Evidence of meeting #33 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was information.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Stéphane Eljarrat  Partner, Davies Ward Phillips and Vineberg LLP, As an Individual
Mark Tonkovich  Associate, Baker and McKenzie LLP, As an Individual
Beatrice Raffoul  Vice-President, Public Affairs, Association of Canadian Academic Healthcare Organizations and Canadian Healthcare Association
Carole Presseault  Vice-President, Government and Regulatory Affairs, Certified General Accountants Association of Canada
Harry Blackmore  President, Search and Rescue Volunteer Association of Canada
Pamela Fralick  President and Chief Executive Officer, Canadian Cancer Society
Lindsay Tedds  Assistant Professor, University of Victoria, As an Individual
Dennis Howlett  Executive Director, Canadians for Tax Fairness
Thomas Hayes  President and Chief Executive Officer, GrowthWorks Atlantic Ltd.
Rob Cunningham  Director, Public Issues and Senior Policy Analyst, Canadian Cancer Society

3:30 p.m.

Conservative

The Chair Conservative James Rajotte

I call this meeting to order. This is meeting number 33 of the Standing Committee on Finance, orders of the day pursuant to the order of reference of Tuesday, April 8, 2014, continuing our study of Bill C-31, an act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures.

I want to welcome our guests to the committee this afternoon. For the first panel of discussion on this bill we have, presenting as individuals, Mr. Stéphane Eljarrat. Welcome.

We have Mr. Mark Tonkovich, associate with Baker and McKenzie LLP. Welcome.

From the Association of Canadian Academic Healthcare Organizations and Canadian Healthcare Association, we have Ms. Beatrice Keleher Raffoul, welcome. She is vice-president for public affairs.

We have from the Certified General Accountants Association of Canada, Ms. Carole Presseault, vice-president. I understand this will be her last appearance before our committee in this capacity today. Welcome back to the committee.

We have the president of the Search and Rescue Volunteer Association of Canada, Mr. Harry Blackmore. Welcome to you, sir.

You will each have five minutes, maximum, for your opening statements, and we will then go to questions from members.

We'll begin with Mr. Eljarrat, please.

3:30 p.m.

Stéphane Eljarrat Partner, Davies Ward Phillips and Vineberg LLP, As an Individual

Thank you, Mr. Chair. Good afternoon.

What drew my attention in these provisions is the amendment to subsection 241(9.4) of the act. This amendment aims to broaden or breach tax secrecy by allowing Canada Revenue Agency officials to provide police authorities with information if they have reasonable grounds to believe that an offence has been committed.

I think this provision should be analyzed to take into account all the issues it encompasses, since the Supreme Court reminded us, over 20 years ago, in Slattery,

that the preservation of confidential tax information is extremely important to our tax system, which is based on self-reporting. We have to be careful, when opening that kind of change, allowing the tax authorities to change information and contexts where they believe a crime has been committed, that this will not cause an issue with the fundamental principles that underlie our tax self-reporting system.

I'll be more than happy to answer any questions that this committee may have on my observations with regard to this particular provision, which is subclause 28(3), which amends subsection 241(9.4) of the act.

Thank you.

3:30 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much for your presentation.

Now Mr. Tonkovich, please....

3:30 p.m.

Mark Tonkovich Associate, Baker and McKenzie LLP, As an Individual

Thank you, Mr. Chair.

Thank you to the committee for the invitation to appear in front of you today. I've had the privilege of seeing tax disputes from many different angles: as a lawyer in private practice, as counsel to the federal Department of Justice, and as judicial clerk to the Federal Court of Appeal.

My current legal practice focuses exclusively on helping taxpayers resolve controversies with Canadian tax authorities. But I am here today as an individual, and my comments reflect my personal views, not necessarily those of my firm nor our clients.

Against this background, I am pleased to offer whatever assistance I can to the committee as it consider parts 1 to 4 of the federal budget bill. But I'd like to take the opportunity to highlight two initiatives that stem from the budget.

Canada is working hard to balance budgetary needs and foreign policy against the sophisticated tax planning that exists on the global stage. One continuing challenge is ensuring that the CRA has the tools it needs to maintain the integrity of the tax system while respecting the basic taxpayer rights of consistency, predictability, and fairness. After all, our society and our laws correctly recognize each taxpayer's right to arrange his or her affairs in the most business-savvy and tax-efficient manner.

Returning to the bill, Bill C-31 contains provisions touching on two new information-gathering tools aimed at helping the CRA to achieve its mandate. The first is the introduction of the new electronic funds transfer, or EFT, reporting regime in part XV.1 of the Income Tax Act. The second deals with the CRA initiative today called the offshore tax informant program, or OTIP.

The Department of Finance released legislative proposals relating to the new EFT reporting regime this past January, and the proposed rules are contained in Bill C-31. The rules will require most financial intermediaries to file reports with the CRA days after completing an electronic fund transfer of $10,000 or more, flowing into or leaving Canada at a client's request. The new regime includes detailed provisions defining which financial entities must submit reports, a corresponding record-keeping obligation for those entities, the creation of an offence for the failure to comply with that obligation, and rules explaining that EFT information can also be used for non-income tax purposes.

Although the CRA will need resources to properly monitor and analyze this new EFT information, the proposed regime will undoubtedly provide a fuller picture of traditional fund transfers across our borders. In turn, this will make it easier for the CRA to consider whether those funds have been properly accounted for, for tax purposes.

Moving to the second initiative, the offshore tax informant program, this a whistle-blowing program that was first announced in 2013 budget and was formally launched by the CRA in January of this year. OTIP aims to pay awards of between 5% and 15% of federal tax collected as a result of tips provided to the CRA concerning major international tax non-compliance. Anecdotally, I understand that a number of would-be informants have already started approaching professional advisers and have begun opening informant files with the CRA.

In contrast to the detailed legislative framework for EFT reporting, there are no legislative rules defining the new informant regime. There are a number of provisions in Bill C-31 that relate to the informant program—which I've set out in a schedule to my speaking notes—but these generally touch on how award moneys will be taxed, and how informants will be kept abreast of the status of their file.

Otherwise, all rules pertaining to OTIP are left to the CRA. This includes who can be an informant, whether awards could be paid for information concerning domestic non-compliance as opposed to international non-compliance, whether there are limits on how tax information can be obtained, and whether an informant's identity will be protected down the road.

Leaving the framework to the CRA is efficient in some respects. It allows the rules to be changed without the need to pursue legislative amendments, but it also falls short in certain other respects. For example, without legislative rules or regulations, the extent to which CRA policies can be relied upon or enforced by informants is unclear, as is the breadth of the CRA's authority to pay awards out of taxpayer dollars.

There's also a lack of clarity concerning how information can be obtained, and whether viable tips can, or should, be acquired by breaking the law or breaching professional or ethical obligations. An important public institution such as the CRA should not be seen as encouraging taxpayers or their advisers to cheat or steal to obtain potentially helpful tax information in order to make a buck.

Finally, the scope of the informant's obligations in any future tax assessment or enforcement proceeding is unclear. It's also unclear as to what ends the CRA will go to protect an informant's identity.

Legislated rules providing a certain degree of protection for informants would make the system easier to administer and more reliable for taxpayers. For these reasons, we propose legislative rules or regulations would assist in bringing clarity to the program.

Thank you, Mr. Chair.

3:35 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much for your presentation.

Now we'll hear from the Association of Canadian Academic Healthcare Organizations and Canadian Healthcare Association.

3:35 p.m.

Beatrice Raffoul Vice-President, Public Affairs, Association of Canadian Academic Healthcare Organizations and Canadian Healthcare Association

Mr. Chair, thank you.

I'm the vice-president of public affairs of the new organization formed by the recent merger of the Association of Canadian Academic Healthcare Organizations and the Canadian Healthcare Association. We represent the institutional voice for research hospitals, regional health authorities, their research institutes, community hospitals, and long-term care facilities. For the past four months we have been known under the hyphenated version of our two names, and I invite you to stay tuned for the announcement of our new name on June 1.

The association is pleased to have been invited to appear before the committee to participate in the study of the main estimates and, more specifically, to discuss clauses 56 to 60 of Bill C-31, concerning hospital parking and GST/HST.

In budget 2013, supplies of paid parking were deemed to be taxable, whether provided by the private or public sector, including charities, as it was perceived that all supplying of paid parking was determined to be a commercial activity in order to maintain competitive equity with private sector suppliers. It should be noted that, since the introduction of the GST, paid parking has been excluded from the general exempting provision for supplies made by a public sector body, PSB, for the purposes of the GST/HST. A PSB is a municipality, university, public college, school authority, hospital authority, charity, non-profit organization, or government.

Budget 2013 proposed two measures to clarify that certain special exempting provisions—supplies of the property or service that are made for free, or occasional supplies of paid parking by a PSB such as those made as part of a special fundraising event—would continue to qualify for the exemption.

The Association of Canadian Academic Healthcare Organizations, on behalf of our members and the broader hospital community, immediately brought the implications of such measures to the attention of the Minister of Finance and through him, to the government. To the credit of the minister and the government, implementation of these budget 2013 elements was delayed. Mr. Flaherty and his staff recognized the unintended consequences that they were being apprised of required further analysis. As well, the government recognized that these measures, at the very least, required more consultation. We assisted the government in this consultation process, and we thank them for that opportunity.

A large number of hospitals across the country, although not all, had their foundations or auxiliaries as the operators of their parking facilities. These additional revenues contributed greatly to their donation envelopes for research, medical devices, medical equipment, patient care, and other important items that hospitals and research institutes require, all in the service of better care, better health, better value for the population they serve. In addition, it had been noted that the impact was not just the GST but the full HST where harmonization had taken place.

The late Minister Flaherty's announcement, on January 24, that the proposed amendments to the Excise Tax Act to provide an exemption from the goods and services tax/harmonized sales tax, GST/HST, for hospital parking for patients and visitors was welcome news to the health care community, and for the most part would reverse the budget 2013 proposed measures.

We are very pleased to see these amendments reflected in sections 56 to 60 of Bill C-31, and urge the members of the committee to approve these sections.

I am happy to answer any questions you may have. Thank you.

3:40 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much for your presentation.

Now we'll hear from the Certified General Accountants Association of Canada.

3:40 p.m.

Carole Presseault Vice-President, Government and Regulatory Affairs, Certified General Accountants Association of Canada

Mr. Chair, ladies and gentlemen members of the committee, thank you for the invitation to appear before you today to speak to Bill C-31 concerning the government's Economic Action Plan 2014. We appreciate this opportunity.

You have come to know us well through our many appearances before this committee. CGA-Canada is currently working with the Chartered Professional Accountants of Canada—CPA Canada—to integrate operations under the CPA banner.

Unification will enhance the influence, relevance and contribution of the Canadian accounting profession, both at home and internationally.

In the midst of global economic uncertainty, CGA Canada recognizes the federal government's strong economic leadership to balance the budget and achieve a surplus in 2015. While this bill is deep and wide in its scope, includes a vast array of measures, and affects several federal acts, our comments today will focus on one measure.

We support the proposal in clause 31, part 1 of Bill C-31, on outstanding tax measures. I initially thought that was a typo, but it is clause 31, part 1 of Bill C-31, which amends the Financial Administration Act.

The purpose of this clause is to require the Minister of Finance to table annually in Parliament a list of legislative proposals, but this is not just any list. This list will include publicly announced proposals that have not been enacted by Parliament since the last federal election.

While this measure is definitely a step in the right direction to better manage changes to the Income Tax Act, you have the ability today to further improve clause 31. In its current form, this measure requires the minister to report only the outstanding tax measures from the current Parliament. As a consequence, the list will not include, potentially, the outstanding tax measures that date beyond that Parliament.

Committee members may want to follow the example of Bill C-549, introduced by one of your colleagues, the member of Parliament Mike Allen. Similar to clause 31, Bill C-549 amends the Financial Administration Act to require the Minister of Finance to table a report listing tax measures, which the government publicly announced its intention to legislate.

However, Bill C-549 goes further by requesting cumulative reports as opposed to reports that only start from the last election. Bill C-549 also requires a parliamentary committee to review the report tabled by the minister and submit its findings to Parliament.

We believe it would be preferable for the Minister of Finance to report all outstanding measures without making a distinction between past and present Parliaments. A cumulative list of proposals would greatly improve transparency.

As some of you will remember, it took 12 years for Parliament to pass the latest income tax technical bill. I'm of course referring to Bill C-48. It was almost 1,000 pages in length and enacted hundreds of outstanding tax measures.

To this, we heard very loudly from many parliamentarians, “Never again.” We agree. Canadian taxpayers deserve a more effective and efficient process to manage introduced and legislated outstanding tax measures. In this spirit, we recommend you consider making a minor technical amendment to strengthen the intent of clause 31 to ensure cumulative reporting of unlegislated measures.

CGA-Canada thanks the committee for recommending that the federal government explore ways to simplify Canada's Income Tax Act to reduce complexities and inefficiencies.

We urge you to continue to champion this important issue. Whether it is through the creation of an independent expert panel or an office of tax simplification, or through a parliamentary committee study, we need a national dialogue. Taxation affects every single Canadian, yet there hasn't been any meaningful discussion on Canada's income tax system since the Carter Commission in the 1960s. It is time for parliamentarians, stakeholders, academics and Canadian taxpayers to talk about tax reform.

Mr. Chair and honourable members of the committee, thank you for your time. We look forward to participating in the ensuing discussion.

3:45 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much for your presentation. I'm hoping that thousand-page tax bill will take the place of purgatory at one point in my life.

3:45 p.m.

Voices

Oh, oh!

3:45 p.m.

An hon. member

You've done your time, Chair.

3:45 p.m.

Conservative

The Chair Conservative James Rajotte

Yes.

We'll now hear from Mr. Blackmore, please, with his presentation.

3:45 p.m.

Harry Blackmore President, Search and Rescue Volunteer Association of Canada

Thank you, Mr. Chair.

The Search and Rescue Volunteer Association of Canada is a national organization representing all provincial and territorial ground search and rescue associations, known as GSAR associations. All of these associations and their 300 teams are totally made up of volunteers.

SARVAC is a federally incorporated charitable organization providing oversight, education, and support. We foster, coordinate, and encourage excellence in volunteer search and rescue organizations in Canada. Our vision is to have a national community of skilled search and rescue volunteers whose contributions are valued and supported by the public and all levels of government.

SARVAC has over 9,000 volunteer searchers, team leaders, and search managers who respond to an average of 1,900 calls a year. Combined, they volunteer 142,000 hours in searches, 63,000 hours in training, 10,000 hours in prevention, and 19,000 community hours in ground search and rescue every year.

The Search and Rescue Volunteer Association of Canada, the Civil Air Search and Rescue Association, known as CASARA, and the Canadian Coast Guard Auxiliary are the three lead organizations for volunteer search and rescue in Canada.

For many years SARVAC has championed the provision of a tax credit to recognize the value of the GSAR volunteers who give so much of their time and effort to searches, training, and maintaining a readiness to search for missing people. The new search and rescue volunteers tax credit is therefore truly recognized as a welcome benefit to GSAR volunteers who commit their personal time, effort, and equipment to finding lost persons in their communities. The new tax credit is recognition of the important role played by search and rescue volunteers in contributing to the security and safety of our citizens and visitors to our country.

For the purpose of determining the cost savings that a volunteer imparts, a value of $25 per hour was assigned to various government agencies. These figures are now 10 years old. This means that by using the skilled search and rescue volunteers, there is a huge reduction to the financial burden of governments to carry out SAR missions.

To be eligible to qualify for the new tax credit, a volunteer must have put in 200 hours or more of volunteer time. This will require that all volunteer time is properly documented to ensure that clear supporting records are kept to show primary hours, which include searching, training, meetings, and on-call; and secondary hours, which include maintenance of equipment and prevention, for a minimum of 200 hours required to qualify. Of these, 101 hours must be made up of primary hours.

GSAR volunteers place themselves at risk any time they are responding to a search for a missing or a lost person. Searches often take place in rough terrain, poor weather, and can happen day or night. Searchers are trained in search techniques, first aid, rescue and recovery, navigation, and survival. They offer themselves as a professional resource to policing agencies in Canada.

Thank you very much.

3:50 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much for your presentation.

We'll begin members' questions with Mr. Caron.

Mr. Caron, you have seven minutes.

3:50 p.m.

NDP

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

Thank you very much, Mr. Chair.

I want to thank the witnesses for their presentations.

My first questions are for Mr. Eljarrat and Mr. Tonkovich. I want to discuss tax non-compliance and Canada Revenue Agency's use of informers.

At an information session where department officials explained to us the various provisions of the bill, they told us that anonymous informant tips would no longer be accepted. However, the deputy minister told us he had not heard that the government wanted to abolish or change the existing tip-based program.

So we can assume that, if the agency receives any anonymous information that corresponds to the criteria of the new non-compliance program, as stipulated in the bill, but under the lead program, the informants would be invited to participate in the new program.

To what extent do you think informants will be deterred by the fact that they have to make their collaboration with the Canada Revenue Agency official? Do you think this could scare them off?

3:50 p.m.

Partner, Davies Ward Phillips and Vineberg LLP, As an Individual

Stéphane Eljarrat

I think this is an excellent question that encompasses various aspects.

First, those anonymous informant programs have existed for a very long time. I think they are working relatively well, since there are always some people who are open to providing information without expecting any sort of payment from the government. However, based on my experience and the discussions I have had with individuals familiar with those programs' administration, one of the key conditions for people is anonymity. The first consideration people think about when they call a hotline to provide information is ensuring that their identity will remain secret. Basically, I think those two programs are completely separate to an extent because, in the first case, anonymous informing does not involve a lot of work. The person calls, provides a lead and the authorities, with the means at their disposal, can check the validity of that lead.

However, an official informant program with compensation does require work. The agency will not compensate people for doing nothing or without providing detailed information. The compensation percentage for the informer varies based on the quality of the information they provide and the work done. So I think two different clienteles are involved.

Second, paid whistleblowing mostly has to do with international tax transactions. Those cases are much more complex and difficult to identify than those involving individuals who call in to say that they think their neighbour is buying goods that seem to be beyond their means. I think those two programs are separate. They are based on their own specific problems and their own specific realities.

3:50 p.m.

NDP

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

I would like to come back to you on this topic, but I would also like to hear Mr. Tonkovich's answer.

3:55 p.m.

Associate, Baker and McKenzie LLP, As an Individual

Mark Tonkovich

Thank you, Mr. Chair.

I agree that these are two different types of programs. The indications from the Canada Revenue Agency are that both programs will continue. One is the anonymous program for those individuals who don't wish to make clear who they are or how they obtained this information, more of these anonymous tips just being received without any additional catches. The other program, the one that I had focused on, the offshore tax informant program, has been officialized in the sense that the Canada Revenue Agency has released a number of rules and a number of guidance documents describing how the program would work. One of these is clear that it does require details as to who the informant is and where the information was obtained.

My concern with regard to officializing it is that these are simply administrative guidance documents, and there are no clear regulations or legislative policies explaining how the structure will work or how anonymity against other parties would be maintained. The lack of additional information in this regard is going to make it difficult for professional advisers or for would-be informants to decide whether to come forward, because it's not clear how far the Canada Revenue Agency will go to protect their identity. Frankly, providing this kind of information may come with other types of liability. If there are no clear rules as to how identities will be protected and so forth, then the program will not work as well as it could if there were clear rules.

3:55 p.m.

NDP

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

My time is limited, so I ask that you keep your answers to 30 seconds or 45 seconds.

When I look at the bill's provisions on informants, I feel that the government wanted, on the one hand, to show that it was doing something, but on the other hand, to implement provisions that would likely discourage informants. Do you agree with that?

3:55 p.m.

Partner, Davies Ward Phillips and Vineberg LLP, As an Individual

Stéphane Eljarrat

I will respond very briefly because we could discuss this for hours. I think this program is somewhat inspired by the one in place in the United States, in particular with the IRS. Canada wanted to benefit from that experience.

3:55 p.m.

NDP

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

But the compensation involved is much lower.

3:55 p.m.

Partner, Davies Ward Phillips and Vineberg LLP, As an Individual

Stéphane Eljarrat

The compensation is lower.

We also now see that including the received amounts in the revenue raises some questions. As my colleague pointed out—and I fully agree—the informant will benefit from no protection under the proposed provisions. The extent of the protection for that person's anonymity is far from being clear. They will also have to include in their income tax return the amounts they received from the agency. Consequently, should any legal action be taken later on against that individual for having provided information—either because the information was obtained illegally or for other reasons—they could always be forced, as a witness, to provide their income tax returns. At that point, it could be noted that they did indeed receive the money. So the notion of anonymity is far from being clear.

3:55 p.m.

NDP

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

I am being told that I have only one minute left. So I will ask Mr. Tonkovich to answer this question, as well.

3:55 p.m.

Associate, Baker and McKenzie LLP, As an Individual

Mark Tonkovich

I will speak quickly.

That's actually one of the potential concerns. There are rules and suggested provisions in the bill to include informant awards, for example in the informant's income and things of that nature, but this is only one side of the rule base. There is silence as to how the program itself will work and what kind of protections, for example, would apply to these informants, whether there are forms of privilege or that kind of thing that would go forward.

My concern is that, when I compare that to the electronic fund transfer rules, we have a fairly detailed legislative base there. We don't have quite the same base on the informant side. That may be something for the committee to consider.

3:55 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you.

Thank you, Mr. Caron.

We'll go to Mr. Keddy, please, for seven minutes.