Finance Committee on May 8th, 2014

[The Chair, Conservative, James Rajotte]

Okay, thank you.

We'll go now to Mr. Allen, for seven minutes, please.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair.

Thank you to our witnesses for being here.

It's probably no surprise that I'm going to start with Ms. Presseault.

Thank you for your kind words, although I know my colleagues are going to remind me of this probably for quite some time after. But I do just want to save the chair from his purgatory, though. We want to do that.

A few questions.... We talked about the unlegislated tax measures. Last week, in the committee meeting, I asked Mr. Cook from the finance department a few questions. He mentioned that the Department of Finance keeps a public listing on its website of draft legislation that has been released for comment or provided to the public. I understand that.

Are you aware of any inventory that's kept out there of unlegislated tax measures that the public would have access to?

[Carole Presseault]

Thank you for your question.

I did look at the transcript from last week's committee and there is no inventory. There is not a list of legislation that's out there for public comment, although the legislation that is out for public comment is available on the website. But there's no list of unlegislated tax measures that have been announced in a budget but not been implemented.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay.

I also asked him about the timelines. Based on the provision in the wording in the legislation, one thing that was good about it is that when you compare it to my bill, it actually brings it up to roughly 18 months before, so it's a good thing. The first report that would be coming to the House of Commons would be in October of this year, 2014. I asked him what happens after 2014. My presumption is that with an election in October of 2015 there would be a delay in some reporting. Then, based on the wording of that government's initiative, when would we see reporting? One of my concerns would be whether we would see regular reporting as a case where, for example, if there was a minority government elected, we might not see a report during the mandate of that minority government.

Can you talk about the timeline as to when we would see reports?

[Carole Presseault]

Thank you.

When we saw clause 31 of Bill C-31, we had some concerns around the timelines, and we worked out a table. With the committee's patience, I'll walk you through it.

In June 2013, we had Bill C-48, which removed that considerable backlog. Sometime this year, subject to parliamentary approval, Bill C-31 would be published, and then in October this year, we'd have a report covering the fiscal year 2012-13. That's what it would do. That's what this bill does.

October 31, 2015, presumably will be right after an election. There will be no list, no table. In October 2016 there would be no report. So the earliest we would have the next report would be 2017, covering that period since the writ was dropped.

Basically, over the next three years, you have a report covering 2012-13, and a report covering the period up to March 31, 2016, which you'll have only in 2017. I'm sorry, this is just the way that we worked through the dates.

The report that Parliament will get in October 31, 2017, will be for up to March 31, 2016, but will not cover the period before the writ was dropped. That's where our major challenge is with that. We've called it cumulative

for lack of a better word.

That's the word we've used. The problems that were identified by the Auditor General, the former Auditor General previously, was this issue that we're not able to pinpoint the backlog.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

So on that basis, the last technical tax bill we did was 12 years, and it had 900-and-some pages, 983 or whatnot. In the absence of trying to get a regular reporting mechanism, which I think we all want here, these things will, I think, grow quite exponentially over the years. One of the comments that he made the other day identified 400 technical amendments, of which 250 were outstanding comfort letters. They've gotten that down to just 10 outstanding, but it seems to me there's still a backlog out there.

Is it the view of CGA that we could see this exponentially grow over a period of elections?

[Carole Presseault]

That's the tendency. It is what it has....

Ideally, in a perfect world, we would want an annual tax amendment bill to be tabled alongside the budget implementation act. That would be the discipline that we would be aiming for, to have it on an annual basis. But that doesn't seem likely, or even possible.

This is a good interim measure to shine a light on the problem and to understand what the backlog is. Sometimes there are real reasons for a backlog, such as lack of consensus, which is why we support the idea that the report tabled by the minister would be referred to a parliamentary committee to try to sort out some of the challenges prior to formal legislation coming forward.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Can you comment on the challenges for small and medium-sized enterprises and others with respect to having a whole bunch of these comfort letters out there, and the challenges to the ongoing business on a yearly basis?

[Carole Presseault]

I think the main challenge is around uncertainty. Our tax system resides on a retroactivity aspect. With retroactivity to 12 years, one major problem that we identified when we came forward on Bill C-48 was the fact that taxpayers lose the right to appeal if the measure has not been legislated, yet they still had to conform to the measure. That's the kind of legislative uncertainty that we need to eliminate from the system.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

In your comment regarding technical amendments, you are referring to a cumulative amendment type of thing. That's what you're referring to. If the technical tax amendments you were referring to in your speaking notes were actually cumulative...so make it that the report is everything, regardless of the government.

[Carole Presseault]

Yes.

We would have language to suggest it is removing a few words out of that clause. That would make it so that the minister would not be restricted and would be tabling the retrospective list of technical tax amendments. It's that growing list from one Parliament to another, or from one fiscal year to another.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Allen.

We'll go to Mr. Cullen, please, for seven minutes.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you, Chair.

I want to continue on in this vein for just a moment with Madam Presseault.

Mr. Allen's bill is very interesting to us, just in terms of the discipline of government that you talked about. You introduce a bunch of tax initiatives, but the follow-through....

Can you explain for me, in perhaps layperson's terms, the uncertainty for small and medium-sized businesses that your members deal with? What are the impacts of that uncertainty for small and medium-sized business in Canada, with all of these unlegislated tax measures that are out there and existing but that haven't been clarified?

[Carole Presseault]

I think when you look at the total cost of compliance of the tax system, this is an incredible...[Technical difficulty--Editor]...especially on small to medium-sized businesses. I wrote down a magic number here around the total cost of compliance. Only on the personal side, it is between $5 billion and $6 billion at the end of the year.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

That's for personal tax compliance; you're not talking about business tax compliance.

[Carole Presseault]

That's only for personal income tax. I think the challenge we have from the small and medium-sized business is that the reliance....

I'm sorry I'm having some trouble with my microphone.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

It's things that the CRA doesn't want to hear; they have power over our microphones. It's incredible that they can do that. They are out there.

[Voices]

Oh, oh!

[Carole Presseault]

Usually the translators find that I speak very fast, so they may be chipping it off to slow it down a little bit.

Essentially it is about the cost of compliance and the reliance on professionals to help them comply with the tax system. It's the uncertainty, and it just adds to the burden.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

That adds to that real cost burden. Governments like to talk a lot about the burdens on business in Canada, with general attention, fixation, on the tax level, what the tax level is for small- and medium-sized businesses and what that impacts on business decisions.

Are you aware of any estimates from the federal government as to the tax compliance costs for small and medium-sized businesses in Canada? Has your organization or the federal government done any kind of assessment of what that figure currently is?

[Carole Presseault]

We've not done that assessment, and I don't believe there's a number out there. We can find out for you and get back to you. I know the Fraser Institute has done some work on the personal side but not as much on the business side. I don't think there's a number out there.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

This could be an interesting thing for this committee to explore at some future date.

Having run a small business myself, you start to realize that when you hand it over to your accountant the costs aren't always the costs, depending on the complexity of what you're asking to do.

Do we have a term for the extra...? I'm just looking through this particular....

I think I should comment on process, for our witnesses. Some of you have been at committees before.

This bill is over 330 pages long. It has 30 separate parts. We're going through parts 1 to 4 right now, in an hour and a half. As to any pretense that this bill is getting proper scrutiny, I think you should remove yourselves of that idea. It's very difficult, I would suggest, for all committee members on both sides to actually have decent scrutiny over the implications of what is proposed in such large a piece. So much is put into these omnibus bills. There are measures, like for yourself, Mr. Blackmore, that are affecting some Canadians in search and rescue, other measures that increase the complexity of the tax code, and other measures around whistle-blowers.

I'd like to spend some time here, Mr. Eljarrat.

We have two distinct scenarios in which we're imagining someone coming forward and saying that either someone is cheating on their taxes—and this would be someone in your profession, someone from Madame Presseault's group—or somebody maybe is suspected of contributing to a terrorist organization. Are they distinct within the law? Forgive me, but I'm not familiar with your world. I'm trying to understand. Are those viewed differently by the federal government, or are those two scenarios accepted and considered in the same breath when dealing with the tax code?

[Stéphane Eljarrat]

I think a distinction has to be made here. As you mentioned, we in certain questions addressed the whistle-blower program. Within the whistle-blower program, there's a new initiative from the government that deals with offshore taxes. We were discussing the different difficulties that ensue from the fact that there are not sufficient rules to protect the confidentiality of the person providing the information. That's one thing.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

On that, the CRA says, we will protect your confidentiality, unless we can't.