Evidence of meeting #25 for Finance in the 40th Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was question.
A recording is available from Parliament.
Conservative
The Chair Conservative James Rajotte
Ms. Hall Findlay, we'll come back to this in another round. Thank you.
Robert Carrier Bloc Alfred-Pellan, QC
Thank you, Mr. Chair.
Good morning, ladies and gentlemen. I am addressing Mr. Baker, who represents the Canada Revenue Agency.
All taxpayers have their eyes on your agency because its role consists in taking money from them in order to produce revenue for the government. As you carry out your mission, people often take a very dim view of your work.
Several cases have been brought to my attention where people challenge the policies that you are enforcing. Let me quote three of them which are already being studied and which have to do with post-doctoral scholarships. We have already raised this issue with people from your agency.
In the case of one specific university, you are no longer considering scholarships as students scholarships. You want to tax the bursaries that these people receive in order to do their very important research work.
Another case has to do with independent workers in information technology. You no longer want to consider them as independent workers, but rather as companies that provide services and that pay higher tax rates.
The third case that was recently submitted to us has to do with truckers. These people do not earn much money and they get meal allowances because they are continually on the road all day. Now you do not want to deduct these allowances from their income and you want to tax them.
I am not questioning the quality of your work, but you are challenging some policies that have already been established. Why do you not consult the public before revising your policies? At least, you could warn them that you are about to change your way of collecting taxes, instead of having to come back to get money from people who no longer have it because they were told that it was tax-deductible.
People are complaining about your interventions. Let me contrast these interventions with your tolerance of cigarette smuggling that makes you lose billions in revenue. I would like you to compare the billions of dollars that you are losing while you go after every penny that you can get from certain citizens.
I would like to hear your point of view.
Commissioner and Chief Executive Officer, Canada Revenue Agency
You have raised many issues, sir.
First, the objective of our agency consists in providing the highest quality service to the public, and every Canadian citizen is a client of ours. We provide a lot of services in order to answer their questions and solve their problems. As we have 25 million taxpayers, nearly 2 million companies and many other people working in the field of taxation, problems can crop up at times.
We must look at each case according to the facts and according to law before making a decision. If the taxpayer disagrees with a decision, he can have it reviewed by the Appeals Branch where nearly a thousand people are accountable for reviewing each decision individually. And it is working well. If the taxpayer is still not satisfied with the decision, he can appeal to the Tax Court of Canada. This system is working fairly well. Mainly, our objective is to give them a very high-quality service.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
For the citizens, your machine has overwhelming power. You take money from citizens and then you tell them that they can resort to certain mechanisms to get that money back. However, you have taken away their income in the meantime and you are transferring the burden of proof to them. This is regrettable.
Commissioner and Chief Executive Officer, Canada Revenue Agency
I would just add, Mr. Chair, that these are difficult economic times. We have certain flexibilities in the act and in policy. For instance, if someone is in arrears, we attempt to work out a payment schedule. It's not our interest to see anybody go bankrupt. Personal bankruptcies see businesses go out of business, and we make our best efforts to try to work out an arrangement that makes sense.
At the end of the day, we have to administer the act, and we try to do that as fairly as possible.
Conservative
Mike Wallace Conservative Burlington, ON
Thank you, Mr. Chairman.
I want to quickly finish with Finance and then move on to CRA. In our estimate books we have main estimates for this year, main estimates for last year, the budget for last year for what we planned on spending, and there is a difference between what we planned to spend and what we did. Based on timing, would it not be possible for us to have a column that gives actuals for, in this case, 2008-09, so we could compare what we said we were going to do and what happened? Is there an issue with timing so that could not appear in these books?
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
For the 2008-09 fiscal year, which just ended this past March, we would have audited financial statements sometime in September or October. We could go back one more year to 2007-08 and show you the information you are looking for.
That is in the public accounts, however. In fact, it might be simpler just to reproduce the page in the public accounts for the department that would provide that reconciliation you are looking for.
Conservative
Mike Wallace Conservative Burlington, ON
I'm spending time, which is fine, but to make it easier for the political side to read these things, having an understanding of where we're coming from.... In actual fact, in 2006-07, for example, on the payments to the international development association we're up 20.7% if we spent all the money that's allocated in these budgets, and I'd like to know whether we did or not. I'm assuming we did.
That is the kind of information I think is helpful, so I'd appreciate the answer, and I'll follow up with that.
I have another question that I'll deal with. I'd like questions for CRA now, and I have a few.
First of all, I appreciate the work, obviously, with the finance department. In your overall review, I see the FTEs planned for this year being slightly less than last year. Is that an accurate statement, where you go from 39,795 to 39,481? I think those numbers are in thousands. What is causing the number of employees to go down?
Commissioner and Chief Executive Officer, Canada Revenue Agency
The first point, Mr. Chair, is that it's difficult to do a point-in-time, year-over-year comparison. Based on a point in time, that's our forecast number of full-time equivalents, but for instance, we had the budget of January, and none of that is reflected yet in this--
Conservative
Mike Wallace Conservative Burlington, ON
None of that was reflected. At the time when you were thinking about this, what was causing the reduction? Was it just retirements and not filling those positions?
Commissioner and Chief Executive Officer, Canada Revenue Agency
More often than not, we were not actually anticipating any reduction. It's just at that point because we're not looking at the full-year expenditure picture. In the case of the CRA, we are always reliant on supplementary estimates (A), often (B) and (C), to get the funding for budget measures announced after the formulation of the main estimates.
Conservative
Mike Wallace Conservative Burlington, ON
So for me reading this, I could say CRA is doing a good job—if that's your view—and they're reducing numbers of staff.
I don't know if you know this—I'm sure you do—but if you look at the main estimates, there's you at $2.8 billion in personnel; Treasury Board at about $3 billion, about the same; HRDC at about half, at $1.6 billion; Defence higher, but you're one of the highest spending in the personnel area. I see this going out. So should I not take solace that this number is somewhat accurate? I don't want to hear that.
Commissioner and Chief Executive Officer, Canada Revenue Agency
At a point in time, based on approved authorities and the FTEs that we can afford with those approved authorities, that's accurate. I'm just saying that when it comes time to look back on 2009-10, there will probably be adjustments throughout the year that will also be reflected in the full-time equivalents.
Having said that, Mr. Chair, we have a constant program of transforming our business to try to become more efficient, particularly with the use of technology. In any given program area, we can show that year over year we achieve efficiencies.
Conservative
Mike Wallace Conservative Burlington, ON
Can I ask you another question from this chart on page 12? You've got appeals going up relatively significantly compared to everything else in terms of planned spending for 2009-10. The forecast goes from 117,000 to 126,000. Is there a reason for that increase in appeals that you're expecting?
Commissioner and Chief Executive Officer, Canada Revenue Agency
Yes. First of all, we've had an increase in the volume of activity in our appeals generally overall. I'll give you one example. There have been well-known cases around charitable gifting shelters. We got thousands and thousands of cases in the appeal system. So we've had a workload increase.
We've also augmented our ability to reply to service-related complaints and provide service to the office of the taxpayers' ombudsman. So that accounts for the increases right there.
Conservative
The Chair Conservative James Rajotte
Thank you.
Thank you, Mr. Wallace. You'll have another round, I'm sure.
Mr. McKay, please.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I wanted to go back to this bouncing ball issue of Nortel, JDS Uniphase, etc. I'll direct my questions to Finance rather than Revenue, since Revenue seems to be unable or unwilling to exercise the discretion.
It is absolutely true that equality of treatment under the law is the hallmark of our society. If we have situations where one part of the country receives one tax treatment and another part of the country receives another tax treatment, it's pretty hard to reconcile those two thoughts.
I wanted to ask again, since the bankruptcy of Nortel is imminent and a lot of employees both in Nortel and in other high-tech companies who have received compensation in the form of stock options are going to get clobbered. They're going to absolutely get clobbered, and you're going to be looking at some pretty tragic situations. In fact, you already are looking at tragic situations.
I want to know, flat out, what the Government of Canada is prepared to do about these situations. Is it reasonable to anticipate that these folks will receive the same treatment as the JDS Uniphase folks received?
General Director, Tax Policy Branch, Department of Finance
Thank you.
I think your question is at least a mix of policy and administration, but I will speak to what I draw from it in terms of the policy question.
In relation to stock options, the Income Tax Act taxes employee stock options as an employee benefit. Depending on the type of stock option, the full amount of the benefit may be taxable, or for certain qualifying options issued at market price at the time the option is granted, there may be reduced taxation of the benefit. But that benefit, whether full or partial, is taxed as employment income just as I am taxable on my employment income.
If the employee chooses to keep their stock, what the Income Tax Act does is treat that employee as it would anybody else who has used their income to make an investment in the market—that is, they're taxable on the employment benefit, and the gain or loss following that point in time is taxable at capital gains rates or is allowed as a capital loss.
Without speaking of particular taxpayers or particular corporations, I believe that's the treatment that arises in these cases. The employment income is taxable, and the consequent loss is treated as you or I would be treated if we had a loss.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
But you've got a huge policy hole here. In fact, it's such a huge policy hole that it actually puts us at a competitive disadvantage with other countries. There doesn't seem to be any appetite on the part of the government to address this hole. It's not only a personal tragedy, which seems to be acknowledged, but it also is a policy gap. The U.S. seems to have responded to it. Other countries, to my knowledge, don't have this problem. It's not as if we haven't seen this train coming down the tracks.
What are you doing to address this inconsistency?
General Director, Tax Policy Branch, Department of Finance
Again, as a policy matter, I can only speak to what the law does today. I'm not in a position to table any or announce any changes to them.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
But with greatest respect, sir, if I ask Mr. Baker, all we get is the answer, that is it. That's a ministerial discretion. The ministerial discretion sometimes gets exercised and sometimes doesn't. I talk to you, and you say the policy is this.
I know what the policy is. The policy has a huge hole in it. The minister, for whatever reason, is not prepared to exercise the discretion. Those two thoughts don't live in the same universe. We have an injustice here. We have an inequality of treatment of taxpayers. What is the government going to do?
General Director, Tax Policy Branch, Department of Finance
Again, I can't offer any announcement of the change today; I can only observe that the treatment today is the same as we would have in other circumstances. Whether it's employment income, business income, or other sources of income, if you take that and invest it and lose money on your investment, you remain taxable on your income.
