Finance Committee on March 27th, 2007

[The Chair, Conservative, Brian Pallister]

Good morning, ladies and gentlemen, and welcome to our officials from the Canada Revenue Agency. It has been so long since we've seen you last. I'm sure you're engaging in some pre-season training to get ready for the end of April. We're glad you were able to make time for us today.

I call vote 1 under Canada Revenue Agency.

Mr. Baker, will you make some introductory comments?

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

Thank you, Mr. Chair.

Firstly, Mr. Chair, thank you for inviting me to appear before the committee today, to discuss the CRA's main estimates.

Before I begin with some brief introductory remarks, I would first like to introduce two of my colleagues who have accompanied me today. James Ralston, Chief Financial Officer and Assistant Commissioner of the CRA's Finance and Administration Branch, and Mary Jane Jackson, Deputy Assistant Commissioner of the Finance and Administration Branch.

The CRA's 2007-08 main estimates are seeking an increase of some $152 million to its authorities over the previous year. This represents an approximately 4.7% year-over-year increase on the mains.

This increase is related primarily to an adjustment of $99 million related to collective agreements. This is, of course, about two-thirds of the increase that's being sought.

There is a transfer of $49 million for the national collection services from Human Resources and Social Development Canada. This is in regard to the student loan program. This includes $21 million in payments to private collection agencies who are involved in that part of our business.

There is an increase of $48 million in re-spendable revenue, reflecting primarily an increased demand for information technology services by the Canada Border Services Agency.

Mr. Chair, if I may offer a note of explanation, in 2003 when the Canada Border Services Agency was spun off as a stand-alone agency in the public safety portfolio, it had until that time been part of the Canada Customs and Revenue Agency. We continue to provide IT support to the border agency because many of our systems and much of our infrastructure is integrated. So this is a reflection of their increased activity.

There is an increase of $19 million to address legislative policy and operational initiatives arising from past federal budgets, including the universal child care benefit and other minor adjustments, such as the new textbook tax credit, the tax credit for public transit passes, and the children's fitness tax credit.

You may recall that when we were last here, which was March 1, on supplementary estimates (B), there was a question about what you need. That was for the current fiscal year, 2006-07. This reflects the ongoing costs, and if you notice, it's lower than what we would have needed to get started up, which was the subject of a question that came from one of the members in early March.

There is also an increase of $18 million for the children's special allowance. This is a statutory payment for eligible children in the care of specialized institutions, reflecting an increase of $21 a month per child for the 65,000 children who receive this benefit.

If you did the math on that, that actually comes up to $233 million, but it's offset by a number of factors. There is a $69 million reduction related to the Canada Revenue Agency's contribution to government budget reduction exercises. There is also a recovery of $12 million from the Canada Pension Plan and EI account to cover the increased costs of administering the agency's CPP- and EI-related responsibilities, yielding a net yearly increase of $152 million over last year's mains.

Mr. Chair, that concludes my opening remarks. My colleagues and I would be pleased to answer any questions that committee members may have.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you very much.

We will begin with Mr. McCallum. You have six minutes.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Chair, this presentation was so rapid, I'm not sure I've collected my thoughts.

[The Chair, Conservative, Brian Pallister]

But you have to agree the quality was there.

[John McCallum, Liberal, Markham—Unionville, ON]

The quality was excellent.

I have been looking through these estimates, and I'm trying to figure out--but I can't tell from the numbers here, and perhaps you can help me--the amount in additional costs incurred as a consequence of small tax credits of various kinds, as opposed to simple taxes.

We have--and you know better than I do--a plethora of new targeted tax credits. Is there any way you could tell us--if these numbers are not here--or you could explain what that has done in terms of the costs of administration?

[William Baker]

Mr. Chair, with your permission, I'll ask Mr. Ralston, the chief financial officer, to give you more detail in terms of the specifics.

[James Ralston, Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency]

The first comment is that the amount Mr. Baker referred to as relating to the 2006 budget is primarily related to the UCCB, the universal child care benefit. As you probably know, there will be further requirements. Mr. Baker mentioned that when we were here for the supplementary estimates (B) of 2006-07, we got some funding for the 2006 budget related to that fiscal year only. We will be coming back in subsequent supplementary estimates for 2007-08, and there will be the continuation of some of what was, in effect, one-year funding at that time.

The full cost of implementing some of the measures that you referred to are not reflected in the main estimates at this point in time. They will be reflected when we come back for supplementary estimates.

[John McCallum, Liberal, Markham—Unionville, ON]

When we will receive those numbers?

[James Ralston]

That will depend on when the supplementary estimates are first brought forward. At that time, we expect to have amounts related to the continuation of that funding, and we'd be in a position to give you the details at that time.

[William Baker]

If I might add something, Mr. Chair, in the normal pattern, supplementary estimates (A) would occur sometime in early or mid-fall. At that point, we will have costed any items that were mentioned in the budget that was just tabled, in terms of what the administrative impacts might be.

[John McCallum, Liberal, Markham—Unionville, ON]

I have another question on a different subject. I remember that when I was Minister of Revenue, we had a number of advisory committees. There was one committee in particular advising on disabilities. I'd ask you to correct me if I'm wrong, but my understanding is that this advisory committee was simply terminated.

A member of the committee came to see me a few months ago, saying that its members were very upset to have been peremptorily disbanded, and that indeed the committee was continuing its work on its own, at its own expense. He had written a letter to the minister and had not, after several months, received any reply. I'm wondering if that's true.

More generally, is it true that many of these advisory committees have simply been disbanded, so that agencies are no longer hearing from stakeholders in the way that used to be the case?

[William Baker]

Mr. Chair, it is true that the standing advisory committees—and they would have been in place during your time as minister, Mr. McCallum—were dissolved in their current form. As a result, this was one of the items in the expenditure reduction exercise that was announced last September. In lieu of those, we're looking at each individual sector and are working out the right way to obtain input from the particular interest group, whether it's small business or disabled.

If I might use an example just to illustrate, there was also a small business advisory committee. In lieu of having a standing committee, we've regrouped some representatives of small business to look specifically at issues as they affect small business. We started this process late last summer, and we call this an action task force, which has been mentioned a couple of times in the context of paper burden reduction. It looks at what can be done to simplify the lives of small business people.

Our view is that we are more effective working with particular groups if we can target our engagement with them on specific problems, with a view to identifying specific solutions. So we still engage with any interested group.

[John McCallum, Liberal, Markham—Unionville, ON]

This is my last question.

On the issue of the disabled, approximately when was this group disbanded, and has another group of any kind been reconstituted? Is there any advisory activity related to people with disabilities going on at this time?

[William Baker]

The announcement on that exercise came out, I believe, in September 2006, so the committee would have been dissolved around that time. I honestly cannot tell you today, sir, what specific activities have been involved with the disabled groups or their representatives, but I would be pleased to report back to the committee on that, with the permission of the chair.

[The Chair, Conservative, Brian Pallister]

You have the permission of the chair, certainly, sir. I'd encourage you to get that information back to the committee. I'd appreciate that.

We will now continue with Mr. Paquette. You have six minutes.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Thank you for your presentations.

In December, a few months ago, we noticed that there was a problem concerning the Attikamek community. It was noticed that the sampling was somewhat skewed because of the audit criteria used by the Canada Revenue Agency. What has happened since?

I know that people have received their cheques, that they have been reimbursed, but have you reviewed your sampling methods? Did you decide to conduct new audits with certain members of that community? What has happened exactly?

[William Baker]

Mr. Chair, under the provisions of the Income Tax Act, it is not possible to talk about specific cases. However, I would be willing to provide this committee with an update on that issue at a later time.

[Pierre Paquette, Bloc, Joliette, QC]

The problem that was cited was that because of the criteria used in the random sampling, certain segments of the population were targeted more than others.

It is important that the committee be made aware of the efforts the agency has made to ensure that the criteria are as objective as possible. I would greatly appreciate a follow-up on that issue.

[William Baker]

Mr. Chair, I can assure you that our case selection process of cases is absolutely fair. I am more than willing to provide you with information to that effect.

[Pierre Paquette, Bloc, Joliette, QC]

Can the audits you conduct on the various parts of programs you administer be found under the heading “Reporting Compliance”?

[William Baker]

Yes. Most of the time, it depends on the documents that taxpayers do not provide. Sometimes it is necessary to do a follow-up, or pay a visit to a taxpayer's business or residence to obtain more information, carry out interviews, or do what is necessary to corroborate facts.

[Pierre Paquette, Bloc, Joliette, QC]

I want to return to the issue of private collection agencies.

Under the heading “Payments to Private Collection Agencies Pursuant to Sections 17.1 of the Financial Administration Act” there is the amount of $21 million.

Can you please explain to us once again why the CRA decided to use the services of private collection agencies? Is it profitable to do so?

[William Baker]

We do so with a very specific goal in mind. With your permission, Mr. Chair, I will ask my colleague, Mr. Ralston, to answer that question.

Thank you.

[James Ralston]

As Mr. Baker, I believe, mentioned, the private collection agencies work only in relation to the student loans, not in relation to taxpayer accounts. And even at that, not all student loan recipients would be contacted by private collection agents. Only a portion of that workload is handled by them.

The amount that you referred to, $21 million, is our expectation of likely spending on commissions to the private collection agents in the upcoming fiscal year. I do have some data on past activities. For example, in 2005-06 approximately $13.5 million was spent to collect approximately $74.5 million. In 2006-07—and these would be partial-year figures—$11.4 million was spent in respect of collections of $68.6 million.