Finance Committee on March 1st, 2007

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

The member will know this is an issue that comes up many times during the pre-budget consultation on an ongoing basis every year. Your party has been particularly vigorous on this issue. I'm assuming you will all continue to be so. You will know that there are arguments both ways in the simplicity of the system, the consistency of the system, the fairness of the system, the difficulty of administering certain exceptions and not others. So those are all policy considerations that will continue to be debated. I know because you'll make sure they are.

[David Christopherson, NDP, Hamilton Centre, ON]

I appreciate that, but nonetheless, it needs to be noted that your government did take the time to make sure the banks are being treated fairly and there are those other issues and there's still no action on those, and they are elements of fairness. Some of those are personal hygiene issues and other matters that really should be cleaned up, and at some point the government should live up to its words when it talks about these things.

There was already a question on the air travellers security charge, but notes are indicating to us that there are concerns about the fees themselves and should they be there. You've addressed that, but Canada's taxes in this regard are higher than those of other countries. Is there some particular reason why it costs us more to provide air security for Canadians than other countries?

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I don't know if the officials have anything to add, but it's a simple matter of size. We have the second largest country in the world. We have more airports than most countries. The infrastructure needs are much, much higher, so the costs are higher.

[David Christopherson, NDP, Hamilton Centre, ON]

It would be interesting, Chair, over the years to get the Auditor General's take on the money that was raised, how it was raised, what was done with it, and then how effective those systems have been.

The other thing I just wanted to ask, if I've got time, and I know I'm running out quickly, was on the Nova Scotia bill, the part for the changes to address Nova Scotia issues. It was passed in 2001.

Has Parliament introduced any changes prior to this? The time lag is what I'm looking at. It's over half a decade between when a province made a move and then there needs to be a reciprocal move on the federal side, but we're just doing it now. Was it introduced earlier and didn't get through, or does it normally take this long between provincial action and then reciprocal federal action?

[Pierre Mercille]

You're talking about the Nova Scotia new housing rebate?

[David Christopherson, NDP, Hamilton Centre, ON]

With the housing, yes.

[Pierre Mercille]

It's a little bit particular in this case, because the policy decision on the amount and who gets the Nova Scotia housing rebate is a provincial decision. When the province harmonized to the HST system, the legislation itself was in the federal act, so there are always a certain number of dealings between the provincial and the federal government.

These measures, I believe, have been amended. I think they were originally announced in 2001. I believe they were amended in 2002, to the person who could actually qualify.

We were not consulted on their announcement, and basically when they announce something, from taking it and putting it into legislation, sometimes there's further policy development to be done at a smaller level, but this still takes time. But this was put forward in 2002 as a news release by the government.

[The Chair, Conservative, Brian Pallister]

Thank you very much.

Colleagues, having no amendments and seeing no other urgent indications of a desire to enter into discussion, we will proceed now to clause-by-clause.

(Clauses 2 to 157 agreed to on division)

Shall the short title carry?

[Some hon. members]

On division.

Agreed.

[The Chair, Conservative, Brian Pallister]

Shall the title carry?

[Some hon. members]

On division.

Agreed.

[The Chair, Conservative, Brian Pallister]

Shall the bill carry?

[Some hon. members]

Agreed.

[The Chair, Conservative, Brian Pallister]

Shall the chair report the bill to the House?

[Some hon. members]

Agreed.

On division.

[The Chair, Conservative, Brian Pallister]

Thank you very much to our witnesses.

I will now invite Mr. Baker and other guests to come forward from the Canada Revenue Agency so that we can deal with, pursuant to Standing Order 81(5), supplementary estimates (B) for the fiscal year ending March 31, 2007, vote 1b under Canada Revenue Agency, which was referred to the committee on Thursday, February 22, 2007.

We're going to give Revenue Canada officials a few minutes to arrive because we're ahead of schedule.

We'll move immediately to an in camera session. I'll ask the cameras to be shut off now, please.

[Proceedings continue in camera]

[Public proceedings resume]

We'll recommence.

To our guests, thank you for your patience. We are glad to see you again.

Pursuant to Standing Order 81(5), supplementary estimates (B) for the fiscal year ending March 31, 2007, we are dealing with vote 1b under the Canada Revenue Agency, referred to the committee on Thursday, February 22, 2007.

The chair invites Mr. Baker, the deputy commissioner and chief operating officer of the Canada Revenue Agency, to make a presentation, sir.

[William Baker, Deputy Commissioner and Chief Operating Officer, Canada Revenue Agency]

Thank you, Mr. Chair.

I will be brief in my remarks in order to provide as much time to members of the committee as possible for questions.

First, I'm joined by Jim Ralston, our chief financial officer, and Mary Jane Jackson, our deputy assistant commissioner, the number two in that branch.

Hopefully we will be able to answer any questions you have today.

This is with regard to supplementary estimates (B), where we're seeking a net appropriation increase of $35.4 million. This is comprised of a few pieces.

There's some $30.6 million related to the 2006 federal budget. Those are the costs we incur whenever there are changes in credits or rates, in order to get the information out to Canadians to adjust our systems, forms, and what have you.

There is also a $13.9 million amount for a significant project that this committee has been briefed on, in the context of the agency's five-year review, which is the corporate tax administration for Ontario. This is a very important piece of work to bring Ontario into a corporate tax agreement, so that the Canada Revenue Agency will be administering taxes for both the province and the federal government with respect to corporations in Ontario. This is the preliminary work to allow us to be ready for January 1, 2009.

There is also an amount of $9.3 million related to our role in administering the Canada-U.S. softwood lumber agreement. As you know, there are a number of financial arrangements and records associated with the companies involved, and we are administering those.

There is also an amount of $5.9 million relating to interprovincial tax avoidance by corporations. This is some additional investment we're making to address a legitimate interest on the part of provinces to make sure they're getting their fair share of provincial tax. In particular, provinces such as British Columbia are concerned that people may be trying to shift income into a lower-tax province, such as Alberta, to avoid giving B.C. the fair contribution to the fisc.

I should say that when you add all those up, it's considerably more than $35.4 million, but we have an offset in the agency of $24.3 million, related to money that's already in our budget for the offshore trust initiative. This enabling legislation has not yet been passed, so we're not proceeding in that regard yet and can reduce the net requirement to $35.4 million.

With that, Mr. Chair, I'll conclude by saying that we'd be pleased to take questions from any members of the committee.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Baker.

We'll begin with Mr. Pacetti.

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

Thank you, Mr. Chairman.

Thank you for coming before us, Mr. Baker, and congratulations on your new nomination or posting. I think you'll do a good job.

I'm going to get straight to it. The amount that worries me the most is this $30.6 million that's funding to address the legislative and policy initiatives, arising from the 2006 federal budget and also for the GST rate reduction.

If I recall, when you appeared before us—and I think Finance officials also appeared before us—we were told that the costs were going to be minimal, at maybe $5 million or $10 million tops, in terms of storing all these gimmicks or small-time tax deduction relief, whatever you want to call it, by the current government in the last budget.

Here we are at $30.6 million; it makes no sense.

You've still got a ways to go, because you haven't adopted them in processing the tax returns for 2006. That's only going to happen now in the months of March and April. Where is this going to end?

I'm going to quote somebody in your department who testified:

...our current estimates are about $10 million to implement the GST reduction over two years. That's on a reduction of approximately $10 billion, which is the $5 billion projection of the lower tax rate for Canadians...

Where is this going to end? It's $30 million to adopt measly dollars for Monsieur et Madame Tout-le-monde. Is this an open throttle and never-ending? I don't know how to ask the question. Can you help me on this?

[William Baker]

Mr. Chair, there are two things. I'll give you a bit more detail, breaking out the $30 million.

The money is being requested in the current fiscal year because of course for us to be ready for the tax year, we have to invest many months in advance, in particular in terms of our information systems, but as well in training. We have to adjust our guides for people filing taxes. We have to make sure that the people on the phones and taking inquiries are able to respond.

The $30 million is for many items that were contained in the 2006 federal budget. There were, of course, matters related to income tax relief for individuals. There were matters relating to the T1, as well as to the trust account system. We had measures related to personal tax credits. These include the Canada employment credit, the textbook tax credit, the tax credit for public transit passes, and the children's fitness tax credit. There is also incremental funding that was sought for processing validation and adjustment of claims, public inquiries for technical rulings and interpretations—

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

Yes, Mr. Baker. I have no issues with that. I understand all the gimmicks that had to be implemented. But you have come before a parliamentary committee, and this is a problem I have time and time again. You know that we're going to ask you about the $30.6 million, but there's no detail. I'm going solely on the information I had previously, which was $10 million over a two-year period.

So now you're coming with $30 million, and it's nice that you can list all those criteria. You can list all the nice, gimmicky deductions. I know it was going to cost money, but at the time, we were told it was going to cost $10 million over two years. Now we're at $30 million and we're not any further ahead.

[William Baker]

I certainly wasn't present when any figure of $10 million came up. My understanding was that was the cost related to the adjustment to the GST.

This figure of $30 million is for all the measures that were announced in the 2006 federal budget, and frankly, the GST is a relatively small part of that.

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

Well, if you can provide us with some details, I wouldn't have to ask the question. I'd be happy to vote for these supplementary estimates, but as it is, I have a difficult time voting for them.

[William Baker]

Sure. Well, certainly, if I may—