Finance Committee on Dec. 3rd, 2014

[Murray Rankin, NDP, Victoria, BC]

That makes sense.

Now, here is an issue that came up last week in the House. We've learned of yet another massive privacy breach, and by way of preamble I want to put this question in context.

Apparently, in 2011 it was revealed that CRA employees had snooped on personal files, accessing more than 37,000 emails and 800 documents. Four years ago a CRA employee lost a laptop with 2,700 Canadians' tax information. Last year the Privacy Commissioner flagged as a serious problem the weak security measures at CRA. The Heartbleed virus was last week's privacy breach.

What do you consider to be the root cause of these serious problems?

[Roch Huppé]

First of all, we take protection of information very seriously, obviously. We're a very large organization; the volume is extremely high. We have in place control frameworks to make sure that we protect information and that only those people who should have access to it do. That said, these controls have picked up instances of employees accessing information they should not have accessed.

As we increase our controls and have better monitoring of the different accesses, we sometimes fall upon somewhat more cases. In the last year, for example, we're dealing with 75 cases of employees who have accessed information that they should not have accessed. Investigations have been launched in all of these cases.

[Murray Rankin, NDP, Victoria, BC]

The Privacy Commissioner last year pointed out that there had been 2,983 data breaches with 2,249 individuals impacted, with only 23 of those reported to the Privacy Commissioner involving 470 people impacted.

That's 1% of the cases reported to the Privacy Commissioner. Doesn't that give you concern, that the Privacy Commissioner is getting so little involved in this issue?

[Roch Huppé]

In our current action plan, as a result of that audit, I can assure you that we have put in place some processes to ensure that we report these privacy breaches in a timely fashion to the Privacy Commissioner.

[The Chair, Conservative, James Rajotte]

This will be a last, brief question.

[Murray Rankin, NDP, Victoria, BC]

Mr. Stewart, how much of the $13.4 million of additional money to audit political activities of charities has been spent to date?

[Rick Stewart]

I'll find that answer, so as to not take up your time. I'll come back to it.

[The Chair, Conservative, James Rajotte]

All right, we'll come back to that. You can submit all that information to the clerk, and we'll ensure that members get it.

Thank you.

We'll go to Mr. Adler, please, for five minutes.

[Mark Adler, Conservative, York Centre, ON]

Thank you very much, Chair, and thank you, officials, for being here this afternoon.

I want to talk about the underground economy. As you know, this is business activity that goes either unreported or under-reported. I want to ask you first of all about what measures CRA is taking to combat the underground economy.

[Ted Gallivan]

I think I'd start with specialized teams, which actually got ahead of our recently released strategy. It was implemented in 2012-13.

These are 20 sites where we have specialized teams with specialized experts who are more on the investigative side of our workforce. They did 8,000 audits last fiscal year and 83% of the time they found a reassessment and they raised $718 million in new revenue.

We're also working with outreach. We've implemented something called the liaison officer initiative to be visible and proactively assist businesses. We've also started to focus on the supply side, as I mentioned in a prior response. We are partnering with other organizations with something like the “Get it in Writing!” campaign, for example, that we have with the Canadian Home Builders' Association, that warns Canadians about the perils of participating in the underground economy. We're trying to inform consumers that if you hire a contractor to build a deck it's not just that you're saving a bit of money, but as somebody who engages in the underground economy may not respect standards, perhaps you are putting the lives of your children at risk. We're trying to paint that picture for Canadian consumers.

[Mark Adler, Conservative, York Centre, ON]

So there's really an education process that's going along with this, is there not?

[Ted Gallivan]

That's one of the three pillars in our recently enhanced UE strategy that was released two weeks ago. We definitely want to begin to affect the demand side with consumers, and also partner with other organizations to extend our reach and get the message out.

[Mark Adler, Conservative, York Centre, ON]

I love what you've got on your website on the UE where it says, “It robs the tax base of needed funds for schools, hospitals, and more.” And then in big bold letters, there's “Don't do it!”

I also want to talk to you about electronic suppression of sales or zapper software. How much of a problem is that in Canada and what's CRA doing to combat that?

[Ted Gallivan]

It's a prevalent problem.

The Government of Quebec went forward with a receipting regime, which basically asked businesses to install extra equipment. There was government expense and a lot of red tape. We chose a different path, which is a more significant sanction if it's detected.

We led off with communication and we've been seeking to educate and communicate to the business community that we have these new sanctions that are available. Moving forward from September 1 in new audits, we will be imposing these increased sanctions. So the agency's strategy, rather than penalizing or putting a burden on all business, we're just going to put an extra penalty or sanction on those businesses that are found to have these devices in their businesses.

[Mark Adler, Conservative, York Centre, ON]

I understand also that the minister recently announced the establishment of the economic advisory committee on the underground economy. This committee comprises industry stakeholders and business leaders. Can you talk a bit about that? It's the first of its kind. I know it's fairly recent, but can you talk about the efficacy of it?

[Ted Gallivan]

There are a few different objectives there. The first is, again, to collaborate with parties outside the CRA to help them push people in the same direction. I think of cross-communication as an example.

The second is to better understand the behaviours and motivations of people participating in the underground economy so that we can leverage those. In other words, we don't want to continuously increase the number of auditors and audit more and more businesses. Rather, we want to seek to influence people's behaviour, and by understanding the motivations and drivers we can better do that.

Third, in contemplating new measures we want to be careful that we don't impose an undue burden on businesses, particularly small businesses. We think that by talking to experts we can be better informed.

Finally I would just add, nudge theory has gained a lot of prominence in the U.K., and in Canada now. We're starting to build specialized units around nudge, so we have academics participating in the committee, kind of giving us the latest science around modifying people's behaviours.

[Mark Adler, Conservative, York Centre, ON]

It was really important that you mentioned the fact that it's not just a matter of revenue loss to the treasury, it's also a matter of standards that aren't being met.

I know some people have told me that they had work done that they paid cash for and didn't report it and their work was shoddy and the builders were using materials that weren't up to standard and counterfeit materials and all of that, so I think it's really important that you mention that and that people are aware. It's not just a matter of not paying taxes and all the consequences that go along with that, but it's also a matter of people not using the right standards, aren't up to code, and all of that. I'm glad you mentioned that.

[The Chair, Conservative, James Rajotte]

A brief response, please....

[Ted Gallivan]

I think that's consistent with our approach that we don't just want to audit, but we want to deter.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Adler.

We'll go to Mr. Cullen, please.

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

Thank you.

Thank you to our officials. Don't take the increased heat in the room personally. We didn't do this just because CRA was coming today. It's some fluke of the environmental systems.

What is the current outstanding balance in undisputed and unpaid taxes in Canada? Do we have a current figure for that?

[Ted Gallivan]

It would be in the range of $41 billion. I will correct it and give you the specific number.

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

Sure, but it's in the $40 billion to $41 billion range.

I'm a bit curious about that simply because the Auditor General, in the 2012 report, set it at about $29 billion. Am I referencing the same number or is there something different between the two?

[Roch Huppé]

I think the $29 billion you're referencing is the receivables that we actually have access to. This number is approximately $33 billion right now.

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

So it's gone from $33 billion in 2012.... The $41 billion is a larger number.