Finance Committee on Dec. 1st, 2011

[Geoff Regan, Liberal, Halifax West, NS]

A year ago we heard about an employee at the Department of Finance accessing the personal tax information of 400 Canadians in connection with a personal business this person had outside of work. My impression is that the person was disciplined for that.

I think Finance said they were taking action to prevent that kind of thing from happening again. Then just last month, in spite of whatever actions were taken for what happened a year ago—and I think there were similar instances in previous years—we learned that 2,700 tax files went missing after an employee of the Department of Finance took them home, electronically or otherwise, and now they're gone.

This does not give us much confidence about how information is being handled and how people are being trained. What is being done about this, and why has there not been an improvement already?

[Filipe Dinis]

Mr. Chair, just for clarity, while I won't speak to specific cases, the individual was a CRA employee and not an employee of the Department of Finance.

Mr. Chair, I do want to state that the CRA has strict policies governing the security, physical assets, and the confidentiality of taxpayer information. We continuously evaluate and review our security policies and practices to ensure that taxpayer information is safe and secure. Our current CRA policy speaks to the fact that protected information cannot be copied onto any other media unless it's encrypted. However, in the particular case that the member references, there was information that was downloaded onto an unencrypted CD. I can confirm that, contrary to what was reported in the media, they were not complete tax files that were downloaded. There was information related to certain personal data but it was not 2,700 tax files.

We are, Mr. Chair, currently strengthening our policies and processes to put in place mechanisms to prevent this from recurring. We are reminding staff that this is key to our integrity. More importantly, we are putting measures in place to prevent the downloading of unencrypted emails. We are also working very closely, Mr. Chair, with the Office of the Privacy Commissioner to strengthen the triggers for our engagement with that office, and we're also working with them concretely to put in place a set of criteria to assess the risk when that occurs.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Regan.

We'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair, and I want to thank the witnesses for appearing here today.

I do want to take an opportunity to ask you to clarify something that's in the estimates. I note on page 32 at vote 1b, there is mention of a transfer of $115 million from the CRA's capital vote to the operating vote. Here, I know that most parliamentarians, when we look at estimates, quite often assume—and Canadians might assume as well—that estimates mean that we're asking for more money, that the public service is needing more money for different things. I understand in this case, with this $115 million, that it is not at all a request for additional money. So I would ask you to explain, please, and clarify what this transfer is doing.

Could you also explain where this transfer of money is coming from? That would be very much appreciated.

[Filipe Dinis]

Mr. Chair, first of all, I would like to confirm that this is not a request for incremental funding. That is indeed the case. The agency, up until about a year and a half to two years ago, had one operating vote, which was operating vote number 1; but in recognition of the need to be transparent in terms of our capital expenditures, we established a separate vote, vote 5, a capital vote, similar to what other departments and agencies have. As a result of that, we at that point in time estimated how much that capital should have been, and our estimate was that it should have been approximately $203 million.

Over time, we recognized that this was something new to the agency. We understood that we needed to refine that number moving forward, because it was a significant estimate. As a result of, I'll say, an overestimation of the capital portion that needs to be accounted for, from an accounting perspective, in large IT contracts, we are now bringing further refinement to what we believe our capital vote should be going forward.

This is an opportunity for us to move $115 million from our capital vote, where it should really not have been, to properly reflect it in our operating vote, in order for us to have sufficient funding to cover expenditures such as salaries and other operating expenditures. It is not an incremental request. It really is a technical realignment between, I'm going to say, votes.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good.

This government has been very vocal about the need to be transparent and the need to be fair and to make sure that Canadians understand exactly how their dollars are being spent. It seems to me that this is a very reasonable way of demonstrating transparency and fairness.

Would you say that's an accurate assessment of what you've done here, following basic accounting principles and being transparent so that Canadians can understand them?

[Filipe Dinis]

Mr. Chair, I would say that is exactly the intent of the creation of the capital vote, our vote 5b, to segregate our capital expenditures and facilitate the depreciation and the accounting aspects of our operations.

The aspect of transparency in our $4 billion budget is just as--and probably more--important. This allows parliamentarians and the public to have a clear understanding of how the CRA budget is established and how it's accounted for from an accounting perspective.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good. Thank you.

I'm very glad to hear your explanation so that everyone can understand how this actually makes the system better, but in future years do you think this kind of transfer will be used more frequently?

[Filipe Dinis]

Mr. Chair, our objective is to be able to make this kind of adjustment once and to be accountable for the projections that we're putting in place for both capital and operating expenditures. Our objective is to manage to these newly established budget levels and to be accountable for them exactly.

We expect this to be a one-time adjustment. However, going forward if there are other significant adjustments, we would come before the committee. But our objective is clear that we would be held to the current levels that we see after this adjustment.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good. Thank you.

[The Chair, Conservative, James Rajotte]

You have 10 seconds.

[Shelly Glover, Conservative, Saint Boniface, MB]

I want to thank my colleague for mentioning the need to inform Canadians about tax measures and tax-filing implementation in the discussions.

Thank you, Mr. Mai.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Glover.

We'll go to Monsieur Mai encore.

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

Quickly, we're talking about transparency. We're talking about informing the public. We're hearing there are funds for publicity.

Right now you know that there are allegations regarding corruption within the agency. Have there been any measures or has anything been done to inform the public that everything is all right? Have there been any measures within the agency to address that issue?

[Filipe Dinis]

Mr. Chair, first of all I'd like to take a moment to reaffirm the CRA's confidence in the integrity and professionalism of its employees. I believe that is key. Our success is in large part as a result of their exemplary conduct in carrying out our complex audit activities every day for Canadian taxpayers, in a manner that demonstrates integrity and professionalism. However, the agency recognizes the inherent risks associated with carrying out massive volumes of financial transactions. Accordingly we remain vigilant to uncover problems and continuously adapt to protect the tax and benefit systems. Controls are constantly being reinforced and strengthened to ensure the long-term integrity of our processes.

In regard to the allegations referred to, the appropriate measures have been taken, and we continue to cooperate with the relevant law enforcement agencies. We must not lose sight of the fact that the actions of a few in no way reflect the continued dedication and professionalism with which CRA's employees carry out their work. We are currently reviewing our audit systems and will be taking a number of important measures to improve the framework that guides the integrity of our workforce.

Mr. Chair, the CRA takes the integrity and fairness of the Canadian tax system very seriously and never loses sight of the fact that the confidence and trust that individuals and businesses have in the CRA forms the cornerstone of Canada's system of voluntary compliance and self-assessment.

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

I agree with you. I have total faith in the CRA and the people working there.

Can you explain to us what measures have been taken? You spoke about measures to be taken and those that have been taken. Can you expand on that, please?

[Filipe Dinis]

Mr. Chair, from a concrete perspective we have taken actions against those involved. As the committee may be aware, we have dismissed those who are involved. Secondly we are putting in place measures to strengthen our values and ethics framework. We are increasing and continuing to increase the competency our internal investigative capacity. We are committed to updating, monitoring, and modernizing the technology we use that enables the agency to detect some wrongdoing or breach of the CRA's code of conduct.

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

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mai.

Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much.

With respect to the supplementary fees you're requesting, I simply want to point out that the French version of your speech says $19.1 billion and not $19.1 million. So when I saw the French version, I jumped.

You told us earlier that this would not be used to hire new auditors. In response to Mr. Regan's question, you said that the Canada Revenue Agency currently has about 9,000 auditors.

I'd like to know how many of them audit personal income tax returns and how many audit corporate tax returns.

[Filipe Dinis]

Mr. Chair, out of the 9,000 or so, we have approximately 8,000 or so auditors who are accountable for the audit programs and are auditing the various files, etc. We have another—and this is an estimate—approximately 900 auditors who are assigned to what we call the enforcement and disclosure program. So within that category, we have two programs, one called the special enforcement program, and the other one the criminal investigations program. That's a rough distribution of the 9,000 auditors we have in the agency.

[The Chair, Conservative, James Rajotte]

You have about 20 seconds for a short question.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

If we're talking about all the corporate and personal tax returns, is there an internal division for that audit?

[Filipe Dinis]

There is one. Unfortunately, I don't have that information with me, but I can send it to the committee. There is a division between the auditors who are assigned to businesses and auditors who are assigned to individual taxpayers.

[The Chair, Conservative, James Rajotte]

If you have that information, you can provide it to the clerk.

Mr. Julian, we will have to move on. We can come back to that in the next round. Thank you.

We go to Mr. Adler, please.