Evidence of meeting #35 for Public Accounts in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was corporations.
A recording is available from Parliament.
3:45 p.m.
Liberal
Derek Lee Liberal Scarborough—Rouge River, ON
Not if she keeps going down the road that we've already been down.
3:45 p.m.
Assistant Deputy Minister, Tax Policy Branch, Department of Finance
Let me try a different tack. The rate is set to be fair to taxpayers. That has to take into consideration not just the government's borrowing rate, but also how much it would cost the taxpayers to borrow it themselves, or even what the rate of return might have been had they been allowed to have those funds in their possession. It's a balance between making sure we're fair to the taxpayer and making sure we're collecting the right amount of tax at the end of the day.
If the administration is reviewed carefully and those deposits that should not be on the account are paid back, then there is no payment provided to the taxpayer that shouldn't be paid to the taxpayer. We're just trying to balance fairness to the taxpayer against collections for the government.
3:45 p.m.
Liberal
Derek Lee Liberal Scarborough—Rouge River, ON
You still, Ms. Levonian, have not told me why it is 5% to 7%. If there's no deposit, of course there's no interest payable. Why is it 5% to 7%?
October 26th, 2009 / 3:45 p.m.
Brian Ernewein General Director, Tax Policy Branch, Department of Finance
If I may, first of all, it's not currently 5% to 7%. As one of the opening sets of remarks said, it's set at the treasury bill rate, rounded up to the next point plus two. Currently the treasury bill rate is, I believe, less than 1%, so currently the interest on overpayments is 3%. It has been 5% to 7%, and it's been higher in the past, reflecting the treasury bill rate of the past.
It's set by law. Parliament enacted a law in 1989 providing this rate.
3:45 p.m.
Liberal
The Chair Liberal Shawn Murphy
Okay. Thank you, Mr. Lee.
Madame Faille, vous disposez de cinq minutes.
3:45 p.m.
Bloc
Meili Faille Bloc Vaudreuil—Soulanges, QC
Thank you, Mr. Chair.
My question is for the officials from the Department of Finance.
In the 2007-2008 Report on Plans and Priorities, you identified this problem. You also addressed the steps to take in order to solve it. When did the problem first come to light?
3:45 p.m.
Assistant Deputy Minister, Tax Policy Branch, Department of Finance
For us....
3:45 p.m.
Bloc
3:45 p.m.
Assistant Deputy Minister, Tax Policy Branch, Department of Finance
It was when the Auditor General began to audit the process.
3:50 p.m.
Bloc
3:50 p.m.
Assistant Deputy Minister, Tax Policy Branch, Department of Finance
No, we did not know there was a problem. We knew that people could make advance deposits to the Canada Revenue Agency, but we did not know that those deposits were too large.
3:50 p.m.
Bloc
Meili Faille Bloc Vaudreuil—Soulanges, QC
I want to ask the officials from the Canada Revenue Agency the same thing.
3:50 p.m.
Commissioner, Canada Revenue Agency
We review advance deposits on an annual basis, and the CRA has long recognized the importance of managing these deposits--
3:50 p.m.
Bloc
Meili Faille Bloc Vaudreuil—Soulanges, QC
What year was that? When did you learn there was a problem?
3:50 p.m.
Commissioner, Canada Revenue Agency
The agency has had this practice of reviewing the accounts in place since 1991. Based on the information that was available at the time, there was insufficient evidence to conclude that there was any problem or that corporate taxpayers were putting deposits in place for any reason other than to protect themselves against future reassessments.
3:50 p.m.
Bloc
Meili Faille Bloc Vaudreuil—Soulanges, QC
Thank you. So this has been going on since 1991. I know that the Auditor General indicated the figure for a few years, but how much has this cost taxpayers in total since 1991?
3:50 p.m.
Commissioner, Canada Revenue Agency
I do not have that information, but as an example, every year the department does reassessments, and in fiscal years 2008 and 2009 respectively, we completed reassessments of $3.5 billion and $4.6 billion, and we had $4 billion on deposit.
3:50 p.m.
Bloc
Meili Faille Bloc Vaudreuil—Soulanges, QC
So you did not notify the Department of Finance before the Auditor General's audit.
3:50 p.m.
Commissioner, Canada Revenue Agency
The Department of Finance was aware of the practice we had in place, but as I said, from our perspective there was insufficient evidence to conclude that corporations were doing anything other than keeping deposits with us to protect themselves against future reassessment. From that perspective, there was no need to inform the Department of Finance.
3:50 p.m.
Bloc
Meili Faille Bloc Vaudreuil—Soulanges, QC
You waited until it came out in an audit before taking any real steps to solve the problem.
Ms. Levonian, did those steps include assessing other administrations that limit the amount of interest payable?
3:50 p.m.
Assistant Deputy Minister, Tax Policy Branch, Department of Finance
The Department of Finance is currently reviewing the rate to determine whether it should be changed. It is important to determine whether the new measures to be put in place by the Canada Revenue Agency will be enough to ensure that the amounts deposited are appropriate.
3:50 p.m.
Assistant Deputy Minister, Tax Policy Branch, Department of Finance
We are in the process of determining whether the rate is appropriate.
3:50 p.m.
Liberal