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.
4 p.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Right, okay. I understand.
It was also mentioned earlier that the entities that are depositing the funds have to have a reasonable expectation of future liability. Who decides whether there is a reasonable expectation of future liability?
4 p.m.
Assistant Commissioner, Assessment and Benefit Services Branch, Canada Revenue Agency
In the administration of the advance deposits, we will take a look at the situation with the corporation and, under the enhanced process, we will determine what the bona fides are of the request and of the possibility of reassessment. Initially, we'll have accounting people involved. If we are not able to arrive at an agreement with the corporation at that level, we will then involve our senior audit staff to take a look at the filing of the corporation and determine whether there is a bona fide chance of reassessment and therefore a requirement for an advance deposit.
4 p.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
But you make the final decision, then, on the likelihood?
4 p.m.
Assistant Commissioner, Assessment and Benefit Services Branch, Canada Revenue Agency
That's right.
4 p.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Okay.
My next question is with regard to existing balances. How do you refund them? What is stopping you from refunding existing balances to corporations or entities that you decide do not have a reasonable expectation of future liability?
4 p.m.
Assistant Commissioner, Assessment and Benefit Services Branch, Canada Revenue Agency
What we're putting in place is, as I said, a two-step process. When we get an advance deposit now, there are enhanced routines that are followed. Before, we would accept advance deposits without certain information; now we take a look to make sure the identification is correct and to see if a tax year is attached to those advance deposits, which is an important indicator for us in terms of identifying the tax year the corporation may feel there may be some issues with down the road. We do that, and if the corporation will not provide us with that information, we will not accept the advance deposit.
Now, we have advance deposits that have already been accepted. Those advance deposits will form part of an annual routine process that we have from November to December, and that annual routine process will also be enhanced. We'll take a look at what's there; we'll then take a look at the underpinnings of the possibility of reassessment. We'll ensure that all the information we need is there. If it is, we will make a determination as to whether the advance deposit should be returned or not.
4 p.m.
Conservative
4 p.m.
Assistant Commissioner, Assessment and Benefit Services Branch, Canada Revenue Agency
In most cases we're talking about large corporations. We're talking about amounts probably in excess of $25 million. There is a large-value electronic transfer system available, and we would communicate with the company and transfer the funds.
4 p.m.
Liberal
The Chair Liberal Shawn Murphy
I have a quick question before we go to Ms. Crombie.
I have to agree with Mr. Lee here, and I'm going to put this to the Auditor General. I may be totally wrong, but it seems to me that the issue is the interest rate. The way the markets are now, it appears to me that the interest rate is too high, and as a result companies are using CRA as an investment bank. They're getting more money from CRA than they can get anywhere else in Canada in the short term. As a result, Canadian taxpayers lost about $30 million in each of the last three years, and it probably goes back over the last 20 years. Those findings were not contested by either the CRA or the Department of Finance. The public accounts committee has to accept the findings that were agreed upon, which are that we are losing $30 million a year.
The CRA is talking about an elaborate scheme whereby each account would be monitored. It seems to me to be a horrendous amount of work to monitor each advance payment to see if it is bona fide and to get into that argument before the assessment is adjudicated.
I really think it's the interest rate, and I don't think all this administrative talk will solve the problem at all until you can deal with the interest rate.
Auditor General, do you agree with my assessment?
4:05 p.m.
Auditor General of Canada, Office of the Auditor General of Canada
Chair, it's a little difficult for me to comment on the interest rate, because that is established in the income tax regulations, so it is law.
I would note, as I noted in my opening statement, that the Minister of National Revenue did write to the Minister of Finance in July, asking him to review these issues around the interest rate, because that's what Finance would have to look after. The CRA can do its part to try to minimize those deposits, but the question of the interest rate is a responsibility of Finance.
4:05 p.m.
Liberal
The Chair Liberal Shawn Murphy
I realize that it is the finance minister's decision.
Let me go back to you, Ms. Levonian. We heard evidence that the CRA minister wrote to the Minister of Finance in July to ask for a review. Has that review been done? Do you have anything to tell this committee as to what might have arisen from those deliberations and discussions?
4:05 p.m.
Assistant Deputy Minister, Tax Policy Branch, Department of Finance
What I can say is that we're definitely now aware of the issue and we're looking at the interest rate in the context of some of the considerations that I've laid out here. What we'll do next is provide advice to ministers, and I couldn't really bring that to the table here.
4:05 p.m.
Liberal
The Chair Liberal Shawn Murphy
In the meantime, taxpayers are losing $2.5 million a month. It's just wasted.
October 26th, 2009 / 4:05 p.m.
Conservative
4:05 p.m.
An hon. member
It's only a few million; it doesn't matter.
4:05 p.m.
Liberal
Bonnie Crombie Liberal Mississauga—Streetsville, ON
Thank you, Mr. Chair. Welcome to our guests.
It's written in a number of places that the same 50 corporations are accounting for two-thirds of these deposits. As we've all discussed, $4 billion is held each year at two points above your government's cost of borrowing, which amounts to $30 million.
Which 50 corporations are these? I'm sure you can't say, but which industries do they represent? Why are they always at risk? Why are they always reassessed? How is their risk being reassessed?
4:05 p.m.
Commissioner, Canada Revenue Agency
Mr. Chair, the honourable member is quite right; obviously we're not in a position to discuss any particular file, and as I mentioned, there can be any number of reasons for a corporation to have a reassessment--
4:05 p.m.
Liberal
Bonnie Crombie Liberal Mississauga—Streetsville, ON
Granted, but it says it's the same 50 each time.
4:05 p.m.
Commissioner, Canada Revenue Agency
Perhaps I could ask my colleague to elaborate a little further.
4:05 p.m.
Assistant Commissioner, Assessment and Benefit Services Branch, Canada Revenue Agency
The whole world of corporations is quite a bit different in terms of reassessment activity. There are a lot of transactions; many of them are extremely complicated and take place over a number of years. Therefore, a continuous stream of assessments and reassessments goes through these corporations. It's very dynamic, and lots of deposits and withdrawals are made.
4:05 p.m.
Liberal
Bonnie Crombie Liberal Mississauga—Streetsville, ON
Okay. Is there any bona fide concern that some of them are doing it for profit or for advantage?
4:05 p.m.
Commissioner, Canada Revenue Agency
As I said, Mr. Chair, based on the information that was available to us at the time, there is no evidence of corporations putting money on deposit for any reason other than to protect themselves. That having been said, we have developed a comprehensive action plan that strengthens and improves our administration of advance deposits in a number of ways, including the review of these accounts to determine the likelihood of a reassessment, whether the accounts should be adjusted, and whether a refund should be issued. We are confident that the enhanced framework will minimize the risk of unnecessary deposits being held.
