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.
Director, Accounts Receivable Division, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
Good afternoon. I think the figure is 4 or 5% for both groups, but we would have to confirm that.
Bloc
Richard Nadeau Bloc Gatineau, QC
I see. That is somewhat similar to the increase shown in exhibit 8.3 on page 245 of the English version of the report. So that refers to either group.
On page 245, you say that you studied why some people have trouble paying their tax debt. You say that you could not take an in-depth look of this issue, because there was a shortage of data.
Can you tell us whether there is a trend, from what you know? Are there some well-known specific reasons that would indicate what could be done to improve the situation?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
The comment was made by the OAG initially. The representatives of the OAG might have some preliminary remarks they would like to make on this.
Auditor General, Office of the Auditor General of Canada
I would just say that this study was done by internal audit, and it wanted to discover the reasons for the increase. The auditors have shown some trends, I believe, but they were unable to pinpoint the exact reasons. There is still work to be done to complete what they had hoped to do initially.
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
I would like to add that we have a great deal of data, but that with the data we have, we are unable to get the information at a higher level. If you want to know how many clients or taxpayers are repeat clients, for example, we can easily say that this year there were a half-million such cases, representing a value of $10 billion.
Bloc
Richard Nadeau Bloc Gatineau, QC
My question is more about the reasons for this situation. I'm told that information is available, but it has been impossible to analyze all of it so far. Is nothing apparent? Is there not a trend? Can you comment on this?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
At the moment we are building data warehouses that will allow us to determine how many accounts came to us from the calls this year, cases where the account was one or two years old. This will allow us to determine how much time the courts might take to...
Collecting an account we get today but that has been before the court for four years is a major challenge. What is the likelihood that we will be able to collect such an account? Has the taxpayer set aside any money? The taxpayer does not have to pay as long as the case is under appeal. What is our specific performance in such cases? We do not have that information. We have information on a case-by-case basis. We can determine which cases went to appeal, we can track the case and see how we perform, but we do not have any data showing how many similar cases there are. These data are not stored or collected in such a way that we can do this type of analysis.
Bloc
Richard Nadeau Bloc Gatineau, QC
Perhaps I should have started by saying that the reason I am asking these questions is as a member of Parliament for a particular riding. Occasionally, people call us because they're having trouble. In Quebec, there are two systems: the provincial income tax and the federal income tax. Nevertheless, we have to try to help these people find a way to pay their tax debt. As you mentioned earlier, this can be done out of court, amicably, but in some cases it is not at all obvious how to proceed. That was the context within which I was asking the question.
Let me pursue a different area. I am now on page 247. There are ways you can deal with people. You referred to this a little earlier.
Are there more effective ways of dealing with people? Should some of your procedures be improved in your opinion? Are legislative changes required to help both taxpayers and the department to meet the objective of paying and collecting tax debts? Could something be highlighted that would be helpful in this regard?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
Indeed, the framework in which we operate means that we use the powers we are given, taking into account the restrictions and constraints which are imposed on us as well. For example, we do not collect the amounts due while an appeal is pending. Cases therefore become older and taxpayers hope to pay but unfortunately are not always able to do so because they have not necessarily set money aside for it.
I think it is a question of fairness towards Canadians. People who expect to win their case wonder why they have to pay Revenue Canada. It doesn't make our work easy.
There are other cases. For example, self-employed workers must do a year-round assessment of the amount they will have to pay at the end of the year in taxes. As the Auditor General's Office has noted, some of them present a challenge. They do the best assessment they can on their own account, but at the end of the year, they find they do not have the sum required to pay when they submit their income tax return. So what do we do in those cases?
This is how things really are. When people have the ability to pay, we have the tools to collect the money they owe. However, when people do not have the ability to pay, when they have not set aside enough money and do not have the means to pay, then what can we do? We have to demonstrate not generosity, but understanding, and acknowledge the circumstances they find themselves in. Often, these are taxpayers who have lost their jobs or whose family situation, a divorce, for example, makes things difficult. Sometimes, the ability to pay will return later, but for the moment, the best strategy we can take with those individuals is to give them an opportunity to put their financial situation back on a sounder footing and deal with their financial problems. We try to demonstrate compassion and take into account the circumstances that taxpayers face. That is in our policy and procedures. We even have a fairness file, where we can write off penalties and interest when the taxpayer in question does not have the ability to pay.
Liberal
The Chair Liberal Shawn Murphy
Thank you very much, Mr. Proulx. Merci beaucoup, monsieur Nadeau.
Mr. Lake, five minutes.
Conservative
Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB
Thanks, Mr. Chair.
Thanks, Ms. Fraser for being here again. It's good to see you again.
I have a couple comments before I get to a couple of questions here.
Mr. Proulx, I noticed you talked about not having bonus systems and referred to the importance of more quality than quantity in terms of the staffing there. I would think that when you're talking about debt collection, there's a direct correlation between the two and right now the quantity is $18 billion of taxpayer money. So I think there is a correlation there.
Mr. Wrzesnewskyj talked about a post-recession period. I would say that a post-recession period could also be called a pre-prosperity period. Whatever you call it, at the time you made enough money to pay taxes and it should have been paid--for the most part.
Mr. Baker also alluded to that as well by saying we always have people who experience hardship and can't pay. My comment on this is that at the time the taxes are owed, for the most part the system is such that at that time they should be able to afford to pay. The trouble is that we're not collecting at that time. That seems very problematic to me. If we had collected the money at the right time, we would be able to collect more of it.
This leads to my question for the Auditor General first. You mentioned you had no problem with the decision to write off the $2.7 billion that's written off. Could we have saved some of that money if we had done better job of collecting it in the first place, and to what extent?
Auditor General, Office of the Auditor General of Canada
Mr. Chair, that's a hard question to answer, because I would presume that many of those accounts are probably very old. We haven't gone through a specific review of that, but when we do our audit of the public accounts, we do look at the provisions and how those provisions are set up. Most of it would be judged by the various agents as to what the collectibility will be.
I think we have to recognize that there will always be writeoffs, given the amounts of money involved, and it was actually a good thing that the agency made a concerted effort to clean up the accounts so that actions aren't continuing on accounts that everyone knows will never be collectible. A specific effort was made in that year, and you'll see that the writeoffs are much higher in that year than in other years, because there was a concerted effort to try to resolve some of those accounts.
As for the specific question, I'm afraid I can't answer that.
Conservative
Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB
Fair enough. We have $18 billion right now, of which $4.7 billion doesn't seem to be collectible. Is that correct?
Auditor General, Office of the Auditor General of Canada
It's $18 billion in non-disputed accounts. There's another $6 billion in accounts that are disputed--on which, as was mentioned earlier, collection activities can't take place because there are notices of assessments or it's in the courts or whatever.
Conservative
Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB
Right. Of the $18 billion we've deemed undisputed, though, just doing the math, I think $4.7 billion is what we deemed to be unlikely to be collected. Is that fair?
Auditor General, Office of the Auditor General of Canada
That's the allowance for doubtful accounts. It's the provision that has been taken against it. That's right.
Conservative
Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB
It does seem, though, that we're dealing with a problem that was identified 12 years ago in terms of the problems with the system, lack of information, and everything else that the folks in the department have.
I have another question to do with the $18 billion. Does that amount include money that dropped off the radar after the 10-year mark we were talking about earlier?
You're indicating it doesn't include that.
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
The amounts that are basically uncollectible because they would be beyond the 10-year mark would need to be written off, or they should be in the allowance for doubtful accounts, so those account become uncollectible.
Conservative
Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB
So on top of the $18 billion, there's also a sum of money...some amount that we've actually taken off the books?
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
Yes. Through the years, through the tax system, amounts that are written off--for example, through bankruptcy--cannot be reinstated, ever. They are forgiven and all that, and there are about 60,000 bankruptcy cases a year.
Canadians owe creditors and owe taxes, and they come and invoke that piece of legislation. That's been written off. It's gone. It's not in the $18 billion. The $18 billion is what we consider to be currently on the books as collectible or in need of being managed. Then there's an allowance on that $18 billion of about $4 billion that we think is likely to be uncollectible. For example, in the year that we had a blitz on the bookkeeping part of it, we wrote off and processed a lot of the accounts and basically got them off the books.
However, one thing should be said about accounts that are written off for any reason other than bankruptcy. If the ability to pay is ever reinstated, we can bring them back in. We have the ability to reinstate accounts if the taxpayer's ability to pay is regained.
Conservative
Assistant Commissioner, Taxpayer Services and Debt Management Branch, Canada Revenue Agency
Not after 10 years.
Liberal
The Chair Liberal Shawn Murphy
Thank you very much, Mr. Lake.
Next is Mr. Christopherson, for five minutes.
NDP
David Christopherson NDP Hamilton Centre, ON
Thank you, Mr. Chair.
What I'd like to do in the interests of time, rather than just using up five minutes for the sake of five minutes, is see if I can nail down a motion, and that'll conclude my round. I throw this out, Mr. Chair, if you'll accept it, and I'd be open to friendly amendments without having to go through formal amendments.
This is just a starting point. Through you to Mr. Sweet, I think you'll find this only addresses the vision plan, so you may want to think about amending it or providing your own motion to cover off the other recommendations, because they were separate. This is specific to the vision outlines.
I would try this. I move that the Canada Revenue Agency report to the Standing Committee on Public Accounts by September 30, 2006, on the status of the agency's 2010 vision plan. The committee specifically requests the agency--and then I'm just swinging into the words that are actually contained in the last sentence of the Auditor General's opening statement in point 12, starting with “the agency”. It would be specifically that the committee requests the agency to provide us with a detailed action plan and a timetable for completing its 2010 vision, and to provide us as well as with regular progress reports. That part is directly from the Auditor General.