Evidence of meeting #38 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cra.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Roch Huppé  Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
Brian McCauley  Assistant Commissioner, Canada Revenue Agency
Richard Montroy  Assistant Commissioner, Compliance Programs Branch, Canada Revenue Agency

4:30 p.m.

Conservative

The Chair Conservative James Rajotte

I call this meeting to order.

This is meeting 38 of the Standing Committee on Finance. Our orders of the day, pursuant to Standing Order 81(4), are to study the main estimates for 2014-15, specifically votes 1 and 5 under Canada Revenue Agency, referred to the committee on Thursday, February 27, 2014.

I want to welcome our three officials from the Canada Revenue Agency this afternoon.

First of all, we have Monsieur Roch Huppé.

Welcome.

We have Mr. Brian McCauley, the assistant commissioner. Welcome back. We also welcome Mr. Richard Montroy to the committee.

I believe you have an opening statement to present, and then we'll hear questions from members.

Mr. Huppé, the floor is yours.

4:30 p.m.

Roch Huppé Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency

Thank you, Mr. Chair.

Good afternoon. Thank you for the opportunity to appear before the committee to present the following and to answer any questions you may have on the Canada Revenue Agency’s 2014-15 main estimates.

Mr. Chair, as you are aware, the CRA is responsible for the administration of federal and certain provincial and territorial tax programs, as well as the delivery of a number of benefit payment programs.

Each year, the CRA collects hundreds of billions of dollars of tax revenue for the Government of Canada, and distributes timely and accurate benefit payments to millions of Canadians.

In order to fulfill its mandate, the CRA is seeking the approval of just under $3.9 billion through these 2014-15 main estimates. Of this amount, close to $3 billion requires approval from Parliament, whereas the remaining $900 million represents statutory forecasts that are already approved under separate legislation.

The statutory items include the softwood lumber disbursements to the provinces, children’s special allowance payments, employee benefit plan costs, and the spending of revenues received through the conduct of CRA operations pursuant to section 60 of the CRA Act for administered activities on behalf of the provinces and other government departments.

These 2014-15 main estimates represent a net decrease of $415.6 million, or 9.7%, when compared with the 2013-14 main estimates authorities.

The largest component of this decrease is a $203-million reduction in the projected statutory disbursements to the provinces under the Softwood Lumber Products Export Charge Act. This decrease is to reflect a revised forecast provided by the Department of Finance, which is based on changing prices and volumes in the Canada-United States lumber market.

Other decreases to the agency’s budget include savings of $119 million as a result of the budget 2012 spending review. Most of these savings can be categorized under two broad categories, namely, making it easier for Canadians and businesses to deal with their government, particularly through the provision of faster, more efficient online services, and modernizing and reducing the agency's back office.

There's a reduction of $57.6 million as a result of savings identified as part of the budget 2013 targeted review of CRA's headquarters operations. These savings do not affect services to Canadians and will be achieved by streamlining our internal services, optimizing our IT resources, and improving our organizational alignment.

A $19.7-million adjustment in the transfer from Public Works and Government Services Canada to the CRA, reflecting a decrease in accommodation and real property services.

There's a transfer of $18.7 million to Shared Services Canada, representing the transfer of responsibility for the procurement of end-user software as well as an adjustment to the base funding previously transferred to Shared Services Canada when it was first created.

These decreases are partially offset by new funding approved in a number of areas. This includes $22.3 million to fund salary increases attributable to collective agreements that came into effect in 2011 prior to the recently announced operating budget freeze for 2014-15 and 2015-16.

An additional $17 million in 2014-15 as part of the multi-year upgrade of CRA's personal income tax processing system. These upgrades will leave the CRA in a better position to address increased numbers of tax filers, respond to new tax policy measures, and implement new partnership agreements with provinces, territories and other government departments and agencies.

Finally, there's an increase of $5.4 million for the implementation and administration of various measures affecting individuals, businesses, and charities, announced as part of budget 2012, including the one-year extension of the hiring credit for small businesses, enhancing transparency and accountability for charities, and the introduction of pooled registered pension plans.

In closing, Mr. Chair, the resources sought through these estimates will allow the agency to continue to provide quality services to Canadians by ensuring that taxpayers meet their obligations, Canada’s revenue base is protected, and eligible families and individuals receive timely and correct benefit payments.

Thank you, Mr. Chair.

At this time, my colleagues and I will be pleased to respond to any questions you or the committee members may have on the CRA's 2014-15 main estimates.

4:35 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you kindly for your presentation.

We'll begin with members' questions for seven minutes with Mr. Rankin, please.

4:35 p.m.

NDP

Murray Rankin NDP Victoria, BC

Thank you, Mr. Chair, and thank you to all the witnesses for appearing before the committee today.

I want to first ask questions about the main estimates cuts. Apparently there was $119 million identified in savings as part of the spending review for budget 2012, and then there was $57.6 million in savings identified as part of the 2013 targeted review of the budget. Could you specify for the committee where those cuts were actually made?

4:35 p.m.

Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency

Roch Huppé

First of all, I'd like to make the point that the $119 million is really the variance between the main estimates and the main estimates. Last year, for example, in our main estimates as relating to budget 2012 we had a reduction of $56 million. Therefore, we have a reduction now in our budget of $175 million; therefore, the variance is $119 million. It's the same thing for the targeted review. Last year, 2013-14, was the first year. As it was announced in budget 2013, the actual reduction from a timing perspective did not appear in the main estimates last year, but we had a reduction last year of $19 million. The main estimates showed zero. It was reduced through the supplementary estimates; therefore, you see the $56 million this year.

4:35 p.m.

NDP

Murray Rankin NDP Victoria, BC

Thank you.

Were there any staff positions cut as a consequence, any auditors for example that were no longer hired?

4:35 p.m.

Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency

Roch Huppé

No auditors. There were obviously reductions in FTEs during these. The main savings were generated through increasing our services in an electronic fashion, so adjusting to what Canadians want. A lot of the reductions obviously have to do with just doing things better, especially from a back office perspective, so consolidation of a certain group, better real property footprint.

4:35 p.m.

NDP

Murray Rankin NDP Victoria, BC

Understood.

The main estimates show a major cut to something called taxpayer and business assistance, apparently from $538 million last year to $350 million this year. What taxpayer assistance activities have been eliminated to cover this reduction in funding?

4:35 p.m.

Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency

Roch Huppé

Actually, the reduction I referred to in my opening remarks, the reduction of $203 million, makes up the vast majority of that reduction. That's a reduction in the softwood lumber disbursements, so it doesn't really affect our program. It's just a revision by the Department of Finance as to what we pay out to the provinces.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

Thanks.

At this committee, Department of Finance officials testified about the estimated costs to the CRA associated with carrying out the implementation of the intergovernmental agreement on FATCA. They said, I think, that the cost would be $5.7 million “not including technical costs”. Is that figure correct, and can you tell us what “technical costs” might be referring to?

4:40 p.m.

Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency

Roch Huppé

I'll open by saying the $5.7 million is actually the amount that was tagged through the budget and was given to CRA for the implementation of that.

4:40 p.m.

Brian McCauley Assistant Commissioner, Canada Revenue Agency

Yes, that's the number we were hoping to get through Treasury Board.

I'm not quite sure what the technical costs would be that Finance would have been referring to. Assuming that the implementation of the measure is actually passed, which is yet to happen, if that happens then there's always a hard scrub of the numbers. They may have been making some provision that there might be some minor adjustments, but that number is certainly the ballpark number we're using.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

That's the ballpark number you're running with, $5.7 million, and technical costs aren't some kind of vague add-on that could be millions in infrastructure costs, computer retooling—

4:40 p.m.

Assistant Commissioner, Canada Revenue Agency

Brian McCauley

No, for sure.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

That's good.

How many Canadians are you reckoning will be affected by FATCA? I think we had some discussion before about a figure of a million people being affected by its implementation. Has the CRA done its own estimate of how many Canadians are expected to be affected by this?

4:40 p.m.

Assistant Commissioner, Canada Revenue Agency

Brian McCauley

We haven't done any estimates that are different from what Finance would have done. The way we've designed the system, basically, is that at the end of the day, whether it's 5,000, or 55,000, or 555,000, the system we've built can handle that flow. We're sort of agnostic when it comes to the actual number.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

I'd like to turn to another topic—you can appreciate that I only have a few minutes, so thank you—on CRA corruption.

There were revelations of a cheque, as you know, for nearly $400,000, delivered to a notorious Mafia leader, who at the time owed $1.5 million to the CRA. Obviously, there are great concerns about corruption. The RCMP recently laid criminal charges in that particular matter, but the minister also said there would be an internal investigation. I wonder if you could give the committee an update on the status of that investigation.

4:40 p.m.

Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency

Roch Huppé

That's in relation to that cheque, right? The $300,000 cheque you're referring—

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

I believe it was in relation to a number of issues in the Montreal office of the CRA, including but not limited to that.

4:40 p.m.

Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency

Roch Huppé

There were no charges laid directly related to that particular cheque. The CRA did say that we were going to investigate the issuance of the cheque, which we did. We released the results of that review, which basically confirmed that in the particular case with that cheque, it was an unfortunate error in our processes. The cheque was never cashed, by the way.

It was recovered first.

Our review was validated by Ernst and Young, and that was also—

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

So that was the investigation the minister referred to. It was just—

4:40 p.m.

Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency

Roch Huppé

Absolutely.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

In my part of the world, I've had a number of environmental organizations call to tell me how concerned they are about apparently aggressive auditing of their operations. This was after the $8-million plan to audit charities in 2012, where the minister referred to cracking down on “environmental and other radical groups”. An example would be where someone was told there was a clean audit, happy news, only then to be told that things had changed and the A-team was coming down hard on these environmental organizations.

I presume there's an arm's-length arrangement between the CRA and the government for political interference purposes. Is there some kind of arm's-length arrangement, or can the government be involved in—

4:40 p.m.

Conservative

The Chair Conservative James Rajotte

A very brief response, please; we're bumping up against time

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

What specific arrangements are there to prevent any kind of political interference with audits?