Finance Committee on March 1st, 2018

[Adelle Laniel]

No. These are staffing—

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Okay, so those are expenditures used to prepare for its establishment.

[Adelle Laniel]

This is about getting their building and their location.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I would like to come back to the issue of the money allocated to Nova Scotia as equalization payments. Did the government have to readjust the equalization payments for any other provinces?

[The Chair, Liberal, Wayne Easter]

You may as well stay there, Mr. Bothman. Come on up, Mr. Countryman, we might as well haven taken the whole team up in the beginning. Welcome.

[Galen Countryman]

For equalization payments the additional equalization that is specific to Nova Scotia. Equalization currently goes to six provinces for 2017-18 Ontario, Quebec, Nova Scotia, New Brunswick, Prince Edward Island, and Manitoba.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Was the calculation of payments for other provinces accurate? Was is necessary to readjust those payments, as in Nova Scotia's case?

[Galen Countryman]

We calculate the regular equalization payments once per year for the upcoming fiscal year. So they do not change over the course of the fiscal year. It will not change in the supplementary estimates.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Okay.

According to what you said, the readjustment done for Nova Scotia was the result of an update to the data used to calculate payments.

Given that update, do you plan to recalculate the amount of equalization payments for other provinces and provide additional funding as a result?

[Galen Countryman]

If I understood your question, basically the amount of the regular equalization does not change. It does not get revised for any of the other provinces. Because this particular payment is a comparison between the two equalization formulas, the old formula actually does get revised. It has two estimates, whereas the new one stays the same. As it gets revised the second time around, there's going to be a change, and that's what's reflected here in the supplementary estimates.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you very much.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Before we turn to the CRA, does anybody have an absolutely burning question that didn't get answered? If not, we will thank the representatives from the Department of Finance for coming in and bringing the whole team.

Ms. Laniel, that was a good exchange. Thank you very much.

We'll suspend for a couple of minutes while the Canada Revenue Agency comes forward.

[The Chair, Liberal, Wayne Easter]

We'll reconvene.

Welcome to the committee. The Canada Revenue Agency is here for further discussion on supplementary estimates (C). We have Ms. Ramcharan, the Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch. With her are Mr. Gallivan and Mr. Trueman.

Welcome, folks.

The floor is yours, Ms. Ramcharan.

[Kami Ramcharan, Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency]

Thank you.

Good morning. Thank you for the opportunity to appear before the committee to present the Canada Revenue Agency’s 2017-18 supplementary estimates (C).

First, the agency is seeking $11.7 million as a result of a reduction in its accommodations requirement. This was made possible due to a series of cost-saving exercises carried out by the Canada Revenue Agency which has resulted in a reduction in our office space requirements by approximately 36,000 square metres of space, representing a total savings of $11.7 million. These savings can now be applied against other operating priorities.

Second, the Canada Revenue Agency is seeking $6.2 million to support its operations related to the legalization of cannabis, which will include the introduction of a related tax regime.

The incremental funding will be used to expand processing systems to accommodate the new tax and introduce the associated administrative framework. In addition, it will be used to start processing early licence applications, so that cultivators and manufacturers are able to provide legal cannabis on the implementation date.

We're also receiving a backlog in resolving pay issues. Also included in the supplementary estimates is $1.3 million for the increased workload in providing tax service support resulting from the implementation of the Phoenix payroll system.

A backlog in resolving the pay problems has resulted in 2016 tax slips being issued with many expected to result in personal income tax reassessments, creating an additional workload pressure. The one-year funding will be used to adjust staffing levels in the T1 adjustments team in order to manage the increased number of reassessment requests.

Also included in these supplementary estimates is a statutory increase of $1 million associated with adjustments to employee benefit plans for new salary funding being sought through these estimates. Following approval of these supplementary estimates, the agency’s revised 2017-18 authorities will total $4.7 billionxx.

In closing, I will say that the resources sought through these estimates will allow the Canada Revenue Agency to continue to deliver on its mission to administer tax, benefits and related programs, and to ensure compliance on behalf of governments across Canada.

Mr. Chair, we will be pleased to respond to any questions you may have.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Ramcharan.

Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair.

Thank you for the presentation.

I was going to ask a question on the Phoenix pay system, but I think my colleagues will probably ask you a lot of questions in that area.

I do want to ask some questions on the cannabis issue. This is an issue that's still garnering a lot of discussion, especially in my riding. I have a large aboriginal population, so when we talk about the issue of cannabis, our elders roll everything into one, and cannabis is looked at in the same way as any other drug and it's all bad. We have to have ongoing discussions with our smaller communities, for sure. Even as recent as yesterday, some of the members of the legislative assembly in the territorial government were talking about concerns around costing. Are both the pricing and revenue going to meet up? There's lots of concern around this issue.

I'm going to assume that the CRA did a forensic review when they costed out what they were going to need for resources, and what they were going to need to implement the taxation regime for cannabis.

Are there going to be additional requirements to properly implement the tax regime for cannabis? How firm is this number? Are there going to be more requirements?

[Geoff Trueman, Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency]

I'm happy to take that question.

The funding request that we've prepared is based on our best estimates for the cannabis market in Canada in terms of the number of producers and the legal production. We're comfortable and confident in the numbers we've prepared. We have significant experience in the world of excise duty taxation with respect to tobacco, alcohol, and other excisable products, and so we are working to prepare a similar robust framework for the taxation and control of cannabis from the duty perspective.

[Michael McLeod, Liberal, Northwest Territories, NT]

My next question is again around the $6.2 million. Is this funding earmarked for compliance-related aspects of the tax regime?

[Geoff Trueman]

The money for the CRA would involve a robust administrative framework for the excise duty, which does include a compliance and oversight function with regard to producers. It's about focusing on legal production and making sure that the product is properly produced, properly stamped, and properly entered into the market in Canada for legal consumption. Yes, there is a compliance aspect to that as well, including reviews and visits with producers, which we would undertake, similar to most excise products.

[Michael McLeod, Liberal, Northwest Territories, NT]

I also want to ask a question regarding the reduction in accommodation requirements that resulted in a fairly significant saving of $11.7 million. I'm really interested to know how that happened. That seems to be a fairly large number. Could you give me a little more detail on what happened? How did that end up being such a big number? Is there more that we can do in this area?

[Kami Ramcharan]

Over the past couple of years the agency has been looking at its operation. It has a very large footprint from coast to coast with our various tax centre offices, the office buildings where our people work. We found vacancies in some of our buildings.

Like every other government department, we pay rent to support those facilities. We wanted to think about how to reduce our overall accommodation footprint, to bring our people closer together, and to think about synergies associated with some of the work.

At previous committees you would have heard about the revitalization of our service, by bringing people together, by centralizing our services. By virtue of bringing those groups together, we were able to reduce our footprint. As I mentioned in my opening remarks, doing that resulted in 36,000 square metres of vacant space. We were able to turn to our colleagues in Public Services and Procurement Canada and say we no longer needed this space, that we would like the equivalent of whatever rent it would have been paying for those buildings to be returned to the agency.

It's one of those things we would very much like to consider going forward, but it is a policy in government that another government department makes those rules associated with it. We will continue to try to do our best to maximize people in our existing footprint, and look for cost savings wherever we can.

[Michael McLeod, Liberal, Northwest Territories, NT]

You talked about doing a cost-saving exercise. I think most governments try to do that on a regular basis. But when we do some of these exercises and try to do more with less, it doesn't always result in best efficiencies.

Are you seeing results? Are you seeing any change one way or the other? Have you looked at other cost-saving exercises, along with the accommodation and the footprint?

[Kami Ramcharan]

The agency does that on a regular basis. It does look at what it's spending its money on and asks if there is an opportunity to really reinvest in higher priorities for government, and reducing things that are lower priorities.

Space is one of those things. This initiative didn't really result in any loss of efficiencies, because it didn't result in loss of people. It was bringing people together and making sure that was more synergistic.

We undertook an exercise last year to take a look at some of our programs. It was an agency-wide initiative, and it resulted in about $20 million that could be reallocated to other priorities.

We're not trying to do wholesale changes. We're looking at the margins where we can create some efficiencies and continue to do that. We do that on a regular basis.

[The Chair, Liberal, Wayne Easter]

Thank you.

We'll have to leave it there.

Mr. Kelly.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

It's nice to have the officials from the department back. This is their first appearance since the November meetings.

At those meetings, I raised several questions on our side, as did Mr. Fergus and Mr. Easter, about the disability tax credit and the changes that had occurred in May that generated a whole series of rejections of applications from diabetics.

We received the department's response yesterday. It acknowledged that the clarification letter had an impact on the approval rate of diabetes-related cases, and confirmed that the minister announced they would return to the pre-May 17 clarification letter.

The minister had also said they would review the rejected applications, and these ran into the thousands. I see additional money is being requested in these estimates to deal with the debacle around Phoenix—and that's another scenario that, if we have time, I'd certainly like to get into as well. What additional resources are going to be put toward ensuring we finally deal with the Canadians who were denied the credit to which they were entitled since the clarification letter was changed in May?