Public Accounts Committee on March 23rd, 2010

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Do you have a joint document indicating what your priorities are and the anticipated revenue?

[Brian Ernewein]

I think it's important to note that these are proposed legislative changes. They are views presented as a list of possible technical changes prepared by the officers and the chiefs and generally the tax legislation division. I have not vetted them, nor has the assistant deputy minister, the deputy minister, or the minister, so they have not been approved by the government for release. It's only when we prepare such a document of proposed legislative changes, take it to the minister, and seek his or her approval of those changes that they're amenable to release by the government. Before then, they're essentially legislative proposals that probably represent cabinet confidences. They presumably do.

[The Chair, Liberal, Shawn Murphy]

Thank you, Madam Faille.

Go ahead, Mr. Christopherson, for seven minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much, Chair.

If I can, I'd rather make an issue of this now. I'd just ask that we review in our steering committee your immediate ruling about banking the two minutes. That's new; we've never seen it before. I don't want to interrupt this proceeding, but I would like to review that ruling by you, Chair. We'll take that up later.

Thank you all very much for attending today. We start off a new session with less than a huge bang, but it's interesting nonetheless. I know I didn't vote for this subject to come up. I was trying to figure out who did. I think it must have been the government. There are other things that I thought were of greater interest.

However, I'm curious, of course, about how we got into this situation. The Auditor General's report on page 2 states that:

Although the government has said that an annual technical bill of routine housekeeping amendments to the Act is desirable, this has not happened. As a result, the Department of Finance Canada has a backlog of at least 400 technical amendments that have not been enacted, including 250 “comfort letters” dating back to 1998, recommending changes that have not been legislated.

I'm curious. When things are running as they should, what would the process be for this annual review? I just heard a little bit of it, this gathering of things. Ultimately what I'm looking for is, obviously, to know where the breakdown happened. Where did the system not work the way it should?

You mention, sir, that there is a gathering of the issues by front line supervisors, and then it goes to the next step; it needs to go to the next step before it has any reality to it. So why wasn't this happening? Where did things break down?

[Brian Ernewein]

I'm not certain I take your point that there was a breakdown. I certainly recognize that it's been a long while since there's been a package of technical amendments implemented, but it's important to review the history of this.

We have said or acknowledged that it would be desirable to have a package of technical amendments issued annually. I think that was said at a time before the comfort letters themselves were functionally being published. For the past several years they have been published by the commercial tax services within a month of two of their issuance by us. So communication of the contents of the comfort letters is less of an issue than it was at that time.

That doesn't take away from the point that it would be desirable to issue this draft legislation and proposed amendments as regularly as possible. Our practice until now has been to do it only after the previous income tax technical amendments package has been implemented. The issue in this case is that the last income tax technical amendments package was published by the department or issued by the Minister of Finance in late 2002. It was issued in revised form in 2004 and again in 2005, and then introduced by this government in 2006 and reintroduced in 2007, but it wasn't passed. So that technical amendments package has not yet passed.

What I believe the Auditor General has identified as a concern is that, because of the languishing of the bill, the rest of the technical amendments packages or technical amendments that we have outstanding have not been processed. I think, and we have acknowledged, that this calls for some review of our practice of only issuing another package after the prior one has been implemented. For that reason, we're proposing to issue others before this one goes forward.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you. I hear you, and I feel the blame being moved around here. I was somewhat jarred to hear you state that we're all here pretty much for nothing, because it's not broken.

I'd like to hear from the Auditor General as to whether or not they agree that nothing's broken. Are we sitting here wasting our time?

[John Rossetti]

I don't think so, Mr. Chairman. Our objective with this chapter was to move the process forward and bring some attention to this issue. The fact that you're having this hearing and bringing this issue forward is exactly what we were hoping would happen.

[David Christopherson, NDP, Hamilton Centre, ON]

Does anybody want to defend “not broken”?

I think you're on your own, sir, with that one.

Does it mean that the problem is, then, that because things didn't move, politically everything else backed up? You talked about bills being introduced and you said that then there was prorogation and they stopped. Does that mean, I'm asking, that the political process interfered, if you will, in what would normally happen, because your next steps are tied to that political process? And is that a problem?

Then I'm going to throw something out here, because I'm running out of time soon. When you run into a situation where your rules are not being followed, one of two things happens: you either have to get things in compliance with the rules as quickly as you can or change the rules to reflect the reality of the way things are. But you can't leave things out of sync.

There are two questions; that was the first one.

The second one would be, should the guidelines change? Should we say: don't try to do this every year, but do it in every other...period of time—some other identifiable timeframe—so that it's not broken? Or do we need to stay with the one year and get everything that's not working to comply with that one year?

Those are the two questions, for anyone.

Please.

[Louise Levonian]

Let me try to answer that in support of my colleague.

I'd like to draw your attention to the Auditor General's report on page 10. There's a chronology of events that took place with respect to what we call the old Bill C-10, which was Bill C-33. It just goes through the steps of what the department did, what was tabled in Parliament. I think it gives a good history of what has happened, and I'll let you draw your own conclusions with respect to it.

What I think the Auditor General has identified for us is that perhaps the way we were working wasn't working well, in the sense that we were waiting for old bills to be passed before we released further bills for comments. I think this has shed light on that process. We're in the process of amending it and saying that we're going to release bills in a draft form more often. We're going to try to put forward smaller bills to see whether that will help in moving the process forward.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you.

Mr. Rossetti, what are your thoughts on that?

[John Rossetti]

The one thing that concerns us is that comfort letters are a good stop-gap measure, and we've identified them as something that users find helpful, but the issue is that if we continue for long periods of time using administrative means to administer tax legislation that really can only be changed by Parliament, it's a concern to us. We'd like to see this thing brought up to date and the use of comfort letters restricted to their original intent, which was to deal with situations that come up over the short term, and get the legislation updated rather quickly.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you. Can I ask you one question before we go to that “one year”? Somebody is getting ready to answer that, I'm sure.

[The Chair, Liberal, Shawn Murphy]

David, this is your last.

[David Christopherson, NDP, Hamilton Centre, ON]

Okay. What I want to ask is how much, in your opinion, we can set aside responsibility of all the other departments, given their suggestion that the political process didn't work as efficiently and that they can't do anything until the political process is done on the previous bill. Is that a legitimate excuse on their part, and do we therefore need to look elsewhere for the problems? Or do they have some responsibility here, and it's not all just the political process?

[John Rossetti]

Mr. Chairman, that wasn't part of our audit, and I don't feel comfortable answering that question.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Christopherson.

Mr. Kramp, you have seven minutes.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Chair, and thank you to our guests for coming in today.

I want to narrow-cast this a bit more. We have a problem. If the customer or clientele or the Canadian public are faced with uncertainty, which they obviously are when we don't have clarity in rules or translation of such, they can not be efficient, we can not be efficient, and the nation can not be efficient. If you're not efficient, you're not competitive. You're not competitive to blow on the economy.

I really need an answer here. We have three areas of responsibility. We have the political arm. This has been outstanding since 2001, and various political parties' governments have been responsible somehow, some way, proportionately—I don't know—right through to the current status. On the other hand, you have the departmental and the finance responsibility. Then on the other hand you have the administrative end, or CRA.

Whose fault is it that we are sitting with legislation that is not passed, that is not helping the Canadian public and/or the business community adapt to the realities and have these implementations completed?

It is not acceptable that we went from 2001 to the current day and all we're getting is that “we're going to get around to it” and “we've made some dramatic improvements over this last couple of years”. Well, good; I'm pleased to see that. But we still don't have a process whereby this is passing the legal and/or the political hurdle.

So where do we affix the blame? Is this the politicians' fault? Is it the departments' fault? Is it CRA's fault? Or is it all of the above? I need a direct answer from all of you.

Mr. Rossetti, please.

[John Rossetti]

Mr. Chairman, our audit wasn't designed to attach blame. Our audit was designed to try to move the process forward. From the responses of the responsible heads of the organizations involved here, we're optimistic that things will change over the near term. As I mentioned earlier, we're happy that you've organized this session to review the important messages in our chapter; we're happy that our colleagues in the departments are taking our recommendations seriously. They've put forward some plans that I think would help alleviate the situation. So the trick is now to implement those plans.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you very kindly.

The finance department, please.

[Michael Horgan]

I think the responsibility of the Department of Finance obviously is to put the government in the position to table technical bills that are required, and we have worked and are working in terms of doing that. I can't go beyond that in terms of laying blame on the political level or Parliament. We've had these bills in Parliament and have been prorogued. I'm not laying blame on anybody. Those are just the facts of life.

Our job as the Department of Finance, as public servants, is to put the government in a position to table the tax legislation that we think is important. We recognize that there's a problem here and our job is to make recommendations to the government--

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

The CRA?

[Linda Lizotte-MacPherson]

Thank you, Mr. Chair.

The CRA is responsible for administration of the legislation and interpretation of the law. I think this audit has identified some areas where we can continue to improve. We have already started to implement our action plan.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

The reason I ask this question is that I noticed in the one statement from Mr. Horgan--and I thank you--in here. This just gives me an example of where we seem to be in gridlock again. You mention here:

...the Department did indicate...whether there are circumstances where it would be appropriate to bring forward subsequent draft technical amendments when the previous...bill is still pending before Parliament. The concern...is the need to protect against confusion and complexity....

In other words, if we can't potentially bring in new bills when we haven't dealt with the old bill because we're going to create a problem, are we sitting in that never-ever? We can't bring in a bill because we're going to impede what is already in there. We're into the chicken-or-the-egg theory on this. Somehow we have to break this impasse and move forward.

What are your thoughts there?

[Michael Horgan]

Well, I think that's one of the reasons why we're actually considering not doing that anymore--or at least releasing some of these things while other things are in Parliament. There's a risk, though, of the confusion of amending the same possible amendments to the same pieces of the Income Tax Act, so that was the reason why we did not do that as a matter of practice in the past. But we are taking a look at that and we may go forward with that, just for the sake of speeding the process along, and take the risk that we can work our way through the possible confusions that would be associated with that.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

Well, obviously, there's a lot of tremendous knowledge within the department and the agencies here. There's a lot of historical knowledge, but there's also a fair bit of acumen in your customer, your clientele, the market out there, and the practitioners in the industry. What type of consultation do you have with them so that you have an ongoing dialogue to see if your actions and their suggestions are somehow compatible?

The CRA?