Finance Committee on May 3rd, 2018

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

Thank you.

As part of the look back on this episode, have you determined how many people were compelled to collapse their disability tax savings plans as a result of being rejected for the disability tax credit?

[Frank Vermaeten]

I'd be happy to answer that.

The way the RDSP program works is that, for an individual who was initially eligible for the DTC and then became ineligible, it allows some time for the opportunity for those cases to be reviewed, for the individual to resubmit the DTC application, or for the individual, in fact, to launch an objection and even an appeal. The winding down of that RDSP doesn't happen right away. They have essentially at least a year to wind that down, if necessary. To the extent that any cases that we reviewed were then subsequently reversed, those individuals would be able to maintain their—

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

Will your review of those who were declined reveal that, and will we be able to have that information as well?

Have those affected had that communicated to them adequately?

[Frank Vermaeten]

When we do the review, whether it's a review or a decision that's overturned, the individual is notified that they're now eligible for the DTC. It's made very clear.

I can look into the issue about whether there would be statistics about whether anybody would wind down the RDSP.

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

In Treasury Board vote 40, assuming the bill will make that legally binding, $3.8 million is earmarked for the CRA to address problems with Phoenix. How much of that will go to correcting T4s, Minister, do you know?

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

Those funds would be available for the agency to help them process the T4s. In terms of the actual issuance of the original or the amended T4s, that's the responsibility of PSPC rather than ours.

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

Minister, how much confidence do you have that it will be sufficient to correct the problem with T4s created by the Phoenix debacle?

[Geoff Trueman]

I'd be happy to take that.

We've been working very closely with our partners at PSPC in order to anticipate the release of amended T4s and to be in a position to process those as quickly as we can so that affected public servants have an accurate tax determination at the earliest possible date.

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

Minister, at a meeting that we had on March 26 with your officials, we talked about the difference between taxes found through audit and those recovered. Do we have an update on that and the $560-million tax finding that was reported at that meeting?

[Diane Lebouthillier, Liberal, Gaspésie—Les-Îles-de-la-Madeleine, QC]

You’re asking me about the Phoenix system, but with regard to the Revenue Agency...

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

No. This is a question on taxes found through audit, stemming from an answer that Mr. Gallivan gave.

I think you, Mr. Gallivan, recall the question that I had.

I wonder if the minister could tell us whether the amount reported, $560 million found, has been recovered. If not, how much of that do we expect would be recovered?

[Ted Gallivan]

Yes. Again, going back to that prior response, it is just not possible or practical across the large number of audits we do to individually track how much these taxpayers are paying. They have multiple debts. They make multiple payments across multiple tax years.

We agree that it would be helpful for transparency to have a general percentage. The work is under way to produce a general percentage to show how much, through ligation, is conceded to the taxpayer and how much goes uncollected.

I would say, though, that the numbers continue to go up. On an apples-to-apples comparison, if you go back five or six years to when the audit function was identifying $9 billion in fiscal impact, and now we're up at 12.8%, we're seeing a positive movement.

Going back to your point, the work is under way.

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

Okay.

[The Chair, Liberal, Wayne Easter]

Okay. Thank you, all.

Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair.

Thanks to the minister for coming here today.

I was happy to see you come to the Northwest Territories, Minister. I was also very happy to see you were able to visit Nunavut. We share a lot of our concerns across the board.

During our time with you in the Northwest Territories, we heard lots about tax issues. Reassessment was one of the things that came up a couple of times. It's something that has been brought to my attention over the last while, also. Again this year, as we hit tax time, the issue of reassessment is starting to surface. The reassessment process takes time. It takes several months to go through. Usually if you're expecting a tax refund and you get notice of reassessment, you're not going to get a refund right away if you were supposed to get one. It creates a lot of hardship for the low-income families.

We know in the north that we are above the average. The average across the country, the national rate, is 4.6%. The number of reassessments that are happening in the north is almost triple that. Some people have been reassessed 10 times in 10 years.

We're really happy that the taxpayers' ombudsman has decided to do some preliminary research on this issue, on the northern residency reassessments. Her office has not yet launched the systemic examination of this issue, but they have said they are satisfied with what they have done so far.

Could you maybe tell me what actions have been undertaken by CRA that have led to the ombudsman being able to say she's satisfied with what she's seen so far?

[Diane Lebouthillier, Liberal, Gaspésie—Les-Îles-de-la-Madeleine, QC]

Thank you for your question.

I did, in fact, travel to the Yukon, the Northwest Territories and Nunavut to meet people. I can’t give you any statistics at this time, but I’ve asked the Canada Revenue Agency for more information on this. Indeed, all the people I met during my tour are concerned about this issue. Moreover, I made a public announcement on CBC that I was taking into account what people had told me and that we were going to ask the agency about it.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Minister.

I was glad that you acknowledged during your trip to the north that there's still a lot of work to be done on the issue of over-frequent reassessments.

Could you tell us what you're going to do going forward? What is the agency's plan to ensure that northerners are not overly reassessed? Is there a plan to address this issue?

[Ted Gallivan]

From a compliance perspective, what the minister has asked the agency to do increasingly is to match our compliance response or intervention to the issue. Where possible, we need to be leading with education, with rules clarifications, maybe suggestions to the Department of Finance, and then follow up with a lighter touch around substantiation, clarification, and maybe perspective treatment. Then, in the space that I'm accountable for, multinationals and aggressive tax planning, that's where we go in with the auditors and a 10-year audit and discretionary penalties.

What we're trying to find in this instance and others is the right mix of education, information, and possibly legislative clarification, because this isn't aggressive tax planning. These are people who are trying to access the benefits they're entitled to. What the minister has asked us to do, as a philosophy, is to review our compliance actions and choose the right intervention for the right behaviour.

[The Chair, Liberal, Wayne Easter]

Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Minister, thank you for your presence and for the work you and your officials do for our country.

We've had some discussions in the House in regard to the Canada child benefit. I note that in your presentation to this committee you said that the agency must ensure that Canadians receive the benefits to which they are entitled, and that is your priority.

Minister, I'm happy to hear you say that. I've worked on many cases where I see that a parent, typically the father, abandons the relationship, together with the children, and provides no forwarding address, in large part because they're looking to avoid making child support payments. They don't want to be found. These types of parents do not change their address, and they still show up as living with their former spouse. In many cases, CRA will then come along and say they believe the spouse is still living at the same address and they're cutting off or even clawing back the benefits until they see proof that the spouse is living elsewhere. In other words, they are guilty in the eyes of the CRA until they prove themselves innocent.

Minister, do you think that this is a fair way to treat vulnerable single mothers? It's mainly single mothers that I've seen this happen to.

[Diane Lebouthillier, Liberal, Gaspésie—Les-Îles-de-la-Madeleine, QC]

I thank my colleague for his question.

As a single mother myself, I know full well what single mothers experience. I’ll say it and say it again: it’s important that people get the services to which they are entitled.

If you have specific cases to submit, you can send them to my team. I’ll make sure that the rules are respected.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Minister, I appreciate hearing you say that, and I have one constituent whose concern was heard, but I've sent your office a number of these cases and we have heard absolutely nothing since that first case was resolved. In fact, I want to go back. When it comes to taking on a single mother, CRA has all the power. They can garnish wages, seize a bank account, and even seize their assets. Given that CRA has all this power, wouldn't it be a more fair approach to not claw back a mother's child benefits until CRA can irrefutably establish that there is fraud, as opposed to the current situation where something as trivial as a former spouse not changing his address can result in serious financial harm?

Minister, one of the ladies I sent to you claims that she lost her home because she did not have the benefit of the Canada child benefit. This is a serious case and I'd like to hear you say that the process is not fair but can be made fair. In fact, you said in your comments that improving the services the agency delivers to Canadians will continue to drive your efforts, that it will ensure a tax system in Canada that is fair, helpful, and easy to use.

Minister, the current system is not fair, helpful, or easy to use.

[Diane Lebouthillier, Liberal, Gaspésie—Les-Îles-de-la-Madeleine, QC]

In a previous life, I was a social worker. I’ve always worked for the less fortunate and those who need the services to which they are entitled. As Minister of National Revenue, I can tell you that I’ll be there for the poor and those who need help and support. I’m telling you and I’m telling you again, if you have specific cases to submit, I would like to receive them. I’ll make sure that those people get the credits to which they are entitled.

I’m going to ask Mr. Vermaeten to give you some technical details.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Minister, I'm glad to hear that you personally feel very strongly about this, but it is a demeaning process. I've been told of someone who had to approach the principal of the school they had just enrolled in to get the principal to sign a letter saying that her spouse was no longer living in that home. It's a demeaning process for someone to go to a complete stranger and ask them to write a letter outlining who is living with them, who is sharing a bedroom with them.

Minister, do you not agree that this process is demeaning and can seem loathsome to a woman who is trying to get the benefits she needs for her children?

[Diane Lebouthillier, Liberal, Gaspésie—Les-Îles-de-la-Madeleine, QC]

I’m going to ask Mr. Vermaeten to really explain the process.