Public Accounts Committee on Dec. 3rd, 2020

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

What types of compliance interventions are used to address non-compliance? You mentioned nudging and letters. Is there more than that?

[Ted Gallivan]

Yes.

I think we try a progressive approach at the CRA. Some in this space are quite young. Their skills are perhaps not in accountancy. That's not what they studied at university. We would lead with education first. We would explain certain provisions of the act. Then we'd watch their account to see if there's a response. Some of them engage a professional accountant and some of them begin filing returns or adjusting income. We always try to do that first.

Subsequent to that—I mentioned this third party information—we would send a second letter that would suggest we have information pointing to their level of income, citing from bank records or businesses that they deal with that we know that the income would be in this range and that their reported income is in that range. Again, if that doesn't work, then it's an audit launch letter, where we use the powers delegated under the act to look at their banking records and their financial statements and those kinds of things.

Most Canadians and most businesses do comply after education and with information. I would say, then, that showing them that we know there's a question or a disparity between our information and their tax filing usually works. As a last resort, we use the audit approach.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you.

I would like to share—

[The Chair, Conservative, Kelly Block]

Ms. Yip, you have 10 seconds left.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Oh, okay.

Well, I'll just say thank you very much for answering my question.

[The Chair, Conservative, Kelly Block]

Thank you so much, Ms. Yip.

We now will go to our last questioner, for four minutes. Go ahead, Mr. Blanchette-Joncas.

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

Thank you, Madam Chair.

Mr. Rochon, I have a more general question. I've taken a moment to remove my ideological filter because this can sometimes lead to other observations.

Can you tell us what the impacts of non-harmonized taxation are on the behaviour of consumers when they buy things?

[Paul Rochon]

As you've already pointed out, there's a risk that the lack of harmonization could lead to taxes not being collected.

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

In that case, Mr. Rochon, I'd like to continue by quoting the Department of Finance, which said that, “the situation could have encouraged domestic vendors to move their operations abroad”.

At the end of the day, when federal government tax measures don't reflect actual buyer behaviour, it's harmful to the economy. The problem of e-commerce taxation has exploded since the beginning of the pandemic. We are headed in the right direction, but the harm has been done. Unfortunately, there have been job losses for Canadian businesspeople and workers. According to the Office of the Auditor General's report, Canadian vendors are moving their operations abroad. This means that when there is no appropriate harmonized taxation that reflects the behaviour of consumers, we're shooting ourselves in the foot.

Mr. Le Goff even said that the tax base would erode because the federal government is depriving itself of revenue. These are damning comments and they raise many questions. The federal government really has to step up to the plate and deal with the situation to prevent it from happening again.

I now have a question for Mr. Ossowski.

Mr. Ossowski, thank you for having provided these details. I'm nevertheless surprised to see that it took a report from the Office of the Auditor General to explain the phenomenal amounts that are in play. We have been talking about several million dollars, and even billions of dollars over several years. If the GST is applied to e-commerce, it would mean $1.2 billion being collected over the next five years.

I don't necessarily want to blame anyone, but it's important to be clear. The scope of the goods and services audits you need to conduct would appear to indicate that you have a huge challenge given the gap between your current resources and the flow of information you have to process.

Is your current funding adequate or do you believe you'll be overwhelmed by the scale of the task, given the explosion in online commerce since the beginning of the pandemic?

[John Ossowski]

I would just say that the Auditor General didn't opine on any sense of leakage with respect to the courier low-value shipment program in terms of overall impact. The $169 million that's referred to is with respect to offshore service providers, such as Netflix.

With respect to resources, I think right now we have a good plan. We'll see how the situation evolves. If it continues to grow and we're not able to cope, we'll obviously seek new resources and authorities from the government to manage that better.

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

Thank you, Mr. Ossowski.

I always try to anticipate to avoid any unpleasant surprises. I will nevertheless ask the question once more, a little more emphatically.

You're aware of the fact that the online marketplace is growing rapidly. Do you believe that you currently have the tools and leverage required, and the resources, to properly do your job? At the end of the day, it's the Canada Revenue Agency that deals with all parcels received. If this work is not done properly, it creates unfairness in the system, harms our domestic vendors, causes job losses—in short, our economy suffers.

Do you need additional support from the government to do your work effectively?

[The Chair, Conservative, Kelly Block]

Please provide just a very short response, Mr. Ossowski, as we are over time.

[John Ossowski]

Thank you, Madam Chair.

I would just say that it was part of our action plan and our economic strategy with the new standards coming in from the WCO, and with the CARM project, I think we're well positioned to support the government's objectives in this zone.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Ossowski.

Thank you, colleagues, for a great meeting today and for your excellent questions.

I thank our witnesses for joining us and I invite you to leave the meeting as we are moving into an in camera session.

Members, as you leave the meeting and log on to a new meeting, the information for the second meeting is in the same email as the information for logging into the first part of this meeting.

It may take us five to 10 minutes to do this. Let's hope not.

We will see you in a few minutes.

[Proceedings continue in camera]