Finance Committee on March 18th, 2010

[The Chair, Conservative, James Rajotte]

I call to order meeting number three of the Standing Committee on Finance. The orders today, pursuant to Standing Order 81(5), are study of the supplementary estimates (C), 2009-10, vote 1c under the Canada Revenue Agency, referred to the committee on Wednesday, March 3, 2010.

Colleagues, we have two witnesses with us here today from the Canada Revenue Agency.

First of all, we have Mr. Stephen O'Connor, chief financial officer and assistant commissioner for the finance and administration branch. We also have Mr. Filipe Dinis, deputy assistant commissioner, finance and administration branch.

Welcome to both of you.

Mr. O'Connor, I understand you have a brief opening statement. Then we'll have questions from members.

Please begin.

[Stephen O'Connor, Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency]

Thank you very much, Mr. Chair—and yes, it is a very brief opening statement.

Basically, Mr. Chair, as you're aware, the Canada Revenue Agency is responsible for the administration of federal and certain provincial and territorial tax programs, as well as the delivery of a number of benefit payment programs. In support of this mandate, the agency is seeking the approval of two related adjustments in its spending authorities through these supplementary estimates. Taken together, these adjustments will result in a net increase of $6.3 million in the revenue agency's total 2009-10 spending authorities.

The first adjustment is for the funding of $10.1 million received under FISI, the financial interoperability and stewardship initiative, which is a Treasury Board Secretariat-led initiative to assist departments in completing IT projects earlier and to better link financial data and systems, thereby improving the integrity of financial information in the Government of Canada. CRA is among the six departments benefiting from the FISI initiative.

The Canada Revenue Agency and the Canada Border Services Agency share a common corporate administrative system, which is maintained and managed by the Canada Revenue Agency. An upgrade of the corporate administration system and subsequent releases funded from the FISI initiative will improve business-critical planning systems to enhance strategic performance in the management of both financial and human resources. The upcoming releases include a “multiple spending authorities” initiative as well as other financial management human resource improvements in the areas of e-recruitment and compensation.

The second adjustment represents a decrease of $3.8 million, which will be transferred to the Canada Border Services Agency, representing its share of the funding for this initiative, in accordance with the agreement between the two organizations.

With the inclusion of these items, the Canada Revenue Agency's authorities will amount to $4.7 billion.

At this time, we would be prepared and happy to respond to any questions from the committee.

[The Chair, Conservative, James Rajotte]

Thank you for your opening statement.

We'll begin questions from members with Ms. Hall Findlay, please.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you, Mr. Chair.

Thank you very much, gentlemen.

I have just a couple of questions. Obviously, there's not a whole lot here to work with, but there are a couple of items on which I'd ask you to elaborate a little.

We have the number for professional and special services and the number for acquisition of machinery and equipment. Can you elaborate a little bit on the breakdown of those? It would be very helpful.

[Stephen O'Connor]

Certainly.

Let me start with the professional and special services. When the Treasury Board put forward this initiative, they recognized that the nature of the work was short term in nature. The result was they expected that most of the department would be having to not only use their existing employees but also bring in contracted individuals, contract IT specialists.

The nature of our program in particular, which is the corporate administration system, is that it is an SAP-based administrative system, and so from time to time we have to rely on SAP experts who come in to fine-tune and adjust our systems. The professional special services amount is related to those contractors who have come in.

The second item, while it's coded as machinery and equipment.... In some sense, I guess that reflects old thinking, because what it is really is software—the purchase of software, the building of software. It's not, as you may have expected, the acquisition of major pieces of IT gear or equipment.

That's what those two items are.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you.

Having lived through an SAP environment many years ago, that part I can understand, although the numbers are awfully big. Are you saying that all of that professional services item is IT, the full amount?

[Stephen O'Connor]

That's correct, yes.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Can you elaborate on software? Is it different from what other departments have done? What kind of software was it?

[Stephen O'Connor]

There is a group of departments that have the SAP system as their financial system, but I believe there are only about four federal organizations that have SAP for both their financial systems and their human resources systems.

What's happened with us—it was intentional—is that we have now a very integrated system, because under that SAP platform we have our financials, our human resources, our procurement, real property, all of that in an integrated manner. So as I say, it does put us, in a sense, as being a little unique from a large number of the departments, and it results in the fact that in a lot of cases, because we've been at it a little bit longer, we're a bit of a pathfinder in terms of improvements of this nature.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Are we going to have two rounds, Mr. Chair?

[The Chair, Conservative, James Rajotte]

Yes, absolutely.

[Martha Hall Findlay, Liberal, Willowdale, ON]

And do I have a bit more time?

[The Chair, Conservative, James Rajotte]

You have about four and a half minutes.

[Martha Hall Findlay, Liberal, Willowdale, ON]

That's lots more time than I probably need.

Just as an elaboration on both the professional services as well as the software, were those normal course or were those related to any particular...like the home renovation tax credit implementation? Was there any particular aspect that required those increases that otherwise might have been attributable to those particular programs?

[Stephen O'Connor]

No, what you're seeing today has nothing to do with the program side. It's all back office functions. It's basically working on improving our financial systems and working on improving our human resources systems. Consequently, it has nothing to do with any of our program initiatives other than providing the basic underlying support that allows those managers to do their management duties.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Okay.

Thank you.

[The Chair, Conservative, James Rajotte]

Mr. Simms, you have three and a half minutes.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

I'll go very quickly, then.

I notice there's a substantial increase--we're looking at 233%--in P3 investments, the P3 fund itself. We're going from $72.8 million to $242.5 million.

What constitutes an increase of that size, and how many P3 initiatives are we speaking of here?

[Stephen O'Connor]

I'm afraid I can't answer that, sir. That's a Department of Finance supplementary estimate.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

All right.

Well, apparently my time is running more short than I thought.

That's fine.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Simms.

Monsieur Carrier, s'il vous plaît.

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

Thank you, Mr. Chair.

Good afternoon, Mr. O'Connor and Mr. Dinis.

I would like to take advantage of your presence here today to remind you that we talk about your agency a lot in our constituency offices. In fact, a number of constituents, entrepreneurs and investors have had dealings with the Canada Revenue Agency. I wanted to talk to you about the issue of fairness in tax collection. You must certainly be dealing with this since it is you who enforce various government laws.

Please refer to page 388 of the budget in the section on employee stock options. Surely, you must be aware of the situation of people who get an exemption for half of their profit when they buy and resell stock options. In the media this week, we saw the example of bank presidents, in particular Mr. Edmund Clark, President of TD Bank, who made $25.5 million, half of which is tax free. Surely, you are familiar with all that. These examples make us see tax collection in a negative light and show that many people can bend the law when it comes to their own income.

On page 388, a table shows the total amounts of stock option deductions. They amount to $4 billion. In the budget, they took the trouble to say this:

Given the considerable tax benefits provided by the stock option deduction, particularly to high-income individuals, it is important to ensure that it is used in a manner consistent with its intended policy objectives.

Given that you are senior officials at the Canada Revenue Agency, could you tell me what that section implies? Are you closely monitoring how these privileges are applied? And since you are certainly being asked to reflect on the matter, would you not recommend possibly reducing or eliminating these tax deductions as part of a government policy?

[Filipe Dinis, Deputy Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency]

Mr. Chair, unfortunately, we are not in the best position to answer that question. We both focus heavily on the financial aspect. As you know, we are here to talk about the supplementary estimates (C). It would be better to ask someone who deals with policy.

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

Do you not think that, by changing these tax deductions, you would not have to come here and ask us for additional millions to do your job? You could have foreseen this possibility in order to avoid asking for additional funds when we are going through a difficult economic period.

[Filipe Dinis]

Mr. Chair, we are currently studying the amounts of investment needed to implement the budget measures that have been announced. As a result, we do not really have any figures, but we are going to continue working on this question and come back to you with the figures.