Ladies and gentlemen, members of the committee, good morning.
I am Jean-Pierre Mathieu. I am an engineer by training and I have a masters in project management. I have been working for approximately 25 years. I became self-employed in the year 2000. In 2006, my company received assessments from the Quebec Ministry of Revenue for the years 2002 to 2004. The following year, the Canada Revenue Agency also sent me assessments.
Today, I will show you how the economic organization of the information technology industry, which we refer to as IT, does not align with the criteria used to decide the status of personal services businesses, or PSBs as we refer to them. In order to do so, I will begin by describing the organization of the IT market.
In our industry, the demand for computer services comes mainly from the major employers. There are definitely private sector businesses, but also the public sector, the federal government, provinces and municipalities, along with their departments, government organizations, and commercial crown corporations like Canada Post and Hydro Quebec.
In terms of supply, businesses compete with each other in order to satisfy demand. First of all, there are a few major consulting companies and IT businesses such as CGI and LGS-IBM which are in fact the two biggest in Canada. Second, there are several average-size consulting companies as well as employment agencies specializing in IT. Finally, there is a high percentage of small businesses, including the self-employed entrepreneurs.
To give you an idea, in 2008, 86% of information technology businesses employed fewer than 10 people.
It is typical of our industry that companies become incorporated, as a preferred way of functioning. Eighty per cent of self-employed IT workers are incorporated, contrary to other sectors where only 20% are. The status of registered entrepreneur is rather unusual.
Subcontracting is also typical of the industry. The major work providers, particularly the public sector, are not hiring much. They prefer to beef up the staff on their projects through subcontracting rather than hiring more employees.
Another common characteristic is that the major work providers generally do business with the major IT companies for big projects. The result of this situation is that it is very difficult, if not impossible, for self-employed entrepreneurs to offer their services directly to the final client. They are obliged to go through big consulting firms or employment agencies who only act as intermediaries. The business relationship is therefore generally threefold: the self-employed entrepreneur, the intermediary, and the final client.
Sometimes, the relationship is multipartite, which is to say that there are several intermediaries between the work provider and the entrepreneur. A two-party relationship or bipartite relationship, that is to say with a direct link to the client, is also rather rare.
Speaking of this bilateral kind of relationship, I want to point to the case of the Treasury Board of Canada which deals with employer-employee relationships in its policy on government contracts on its website. In 2006, the year that I received my assessments, Treasury Board had set a deadline of 20 weeks for the signing of a service contract with a self-employed person in order to prevent there being any employer-employee relationship.
However, nowhere is there a time limit mentioned in the official documents of the Canada Revenue Agency beyond which the business relationship may be considered as being an employer-employee relationship.
Now that I have given you an overview of the organization of the IT market, I will present an overview of how work is organized within the parameters of a computer project.
Computer systems development is carried out in project mode. A team is tailor-made to produce a computer system. Projects are by definition unique and temporary. There is a beginning, a more or less lengthy middle, and an end. Project duration varies. A small project can last less than a year and require only a few people. On the other hand, a major project can last several years, be divided into several stages, require hundreds of people and cost tens if not hundreds of millions of dollars.
Computer systems development is complex and involves a multitude of activities. I will list a few for you: analysis of the client's needs, the design and programming of software, the setting up of hardware, field trials, and implementation.
An self-employed entrepreneur may be involved in one or several activities according to their expertise. For example, a business analyst would only be involved at the outset of a project in order to analyze the needs of the client. A programmer would be involved from the start of programming until the implementation stage. Finally, a project manager would head up the project from the beginning to the end. One can see that the period of time the services are offered can be shorter or longer.
Moreover, IT professionals provide service according to accepted standards and practices. In our business, best practices are to be found grouped in specialized texts such as the PMBOK Guide, or Project Management Body of Knowledge for project management, and the ISO 9001 standard for quality, which you are certainly aware of.
These are international standards which don't belong to the clients, nor to the consulting firms, but everyone applies them.
As you know, unless a person is in the business of fixing computers, people who work in IT usually have to make many small interventions, and they normally work in the client's office. In fact, they are usually on site all the time during regular business hours, because they have to meet and interact with the people who are working on projects. The service is delivered using the client's information systems.
How does Revenue Canada interpret this? How does it assess the fact that we work on site, full-time and during regular business hours, and that we participate in meetings? It sees these things as monitoring indicators because it says that we participate in the organization of the client's work.
Further, how does Revenue Canada assess the fact that we work on clients' information systems? It is another control indicator because the client provides us with the tools and the equipment, whereas we don't bring in our own.
I have a third example. How does Revenue Canada assess the fact that we fill in time sheets, which is a good project management practice, in order to follow the progress of the entire project?