Evidence of meeting #60 for Finance in the 40th Parliament, 3rd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cra.
A recording is available from Parliament.
Director General, Resource Management Directorate, Finance and Administration Branch, Canada Revenue Agency
Yes. I think the term “horizontal” here is used—and I believe it's defined earlier in the book--when we're talking about initiatives where there is a shared responsibility for the delivery of an initiative among two or three or more departments.
In this case here, I think this HST initiative is identified overall as a horizontal item because it involves the Canada Border Services Agency and Statistics Canada, which are also receiving some funding.
Conservative
Mike Wallace Conservative Burlington, ON
Well, let me just point out, Mr. Chair, that normally on horizontal items, if it goes between departments, we see it in the front of the book, and I couldn't find that in the front of the book.
Conservative
The Chair Conservative James Rajotte
Okay. Thank you, Mr. Wallace.
Monsieur Mulcair, s'il vous plaît.
NDP
Thomas Mulcair NDP Outremont, QC
Thank you, Mr. Chairman.
Mr. Dinis and Mr. Case, welcome and thank you for your presentations.
I want to go back to the harmonization of the sales tax. I always try to pay careful attention and to respect the fact that you don't work in our area of government activity. I'm trying not to drag you into our battles. However, certain objective aspects of the harmonization file have to guide us in decision-making, and that's why I have to address them with you.
You refer to material or human resources costs as a result of harmonization. The amounts granted to cover the costs incurred for the provinces, in particular British Columbia and Ontario, are amounts that have been paid to those provinces to cover their harmonization efforts. Subsequently, the additional costs you're referring to here today are fixed costs for the Canada Revenue Agency.
Can you tell us whether there is a formula for considering these costs when payment is made to the provinces? In the event Quebec wants to sign a harmonization agreement and continues to collect the harmonized tax, as it is currently doing, it would be important to know how you calculated the amounts in question as objectively as possible. Can you provide us with a summary on that point, Mr. Dinis?
Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
Mr. Chairman, I can talk about the fixed costs. They are the $57 million we're discussing today, for approval. There's no formula as such. It varies from case to case based on the circumstances of a file.
NDP
Thomas Mulcair NDP Outremont, QC
When you say "a file", are you talking about the transaction conducted with a province?
Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
That's correct. In that context, we have some experience with other similar projects. We know, for example, how much it will cost to make certain technical changes to our systems, and so on. We follow a process in order to arrive at those costs. We also know in principle how many additional calls we will manage as a result of the change to a certain program. So certain costs are not entirely fixed, but we have a formula to arrive at that. When we prepare that estimate, we don't follow a fixed formula, but rather principles that we've acquired in the past. That's how we arrive at our estimate. In addition, if there are any special cases in certain files, we also have a process for arriving at those costs.
NDP
Thomas Mulcair NDP Outremont, QC
Is there a place where a taxpayer or an tax-paying MP can find out how to arrive at exactly that calculation? You refer to different cases. We agree that, when harmonization occurred in Quebec—because harmonization has occurred, as your own documents indicate—it was a series of rules. The rules for the Maritime provinces were different from those prevailing today for British Columbia and Ontario.
Is that indeed what we are to understand?
Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
Yes. To arrive at the amount in question, $57 million, we rely on categories such as the communications system, calls, etc. We use certain principles to arrive at those amounts, but these are only costs for the implementation of a program such as this one.
NDP
Thomas Mulcair NDP Outremont, QC
Earlier Mr. Wallace referred to major increases in the amounts granted to the Canada Revenue Agency in recent years. You referred to the fact that systems often have to be put in place, whether it be investigation, evaluation, verification or audit systems, as well as equipment systems, in order to provide follow-up.
Following the widespread media coverage of the case—and we have to be very careful here; I obviously understand that you aren't going to comment on cases and I won't ask you to do so either—of allegations of serious fraud at the Canada Revenue Agency, particularly in Montreal, were increased resources allocated to internal departmental audit and control? If we consider your budgets at the present time and what you've done with the money that has been given to you, have any new and organized efforts been made to deal with this file and to ensure it will never occur again?
Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
Mr. Chair, in response to the member's question, I'd like to assure the committee that on an ongoing basis we do realign resources to the areas that are at the highest priority for risk and of concern to the agency. This is one of the areas, so we are realigning resources to address the concerns the member has raised.
NDP
Thomas Mulcair NDP Outremont, QC
Could we have some indication of the nature of the resources? Are they human resources, financial resources, IT resources or a combination of those three types of resources?
Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
The resources that are being realigned are additional resources from a human resources perspective in particular, but in addition to that, we are making adjustments from a process perspective and a systems perspective as well. It's a combined effort in terms of realigning resources to deal with the priority that has been shared by the member.
NDP
Thomas Mulcair NDP Outremont, QC
Over the years, the federal government has worked on the competition file and has gone as far as the Supreme Court to assert its authority in that field. One Supreme Court decision confirmed that it was a federal jurisdiction. So we have a Competition Bureau that enforces a competition act.
With regard to tax fraud, collusion is one of the most important aspects of that act. This has an enormous influence on public expenditures, when there is collusion in a public market with regard to a call for tenders or a request for estimates by a municipality or a province. There was one very specific case concerning the cost of snow removal from Quebec streets, and a $1 million fine was assessed to a number of businesses that were caught.
Is the Canada Revenue Agency working in close cooperation with the Competition Bureau to screen these files and verify whether everything is going well? The collusion cases were intimately related in this instance because a situation had to be covered up. Are you working on this file with the Competition Bureau?
Conservative
Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
Mr. Chair, I'm not aware, and at this point I'm not in a position to respond to the question. I know we have partnerships with various provincial and other partners. I don't have an answer to the question that has been asked.
Conservative
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you, Mr. Chair.
I thank the witnesses.
I guess the fact that there is a limited number of requests means you're going to get the same question but in a different manner, so going back to the HST implementation, my understanding is that Finance would determine the amount the provinces would receive in terms of compensation. You would not necessarily have any dealings in the negotiating of the sum.
Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
That's correct.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
But then it would be up to you to administer the HST and absorb all the costs of implementing that HST harmonization. Wouldn't Finance ask you what that estimate would be? Why, all of a sudden, an extra $54 million out of the blue, plus $3 million?
Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
Mr. Chair, there's obviously a cost to implementing an arrangement, a harmonization program such as this.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
These are just the incremental costs. An estimate was already involved.
Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
Right. There were two components. One process the committee has seen before was with respect to being well positioned to have the harmonization of the two taxes in those two provinces in place by July 1, 2010.
This is the funding that's required to administer the program on an ongoing basis, and the $57 million is in relation to 2010-11.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
But the original amount, was that in the $300 million?
Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
No. The original amount was $40 million to be able to put the program in place in 2009-10.