Finance Committee on Dec. 11th, 2018

[Bob Hamilton]

Let me respond with a few points.

First I would say that one of the important jobs we have at the agency is to make sure we administer the system as fairly as possible and that it's perceived that way by Canadians. This notion that somehow big taxpayers can get away with something that regular taxpayers can't is important. We want to make sure that we don't administer that way. I believe that we do a very good job of administering the system fairly for all.

[Pierre Poilievre, Conservative, Carleton, ON]

The Auditor General doesn't agree.

[Bob Hamilton]

That is an opening point. It's very important for us, because if Canadians don't have trust in us as administrators, that's a problem in a self-assessment system.

Point two is that the tax system we administer does obviously apply to a diverse range of taxpayers—as you've pointed out—from multinational corporations to small businesses to individuals. We need to recognize—

[Pierre Poilievre, Conservative, Carleton, ON]

I have a point of order, Mr. Chair.

We have five minutes here to ask questions. It was specifically about why people with offshore transactions don't have to provide evidence of their transactions while individual taxpayers here in Canada must do so within 90.... I don't need it to be explained to me that there are various types of taxpayers. That's sort of elementary. We all know that.

Just for your reference, it's paragraph 7.32 and 7.33. I appreciate that this should have been a question to the minister, but she's obviously run for the hills because she doesn't want to answer these questions. If we could just stick to the actual question rather than trying to give us a pedagogical background on the different types of taxpayers who exist.... We already know that.

[The Chair, Liberal, Wayne Easter]

Mr. Poilievre, the commissioner has the opportunity to answer. He's a stickler on time the other way. He didn't have half the time you took to ask the question. It's fair. I try to be fair in terms of my ruling. I think the commissioner has the right to answer how he feels is the correct answer and give a full explanation. You may understand it because you have the Auditor General's report in front of you, but somebody who may be watching this may not have the same explanation as you do.

I think it's fair and I'll not take time away from you based on our discussion here.

Mr. Commissioner, you have a little time left to answer fully.

[Bob Hamilton]

I will respond.

That's the important aspect for us, to understand that we want to administer fairly across the broad range of taxpayers, but we do obviously deal with them. In this particular example that was raised in the Auditor General's report I would say that we are reviewing the issue that he raised for us. We understand that in dealing with diverse taxpayers sometimes to get to the right answer it takes more time with some than others. We are looking at both ends of that spectrum, though. In the case of people who face the 90-day deadline, there is always an opportunity for them to come to the agency and request more time, and we try to accommodate and show that flexibility when we need more time to get to the right answer.

On the large, multinational, complex cases, we did commit in the action plan to look at our rules there and to look at whether we can come up with clearer guidance as to how much time should be taken and when we need to take stronger action. But there is at the base of it—and this is why I started with my response—that we have to recognize that in order to get to the right answer, so that the right amount of tax gets collected, sometimes it takes longer in certain situations than it does in others. We need to have a system that accommodates that and administers the tax system fairly, but we are looking at—

[Pierre Poilievre, Conservative, Carleton, ON]

We have no doubt that you have different approaches to different people. That's quite clear. I agree with you on that. The Auditor General's report did find that you're very aggressive when it comes to Joe, the local pizza shop owner, but you're very hands-off when it comes to the international tax evaders, which is consistent with the approach that this government is taking. “Sometimes, the Agency did not obtain information at all, and the file was closed without any taxes assessed”, the report says of the pursuit of offshore transactions and international banks and other organizations that have money stashed away abroad.

The average taxpayer, Mr. Commissioner, looks at that and says, my, that must be awfully nice to be able to just keep the information away from the tax agency long enough that CRA just quietly goes away. Unfortunately, as you know, that is not the approach of this government when it comes to everyday working taxpayers, nor has it been with respect to people with diabetes. The Liberal government denied thousands of diabetics their right to the disability tax credit.

Your agency violated the law in doing that. The law is very clear that these people were eligible. You then did a reassessment and admitted that you were wrong to deny 1,326 of the originally denied claims. However, there are 941—I'm wrapping up here—individuals whose applications have been re-disallowed. In other words, they're not going to receive the tax credit they thought they would. Now we find out you're not going to inform them of that fact. Why would you deny these people the right to know they've been refused and thereby prevent them from filing an appeal to that refusal? Why not just send them a letter saying they've been refused so that they have the opportunity to appeal that refusal?

[Bob Hamilton]

I'll take the last part of the question, the disability tax credit, and then I'll just turn to my colleague, Ted Gallivan, to comment on the offshore activity.

On the DTC, you're right. Last year we did conduct a review of applications that came in during a certain time frame, and certain of those were deemed to be eligible after review and certain were not. About 900 people, as you mentioned, were found to be still ineligible after the review. We have heard from a number of those people—about 600, I believe, is the number, but I'd have to verify that—and we are looking at options of what to do about the other 300. Normally if we do a review within the agency—say, we undertook on our own to look at a case that was denied, and we feel that it still should be denied—we wouldn't proactively communicate but we are looking at options in this case to make sure that we do the right thing.

Maybe I'll just ask Ted to comment on the first part of the question.

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

I will make just two quick points vis-à-vis offshore. First of all, it's not just the agency's opinion that these matters take longer. The Income Tax Act provides three additional years for the agency to finalize compliance work with respect to transfer pricing, offshore assets and offshore trusts, so the complexity is recognized.

The second thing is that I think we're confusing the burden of proof. When there's a credit claim—whether it's a multinational or a regular taxpayer—the CRA provides 90 days for somebody to substantiate a credit, because the burden of proof is on the taxpayer. When it's an offshore income situation, the burden of proof is on the agency, so in the interests of fairness you actually want the agency to spend more time to get that information, because the burden of proof is on our auditors to substantiate that income should have been paid, and that's why we're taking additional time. I know it can seem like we're giving them a break, but actually more time in the saddle for our auditors is yielding a more appropriate tax reassessment.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chairman, and thank you to the presenters today.

I have to first of all say how much I appreciate the improved relationship we've had in the north in the last couple of years and the improved communications. I think it's really starting to show in the number of complaints that I've been receiving over the years. The minister stated quite clearly that the process has to be fair and equitable across the country. I think there's a lot of work to be done, and a lot of work has been done. It's my understanding that CRA has recently appointed a chief service officer. How is this appointment going to help in improving fairness at the CRA?

[Bob Hamilton]

Yes, indeed, we did earlier this year appoint a chief service officer at the agency and it's a piece of a broader exercise we have to try to improve service at the CRA and to take an approach more centred on the Canadian taxpayer.

I think in the past we have found ourselves sometimes working in silos within the agency. One part is doing something that is not as connected as it should be to another part. We have to recognize that when we provide services to Canadians we're providing a range of services. It could be telephone calls, correspondence, the website, and we need to take an approach that looks at it from the taxpayers' perspective and that we're providing the services we need to. We did name a chief service officer in that regard, and her job is primarily to look at the way we provide service to Canadians, both digitally and by paper, but across the board, so that comprehensively we can say, yes, we're doing things that make sense for the taxpayer.

We're listening to the feedback that they get. We have different channels to get feedback, whether it's public opinion, research, complaints that come in. We make sure that we're listening to that, and then further make sure that we're taking that information and looking for ways to improve, whether it's how we respond to phone calls or the accessibility of our website. That is really what her job is going to be. If I think of it, it's integrating the activities of the agency so that we can better focus on how we can provide services to Canadians better.

[Michael McLeod, Liberal, Northwest Territories, NT]

The previous government shut down the only office that existed in the north for CRA. I know when I first got elected, there were a number of complaints coming forward. I think it was a real challenge for many people to try to get the attention of the CRA through the process that was in place. I'm happy to see that there's been some progress in the communications and maybe we could talk about that. I really believe that services have to be equivalent right across this country, and that includes the north. There's been some progress.

Can you talk about some of these things? We've had issues with the northern residency deduction. We've had triggers that were calling for audits and some people have been audited over and over again, but things seems to be moving forward. Can you talk about what you're doing in the north?

[Bob Hamilton]

Yes, I'm happy to talk about that.

Again, I think as we look at the services that we are providing in Canada.... One of the steps we have taken in that regard is in the north, where we're doing, I'd say, three things to try to improve services there.

The first is to provide more access to CRA employees. Putting somebody in an office up there in the north, to answer questions, is something that we are doing. Hopefully, it will help provide better information to taxpayers. What this is all about, and what you'll see in all of our service activities, is trying to better explain to Canadians what is required, what their tax obligations are and how we can make it easier to comply.

We think that providing offices in the north will help in that regard, and we will make CRA people available in those offices. We will be looking to expand the community volunteer program, which goes out to try to help people fill in their taxes. That's one key element.

The second is looking at the northern residents deduction, to see if, as you say, we can uncover any systemic reasons we might be verifying the same people over and over again. We're looking at the algorithms we use that decide how we test and review certain cases. We're also trying to make sure that we better explain earlier on and have good conversations about what the obligations are under the northern residents deduction.

That's a second place where we're trying to do a better job of communicating, explaining and even looking at our process to see if we can simplify it.

A final area was looking at a regulatory change on the low-cost airfare, just to make sure that we didn't have a system in place that was too hard for people to comply with, where you had to pick the lowest airfare on a particular day to be eligible for it under the program. We're looking at ways to simplify that and advance a regulatory change to that effect.

Those are the pieces that we think will help and hopefully reduce some of complaints we get in the north. It's part of a continuing effort to improve our services.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Before I go to Mr. Richards, I did have a question in this area of the chief service officer. At our constituency offices—and I assume most members' constituency offices are in the same situation—we'll get where we're the last stop, and we'll get calls from constituents in tears trying to deal with CRA.

There's no front office service anymore. It used to be fine when people went in and were able to sit down with somebody—in my case, in the Charlottetown office—to talk it through and see what they could do. Maybe their bank account's been frozen, and whether for right or for wrong, there is a feeling among many constituents when they're talking to a CRA representative on the phone, after they get through the queue—sometimes they have to wait a long time—that they're treated like a criminal.

There has to be a different attitude in that regard, because then we get the calls and we try to deal with it through our contacts.

I will say that for MPs, most of the time in the contact we have with CRA, they do their best to help us out, and through that, help the constituent. I just want to put that on the table, that there is a problem for constituents in what they feel the attitude of the CRA individual is toward them. They feel like they've been treated like a criminal. It may have been an innocent mistake on their side or it may not, but their bank account may have been frozen or whatever.

I'm just telling you, that is a problem we have to deal with, Commissioner Hamilton. Will the chief service officer help in that regard? Is there any thought of bringing back front-line services at CRA offices?

[Bob Hamilton]

Mr. Chair, I think very definitely that the chief service officer will help with the kind of perception you have talked about, which I don't like to hear about, frankly. I don't want people being treated like criminals on phone calls, as a starting point. The conversations may evolve down the road depending on how things go—people have to face the consequences of their actions—but we are very much about changing the culture at CRA, as I've said, to being a service provided to the taxpayer and the client.

What I would like to see us do and what we are doing, and where the chief service officer will help, is focusing more on the conversations about educating both sides of the conversation. For us it's making sure that we're explaining to Canadians what they need to do and why. Sometimes, because we deal with so many people, those can be shortcut conversations. They can be abrupt. We're trying to make sure that they are not, that they are fulsome explanations for people. That takes time and resources, but we need to do that to fulfill our service commitments.

We are also going to be paying attention to the feedback we get—because we hear some of the same things that you hear—and make sure that we listen to it, as I've said, but also to try to factor in what we can do about it, how we can correct those issues.

It's not to say that there will never ever be an issue at the CRA, but we need to make sure that we're correcting as many of them as possible, and that as many people as possible feel like they are being treated fairly and respectfully by the CRA. I would want that to be the case in every single interaction that we have.

When we talk about service culture, though, it isn't just the people picking up the phone and talking to you. That's obviously an important element of service, but we are also trying to embed a service culture within the audit and enforcement activities. Yes, we will ultimately need to make sure that the proper amount of taxes are paid, but we need to go about it in a way that tries to educate first. Let's make sure that there's an understanding and work through it, and that way maybe get some long-term compliance. If people understand the obligations and we understand their situation, hopefully we can get on a path of long-term compliance.

Having said that, if there are still issues, we will have to enforce the law and make sure that the proper taxes are paid, because that too is important, for the perception of fairness by other Canadians.

I'm very confident that the chief service officer is going to help us refocus our efforts to provide better service to Canadians. Some of the changes have started, but I look forward to even more changes down the road.

[The Chair, Liberal, Wayne Easter]

Thank you.

We have Mr. Richards, then Mr. Fragiskatos, and then Mr. Dusseault.

Mr. Richards.

[Blake Richards, Banff—Airdrie, CPC]

We've already heard from the Auditor General's report about this very different take that there has been towards different types of taxpayers, from your everyday regular Joe taxpayer to someone with a big offshore account. Given that there are very wide differences in how they are being treated by Revenue Canada, I want to raise an example that I've raised with your minister and with you before. I'm trying to determine whether this is something that falls in the same vein here.

It's the issue around the small business deduction and eligibility for that, where something is being considered as a specified investment business and then considered ineligible. It's something that has affected campgrounds, and self-storages and other businesses like that. They are being considered as deriving their income solely from the value of the land and rents that come from it rather than from the services that they provide. It's based on the fact that, in many cases, they don't have five full-time, year-round employees. Of course, in the case of campground, they might have far more than that, but not year-round, because we're in a cold winter country.

I want to ask you, when you were given direction by this government to go after tax evaders, is this the kind of person or entity that you were going after?

[Bob Hamilton]

No.

Let me start on that, and I might ask Ted to comment on some of the specifics on the compliance activity.

There are two things that we do. Well, there are more than two, but there are at least two things that we do at the agency. We want to uncover tax evasion where people are willfully evading taxes. It could be offshore. It could be domestically. Also, we need to make sure we collect the taxes that are due under the law as it exists right now.

In that case, the campgrounds would be an example of where the law says what shall be done. Our job as administrators is not to redo the law, but to administer that law in the fairest way that we can. Those examples will come up in a whole range of cases. It could be campgrounds, as you have mentioned. It could be some place where expenses are being misallocated between personal and business. There are a number of places where, through our verification and review process, we need to make sure that the taxpayer is complying with the law.

[Blake Richards]

Let me interrupt you there. I get what you're saying, that you have to ensure that the law is being complied with. This is something that was identified a number of years ago as being a problem. This was affecting businesses it shouldn't be affecting. That's why, in the 2015 budget, our previous Conservative government put in place a review of these rules to try to determine how this could be improved so that businesses like campgrounds, self-storage facilities and those that shouldn't be affected by it were no longer being affected by it.

Now, that review began, and all but one of the submissions that we received during that review indicated this was an unfair rule and offered that it needed to be changed to no longer have this chilling effect on these legitimate small businesses. Unfortunately, in the 2016 budget, of course the new Liberal government at that time cancelled that review before it was completed.

I wonder if you can tell me what led to the cancellation of that review. Was that something that you recommended?

[Bob Hamilton]

I can't really comment on it. I certainly don't think I was there when the review was cancelled, so I have nothing to add on that.

[Blake Richards]

You don't know whether the agency made any recommendations about the review, what should be done, whether it should be cancelled or whether it was something that should be proceeded with. Have you no idea what took place with that review or what the results were?

[Bob Hamilton]

No, I can't comment on that. The only thing that I would say is that, if I were thinking about a review like that, it would encompass both administrative and policy aspects. To extent that it was looking at the policy side and for a legislative change, it would be something, obviously, that the Department of Finance would be looking at. But I don't have any further information with me. I don't think Ted does either.

[Ted Gallivan]

No, I don't think we can respond.

[Blake Richards]

There was a review conducted and it was cancelled, but the agency has no idea what took place or what recommendations were made. You have nothing to say about it at all.