Evidence of meeting #59 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was change.
A recording is available from Parliament.
4:15 p.m.
NDP
Hoang Mai NDP Brossard—La Prairie, QC
I would just like to take a few moments to clarify, and to say that Ms. Nash's comments were correct. So just to be on the record, those comments were right.
Regarding the charitable organizations, I think the chair has mentioned that we don't want CRA to be political regarding charities, but what is happening in this bill is that we're giving the right to the minister. Yes, Mr. McCauley, you said that CRA will give advice and then the minister has to follow it. That's not how I read it. What I really hear is that it provides the Minister of National Revenue with the authority to suspend the tax receipt privileges of a registered charity if the charity devotes resources to political activities in excess of the limits set out in the Income Tax Act.
So, yes, the CRA will be monitoring that, and, yes, there's the argument of what is reasonable, and CRA will look at it. At the end of the day, it's the Minister of National Revenue who will make the decision.
4:15 p.m.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
I apologize if I was unclear.
The authority is delegated to officials within the agency. For example, revocations—even now, I don't see a number of them—are taken at the director general level. As I mentioned, we keep a very clear line between the minister's office on the political side and the decisions we take that are delegated to us through the tax system. I apologize if I didn't make that clear, but those authorities, decisions to revoke, are made within the agency.
4:15 p.m.
NDP
Hoang Mai NDP Brossard—La Prairie, QC
Once again, could you explain to me what this provision means? It states that it “provides the Minister of National Revenue with the authority to suspend the privileges, with respect to issuing tax receipts...” Is this new and what might the impact be?
4:15 p.m.
Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
With respect to the structure of the Income Tax Act, generally the way the Income Tax Act is drafted is that where an administrative action is required—for example, filing a return or even filing an election—the Income Tax Act won't say “file an election with the Canada Revenue Agency”. It will say “file an income tax return, or file an election with the minister”. Almost all administrative actions are undertaken by the minister, and then there's the specific provision in the Income Tax Act, which I believe is section 221, which provides for the delegation to the officials by the minister of those obligations in the Income Tax Act. Those delegations are done.... There's a very specific structure, which is done perhaps annually, I believe, and for various provisions of the act the CRA goes through and the minister approves. Those authorities or obligations are delegated to specific positions within the Canada Revenue Agency.
So Mr. McCauley is saying, with respect to suspensions or even revocations of charities, that there's been a delegation of authority, which is done on a systematic basis to officials within the Canada Revenue Agency, and having been given the delegated authority to do so, that's where the decision will be made.
4:20 p.m.
NDP
Hoang Mai NDP Brossard—La Prairie, QC
If it has already been delegated, as it was before, why are we now giving back that power to the minister? I'm not sure I follow it.
4:20 p.m.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
I think in this case it's because we're introducing the additional authority to suspend that was referenced a little earlier. We didn't have the authority to suspend before, so the new authority, which is to suspend for a year or more, is being put in place within the existing structure the minister has, and then as soon as the bill passes, assuming it passes, we have delegation instruments that the minister immediately signs that delegates that back to us.
4:20 p.m.
NDP
Hoang Mai NDP Brossard—La Prairie, QC
Would it be fair to say that the minister still has the power to revoke? The minister has the right to delegate, or has the right to use that power?
4:20 p.m.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
Technically, but given that we never provide any information or access that information to the minister's office, there wouldn't be anything for her to act on, which again is how we try to protect the integrity of the tax system.
4:20 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you.
Do I have a Conservative?
I'll go to Mr. Marston, please.
4:20 p.m.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
Thank you, Mr. Chair.
Mr. McCauley, I am satisfied with the integrity that we see from the people before us here today, and I'm not suggesting that the government lacks any faith in your integrity, because I think it's important.
One of the problems we've had that politicizes these hearings is the kind of rhetoric that occurs from time to time in the House, and of course one was quoted earlier today relative to environmentalists and people from outside the country and that kind of thing. Then following that event, when you get into a situation that we now find before us—a change—it's potentially significant, but something we don't believe had been asked for from your department. So with regard to the eligible foreign organizations and the reporting requirements, was that a request from your department? Was that a need you thought should be filled and suggested to the minister?
4:20 p.m.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
The normal process is that it is the Department of Finance that brings forward tax policy and other measures. A number of those emanate from the Department of Finance, and from time to time there are some that are suggested by us. This would have been part of that general discussion. I don't know if there is anything more to say than that, really.
4:20 p.m.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
Yes. You're not aware of anybody on the official side who made a request for this to be enacted?
4:20 p.m.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
I don't believe.... Again, that's part of the general discussion on advice and guidance to ministers. I think I'll leave it at that.
4:20 p.m.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
That's fine. I'm not trying to press you too far on this.
The reality of the situation is that whether either side of this room has a concern about it, there has been a certain amount of reaction within the public with regard to this particular issue because of those comments in the House. I think it's fair for us to delve into it in a reasonable fashion to find out where it came from and why, because it's got the taint of a potential situation where somebody in authority might push for something. If that's not the case, we certainly want to rule it out. We certainly also want to understand that in your case, as you've indicated, you have independence. If we happen to be the government or someone else is—God bless us, even if the Liberals come back, and I said God bless us, so I think we're safe—you'll still have the same integrity.
The thing here is, contrary to the view that we shouldn't necessarily dig into this, I think it is very important that we make clear the integrity of our officials and our departments. I want to thank you for being clear on that.
I'll go to a question that's a little simpler. There's a part of the changes to the demands for tax returns that talks about the fact that it now could be done online. Of course many things are happening online these days, so it's understandable. I'm concerned, because in the past would you not have sent a registered demand letter? I've had discussions with the parliamentary secretary about cases in the Hamilton area of people who were very neglectful and hadn't done their tax returns for a long time and how we could address that side of it. I guess the aspect of it is oftentimes people delay that first year and then they're nervous or frightened to get involved with the CRA after that.
If you're sending an e-mail, how do you confirm that the intended person has received it? Would you send a registered letter as well to the person who's the problem?
4:25 p.m.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
Yes. It's Canada Revenue Agency. It's page 5 of the document we have here. They're making a change to the notification. They're allowing for e-mail, as opposed to just by royal mail.
4:25 p.m.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
What we're hoping to do in the measure is to remove the absolute requirement for us to send it by registered mail. It would leave us with some discretion as to whether or not it's online. Maybe in some circumstances it would be in person; maybe in some circumstances it would be registered mail.
What we've looked at is that the current process isn't really as effective as one might think. I think when we were chatting in the Senate, when we looked at trying to create efficiencies, even now with registered mail, there isn't a requirement for the person to actually sign and receive it. What would have been the original concept of registered mail has been weakened over time. We looked at removing the absolute requirement, which we believe is certainly a waste of money at this point in time, and giving us more flexibility to choose the best way to follow up with people.
4:25 p.m.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
I'm sure you're trying to get the advantage of the situation. I guess I'm old school, because I believed that if I was sent a registered letter, I had to be the sole signatory for that letter. If that's not the case, then I understand.
I must be getting close to my time.
4:25 p.m.
Conservative
4:25 p.m.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
No, I'll let it go. That's as far as I'm going with this.
4:25 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you very much, Mr. Chair.
I want to go back to the changes made to the Governor General's compensation.
Reviewing the methodology around this, the government's assuming that he's earning at least $134,000. Of course he's earning other income that's not related to his position; that was clarified earlier. You're assuming in terms of the calculations we've made that he will pay the top marginal tax rate on all of his salary as Governor General, instead of a portion of the salary in each of the tax brackets, as Canadians would do.
Why did you calculate it that way? Why wouldn't you assume his taxes would be paid at different percentages based on different strata of income, based on thresholds of income within the tax system?
4:25 p.m.
Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
The way the tax system works is that different sources of income are combined such that your total income is taxed according to the rate schedule. So the Governor General has income that already takes him up to the top marginal rate, such that his existing sources of income are taxed through the rate schedule. Then it's the fact that his salary as Governor General would now become taxable, be included in his taxable income. Then by virtue of the fact that it would be added on to the top of his existing sources of other income, it would all be taxed at top marginal rates. It doesn't get taxed under the entirety of the rate schedule as a different source of income. It becomes all part of his own personal taxable income.