Evidence of meeting #139 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was debt.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Kami Ramcharan  Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
Frank Vermaeten  Assistant Commissioner, Assessment, Benefit, and Service Branch, Canada Revenue Agency
Ted Gallivan  Assistant Commissioner, International, Large Business and Investigations Branch, Canada Revenue Agency
Adelle Laniel  Chief Financial Officer, Financial Management Directorate, Corporate Services Branch, Department of Finance
Nicholas Leswick  Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Nicolas Moreau  Director, Funds Management Division, Financial Sector Policy Branch, Department of Finance
Roger Charland  Director General, Social Policy, Federal-Provincial Relations and Social Policy Branch, Department of Finance
Rick Stewart  Assistant Deputy Minister, International Trade and Finance Branch, Department of Finance
Richard Botham  Assistant Deputy Minister, Economic Development and Corporate Finance Branch, Department of Finance

4:20 p.m.

Liberal

The Chair Liberal Wayne Easter

I'll call the meeting to order.

Pursuant to Standing Order 108(2), we are studying the subject matter of interim estimates 2018-19: votes 1 and 5 under Canada Revenue Agency.

From CRA with us today, we have Ms. Ramcharan, the Chief Financial Officer and Assistant Commissioner; Mr. Gallivan, Assistant Commissioner, International, Large Business and Investigations Branch; and Mr. Vermaeten, Assistant Commissioner, Assessment, Benefit, and Service Branch.

Before we begin, we do know there will be 30-minute bells around 4:40 for a vote, with a vote at 5:10. Would it be okay if we go to five o'clock, and then suspend for the vote, so this group would be completed by five o'clock? Is that agreed?

4:20 p.m.

Some hon. members

Agreed.

4:20 p.m.

Liberal

The Chair Liberal Wayne Easter

Ms. Ramcharan.

4:20 p.m.

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

Good afternoon, and thank you for the opportunity to appear before the committee to present the Canada Revenue Agency's interim estimates for 2018-19, and to answer any questions you may have on the associated funding.

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 agency collects hundreds of billions of dollars of tax revenue for the governments of Canada, and distributes timely and accurate benefit payments to millions of Canadians.

In order to begin the 2018-19 fiscal year, the CRA is seeking a total of $822 million through these interim estimates. This represents the funding required to cover expected payments that will occur in the first quarter of the fiscal year for ongoing operations. This amount would have historically been included as part of the main estimates interim supply bill.

The funding being requested as part of the interim estimates is roughly one-quarter of the voted appropriations that will be sought by the CRA through the 2018-19 main estimates. It does not reflect incremental resources for announcements made by the Minister of Finance in the February 2018 budget. The funding required for the implementation and administration of these measures is currently being evaluated by the CRA, and will be presented to Treasury Board ministers through formal submissions in the coming months.

The resources being requested through these estimates will allow the CRA to continue to deliver on its mandate to Canadians by making it easier for the vast majority of taxpayers who want to pay their taxes, and more difficult for the small minority who do not, as well as ensuring that Canadians have ready access to the information they need about taxes or benefits.

To give you a sense of the kinds of programs this funding supports, let me touch on some service improvements the CRA introduced last year.

At the beginning of the year, the 2017 T1 tax forms and guides were mailed directly to the homes of Canadians who filed paper returns in 2016. People no longer need to pick up guides and forms to fulfill their tax obligations at service centres, which is helpful for people with mobility problems, or who live in remote areas.

Also, in January 2018, the CRA launched an automated phone system called File My Return. This phone system helps more than 950,000 Canadians, particularly those with low incomes or fixed incomes. After identifying themselves on the phone system, the users will answer a series of short questions, and their income tax returns will be filed. For people using this system, there is no need to fill out forms, or make complicated calculations.

The CRA continues to promote another Canada-wide program called the community volunteer income tax program, and a Quebec component called the volunteer program. Through these programs, trained volunteers help people file their income tax returns and receive benefits and credits to which they're entitled. These free clinics serve people with low incomes and simple tax situations, including seniors, students, indigenous people, newcomers, and people with disabilities. These programs help ensure Canadians receive what they are entitled to, in ways that are respectful, and meet the needs of individuals, while at the same time helping people meet the obligations of the Income Tax Act.

At this time, we would be pleased to respond to any questions you may have. Thank you.

4:20 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much.

Mr. Grewal, for a five-minute round due to the tightened time frame.

4:20 p.m.

Liberal

Raj Grewal Liberal Brampton East, ON

Thank you to our witnesses for being here today.

I think for members of Parliament, when you're in the constituency, I would say unequivocally that the most difficult department to deal with is the CRA. Obviously, the Auditor General had some not-so-nice things to say about you guys in the last report. What is being done to ensure that customer service is of the utmost importance at the CRA?

4:20 p.m.

Frank Vermaeten Assistant Commissioner, Assessment, Benefit, and Service Branch, Canada Revenue Agency

We take customer service very strongly to heart. We're doing a range of things to try to improve those services. My colleague Kami talked about some of the things we're already doing—for example, this year the distribution of the forms, to make sure that people get the tax forms and don't have to go to Canada Post or to a bank to get those. We've introduced a whole range of services, digital services, to make it easier for people to fill out their own taxes. File my Return, as Kami mentioned, really makes it easier, particularly for low-income people, to be able to file their taxes. When they have a simple tax situation, they can do that over the telephone. I think that's a real significant improvement for some; not for everyone, but certainly for some.

We're doing a whole range of things. I think we have a very solid action plan on the phone services. I think we've seen some very strong results early in the filing season. The improvements we have put in place are really making it easier for Canadians to reach a call agent.

Those are some of the things we're doing. I'd be happy to elaborate further on any of those, or on other issues.

4:20 p.m.

Liberal

Raj Grewal Liberal Brampton East, ON

I don't want to bring up specific examples, but I've been a member of Parliament for the last two and a half years. Any time we've had to deal with the CRA, it's been extremely frustrating because the interpretation is so strict, to the letter of the law, even if common sense would dictate that the resource being spent fighting this doesn't make any sense.

For example, a company is behind on its HST. You guys freeze their accounts, which allows them not to pay their employees, which allows them not to conduct business. Basically, you want them to pay, but you also won't allow them to conduct their business. Logically speaking, in good faith it would be like, “Okay, we'll pay you $1,000 every week. Please let us continue our business so that we can make revenue, pay you, and work with the CRA to get to this balance.” It seems like an overly harsh interpretation to say, “Pay the $5,000 you owe or we're not going to unfreeze your accounts.” To me, that doesn't make any sense.

I would love your insight on why there's such a strict interpretation by some of your officers at the CRA when it's small businesses that aren't overly wealthy, that are employing Canadians, and that sometimes, because of bad accounting advice or bad legal advice, fall behind on their payments. They recognize that they have to pay it, and they're looking for a payment plan.

4:25 p.m.

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

There's no doubt that collection situations can be tense. The employees have all kinds of training in terms of communication skills and soft skills, but it can be difficult for the taxpayer. Our collection approach is founded on communication and adaptability. We actively encourage payment arrangements. One of the most difficult situations for taxpayers is when there's a lack of responsiveness and a lack of communication. What can happen is that the taxpayer just doesn't respond because they don't have the money, and there's no engagement. That can be a route to getting your bank account frozen.

Then the CRA might ask for a substantiation. In other words, if we're entering into a payment arrangement, we might ask to see financial statements so that we can determine what is a reasonable rate of repayment. Again, taxpayers can be reluctant to provide that information.

I think transparency is important. To help regain Canadians' trust, the CRA is working very hard to be more transparent. Under that theme, all of our collections policies are up on the Internet. They're disclosed for taxpayers, representatives, family friends, or whoever's helping the small business. I think we have a commitment to be reasonable and to engage in payment arrangements. That's a key part of our collections approach. I think we also, more importantly, have a commitment to be transparent. All of the policies we follow are out there. If the CRA collector isn't adhering to it, well, it's there on the Internet site for you to call us on it.

4:25 p.m.

Liberal

Raj Grewal Liberal Brampton East, ON

Turning to my last question, obviously all Canadians across this country, from coast to coast to coast, work really hard. Whether they're business owners or entrepreneurs, or whether they work for a Fortune 500 company or a smaller one, or a manufacturing company, they all pay their fair share of tax. Our government is committed to ensuring that Canadians, no matter what their tax portfolio looks like, pay their fair share. The question of tax evasion and tax avoidance has been coming up a lot, not just in Canada but around the world. There has been significant investment, since our government came into office, in ensuring that Canadians, especially multinational corporations, are paying their fair share. How have these investments paid off in the last two and a half years?

4:25 p.m.

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

Ted Gallivan

I'll talk quickly at three levels.

At the first level, which is people paying voluntarily in the first place, I'll look back to last fall's “Fiscal Monitor”. In the November report, they showed that multinationals paid 7.5% more tax in the six months ending November 2017 than they did previously. The economy grew at 3%, so they paid 4.5% more corporate tax than the economic growth would seem to suggest. Non-residents paid roughly 20% more tax in the similar period. Strategically, I think there's some sense that the people we're targeting are getting the message, and they're starting to do the right thing.

Now, with the second level, the audit yield, what we identified through audit, there was an expectation that we'd find $380 million in fiscal 2016-17. We found $500 million. This fiscal year, which is going to close in a couple of weeks, we expected just over $1.1 billion. We had hit that by the third quarter. In terms of the immediate revenue generation, we expect that to be exceeded again this fiscal year.

In terms of the right taxpayers, that's where we talk about people with offshore money. We talk about 40 criminal investigations in terms of offshore, and over 1,000 audits of individuals who had money offshore. Now, we have been talking about audits and not results yet, because those are complicated audits. We have taxpayers who are refusing to be audited. We have a number of cases before the courts where the taxpayers aren't co-operating with us. It will be a number of years for those criminal investigations to be finalized and the audits to be finalized.

I would say that at the level of strategic voluntary payment with the revenue generation we committed to and the target action on offshore, we have a track record of results.

4:30 p.m.

Liberal

The Chair Liberal Wayne Easter

Okay, we'll leave it there.

Mr. Kelly.

4:30 p.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Thank you.

Mr. Gallivan, I'd like to carry on with something you just mentioned.

You said that you had a target to find $360 million through audit and you found $560 million. Did I get that correct?

March 26th, 2018 / 4:30 p.m.

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

Ted Gallivan

That's correct.

4:30 p.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Of that $560 million in tax finding, how much has been collected?

4:30 p.m.

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

Ted Gallivan

Of the $500 million, we don't have an exact calculation.

What I can tell you is that last fiscal year, our collections program collected 96.7% of all funds that were outstanding, so they closed 96.7%. The reason we don't have an exact calculation is because many of these taxpayers owe us debt for multiple years on multiple accounts. They don't pay it off all at once, so you have a multiple of debts and a multiple of payments.

We are committed to providing an estimate. This is a question that's been asked in the media and by parliamentarians, and the agency is now working on an estimate. I hope that the next time we're here, or shortly thereafter, we'll be able to give you a percentage estimate of what we've collected. It's very difficult.

4:30 p.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

I look forward to that.

Clearing a file is not the same as collecting either, and that's an important distinction. Writing off a file as uncollectible or one that would likely not survive the objection process is another way to clear a file. Finding tax is one thing; collecting the actual money is something else.

4:30 p.m.

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

Ted Gallivan

You're point is very well taken.

I will make a point with respect to litigation, though. Some of these tax professionals are very creative. Some of our work in this area is policing the acceptable limits of tax planning. Sometimes we need to litigate, and even lose, to establish that the law needs to be clarified. That's why we work very closely with the Department of Finance with respect to closing tax loopholes.

I would caution that sometimes when the CRA identifies an amount and we lose in Tax Court, it ends up leading to the right thing, which is a legislative change that closes the loophole and stops the tax leakage.

4:30 p.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Okay.

4:30 p.m.

Liberal

The Chair Liberal Wayne Easter

I'll ask to interrupt for a second. The bells are ringing, which is way earlier than expected. It's a 30-minute bell.

Do we have unanimous consent to go to 10 minutes short of voting time?

4:30 p.m.

Some hon. members

Agreed.

4:30 p.m.

Liberal

The Chair Liberal Wayne Easter

Okay. Go ahead, Pat.

4:30 p.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

How much time do I have left?

4:30 p.m.

Liberal

The Chair Liberal Wayne Easter

You have lots of time left.

4:30 p.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

What is the general trend line on the time it takes for a notice of objection to go through the CRA appeal process for corporate tax filers and small business corporate tax filers?