Evidence of meeting #136 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was million.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Adelle Laniel  Chief Financial Officer, Financial Management Directorate, Corporate Services Branch, Department of Finance
Galen Countryman  Director General, Federal-Provincial Relations and Social Policy Branch, Department of Finance
Brad Recker  Director, Fiscal Policy Division, Economic and Fiscal Policy Branch, Department of Finance
Rick Stewart  Assistant Deputy Minister, International Trade and Finance Branch, Department of Finance
Nicolas Moreau  Director, Funds Management Division, Financial Sector Policy Branch, Department of Finance
Leah Anderson  Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
Miodrag Jovanovic  Associate Assistant Deputy Minister, Tax Policy Branch, Department of Finance
Richard Botham  Assistant Deputy Minister, Economic Development and Corporate Finance Branch, Department of Finance
Kami Ramcharan  Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
Geoff Trueman  Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
Ted Gallivan  Assistant Commissioner, International, Large Business and Investigations Branch, Canada Revenue Agency

10:30 a.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Thank you, Chair.

Good morning, everyone.

I just wanted to elaborate on the $1-billion investment that we've made in CRA. That $1 billion was $500 million in year one, in budget 2016, and then another $444 million was in year two. I think those were the numbers.

In terms of the progress that CRA has made and the tools available to CRA, are we at a point where you folks at CRA have the resources to ensure that all Canadians, all Canadian organizations, and foreign organizations in Canada are paying their fair share of taxes?

10:30 a.m.

Assistant Commissioner, International, Large Business and Investigations Branch, Canada Revenue Agency

Ted Gallivan

Let's look at the behaviour of the taxpayers most directly affected. Form T1135 is for the disclosure of offshore assets. Individuals and corporations have to report them. Since 2013, the number of those reported each year has more than doubled.

Taxpayers, as a general rule of thumb, are twice as likely to disclose their offshore assets as they were in the past. With regard to voluntary disclosures, if you look at the three previous years versus the three years prior to that, in a six-year period, the offshore voluntary disclosure has doubled. Taxpayers who have assets offshore were twice as likely to come in through the voluntary disclosure program to disclose those assets.

In the November 2017 Fiscal Monitor, the Department of Finance noted that corporate tax revenue had increased 7.5%. GDP growth was 2% or 3%, but there is an extra $10 billion on an annual basis in corporate tax revenue coming in voluntarily. I can talk a bit about the agency's actual results, but if you look at the behaviour of multinationals, non-residents' tax is up roughly 23%. Non-residents are paying more tax voluntarily.

In terms of the ultimate outcome of people complying voluntarily, the results are there. I mentioned the direct revenue generation target from the budget funding, which was $380 million. We had $500 million, but we are also building the automated tools that convince the insiders, the aggressive tax planners, that we have the technology.

We talk a lot about electronic funds transfers over $10,000 and using that as a line of sight to aggressive tax planning. The budget money gave us the funds to automate that process. We are on track to automating that system, which will allow us to peer into 1.5 million international fund flows per year, and to have the data analytics to reach in and find the ones that are problematic.

Five or six years ago we had a few offshore audits. We perhaps had one criminal investigation in that space, and today we can report that we have more than 40 criminal investigations, like the Panama Papers search that was reported widely recently, and more than 1,000 audits in this space.

I would say it remains a $1-billion issue. It remains a priority for the agency, but there are promising early signs.

10:30 a.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Thank you for that colour.

What about in terms of the culture within CRA, in terms of the service culture, when an average Canadian calls in? I know in our office, we deal with CRA continually. I am just saying that with the increased investments.... I would argue that the prior government actually did a lot of cutting at CRA. Even if you don't increase your budget, year over year, an increase in population and an increase in filers really means an effective cut.

How has the culture at CRA changed over the last two and a half years with these investments that our government has made? Can you give us any colour on that front? I think it's important for Canadians to understand that these are folks who are being paid by the taxpayers.

10:35 a.m.

Assistant Commissioner, International, Large Business and Investigations Branch, Canada Revenue Agency

Ted Gallivan

One of the focal points of the agency's senior leadership right now is world-class tax administration, and looking outward to other countries to see what best in class is. You spend a lot of time on the call centres. You heard some critical words from the office of the Auditor General.

The agency's response around better technology, stronger training, and having the right number of employers there is part of the solution. We have a service culture task force within the agency, which launched a survey to the employees to begin a dialogue around service. Even in the audit space, we have something called the liaison officer initiative, whereby we go out and do outreach, and we help businesses without the threat of a bill.

I think we work very hard to pick the right intervention for the right issue in the agency, from support and assistance to audit.

10:35 a.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

If I can just...

10:35 a.m.

Liberal

The Chair Liberal Wayne Easter

Go ahead.

10:35 a.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Your comment about going out and helping our SME, small and medium-sized enterprises...I think that program is crucial. I don't know how vast it is, but I have heard about that; where someone goes in and assists a business in terms of compliance, of ensuring they're doing everything correctly, and not receiving bad advice from whichever financial advisor or accountant they're using. I think that is of paramount importance. I think it'll lead to more voluntary disclosure, better disclosure, higher tax revenues, and at the end of the day using those tax revenues. First to invest in services, but also from my personal perspective, to lower tax rates across the board.

10:35 a.m.

Liberal

The Chair Liberal Wayne Easter

Mr. Kelly, you have five minutes.

10:35 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Thank you.

I would like to ask the question, and I'd like just the simple yes or no answer, about whether or not there are any employees of the CRA who received performance pay for taxes found?

10:35 a.m.

Assistant Commissioner, International, Large Business and Investigations Branch, Canada Revenue Agency

10:35 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Okay.

Nobody in the CRA gets a bonus because of taxes they've found? Nobody?

10:35 a.m.

Liberal

The Chair Liberal Wayne Easter

I remind people that we are on estimates, but Mr. Gallivan you answered that question directly. That's your choice.

10:35 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Okay. So the answer is no.

I will go back then to the answer to Mr. Poilievre's question about the expectation of finding $5 billion in new taxes as a result of the billion dollars in additional funding to the agency. The answer that the minister has given many times in response to a variety of questions from both opposition parties has been an expectation of collecting $24.5 billion.

What is the difference between those two numbers?

10:35 a.m.

Assistant Commissioner, International, Large Business and Investigations Branch, Canada Revenue Agency

Ted Gallivan

The $12.5-billion annual fiscal impact is from all of our core activities. That's our base budget that we've had for decades—sales tax, large business, SMEs.... That's the overall audit effort of the agency. The $5 billion over five years is the incremental lift over and above that from the incremental dollars.

10:35 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

That's $5 billion over five years, resulting from an additional billion dollars that has been allocated. What's the time spread of the billion dollars that the agency will receive?

10:35 a.m.

Assistant Commissioner, International, Large Business and Investigations Branch, Canada Revenue Agency

Ted Gallivan

It's six years, because there were two budgets of five years each—so six years. Much of the money is ongoing after that.

10:35 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Maybe I can ask about the other side or other half of the process of assessing and collecting taxes. On the collections side, what performance measures, metrics, or indeed bonuses are those employed in collections subject to?

10:35 a.m.

Assistant Commissioner, International, Large Business and Investigations Branch, Canada Revenue Agency

Ted Gallivan

Again, there is no direct percentage or performance pay that links the dollars collected by an individual collector and their compensation.

Having said that, there is an expectation that employees will do their jobs. An employee who isn't successfully collecting will prompt a dialogue. Is it a training issue? Is it a mental health issue, etc.? So there is no—

10:40 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Let me just be clear. There are many reasons that taxes don't get collected.

They may be uncollectible. The money is not there. It may well be that the taxes found and assessed do not stand up to appeal, do not stand up to a court challenge. The connection between actually assessing a taxpayer and finding taxes, and actually collecting from them is subject to many factors that create a discrepancy between those two sides.

But let's assume that it gets to collection, and an assessment has not been appealed or struck down at appeal. What steps are collectors expected to take rather than to assess whether taxes are collectible or not? There are many Canadians who are concerned about people who are assessed and aren't paying, and the agency is.... Finding the tax is one thing, but collecting is another.

I'll let you comment on that.

10:40 a.m.

Liberal

The Chair Liberal Wayne Easter

The last word is for you, Mr. Gallivan, and that will end this round.

10:40 a.m.

Assistant Commissioner, International, Large Business and Investigations Branch, Canada Revenue Agency

Ted Gallivan

The last tax year the agency collected $52 billion and 96% of the new debt that arose was collected. The collectors assess things like ability to pay. They assess the liquidity of the taxpayer. They try to work through payment arrangements, a kind of softer collaborative approach. They have a range of options, including seizing, garnishment. In fact, we can get a jeopardy assessment before we even audit. So with ultra high-risk taxpayers, people involved in the criminal realm, we'll go to court and seize their assets before we even post the audit. I would say our collectors drive their behaviour based on the taxpayer risk, the taxpayer's ability to pay, and how the taxpayer collaborates with the agency vis-à-vis clearing the debt.

10:40 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you both.

Ms. O'Connell's will be the final series of questions.

10:40 a.m.

Liberal

Jennifer O'Connell Liberal Pickering—Uxbridge, ON

Thank you, Mr. Chair.

And thank you for coming.

I still have some of my original questions on the supplementary estimates. I've had some concerns about some of the testimony I've heard here today, including some of the inconsistencies in the answers to some of my colleagues' questions. Around the disability tax credit, there is a lot of frustration at this committee with the information that has come forward in testimony, and the discrepancies between the information supplied to committee and the information that has come out afterwards.

When Mr. Kelly started discussing the disability tax credit, he referenced the potential thousands—if I'm paraphrasing correctly—of reviews. Then when Mr. Julian asked how many reviews there were, you couldn't provide an answer. However, when Mr. Kelly asked about the thousands of reviews, heads were nodding, but there was no confirmation of whether that was accurate or not. I'm not questioning their line of questioning, but how can this committee feel reassured about the numbers you're allocating if, from your responses to two questioners, I don't know if the agency understands how big a problem this is. When we previously heard testimony on the disability tax credit, we were told by CRA officials that there was not an increase, but that we wouldn't know until the files were manually looked at. Then here today, again, there's a difference in the numbers. So which is it?

The other thing is it was stated that if more resources are needed if it turns our that thousands of disability tax credit applications were rejected.... We were told that that wasn't the case, but if it turns out that it is the case, you said today that resources would be allocated, and then also that, no, there are reserves. So which is it? If there are reserves that's one thing, but if it's a reallocation.... The CRA is arm's length in terms of the minister's ability to oversee some of these things. If funds are being reallocated and it's not at the discretion of the minister but at the discretion of the agency, don't you think Canadians deserve to know where those reallocations would come from. I wouldn't want to see a reallocation of funds from another program, and it's not something that the minister has discretion over. Unless you understand the scope of the problem, how can you properly prepare to fix the problem and provide testimony to this committee saying it's reallocation or reserves, because those or two extremely different things?

10:45 a.m.

Liberal

The Chair Liberal Wayne Easter

I will let you answer, but we did get the response yesterday on a series of questions we raised with the Commissioner of Revenue Canada Mr. Hamilton at the meeting on November 23. I think where Ms. O'Connell is going is that really in looking back at that meeting we as a committee are not happy with the answers we were given at the time, in fact we question some of them. That's a question for Mr. Hamilton. Not necessarily are you here to answer those questions, but I'll let you go where you want to go in terms of Ms. O'Connell's question.

10:45 a.m.

Liberal

Jennifer O'Connell Liberal Pickering—Uxbridge, ON

Mr. Chair, then if I can just specify, if you can at least clarify the contrary kind of message on reallocation versus reserve because at the very least, I'd like to get that answer because if it is a reallocation and the Minister doesn't have .... The CRA is a different agency in the sense of ministerial ability to provide directive. If it's within the CRA to determine a reallocation, then I want to know about that in advance.