Pension Plan and the Employment Insurance Act."

Are you confirming for us that the $57 million mainly covers the additional cost of harmonizing the taxes?

[Filipe Dinis]

That's absolutely correct. This amount is intended for the implementation of the harmonization program. The amount also includes the portion we've just discussed, that is the salaries of provincial employees who will be coming to the agency. This is really for the implementation of the harmonized tax for the two provinces.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

I had the impression it concerned the points mentioned, the Canada Pension Plan and the Employment Insurance Act, but that's perhaps a general title used from year to year. This year, there are no additional votes required for these items: this is simply for harmonizing the taxes. Is that correct?

[Filipe Dinis]

Mr. Chairman, the member is clearly right. The title also refers to the operating budget, including pensions, etc. It's a generic title that we often use in supplementary estimates. There's nothing new on the Canada Pension Plan side.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

All right. As for the harmonized tax, this is a topic that is dear to us in Quebec. We've been talking about harmonized taxes for at least two years. A subsidy has been granted for that purpose. Your experience in this regard no doubt enables you to assess the discussions currently being held with Quebec, which administers both taxes.

Does your assessment of the Quebec file, which is not yet complete, take into account the additional costs resulting from harmonization?

[Filipe Dinis]

Mr. Chairman, the Canada Revenue Agency is not responsible for assessing this arrangement. Discussions are underway, and they're really going on between the Department of Finance and the province of Quebec. As you know, we are responsible for administering the agreements between the governments.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you for that answer, even though it isn't very detailed. The $50 million amount is impressive, even though it's not enormous relative to the government's overall budget. The fact remains that it's quite an astronomical figure. Perhaps you gave an explanation in English a little earlier and I may have missed it, but I'd like to know how this advance cost assessment can be so wrong.

[Filipe Dinis]

To arrive at the $57 million figure, as you can see, a lot of work was done to validate the figures and to get approval. A large part of the $57 million will go to human resources, for experts who will come to the Canada Revenue Agency from provinces such as British Columbia and Ontario.

In addition, changes have to be made to the system to move program implementation forward. There's also the communications aspect, for which we have responsibility for the purposes of administering the program. So a number of factors are included in the $57 million, such as human resources, systems, communications, etc.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Can you enlighten me on one point? In vote 1c, I suppose these are operating expenditures that include operations as a whole.

The pilot project that was set up, called the Related Parties Initiative, targets the richest business-related families and contributors. I recently read that it was a pilot project, but it was going to become a permanent program because you considered it very profitable.

Would the costs of that pilot project eventually come under vote 1c, or are they already provided for?

[Filipe Dinis]

If it's a program—

[The Chair, Conservative, James Rajotte]

You have one minute left.

[Filipe Dinis]

I don't have any details on the program as such, but if it's a program that belongs to standardized tax management, it will be part of it. From the description you've given me, I assume it's not entirely included in this $57 million amount. However, it would enter into vote 1c as such.

As for vote 5c, to which you refer, these are capital expenditure amounts related to the $57 million figure. These are investments that have depreciated. As you know, this year is the first time we've had this kind of vote at the Canada Revenue Agency. We used to have only vote 1c.

[The Chair, Conservative, James Rajotte]

Merci.

We'll go to Mr. Wallace, please.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I thank our guests for coming today.

I would like to start with a general question. I've been working under the assumption that as time goes by we're doing a better job in terms of electronics, in terms of service, and in terms of tax collection and so on. Would you be surprised to know that in the last four years, from 2008 to this year, in the main estimates you've had a $1.1 billion increase? That is a 33.3% increase in four years.

I'm interested in knowing what the department's view is of such a substantial increase and why you've had over a $1 billion increase, 33.3%, in four years. Are we providing better service to Canadians with that money? What are we doing with that cash?

[Filipe Dinis]

Mr. Chair, we believe we are providing excellent service to taxpayers. As you may know, we conduct regular surveys on an annual basis of our services and how they are perceived by the taxpayers. Year over year, we're proud to say that we fare, I would say, very well in terms of the level of satisfaction with our services.

We always strive to deliver those services in the most efficient way possible. We leverage technology significantly in the agency, whether it's online or through our phone services. Our call centre operation is one of the most sophisticated call centre operations we have in Canada.

[Mike Wallace, Conservative, Burlington, ON]

What percentage of your returns is coming in online these days? I know you do other tax collection, but the personal income tax business online, what percentage is that?

[Filipe Dinis]

The most recent number I saw for electronic returns was around 56% to 57%. We're continuing to work on that number.

As it relates to the reference made to our budget having increased over time, there is no doubt that it has. There is also no doubt that the agency has been asked over the years to take on more and more responsibility in terms of delivering some of the key programs. We've obviously had discussions on some of them in this committee. With those additional dollars coming into the agency, there is also additional accountability for delivering some key programs.

[Mike Wallace, Conservative, Burlington, ON]

On a related question, which Mr. Szabo was alluding to, I have notes here that in 2008-09, based on what you have said, the finance department recommended $419 million, and the actual was $180 million. This was on the softwood lumber piece. In 2009-10, $429 million was recommended and was put in the main estimates, and the actual expenditure was $206 million. Then, last year, it was $479 million, and the actual expenditure will be around $200 million.

Does CRA not have a responsibility to push back and say that these are your budgets and they're putting in estimates that obviously haven't been accurate? Today, with supplementary estimates (C), you can come here and say you're asking for a reduction, but in my view, it's because of poor estimating in the main estimates over not just the last year, but over three years.

What is the department's responsibility to say that “this isn't accurate and we're not putting it in our mains as part of our responsibility”?

[Filipe Dinis]

Mr. Chair, the estimate originally arrived at in 2009 was I guess based on the best available information at the time. Since then, we've obviously seen that conditions have changed year over year, but we've also noticed that the payments to the provinces were somewhat lower, as the member outlines. So as a result of that and the current conditions....

I should remind the committee that this money is in a special purpose allotment and there are two things. One is that while it affects the agency's bottom line from a budget perspective, it doesn't decrease the agency's operating budget. Also, it is truly an in-and-out amount in terms of the amounts the government collects, minus the administration, legal fees, etc., and the net goes off to the provinces.

Having said that, we have a close relationship with the Department of Finance and we engage with them concerning what the actual disbursements are. Over time, we have been able to provide that information to the Department of Finance.

[Mike Wallace, Conservative, Burlington, ON]

I appreciate that there is a special account for that, but the fact is that we probably don't do a good job of scrutinizing expenditures as it is, and when they're inaccurate, it makes it even more difficult for us to do the job.

On the internal transfer that's in this $54 million or $57 million, I didn't see how much of it was for one of the Atlantic provinces doing a GST adjustment, or an internal adjustment, and then you have a horizontal transfer here. How much of that $54 million is this horizontal transfer and where is it coming from?

It's on page 91 of the book. It's for Nova Scotia. It says, “Affordable Living Tax Credit for Nova Scotia (horizontal item)...”. Is that the three-million-dollar item?

[Filipe Dinis]

No. The $3 million reflected on page 91 of the book is indeed the capital portion of the $57 million.

[Mike Wallace, Conservative, Burlington, ON]

I didn't see what is in this actual living tax credit, this “horizontal item”. I wanted to make sure it's.... When I looked at the part of the book for transfers between departments—horizontal transfers—I did not find it there, so I'm assuming it's internal to your grouping. I want to know how much it is and where it's coming from.

[Filipe Dinis]

Mr. Chair, on the amount related to the Nova Scotia affordable living tax credit, I think we'll have to come back to the committee to tell you, out of the $57 million we're requesting approval for, how much relates to that credit.

[Mike Wallace, Conservative, Burlington, ON]

But when we see “horizontal” listed in here, but not at the front of the book, is it internal to CRA, not trading off with another department?