Public Accounts Committee on May 25th, 2015

[John Carmichael, Conservative, Don Valley West, ON]

Mr. Ferguson, did you want to add to that?

[Michael Ferguson]

Yes, thank you.

My understanding is, yes, if you look at the “Tax Expenditures and Evaluations” report, you will see that it contains four years of actuals. For example, if you look at the 2014 report, the four years of actuals go up to 2012. The projections are for 2013 and 2014. What they really represent is the fact that the final numbers are not known for 2013 and 2014 at the point in time that the 2014 report is prepared. They are not providing projections into the future, which would be what you would see, for example, in a report on plans and priorities of a department—what that department is expecting to spend a couple of years into the future.

In this conversation about projections and providing projections, I think we've got two different definitions of “projections” happening. What we're talking about essentially is the same type of information. In spending programs there's lots of lack of precision in those estimates going forward as well, but in spending programs it's possible to provide those projections beyond the year in question. So we're saying that because a number of these programs are similar to spending programs, that type of projection information would be useful for the reader to understand what the costs of these tax expenditures are going to be into the future.

[John Carmichael, Conservative, Don Valley West, ON]

So are the additional two years, then, are strictly for future planning, future projections?

[Michael Ferguson]

It would be estimates of the value of the tax-based expenditures two years into the future.

[John Carmichael, Conservative, Don Valley West, ON]

As we review this type of information and data, I heard one comment, and I think it was Mr. Marsland who mentioned that the cost expenditures are reviewed every year and updated within the tables.

Does that mean, then, that the previous two years are updated annually, as that information comes available?

[Andrew Marsland]

Yes. We publish the tax expenditure report in line with the tabling of the main estimates every year. In preparation for that, we use the latest available data, which will vary from measure to measure. Whether it's a corporate measure or a GST measure, the data sources are different. We use the most up-to-date information to revise the numbers and look forward. As I say, that's an important part of the monitoring of these tax expenditures.

[The Chair, NDP, David Christopherson]

Thank you. Sorry, the time's expired.

Moving along, we go over to Mr. Woodworth now. You, sir, have the floor.

Sorry, my mistake: you don't get enough spots and I ran right over you. My apologies, Mr. Vaughan. You, sir, now have the floor

[Adam Vaughan, Liberal, Trinity—Spadina, ON]

Thank you very much.

I have a couple of questions.

Regarding the child tax credit and the decision not to make public its benefit, in terms of how it's quantified, why wouldn't that happen as just a regular practice? Why would it have to be mandated to occur?

[Andrew Marsland]

The document referred to was an internal policy development paper that we prepared in looking at evolving the policy. It wasn't a document that we prepared for public release.

[Adam Vaughan, Liberal, Trinity—Spadina, ON]

But why wouldn't that be released as part of a process to understand exactly the impact that the tax is having? Why wouldn't that be part and parcel with the launch of a new tax like that?

[Andrew Marsland]

As I say, it was prepared for an internal purpose, in terms of the policy development and the changes under consideration at the time.

[Adam Vaughan, Liberal, Trinity—Spadina, ON]

You say that you don't consider the spending alternatives, that in some of these taxes you're looking at the tax credit just as a tax credit, but you don't examine what the alternatives would be as an expenditure. Unpack that for me. Why is the alternative not asked for, and why is the alternative not presented as part of a proposal going forward?

[Andrew Marsland]

I think I said that it's part of our analytical framework. We have a kind of template that we use when we look at any tax measure, and part of that is looking at spending alternatives, alternative delivery mechanisms. I think there are exceptions where we don't get much further than looking at it and saying, well, there isn't an exception. If it's a measure that really goes to the measurement, for example, of employment income, you're trying to get at what's the person's real employment income. You're recognizing tradesmen's tools, for example, what they're required spend on those, and it's not really practical to envisage a spending alternative for that at the federal level. So we probably don't go to great lengths to analyze it, but we certainly kind of consider it. It's a question we ask in every case.

[Adam Vaughan, Liberal, Trinity—Spadina, ON]

On the first-time home buyers’ tax credit at 3.60, the report says:

For the First-Time Home Buyers’ Tax Credit, we found that the Department identified some risks regarding this tax credit that the government had introduced to stimulate housing demand.... We found that the Department did not evaluate these two tax credits years after their implementation....

If there were risks, why wouldn't you evaluate the years after, and why wouldn't you report out as to whether or not those risks where mitigated or whether they came to fruition?

[Andrew Marsland]

I'm not aware of the specific risks referred to in the report.

But I guess what I would say as a general statement before I come back to the specific is that I don't think there is any case where there aren't risks, in my experience, when looking at a tax measure. There are always risks, whether they be compliance risks or risks that the reality will be different than our anticipation of the reaction of taxpayers. There are always risks. I guess our role is to identify those risks, analyze them, and mitigate them or provide ways of mitigating them.

We did monitor the first-time home buyers' credit. The government reported out on that in its reports on the economic action plan, and we continue to monitor that in the context of developments in the housing market, but we did not do a single evaluation on that measure.

[Adam Vaughan, Liberal, Trinity—Spadina, ON]

You didn't, even though you identified it as a potential problem.

[Andrew Marsland]

As I say, I don't know the specific risk, but there are always risks and issues with tax measures, given their nature.

[Adam Vaughan, Liberal, Trinity—Spadina, ON]

Would that mean....

The tax credit isn't indexed. It's stayed at the same level since its introduction. Does that mean that you haven't, for example, evaluated whether or not flat-lining it has actually led to a decline in it being employed or its usefulness or whether it's no longer stimulating first-time buyers to enter the market? Is that assessment not being done, or is it being done?

[Andrew Marsland]

We do a lot of work in the context of budgets, which I can't really talk to. We do look at these issues kind of continually.

But I can't tell you whether we've evaluated specifically the threshold and whether we've thought about increasing it.

[Adam Vaughan, Liberal, Trinity—Spadina, ON]

I guess what we're then concerned about is that you say you identify risk, you don't do the follow-up to identify whether that risk has been mitigated or not, and you don't necessarily disclose whether the risk has been breached. So how are we to assess whether or not the due diligence is being done if you don't give us the due diligence as a report?

[Andrew Marsland]

I guess what I'm saying is when we analyze a measure, when we look at changes in the measure, we look at the risks associated with that, and we provide advice in relation to that.

[Adam Vaughan, Liberal, Trinity—Spadina, ON]

But you don't table that advice. That advice is provided to the minister.

[Andrew Marsland]

It's provided to the minister.

[The Chair, NDP, David Christopherson]

Thank you. The time has expired.

I'll leave myself open to being corrected again, but I do believe, Mr. Woodworth, that it is your turn to have the floor, sir.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for attending today.

I'd like to begin at least with some questions for you, Mr. Marsland, specifically about the issue of evaluation.

I'd like to begin by confirming whether I heard you say at some point that it is your view that the department did evaluate seven of the eight programs the Auditor General looked at. Did I hear that correctly?