Public Accounts Committee on Dec. 3rd, 2020

[Paul Rochon]

We estimate in the update that the combined revenue uptake from the three measures—which is what you're asking, I believe—about is $396 million in fiscal year 2021-22 and $583 million in fiscal year 2022-23. It rises each year thereafter.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Perfect.

At least a portion of that will be coming from the Canadian taxpayers, and as a sales tax, it is regressive, meaning that people at lower incomes pay proportionately more than those at upper incomes.

There is the GST credit, which you rightly point out in your answer. However, the GST rebate is not being increased. Is that correct?

[Paul Rochon]

The GST rebate is not being increased, not at this time. It is indexed to inflation, but you're right. It is not being increased.

I think a legitimate question in regard to the issue that you're pointing to is to what extent digital types of products and services are displacing current non-digital types of products and services that are currently being taxed.

This whole question of the increase in the tax incidence of these measures is—

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I think that's fair. I'm just going to try and squeeze in one more question—

[The Chair, Conservative, Kelly Block]

Thank you. No, I'm sorry, MP Lawrence. It was a good try, though.

I will now turn the floor over to Mr. Sorbara for six minutes.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Chair.

I'd like to begin on a slightly different note before I get into my questioning. I'd like to say thank you to Mr. Rochon.

Mr. Rochon, you announced you'd be moving on or retiring in the days ahead, so I want to say thank you. I got to interact with you many times over five years when I sat on the finance committee in the first session of Parliament to which I was elected.

We both share two things very much in common. We're both alumni from the University of Toronto's master of arts and economics program, where we both got our graduate degrees.

Second, you worked for a number of years—I think it was three years—at the Conference Board of Canada before joining the Department of Finance. You made a decision to change gears and move to something different, much like now, whatever that may be, whether it's retirement or whatever.

I too faced the same situation, and met a co-worker of yours, Paul Darby, many years ago when I was interviewed at the Conference Board of Canada. Unlike you, who were much wiser and decided to work at the Conference Board of Canada, I declined the offer and decided to move to New York City to work for an investment bank for a number of years before I came back here.

I know both our passion for economics and good policy is there, but I really want to say I wish you the best in your new endeavours. You've served the country in some very trying times, and I know you are an anchor within the department in guiding the country and our fiscal policy forward. I do want to say thank you.

I wanted to give you a minute or so to respond to that if you wish, before I get to questions.

[Paul Rochon]

Thank you very much for those gracious comments.

As you say, I had the great benefit of starting my career at the Conference Board, going then to the Department of Finance, the Department of Health, international development and back to finance, where I've had the tremendous opportunity to work with great ministers and great colleagues and to interact with fabulous parliamentarians.

I thank you both for your comments, Mr. Sorbara, and also, by extension, I thank you and the committee for the important work that you do. We sometime bat and debate things back and forth, but I think it's important not to lose sight of the importance of these discussions and the transparency and the things that we learn through them. Thank you very much.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Absolutely. Thank you.

Commissioner, can give us an update and further expand on your introductory remarks in terms of the commitments the CRA has fulfilled? I know there's one commitment coming for December 2020, so could you elaborate on your introductory remarks in terms of what the AG recommended and what CRA has done? Thank you.

[Bob Hamilton]

Thank you.

We had recommendations from the AG, and as I've said, we've completed some elements of the action plan and everything is on track for completion. It was basically to look back at our corporate risk profile and identify places where there were risks of non-compliance.

Obviously, the change in legislation will change that calculation, should the legislation come forward, but we did recognize that this area is growing. We needed to integrate it better into our compliance risk strategy and take better account of where those risks are and what we could do about them by using tools that are available to us, some of which are technology-based.

We have done that. That part of the action plan was completed, in fact, earlier this year.

There's another part, which is to implement the system changes on tracking and monitoring. One thing that we were not doing was separately identifying our compliance activities in this particular area, as opposed to general compliance activities. We weren't tracking them separately and monitoring, and we will now be doing that. We are completing imminently that process of building those systems into place, and that will give us a better read in a real-time basis as to what's happening. The tracking will identify the places where we might be falling short and where we would need to correct the course.

Again, we're nearing completion on that aspect. The final area, really, is drafting a strategy going forward and, again, obviously we'll need to calibrate this to reflect the legislation at the time, but we are looking at that legislative framework. We'll be looking at the information that comes out of our better tracking and monitoring and coming up with effective compliance mechanisms.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Chair, may I follow up very quickly?

[The Chair, Conservative, Kelly Block]

You may. You have 30 seconds.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Okay.

In terms of the estimations of the tax gap, Commissioner, in terms of the FES document and the application of the GST, will our tax gap estimates on the various measures be strengthened, because now we'll have a greater transparency into some of these markets or sectors?

[Bob Hamilton]

I would expect there would be some improvement in the tax gap as a result of these measures, but again, I think that may be more important in the future than right now, if this area grows. In the past when we've looked at this and the degree to which we thought there was a gap in this area, we saw it was smaller relative to the bigger tax gaps that we have in other areas.

Yes, it will help—

[The Chair, Conservative, Kelly Block]

Thank you.

[Bob Hamilton]

—but I think that as this grows in the future, we would hopefully see even greater benefits.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Hamilton.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Commissioner.

[The Chair, Conservative, Kelly Block]

We will now move to Mr. Blanchette-Joncas for six minutes.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Madam Chair.

Good morning to my colleagues.

I'd like to thank all the witnesses for being here.

I'm very pleased about the fact that this meeting is being held. It's one that I asked for, because I thought it was important to have a clear update. I'd like to thank my colleagues for their support in requesting that this meeting be held.

My first question is for Mr. Rochon.

Mr. Rochon, your record of service with the Department of Finance is eloquent. It speaks for itself. I was also told that you're the longest-serving deputy minister in the department since World War II. Your expertise is invaluable, particularly in view of the crisis we find ourselves in at the moment.

Can we infer from what you've said that the issue surrounding fair electronic taxation is closely tied to the government's will? Are there other reasons, legislative or otherwise, behind this matter?

Is it fair to say that Canada dragged its feet on collecting billions of dollars?

We might also ask about Big Tech, namely Google, Amazon, Facebook and Apple, or GAFA.

[Paul Rochon]

I believe that the measures announced in the economic update provide a structure that would enable us, particularly with respect to sales taxes, to deal with the major issues involved in electronic commerce.

My colleague Mr. Marsland has been dealing with this matter for several decades. I will therefore ask him to give you further details.

[Andrew Marsland, Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance]

My apologies; I was on mute.

I think, as Mr. Rochon said, these proposed measures really equip the sales tax system to deal with the particular challenges associated with electronic commerce. I think the government, in terms of the revenues, has published estimates with respect to the expected revenue pickup from the implementation of these measures.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you for this clarification, Mr. Marsland.

I will now return to you, Mr. Rochon.

The third measure you raised earlier in your presentation caught my eye. You said that individual property owners were renting out their residences or cottages through digital platforms, and that the government is proposing to apply the GST/QST to these individuals by 2023. It's staggering to be so proactive in going after taxpayer money when the GAFA companies have been a problem for years.

[The Clerk of the Committee, Ms. Angela Crandall]

Sorry.

We have an interpretation problem.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I have a point of order.

He's been interrupted a couple times. Can we make sure, Chair, that he gets the time that he's entitled to while we've had these little technical issues?

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Can you hear me?

Is the interpretation working properly?

Madam Chair, could you check with the clerk to see how much time I have left?