Finance Committee on Dec. 12th, 2024

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I have a request to share with you on behalf of my constituents. My riding is home to a lot of seniors, more than the Canadian average. The seniors in my riding often want to be able to access services through traditional methods like phoning. I really appreciate the efforts you're making to innovate and find new ways to provide services to Canadians, but I just want to remind you and your team that while you're doing that, please don't forget the people who still need to use traditional methods.

A lot of things have been said lately about the CRA's writeoffs. It's even been insinuated that these were arbitrary decisions, not decisions based purely on an accounting process.

Could you clarify the steps leading to a writeoff and tell us who takes part in making that decision?

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

Certainly.

First of all, I can tell you that I play no part in the process. There's no political interference whatsoever. I'm not kept in the loop at all. Officially, this is a power conferred on the minister, but that power is delegated to the commissioner and assistant commissioners, based on the amount of the debt.

Before a decision is made to write off a debt, there's obviously a whole collection process to be followed. It's a multi-step process, and it usually takes several years before the agency reaches the provision for bad debt and the subsequent steps. The entire process complies with generally recognized accounting principles. That includes the agency's procedures, of course, but it also complies with the Financial Administration Act and the Bankruptcy and Insolvency Act. This process is very strictly controlled. Furthermore, the Office of the Auditor General of Canada reviews the agency's decision.

The agency puts in a lot of effort before reaching the writeoff stage. A number of considerations factor into the equation. For instance, we consider the age of the account and how long it's been delinquent for. We also assess the creditworthiness of the indebted individual or company. In our quest for continuous improvement, we always keep an ear to the ground so we can hear about the latest schemes and prevent people from using them.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Baker.

Now we will go to MP Ste-Marie, please.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Minister, it's a real pleasure to have you here. I also want to thank Mr. Hamilton and all the members of the CRA team who are joining you.

My first question is fairly technical. It's about Quebec's recreational vehicle dealers. You know about this file. The Canada Revenue Agency is demanding that they pay a retroactive amount equivalent to Ontario's harmonized sales tax, which is 8%, for RVs imported from the U.S. that were intended for sale in Quebec but went through customs in Ontario. This measure applies retroactively to 2012 and seeks to recover a total of $50 million.

Could you please fix this problem?

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

We've looked into the situation. It was of course brought to our attention for one sector in general. What we concluded is that the tax application process is the same regardless of the product. I'm trying to make sure I don't get too specific, but the sector did receive the correct information. We wanted to make sure everyone had understood. Generally speaking, it's been correctly applied across Canada.

You can see what a tricky position I'm in. I can't talk to you about individual cases, but I can assure you that when such situations arise, the agency staff work with the people involved to find the best way to solve the problems. As for situations that could come up in the future, the system is working and people have received the right information, so everything should happen properly from the outset.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you for your answer.

That means that these dealers will have to pay back $50 million. Obviously, that's going to have a major impact on their cash flow, since they'll have $50 million less in their accounts until the necessary deductions are made and they can get that money back. We know that these dealers don't have very big profit margins and that the recreational vehicles they sell are very high-priced. I'm glad to hear that this issue is going to be resolved, but I urge you and your entire team to come up with a solution as quickly as possible. People have been reaching out to us about this for over a year. Thank you.

Now I'm going to completely change the topic. It seems to me that the Canada Revenue Agency has been in the news every week this fall, whether in the Le Journal de Montréal or on Radio-Canada, often concerning new fraud cases or schemes. These news reports essentially seemed to be saying that the agency, and you personally, appear to be going after the whistle-blowers and telling them not to talk about the situation to the media.

I see you reacting, Minister, so go ahead and explain that to us.

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

Certain distinctions are in order.

Sometimes, in certain situations, disclosures by whistle-blowers are necessary. However, the context of our work at the Canada Revenue Agency also needs to be taken into account. Obviously, we are a prime target because of the huge amount of personal, financial and sensitive information in our possession. We have to manage this information very carefully. We ensure that employees have no more access to it than is necessary. This demands constant checks. The fact remains they owe a duty of loyalty to the government and to the agency. It's important to remind agency employees that they have responsibilities and must live up to them.

As for the other matter you mentioned, it's important to keep in mind that employees can always express their concerns or dissatisfaction within the agency, either to their supervisor or to someone higher up the hierarchy. They can also contact the Office of the Public Sector Integrity Commissioner of Canada or other resources outside the agency.

Furthermore, I must say that employees who blow the whistle on situations they consider unacceptable may not always be aware of all the efforts the agency is making to correct the very same situation. The agency has nearly 60,000 employees. Obviously, the teams working on fraud scheme issues don't disclose all the details of what they're doing at end-of-week team meetings.

In my opinion, these people have been taken seriously and work is being done, but the agency's efforts to combat fraud schemes aren't being broadcast. We don't want to give ideas to people unfamiliar with them. Communication is where some things fall through the cracks.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Okay, thank you.

Obviously, I was very concerned every time one of these stories came out or when my MP's office was made aware of service-related issues. Personally, I think that whistle-blowers who expose all these fraud schemes are doing a useful service to democracy. It is good for the health of our democracy to ensure transparency in this area. However, after seeing the messages being sent out by Mr. Hamilton, the CRA and you, I wondered whether you were going after the fraudsters or the whistle-blowers. That was the impression we got when we read the news reports.

My time is almost up for this first round, but I have a request to pass on to you. My colleague, Jean-Denis Garon, the Bloc Québécois critic for national revenue currently on parental leave, wrote to you this summer with a request. Six months have passed and, in the meantime, several other items of information have been made public. Earlier on, you referred to a section of the Income Tax Act. However, section 231.4 of that act grants the minister responsible for the CRA the power to authorize an external investigator to conduct an investigation. Considering the many revelations made in the media over the past year, especially last fall, I'd like to reiterate this request so that we can get to the bottom of this matter. You say that teams are putting fraud strategies in place, but I get the impression that fraud cases are more frequent than ever and that the problem is not going away.

Only you have that authority. Are you considering using it?

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

We have to move on.

We are moving to MP Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chair.

Thank you, Minister, for being with us.

Minister, as we know, the CRA approved $4.9 billion in writeoffs for the 2023-24 fiscal year. That was the highest amount disclosed over the past nine fiscal years. The breakdowns indicate that the value of the writeoffs is heavily weighted towards a small number of large cases.

I'm wondering if you could explain for us what factors explain the increase in CRA writeoffs for that year. Can you explain why the value of the writeoffs is so heavily weighted towards large cases?

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

The more that total revenues increase, the more likely that total writeoffs will increase. However, I did a little comparative research and noticed that revenues processed by the agency in the past 10 years had increased from $376 billion to $662 billion, which amounts to a 76% increase, while total writeoffs had increased from $3.3 billion to $4.3 billion, for a 31% increase. This comparison indicates that the revenue growth rate of three quarters, is much higher than the writeoff growth rate of one third. I think that demonstrates how seriously we are taking the matter and that our collection activities are quite effective.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

In November, 600 CRA employees working in revenue collection and audit were informed that their contracts were being prematurely terminated. Some lost their jobs as of November 29, and all affected employees will be terminated by tomorrow, December 13.

Given the writeoffs last year for uncollected debts, can you explain how laying off hundreds of revenue collection and audit workers will improve the situation?

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

The agency's team is very large. It grew a lot because of programs introduced during the COVID-19 pandemic, but has since reverted to roughly its normal size now that certain programs have ended. For example, we are in the process of finalizing the recovery of COVID-19-related benefits. A lighter workload is one reason why we have fewer employees in the field.

It is important to keep in mind that the agency's work is cyclical. For example, we naturally expect to hire more people during tax season. Summer is another busy period, when benefits are being renewed.

The agency's workforce always fluctuates to some degree. Still, the unusual rise in employee numbers in recent years has not escaped our notice.

[Don Davies, NDP, Vancouver Kingsway, BC]

Are you saying, Minister, that all 600 of those CRA employees are people who were hired only to deal with the temporary programs that are now coming to a close?

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

These people were hired on fixed-term contracts, not as permanent employees.

Some permanent employees were placed in temporary positions, but have since returned to the permanent position they held before leaving. No permanent positions have been cut.

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay.

I'm curious, Minister, about whether you know, for every dollar spent on audit and revenue collection, how much is returned to the federal treasury.

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

I don't have an answer to that question. I would have to look into the matter unless one of my colleagues can respond.

Would you like to respond, Commissioner?

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay.

[Bob Hamilton, Commissioner of Revenue, Canada Revenue Agency]

I can respond to that in a general way.

I will note that, at times, we get resources from Finance Canada through a budget.

We have a rough rule of thumb that, for every dollar we get to spend on increased auditing compliance, we return somewhere between $3 or $4. It's always a ratio greater than one. If you give us a dollar, we'll return more. That can depend on the type of activity those people are engaged in or the technology they're using.

Roughly, if you think of three to one or four to one, that would probably be a good ballpark figure.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Hamilton. It sounds like a good investment.

Marc Brière, the president of the Union of Taxation Employees, said in November:

We strongly oppose these job cuts. Just to give you an idea, a collection officer collects between $1 to $5 million per year, while their salaries range between $65K to $73K/year...It doesn't make sense to lose hundreds of millions yearly. It certainly doesn't help to balance the government's books.

Would you not agree that if we have uncollected debts—and there are certainly more, and I don't think you would assert there isn't more money out there that audits and collections would return to the treasury—it makes sense to be investing in increased audit and collection services at this point in time, not cutting them?

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

I'm pleased to hear that you would support increasing the Canada Revenue Agency's operating budget.

That said, it's important to consider the sector where the various employees work. The agency's human resource managers try to assign positions in the best possible way so that the agency can meet all of its obligations whether they relate to service delivery or tax and collection management.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Davies.

Members, we are moving to our second round of questions, and timings are a little different in this round.

We're starting with MP Hallan for the first five minutes.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thanks, Chair.

Minister, your temporary two-month GST tax trick, according to small businesses, is confusing, cumbersome and complex. They're scrambling right now at the busiest time of the year to change their POS systems because of this policy that was dropped on them. It's not only costly, but very confusing. It's not very clear, through your department or Finance, what's included and what's not.

Why were businesses not given more of a heads-up?

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

As you know, the Department of Finance works on tax policies, while the Canada Revenue Agency administers those policies.

I can tell you that the agency team in charge of answering questions from businesses, specifically questions about taxes, has been mobilized to be ready to take phone calls. However, we were pleasantly surprised to see that the team's phone line was not being flooded with calls. I think that's proof that the information on the agency's website is quite detailed.