Finance Committee on Oct. 27th, 2014

[Paul Magrath]

Yes, it's a very good question. Unfortunately, TEI really is looking at the policy and tax decisions more from the company's perspective as opposed to the individual taxpayer's perspective, so I don't know that we have a position on the stock option benefit or any statistics around it.

[The Chair, Conservative, James Rajotte]

I think in the interest of time—and colleagues, we do have a motion we obviously want to deal with today—unfortunately, we're going to have to cut it there.

Thank you all for coming in. It was a very lively discussion this afternoon.

Colleagues, we will switch the panels, but I'm going to go right to Mr. Cullen and his motion while we switch the panel.

Thank you to all of our first panel of guests for being here.

Mr. Cullen, we will go to your motion, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you very much.

I have just one single motion, Chair, and I think all committee members should have a copy of the motion in front of them.

Is that true, Mr. Chan, as well? Good.

As committee members will know, there was a bit of a mistake made at the finance department a little while ago. What seems to have taken place—and this has been confirmed by the minister as well—is that there was a premature release of public information about the fall economic update.

There were two primary concerns that were raised for us initially, because this has been alluded to before, when the Liberals were in government and concerns came from Conservatives in opposition at the time. I'll speak very briefly.

One concern was whether there were any particular impacts on the market. The information was up on the finance department's website for only for a few minutes, I think—15 minutes according to the minister—and then was taken down. We didn't know what the information contained. Essentially what was done is that the wrong press release was sent out, and it contained a number of details that were not in the forthcoming legislation. What appears to have happened is that the finance department then got that secondary piece of legislation ready quickly, overnight I assume, and brought forward a motion in the House the next day to introduce it to catch up to what had been revealed publicly.

Now, our first concern was impact on the market. Was anybody able to use the information that they were able to glean in those 15 minutes before it was withdrawn to take some advantage?

I just received this now, Chair, a letter from the minister that I'm happy to distribute. We had written to the minister to clarify first, in terms of that concern around the impact on the market. I feel assured and satisfied with the minister's response that an assessment has taken place internally and that there was no impact, and I think the tax provisions that were accidentally released were unlikely to have any significant impact on anybody's investment decisions.

The second question that I raised with him in my correspondence has not yet been addressed, and that's what this motion also deals with, to invite the minister to come forward to explain how....

Oh, to our witnesses, please come forward and make yourselves comfortable while I prattle on.

The motion is to invite the minister to come forward at a time that is convenient for him to explain how this can't happen in the future, what specific measures are being taken internally to assure...because I would essentially say we got a bit lucky, Chair. If there had been some more substantive measures that had accidentally been released before legislation was presented in Parliament, even if it had been for 30 seconds, as we all know with the digital age that we live in, it could have caused an advantage in the market and a distortion within the market in Canada—particularly large tax measures, and particularly spending initiatives that the government was going to do. I don't want to take potentials, just what we're dealing with right now.

That's the motion. I spoke to the minister briefly today after question period to assure him there is no political motivation in this. This is for the finance department to assure us, as committee members dealing with financial issues, and the broader Canadian public, and the market in particular, that a slip of a computer mouse can't lead to the government releasing sensitive tax information well ahead of when the government has legislation ready and prepared to back it up.

That's what the motion says. We don't ascribe any particular date or a deadline, but certainly, I would imagine this is in the government's interest as well to say that this is the way this can't happen again, and let's be good rather than lucky when it comes to releasing financial information to the broader Canadian public.

That's it for me.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Cullen.

I have Mr. Keddy on the list. Mr. Keddy, please.

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

Thank you, Mr. Chairman.

I want to as quickly as possible review a few of the points Mr. Cullen has made. He has been consulted by the minister, and the minister has also been extremely clear with the media on this issue and exactly what has happened. Mr. Cullen, you state you are also satisfied with the minister's answer, but there are a few facts that really need to be stated.

On October 9, shortly after the Prime Minister announced a significant enhancement to the children's fitness tax credit, the department's consultations and communications branch posted online an incorrect news release on a ways and means motion that was not to be tabled until the following day.

A link to the news release was sent to an electronic distribution list maintained by the department. Though the earlier email would still be in the inboxes, the link became inoperative when the news release was removed from the website, so really there was little chance of real serious damage being done, and it was removed from the department's website within 15 minutes.

Because of the error, the minister moved up the tabling of the ways and means to ensure the information was in the public domain--so he moved it ahead. It was tabled the next day, October 10, with all the measures that were inadvertently released. The minister also went further than that and instructed senior officials in the Department of Finance to implement additional safeguards to ensure such a lapse never happens again.

So for me, Mr. Cullen, with respect, you have been consulted. The minister has also been very clear in the media, plus I've reiterated that again today, and you stated yourself that you're satisfied with the minister's remarks.

The only other thing is that there's a small mistake in your motion that stated it was the fall economic update. Actually it was the budget implementation act bill.

That's really all I have.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Keddy.

We'll go to Mr. Cullen, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Absolutely. I simply want to clarify one thing.

Mr. Keddy is right in that we were satisfied with one of the two concerns that we raised, but we would be mis-characterizing it to say I was fully satisfied.

To be fair, I just received the letter from the minister only a few minutes ago, and in conversation...did read the media reports. It's the second part, not the market issue that was raised and important, but I think it would be certainly reassuring to committee members, myself--and I can't speak for other members--but these very measures the minister talks about having been taken—I don't know what those are—to ensure it doesn't happen again.... Committee members have to be aware of the significance of this. It is not whether this particular incident turned out to be significant, but to not have processes in place in the finance department to not accidentally release, as Mr. Keddy properly points out, the budget implementation act information before it has gone to Parliament, could have serious ramifications, depending on what gets released.

This is a question of basic competence, and again we want to be fair to the minister and to public officials, but the fact this could have happened means it could happen again unless we're reassured. The two sentences in the letter I have received from the minister are certainly not enough, because I don't know what those measures are. All we have is that certain measures have been taken. I don't know what that is. I think it would give them....

Again, this is to give the minister the opportunity to clear the air and say this is what we're doing, this is why it can never happen again, because I think we would at least all agree that this happening again would be hugely problematic if the substance of the information had been of a much more sensitive and impactful nature than it was over the fitness tax credit or the other things that were announced.

Thank you, Chair.

[The Chair, Conservative, James Rajotte]

Thank you.

Colleagues, can I go to a vote on this motion, or is there further discussion required?

Mr. Chan.

[Arnold Chan, Liberal, Scarborough—Agincourt, ON]

For clarification, are we amending the motion slightly to read to the budget implementation act, or is it as it reads?

[The Chair, Conservative, James Rajotte]

I have not received an amendment, so we're dealing with the motion as is.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Why don't I do that, Chair, to clear up the language? I think Mr. Keddy's point was fair, if it's okay to put an amendment forward “contained in the budget implementation act”.

[The Chair, Conservative, James Rajotte]

You can't amend your own motion.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I can't amend my own motion.

I wonder if Mr....

[Murray Rankin, NDP, Victoria, BC]

I'll move to amend it.

[The Chair, Conservative, James Rajotte]

And what are you moving, Mr. Rankin?

[Murray Rankin, NDP, Victoria, BC]

That there be an amendment to the motion to replace the language “Fall Economic Update” with “budget implementation act”.

I think that would do it, wouldn't it?

[The Chair, Conservative, James Rajotte]

Okay. The amendment is to replace “Fall Economic Update” with “budget implementation act”.

Is there discussion on the amendment, Mr. Chan?

[Arnold Chan, Liberal, Scarborough—Agincourt, ON]

No. I will second the motion if necessary.

[The Chair, Conservative, James Rajotte]

All those in favour of the amendment to replace “Fall Economic Update” with “budget implementation act“, please raise your hand.

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

We're wasting time here, Mr. Chairman, really.

[The Chair, Conservative, James Rajotte]

Okay. Well, I'm getting to the amendment and the motion.

[An hon. member]

A recorded vote.

[The Chair, Conservative, James Rajotte]

(Amendment negatived: nays 5; yeas 4)

(Motion negatived: nays 5; yeas 4 [See Minutes of Proceedings])

Thank you all for that discussion.

I want to thank our guests—our witnesses—for your patience. We had to deal with the motion between the two panels. Thank you so much for being here with respect to our pre-budget consultations 2014.

I'll just identify who we have before us. We have, as an individual, Mr. Gareth Kirkby. Welcome to the committee. We have the Canadian Bankers Association, the president, Mr. Terry Campbell. Welcome back. We have the Chartered Professional Accountants of Canada, president and CEO, Mr. Kevin Dancey. From Deloitte we have the global tax policy leader, Mr. Albert Baker, and from the Investment Industry Association of Canada we have Mr. Brian Parker, who's the president and CEO of Acumen Capital Partners.

Welcome to all of you. Thank you so much for being with us.

You each have five minutes maximum for an opening statement, and then we'll have questions from members.

We'll start with Mr. Kirkby, please.

[Gareth Kirkby, As an Individual]

Thank you, Mr. Chair.

I'm here today to share with you the implications of the findings of my master's thesis. I interviewed 16 leaders of charities of various sizes in five sectors and five provinces and also five charity experts. The leaders spoke, most on condition of anonymity, of the impact on their organizations of the threat of CRA audits for political activities and the rhetoric of cabinet ministers since 2012 conflating charities with money launderers, criminal organizations, and even terrorist organizations.

My study discovered that charities are being muffled in their communications and distracted from their publicly beneficial missions by these actions. Studies show most charities have less than 3% of their resources going toward political activities, as seemingly defined by regulations. My data suggests that even those organizations targeted by CRA are, on average, well under the allowable 10% of resources devoted to political activities.

Clearly, there is no obvious problem that needs addressing through stepped-up auditing. The pre-2012 auditing regime was sufficient. Few charities exceed political activity limits as they are generally understood, a fact confirmed by how few charities have publicly been identified by CRA as being out of line. This begs the question as to why the government would devote $13.4 million to beef up political activity audits, while, to use a recent example, reassigning auditing staff pursuing genuine criminals, like tax evaders who shift their money to offshore tax havens.

I found that the government is using the tax collector to fight partisan battles against charities that have different public policy preferences to the government. Researchers who have long studied the voluntary sector have, since 2012, found evidence of politicization of CRA. I am not the first to warn that something is seriously amiss. My contribution is in detailing the effects of these on charities and on national conversations and exploring some of the implications for the health of democracy.

I would suggest that the clearly unnecessary new political activities audit program should be abandoned. Rather than finding a nest of cheating charities, this audit program is muffling and distracting charities from their missions, missions that their citizen supporters presumably want them focused on. Charities are experts in their mission areas, and Canadians know that. The program is thus interfering with important national conversations about public policy choices, arguably at the very time in our history that we need the widest possible input from experts. A democratic society needs to hear all sides of an issue. Why, my interview subjects kept asking, is our federal government afraid of vigorous national discussions? Some answered their own question, and that can be found in my thesis.

I'd like to raise another major issue that came to light in my research. The lack of clear definitions of specific terms in the regulations leaves charities confused and receiving different advice from different lawyers. The examples posted on the CRA website for charities to apply to real-life situations, while acknowledging an improvement over the situation before 2002, are described by some charity leaders as naive and unhelpful.

There are numerous grey areas open to too much interpretation. Allowing people to stay in a state of confusion despite years of feedback about vague definitions and illustrations leads some leaders to think that this is intentional. On top of that, some charity leaders believe that politicization of CRA since 2012 has resulted in these special audits using new interpretations of the regulations. Charities that have repeatedly passed previous in-depth auditing worry about results this time. That's a head-scratcher.

Charities do important work that has historically had all-party support. This auditing program and the government's confrontational rhetoric is not helping address society's needs and it is hurting all charities, including those beyond the targeted sectors.

Thank you for inviting me today.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll hear from Mr. Campbell now.