Finance Committee on June 12th, 2006

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

So you think your agreement is going to come into effect by fall, that you will meet their requirements for a performance review.

[Stephen O'Connor]

I think we'll reach an agreement with them. In any agreement, of course, there will be, no doubt, a little compromise from both parties.

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

Lastly, the recent Séguin report on equalization recommended that CRA collect a harmonized sales tax revenue in every province and territory, as is done in the Atlantic provinces. Has the CRA performed any recent studies, or does it have any idea which way it's going to go with this?

[Michel Dorais]

No, I don't think we're in a position to comment on that in any way. If the governments decide to sign an agreement and implement it, we of course will be there to implement it.

[The Chair, Conservative, Brian Pallister]

You still have a bit of time, if you'd like, Madam.

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

Well, my last question is going to be a real good one for you guys.

In terms of the multicultural outreach program, could you tell us how you're handling the outreach to the different communities that have questions?

I think it goes to what the previous member has said in terms of service. How are you serving the various different ethnic communities?

[The Chair, Conservative, Brian Pallister]

You have about 30 seconds, unfortunately, Mr. Baker.

[William Baker]

First of all, we have made a number of our core documents available in different languages, to different groups in Canada. We also, for instance, have a record of our employees' language abilities so that we can arrange to converse with a taxpayer in the language of his or her choice on an appointment basis. Obviously it may not be the person you first meet when you walk into a tax office. We also have different outreach programs with different communities to make sure they're getting the service they need.

[The Chair, Conservative, Brian Pallister]

To continue, Mr. Del Mastro. You have five minutes, sir.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

I just want to start with a bit of a comment, and you're welcome to comment on it, if you'd like.

There was an earlier question pertaining to the GST, the reduction of GST, and whether or not that would help to disrupt the underground economy or at least encourage people to be a bit more honest.

I just want to suggest that economics would point to lower taxes leading people to be more honest with tax reporting. The Laffer curve demonstrates, as a matter of fact, that a lower tax rate does lead to people being a bit more forthright in their taxes, since there's not as much to gain by lying or conducting an underground economy.

I do have, as kind of an offshoot from that, a question pertaining more to GST refund overpayment. I find it kind of concerning that currently there's no process in place to estimate where we're at with GST overpayment. In fact, the very fact that it even exists disturbs me. It's essentially theft, when you're claiming more money back than you're deserving of.

Have you made any progress in estimating overpayment, if there's any, and what kinds of repercussions there might be for people who are claiming GST refund overpayment?

[Michel Dorais]

I would have to defer to one of my colleagues. Bill or John will have the answer to that. I don't have the answer to that question.

[John Kowalski]

We recognize that refund overpayments are a key area of risk for tax administration, for any country with a value-added tax system. It's one we pay a particular amount of attention to. Over the years we have greatly enhanced our registration review process, in the belief that if we can know who it is who's registering as a business and is claiming these refund credits, then we're far better off to begin with. There are a lot of steps taken to ensure that if you register you in fact exist, and not just a post office box somewhere.

We have high-risk analysis teams that go through the refund overpayments. We have a referral to our audit people, who will go out and actually do a books and records review and confirm that the refund payment is legitimate and warranted before the payment is paid out. So there's quite a bit of attention paid on the GST prepayment side, for the very reason that it is an area of high risk and that we recognize it.

[Dean Del Mastro, Conservative, Peterborough, ON]

I suppose an offshoot of reducing the GST is that the refund overpayment would also be reduced. We're in effect reducing the potential for liability. Since the rate is actually reduced, the refunds over the aggregate economy would also be smaller.

[William Baker]

Mr. Chair, I too am familiar with a number of the studies that attempt to associate the level of taxation with the level of non-compliance. I think one thing that is useful for committee members to acknowledge, though, or to understand, is that a change in the tax rate doesn't immediately lead to a change in compliance behaviour, because people who choose to not comply for whatever reason are not going to be immediately motivated by a reduction in taxes. It's a culture of non-compliance, and we have to be constantly vigilant to address it.

[Dean Del Mastro, Conservative, Peterborough, ON]

With respect specifically to refunds, refunds based on a 7% GST would be higher than refunds based on a 6% GST. If we have a problem with overpayment of credits, it would be minimized by reducing the GST. That's my point.

The other thing I was going to ask about is as somebody who comes from small business. I was quite surprised to see that 60% of GST is actually collected by small business. On their behalf, I would like to ask why there are very strict compliance rules for when businesses have to remit GST, but when they're owed GST, the process for receiving it back—and certainly in small businesses, being owed thousands of dollars in GST can be quite crippling, and often this process takes months.... I'm just wondering why there's so much lag in receiving GST when it's owed to you, but the actual penalties for being even a day late on your GST submission are quite severe.

[Michel Dorais]

We would have to come back to the committee on this. I don't think one of us has the answer.

[Dean Del Mastro, Conservative, Peterborough, ON]

Perhaps one of the things you might also look into is how you could streamline the system a little bit for small business to make it a little easier for them to comply—whether we could move towards an electronic filing for payment of GST--because as it is right now you actually have to go to the bank and have it stamped. It just seems there might be an easier way for businesses to remit GST that would be a bit easier for them to do.

[The Chair, Conservative, Brian Pallister]

Your time is up, Mr. Del Mastro.

While you're preparing that data, I want to remind you of your commitment earlier to provide data to the committee on the number and nature of disciplinary actions that occurred. I didn't put that on the record.

Also, could you provide a bit of a summary sheet? It's my understanding that interest on taxes owing is calculated differently from interest on refunds to taxpayers. Also, the interest payment obligation begins sooner for the taxpayer who owes money to Canada than it does for Canada when owing money to the taxpayer. I would like you to outline that in your summary sheet for the committee's application as well, if you would.

We'll continue with Mr. Boshcoff. You have five minutes, sir.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you very much, Mr. Chairman.

Mr. Dorais, do you believe all Canadians should have equal access to public servants and public services?

[Michel Dorais]

By access, do you mean being employees of the public service?

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

I believe that in a country as large as ours—that's enough cryptic questioning—in terms of physical access to buildings and decentralization throughout the nation, people who want face-to-face contact and want to know they can walk into an office and get advice.... I'll just add one small point. I believe there already exists an infrastructure of facilities throughout the nation that is underutilized.

I'll leave that to you.

[Michel Dorais]

I don't know if the member refers to what we used to call service counters or inquiry counters, where anybody could walk in and see someone. If I go back to the original question—do I believe Canadians should have access to civil servants?—absolutely. This is why Service Canada was created, and this is why we have an appointment system that allows people to sit down with someone who knows what questions will be asked and is able to serve well.

Now, if the question is, are we living in a period where anybody can walk into any office and automatically have someone sitting there waiting for someone who happened to walk in, I think this is a very costly proposition, and the agency is moving out of that type of service.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

I am actually more concerned about the amalgamation of offices, say, from northwestern Ontario to northeastern Ontario, or smaller communities to Ottawa or the large urban centres. I believe it requires a critical mass in an office, so that someone can feel upward mobility and the ability to get promotions or try different jobs, and also so there can be decision-making functions. If it all comes from central command here in the valley, that would dissuade people from moving to other parts of the country—I don't just mean my riding, I mean all over the country—as opposed to knowing that they could have a fulfilling career with some measure of advancement by being outside of the largest governmental centre.

[Michel Dorais]

The question of the member is very important, and it's also something that's very dear to my heart. I have made it very clear in many speeches to the staff that if the agency grows, it will not grow in Ottawa; it will grow outside of Ottawa.

I'm preoccupied by the fact that Ottawa has now about 21% of the total staff of the agency. I think this is too high, and I think we have capacity in a number of places in the country. A number of areas are now looking at possibilities of growing the business in various areas of the country. So, hopefully, in the future, we'll see an agency that has less than a 21% proportion in Ottawa and more in the various regions of the country.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

I'm sure you're aware of the rental disparities of, say, downtown Toronto versus Thunder Bay or places like that, where whatever you think you save in centralization, you're paying out in overtime, because staff can't get home in the rush hour anyway, those types of things, and the hyper-rents that are being charged in the real core areas.

Mr. Baker.