Public Accounts Committee on May 25th, 2015

[The Chair, NDP, David Christopherson]

I'm sorry, but we're a minute and 15 seconds over the time. You got your question in, but I'm afraid you're not going to get an answer. We're going to move along.

Mr. Albas, sir, you have the floor.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

Thank you, Mr. Chair.

Again, thank you to everyone who has been here today to offer their views on the Auditor General's report.

Specifically, I'd like to cap off with a conversation around the action plan.

Mr. Marsland, perhaps you or some of the other officials here today can point out some of the steps that you will be taking in response to the Auditor General's report.

[Geoff Trueman, General Director (Analysis), Tax Policy Branch, Department of Finance]

I'm happy to respond to that one, Mr. Albas.

To recap some of the material that I think has already been covered today, in order to respond very directly to the comments in the Auditor General's report, we will be adding those two additional years of cost projections. What that will do is give those two forward-looking years that move beyond the backward and the present, and we'll be able to have some forward projections for a couple of years, subject to any caveats that are necessary about the robustness of those estimates.

We'll also undertake to provide additional information on government spending programs so that we can add that into the companion document, the somewhat more in-depth explanatory document that accompanies the tax expenditures. Also, we'll try to provide links to relevant programs, so that when individuals do go to look at the tax expenditures they'll be able to undertake a comprehensive approach. For example, if you look at information about the scientific research and experimental development tax credit, there could also be information then directing you to certain programs that are offered by Industry Canada that also target research and development. That would be an obvious one to add there.

We've also certainly committed to the ongoing monitoring of tax expenditures and to undertake that in a more formalized systematic process. That will help to inform the breadth and depth of our analysis. Where possible gaps are identified, we'll be able to move to address those gaps more quickly by undertaking relevant evaluation reports.

Finally, I would note that we certainly are committed to continuing to publish pertinent information. In recent years, we've been able to publish at least two evaluations per year over the recent past, and we would certainly like to be able to continue to do that going forward, providing that kind of robust analysis and quality information and making that available to the public and parliamentarians.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

Thank you.

Mr. Chair, I'd like to thank all of our witnesses today for their efforts. We all have different roles, but I do appreciate your service to your country. Many of my constituents really like the different tax credits that are available. I received phone calls last week asking about the new ones that will be installed. I'm sure your methodology and your continued vigilance towards the integrity of our tax system, while making sure that all Canadians have a high quality of life, will be very helpful.

Thank you again, Auditor General, for your work on this.

I have no further questions.

[The Chair, NDP, David Christopherson]

Very good. Thank you.

Mr. Giguère, do you have an intervention?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Since it is 5 p.m. and the room is available until 5:30 p.m., I would have liked to ask a question and I would have liked all of the members to allow one of our witnesses to answer it.

The question concerns the issues posed by the complexity of the act. And in fact, it only gets more and more complex. I think it would be useful to ask ourselves whether there could be some solutions that could be brought to the table.

[The Chair, NDP, David Christopherson]

It sounds like you'd like to know whether the committee is interested in extending the discussion. We have completed the usual rotation once. It's always up to the committee if they wish to continue or not.

Did you want to make a particular suggestion, Monsieur Giguère? Did you want to go for a whole half-hour, or one more each? Just quickly, please, what are you looking for?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

I don't want to force my colleagues to listen to endless discussions. However, I did ask a question and unfortunately because it took me too long to formulate it...

[The Chair, NDP, David Christopherson]

Ah. So you're just asking for permission for that answer.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Yes.

[The Chair, NDP, David Christopherson]

Sorry, I'd misunderstood. Just to be 100% clear, you're just asking for the time to hear the answer to the question you'd asked.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Yes.

[The Chair, NDP, David Christopherson]

Let me test the floor.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

If it's a minute, I don't think it's an issue.

[The Chair, NDP, David Christopherson]

Yes, that's my sense of it.

Okay? Very good. That's fair.

Just to retune here, Mr. Giguère asked a question and ran out of time. It went too far over for me to allow an answer. The committee has now agreed to allow that time.

If one of you would just provide a brief answer to Monsieur Giguère's question, we'd very much appreciate it.

[Andrew Marsland]

I'll attempt to do that.

I believe the question related in a general sense to the complexity and growing complexity of the tax system, specifically the disability tax credit as an example of that.

In terms of the complexity of the tax system, I can't sit here and tell you that it's not a complex tax system. Any tax system is complex in that it's the application of somewhat complicated rules to extremely complicated economic and social activities. To some extent there's an inevitability about the complexity. But in looking at a specific tax measure or the tax system as a whole, there's a balancing of a number of considerations—for example, its relevance in addressing a policy objective, its effectiveness in doing so, its economic efficiency, its equity considerations in terms of vertical equity and horizontal equity, and its simplicity in terms of its simplicity for our colleagues at CRA to administer. More importantly, there's the compliance burden it places on individuals. Any tax policy consideration requires a balancing of those considerations. Simplicity is an important one.

In the context of a measure such as the disability tax credit, this is a generous measure in the context of the tax system. It's focused on people who are suffering severe mental or physical impairment. It's important that it be appropriately targeted, because if it weren't, it would be extraordinarily expensive. It needs to be targeted to the appropriate group of people who unfortunately suffer from those impairments. There have to be rules. That's inevitable. I think our colleagues at CRA make great efforts to try to explain those rules, not in legislative language but in language that's accessible to people.

I guess the point I'm making is that this complexity is to some extent inevitable, but the search for simplicity should continue.

I hope that's helpful, Monsieur Giguère.

[The Chair, NDP, David Christopherson]

That's very good. Thank you very much.

Thanks to the committee.

I have one quick question, not so much on this but relative to the whole issue of tax expenditures. The Economist just did a major front-page story on tax-free debt, making the case that the ability to deduct interest payments on debt is a little-known problem and a ticking time bomb within the world economy.

By the way, no one has to answer this. I'm just asking for any feedback if it's there.

They make the case that it's so damaging it's why Britain has moved from the American style system, where you are are allowed to deduct your mortgage payment interest, to the Canadian style where you're not.

They make the case on the corporate side that it would be worthwhile. Does anyone here agree with this or have any thoughts on it? The Economist was making the argument that switching away from allowing debt to be deducted, interest to be deducted, and, even, if you changed the tax rate to make it revenue neutral, would be an improvement in the way we run our national economies.

I wonder if anybody has any thoughts on whether this is an issue, because it is a tax expenditure. Any time there's a tax deduction, we're talking about the same as if we were spending money.

Has anything been said about this in the Canadian context or, quite frankly, has nobody talked about it? Did anybody even see the article? I'm throwing it out there to see if there's any take-up.

[Andrew Marsland]

It was an interesting article, and I felt the blog afterwards was even more interesting in terms of the difference of views on that particular aspect, which I think was indicative of this complex issue.

Specifically on the deduction of mortgage interest payments, I think the evidence would probably show that when countries provide that, it gets capitalized in the price of houses, so it becomes a zero-sum game.

[The Chair, NDP, David Christopherson]

That was the concern. It's artificially raising the price, and that's why Britain moved away from it.

Thanks. I appreciate it. I just wanted to get that off my chest, given that we were talking about tax expenditures.

I see no other interventions, and so on behalf of the committee I thank our Auditor General and his staff and our guests here today. We appreciate your answers. By the way, the action plan was here on time in advance. That's much appreciated. Good job. Thank you.

With that, this committee now stands adjourned.