Finance Committee on Dec. 1st, 2011

[The Chair, Conservative, James Rajotte]

I call this meeting to order. This is the 32nd meeting of the Standing Committee on Finance. Our orders of the day, pursuant to Standing Order 81(5), are the supplementary estimates (B) 2011-2012, votes 1b and 5b under Canada Revenue Agency, and votes 1b, 5b, and L15b under Finance, referred to this committee on Thursday, November 3, 2011.

Colleagues, we have officials from the Canada Revenue Agency for the first hour and from the Department of Finance for the second hour. We have with us two officials from CRA, Mr. Filipe Dinis, chief financial officer and assistant commissioner of the finance and administration branch; and Mr. Richard Case, director general, resource management directorate, finance and administration branch.

Welcome, gentlemen, to the committee. At this time I will give you time for an opening statement, and then we'll have questions from members.

Mr. Dinis.

[Filipe Dinis, Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency]

Thank you, Mr. Chair.

Good morning and thank you for the opportunity to appear before the Committee to present the Canada Revenue Agency's 2011-2012 Supplementary Estimates (B) and to answer any questions that you may have.

Before I begin I would like to take a moment to introduce my colleague, Mr. Richard Case, the director general of the Resource Management Directorate of the Finance and Administration Branch.

Mr. Chair, as you are aware, the CRA is responsible for the administration of federal and certain provincial and territorial tax programs, as well as the delivery of a number of benefit payment programs. Each year, the CRA collects hundreds of billions of dollars of tax revenue for the Government of Canada, and distributes timely and accurate benefit payments to millions of Canadians.

Through these supplementary estimates, the CRA is seeking increases to the reference levels for three items.

First of all, the agency is requesting $19.1 million for the implementation and administration of Budget 2011 tax measures that affect individuals, benefit recipients, trusts, businesses, and charitable organizations. The funding will be used to make systems modifications, develop and implement new business processes, and update publications and information products for our clients.

Second, the agency is seeking funding to undertake planning activities for the upgrade of the personal income tax processing system. This system is integral to the delivery of CRA programs and services to Canadians, providing Canada, the provinces, and the territories with their principal source of revenue, about $360 billion in gross income taxes annually. The system also enables the determination of eligibility for individual Canadians who receive benefit payments and tax credits each year. These upgrades will leave the CRA in a better position to address the increased number of tax filers, respond to new tax policy measures, and implement new partnership agreements with provinces, territories, and other government departments and agencies.

The third item requested in these supplementary estimates is an amount of $1 million for the government advertising programs. This funding is intended to supplement the previously approved funding to increase awareness of tax measures in advance of the 2011 tax filing season.

Through these supplementary estimates, the agency is also seeking a vote transfer between the capital and operating votes to correctly align its base spending authorities with planned expenditures. This adjustment is technical in nature and does not represent a change in the agency's planned acquisitions, nor is it a request for incremental funding.

Finally, Mr. Chair, the CRA is requesting a transfer from its budget to the Treasury Board Secretariat of $100,000 in support of the National Managers' Community. Medium and large departments and agencies were asked to share expenses related to the National Managers' Community on an annual basis. This funding enables the national managers' community to deliver a national program in response to government priorities. The community members ensure the operational implementation of public service renewal in each of their organizations and promote leadership and public service values.

These Supplementary Estimates (B) are displaying an overall net increase of $26.2 million to the CRA's 2011-2012 authorities granted by Parliament to date. Once adjusted for these items, the CRA's revised authorities for 2011-2012 will, therefore, total $4.497 billion.

At this time, my colleague and I will be most happy to respond to any questions from the committee.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

I want to thank you for outlining the supplementary estimates (B) for CRA for the committee.

We'll begin members' questions.

Mr. Mai, you have the floor.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you for being here this morning and for making your presentations.

My first question concerns jobs, and therefore resources.

We're talking about $19 million for the implementation, and I'd like to know whether there are plans to cut auditor positions.

[Filipe Dinis]

Mr. Chair, we haven't cut any auditor positions. It's an area that the agency still feels is a priority. We have established the link between the work done by the auditors and the funds collected by the government. However, in a perspective of realigning resources, we are looking at all the possibilities. Regardless, I can tell the committee members that the auditors continue to be a priority for the agency.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Are you saying that no cuts are planned for that area?

[Filipe Dinis]

At this time, we have no plans to cut auditor positions, but all departments are in the midst of budget reviews. We are examining anything that will allow us to realign resources.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

England, for instance, applies a system where each dollar invested makes it possible to recover more money, specifically to avoid tax evasion.

Do you think that the Canada Revenue Agency should take on tax evasion more seriously?

[Filipe Dinis]

Mr. Chair, as I said, that area is a priority. The main purpose of all the resources invested from the auditors is to generate additional income for the government. It is always possible to continue to look at that as a priority.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

You spoke about advertising in your report.

Is it used to inform Canadians of their obligations or their benefits, or is it used to promote those programs?

[Filipe Dinis]

Mr. Chair, the funds that are requested for advertising are really for generating more information for taxpayers about what they can claim. We also want to continue to publicize the agency's electronic services and improve them for the benefit of Canadians.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

With respect to electronic services, do you mean that the department is moving more toward IT for filing income tax returns or for claims?

[Filipe Dinis]

Mr. Chair, a lot of progress has been made in recent years in this area. Almost 60% of all Canadian income tax returns are filed with the agency electronically. We think it is still possible to increase that percentage. We would like to continue to make progress in that respect.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

More specifically, with respect to the TFSA program, we know that there are a lot of problems when it comes to information. Can you tell us where we are with that? Are people better informed? What steps have been taken to truly resolve the problem with the lack of information or the problem with information not being sent to taxpayers?

[Filipe Dinis]

Mr. Chair, the agency has taken very concrete measures and worked very closely with the agency's Office of the Taxpayers' Ombudsman to resolve some of the problems. More concretely, we have increased the visibility of the information on our website, and we continue to work with the financial institutions to ensure that the information is available on their websites and that the information points to us. So we have taken proactive measures in the past few months to ensure that the information is clear and available. And if Canadians need more information, they can get it through our agency.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mai.

We'll go to Ms. McLeod, please.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Mr. Chair.

I was almost tempted to call a point of order. I didn't at that time, but I do want to note that it is the supplementary (B) estimates that we're here to talk about. I noticed that the questions at the start were drifting away from supplementary estimates (B), so I just want to make this comment. I think it's important that we focus on the very important job we have here today in terms of the supplementary estimates.

Having said that, I notice you talked about $4.497 billion that is your main estimates, plus the supplementary estimates. You actually bring in approximately $360 billion in revenue, so I think that perhaps unlike any other department, you have a very different role compared to the majority of departments within government.

Has that remained relatively stable over time, in terms of expenditures versus revenues? Can you speak briefly to that?

[Filipe Dinis]

Mr. Chair, our budget has grown over the last few years, but it's grown as a result of the increased responsibility that has been given to the agency to deliver some key government programs. We've just recently touched on one, and there are obviously other key programs that we've been asked to deliver on behalf of the government, some of which are the subject of our discussion here today, in particular some of the tax credits.

We continue to put a priority, as I said earlier, on increasing government revenues with the resources we've been allocated. To the extent possible, we realign those resources. When we are asked to deliver on additional government programs, it is at that point that we seek incremental revenues, but it's only at that point. Our history has been one of realigning current budgets to address additional workloads.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I'd like to head now to a specific item in the estimates. Frequently when supplementary estimates come to the table, it's regarding unanticipated expenditures that the departments are seeking approval for. Here you've got $6.2 million for 2011–12 with respect to projects designed to improve and modernize IT infrastructure. To say this is additional money is a little misleading, because I understand it was really part of a long-term plan that the government originally announced in Budget 2010 to spend about $250 million in this area. Can you perhaps comment on this particular issue?

[Filipe Dinis]

The agency relies on IT infrastructure to deliver the majority of its programs. The member is correct in saying that as part of Budget 2010, there were some resources set aside by the government—in particular $251 million over nine years—for us in the agency to upgrade a 30-year-old system.

It is the key system that brings in $154 billion. It's the system used to deliver benefit cheques to Canadians. About $22 billion in benefits is issued every year to Canadians. This system supports that. In essence, the request that we have here for $6.2 million represents the first draw on the $251 million. So it's money that was planned by the government and has been set aside in the fiscal framework. It is also a work that we're undertaking in response to the OAG's 2010 report on aging government IT systems and the need to address this problem. In particular, the system that issues income tax refunds, employment insurance, and pension cheques was referenced as one of the key systems that needed to be upgraded. So this funding of $6 million is, in essence, our first draw on funding that had already been planned for in the fiscal framework.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

What can you tell us about electronic filing and where you're going with that? What percentage of Canadians now file electronically?

[Filipe Dinis]

Between 60% and 64% of Canadians are electronically filing their income tax returns. We believe there's an opportunity to bring that number up. I can share with the committee that our colleagues in the United States are at approximately 83%. We believe we can continue to progress towards that objective.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

We'll go to Mr. Regan.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you, Mr. Chairman, and my thanks to the witnesses for appearing today.

I'm going to ask about a special category of Canadians. Thousands of Canadians who have been paying taxes in Canada for many years are now being pursued by the U.S. Internal Revenue Service for back taxes, because they also happen to be U.S. citizens or children of U.S. citizens born in Canada and considered by the U.S. to be American citizens. What are these Canadians to do?

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

On a point of order, Mr. Chair, the Canada Revenue Agency is responsible for administering Canadian tax law. We are here to talk about supplementary estimates (B). I would suggest that we are drifting way outside the boundaries of our plan for today.