Finance Committee on March 5th, 2013

[Larry F. Chapman]

Back to what this committee can do, I think it might be useful to have a timetable of when we're going to check in with the Department of Finance on technical legislation at a specific time of year. The fall is an excellent time of year to do that, particularly given their workloads. They brought this bill forward in October, so maybe that's a good time.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Nash.

I'm going to take the next round as the chair.

I want to compliment all of you on your presentations. I appreciate the clarifications with respect to the process. Ms. Plant, I very much appreciated paragraph 3 of your statement, where you say:

Technical amendments are changes made to correct anomalies that arise after the original tax measure was passed and to correct consequences that were not intended. These amendments do not introduce new tax policy or change existing tax policy.

I think that's important for anyone following these hearings. When I told people in my riding that we were debating a 1,000-page tax bill, they got very nervous. They think somebody may want to increase their taxes, which is absolutely not the case. This is not changing tax policy. So I appreciate that clarification.

I did want to follow up with you on the point you made in paragraph 8, in reference to your recommendation that the department regularly draft technical amendments and release them to the public. We have the process with respect to the comfort letters, and then you have the process with respect to legislation. But what all three of you would probably recommend is that the department continue to draft legislation, put it forward, allow for input from the public and experts such as yourselves, modify or amend that as necessary, and then introduce tax legislation. I think that would be the process you would recommend.

[Vicki Plant]

It was certainly part of our recommendation that the draft legislation be released for comment so that practitioners could provide input. That's an important part of the process. This means that before it actually gets tabled in the House, it's had input and it's not going to be a surprise to the practitioners. If there are any glitches, they can be straightened out.

[The Chair, Conservative, James Rajotte]

I'd like to ask our other two guests if they find that the department is doing a good job in drafting legislation and consulting with practitioners on a regular basis.

[Gabe Hayos]

The joint committee is probably one of the biggest contributors to the whole process. Since the middle of 2003, the joint committee has made over 70 submissions, some of them being hugely complicated submissions. So generally speaking, the answer is yes.

The only criticism we ever have is that sometimes we are not given as much time to respond as we might want, but other than that I would say they have been wonderful.

[The Chair, Conservative, James Rajotte]

So generally it has been working very well.

Mr. Chapman, do you have anything to add to that?

[Larry F. Chapman]

No, I think the process works very well. I think Finance is open to consultation and that's a positive. Finance doesn't always agree with the input they receive, but this is complicated stuff and reasonable people have differing views.

[The Chair, Conservative, James Rajotte]

I appreciate that very much.

Mr. Hayos, I wanted to move to your recommendations on the expert panel and royal commission. This committee recommended that in our pre-budget report, tabled in December.

Let's go back to your first recommendation about the office of tax simplification, which was established in the U.K. in 2010, I believe, by the chancellor. For the committee's benefit, could you explain how it operates and why this committee should consider it?

[Gabe Hayos]

We all talk about simplifying the tax act, but there are so many competing interests that a simplification to one person is taking somebody else's advantage away. You have a huge number of competing issues. I think simplification requires a two-part process. One is to try to see if you can tweak the current system, and another is to see if you can make more systemic changes.

In the U.K., they introduced an office of tax simplification. It is an independent body as opposed to being part of their finance group. They both suggest improvements to the system, and they also receive input from the taxpayers. To date, I think they've made 100 legislative changes. I think it's a wonderful way to tweak the current system. It may have some issues to it, and you may need to take a longer-term look to see if you can make more fundamental changes to the act.

[The Chair, Conservative, James Rajotte]

So it's an independent body that provides advice to the chancellor.

[Gabe Hayos]

Exactly.

[The Chair, Conservative, James Rajotte]

Can you describe the make-up of the body and what a similar body would look like here in Canada?

[Gabe Hayos]

I don't know all of its members, but the head of it is actually a chartered accountant from the Institute of Chartered Accountants in England and Wales. This person is a former tax practitioner, an experienced person who's able to understand and comment on technical tax legislation.

[The Chair, Conservative, James Rajotte]

Okay.

Does anyone else want to comment on the establishment of that office?

Mr. Chapman.

[Larry F. Chapman]

Gabe and I are not on opposite ends, but I'm a bit more skeptical about how much we can actually simplify the legislation. There's a trade-off between fairness and simplicity, and that happens every day. If you have a taxpayer before you, and you ask that taxpayer if he would rather have fairness or simplicity, if it's fairness for that person, he's going to choose fairness every day. They'll take the complexity every day of the week and twice on Tuesdays.

[The Chair, Conservative, James Rajotte]

But you can't have fairness and simplicity?

[Larry F. Chapman]

You know what? I think we need to strive for greater simplicity. That's absolutely a worthy goal. But in my 30 years' experience in this profession, I've only seen the act grow in complexity.

I think the professions are being a bit disingenuous if they don't take some responsibility for that added complexity. We can't blame it all on the Department of Finance.

[Gabe Hayos]

I would just add that I think until the government makes a real commitment and does something towards it, we can talk about it until the cows come home and nothing will happen.

I do believe you can make some changes. I've spent 34 years working with this act, and there are areas that can be improved. But it needs government commitment.

[The Chair, Conservative, James Rajotte]

I appreciate that input very much.

Mr. Caron, you have the floor.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chairman.

First, we have heard from the government that it would like Bill C-48 to be passed as quickly as possible. This is an approximately 1,000-page long document. Liberals, Conservatives and ourselves all agree that this is not a particularly controversial bill in terms of its content and technical aspects.

However, two things should be kept in mind. First, the content is made up of the recommendations from the Canada Revenue Agency and the Department of Finance, comfort letters and tribunal rulings. In other words, this is an update of provisions that have generally or often already been applied. It is a confirmation of those provisions. This is legislation that brings it all together.

The second point that we are currently discussing is the issue of process. For ten years there were no legislative updates. We feel that this highlights a very specific and serious problem with the way in which technical bills such as this bill dealing with tax amendments are brought forward and tabled.

From our perspective, we could be accused of not properly playing our role as an opposition if we didn't raise this specific issue of how legislative measures are tabled; we must ensure that this is done efficiently for the sake of taxpayers, accountants, and tax practitioners, but also for the sake of parliamentary process.

I think that we should specifically consider process and how these measures are tabled. That is why I feel that it is very unfair and probably inefficient on the part of the government to ask us to hurry up. In the end, we will not have the opportunity to discuss process if we don't do it now. Once the bill is passed, there will not be unlimited opportunities to come back to the issue.

Furthermore, a little earlier the Minister of State told us that the recommendations that had been tabled by various chartered accountants' organizations and by the Canadian Tax Foundation were definitely interesting and he understood them, but they wouldn't necessarily be implemented.

I would like Mr. Chapman and Mr. Hayos to tell us how long this debate has been going on. Did it happen during previous parliaments? Is this more or less the same debate that you have already heard? If so, based on your experience, can you tell us why we are in this situation in 2013, in Parliament, in terms of process and in terms of amendments still being chosen for consideration in a very random way?

[The Chair, Conservative, James Rajotte]

Who would like to comment—Mr. Chapman?

[Larry F. Chapman]

What I will say is that the last bill was introduced in 2001, so it's been 12 years, right? Before that, the Department of Finance had followed, for a few years, the process of bringing bills forward on a more regular basis. Then this came along.

I'd say there are a lot of reasons why it's taken...and it's not just process. There are a lot of individual reasons why it's taken a long time to get this bill before Parliament. Some parts of this bill, earlier versions of it, were highly controversial in the taxpayer community. With the foreign investment entity rules and the non-resident trust rules, people were concerned about how broadly they applied.

Gabe has talked about the important role of the joint committee in providing input. The joint committee spent a lot of time on it.

To some extent, then, I would say that the community faced with the earlier decision of “Would you have liked to have seen earlier versions of this passed in a different form?” might well have said no. They might have said they'd prefer to see whether the legislation could be improved.

To Finance's credit, they heard all of that. There was a lot of consultation.

I mean, the other part, and you guys know this much better than I do, was that it was a turbulent time in Parliament. This bill was about to be passed, and Parliament was prorogued once and Parliament was dissolved once.

So I think there's joint responsibility around the table. I think our answer to Ms. Nash's question about trying to have more of a timetable is a good way forward. And I encourage you just to study the bill.

[The Chair, Conservative, James Rajotte]

Mr. Hayos, very quickly.

[Gabe Hayos]

There's only one thing I would add, because you've heard a lot about the time delay. I would say that for this committee to do its due diligence, it should be finding out who has made comment on the various technical amendments. That way you'll see it has received good input. That is one step you should take.

[Larry F. Chapman]

One thing you can take some comfort from is that the community is really helping you to do your work.