Finance Committee on May 5th, 2009

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

Would it be for personnel or technology?

[William Baker]

It would be for both.

James, I'm not sure if you have more to add.

[James Ralston]

I think you've pretty much covered it.

[William Baker]

Okay, I think I've covered that.

[The Chair, Conservative, James Rajotte]

Last question.

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

So you wouldn't necessarily refer that to FINTRAC, but it would be within the CRA?

[William Baker]

This is all part of the government's anti-terrorism initiative. Of course, we have relationships.... We receive referrals from FINTRAC, and of course, we also work closely with the Department of Public Safety.

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

My time is almost up, so I just have to ask this last question.

[The Chair, Conservative, James Rajotte]

It's your last, last question.

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

We didn't have a budget last year for the taxpayers' ombudsman. It's a newly created department. It's going to be under CRA. You're responsible for the funding, but it's supposed to be independent. Are you comfortable with that? And who came up with the $3.3 million?

[William Baker]

Well, when the government decided to create a taxpayers' ombudsman, work was done on defining the mandate through the order in council. Of course, from that we developed an estimate of what the annual operating costs would be for the taxpayers' ombudsman. Mr. Dubé, the ombudsman, has been in office now for a little over a year. He's getting through one tax season as we speak, and we'll be in a position shortly to assess whether we set the right amount.

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

So you're working with him?

[William Baker]

On the budget side, yes.

[The Chair, Conservative, James Rajotte]

Mr. Carrier, you have five minutes.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Mr. Baker, in reference to the questions I put earlier, I do not feel that the thousands of people who are concerned by the three cases I mentioned will be satisfied with the answers that you gave. I know that we have time constraints: five minutes go by very quickly.

I would like to hear your comments on one basic element. Certainly, you must observe the legislation adopted by the House of Commons. However, when you have to send out a notice of assessment in the course of your audits, there must certainly be a distinction between someone who forgot some factors in his calculations or who made errors or who did not fill out the declaration correctly and someone who is at the mercy of the enforcement of new policies, as in the cases I mentioned to you where certain sums had previously been deductible. These are not people who tried to defraud the system.

The agency unilaterally states that things have changed and it asks for money that it should have asked for during the previous years. Rather than send out a notice of assessment, could you not send these people a letter that says that the agency now considers that the policy is not correct, and give them 60 or 90 days to state their arguments, or else the measure will be enforced? This would give people the time to react. Currently, some people go into a panic, they feel distressed and they say that they cannot afford to pay this notice of assessment that goes back a few years. Does the legislation oblige you to act so harshly, in my opinion, or is this the customary behaviour of the Canada Revenue Agency?

[William Baker]

The Canadian tax system is based on the principle of responsibility of the individual taxpayers to make the proper declaration of taxes payable. We do whatever we need to do to assist them. If you've been on our website, we have publications and we work with tax professional groups to make sure the information is out there.

Certainly if there is a change in tax policy, both the Department of Finance and the CRA make efforts to communicate that change so that people are not caught by surprise. In our determination of any penalties or adjustments, we obviously look at timing issues around that to try to be aware of that.

You were also referring, in the latter part of your comment, to challenges today of people paying taxes owed. I mentioned earlier that we have some flexibility under the act to work out payment arrangements to help people. But at the end of the day, a tax debt is a tax debt. Taxpayers expect other taxpayers to pay their taxes, and that's what we have to accomplish.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you.

I will let my colleague use the remaining time.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Baker, in 2007, the Minister of Finance had proposed a measure to get rid of the double tax deduction granted to companies with head offices outside Canada. This year, in 2009, he withdrew this measure to allow for a form of tax avoidance for some companies.

Can you tell us the amount that the government will lose by applying this measure? If you cannot tell us that today, could you send us the figures?

[William Baker]

I don't have the figures, but with your permission, Mr. Chair, I am asking Wayne Adams, who is our senior technical officer in the CRA, to reply to that question.

[Wayne Adams, Director General, Income Tax Rulings Directorate, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency]

Thank you very much for the question.

The provision you are referring to is a measure that was tabled by our colleagues in the Department of Finance--section 18.2--to deal with certain interest deductibility. It had a nickname: double dips. We appeared before this committee two years ago, I believe.

That measure was repealed. It means that if companies are now entitled to certain deductions for moneys they laid out, that wouldn't be a field in the corporate tax return that we'd be able to capture and report back to you. It was determined by the panel to review international taxation that this measure was harmful to Canada, and the decision was made to repeal it.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

I understand the system quite well, but how much money will the government forego in the future, each year, by withdrawing the exclusion?

If you don't have that information with you today, I would appreciate it if you could forward it to us.

[The Chair, Conservative, James Rajotte]

Just give a very brief response, if possible.

[Wayne Adams]

When the measure was first proposed, there was an estimate in the budget documents of how much was thought to be recovered, and those estimates would largely be...our colleagues at the Department of Finance.

[The Chair, Conservative, James Rajotte]

Okay, do we have a brief answer?

[Brian Ernewein]

A very brief answer. The measure was projected to come into effect in 2011 or 2012, I believe, and the revenue estimates for the repeal of section 18.2 are $80 million for 2012-13 and $105 million for 2013-14.