Public Accounts Committee on Nov. 17th, 2020

[Bob Hamilton]

Okay.

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

Thank you, Mr. Hamilton.

I'll try to be a bit clearer.

Earlier you said you try to provide information to people who have to complete tax declarations on their own when they buy goods from outside the country.

Personally, as a consumer, I have never received any information from the CRA. I've seen no communication effort in that regard. So I don't feel the CRA has made a great deal of effort to increase Canadians' awareness of the situation.

Have you previously imposed penalties on Canadians for failing to complete that kind of mandatory tax declaration?

[Bob Hamilton]

It's true our efforts aren't perfect.

Many Canadians need information. We use the means of communication I've described, which are letters, websites and social media. We're constantly improving the process in order to inform Canadians.

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

Mr. Hamilton, have any penalties previously been imposed on Canadians who have failed to complete their declarations?

Goods that Canadians buy and that aren't taxed represent $247 million. Has the Canada Revenue Agency made any effort to recover the tax amounts owed?

[Bob Hamilton]

It's important to draw a distinction between the $247 million estimate and an actual transaction. If an actual transaction occurs, penalties can be assessed.

The figure stated in the Auditor General's report is an estimate.

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

Mr. Hamilton, I want to go back to my question and state it clearly.

Have you ever imposed a penalty on a Canadian who had failed to complete this kind of declaration after purchasing a microwave oven on Amazon?

[Bob Hamilton]

It's possible, but I don't have the figures in front of me. I can't verify whether that's the case, but Mr. Gallivan may have a better answer for you.

Mr. Gallivan, do you have anything to add?

[Ted Gallivan]

Madam Chair, for the committee's information, I would say that our focus is really the risk level. When we talk about rentals, we're talking about those people who have 20 houses or so and 15 apartments...

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

Getting back to my question, Mr. Gallivan.

It's a very specific question directly related to the performance audit. I want to know what measures the Canada Revenue Agency has taken.

The estimate is now $247 million. Going back to microwave ovens, Canadians probably buy hundreds of thousands of them every year in transactions that are not taxed.

Has the agency ever taken punitive measures against Canadians who haven't completed this voluntary tax declaration, yes or no?

[The Chair, Conservative, Kelly Block]

I'm sorry, Mr. Berthold, but your time is up. Thank you very much. Perhaps we could ask the Canada Revenue Agency to provide us with an answer in writing, unless the question can be asked again later on in this meeting.

I will move to Mr. Blois.

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you, Madam Chair.

Thank you to all the witnesses. This has been a very intriguing discussion today.

I'll start with you, Ms. Hogan. I'll try to cover ground quite quickly. You mentioned $160 million in terms of lost revenue that could have come to the Government of Canada. That might have increased to about $250 million. I think you just mentioned that in your comments. Is it presumably even higher, given the fact that you don't really have the bandwidth in terms of products that might be coming under that low-value shipment program that you don't really have any eyes on? Is it fair to say that the number could be even higher?

[Karen Hogan]

I think you've categorized it well. That number is based on e-commerce that we looked at, and we did not look at physical goods that would enter through the low-value dollar shipment program. Yes, if you incorporate both, then this number is, as we said earlier, on the low end.

[Kody Blois, Liberal, Kings—Hants, NS]

I want to go quickly. It's outside the scope of this report, but obviously, this is dealing with international e-commerce products that are finding their way into the country. What about between provinces domestically? Could you just, in 20 seconds, tell me what types of mechanisms are in place for the provinces in terms of collecting their own-source revenue?

[Karen Hogan]

I unfortunately don't have that. Maybe Philippe does, but really, where we're seeing the lost revenue is where the products are coming from a foreign vendor.

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you.

I'd like to go to the CBSA to talk about the fact that obviously at the border there is some level of compliance. One of the recommendations, of course, was to try to evaluate a little bit more around the courier low-value shipment program. What percentage of products, so to speak, physical products that would be coming in through the border, are actually stopped and evaluated? I understand that this is a double-edged sword and we have a huge border that we need to make sure we can move goods across quickly, but roughly what percentage of those programs are actually audited, so to speak, at the border to ensure that they are valued under $20?

[John Ossowski]

I'd have to get back to you on the percentage. I would say, with seven million shipments a month that we're getting, it would certainly be done on a risk-based approach. First of all, if we have some suspicions because of some knowledge of a certain supplier, or some issues with some particular good that might be counterfeit, we would pull it aside and assess. Other than that, we work with our courier companies and their systems to validate that the tax has been collected properly.

I would just be clear, though, that the Auditor General made no such reference or no estimate of what was being leaked through the courier low-value program. That $169 million that is being referred to is about the digital services; it's not about goods.

We will get back to you in terms of whether there's something around $20—

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you. I appreciate that.

I'd like to go to Mr. Hamilton.

Exhibit 3.1 in the Auditor General's report was very illustrative for MPs to be able to see the different web of how we collect GST and HST for products. There is a register required for digital products—sound, movies, perhaps, anything digital in nature—where there is a requirement for businesses to register. Is that something we've contemplated or something that we could look at in terms of having companies that are physically shipping products in, like Amazon and some of the bigger players?

[Bob Hamilton]

Perhaps I'll let Ted respond to that question.

[Ted Gallivan]

I think the crux of this issue is that non-residents who are distributing the goods don't have to register. If I understand your question, it's about whether the legislation would fix it. I think that's been the crux of the discussion. If there was a requirement of foreign-based businesses that are selling into Canada to register, which is the OECD model, then I think that would make a significant dent in the leakage that you're talking about today.

I can say the CRA is active with the OECD. We're active in terms of the invoicing and the technology, and spending $1.3 million this year in setting up the IT infrastructure that would allow us to ingest that data. We're hopeful that either under a voluntary regime or under a legislative regime, at some point we will be getting the data we need to enforce compliance in this space, and that—

[Kody Blois, Liberal, Kings—Hants, NS]

Can I ask a quick question? I only have 30 seconds.

I understand that we don't have legislation that makes it compliant for these companies. Is that why we do it through the actual courier companies? Do we work with them to be able to do it because there's no other real mechanism to register companies en masse to do that?

[Ted Gallivan]

I think you've just jumped from digital delivery of content to customs importation.

[Kody Blois, Liberal, Kings—Hants, NS]

Okay, but as I understand it right now there is a requirement for physical goods that were bought online and are coming into the country that the levy, the PST, the HST, be collected by couriers, perhaps through the low-value courier program. Is that because we don't have any type of legal compliance mechanism for companies that are exporting, that are basically sending in...?

Sorry, Madam Chair, am I out of time?

[The Chair, Conservative, Kelly Block]

You are out of time. I'm sorry about that.

We are now moving into a third round of questioning, which means we go back to our six-minute rounds. I will turn the floor over to Mr. Lawrence for six minutes.

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

Perfect.

Once again, in perhaps an unprecedented move, I'm going to build on my NDP colleague's earlier questioning. With respect to the digital giants, because of the lack of legislation and lack of movement in the last five years, we understand that at least a portion of those funds that should be ours as Canadian taxpayers to protect our tax base are not being gathered. My question is related to that. As opposed to the digital giants, which are not currently paying any interest on penalties on monies that really should be the Canadian government's, how much on a daily basis are Canadians currently paying, during a pandemic, on taxes and penalties every day to the CRA?

[Bob Hamilton]

I'll have to get back to you with a specific number on interest and penalties during the pandemic. I certainly don't have that at my disposal.

As we talk about these issues, one of the things that we try to keep in mind here—and as we discuss it internationally—is differentiating between the types of transactions. We've talked about goods coming in, digital services and digital giants, so I think it's important to parse these and understand the components. I'll do my best to find the numbers that were referenced.