Finance Committee on Dec. 3rd, 2014

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

How many years do you figure it's going to take to round this out? Will it be five years before you meet all the objectives?

[Rick Stewart]

I have the number of years.

Let me clarify. If I said $15 million, I believe I misspoke. If I might be permitted to correct myself, it's $5.8 million over the period 2014-15 to 2018-19.

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

Okay.

[Rick Stewart]

The bulk of those resource requirements are in 2014-15, because we're setting up the front-end system to be able to receive and transmit the information. Then there are some smaller amounts on an ongoing basis in those outer years to manage the ongoing vetting and assure ourselves that the information is of good quality.

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

Okay. Basically it's $2.4 million in 2014-15 and then another $3 million or so spread out over the next four years.

[Roch Huppé]

Absolutely. This is what was officially announced as new funding for the CRA to move on this.

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

Okay, that's helpful.

Also, I'd like to ask you, as we start getting into more and more intergovernmental agreements and tax exchange agreements, what the impact on the agency is, as we sign more of these. Presumably there would have to be dollars spent to meet the objectives of these intergovernmental agreements.

Do we have a history of what it generally takes, from the standpoint of the CRA, to meet those objectives and of what investments are made in IT systems to meet the objectives of those agreements?

[Ted Gallivan]

I think the IT investments are before the committee today. Those are the amounts, and then we use that to better target our audit efforts. Then we reallocate our existing resources, the 6,000 auditors I told you about earlier. So with the treaties, we have 91 treaties enforced today. We have roughly 20 TIEAs, so we have a broad network of international agreements that give us better data that lead to results like in the aggressive tax planning area. Last fiscal year, we assessed $1.7 billion. So there is a clear track record of strong financial results coming from these kinds of investments, which better directs the 6,000 auditors I told you about earlier.

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

Okay. That's helpful because the tax information exchange agreements and the intergovernmental agreements that we do have and the systems implementations that we do and the upgrades actually help you focus those auditors. In some ways, it probably saves them a lot of time as well. Is that true?

[Ted Gallivan]

That's correct. It also saves us from knocking on the doors of taxpayers who are otherwise compliant that we shouldn't be knocking on.

Just a clarification though, FATCA isn't going to be in...it's not necessarily analogous in the sense that....

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

I understand.

Carrying on to that now is the online filing. I would just like to understand a little bit as you're going through your multi-year upgrade to your processing systems, how those upgrades helped with respect to managing the online filing process. How scalable are your systems when we make changes or as we have more filers come online and that type of thing? Can you talk about the success of online filing and the percentages we're now seeing and the scalability of the systems to handle more?

[Ted Gallivan]

Absolutely.

As I mentioned in an earlier response, we're well over 70% in online filing for most types of returns. Those permitted certain efficiencies to the agency, but also efficiencies to taxpayers who receive their refunds in a very short timeframe. It also weeds out errors. The electronic filing process also allows errors to be identified right at the outset and taxpayers to kind of self-correct.

Increased IT also allows us to move into apps. The agency recently launched its first mobile app. We're also developing mobile-friendly applications. So these IT investments allow us to move out of the old bricks and mortar mainframe era to an environment where taxpayers can file their tax returns over their phone and over their mobile device.

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

I'm just following up on that. How is that linked with the tax preparer program that this year CRA's actually implementing? You know, you hear some of the small tax preparers having to pay and register for this program a little bit of consternation about that, but given the amount of changes that CRA is going through, system changes, online filing, and staying up to date, how do those two things link together?

[Ted Gallivan]

I think it goes back to the point raised by the other member regarding voluntary compliance. Our tax regime works through voluntary compliance with the collaboration of a lot of key stakeholders including the tax preparer community. We have begun discussions with the tax professionals around the registration of certain tax preparers, which they see as a welcome sign because, I'll use the word, “legitimate” tax preparers definitely want the seal of approval from the CRA in the sense that they're part of the club and are recognized as these valued stakeholders. I think Canadians also want that assurance. So we've been working with the tax professionals to evolve a regime where that would be recognized through formal registration with the CRA.

[The Chair, Conservative, James Rajotte]

You have about 30 seconds, Mr. Allen.

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

Okay.

Last quick question, the $2.6 million for tax measures and implementation to lower the burden on charities, can you talk about one or two major burdens that you're reducing for charities?

[Rick Stewart]

I think the biggest advantage or the biggest part of those moneys is used to create an electronic application and annual reporting system for charities. Currently their only ability is to file this to us in paper format, which is cumbersome and frankly old world.

The moneys that are being sought this year are the first-year funds to start putting in place the IT system that will allow for that electronic interface and exchange, which should significantly reduce the burden on charities to actually file and meet those compliance obligations.

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

Thank you very much.

Thank you, Chair.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Allen.

We'll go to Mr. Rankin, and we'll do five-minute rounds, colleagues, from now on.

[Murray Rankin, NDP, Victoria, BC]

Thanks, Chair.

Thank you to the witnesses.

In the departmental performance reviews that were released a few weeks ago, it was revealed that the CRA drastically missed its targets, 56% versus 90%, on the number of full-scale investigations that are referred to the director of public prosecutions.

I wonder if you could explain why the targets aren't being met.

[Ted Gallivan]

As you may be aware, in 2012 we started a transformation of our criminal investigations directorate function. We made two major changes, one being centralization into six sites to be co-located with the RCMP and the public prosecutor, and the second being upgrading the classification of the employees.

Through that transition we haven't fully utilized all of the FTEs, because we've had delays in staffing those positions, so this is a byproduct of working through that transition, which we think will leave us at the end with a stronger criminal investigations function that's better focused on the worst offenders.

[Murray Rankin, NDP, Victoria, BC]

Thank you. That makes sense.

Turning to the issue of auditors—I'm talking now of senior auditors—an order paper question that we got a response to last year showed that in the international audit program and in the aggressive tax planning program there had been a significant decline from 2008-09 to the present in the number of senior auditors. In fact, information I have received says that 70 such senior positions were eliminated, representing more than a thousand years of specialized expertise, with 50 senior people actually losing their jobs.

Could you comment on that?

[Ted Gallivan]

Again for clarity, we haven't reduced the number of auditors. We have made a number of changes in terms of specialization, structure, and organizational reporting relationships that sometimes give rise to these misconceptions.

I don't have the specific numbers you've quoted in front of me, but I would be happy to provide a specific response to the question.

[Murray Rankin, NDP, Victoria, BC]

This is about senior people. I understand the number of total auditors, young people, but I'm talking about thousands of years of corporate expertise going after some of the most complicated tax avoidance schemes. That expertise has been lost, according to the information we've had.

[Ted Gallivan]

We work very hard to retain those people and have actually increased the grades and levels. Generally the trend has been upwards, an increase, and we very much recognize the importance of having the right people—skilled, trained people.