Finance Committee on June 12th, 2006

[Yasmin Ratansi, Liberal, Don Valley East, ON]

My question is a little complicated because I wanted to talk about risk management. You gave an answer saying that when you're assessing risk you probably have a debtor profile or a taxpayer profile. And you go after that specific profile. You mentioned that if you live in a certain area like Rosedale and you declared a $14,000 income, you'd be in real trouble.

There's a lot of tax--I wouldn't say evasion. The tax law allows people to take certain credits, for example, the MURBs. They are those tax shelters they have.

When does Revenue Canada decide whether that shelter is not good or bad? When does it change its legislation? When does it change its treatment? How much notice does it give to these individuals? These individuals turn out to be our constituents, who are a little concerned at the unfair treatment they are getting by sudden changes in legislation without their knowing about it.

[Michel Dorais]

John, do you want to answer that question?

[John Kowalski]

I'll give it a try.

In terms of tax shelters, there's a requirement under the Income Tax Act for all tax shelters to be registered with the agency. That's done in order for us to be aware of the existence of a tax shelter. There are quite severe penalties if they're not registered. So we need to be aware of tax shelters. And ever since I think about 1994, when there was a joint announcement by the Ministers of Revenue and Finance, we've given very close scrutiny to tax shelters. We will review them to ensure that they do in fact comply with the legislation as it's written.

What happens is that we will assess people's income tax returns as they file them. But we still have a period of three years in which we can actually reassess that return. Some of the tax shelters, of course, are very complicated in the way they're structured, and it can take us some time to review that tax shelter and to determine whether or not it is compliant with the legislation.

So it does happen sometimes that there is a time gap between when that determination is made and when we will go back and reassess the individual investors who are participating in that particular tax shelter. Sometimes you do have that kind of a time delay.

In terms of legislative changes, those, of course, are the purview of the Department of Finance, and we're not privy as to when they do or don't make those.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

But how does a taxpayer know if there has been a change in the way you are going to do business? We are MPs. We get these questions. We don't know what to do because we have a relationship with certain branches of the income tax people. But there are certain complicated ones, and these are small shelters for small investors, etc. How do we go about ensuring that they get a fair treatment but they pay their fair share as well?

[John Kowalski]

Part of our approach to tax shelters is to communicate our position on them quite widely, and on the CRA Internet site we do provide quite a bit of information to people in terms of the kinds of considerations they should take into account in deciding whether to invest in a tax shelter or not.

Over the years we have published and put up a number of notices alerting taxpayers to one arrangement or another and cautioning them about going into certain types of arrangements. We have been as specific as we can be in terms of the kinds of arrangements they should perhaps avoid, and we have always counselled them to seek professional and independent advice before they enter into a tax shelter arrangement.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

This is on your website.

[John Kowalski]

It is definitely on the website.

[The Vice-Chair, Bloc, Yvan Loubier]

Thank you, Ms. Ratansi.

Before thanking you, Mr. Dorais, I'd like to make a request and a comment. The request is an administrative one. For your appearance next week, would it be possible to send the documents related to that appearance to the clerk as soon as possible?

In addition, on behalf of my colleagues, I'd like to thank the staff of the Canada Revenue Agency who answered the requests from MPs' offices concerning the points at issue. These people are formidably efficient, in addition to being pleasant. Our caucus has mentioned that on a number of occasions. Every time we submit difficult cases to them, we are pleasantly surprised at their response. I don't know whether that feeling is shared by the other parties, but whatever the case may be, I'd like you to transmit our congratulations to them.

[Michel Dorais]

Thank you for those kind words. We don't get to hear those kinds of encouragements everyday. I'll be very pleased to pass them on to them.

Thank you.

[The Vice-Chair, Bloc, Yvan Loubier]

Mr. Dorais, Mr. Baker, Ms. Gauvin, Mr. Ralston, Mr. O'Connor and Mr. Kowalski, on behalf of my colleagues on the Standing Committee on Finance, I'd like to thank you for attending this meeting. Your expertise and kindness are very much appreciated. Good night.

The meeting is adjourned.