Finance Committee on May 8th, 2014

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

Welcome to our witnesses. I'm looking forward to good and robust discussion.

I want to continue on for a moment on the offshore tax informant and the difference between anonymous information and paid information. I recognize the points that both Mark and Stéphane have brought up, but you're well aware that under the Income Tax Act, CRA is criminally responsible for individuals' information, so obviously the system will have to recognize that. Government is responsible, so it has to be protected.

You are aware of the clause, I'm certain.

[Stéphane Eljarrat]

Just to be clear, you're talking about the fact that it's illegal for the authorities to release information under section 241?

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Yes.

[Stéphane Eljarrat]

Clearly it is, but we're also seeing under the proposed change to subsection 241(9.4) that, in certain circumstances, the CRA would be able to provide that information to other authorities.

That being said, as I mentioned before and like my colleague says, because there are no rules, there are all kinds of issues, such as third party liability lawsuits that people could face. One of the points I was just trying to make as an example is, if the person is forced to include in their income the receipt they got from the Canada Revenue Agency for their help, if there is a lawsuit later, that person could be forced in civil courts to present himself under a subpoena with their tax returns, and that information then would appear.

But there are other serious issues with regard to whether or not in all circumstances CRA would be able to protect the information. For example, if the person is charged for tax evasion, in certain circumstances there is an informant protection at common law that exists for police informants, but when innocence is at stake also in certain circumstances, that information must be released.

So it's just not completely clear. I agree that, if the rules were set out in more detail as to how the protections would work, I think it would help the program function better. I definitely agree with Mr. Tonkovich on this.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Go ahead.

[Mark Tonkovich]

I agree with Mr. Eljarrat, obviously. I think we share a similar position on this point.

I am certainly familiar about the rules prohibiting disclosure of taxpayer information by the Canada Revenue Agency. However, there are a number of exceptions to those rules, one of which is if it's necessary for the purposes of administration or enforcement of the act.

This is something that comes up particularly in the context of assessment in enforcement proceedings. When taxpayers who are covered by this confidential and anonymous information or non-anonymous information, if they have been assessed for taxes and the matter proceeds to court to collect those taxes, then those kinds of protections won't apply or may not apply.

My concern is that, without including some type of provision making clear when the anonymity will be protected, when the identities will be protected, it leaves a gap there to decide when we're advising potential informants.... Even if we're not advising, it leaves a gap for the informants themselves to decide whether or not to come forward because it's not quite clear how their identity will be protected down the road.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

I appreciate that. I do have other questions, but I think it's worth repeating that CRA has an obligation to protect all taxpayer information that is within their system. If you take that as fact at the beginning, that would also go to mean that we are going to protect anonymous information and any information coming out of this new offshore tax informant legislation.

I have a quick question.

How much time do I have, Mr. Chair?

[The Chair, Conservative, James Rajotte]

You have three minutes.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Oh, I'm doing better than I thought.

Mr. Blackmore, thank you for being here today.

I represent a rural coastal riding in Nova Scotia, so we have a great relationship with our coast guard auxiliary and land-based search and rescue, and volunteer firefighters. We're small-town Canada in a big way because the largest community in my riding is 8,000 people. So we're very rural.

Part of this budget allows the combination of the search and rescue and the volunteer firefighter tax credit for your body. Do you have any realistic opinion on the numbers that this could affect? For small communities, some volunteer firefighters may get 100 hours as a volunteer firefighter. They may get 110 hours in search and rescue, but they don't have enough of either one individually to qualify. So is there a number out there that...?

[Harry Blackmore]

Right now, under 200 hours, you can combine them according to CRA, so if they do have 100 and 110, as long as one is enough to make primary and secondary, they can combine them and just claim once. Therefore, that's the reason smaller towns combine them, because the volunteer firefighters had this two years ago, and now this gives everybody a chance, because a lot of them were in between. Now most of them can hopefully avail of it with the program being combined.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you.

Beatrice Keleher, you talked about GST/HST on hospital parking. I think that was one of those items that got lost in the mix, if you will. Do you have any idea of an actual number that hospital parking is worth to hospitals? I was in a hospital parking lot three weeks ago, and it was midday and I counted the cars. There were 125 cars in the parking lot. That was at two o'clock in the afternoon at three bucks a hit. I assume a lot more went in and out of there during the day, so it should be quite a good revenue generator for hospitals.

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

[Beatrice Raffoul]

Yes, in fact it was. That was the reason, when this measure came out of the blue, the impact was severe. The remittance of that GST, which would have been implemented immediately, would have meant in the neighbourhood, for example, in the province of Quebec, of some $10 million, just for the GST, just in one province alone. So that's 13% of what number?

This was very significant. As I said, the minister had not fully appreciated.... They were trying to close the loophole, but they hadn't factored in this particular matter coming to light as it did.

[The Chair, Conservative, James Rajotte]

Thank you very much.

Thank you, Mr. Keddy.

Mr. Dubourg, go ahead. You have seven minutes.

[Emmanuel Dubourg, Liberal, Bourassa, QC]

Thank you, Mr. Chair.

It is my turn to say hello to all the witnesses joining us this afternoon.

My question is for Mr. Eljarrat.

Not so long ago, in 2012, Mr. Eljarrat was representing his organization at a meeting of a Quebec parliamentary commission. The topic of discussion was breaches of confidentiality of information.

We know that the Canada Revenue Agency has a lot of power to obtain information. We also know that we have a voluntary compliance system in place for the Income Tax Act. However, the negative impact of measures such as the one proposed in Bill C-31 is huge, not to mention the fact that the agency has also concluded information exchange agreements with the Quebec revenue department, among others. While I was a member of the Quebec National Assembly, the Ordre des comptables professionnels agréés du Québec and the Barreau du Quebec told the minister that proposing such a measure was really inappropriate. One of the experts in attendance was Mr. Eljarrat. I would like him to remind the committee members of the negative impact a measure like the one proposed in Bill C-31 can have.

[Stéphane Eljarrat]

Thank you, Mr. Dubourg.

I believe you are referring to subclause 28(3) of the bill, which amends section 241 of the Income Tax Act by inserting subsection 241(9.5). Is that right?

[Emmanuel Dubourg, Liberal, Bourassa, QC]

Yes.

[Stéphane Eljarrat]

As I mentioned in my opening statement, I would simply say that the Supreme Court reminded us, in its Slattery ruling, that confidentiality of tax information is fundamental in our self-assessment system.

We have to report all of our income. In order for our system to work and for all Canadians to ultimately be able to benefit from the accurate reporting of all income, they must be able to do so without fear of finding themselves in a situation where this information could lead to charges or a criminal prosecution in an entirely different context. Let us keep in mind that people report their income fully because they are legally required to do so.

However, we have to be careful because our world is changing and we have to adapt. Some of the realities include the fact that the legislation pertains to issues related to terrorism and some extremely serious matters. We need to understand the current situation and the changing world.

We do need to keep in mind that tax secrecy still has some benefits. If people begin to fear providing information, all taxpayers could lose out because part of the income would not be reported, and abuses could take place.

As you mentioned, the Quebec legislation has a provision that is similar, but contains a major difference. I am talking about section 69.0.0.12 of the Tax Administration Act. The provision stipulates that this type of information can be shared, but only with a judge's permission.

I think this requirement—the addition of a judge's permission between the agency and the police authorities—would, on the one hand, help make those information exchanges adequate when they are necessary and avoid their becoming automatic and, on the other hand, help protect both the police investigation and the tax authorities. Those authorities have a dual responsibility. They ensure that taxes are paid in a civil manner and that they can also result in criminal prosecutions in case of tax evasion.

When the authorities conduct civil audits, they have the power to compel—in other words, they can force people to provide information. If the information is compelled, later on, could someone be acquitted of a charge based on the information provided?

That would jeopardize this provision's objective, which is ultimately to obtain a conviction. The ultimate goal is not to charge criminals, but to convict them. So it is pointless to adopt measures that can lead to abuses.

That is why I am recommending that this committee consider the measure adopted in other jurisdictions, especially Quebec, to add a judge to the process. That would help strike a balance between the new reality of fighting some extremely serious crimes and the change to Canada Revenue Agency's role.

[Emmanuel Dubourg, Liberal, Bourassa, QC]

Thank you.

How much time do I have left, Mr. Chair?

[The Chair, Conservative, James Rajotte]

Two minutes.

[Emmanuel Dubourg, Liberal, Bourassa, QC]

Thank you, Mr. Chair.

You heard what Mr. Eljarrat said. It could not have been stated more clearly.

I would like to ask Mark Tonkovich a question about the Offshore Tax Informant Program. As it was mentioned, this program is somewhat based on the American system.

Was it not due to the fact that cuts were made at Canada Revenue Agency that such a measure for informants was developed in an attempt to generate additional revenue?

[Mark Tonkovich]

I think that's a very reasonable inference to make. This is an attempt to get more tax revenue into the system. More accurately, I think it's an attempt to get tax revenue that may have otherwise escaped the system and should have been there in the first place. So, yes, certainly that is a way to look at the new offshore tax informant program.

[Emmanuel Dubourg, Liberal, Bourassa, QC]

I also think that an in-depth review of the current informant program may be in order. Perhaps the Auditor General should be involved to ensure that the program is working.

It's true that this program has existed for a long time. Is it fairly effective when it comes to leads? How do the Canada Revenue Agency auditors use it? How far do they go with those systems? I think it would also be a good idea to look into everything.

What do you think?

[The Chair, Conservative, James Rajotte]

Just a brief response....

[Mark Tonkovich]

I think it does make sense to compare the efficacy of the existing program. If the Auditor General is going to do this, then I suggest comparing that as well to, for example, the United States program. How effective is the new award program compared to regular informants or anonymous informants that existed before that program was introduced?