Mr. Speaker, I rise this afternoon to speak to Bill C-48, the technical tax amendments act, 2012.
Bill C-48 is 955 pages in length with 428 amendments. I am going to use my time in the House today to examine how we got to this point, and where we are now examining such a mammoth bill, looking at the recent history of technical tax bills, including the Auditor General's report from November 2009 on income tax legislation, as well as the study by the public accounts committee on that report.
I intend to talk about the need for Parliament to regularly adopt technical tax legislation in a timely manner, as well as the overwhelming need to thoroughly examine and, yes, simplify the Income Tax Act.
Finally, I would like to use my remaining time to briefly discuss Bill C-48 itself.
With respect to the recent history of technical tax bills, if Bill C-48 receives royal assent, it will be the first technical tax bill to do so since Bill C-22, the Income Tax Amendments Act, 2000, which received royal assent in June 2001, almost 12 years ago.
With such a massive bill before us now, it begs the question as to why Parliament has not approved any technical tax bills since 2001.
The previous Liberal government did publish technical amendments for public comment on three separate occasions: December 2002, February 2004, and July 2005. Those amendments were introduced in Parliament in 2006 as Bill C-33, the Income Tax Amendments Act, 2006. Bill C-33 received third reading and made it to the other house, but it died on the order paper when the Prime Minister asked the Governor General to prorogue Parliament in 2007. Later in 2007 an identical version of this legislation was tabled as Bill C-10. Once again the legislation made it to the other house and died on the order paper when the Prime Minister again asked the Governor General to prorogue Parliament in 2008.
Since then there has been nothing. For four years the Conservatives failed to introduce a technical tax bill in Parliament. Clearing up the growing backlog of technical tax amendments was nowhere to be found on the Conservatives' list of priorities.
Next week the Conservatives will pass the seventh year mark in government, but they have yet to pass a single technical tax bill. It is a failure of public administration. It is not good public administration that it has taken this long, particularly when at the time the Conservative government was elected in 2006 there was legislation ready to be introduced and twice prorogation killed legislative attempts to deal with this.
I want to speak to the Auditor General's report. In the fall of 2009, Auditor General Sheila Fraser reported on the government's inability to take action on this. She emphasized the need for the government to introduce technical tax legislation in order to bring clarity to the Income Tax Act. When she released her report, she said:
The Income Tax Act is one of the longest and most complex pieces of federal legislation. Taxpayers have the right to expect clear guidance on how to interpret the Act so they can determine how much income tax they owe.
That makes sense. In her report she argued that by failing to provide clarity through technical tax amendments, the government was increasing the costs for everyone involved. The report states:
For taxpayers, the negative effects of uncertainty may include
--higher costs of obtaining professional advice to comply with tax law; less efficiency in doing business transactions;
--inability of publicly traded corporations to use proposed tax changes in their financial reporting, because they have not been “substantively enacted”;
--greater cynicism about the fairness of the tax system; and increased willingness to use aggressive tax plans.
For the tax administrator, the negative effects may include
--higher costs for providing additional guidance and interpretations to taxpayers and tax auditors; and
--higher administrative costs for reprocessing the tax returns after an outstanding legislative amendment is enacted and for obtaining waivers to extend the limitation period for reassessment.
The result may be uncertainty in the amount of tax revenues to be collected by the government and possible loss of tax revenues.
What the Auditor General is saying is that this is not some esoteric, arcane discussion as to whether or not it is a failure of the government to provide in a timely manner these technical tax amendments to the House and to pass them. It does result in higher transaction costs for companies. It results in confusion for Canadian taxpayers, not knowing how these will affect them, and higher costs from professionals like accountants and auditors in dealing with these.
The Auditor General's report said that the result may be uncertainty in the amount of tax revenues to be collected by the government and the possible loss of tax revenues. It actually affects the amount of revenue that the government is collecting or can collect.
The Auditor General went on to warn parliamentarians that we must not wait to pass a technical tax bill, that we must clear the backlog immediately and then regularly adopt technical tax amendments. In her report she said:
If proposed technical changes are not tabled regularly, the volume of amendments becomes difficult for taxpayers, tax practitioners, and parliamentarians to absorb when they are grouped into a large package.
Finally, she pleaded with the Department of Finance to fix the situation.
Auditor General Sheila Fraser said:
The Department of Finance needs to do more to bring the urgency of the problem to the attention of the government and Parliament. It ought to review the way it manages this process.
Beyond the Auditor General's report, we also have a report from the public accounts committee. In early 2010, the public accounts committee studied the Auditor General's report. The committee was then chaired by my former colleague from Charlottetown, the hon. Sean Murphy. The committee shared her concerns about the waste and mismanagement that resulted from the Conservatives doing nothing to introduce these technical amendments. Quite naturally, the committee wanted to know when the problem would be fixed, so it called the deputy minister of finance and the commissioner of the national revenue agency before the committee. These officials assured committee members that the problem was under control and the solution was forthcoming. The committee's April, 2010 report stated:
Officials from the Department told the Committee that they are hoping to have a technical bill ready for the government's review within the next couple of months. They are also considering releasing smaller packages of technical amendments on a regular basis.... Although, officials told the Committee that they would not be in a position to propose annual technical bills until the end of 2011.
If senior officials were telling a parliamentary committee back in 2010 that a technical tax bill would be ready in a few months, we have to ask ourselves as parliamentarians what happened. What we really need, broadly, is tax reform and tax simplification. The fact is that over a long period of time, not just under this government, the Income Tax Act has grown too large and unwieldy. However, it is notable that under this Conservative government, the Income Tax Act has actually grown by almost one-sixth in size. We have arrived at the point where accountants—the very profession that bases its livelihood on interpreting on behalf of clients the complexity of tax laws—are now regularly lobbying Parliament and the finance committee for tax simplification. Even the accountants are saying the tax code is too complex.
The Canadian Institute of Chartered Accountants stated in its most recent prebudget submission:
Reducing complexity in Canada's domestic tax regime is crucial to easing the regulatory burden placed on Canadian businesses and attracting investment. Simplifying our tax system would make the country more competitive and allow both individuals and businesses to prosper.
According to the Global Competitiveness Report 2010-2011, issued by the World Economic Forum, tax regulations are among the top four most problematic factors cited by business executives for doing business in Canada. Many aspects of Canada's tax system have become too complex. We recommend that the government establish a national consultation process to examine tax simplification measures.
That quote was from the Canadian Institute of Chartered Accountants' pre-budget submission to the House of Commons finance committee.
The most recent pre-budget submission from the Certified General Accountants Association of Canada includes the following recommendations:
Modernize Canada's tax system—make it simple, transparent and more efficient
Introduce and pass a technical tax bill to deal with unlegislated tax proposals
Implement a “sunset provision” to prevent further legislative backlogs
Appoint an independent panel of experts to recommend steps to reform Canada's tax system.
It is important to realize that we have not had a comprehensive review of Canada's tax laws and our tax code since the Royal Commission on Taxation in the 1960s. The Carter commission published its report in 1966, and the changes were implemented in 1972. That is more than 40 years ago. If we were asked to sum up in one word what has changed in the Canadian and global economy since 1972, it would be “everything”.
The reality is that there have been so many fundamental structural changes to the global and Canadian economies since 1972 that we desperately need a thorough study, review and perhaps royal commission to deal with the tax changes we need as a country, with the objective of building a fairer and, in terms of economic growth, a potentially more competitive capacity to attract investment, as well as a simpler tax system.
In the House we have talked about the issue of income inequality. That has to be a consideration when we are talking about tax reform.
We have talked about issues of competitiveness and what kinds of taxes render an economy less competitive. We have to look at those. We have to study to what extent we can use the tax system to incentivize greater investment in research development and commercialization of technologies, and potentially clean technologies to green our production of energy in Canada, including cleaner conventional energy and the oil sands, as well as what kinds of tax incentives we can offer to make it more attractive to invest in and develop those technologies as we move forward.
When the Carter commission came in, among other things, it got rid of inheritance tax in Canada and replaced it with a capital gains tax. That was a significant change at the time. Today, we may look at that differently and consider some of the advice being given by tax experts both within Canada and globally.
Clearly, not to have had any thorough study of our tax system since 1972 indicates how woefully out of date our current tax code is. The reality is that the tax code under the Conservative government has since increased by one-sixth of its size. It is more complicated and less fair because of what some people refer to as the boutique tax credits the government has brought in for children in hockey and studying music, family caregivers and volunteer firefighters. We all believe it is laudable to support volunteer firefighters, family caregivers and families putting their children in activities, and we support that.
However, first, the reality is that it does complicate the tax code. Second, the fact that these tax credits are non-refundable means that the lowest income Canadian families do not qualify, those people who need the help the most, whether with respect to the family caregiver tax credit or to families with children in activities.
Not only have the Conservatives complicated our tax system, but by making these tax credits non-refundable, they have actually rendered our tax system less fair and contributed to income inequality and income disparity by not helping the people who need the help the most. Those are low-income families who, perversely, do not qualify for these tax credits.
I would like to speak about the Canada Revenue Agency. When the tax code grows in size and complexity, so do the requests to CRA for clarification. Governments have the power to compel residents to pay taxes, and that is a huge power, but with that power comes the responsibility to provide taxpayers with clarity around the law and to recognize that not every Canadian taxpayer can—in fact the vast majority cannot—really afford professional help to deal with these complexities.
One of the ways the government can provide clarity around tax law is with advanced income tax rulings. That is an area the Auditor General examined in her 2009 report. It is also an area where the CRA is failing and the record is getting worse. The CRA has set a target for itself to issue advanced income tax rulings within 60 days, and in 2004 it met this target. Three years ago the average ruling took the CRA 98 days. Two years ago it was 102 days. Last year it was 106 days, close to double the target CRA set for itself. These delays lead to increased costs both for the taxpayer and for the government.
For good public servants in the CRA who work in places like Charlottetown, P.E.I., those cuts to CRA are actually, perversely, going to lead to the government ultimately contributing not only to ambiguity and confusion around interpretation of these tax changes but also to actually collecting less money.
One of the things we discovered in our study around offshore accounts and the offshoring of personal wealth by many Canadians is that investments by the previous Liberal government to CRA to specifically target offshore accounts led to a huge level of success in terms of return on investment, in terms of collecting this money. The Conservatives have cut back funding to CRA, which will in time reduce governance and the capacity to target, identify and collect from offshore accounts and in other areas where we could collect more in terms of taxes.
The Auditor General said in her report, speaking about the CRA:
If the Agency's guidance is not timely or correct, taxpayers may inadvertently fail to comply with the law or they may become frustrated because the information they need is not available. Either may lead to a loss of tax revenue or an overpayment that later must be adjusted.
She made the following recommendation:
(4) The CRA “should develop more concrete plans to meet its own target times for issuing advance income tax rulings, given the significance of the rulings to proposed business transactions.”
Again, this is another report where the Auditor General is being extremely clear with some specific corrective measures that the government could take.
In 2009, the government said it agreed with this recommendation, but the dismal results suggest that nothing has been done about it.
Last week the Canadian Federation of Independent Business issued a press release entitled, “CRA Call Centre Business Helpline gets C- grade from CFIB”. According to the CFIB, only 61% of callers received full and accurate information “service standards and agent professionalism have declined”. Again, I am not blaming the CRA employees, but the government is making it very difficult for them to do their jobs.
The Liberals are concerned. We support the idea of Bill C-48 being presented now, finally dealing with some of these issues, but we do not support the tax direction of the government, which is ultimately creating a less fair, less competitive and more complicated Canadian tax system. We believe we need more than tax tinkering; we need real tax reform aimed at building a more competitive, fairer and simpler Canadian tax code.
