Finance Committee on May 12th, 2015

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Changing gears for a quick second, I have a cousin who's interested in bitcoin. What's the situation in terms of CRA recognizing bitcoin in currency? How big a deal is it in Canada?

[Rick Stewart]

I think that's a bit of a difficult question to answer at this point in time, because wrapped up in that are policy issues that of course are the prerogative of the Department of Finance. At this point in time, the CRA or the government's position is that bitcoin does not meet the criteria, if you will, to be deemed to be an actual currency. Therefore, it is a commodity like any other commodity with the normal tax rules. The rules we apply to commodity transactions in tax administration are the same rules we apply to bitcoin transactions.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Cannan.

Mr. Cullen, please.

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

To our witnesses, thanks for being here.

I have a letter from Karen Walter. She is posted overseas with her husband in NORAD in the United States. She received a letter from you folks at the CRA, a relatively aggressive one, telling her this:

[W]e have determined that you may have to pay a tax on the contributions you made [to your TFSA] while you were a non-resident of Canada in 2013. If this is the case, you should withdraw the contributions immediately to avoid any future tax.

Ms. Walter wasn't the only one. Her husband is posted at NORAD. We obviously have Canadian Forces posted all over the world. CRA policy states “if there is evidence that an individual's return to Canada was foreseen at the time of his or her departure, the CRA will attach more significance to the individual's remaining residential ties with Canada”.

Do Canadian Forces and their families not qualify under international residency, paragraph 1.17? Why are Canadian Forces families getting these letters from the CRA telling them that their contributions are not compliant with Canadian tax policy?

[Rick Stewart]

Mr. Chair, I think you can appreciate that I'm not in a particularly good position to respond directly to the question.

Mr. Cullen, perhaps that could be forwarded back to us. We will take this back to the department, absolutely. If you could share the correspondence with us as well, just to help facilitate that, we'll look into it.

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

I'd be more than happy to. You've had this since February 25 of this year.

The concern for many Canadian Forces families not only at this base but many bases is that families are getting these letters telling them that they're not in compliance with Canadian tax law and that they can't apply and receive the contributions through their TFSAs. I understand that CRA is a big organization and at times faceless, but you can understand the stress that's putting on families who in some cases are already stressed. We'll forward to you all of Ms. Walter's letters, which you already have.

I want to move to a point Mr. Cannan was making about the good work of the CFIB and the important work of small businesses in Canada. I thought he was going in a different direction, because your internal audit shows that one in four questions to your small business department were being answered incorrectly.

Has the CRA looked to waive any penalties that small businesses may have incurred after they received wrong advice from the CRA, going to the future? You can understand the frustration of small businesses. They phone the CRA office. They wait patiently. They get advice. They file taxes that way, and if the advice is wrong, it won't be the CRA paying the penalties; it will be the small businesses.

[Ted Gallivan]

I appreciate the question.

At the agency, obviously, we need to strive for 100% accuracy. Any level of error is not acceptable. Notwithstanding that our internal stats show roughly a 92% accuracy rate, it's just not acceptable. We appreciate that. We have a taxpayer relief program in place to deal with this specific eventuality, and your specific question. The taxpayer relief program gives the minister, and delegates to officials, the authority to waive penalties and interest. One of the specific criteria is departmental error.

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

The question, though, is that if the small business says, “I received this advice....” I'm going to challenge you on that 92%; I know that's internal, but it was your own internal survey that showed the accuracy rate at 75%. You actually omitted one of the seven questions asked to help the numbers out. CFIB was the one that was probing on this, that is, if a business says, “I phoned and this is the advice I got” and if the business doesn't have any evidence other than that, the CRA is going to say, “Sorry, we don't have a record of that, so you owe us x number of dollars and you owe penalties because you filled out your taxes wrong.”

[Ted Gallivan]

This specific concern was brought to light a number of years ago, and it was actually the first time the minister—it was Minister Shea—received the Golden Scissors Award from the CFIB where we instituted a written online question service. To address that specific concern, taxpayers can go into their My Business Account or rep account and ask a question. The CRA will provide a written response and the CRA has said that we will stand behind that written advice and hold taxpayers harmless from penalty and interest.

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

Are we talking about advice over the phone?

[Ted Gallivan]

The concern was there is no written record of a phone conversation, and so, to go back to a phone conversation, it's taxpayer relief. The taxpayer would have to contact the CRA and indicate that they were given inaccurate information. Under the criteria of taxpayer relief, departmental error is one of the criteria through which the taxpayer could see the penalty and interest waived.

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

Thank you.

We just finished a fairly lengthy study on combatting terrorist financing and money laundering. How much do we spend annually in Canada on those initiatives through the CRA?

[Rick Stewart]

For CRA specifically, the unit we have that is involved in that, we spend roughly—I didn't bring the stats with me today—I think it's around $3 million a year. Those are the resources we have committed to that unit within my directorate.

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

Around $3 million, and what was the allocation to auditing and going after charitable groups in the last budget from the federal government? How much money does the CRA have for charitable audits?

[Rick Stewart]

As a result of the budget 2012 initiative? I believe it's around $13.5 million over a five-year period.

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

Here's the confusion. We have growing terrorist threats globally. We're spending $3 million a year going after terrorism and money laundering, and $13 million a year going after Canadian charities.

[Rick Stewart]

I think that CRA is not the only organization that is involved in monitoring and pursuing terrorist financing. We are actually a very small bit of a bigger effort, but nobody else does charities registration.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Cullen.

Mr. Van Kesteren, for your round, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, witnesses, for coming. It's been good testimony this morning. I thank you.

I find the CRA, although certainly you probably have your problems, for the most part to be very professional. I want to thank you for the work you do.

I'm encouraged by some of the things I'm hearing. Mr. Cannan spoke about small businesses. I come from a small business environment. I started my day off this morning, as a matter of fact, talking to a small business owner about some of the frustrations. It wasn't in regard to your department, but the theme is generally the same. I'm encouraged to hear that you've implemented some policies that are helping small businesses, and I think they're working.

What I think we spent more time talking about this morning was on the area of sensitivity. I'm wondering if you do training. His comment was, “Don't these people understand that our businesses have to make a profit, and if we're not in business, we're not going to be there?” I find a lot of businesses get frustrated to the point where they say, “What am I doing this for?” I'm wondering if you're engaged with the employees at CRA so that they understand the frustrations that small businesses go through. Maybe you could comment on that.

[Ted Gallivan]

I'll make three quick points.

First, the 6,000 auditor workforce I mentioned previously all receive sensitivity training on business realities, and then specific training around sector-specific issues. We provide that training up front.

A second thing I'd mention is last year we piloted and have now made permanent something called the liaison officer initiative, where auditors invite businesses to receive a CRA official in their place of business in a non-audit context, with no possible reassessment, to talk to them about common errors and mistakes and help them get it right from the start.

We see those two measures as reactive and reflective of the small business reality.

The third point is the minister recently announced a review of our output in letters for plain language and understandability so that we communicate with Canadians in a manner they understand, that's clear and offers them the help they need, rather than in an aggressive tone that may confuse the issue.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Do you get that message across? I don't see it on television. Are there ways that maybe we could improve on that? Are businesses getting that message?

I'm going to tell you, in a small business, oftentimes I would get forms from CRA and if it looked like it was basically the same form for a remittance or something, I wouldn't read all the preamble, so I'm wondering if you're getting that message across to businesses.

[Rick Stewart]

This was an issue that I heard on a consistent basis in the consultation forums that I participated in over the course of last fall. In many cases there was surprise on the part of small businesses when they were informed that there were certain flexibilities that were available to them, for instance, information availability. To be frank, I'm not sure that we have done the job that we need to do in ensuring that the small business community is fully cognizant of the services that we have available to them. Frankly, that is something we'll have to do a better job of going forward, and certainly our commitment is to kind of redouble our efforts to improve that communication.

I don't think it is just about us. I think it is about CRA also working with some key partners like CFIB and CPA Canada, because they can help us play a role in communicating with their own members the flexibilities that exist and the information that's available. We'll be taking that seriously on board.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I'm glad to hear that.

Very quickly, the other business owner who I spoke to on the weekend was expressing his frustrations with the underground economy. He is in the demolition industry. A lot of the regulations were not just regulations or restrictions on the federal side, but they're also on the provincial side. The question I hear repeatedly is, “What am I doing this for?” They talk about using those same techniques that are hurting them. What is CRA doing to combat that sort of problem that we have in this country of the underground economy?

[Ted Gallivan]

Last fall we released a renewed three-year underground economy strategy. What's new is a focus on the demand side, on the consumer side, working in partnership with key stakeholders. The minister established an advisory committee, and we have people from the CFIB, Canadian Home Builders' Association, and others at the table using their credible voices to get the message out.

The budget proposes an additional $118 million over five years that would provide for roughly 150 additional full-time equivalents in the field. That strategy very much is about a level playing field. As we go into these audits and as we talk to these auditors, it is about the people who are underground, who are making all of us pay more, and about establishing a level playing field for the businesses.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Mr. Dionne Labelle, the floor is yours.