Mr. Chair, thank you for this opportunity to join this panel to discuss chapter 3 of our 2009 fall report in relation to Bill C-48, which is before you now.
In our chapter on income tax legislation, we focused on activities within the Department of Finance Canada and the Canada Revenue Agency that helped to provide or improve legislative clarity for both taxpayers and tax administrators. We have not audited this subject since our 2009 chapter, so we have no view on specific measures in Bill C-48.
During our audit, we reviewed the way the Department of Finance develops technical amendments to be tabled in Parliament. These amendments are aimed at correcting discrepancies identified after the implementation of initial tax measures and getting rid of some unintended consequences. They are not aimed at bringing in new tax policies or amending an existing policy.
In addition, we reviewed how the Canada Revenue Agency helps the Department of Finance determine which technical amendments to make to the act and how they should be formulated. We also reviewed how the agency provided its tax auditors and taxpayers directives on the enforcement and interpretation of the Income Tax Act.
Our system of income taxation depends on taxpayers self-assessing their tax obligation based on a clear understanding of the law. Legislative clarity is important if taxpayers are to easily self-assess and correctly calculate their taxes. When the intent of the legislation is not clearly conveyed by the words, taxpayers may face higher cost to obtain professional advice, may be more willing to use aggressive tax plans, and may need to re-file a tax return at additional cost.
Uncertainty about how the tax law should be interpreted can also affect the efficiency of tax administration. For example, there are higher costs for the agency to provide additional guidance and interpretation to taxpayers and tax auditors. There are also increased administrative costs for the agency to obtain waivers from taxpayers to extend the limitation period for audit reassessments until the uncertainty is resolved. It may even result in lost tax revenues.
In 2009, we found that the list of outstanding technical amendments to the Income Tax Act had been growing and that no income tax technical bill had been passed since 2001. At the time of our audit, there was a backlog of at least 400 technical amendments. Some of these were included in proposed legislation that was first tabled in 2002 but was not enacted.
Following our audit, we recommended that the Department of Finance develop and implement a plan to clear the backlog in terms of required technical amendments. We also recommended that the department develop and publish draft technical amendments regularly so that taxpayers and tax experts can find out what kind of changes will be made and provide feedback on them.
Mr. Chair, when the Department of Finance determines that some changes have to be made to the Income Tax Act, it is important that legislative changes be tabled in the House of Commons promptly. If the proposed legislative amendments are not tabled regularly, they accumulate and turn into a raft of amendments that taxpayers, tax experts and parliamentarians have trouble processing.
Creating a package of technical changes is a start. In the past, the government said that an annual technical bill of routine housekeeping amendments to the act was desirable. Your committee may wish to ask Finance Canada how the department plans to keep the Income Tax Act up to date in the future.
Mr. Chair, that concludes my opening statement. I would pleased to answer your committee's questions.