Finance Committee on Feb. 23rd, 2021

[The Chair, Liberal, Wayne Easter]

I call this meeting to order.

Welcome to meeting number 21 of the House of Commons Standing Committee on Finance. Pursuant to the order of reference of January 27, 2021, the committee is meeting to study Bill C-224, an act to amend an act to authorize the making of certain fiscal payments to provinces, and to authorize the entry into tax collection agreements with provinces.

Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, 2021. Members are therefore attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website, and so you are aware, the webcast will always show the person speaking rather than the entire group. I think most members are aware of all the technicalities around this. Also, to remind people, pictures are not supposed to be taken of the meeting and keep your mikes off when you're not speaking.

We have three witnesses here today for the session. We'll start with the president of The Professional Institute of the Public Service of Canada, Ms. Daviau, and Quebec's representative, Mr. Couillard.

The floor is yours, Ms. Daviau, if you have opening remarks.

[Debi Daviau, President, The Professional Institute of the Public Service of Canada]

Thank you so much. Good afternoon. My name is Debi Daviau. I am president of The Professional Institute of the Public Service of Canada, or PIPS, the national union that represents approximately 1,400 Canada Revenue Agency professionals in Quebec. Overall, we represent some 12,000 auditors at the Canada Revenue Agency across the country.

With me today is Mr. Jean Couillard, our representative for our group at CRA, and he is our representative for the Quebec region. He is a CPA and a CGA and a subject matter expert on CRA-related issues.

We'd like to thank you for the opportunity to present our views on Bill C-224 and on the possibility of transferring tax processing from the Canada Revenue Agency to Revenu Québec. Together, we would be happy to answer any and all questions you may have after our presentation.

I want to assure committee members that we have thoroughly researched this issue. Our position is based on substantial academic and expert literature. In a nutshell, Bill C-224 is not in the best interests of Canadians and Quebeckers, and there are alternatives to transferring this responsibility to Revenu Québec. We urge members of Parliament to carefully review our arguments and decide if this is really the road to follow, especially at this time. Why? Because it would have a negative financial impact on taxpayers across Canada, and it would not result in tax-processing efficiencies for residents of Quebec. It's a step backward in the fight against tax evasion. It's a move away from tax fairness. Finally, it would lead to the loss of high-quality jobs in Shawinigan and Jonquière, two smaller provincial communities already hard hit by the pandemic.

I'd like to emphasize that we are not the only ones to take this position. Academic and expert literature on this issue demonstrates that there is no clear evidence that decentralization of Canadian tax administration to a provincial authority would result in greater aggregate savings, efficiency, compliance or accountability, as compared to centralizing the administration of provincial taxes at the CRA.

Please note that we can provide committee members, and any member of Parliament, with our list of these studies and references upon request.

I'd like to address each of our arguments individually.

First, the numbers don't add up. There are no savings or efficiencies to be gained either for Quebec taxpayers or for those in the rest of Canada. The June 2015 report of the Commission de révision permanente des programmes, which was commissioned by the provincial government itself to look into this and other issues related to government spending and efficiency, found that the most efficient and cost-effective way for Quebeckers to have a single tax return would be for the CRA to administer all tax collection. Plus, a shift from the CRA to Revenu Québec would require a significant expansion of the latter's capacity as well as an expansion of its administration budget. The CRA is already in a position to centralize Quebec's tax administration.

Second, it represents a step backward in the fight against tax evasion. We know that other provinces are watching to see what happens with Bill C-224. We believe that if it is adopted, the bill could lead to a balkanization of Canada's tax system, resulting in more regressive taxes and weakened enforcement of measures aimed at combatting tax avoidance amongst wealthy Canadians and large corporations. Also, because international agreements aimed at fighting tax evasion are signed between central governments, it would be difficult for Quebec to perform the federal government's work in this area without a great many treaties being redrafted. This could lead to increased tax evasion at a time when billions of dollars are sitting offshore that the government is trying to recuperate. This is money that is badly needed to fund the public programs and services that Canadians depend on every day.

Third, it's a move away from tax fairness. Progressivity in Canada's tax system largely stems from federal taxes. This is even more the case now, as the federal government has introduced more progressive tax measures at both the top and bottom ends of the income spectrum. These measures are delivered through Canada's existing tax system. Their administration would be far more complicated if individual provincial agencies became involved. If we are to have a fairer and more progressive tax system in Canada, it must come from the federal level of government. We can't depend on provincial governments, which are by nature and by economic imperatives more constrained in what they can do.

Historically, the shift to a tax-on-income basis for provincial income taxes rather than as a percentage of federal taxes gave them more flexibility to set their own rates. This led to many putting into place considerably less progressive income tax systems.

Of course administration and collection of taxes are different from tax policy-making, but further devolution of the administration and collection of taxes will inevitably lead to a greater devolution of tax policy-making and to a less progressive tax system overall.

Finally, it’s critical that we not lose sight of the impact this could have on employment in Shawinigan and Jonquière, where the Canada Revenue Agency provides good jobs to a great many people. I can’t think of a worse time than the middle of a pandemic to start thinking about cutting jobs in smaller communities. The CRA is a governmental leader in the decentralization of its jobs. They are not all concentrated in the national capital region, as is often the case with federal jobs. They may not be easily redeployed to other departments.

To conclude, Bill C-224 should not be adopted. A better way to go, if we want to have less paperwork and a lighter tax-filing burden on individuals and ensure that people get the benefits they are entitled to, would be to have automatic tax filing. This is something the Trudeau government has committed to implementing. We support that initiative, and the CRA has the capacity to effectively process Quebec taxes as it already does for the other provinces.

I want to thank you for your time. Mr. Couillard and I would be pleased to answer your questions

[The Chair, Liberal, Wayne Easter]

Thank you very much.

We turn now to the Quebec public and parapublic service union, with Mr. Sylvestre, vice-president, national executive; Mr. Caron, research adviser; and Mr. Gaudreau, political consultant.

Mr. Sylvestre, the floor is yours.

[Jean-François Sylvestre, Vice-President, National Executive, Syndicat de la fonction publique et parapublique du Québec]

Thank you, Mr. Chair.

Thank you very much for your invitation.

For five years, the Syndicat de la fonction publique et parapublique du Québec has been proposing that Quebec taxpayers fill in one tax return only, rather than two, as is currently the case. In order to ensure Quebec's autonomy in tax matters, this single tax return should be administered by Revenu Québec. We therefore enthusiastically welcome Bill C-224, as proposed by the hon. member for Joliette, and we invite all parties to study it seriously and support it in the upcoming votes.

A single tax return would clearly come with its share of changes, but the advantages would be well worth the cost, especially if the necessary measures are put in place to avoid any loss of jobs. Thanks to employers like the public service in Quebec and at the federal level, all the mechanisms are available to protect them.

Among the advantages of a single tax return, we might mention the significant and ongoing savings for the governments and therefore for the public as well. According to an analysis by the Research Institute on Self-determination of Peoples and National Independence, the savings could well be $425 million annually. In the light of this observation, a refusal to achieve those savings can only feed the prevailing cynicism as to the management of public funds. Given all the investments needed for services to the public, those hundreds of millions of dollars could clearly be put to better use.

In terms of the choice of the agency that would become responsible for the single income tax paid by Quebeckers, it seems clear to us that Revenu Québec would be the best option. In fact, according to Revenu Québec itself, leaving the collection solely to the CRA would not mean savings. It would mean annual losses of $300 million, because Revenu Québec combats tax evasion more aggressively. It does so through the wealth indicators program that uses artificial intelligence to identify taxpayers whose returns do not match the value of their assets.

It is also essential to maintain Quebec's autonomy in tax matters. The autonomy allows the Government of Quebec to have its own tax policies without having to pay a penalty, as is the case with other provinces that wish to define the tax base differently from the federal government. The fight against tax evasion and tax avoidance is close to the hearts of Quebeckers, as shown by the strong support for taxing the tech giants, hand in hand with the strong criticism directed at the federal government for taking too long to collect those taxes. The provinces turned over tax collection to Ottawa. We therefore emphasize that, since Ottawa asked the provinces for flexibility in determining the tax base, Quebec could well ask Ottawa for flexibility in return.

Revenu Québec also has much more of a presence here than the Canada Revenue Agency. The provincial agency has 60% more points of service than its federal equivalent. We must also ensure that we maintain service in French that is of good quality and easily accessible. A lot of evidence, albeit anecdotal, shows that people prefer to call Revenu Québec for information on federal income tax.

Now that we have laid out the advantages of a single tax return, we also want to submit our ideas on solutions to mitigate the impact on the workers as much as possible. This of course is a problem to which we as a union are sensitive.

The impact that this change would have on the 5,000 affected jobs in Quebec should be carefully studied. All transfers or re-assignments should be spread over as many years as it will take. The Saguenay and Shawinigan regions specifically will have no costs in moving to a single tax return. We also believe that the National Verification and Collection Centre in Shawinigan-Sud, with its 1,300 jobs, should hardly be affected. Because it deals with returns coming from all over Canada, there would be therefore no reason to change the Centre's mission.

In addition, new exchanges of tax data between countries as a result of the OECD's initiative called BEPS, or base erosion and profit shifting, require some reinvestment in the federal agency so that this significant quantity of data is properly processed. We must also not forget the eight programs created in response to the health crisis, which CRA manages. As Quebec already has fewer federal public servants compared to the Canadian average, it would be even more timely for those new investments to be used to maintain CRA employment in Quebec.

Other federal programs could also benefit from the skills of the people working at CRA, including the ability to provide quality services in French. Priority hiring in certain other federal departments and agencies could be made available to the workers that have to be reassigned.

In addition, we must keep in mind that Revenu Québec would certainly benefit from the expertise of CRA employees, who could be transferred to the provincial agency, with all their working conditions intact. This type of situation has come up before; it would not be the first time.

Finally, we will conclude by asking for the same thing as the Commission des finances publiques du Québec, that is, greater cooperation between the two agencies in exchanging information required as the result of federal agreements. Whether or not we have a single tax return, it is essential that each tax authority have all the information available to ensure that all taxpayers pay their fair share.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Sylvestre.

Turning to the last panellist, with the Union of Taxation Employees, we have Marc Brière, national president.

Go ahead, Mr. Brière.

[Marc Brière, National President, Union of Taxation Employees]

Thank you.

Good afternoon, ladies and gentlemen.

I am the national president of the Union of Taxation Employees.

First of all, I too would like to thank you for giving me the opportunity to take part in this discussion today on Bill C-224.

The Union of Taxation Employees is a component of the Public Service Alliance of Canada. We represent around 28,000 employees of the Canada Revenue Agency.

The purpose of the bill introduced by the Bloc Québécois member of Parliament Gabriel Ste-Marie is to have the federal government make the province of Quebec responsible for collecting and administering federal-level personal and business income taxes on behalf of the federal government.

Because the Bloc Québécois is an openly sovereignist party, I can certainly understand the political reasons that prompted him to introduce this bill. However, I can see no other good reasons that would justify passing Bill C-224.

First of all, massive job losses will clearly ensue if this bill is passed and the federal government hands over administration of Quebec's federal taxes to the provincial government. The Canada Revenue Agency currently employs approximately 6,000 people in Quebec, and our union represents about 4,000 of them. Revenu Québec has around 12,000 employees. Together, the two agencies therefore have a total workforce of approximately 18,000 people. If we compare that to the CRA'S total workforce in Canada outside of Quebec, which is about 39,000 employees, it's easy to see that there would be a surplus of employees in Quebec if the bill is passed.

Moreover, as reported in a January 2019 article in the daily Le Devoir, Quebec Premier François Legault believes that there will definitely be job losses. He is also careful to point out that only employees in the group working for Revenu Québec would keep their jobs. I actually don't agree with him, but that's what he said.

I'd like to point out in passing that the vast majority of jobs that would be lost are held by people living in Quebec who pay taxes there and greatly contribute to the province's economic activity. Basically, they are Quebeckers from all over Quebec.

Included in these job losses are more than 1,200 employees in the Saguenay—Lac-Saint-Jean region and 1,500 in Mauricie. The bill calls for measures to be put in place to mitigate the job losses that will be inevitable. While I have been looking for a realistic solution to this problem, I have yet to find one.

Now, I also need to point out that the idea itself of creating a single tax return in Quebec is not the solution, at least not at this time. This is not coming from me. This is according to Quebec tax experts who met in May 2019 in Sherbrooke. According to those experts, the solution is not applicable at this time. They said that international practices would prevent Quebec from being able to do a part of the federal government's work in this area. They also said that the result of bilateral agreements negotiated solely between the central governments, like the Government of Canada and other countries, such as co-operation agreements on, among other things, combatting tax evasion, do not usually allow the data to be shared with other levels of government.

I know that the bill is asking us to look into that, but I want to point out that it took years for the CRA to negotiate these agreements with other countries. It will take a long time, if it can happen and if the other countries agree, to make any changes to these agreements.

In any case, the real problem doesn't lie there. The bulk of the additional cost of tax compliance in Quebec doesn't arise from a redundancy issue, according to François Vaillancourt, a renowned Quebec tax expert. It comes from the tax policy differences between the two levels of government, because there are two tax laws, one provincial and one federal. He said that as long as we have to comply with two different sets of legislation, we cannot hope to achieve such huge savings.

The experts therefore suggest that Quebec and Ottawa harmonize their tax policies before even thinking about creating a single tax measure. According to those experts, if the objective is solely to reduce redundancies and achieve efficiencies, it would be more logical to entrust the work to the agency that is most capable of achieving large-scale savings, namely, the Canada Revenue Agency. I suggest that this is why the nine other provinces are counting on the CRA to do the work.

In its report published in June 2015, the Robillard commission, commissioned by the current government itself, came to the conclusion that transferring the tax administration activities from Revenu Québec to the Canada Revenue Agency would result in direct annual savings of approximately $400 million for the Quebec government.

In our view, if Quebec administers the federal government's taxes in Quebec, it will lose some of its autonomy, since it will have to harmonize many of its tax policies with those of Canada's Income Tax Act. In particular, that will include the definition of income, which is not the same at the federal level as it is in Quebec.

In conclusion, thank you again for the opportunity to speak to you today. I will be pleased to answer any questions committee members may have.

[The Chair, Liberal, Wayne Easter]

Thanks, all of you, for your presentations.

For a six-minute round, Mr. Berthold, the floor is yours.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you very much, Mr. Chair.

First, I would like to thank our guests. Today, they have provided us with a lot of very enlightening information about the situation we're in right now.

We have a bill that will harmonize the Quebec and federal tax collection and administration systems, making the Government of Quebec responsible for them.

I'd like to remind you that the Conservative Party has already made the people the focus of the single tax return initiative. The Conservative Party wanted and still wants Quebeckers to file only one tax return. However, where our proposal differs from the bill is that we believe it's possible to make Quebeckers' lives easier without changing the whole system.

I'd like to hear what the three organizations represented here have to say about that.

Do you think we could make Quebeckers' lives easier by requiring them to fill out only one form, which would be sent to Revenu Québec and the Canada Revenue Agency? The two agencies could then continue to process the information, but it would be on a single form to make it easier for Quebec taxpayers. Canada Revenue Agency officials told us that this is possible.

Is it realistic and feasible, in your opinion? Might it be easier than trying to harmonize the two tax systems by transferring power from one revenue agency to the other?

We could start with Ms. Daviau.

[The Chair, Liberal, Wayne Easter]

Ms. Daviau, would you start?

[Debi Daviau]

Yes, if I may, I will ask Monsieur Couillard to respond, because he is actually an employee of Canada Revenue Agency in Quebec.

[Jean Couillard, Québec Representative, AFS Group, Professional Institute of the Public Service of Canada]

Good afternoon.

My name is Jean Couillard and I'm an auditor with the Canada Revenue Agency in the—

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Mr. Couillard, we already know all that.

I would like you to answer the questions, please, because we don't have much time.

[Jean Couillard]

Okay.

It would be quite complicated to combine the two tax returns on a single form, because the two systems have major differences. Specifically, one difference is the distinction between personal and business tax returns. It could therefore be complicated to put them on one form.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

All right.

What do you think, Mr. Sylvestre?

[Jean-François Sylvestre]

I invite my colleague Mr. Caron to provide you with more details on that.

[The Chair, Liberal, Wayne Easter]

Mr. Caron.

[Pierre-Alexandre Caron, Research Advisor, Syndicat de la fonction publique et parapublique du Québec]

I also have a feeling that it would be quite complicated to have a single return and keep the two agencies separate. I also feel that it would draw us away from the goal, which is to save money and give it to other public services that really need it.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

What does PSAC's Union of Taxation Employees have to say?

[The Chair, Liberal, Wayne Easter]

Mr. Brière.

[Marc Brière]

It would be very complicated, and to be perfectly frank, I don't think it would save a dime.

I say that because the federal and provincial systems define income very differently. For example, if an individual has a private health insurance plan that is paid wholly or partly by their employer, it is considered a taxable benefit in Quebec, but not at the federal level or in the other nine provinces. Combining that to have a piece of legislation—

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

All right, I'm going to stop you there, Mr. Brière. I understand what you're saying: it's very complicated.

As things stand, it's no trouble for employers to send people T4s and RL-1 slips, so I can't see why it wouldn't be possible for them to send a single document, instead, with the information from both forms. Why couldn't taxpayers fill out the appropriate boxes, depending on whether the information applied to the federal or provincial system? The federal and provincial governments would refer only to the boxes and information that pertain to their respective systems. Individual taxpayers would just have to send their information to both revenue agencies.

The idea is not to save taxes or put people out of work. The idea is to make life easier for Quebeckers. What we are trying to figure out is how to do that. I'm especially surprised to hear someone from the CRA say that it's practically impossible to make life easier for Quebeckers by allowing them to fill out a single income tax return. I have a hard time wrapping my head around that.

Mr. Brière, it looks like you want to comment, so please go ahead.

[Marc Brière]

Thank you.

[The Chair, Liberal, Wayne Easter]

Okay, Mr. Brière.

If I may just interrupt for a second, Mr. Berthold, we have two hours today and only three witnesses, so there's ample time. We don't need to rush too much.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I see.

[The Chair, Liberal, Wayne Easter]

Mr. Brière.