Evidence of meeting #7 for Public Accounts in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was debt.
Liberal
Navdeep Bains Liberal Mississauga—Brampton South, ON
That's fair.
You indicated, Mr. Baker, that tax debts are unlike private sector debts. You don't actually go out and solicit clients; you're dealing with the general public. How does the tax revenue agency's 5.4% of tax debt compare to the private sector, for example, say, banks, private institutions, or other institutions? How does that compare?
Deputy Commissioner and Chief Operating Officer, Canada Revenue Agency
My general understanding is that an outstanding amount of tax debt in that range is not unusual for types of businesses. What makes us unusual is the sheer volume--$18 billion is $18 billion. It's a difficult number to ignore, even if it is only 5% or 6% of the total amount that we collect every year.
The main difference between us and the private sector, as you pointed out, is that we don't choose our clients. They enter the system without our permission and we have a duty to collect. On the one hand, we probably have the toughest measures available to collect tax debt in the country. On the other hand, we're held to a standard by parliamentarians and the public in the manner in which we collect debt, so we want to ensure our approaches are fair and reasonable.
We have measures available for individuals who cannot pay to stage their payments. In an exceptional circumstance, where we think there are factors beyond the control of the individual, we can relieve interest on penalties. We have tools to make it more palatable to pay, but at the end of the day, we will always have a certain number of people who get in over their heads, and in spite of our best available tools, we will not be able to collect.
Liberal
Navdeep Bains Liberal Mississauga—Brampton South, ON
With respect to the remarks the Auditor General made in terms of the fact that management is unable to explain some of the poor tax debt collection, basically that has to do with data mining, data warehouse, that type of information. It's indicated here that there have been some improvements in terms of having a call centre and so forth. Is there any correlation to that? I think the root cause is something else, which has to do with data management. I'm not sure the call centre is the appropriate response for that. Is that a fair comment?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
Our basic challenge is that when you look at taxation, it's based on self-assessment, and people should normally pay voluntarily when they have taxes owing. Part of our challenge is, why are people not paying when they file their taxes? It's more than just managing the account when it comes in; it's finding the basic causal factors as to why people are not paying their taxes and instead paying somebody else.
We need to start looking more in terms of the external indicators and ask, what are the predictors of information? We are looking at other private sector organizations such as Equifax and credit bureaus. They're saying they can predict with some level of accuracy who's going to be bankrupt next year, because they can see trends developing in their behaviour.
We have information in our agency that we could probably use more strategically to predict some of the taxpayers' behaviour. The problem with that is that you need to capture that data be able to use it in a way that enables a more intelligent usage.
Liberal
The Chair Liberal Shawn Murphy
Thank you very much, Mr. Bains.
We're going to go now to Mr. Watson for five minutes.
Conservative
Jeff Watson Conservative Essex, ON
Thank you, Mr. Chair.
I want to start with Mr. Baker's opening statement here. You say that from 1996 to 2005, some $80 billion in debt has been resolved—interesting word, “resolved”. Does that mean the money's been retrieved to the Crown, that some of it has been forgiven? Can you give me a breakdown on that?
Deputy Commissioner and Chief Operating Officer, Canada Revenue Agency
That would be everything. That would be moneys recovered as well as debts written off.
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
It's normally within the range of one-third per cent to one-half per cent of the money we collect. Last year, for the year the OAG did the audit, I think the amount was in the $2.7 billion range. In that year, we did have a blitz on writing off old accounts because we felt that our portfolio was overinflated in terms of value. There were accounts that were simply not collectible. They were accounts we had no hope of ever recovering.
In our case, in order to make an account officially not recoverable, we have to write it off under the Financial Administration Act, which means we have to study the account and convince ourselves that we have done everything in our power to collect the account and—
Conservative
Jeff Watson Conservative Essex, ON
Who gave the direction for that decision to write off the debt in question?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
It's part of normal portfolio management to manage accounts--to collect those that you can collect, but you also shouldn't—
Conservative
Jeff Watson Conservative Essex, ON
I'm asking who made the decision to write off that much debt? Is there somebody who said you were going to write off a portion of that debt that year?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
It's part of my duty as a portfolio manager to make sure we have meaningful financial statements. If those accounts are not truly accounts receivable, the normal accounting standards call for that debt to be reduced.
Auditor General, Office of the Auditor General of Canada
I wanted to say, for the benefit of the committee, that we looked at the procedures pertaining to writeoffs of tax debts in 2002, and we had no issues with the way it was done at that time.
Conservative
Jeff Watson Conservative Essex, ON
I have a question on whether we're heading back to that same strategy again. Over 50% of the debts are over two years, which we've concluded are either less collectible or uncollectible. Are we not heading for another debt writeoff of a significant proportion?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
We write off debt every year. In the private sector, they write off debts after six months. Sometimes we end up having to keep debt on the books for a very long time. So the questions here concern the time to process the debt and the procedures to process debt and reflect its actual collectibility in the portfolio.
Conservative
Jeff Watson Conservative Essex, ON
How much money has been lost to the Crown since 1994 from the inability to collect on debts or from debts that have been forgiven? Do we have a number on that?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
Those are published in our financial statements, either through fairness or writeoffs.
Mike, is the information available publicly?
Public accounts already receives this information as part of the agency's performance.
Conservative
Jeff Watson Conservative Essex, ON
You've concluded that out of the $18 billion owed at the end of 2005, $9.5 billion has been collected, and yet you can't attribute those amounts today before the committee. You've just been asked to attribute whether those are specific to that debt or not. How can you conclude in your statement that it's been collected if you can't answer to the committee whether it's attributable to that year or not?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
We can come back to the committee and give you the estimate, if you want. Generally speaking, most of the debts we collect are younger debts. When you look at the analysis of aging, accounts that are one year become two years, then accounts that are two years become three years. When you maintain a certain stability in that portfolio, the amounts collected are generally attributable to the younger debt.
Conservative
Jeff Watson Conservative Essex, ON
The ACSES system that's developed for collection officers is the main tool that they use. Obviously some problems are identified by the Auditor General here, and then it goes on to say that tax service officers have developed their own tools, additional tools. Was that a decision from somebody up at the top of CRA that these tools be developed, or are these individual officers developing their own tools and you're now trying to figure out how they use them?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
I wouldn't characterize it as that. I think the ACSES system was built in 1989. It operates off a main frame, and basically it's in need of rejuvenation. We do have in our future plans to basically not redo the ACSES system but to build a new case management system. The staff at the field level who are users of that system now have access to desktops that allow them to make more intelligent use of that system.
The concept is called macros, for those of you who are familiar with Excel spreadsheets and things of that nature. We have centralized the development of macros for all field offices with our colleagues from our information technology branch. We do monitor, track and approve who uses macros and the circumstances under which they use them.
Liberal
The Chair Liberal Shawn Murphy
Thank you very much, Mr. Proulx.
Thank you very much, Mr. Watson.
We'll now move to Monsieur Nadeau.
You have five minutes, Mr. Nadeau.
Bloc
Richard Nadeau Bloc Gatineau, QC
Ms. Fraser, gentlemen, Mr. Chairman, we began by talking about the number of income tax returns you process on average, yearly. The figure mentioned was 23 million individual income tax returns and some 2 million corporate returns.
What percentage of individuals have trouble paying you what they owe, compared to corporations?