Public Accounts Committee on Dec. 3rd, 2020

[John Ossowski]

Thank you for the question.

It's important to understand the flow of goods. You go online and you buy something with some type of payment tool. Potentially, it's cryptocurrency. At some point it's going to come into the country, and depending on the value or the mode with which it comes into the country, we will levy the appropriate duties and taxes at the border.

Regarding our role at the border in terms of the application and in the context of what the Auditor General commented on in this particular report on the courier low-value shipment program, it's moot to us how the good was initially paid for. It's up to the courier company to ensure, in this particular study, that the appropriate duties and taxes have been applied against the country. We would then follow up and look at validation of that with various compliance work to verify the country of origin, a proper description and ultimately whether the right duties and taxes were assessed against it.

[Len Webber, Conservative, Calgary Confederation, AB]

Mr. Hamilton, do you have any comments with regard to Bitcoin currency and the CRA?

[Bob Hamilton]

I'll start.

We have been doing quite a bit of work in this area, just to think about what cryptocurrencies mean for us in the tax compliance world. As with e-commerce, it's a growing industry, and we want to make sure that we're aware of how it can be used positively and where it could pose some challenges for us. We've actually set up a group of people to look at that.

Ted, maybe you want to give some brief insight into the work we are doing.

[Ted Gallivan]

I'd say there are three key components. We are active. We have specialized audit teams and training. We're trying to get technical experts. We're active in terms of capital gains, so there has been a clarification in terms of people buying and selling and what the tax treatment is of those transactions.

Second, either through CRA criminal investigations or with the RCMP, we're looking for a nexus with criminality.

We are also in our first unnamed persons requirement with a cryptocurrency vendor. We get a client list and their records and match that against our data to see if people are doing a traditional underground economy.

I think we're active in all three of those spaces right now.

[Len Webber, Conservative, Calgary Confederation, AB]

Excellent. That's great to hear. Thank you.

Madam Chair, I don't know how much time I have left, but I know my colleague Mr. Lawrence has a question that he really wants to get out, so I'm going to pass it on to him.

[The Chair, Conservative, Kelly Block]

Mr. Lawrence, you have one minute.

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

Thank you. I appreciate that.

It's more for a report, so the minute should be enough.

Mr. Rochon or maybe Mr. Hamilton, with respect to individuals with outstanding taxes, one of the things that's created in this is the inequality between the tech giants and the small businesses of Main Street. I'm curious to know how many small business owners are now behind in HST remittance, how many are paying interest and penalties and how many small business owners are also late in paying their taxes.

I know you won't know the numbers, but if you could provide me with a report, that would be great.

[Bob Hamilton]

You're correct that I don't know those numbers, but we'll do the best we can to get you those numbers.

[The Chair, Conservative, Kelly Block]

Mr. Hamilton and Mr. Lawrence, thank you very much. That takes us very close to the end time of this round.

We will move to Mr. Fergus for five minutes.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you very much, Madam Chair.

First of all, I would like to wish Mr. Rochon good luck and every success.

Mr. Rochon, we're extremely grateful for your dedication and for the work you've done in the public service.

My question is for Mr. Ossowski.

Mr. Ossowski, at our last meeting on the report, we heard that the agency needed an automated system to quickly handle the high volumes of parcels.

In the updated action plan provided to the committee, it is mentioned that options are currently being examined to further automate the program by March 2023, including the capacity to receive, process and analyze data on customs activities. It mentions that an interim solution has been introduced to rationalize many of the processes involved in shipping low-value products by courier.

Could you tell us more about the interim solution and how it works?

[John Ossowski]

Thank you for the question.

As an interim solution, we have something called CARM, the larger system that I mentioned last time as well as in my remarks today.

We have something called the courier analytics tool. This is being piloted, I believe, in three ports of entry. It allows us to tap into some technology to allow the officers to assess better what's coming in.

Let me turn to my colleague Peter Hill to expand on this a bit.

[Peter Hill, Vice-President, Commercial and Trade Branch, Canada Border Services Agency]

Thank you.

We have been piloting the courier analytics portal since 2019. As the Auditor General noted, we rely on the couriers' proprietary systems for data. What we're trying to do is build on this system to establish an easier way to receive the data.

The pilot is operational in a testing mode, such that it facilitates the provision of electronic data. It provides a single interface for our officers to use, and we're able to begin to risk this information to identify areas of potential higher non-compliance.

This gives us a tool that will also help us build a national system to scale. It's a networked system using the cloud. It will enable us to apply data analytics as well as machine learning, going forward, to ensure that we have an ability to ensure compliance in the CLVS system.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you for your answer, Mr. Hill, but in view of the growing dependence of your activities with respect to the shipping of products purchased online during the COVID-19 pandemic, don't you have concerns about failing to further automate the systems before 2023?

[Peter Hill]

We're using all of the systems we have, and our officers have authority to examine shipments whenever there is suspicion. We have the authority to compel bills of sale and so on.

We're dealing with the volumes with all of the tools we have and we are on track to deliver our action plan. We're moving ahead as quickly and as prudently as is possible.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Is this really a time to be prudent? Shouldn't it be a time for action?

Allow me to put my question another way. Is it possible to speed things up in order to do a better job of addressing the urgency and requirements of the new realities?

[John Ossowski]

As I mentioned, this CARM project, which we have been working on for a number of years, is coming online in a couple of years. It will be, quite frankly, a game-changer.

I want to assure the committee with respect to the point around the courier low-value shipment program that we're very comfortable with the level of risk that's being managed here. We believe there is not significant leakage. We have done several compliance reviews ourselves to assure ourselves of that.

I think the system will be able to cope with the volumes. It has certainly advanced further than people anticipated, as a result of the pandemic, but I think we're in good shape. It will become easier not only for us but also for the importers to track in detail, with the new system, the progress of goods through the system.

[The Chair, Conservative, Kelly Block]

Thank you, Mr. Ossowski.

We will now move to our next round of questions. We have 16 minutes left, and these are six-minute rounds.

We will start with Mr. Berthold for six minutes.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you very much, Madam Chair.

Mr. Ossowski, I'd like to begin by apologizing for last week, when I had trouble pronouncing your name. I hadn't brought the right glasses with me and could not read very well. I felt that it was a lack of respect on my part to be unable to speak your name properly in committee. I just wanted to take a few moments to tell you so.

My questions are rather practical. You said today in your statement that the volume of parcels valued at less than $20 has greatly increased in recent years. It's easy to write on a parcel that its value is below $20, but what process is used by customs staff to ensure that the contents actually match what is written on the form?

[John Ossowski]

I might turn to my colleague again, but essentially we do a risk-based compliance activity. We rely on the courier companies to ensure that their documentation is correct with respect to the country of origin, the value of the good and the description of the good. Then over time, using some of the technologies my colleague described before, using techniques such as artificial intelligence, you start to understand what you're seeing. It will flag items for our officers that they might want to take another look at to validate that those elements have been properly declared.

At a deeper level, there is a full-on books and records review compliance activity by which we go into the company, do a sample and do a deep examination to satisfy ourselves that the program is being administered properly.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

When you notice that a particular supplier tends—when a business is systematically reporting value incorrectly—do you take special action with this vendor or carrier?

[John Ossowski]

Absolutely. We have the ability to flag certain companies in our system. We would divert anything that we have any concerns with for subsequent secondary examination or deeper follow-up.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Do you take punitive measures? To whom do you refer the matter?

[John Ossowski]

With respect to the carriers, which are responsible for administering this particular program, there is an administrative monetary penalty regime, but it's part of our e-commerce strategy that we'd be looking to develop a little further.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Okay.

Mr. Ossowski, during the Christmas holidays there must be an absolutely phenomenal number of parcels going through. Are additional measures taken at this time, particularly this year with the pandemic, to make sure that the rules are followed?

[John Ossowski]

Yes, of course, we are very aware of the seasonal cycles of these types of activities in all modes, whether it's postal mode or carrier mode, so we are able to allocate additional officers and resources to these challenges.