Finance Committee on Dec. 7th, 2006

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Is it being administered now?

[William Baker]

There's continued work with the Department of Finance to work out the administrative provisions.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

When will it be in place? What is the target date for implementation? Can you tell me that?

[William Baker]

I'd have to confirm that, sir.

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

We don't have those numbers.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

It was announced in the budget of 2006. Would that not mean it was going to be in place at some point in time—some time in the next thirty or forty years perhaps?

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

Yes, most definitely.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Thirty, or forty?

[William Baker]

Typically it would be with the upcoming policies, but I'd want to confirm that.

[The Chair, Conservative, Brian Pallister]

Thanks very much, Mr. Savage.

I'll use my prerogative and just introduce a couple of topics for discussion here.

Since we know the tax debt in the country has grown faster than total taxes paid for a decade and a half, we know we have a challenge, at the very least, to collect unpaid taxes. The committee has just finished its prebudget consultative process and put together recommendations. The report was just released today, and we may have a suggestion, Minister, that you can take to your colleague, the finance minister, if you're supportive of it, and he might change a policy that may assist. This is an issue or recommendation that relates to the fairness aspect of our system.

Obviously, if it rests on any foundation at all as far as tax collection is concerned, our system rests on the foundation of perceived fairness. It's a voluntary system. Surely, if it isn't perceived as fair, people won't cooperate in the system to the degree that we'd like.

One of the policies that was introduced in terms of tax collection about sixteen years ago was to create a differential obligation on the part of Canadian taxpayers, in terms of the interest they owed Revenue Canada on late payments versus the interest they were awarded on money owed to them. Our recommendation as a committee is that these interest rates be leveled, that they be the same. From the standpoint of perceived fairness, at the very least, as a committee we think this is a valid recommendation. Obviously, charging more to Canadian taxpayers than they get for the money that's owed to them hasn't worked in terms of encouraging them to pay their taxes promptly and on time, so I would argue against anyone who would advance the idea of this change being somehow a disincentive to Canadians to pay their taxes.

If you'd like to comment on it, great. If you're supportive of it, great. I know the committee would appreciate it. We know it's a policy issue, but we also know that a whisper from you to the minister would of course convince him to make the change.

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

Oh, you're so sweet.

I will take your advice to the minister and ask him to look at it. I will tell him that it comes from you and that I respect each and every one of you and hope that he looks at it.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Minister.

On the issue of the outstanding tax amounts, I think $18 billion, approximately, was the last estimate we had heard. I want to throw you an open-ended suggestion here, and perhaps you could respond as to how the agency is working on this file. I understand there is, what is it, $5 billion that constitutes doubtful accounts and is not recoverable? This has been an ongoing problem, for a long time. What is the agency doing to address this massive challenge?

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

It's a huge priority for me, and I felt the pressure right from the beginning because of my concern for the taxpayer out there. But I'm going to allow Bill to tell you what I have tasked him with.

[William Baker]

Mr. Chair, members may have read the response to the public accounts committee report that I believe was tabled on September 30. You will find in that, for those who haven't had a chance to study it in detail, a very detailed plan to revitalize the collections program over the next few years. It really involves two things. The first is modern information systems that will equip us to do a much better job in identifying risks and taking the proper actions; and secondly, we are reorganizing the way we deliver the collections program. We have roughly 4,000 collection agents to make sure we're getting maximum return from their investment.

I should point out that notwithstanding the large amount of tax debt in total dollars, the vast majority of Canadians pay their taxes on time. Our accounts receivable at a point in time represent roughly 5.5% of what we bring in, in a given year, and we write off actually far less than that in any given year.

[The Chair, Conservative, Brian Pallister]

Thank you very much.

The next person to speak will be Mr. Paquette. You have five minutes, Mr. Paquette.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you very much.

On another matter, I would like to hear from you what role the Agency plays in combatting money laundering and tax evasion in tax havens. It has an international dimension. It is a well-known fact that this scourge is becoming increasingly widespread. One sign of this is the increase in direct investment from Canada in Barbados, an amount that has grown from $5 billion in 1995 to almost $25 billion in 2005. This cannot simply represent money in direct investments.

So what is the Agency's role and how does the Agency organize its work with other entities, such as the RCMP and FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada? Recently, a bill concerning ways of improving FINTRAC's work was studied, and everyone at the Agency seemed happy about it. Could you speak to us a bit more about it.

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

I want to say that Minister Flaherty and I take this whole tax fairness issue very seriously. The government is reviewing tax havens. CRA is working internationally with groups such as the Organization for Economic Cooperation and Development and the Leeds Castle Group, which Michel is chairing. There will be a meeting in--

[Michel Dorais]

January.

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

—January, in British Columbia.

The Leeds Castle Group is a group that combats global compliance through a joint international shelter information centre, so they work with information.

I just want to reassure this committee that our present Prime Minister won't avoid paying Canadian taxes.

I'll let Bill go on a bit more about the collections.

[William Baker]

The officials share the concern about the activity in international tax havens and aggressive tax schemes that syphon money out of the country. The key is information.

We lead a group with OECD, with seven countries. We've set up a four-country information sharing group. We've also created centres of excellence across the country within the last year that bring together our international tax experts and our tax avoidance experts, and they are really starting to have a more impressive impact on our ability to counteract this.

We've launched some projects that I can tell you have very significant consequences from tax reassessments. We can't talk about those, of course.

[Pierre Paquette, Bloc, Joliette, QC]

Between you and FINTRAC, who takes the initiatives? We know that within FINTRAC, there are very compartmentalized areas. They cannot deliver information, but simply answer your questions. I would like to know how you operate. Is there a specific service within the Agency that handles that?

[William Baker]

Yes, a division of our Compliance Programs Branch focusses on compliance. Links were established with FINTRAC and we work very well together.

[Pierre Paquette, Bloc, Joliette, QC]

Excellent.

[The Chair, Conservative, Brian Pallister]

Merci beaucoup, Monsieur.

We'll continue now with Mr. Wallace.

Five minutes, Mr. Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chairman.

And thank you, Madam Minister, for being here today.

I have a few questions for you. One is following up on another tax credit. Back in the riding I've heard from a number of the charities I am involved with about the uptake on the tax advantage of putting shares to the credit of different charity organizations. Can you tell me if there has been an uptake. Are we doing it? Can you let me know? It seems to be happening. I would like to know whether CRA has noticed a change in that yet, or will they not see that until the next tax year?