Evidence of meeting #152 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was provinces.
A recording is available from Parliament.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Are these just like delegation of authority sections about administering?
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
Yes.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Would there be a scenario under which an outside organization would have delegated authority to do an investigation? Would that happen?
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
I'm not aware of any such situation.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
In the inspection section—section 141, subdivision K—it talks about inspecting, audits, records, and processes. That's pretty standard form. That's found in other income tax acts. Is it modelled after it? Is it the same thing?
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
Yes. It's modelled on other statutes that are administered by the CRA.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Then it says, “may enter any place in which the authorized person”. These are sections that would just say that, if for some reason I file...as a company. I would assume that the person involved would be a business and it has carbon taxes that it pays. It gets a rebate or maybe it doesn't get a rebate, so there's a disagreement at some point. Then the CRA would be able to go in and not just check the corporate income tax files, but would check all of the carbon tax files that you're keeping as well, hopefully.
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
It's the general power that CRA has to audit business. As I said, this is similar to other powers the CRA has when it administers other statutes.
The way it's done in practice, CRA doesn't usually just show up at the business and ask questions. Usually, CRA staff contact the person. They may just request information over the phone, or they may ask to visit, to have a better idea of the business, but these are standard practices used by CRA.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
They have great customer service, I'm sure.
Under clause 96 on the rights of the person investigated, is that pretty standard as well? It talks about any person whose affairs are investigated in the course of an inquiry, and says that the minister may order the removal of a person if the minister believes that person's presence or that of their counsel “would be prejudicial to the effective conduct of the inquiry”. Is that pretty standard, too? The CRA has that ability to administer...?
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
Yes, all the provisions that you see in here that are administrative in nature, or related to enforcement by the CRA, are modelled on other statutes administered by the CRA.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Does that include clause 132 under offences and punishment, as well? It says failure to file as required, or to comply with an obligation or order, renders you liable to a $2,000 to $40,000 fine or up to a year in jail, or both. You spend a year in jail if you don't comply with the CRA's audit.
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
This is modelled on other statutes administered by the CRA.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Okay, can I then move on to clause 166? It's a pretty broad section. Clause 166 in division 8, on the regulations, again has a lot of catch-all terms. I know some members like the Canada Gazette, but there are a lot more regulations than there used to be.
It goes into the details here of all the things that haven't been determined yet, so “distinguishing among any class of persons, provinces, areas, facilities, property, activities, fuels, substances, materials or things; and...generally to carry out the purposes and provisions of this Part.”
This is already a 200-page piece of legislation, and then in the regulations, basically you threw in everything else you might have missed. Is that correct?
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
Essentially, the way part 1 of this bill has been designed, we have tried to put in place all the rules that are necessary to the proper functioning of the fuel charge. As I mentioned last time I was here, this is a new charge, a new area, and something the government doesn't have a lot of experience with.
These regulatory powers are there basically to allow the government to be in a position to address issues that may arise. When people start complying and the CRA starts administering this, they may discover certain situations where the result may not be what was intended in terms of policy. These regulatory powers allow the Governor in Council to make some amendments to fix those particular situations.
At this point, we don't envisage any of those particular situations needing to be fixed by those powers, but the nature of the instrument is such that when people start to comply, they may have questions and issues may be raised. A technical adjustment to the legislation may be required.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Once you see how it behaves, how the provinces that have a carbon tax create their programs, and what kind of rebate programs they want.... Is that what you mean?
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
No. If a province has its own system in place, this will not apply.
Let's say a province doesn't have anything, and the government has made the decision to impose the fuel charge in that jurisdiction. The businesses in the jurisdiction will start complying with the rules, and they may raise issues that we did not think about when we developed this. It's difficult to predict the future, and we may not have thought about everything. There might be a new transaction that starts appearing.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Could I ask you about businesses that cross provincial boundaries, like a bank or a railway, and the compliance of their documentation? Obviously, for railways, you have a lot of things in here already to try to cover them off.
Regarding the paperwork involved in electronic filing, some businesses might have activities that move from a province with a cap-and-trade system to a province with nothing, to a province with a carbon tax with no rebate directly to companies, to another province—say B.C.—that tried to do a revenue-neutral thing and it didn't quite work out for them. In this model of investigations and compliance, how much latitude would be given to these companies that cross different boundaries? They are not just large ones. There are some medium-sized trucking companies, for instance, that may work in all western provinces.
How much latitude would be given to them? Is there anything I might have missed in this legislation that gives them a few years to figure out their compliance and how they would file? How would you demonstrate this, in the case of an assessment or audit?
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
This is legislation that the government wants to put in place. The CRA is already preparing the documentation to help the people who will have to comply with those rules. The goal is that when the government decides when they want to apply the carbon pricing, it will apply as of that time. With every new legislation, usually CRA is more tolerant with the people who make honest mistakes at the beginning. There are powers to waive interest and penalties in some cases where CRA may see that it's not in the best interest to—
Conservative
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
Yes, they are.
Director General (Legislation), Sales Tax Division, Tax Policy Branch, Department of Finance
Yes. It's like under other statutes administered by the CRA.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
I would like to add something, but I will be brief.
This policy was put into a document for public consultation in May. Consultations and submissions have been made by many industries in Canada, including rail carriers and transportation companies operating in a pan-Canadian environment. The special rules that have been put in place for air carriers and rail carriers, in particular, reflect the consultations and feedback that we have received from those companies.
Subsequently, the proposed legislation was also published for consultation in January. Mr. Mercille mentioned the work that will be done by the Canada Revenue Agency when it comes to public information.
In terms of the major industrial groups that will have to operate either with the federal backstop or with existing legislation, some initial work has already been done. The legislation in its entirety is not a surprise to those groups, although, like us, they are not aware of the actual application or non-application of the proposed legislative framework in a province or territory.
Conservative
