Public Accounts Committee on March 23rd, 2010

[Louise Levonian]

I can answer that.

The first thing we've done is consolidate all our lists. Something Brian, my colleague here, just said is that all the information to move forward with this legislation is there and has been there all along. The auditors themselves noted that what we've had in place is a people-oriented process, as opposed to a database-oriented process. So I would look at this as a two-track process, as opposed to one where we need the database before we can move forward with legislation. We now have the complete inventory consolidated and all in one place, and it's actually electronically done as well, but it's not the easiest system to use, and so on. So we have that process and we're also working on putting forward, potentially, the old Bill C-10 and smaller bills. That track is moving and we're making progress in that respect.

[Terence Young, Conservative, Oakville, ON]

Okay, I'm just trying to understand. Is Parliament holding you up? Is there something Parliament has to do before you can get this in order, or is it just administrative?

[Louise Levonian]

I don't feel qualified to answer whether Parliament--

[Terence Young, Conservative, Oakville, ON]

Were you waiting for Parliament to pass a technical bill or something, or do you have what you need in order to do what the Auditor General recommended?

[Louise Levonian]

In terms of specifically what the Auditor General recommended in having a database and ensuring that we have systems that track the technical amendments, we can do that on our own. But I think what the Auditor General is also alluding to—and I won't speak for the Auditor General but let that office speak for themselves—is that having technical amendments that have not passed and having many technical amendments that are vintage is not good for the tax system, and passing this legislation is also important. So the department can do what it can do, which is to make sure that we have good processes in place, make sure that all the information is consolidated, make sure that we are bringing forward legislation, but the next step is when the legislation is brought forward, our duties stop at that point.

[Terence Young, Conservative, Oakville, ON]

Thank you.

Mr. Saxton....

[Andrew Saxton, Conservative, North Vancouver, BC]

I have a quick question on comfort letters. I understand the department issues about 30 comfort letters a year, which means that at any one time we have probably hundreds of comfort letters there. The Auditor General is not satisfied with the way the inventory is being kept. Maybe it's similar to the technical amendments inventory. Perhaps you could explain how you intend to improve the inventory of comfort letters.

[Louise Levonian]

It's the same inventory. Right now, we have all the information consolidated into one database. They're all technical changes. In essence, they're from things that are brought to us by taxpayers and we write comfort letters. They're brought to us by the CRA or they're brought by us noticing that there are technical issues that need to be put in place.

At the end of the day, they're changes to the legislation, so they all go into the same database. We may categorize them as comfort letters and technical amendments, but they're all in the same place.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Saxton.

Monsieur Dion.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Thank you, Mr. Chairman.

Just to make things crystal clear, is the fact that 400 technical amendments are not enacted today only a problem with regard to communication to the taxpayers, or do we also need to take into account legal consequences for them--for taxpayers--or for you vis-à-vis lack of revenues?

[Brian Ernewein]

Thank you.

If I might, I would break the types of amendments or issues into two parts. Our comfort letters are our undertakings to recommend to our minister technical changes to the income tax legislation. Those letters are directed at specific taxpayers. They are almost always transaction-specific, so the concern or the issue will be limited to them. They will file perhaps on the basis of that comfort letter. CRA will judge whether or not it believes a waiver needs to be filed to keep the taxation year open if the undertaking to recommend an amendment has not yet been implemented. So that question can be relevant in the context of old Bill C-10, for which there are comfort letters going back some time. Taxpayers will have received these comfort letters. With Revenue Canada they will have to work through how to keep the year open if necessary to deal with the comfort letter itself.

The rest of the technical amendments, in some sense, don't exist as a matter of public awareness. They are issues, as Louise Levonian said, that we identify, that revenue identifies, that the taxpayer may identify. We have not communicated with anybody an intention to make a change, but we have put it on a list as something to consider. It may be the view that one of the officers or one of the chiefs in the legislation division believes that a change has been made. That will be debated when it comes time to assemble the next technical bill. So with regard to uncertainty or open years or anything like that, I don't believe that really applies in the context of that group of cases, because they're possible changes that we have yet to decide whether to proceed with.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

In the context where you would disagree with the taxpayer who is arguing with you, what is the legal status of these amendments if they have not been enacted?

[Brian Ernewein]

Again, as far as the comfort letters are concerned, we would work with Canada Revenue Agency to seek to encourage them to consider that comfort letter in their debate or argument with the taxpayer, and our belief would be that Canada Revenue Agency would take the comfort letter into account, so it ought not to be an issue or a subject of a debate. If it's something else, which is an idea that's sort of internally generated but not in the public domain, then Revenue Canada would apply the law as enacted without reference to any possible technical change we have in our internal inventory.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Would they take that into account as if it were the law?

[Brian Ernewein]

They wouldn't in the second case--

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

I mean in the first case.

[Brian Ernewein]

In the first case, no, not necessarily. It might be a case in which they would seek to have the taxpayer file a waiver to keep the taxation year open until the comfort letter is passed.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Then it really is a problem that it's not enacted.

[Brian Ernewein]

Yes; it ultimately requires that Parliament enact the implementing legislation, absolutely.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

This is my final question. Is the department now equipped to give the minister and the government their yearly bill, which would be exhaustive and include all the technical amendments?

[Louise Levonian]

There is a backlog of amendments, and we are in a position to put forward certain packages, but regarding a question that was asked earlier, it will take some time to clean up the entire backlog, and we'll proceed from there. Basically the information--

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Is it yes or no?

[Louise Levonian]

We would be in a position by the end of 2011 to do it.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

It would not be before the end of 2011? We are in 2010.