Public Accounts Committee on Nov. 17th, 2020

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

Thank you, Mr. Hamilton.

There is one other question that you may not have an answer to, but it would be appreciated if you could get back to us. How many Canadians are currently in arrears with the CRA? Is it possible for you to get back to us?

[Bob Hamilton]

Let me see what I can do. I certainly don't have that number at my disposal. That will be a number that changes over time, obviously. Going through a pandemic or certain other circumstances can change that. Let me see what best number I can give you to get an order of magnitude.

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

Perfect.

The next questions are with respect to privacy and the third party request for funding.

I wonder, Mr. Hamilton, if you would be opposed to reporting, for all of your department or yourself personally, all of the bank accounts you currently have, all of the investment accounts you currently have, all of the real property you have, the vacations you've had within the last 10 years and all of your income to the committee.

I suspect that it might be an issue for you, that you wouldn't want to do that. Is that correct? Just a yes or no is fine.

[Bob Hamilton]

I would do it if I had to.

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

Yes.

[Bob Hamilton]

I don't have a comment on that question.

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

No, and that's exactly.... I think many Canadians are in the exact same position as you. One of the recommendations that the Auditor General made that I found a bit troubling was to use more third party information, especially given that the CRA just had a cyber breach mere months ago.

We are gathering this information. The government has overstepped Statistics Canada in trying to get bank account information. The Government of Canada is now trying to get more and more information when it's been proven that you cannot keep that money safe.

How in good conscience can anyone recommend that the government aggressively gather information from law-abiding taxpayers?

[Bob Hamilton]

Madam Chair, I guess the assurance that I can give you is that the CRA takes very seriously its privacy obligations. We have a lot of sensitive information here and we get access to it, so we work very hard to make sure that we don't violate the privacy laws of this country and that we protect the information we have.

For example, I think as Ted mentioned earlier, when we go to get an unnamed persons requirement, that's a process we go through with the court and people can challenge us on issues of privacy or why we don't. We have quite a rigorous process that doesn't allow us to do something inappropriate and does put boundaries around us. Once we get information, we do everything we can. I think we have a good track record—nobody's perfect—with protecting and safeguarding Canadians' information.

You can rest assured that where we do get information, from whatever process, we're careful about not violating people's privacy. We also protect that information as best we can. It does help us in some cases to know what's going on and where we can focus our efforts in that risk-based approach that we take.

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

How much time do I have, Chair?

[The Chair, Conservative, Kelly Block]

One minute and 10 seconds.

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

Thank you.

One of the things that came to mind in reviewing the report is that, if we do increase enforcement, either on taxation of the digital giants or on goods coming into our country for the collection of GST and HST.... Perhaps the deputy finance minister could comment on whether there would be any reciprocal actions by any of our trading partners as we attempt to collect more tax from perhaps some of their resident corporations.

[Paul Rochon]

I do not believe so, in this case, because we're talking about sales tax. There's a larger debate on the income taxation of digital giants, which I think is what you're referring to, for example the French digital services tax.

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

Yes.

[Paul Rochon]

The distinction is that the digital service tax in France, for example, is applied to the corporate income taxes that those companies are payable for. What we're talking about here is the goods and services tax, and I do not believe there is an international dimension to this.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Lawrence.

We will now move to Mr. Berthold.

Oh, I'm sorry. We will now move to Mr. Longfield.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, Madam Chair. I'm the less good-looking one.

I'd like to share my time with Mr. Blois. He was in the middle of a thought that I think would be really good for our committee to get completed.

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

Thank you very much.

Through you, Madam Chair, to Mr. Gallivan, I'll go back to exhibit 3.1 in the Auditor General's report. It talks about “[p]hysical products imported into Canada after being purchased online”, and it talks about foreign companies that are “[n]on-registered” and a “non-resident vendor not carrying on business in Canada”, and says that, essentially, we collect that tax revenue, the goods and sales taxes, through the couriers.

My question to you was, do we do that because that might be the only efficient way to do so, if we can't basically volunteer how these companies register? That would be the first part of the question.

The second part would be, what is the percentage of those transactions that are coming into the country this way, these physical products where basically these companies have no association to the country and no other ability...? What percentage would that be? Do you have any idea?

[Ted Gallivan]

Again, I was trying to defer to colleagues from Customs to address the importation aspect.

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

Okay. Sorry about that.

Maybe it's for CBSA or whoever might be best suited to answer that.

[John Ossowski]

Sure. Thank you, Madam Chair.

The program was established many years ago, specifically for what we refer to as “casual goods”. We don't know what the long-term relationship would be, so really, the transaction is effected by the courier company that is doing the importation, for anything between $20 and $2,500 during the period of the audit. I would note that the $2,500 now has been increased to $3,300 as a result of the new Canada-U.S.-Mexico trade agreement.

The courier companies, in the scheme as we currently have it, are responsible for the collection of the GST and HST and remit it to us as part of that transaction. I think it's more about the transitory nature of the casual goods that are being imported.

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

Okay.

Thanks, Lloyd.

[Lloyd Longfield, Liberal, Guelph, ON]

Thanks, Kody.

I want to build on that, as it turns out.

Without reading the entire paragraph, I note that paragraph 3.23 of the audit says that Canada was one of only two countries that were “relying on consumers to voluntarily declare that they owed taxes” and to mail them to the government. There were 35 countries that had simplified their registration systems.

In a previous career, I was bringing product in from Europe and reselling to the United States, because the United States just saw Europe as a really foreign country, whereas Canada was more aligned with the United States in some ways. We were importing and then exporting to the United States, and I found out that our courier company could do this and trap the data, and that we really didn't have to do much in changing our business systems to catch information on duty and taxes.

On the audit related to the taxes, I know the audit was on taxes, but on the data that comes through courier companies that includes duty information and could include even transfer cost prices to make sure that product wasn't getting dumped into our market, is that any related piece that we would benefit from if we went to a more streamlined digital trapping of this information?

This goes over to Mr. Ossowski for starters, and then possibly over to Mr. Rochon.

[John Ossowski]

Thank you for the question.

I would say that's part of the reason why we have this new assessment revenue management system, which is going to be looking at the entire commercial continuum, whether it's casual goods as I've described them in the courier program, postal program, or the larger commercial import.

Certainly, we look at stuff in terms of large importation of things for dumping and tariff violations, whether it's aluminum or steel, as the case may be. However, the focus of this audit is really around these low-value shipments as they've been defined by the program. Certainly, we're looking forward to this new system coming into place and working very closely with the international community. Quite frankly, we're all struggling with the burgeoning and growing field of e-commerce to make sure that the appropriate taxes and duties are being attracted properly to each of these transactions.

[Lloyd Longfield, Liberal, Guelph, ON]

I'm really pleased that the Auditor General has highlighted this and that you've responded as quickly as you have. Canada being a trading nation, our business was focusing on $50 shipments, even. They were sometimes very small items, but we would have a few hundred a day sometimes.

Thanks for the answer.

Paragraph 3.49 says:

Although the Agency contributed to the OECD guidelines on sales tax on electronic commerce, it did not have the legislative authority to implement these practices in Canada at the time of our audit. In our view, these practices would facilitate the collection of the GST/HST.

We have talked about legislative requirements and the authority that CBSA doesn't have in terms of legislative requirements. This committee isn't a policy development committee—and thanks, Madam Chair, for reminding us of that—but looking at the opportunities for improvement, could you say whether this impediment would stop you from continuing and whether we may need to recommend to our colleagues over at the finance committee to pick up on some of this?

[John Ossowski]

Again, thank you for the question.

From our perspective—and this has nothing to do with the OECD, but it's certainly helping us analyze the risk of what is coming into the country and what duties and taxes might be attracted to it—having advance data is the piece we would be looking for in terms of legislative change. Then we could risk-manage shipments before they even get into the country and decide that we want to look at them more closely to determine whether or not they were properly classified, whether they were contraband, whether they were dangerous. We believe that the secret sauce in the future is going to be about data.