Finance Committee on June 19th, 2006

[Sheila Fraser]

No.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

You have identified a number of administrative shortcomings. Do you have any amendments to the Canada Revenue Agency Act to propose? Ultimately, that's what this committee will have to decide on.

[Sheila Fraser]

No. It's really not our role to suggest amendments to the act. We can raise issues that in our view, require further study or analysis, but it would be inappropriate for us to take a position on the act, because that's often a political issue.

[The Chair, Conservative, Brian Pallister]

Mr. St-Cyr, you don't have much time left. Please make it a short question.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Apart from the administration, what aspects of the act should the committee focus on?

[Sheila Fraser]

We didn't raise many issues with the act. We looked at the treaties and foreign affiliates, but the bulk of our work focuses on the administration and management of programs.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Thank you.

[The Chair, Conservative, Brian Pallister]

The next questioner will be Mr. Del Mastro, for five minutes.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

I want to go back to reiterate a point that's been made a couple of times. I find it actually quite remarkable that the agency is running at a cost of about $3 billion and collecting about $300 billion. That's a 1% administrative cost. I know, from my experience in business, I would have been very content to get anywhere close to a 1% administrative cost. I think it's quite a remarkable achievement.

[Sheila Fraser]

You have to realize that the vast majority of income tax is deducted at source. Those are payments that come in with essentially no collection effort. We can try to find the numbers on how much is not actually deducted at source, but it's a relatively low amount. Also, generally in Canada I think the compliance rates tend to be pretty good compared with those in other countries. A large part of it is personal income tax, and most of that comes in automatically.

[Dean Del Mastro, Conservative, Peterborough, ON]

The one other area that we've talked about quite a bit is the bad debts, essentially. How much of an allowance are they setting up for bad debts? How much are they writing off every year that wouldn't go to the accumulation of outstanding debt?

[Sheila Fraser]

I'll let Mr. Hood answer that.

[Jamie Hood]

In 2004-05, the allowance for doubtful accounts was $4.7 billion, of the $18 billion.

[Dean Del Mastro, Conservative, Peterborough, ON]

So about 1.5%, roughly.

[Sheila Fraser]

We should just clarify that the $18 billion are taxes that are not in dispute. There was another $6 billion of taxes that were in dispute.

[Dean Del Mastro, Conservative, Peterborough, ON]

Okay.

My experience in receivables is the older they get, the harder they are to collect; the more current you are with things....

I was talking to the officials when they were here about the GST, and I said that the system is still quite cumbersome, actually. There's no electronic system for submission of GST, and it's actually quite slow in industry, if you're owed GST, to get that refund back.

I also found out, as you've indicated, that they may have a bit of a challenge directing their resources. When the CFIB was here the other day, they indicated that companies are getting audited much more frequently, and the audits that were taking about five days are now taking up to nine days. So it would seem that if we redirected our resources there a little bit, we might be able to be a little more current checking up on accounts, and we might be able to make some technology investments. All these things could lead to a much more responsive system, and we may not need a 1.5% allowance.

[Sheila Fraser]

We were, obviously, in all our audits saying that with the resources that are being given to them, they have to make sure that those resources are targeted at the areas of highest risk, and that they should be able, as well, to know the kind of risk associated with the various accounts. So it does go back to information systems.

At a recent hearing they were saying they wanted to get into data mining and have better information on taxpayers so they would be able to target them much quicker.

[Dean Del Mastro, Conservative, Peterborough, ON]

Okay.

We heard from union representatives last week, and they're concerned that there may be, as far as promotions and so forth are concerned, a little bit of nepotism or maybe even a little bit of cronyism. They're not satisfied with the guidelines by which people are receiving promotions and so forth within the agency. Have you heard these types of concerns?

[Sheila Fraser]

As I said, we haven't done an audit yet of human resource management, and I'm not sure that we particularly heard that. We did hear, in one of the concerns that was raised, about the internal transfers of people, so it could be viewed as being non-competitive resourcing. We just wanted them to better explain to us so we could better understand what that system was. So that could be one of the areas we would go back to. Certainly if the committee expressed a concern in that area, we would seriously consider including it in the audit.

[Dean Del Mastro, Conservative, Peterborough, ON]

For a department of this magnitude, the Canada Revenue Agency, which is only five or six years into its mandate, it would seem that we could be looking at this a little too early. By and large, it seems, as compared to the Department of National Revenue, they're doing quite a good job.

[Sheila Fraser]

We're certainly, I would say, very favourable to the governance structure that's been put in place. The board of management, the requirements to have audited financial statements, the performance report that they have to produce with an assessment, have certainly brought a lot more rigour and a lot more attention to financial management issues, and management issues perhaps generally, than one would find in a department. So that whole kind of oversight of the board of management and the audit committee have really played a very important role with the agency.

[Dean Del Mastro, Conservative, Peterborough, ON]

Is there a difference for you--

[The Chair, Conservative, Brian Pallister]

Sorry, Mr. Del Mastro, your time is up.

We'll go to Mr. Pacetti.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chairman.

Welcome, Ms. Fraser. We didn't have a chance to get you before the committee last year; we were very busy. So thanks for coming.

Can we go back a step? We are here for the five-year review. What happened, exactly? I wasn't here. Revenue Canada went from being a department to being an agency. What is the difference? We're here looking at the five-year review of the CRAA, but it sounds as though we're making all kinds of excuses: there's a transitory period in terms of how they collect and how their staffing is done; we've had the unions here, and they seem to have an issue with how some of their hiring and firing and promotions and demotions are done, and with how they're closing certain areas of service they're offering.

We seem to be offering lots of excuses, so I'm not sure where we're going with this. Our question here is, do we review the mandate, or do we accept...? It seems as if it's a fait accompli, where we're just going to say we'll do the five-year review and are going to renew it.

I think it's a broader question, a much more complex question than what we're addressing here. Can you help me with this?

[Sheila Fraser]

What I can say is that generally in government there are three agencies that have been created with a different structure, if you will, from government departments.

I would say the revenue agency is probably the most different of all. Rather than having a department with a deputy minister who reports through a minister, you have a very different accountability regime. You have a board of management with people from outside government who have an oversight responsibility for the administration part—not the tax policy area, but the administration—and with a commissioner who has much more specific kinds of responsibility, or more clearly-defined responsibilities, than does a deputy minister and who has also been given more flexibility in the human resource regime than you have in a government department.

On the one hand there are more flexibilities; on the other hand, there are more accountabilities. They have to produce a performance report on which there is an assessment; they have to produce audited financial statements. There are a number of conditions that were put on them when they were created as an agency.

What is, I think, the most striking difference in the governance is the role of the board of management and the impact of its oversight on the administration. Obviously, such things as the Income Tax Act and the Excise Tax haven't changed; it's how the administration of these is carried out. I would say the board of management has put more attention to the administration of the business than was there previously.