Public Accounts Committee on Oct. 26th, 2009

[David Christopherson, NDP, Hamilton Centre, ON]

I'm still not convinced, but that's neither here nor there.

I do want to ask one component question. I realize it's ADM, so take the promotion and run with it. It's when they under-promote you.... If anybody in uniform walks in, you're not sure if they're a general. That's the way it works in politics.

I'm having trouble understanding why there would be a concern that they get enough money back, in lieu of what they could have done with that money, when they're the ones who voluntarily put it there in the first place.

[Louise Levonian]

We've constructed a situation where if they don't give us the right amount of tax, we are going to charge them interest that's non-deductible and there will be penalties. In this whole thing it's a balance of trying to treat the taxpayer fairly. If our assessments show they did pay too much tax, it seems fair and reasonable that we should pay them either the government's borrowing rate, the rate they would have borrowed at, or what they would have earned as a rate of return. There should be some kind of fair compensation if the government has kept a taxpayer's money that it shouldn't have kept.

[David Christopherson, NDP, Hamilton Centre, ON]

But they volunteer it.

[Louise Levonian]

But they don't know exactly how much could be owed to them at the end of the day. These are large corporations.

[David Christopherson, NDP, Hamilton Centre, ON]

Is there any worry of collusion?

Thank you.

[The Chair, Liberal, Shawn Murphy]

I have just one point before we close, maybe to Ms. Fraser or Ms. Lizotte-MacPherson. You're saying there was a $30 million loss over the last three years, but it would probably be $30 million over the last 19 years. Is that a fair assumption?

[Sheila Fraser]

We certainly haven't calculated that. I presume there would have been deposits during those years, but we didn't go back to see what the level of those deposits would have been.

[Linda Lizotte-MacPherson]

CRA's position is that we did not waste taxpayers' money. Based on the information that was available to us at the time, there was insufficient evidence to conclude that corporations were putting on-account deposits for anything other than reassessments they expected in the future.

[David Christopherson, NDP, Hamilton Centre, ON]

I have a point of order.

We've gone through this whole thing and now the commissioner is telling us there's no problem?

[The Chair, Liberal, Shawn Murphy]

We have to go.

Madam Commissioner, the meeting is pretty well over, but I'm going to read the last sentence of the main points.

We conservatively estimate, based on a limited number of accounts, that the difference between the government’s borrowing rate and the interest rates on these deposits represents at least $30 million in unnecessary interest costs for each of the past three years.

The CRA agreed with that statement. If they didn't agree, they should have challenged it beforehand. We don't arbitrate the facts. We assume that the facts are determined before the matter comes to the committee, so we'll go to our deliberations assuming that fact is correct. That's all I can say.

Do you have a point, Madam Fraser?

[Sheila Fraser]

I hate to disagree with the commissioner--and she may have been improperly briefed--but in paragraph 4.20 we say:

When it prepared its year-end audited financial statements for 2007 and 2008, the Agency identified some cases in which corporate taxpayers had made an advance deposit because an ongoing audit presented a bona fide risk of reassessment. In most other cases, the Agency concluded that the amount of funds on deposit significantly exceeded its estimates of additional tax that might be payable under future reassessments.

The agency did not indicate any disagreement with the facts. This is their assessment and they agreed with that statement.

[The Chair, Liberal, Shawn Murphy]

I'll give you a last comment, Madame Lizotte-MacPherson. But the committee has no option but to start our deliberations based on the assumption that statement is factually correct.

[Linda Lizotte-MacPherson]

On a point of clarification, the official was referring to accounting principles that require the amounts on deposit to be recorded as a liability on the financial statements until the reassessment of taxes owing is complete.

As I indicated, I think we agree with the recommendations of the Auditor General, and we have put in place a robust action plan to deal with those findings and recommendations.

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

I'll now ask the parties for any concluding comments. I'll start with Ms. Fraser and then go to Madame Lizotte-MacPherson.

[Sheila Fraser]

I'd like to thank the committee for its interest in this report. I think the issue is a fairly straightforward one. The committee may wish to ensure follow-up by asking for the amounts on deposit at the end of the next fiscal year.

Thank you, Chair.

[The Chair, Liberal, Shawn Murphy]

Madame Lizotte-MacPherson, do you have any closing comments?

[Linda Lizotte-MacPherson]

I would like to thank the committee for having us here this afternoon. We have developed a robust administrative policy on managing advance deposits and are confident that the enhanced framework will reduce unnecessary interest costs.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Okay. That word “robust” has been used a lot at this hearing.

Ms. Levonian, do you have any final comments?

[Louise Levonian]

I want to thank the committee and the chair for allowing us the time to appear on this issue.

[The Chair, Liberal, Shawn Murphy]

I want to thank everyone for being here today. This is a very interesting issue, and the committee will certainly be writing a report.

[Proceedings continue in camera]