Finance Committee on Feb. 16th, 2021

[Mireille Laroche]

Yes, I can send it to you.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

How can we arrange for the benefits of those programs to be paid out as part of an agreement between the governments of Canada and Quebec?

Have you at the Canada Revenue Agency looked at those types of scenarios?

[Mireille Laroche]

We have not done scenarios of that kind.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay.

Thank you for agreeing to send us the other information we were just talking about.

[The Chair, Liberal, Wayne Easter]

We'll have to end it there, Peter. There will be another two and a half minutes later on.

We're going to Mr. Lawrence, followed by Ms. Dzerowicz.

Mr. Lawrence, go ahead.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much.

I'd like to thank the witnesses. I am used to having marauding children and poor rural Internet, so I understand the challenges. I appreciate that, and the interpreter as well has done a terrific job through some choppy Internet, so thank you.

I'm thinking of a phrase I heard in my childhood, which is that water can't get any more wet. When I look at the CRA.... One of the things that you're presenting to us is the fact that if we put the provincial in there, the coordination would be impossible. It would be difficult, at least, which could cause things like systems not talking to each other. Systems like the CRA are not able to talk to ESDC, preventing people who are in desperate need of benefits from getting them because these two systems can't talk, systems that have people online for literally hours waiting desperately to get [Inaudible—Editor] that cost thousands of dollars...the CRA cannot respond to. Water cannot get any more wet, is the response.

When we look at these things, miscommunications like not being able to tell people whether CERB benefits are based on gross or net, when we look at these failures, how much worse could it get if Quebec was involved? I have trouble fathoming it. Despite these billions of dollars that the parliamentary secretary talked about that are in there, the CRA is failing Canadians, and I find it challenging to see how this water can get any more wet. Maybe you could expand on that for me.

[Mireille Laroche]

In terms of the complexity...I just want to confirm the question being asked.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

My question is this. We're in 2021. We have software that's spectacular, that can do everything, that can make cars drive by themselves, but we can't have software that can allow a province to talk to a federal tax collector. I just find that unfathomable.

[Mireille Laroche]

In terms of its administration, the tax system is extremely complex. If you just look at the law and also the different types of provisions, it is necessarily extremely complex, like a lot of systems. I would say that the CRA takes a lot of pride in the work that it does and actually invests significantly in making sure it updates the system and provides the best service it can to Canadians.

Ultimately, what we're talking about is that we have established processes, we have established connections and we have established systems. If we take a part of the administration and we tell somebody else to do it, we need to unwire and rewire. It is part of the fact that we have to create connections. That takes investment and it takes time to do.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Mr. Chair, can I give the rest of my time to Mr. Fast, our new vice-chair, whom I congratulate?

[The Chair, Liberal, Wayne Easter]

Yes, you can.

Go ahead, Mr. Fast; you're on. Welcome.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair.

I just wanted to say thank you to all of you who have already reached out to me to welcome me to the committee. I'm looking forward to being a constructive voice at the table, even though it is like drinking out of a firehose right now.

I have a question for Mr. Marsland. Our colleague Mr. Ste-Marie has assured us that his legislation facilitates what he refers to as a benign agreement that makes the filing of a tax return simpler and more efficient. I'd like to hear your view as to what might happen if that so-called arrangement were to evolve over time into a more significant right, even a constitutional right, especially as judicial creep sets in.

The second part of that question—

[The Chair, Liberal, Wayne Easter]

Ed, before you go to the second part, could you lower your mike a little? You're coming through—

[Ed Fast, Conservative, Abbotsford, BC]

I'm popping, right?

[The Chair, Liberal, Wayne Easter]

Yes.

[Ed Fast, Conservative, Abbotsford, BC]

The second part of the question is simply this. Has the department already turned its mind to what the negotiations and an agreement with a province like Quebec might look like? What safeguards would be built into such a benign agreement that would ensure that the federal government could extract itself from such an agreement if necessary?

[Andrew Marsland]

I will perhaps begin my answer, since the GST arrangement has come up a number of times, by drawing a distinction between that and what is proposed here. Under the administration of the GST, the administration is a harmonized system. There is an agreement between the two levels of government to keep the system harmonized. It is one system, essentially, with two parallel sets of rules that are virtually identical.

As has been alluded to a number of times, there are differences in policy and law between the federal income tax system and the provincial income tax system. An example came up earlier in the discussion with child care expenses. Quebec has made policy choices to have a subsidized system and therefore does not provide a deduction for child care expenses. It provides a subsidy and a credit under certain circumstances. There are very important differences at the core of the system.

I'm not sure if it's a question of drifting apart, because they are not together now, and the discussion really isn't about harmonizing the two systems, because they reflect different, very important policy choices by the federal government over time and by the provincial government over time. It's not necessarily a question of drifting apart, as they are already apart, and that really goes to the issue of a single tax return and the economies in compliance that can be achieved when you are dealing with two different systems.

I hope that goes some way toward answering the question.

[Ed Fast, Conservative, Abbotsford, BC]

Not completely. The focus of my question was more about whether such an arrangement would have built into it an opportunity for the Government of Canada to extract itself, should it be deemed necessary at any time in the future.

[Andrew Marsland]

Well, I can't really say what would be in the agreement, which would have to be negotiated, but any type of agreement has some kind of termination clause in it. I think you'd have to consider what.... If indeed there was an agreement that was operationalized and then terminated at some point, you would have to consider the implications in terms of building a new system to replace the one that had replaced the previous one.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Okay, we'll have to move on from there.

I would say, Ms. Laroche, on the complexity of the system, just keep in mind that this committee has recommended I think three times now that we need a comprehensive review of the tax system to simplify it over time. It would take a number of years, but this committee has recommended it twice at least, maybe three times, and the government needs to get to it.

Ms. Dzerowicz, the floor is yours for five minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I want to say thanks to our presenters today.

I have a few questions. My first question goes to Ms. Laroche.

Ms. Laroche, you mentioned in your opening paragraphs that many jobs across the country would be impacted. Would you have an idea how many jobs would be impacted outside of Quebec and in which provinces?

[Mireille Laroche]

We do not have an impact [Technical difficulty—Editor] because it would depend on the modality of the [Technical difficulty—Editor] the fact that we have organized our workforce and our flow of work in such a way as to optimize our operations and to ensure consistent service to all Canadians regardless of where they live.

As a result, we've used things like sectors of expertise across the country, and we also have national workflow where it doesn't really matter where the request is coming from. If it comes from Quebec, it could be dealt with in Ontario, or it could be dealt with elsewhere in the country.

In the event that this bill is passed and we come to an agreement, again depending on the nature of that particular agreement, there would be a reduction in the workload of the Canada Revenue Agency, and as such, it would need less workforce to be able to do its work.

If we talk purely about the processing of T1s for individuals and T2 corporation files, these activities for Quebec residents are primarily occurring in Jonquiere but also in Sudbury and in Summerside for the T2. That gives you an example, and naturally other functions are elsewhere in the country.

[Julie Dzerowicz, Liberal, Davenport, ON]

That's very helpful. Thank you so much for that.

Under “Efficiency in international taxation”, you mentioned, “Convincing our partners to make changes to include other subnational tax administrations is not a given”. If we go outside of that comment, if we set that aside, and if this moves forward and is implemented, would you have any commentary about how this bill might impact the federal government's ability to continue to fight tax havens and tax evaders?

[Mireille Laroche]

The comment I'll make is that typically these large corporations do not just operate in one province. They're everywhere in the world, including in all provinces and territories, in terms of how they do business, so there would be a need for very close relations between the two administrations to be able to work collaboratively on files, to be able to attain.... I would say that one of the first impacts that I see would be a need to have real collaboration in terms of looking at these large businesses that have dealings across the country.