Mr. Turner, your time is up.
Evidence of meeting #11 for Finance in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was revenue.
Evidence of meeting #11 for Finance in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was revenue.
6:20 p.m.
Conservative
6:20 p.m.
Bloc
Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC
I'm sorry, but your time is up. We mustn't encroach on the time allotted to the others.
Mr. McKay, you have five minutes.
6:20 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Thank you, Mr. Chair.
I wanted to ask a question on the issue of who pays what for these taxes that are collected.
You collect taxes on behalf of the provinces. How does it work? Do you charge a fee to the provinces for collecting those taxes?
6:20 p.m.
Commissioner, Canada Revenue Agency
No. In fact, to be very accurate, we say for convenience that we collect tax for the provinces, but what we do is administer a tax agreement that is signed between the federal government and the province. The tax agreement describes the service and the collection we'll make and the rules for it, and it's financed by the federal government.
We do have the capacity, however, to enter into agreement on a cost-recovery basis. This is what we do with some organizations like the Workers' Compensation Board of Nova Scotia, for example; we administer some of their activities, and they reimburse us on a fee-for-service basis. The agency is financed with both, but the bulk of the funding is through appropriation.
6:20 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I find the Ontario negotiations somewhat puzzling. Industry is desperate to have the corporate taxes collected by the federal government, and they have pushed the provincial government extensively, yet the federal government, at this stage in the negotiations, is actually proposing to pay the Province of Ontario to make the tax system more efficient and to do what was heretofore a provincial job.
How is it that the federal government ends up with the work and ends up paying for that work as well?
6:20 p.m.
Commissioner, Canada Revenue Agency
I will ask Mr. O'Connor to comment a little more on that, but one has to realize that when we decide to administer the tax, we also get the penalties and the interest as a result. The whole negotiation is the savings to a province for the collection of tax versus the additional revenue the federal government can make through penalties and interest and the cost of administration, and it's all that calculation that leads to a negotiation.
Do you want to add to this, Stephen?
6:20 p.m.
Assistant Commissioner, Corporate Strategies and Business Development Branch, Canada Revenue Agency
The only thing I would add to that is the point that in those discussions, part of the situation is to have the Ontario tax harmonize with the federal tax, and part of the compensation package may well be to compensate Ontario for lost revenue associated with the harmonization.
6:25 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
How does Ontario actually lose revenue if the same amount of tax is being collected and remitted by the federal government?
6:25 p.m.
Commissioner, Canada Revenue Agency
Moving from deductions to credits, for example, creates a transition cost for a province, and the actual differential between the interest rate charged in Ontario and the interest rate the federal government might charge creates another difference.
I don't know if you want to add more.
6:25 p.m.
Assistant Commissioner, Corporate Strategies and Business Development Branch, Canada Revenue Agency
Yes, that's it, and the sense that in moving toward a harmonized system, Ontario, if they come forward, will probably be eliminating some of their tax credit programs.
6:25 p.m.
Bloc
6:25 p.m.
Conservative
Garth Turner Conservative Halton, ON
Somebody asked a question I was trying to ask, and that was regarding income splitting or pension splitting. There's quite a movement among the retired generation today to try to get pensions put in because a lot of retired couples have one income earner, in terms of pension income, and they're in a higher tax bracket.
From your standpoint, would it be a very complicated thing to do, to allow pension splitting among retired couples?
6:25 p.m.
Deputy Commissioner and Chief Operating Officer, Canada Revenue Agency
What you're raising is, of course, a matter of tax policy, which would be best directed to officials from the Department of Finance.
6:25 p.m.
Conservative
Garth Turner Conservative Halton, ON
But you guys have to collect it. Would it make any difference? Is it a complicated thing, or is it just changing a line in the tax form? I just want to see if there's any particular obstacle, from your point of view.
6:25 p.m.
Deputy Commissioner and Chief Operating Officer, Canada Revenue Agency
I don't know if there would be a particular obstacle. I can say that we administer, as you know, such a full range of federal and provincial tax and benefit and credit programs and so on that there is rarely anything new presented to us that we cannot accommodate.
6:25 p.m.
Conservative
Garth Turner Conservative Halton, ON
When we allowed splitting of Canada Pension Plan income, what was involved, from your standpoint, with that change?
6:25 p.m.
Deputy Commissioner and Chief Operating Officer, Canada Revenue Agency
I can't relate to the specific experience when we did the split on CPP, and I don't know if we have anybody here who can provide any detail. I certainly think, Mr. Chair, if there is some information regarding the cost to the agency, we could provide that to the committee.
6:25 p.m.
Bloc
6:25 p.m.
Liberal
Yasmin Ratansi Liberal Don Valley East, ON
Thank you.
I just need some clarification on your response to the previous question from Mr. McKay.
When the CRA pays the provinces, you pay the provinces based on assessment. So say you assessed that the taxpayer is going to be giving $500 and you collected $200. The spread, or the difference, is $300. You responded that your penalties and your interest collection are based on the fact that you are doing A and B. So could you tell me, are your interest and penalties based on the fact that you might have a spread and this negative spread is accommodated in this?
6:25 p.m.
Liberal
Yasmin Ratansi Liberal Don Valley East, ON
Say I am the Province of Ontario and you assess my taxpayer at $500, and you paid me $500, but you ended up, as CRA, collecting $200, so there's a spread of $300 uncollectable. Does that become your bad debt? What is the treatment of it? In one of the answers you did say you collected interest and penalties to compensate. By the way, I come from the banking industry, so having done spreads, I'm trying to figure out how you do your risk management and what you are talking about.
6:25 p.m.
Commissioner, Canada Revenue Agency
I think the word—I'm not sure if I said it, and if I said it, I should not have said it—is to “compensate”. There is a differential. We collect penalties and we collect interest, and a certain amount of excess revenue comes to the federal government, but you're absolutely right, we pay the province what we assess.
Now, in an agreement like the ones we've signed with some provinces, there's a public interest at stake, and there's a cost assumed by the federal government for that public interest. For business in that particular province, harmonization of tax collection creates an enormous relief in terms of bureaucracy, and they have to see a single auditor, a single taxable revenue. So an element is assumed by the federal government in the interest of the country, in the functioning of the country. I didn't say they would “compensate”, but it's certainly an added revenue.
Do you want to add to it?