Evidence of meeting #2 for Finance in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was budget.
Acting Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
Unless Jim has it, I don't have the ITC number, but of the $67 billion, the net revenue to the government is around $29.7 billion. That year it cost CRA administration about $635 million, which I think is a cost ratio of about 2.32%, if I work it out properly.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
So roughly $660 million is the cost to the system, and the rest would presumably be credits. Would that be right?
James Ralston Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
No.
As you may be aware, there's a gross payment and input tax credits are credited against that. So the net amount of revenue to the government after the input tax credit is $12.3 billion. I'm reading the numbers for 2005. Then there's a further reduction representing $3.3 billion of the quarterly tax credits. So the absolute net revenue to the federal government is $9 billion.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Nine billion...I find that astounding. It doesn't sound right if you've got gross revenues--
Liberal
Acting Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
Sorry, it's around $29 billion, which accommodates the ITCs and the other things being out.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
For the purposes of this discussion, I can assume that the government effectively receives $30 billion net. Is that a fair comment?
Acting Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
For 2004-05.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
For 2004-05, that's right. So each point generates about $4.5 billion--$4 billion to $5 billion.
If you work your reduction of one point through the system, is it equal to effectively one-seventh? I see how gross would be reduced by one-seventh, but are the credits and the costs also reduced by one-seventh?
Acting Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
At this point in time, certainly the administration costs wouldn't be reduced by one-seventh, because arguably, when we've looked at them over the last 15 years, we haven't increased them, for example, in terms of the revenue growth of the economy. In other words, our numbers are fairly constant, in terms of steady dollars, in terms of the cost to administer the GST, so that one is probably a wash. In other words, whether it's seven, eight, or five, our administration costs are probably going to stay about the same.
As for the ITCs, I honestly don't know. I'd have to get back to you through the chair.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
It's a fairly significant question, and I would like an answer on this.
I think you actually start to make the system slightly less efficient, because your costs will essentially remain fixed. Now the costs aren't a huge number, but the costs will remain fixed and possibly even go up, because you're going to have to change from seven to six and then six to five.
Having said that, I would be interested to know what impact the credits will have by virtue of reducing your gross revenues by effectively one-seventh. At one level you're possibly turning a relatively efficient tax, which generates in the order of $30 billion, into a far less efficient tax.
I'd be interested in knowing what the answer is.
Commissioner, Canada Revenue Agency
There are a lot of numbers. They are very important numbers for the members, and I can see there is some confusion here. With your permission, Mr.Chair, I would like to table the numbers with the committee so they are the right ones.
Conservative
The Chair Conservative Brian Pallister
I will ask that you undertake that, and if you could forward them to our clerk we'll distribute them for the edification of all members.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I'd like to make that subject to the reservation that if the numbers produce some startling results, we carry on this conversation. It may be a straight-line reduction, but on the other hand there may be a curve in there that could possibly be quite significant.
Conservative
The Chair Conservative Brian Pallister
We can carry on that discussion as we receive the numbers.
I'll turn to Mr. Turner now for five minutes, please.
Conservative
Garth Turner Conservative Halton, ON
Thank you very much for appearing before our committee.
Like Mr. McCallum, I have some experience with Canada Revenue Agency, only much less brief than my esteemed colleague. However, the agency ran flawlessly during my period of time, as with Mr. McCallum.
I actually have three brief questions. One is on the issue of compliance costs for the GST. You kind of didn't answer the question, when it was asked previously by my colleague across the way, on the compliance costs for small business, or business in general, for the GST reduction of a point. Has the revenue agency done an analysis at all of the compliance costs that businesses in general would face? If you haven't, why not, because it seems to me to be a pretty salient point.
Have you given any thought to assistance that CCRA can provide to Canadian businesses to help them comply? In other words, if I have a small business and I have three cash registers that aren't electronic, can I call up and ask if there's some way you can assist me in that?
I've heard it estimated by my friends across the way, or a lobby group speaking for them, that compliance costs of reducing the GST would be in excess of $1 billion across Canada. I'm wondering if you have an opinion on that, whether there's any basis to that, or whether you believe this is just Liberal scaremongering.
My second question has to do with the amnesty program. I might make the point that this is an excellent program brought in by a far-thinking Conservative government in the past to allow Canadians who actually feel that they are offside with CCRA to step forward and make good on their past payments.
I'd like you to give us a little summary, if you could. I realize that a study was released just recently, and I'm wondering if you can refresh the committee's memory on what the response to the amnesty program has been. Secondly, have you given any thought to expanding that? It seems like a pretty cost-effective way of raking in a whole bunch of extra money.
My third quick question is, the Liberal tax cut from 16% to 15% for the lowest tax bracket in the 2005 budget was never passed by the House. What is the status of a tax cut that never gets legislative approval, and yet the Canadian population believes is de facto in place? Then we have a budget that comes along in 2006 and says we are in fact going to legislate that. It seems to me there is a bit of a grey area there, and I'm wondering if you can explain to us, and to Canadians in general, exactly what their status is in terms of that reduced level of tax.
Commissioner, Canada Revenue Agency
There's a lot of meat in those three questions, obviously, and I think--
Conservative
The Chair Conservative Brian Pallister
We set a precedent earlier for five-part questions, I'm afraid.
Commissioner, Canada Revenue Agency
It shows the member's experience with the agency or the department, if I'm not mistaken, at that time.
I will leave some time for my colleague, Mr. McCauley, to think about the compliance cost question, but let me briefly address the two others.
I think when the member mentioned the amnesty program he was referring to the voluntary disclosure program. That is a program that was put in place to encourage taxpayers, who somehow were in this irregular situation, to catch up and go back into the regular stream.
Voluntary disclosure is valid if we determine it is voluntary, complete, involves a penalty, and involves information that is at least one year old. That's to avoid people simply saying, “I'm not going to pay my tax, I'm going to do voluntary disclosure”. So it doesn't work that way. There are some strict criteria, but it allows people to come, and in some cases the penalty is waived, so people can bring their account with us to zero and become regular taxpayers on a yearly basis.
The program has worked well. I don't have the figures, but I think there have been around 6,000 voluntary disclosures. Most of them were done by tax preparers, on behalf of taxpayers, who helped them regularize their situations with the fisc, and that has paid off over time. There is at this point no intention to expand it any further.
On the issue of the budget, this is a simple and complicated issue at the same time. When the government introduces a budget.... I should say governments, because at the agency we face a lot more than one budget a year. We also face provincial budgets, because we also collect taxes on behalf of provinces. So we have about 13 different budgets per year that we have to adjust.
At the federal level, on the tabling of the ways and means motion that expresses the intent of government, usually the agency will take the measures to prepare to implement the budget. In normal situations, this is then carried by Parliament and voted on.
In the particular case the member raises, it was done in a minority government, and as the members know, it was not legislated. The agency has taken the decision, on the basis of ways and means, to reduce the marginal rate from 16% to 15%, on the understanding that the next government elected would confirm that decision or not. The government has confirmed the decision for one year and changed it in the last budget, so we are already taking measures, as a result of the tabling of the most recent budget, to make the correction for the next taxation year.
Conservative
The Chair Conservative Brian Pallister
Can I just make a point here?
Mr. Turner, your time is up. It's Mr. St-Cyr's opportunity to ask some questions, but we will continue as our time allows. Perhaps you'll have another chance.
Conservative
Conservative
Bloc
Thierry St-Cyr Bloc Jeanne-Le Ber, QC
I'd like to get your opinion about something. In the past, several auditors general have expressed some concerns in their reports about the erosion of the federal tax base. particularly because of the existence of tax havens.
Conservative
Garth Turner Conservative Halton, ON
Point of order, Mr. Chairman.
I didn't get an answer to my third question. Is there any particular reason for that?
Conservative
The Chair Conservative Brian Pallister
It may or may not be true, Mr. Turner, but your time is up, and I've been instructed by the committee to proceed with this order of questioning.
Mr. St-Cyr, I'll ask you to continue with your question, please.
