Finance Committee on March 27th, 2007

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

I was just trying to help you there, to make you part of the process during the budget process, so that you can perhaps recommend to the finance minister, when he introduces these measures, that they actually cost taxpayers money instead of saving them money. It was a way for you to get some help, to get into the finance department and add some input. I was trying to help you out there.

[The Chair, Conservative, Brian Pallister]

Of course, we all recognize here that the whole tax collection system costs taxpayers money. I think that's pretty much a given.

Mr. Pacetti, you have a brief moment left.

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

I'll wait until I have a third round.

[The Chair, Conservative, Brian Pallister]

We will continue with Mr. St-Cyr.

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

Thank you, Mr. Chair.

On the last page of your speech, you say that there will be a recovery of $12 million from the Canada Pension Plan and EI account. Will those funds actually be reallocated to the EI account and CPP?

[William Baker]

As regards our activities in administering responsibilities related to EI and the CPP, we receive funds directly to cover our expenses. This sum simply reflects the fact that this type of work is being increasingly requested.

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

That is how you bill the department that is responsible for employment insurance for the services you provide to it?

[William Baker]

That is essentially the case. Regardless, and with the permission of the chair, I wish to ask my colleague James to answer.

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

Please go ahead.

[James Ralston]

I don't know whether you have before you page 4.4 of the estimates, but there's an interesting table there.

When we ask in the main estimates process for authority to spend, the amount we are seeking authority for, which in total turns out to be $3.379 billion this year, does not in fact reflect all of the spending we will undertake. In addition to that amount, we will spend another estimated $163.9 million related to the CPP and EI functions we undertake.

The particular $11.6 million item you refer to is to reflect the fact that when, for example, we have another amount, which we indicated was $99 million that we were asking for in respect of collective agreements, and there was a certain amount reflected in respect of the administration of the student loans program.... Included in those other amounts was the $11.6 million, and we broke it out in order to avoid double counting.

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

All right, thank you.

These days, people are able to buy software that can produce and analyze income tax returns, and submit them electronically. To my knowledge, this cannot be done free of charge, however. If I am mistaken, please let met know. For those who fill out their tax return manually, as I continue to do, an electronic copy of the tax return cannot be found on the Internet, and therefore cannot be submitted electronically.

Is this correct? Is there a free service? If not, do you intend to provide free service? In my opinion, this would be a good idea. You would not be competing with private companies who process, analyze and manage data. People would then be able to file their returns electronically, free of charge. That would save you from—

[William Baker]

For now, we have no intention of doing so. Software provided by the private sector costs between $6 or $7 to $40. However, pursuant to agreements we concluded with the private sector, approximately 60% of low-income earners have access to the software free of charge.

There are now 14 companies in Canada that provide electronic filing software. They've been in business since the 1980s. It's a vibrant business, and it's not our intention at this time to replace that, given they've agreed to ensure that lower-income Canadians, and in fact 60% of Canadians, have free access to this software.

I might add that any Canadian can also file using Telefile free of charge. We also provide a very robust community volunteer program for immigrants, senior citizens, and Canadians in need for whatever reason, which can help people file. They use electronic filing, and that's available free of charge.

[The Chair, Conservative, Brian Pallister]

Thank you.

Thank you, Mr. St-Cyr.

Mr. Dykstra is next for five minutes.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you, Chair.

I'm a little concerned about my good friend Mr. Pacetti, who seems to want to increase taxes on the folks who probably need money the most--those using transit. It's a big concern. It's probably something he regrets and wants to take back.

I want to ask a couple of questions to get a broader understanding of the appeals process and what exactly we fund under it. I notice it has jumped by about 14%. I know that Mr. Wallace asked about it, but I'd like an overall understanding of it.

[William Baker]

Any taxpayer, whether it's an individual or a business, assessed by the Revenue Agency has the option to contest that assessment for whatever reason.

We've had the process for many years, and the first step is an internal process through the appeals branch. This is part of the Revenue Agency, but it has complete independence, which allows it to take an objective look at any decision the agency has taken and review the facts. That group resolves on average about 95% of all the disputes it receives. It's a well-functioning unit. It has been modelled across the world, and is provided at no cost to taxpayers, unless of course they choose to be represented by an accountant or a lawyer.

If they're not satisfied with the decision from the appeals branch--the administrative redress process--their option is to file an appeal with the Tax Court of Canada. That's a special court in Canada that exists just to deal with tax matters. It's very professional. You can appeal a Tax Court decision to the Federal Court of Appeal and ultimately seek leave from the Supreme Court. That is the mechanism we employ to deal with disputes.

[Rick Dykstra, Conservative, St. Catharines, ON]

When you use that, I'm assuming the purpose of the cost recovery is from an internal perspective. We don't generally cover the costs for those who file appeals.

[William Baker]

That's correct. There is not a charge to have your file reviewed by the appeals branch. We consider this an integral part of providing service to Canadians.

[Rick Dykstra, Conservative, St. Catharines, ON]

Just out of interest, what did you say the percentage of successful appeals was?

[William Baker]

We resolve, at the appeal stage, about 95% of our disputes. Now, I should say that some people may not be totally satisfied but are reluctant to go to court for whatever reason, but we also have at the Tax Court something we call an informal procedure that is for amounts under a certain threshold--I don't know what it is. It's designed to pick up most individuals and small businesses even, and that's included in the number that go downstream, so it's very small.

[Rick Dykstra, Conservative, St. Catharines, ON]

This relates not so much to the point that Mr. Christopherson made with respect to the Auditor General, but more speaking to the longer term, the work that you've done on the vision, focusing on where you're going to go as an organization and relating that to trying to achieve some cost savings. I know we talked about that overview earlier in the term, but later last year, 2006.

One of the issues I've run into and a number of my colleagues have mentioned to me as well is the issue of changing the process in a local community in terms of not being able to actually go and speak to somebody now. I know there were some cost savings tied to that. How has that gone?

Speaking from the perspective of the riding in St. Catharines, it hasn't gone very well. I'm wondering if there's still internal review and work being done on it.

[William Baker]

Mr. Chair, I think the specific measure you're referring to is the decision to move from walk-in service to a by-appointment service only. This was done for three reasons.

First of all, the number of people wishing to walk into our offices for answers has declined over the years. More and more people are comfortable getting answers via the telephone or on the Internet, and that's just a modern way of doing business. We encourage it because it's actually more efficient, it provides a more precise answer, and it is cheaper to administer for taxpayers.

The other factor is that we've found that those issues that do require service at the counter are increasingly complicated, and the idea of having somebody walking in, speaking to one of our client service officers and getting all the answers at that point in time is increasingly unlikely. So we ask people now to call, let us know the nature of the issue that they wish to discuss, and we'll gladly arrange an appointment for that person to come in. We've also found generally that people are very satisfied with our telephone and online services, so we're confident.

It is an adjustment; I don't deny that. Any time the agency changes anything, because we affect so many people, it takes a bit of getting used to. But I believe this is a wise way forward for the evolution of the agency.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Dykstra.

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

Mr. Baker, a friend of mine, a well-known lawyer--you'd probably recognize his name if I mentioned it--used to make something of a living going around the charitable circuit, primarily Christian charities, and he used to explain the new rules or try to explain the new rules for charitable compliance to a variety of groups, whether they were church groups or NGOs, or in some cases non-Christian charities, etc. He lobbied hard and long with the Department of Finance to try to get them changed so that there was some simplification so people wouldn't err inadvertently and fail to comply because they either didn't understand or misinterpreted the rules.

He was notable in his lack of success in terms of changing the rules, and so now I assume your agency is stiffed with trying to interpret these rules or at least force compliance by these charities, of which there are quite a number. There are literally thousands of charities that you have to deal with.

So I would like to know from you, from your perspective, the experience that you've had with these new rules and what measures, if any, are in place with respect to compliance errors that are largely innocent errors.

[William Baker]

If I may, Mr. Chair, we have over 80,000 registered charities in Canada today--that is, they are registered as charities under the Income Tax Act. The approach we take with charities with respect to compliance with the rules, I think, recognizes the important role they play in Canadian society. Often, as well, charities are not being run by large boards of directors that have sophisticated knowledge and expertise.

We're doing a few things. First of all, if we determine that there's a compliance problem with a charity, we don't tell them in the first instance that they're offside and therefore no longer eligible to derive the benefits of being a charity. We would get in touch with the charity and let the charity know the issue we've identified and find a way that resolves it.

There was reference earlier, in fact--and I'll just highlight it in the main estimates--to charities regulatory reform, which was announced in budget 2004. As Mr. Ralston explained, this was also designed through outreach to provide more education and support to charities to help them comply with the requirements under the Income Tax Act as they affect charities.

[John McKay, Liberal, Scarborough—Guildwood, ON]

What's been your experience to date?