Proceedings of the Standing Senate Committee on National Finance
Issue 23 - Evidence
OTTAWA, Wednesday, February 17, 1999
The Standing Senate Committee on National Finance, to which was referred Bill C-41, to amend the Royal Canadian Mint Act and the Currency Act, and Bill C-43, to establish the Canada Customs and Revenue Agency and to amend and repeal other acts as a consequence, met this day at 5:30 p.m. to give consideration to the bills.
Senator Terry Stratton (Chairman) in the Chair.
[English]
The Chairman: I call this meeting to order. We will begin by continuing our study of Bill C-41, an act to amend the Royal Canadian Mint Act and the Currency Act.
Welcome, Minister. We are pleased to have you here.
The Honourable Alphonso Gagliano, P.C., Minister of Public Works and Government Services: Thank you, Mr. Chairman. It is a pleasure to be here today to discuss Bill C-41. I know that you have previously spoken with Ms Danielle Wetherup, the President and Master of the Mint, so you are already familiar with the bill. Ms Wetherup is here today to assist me with any technical questions you may have.
I have a brief statement to make, Mr. Chairman. I would like to spend most of my time here answering your questions.
I feel privileged every time I speak about my responsibilities for the Royal Canadian Mint because it is an important tool in defining Canada's identity, its values and culture. For nearly a century, it has successfully provided Canadians with symbols of our nationhood upon which people from coast to coast look with pride.
[Translation]
I am sure that Ms Wetherup spoke very ably about the different issues related to the Mint. The Mint is a fully commercial Crown Corporation whose mandate is to produce coins for Canada and other nations and operate for a profit. It also manufactures and markets high-quality collector coins, precious metal investment products and refinery services globally. I am however proud to tell you that last year the Mint produced some 2.5 billion coins for 17 different countries. The Mint's global business, which represents 80 per cent of its revenue, helps to reduce the overall cost of Canadian circulation coinage. The Mint not only covers its costs, it is profitable. I am told that profits for 1998 will be in the order of $4.5 million. This is a commendable achievement.
[English]
The Royal Canadian Mint produces and sells non-circulation coins in Canada and throughout the world. The markets for these coins are constantly changing and are very competitive. Coin collectors and gift givers expect a wide variety of coin designs in a variety of denominations and metals. Likewise, investors are attracted to investment coins in different denominations and purity. The Royal Canadian Mint requires a legislative framework that enables it to respond quickly to new opportunities.
I wish to point out that the proposed amendments stand to benefit all Canadians. We have listened to the people. We have heard the concerns voiced by our colleagues. We have accepted that the process to approve new circulation coins will continue to be the prerogative of Parliament. For example, should the government one day decide to introduce a $5 coin, parliamentary approval will be required.
[Translation]
Another concern raised was the intention to increase the Mint's borrowing authority from $50 million to $75 million. I would like to take this opportunity to explain how this change is necessary in order for the Mint to meet its long-term strategic plan. The higher borrowing authority is designed to provide the Mint with greater flexibility and room to manoeuvre in the marketplace. In order to achieve world leadership in minting, the Mint must be able to search aggressively for new markets and develop its existing ones. It must be able to respond swiftly to financial needs in order to meet challenges and opportunities that will no doubt present themselves during the Mint's journey to success.
The Mint is a dynamic and highly respected organization in an extremely competitive global market. Its strategic vision for the future is to be the world leader in minting through people, innovation and quality. The Mint has the people, the talent and the vision to achieve this goal. The proposed changes to the Royal Canadian Mint Act that we are discussing today are essential for the Mint to be able to surge forward and meet the high standards it has set out for itself.
[English]
The Royal Canadian Mint has served Canadians well for the past 90 years. Since becoming a Crown corporation in 1969, the mint has returned $164 million in earnings and profits to the government. This does not include the $1.5 billion in seigniorage or profit from the sale of circulation coins to financial institutions since 1987. This revenue accrues directly to the Consolidated Revenue Fund of the Government of Canada.
The mint is a source of national pride. It provides an essential service to the Canadian economy and it creates beautiful coins that help celebrate proud symbols of our nationhood. Bill C-41 would provide the mint with the tools it needs to become the world leader in minting while it continues to be an asset for all Canadians.
I am ready to respond to your questions.
[Translation]
Senator Bolduc: I admit that I was one of the committee members who insisted that you testify before our committee. It is important for the minister to be in attendance when an amendment to legislation setting up a government body is brought in. It is a matter of ministerial responsibility. By this, I am not trying to underestimate the ability of your associates, because we saw for ourselves last week the competent persons who assist you in your duties. It is a matter of principle and that is why we called you before our committee.
Since we did review the bill last week, my questions will be brief. At the time, we put a number of policy questions to your staff. It was a somewhat uncomfortable position for me, as a former public servant, to find myself in but I took a chance and received some satisfactory answers. There are two points that worry me, however.
In Mr. Martin's budget tabled yesterday, profits are reported to be $4 or $5 million annually, thereby giving the government the flexibility to spend on all kinds of things. That concerns me a little. I am not trying to blame you for turning a profit. Does the Mint post profits of $5 million every year or are you aiming for $10 million in profits? Are you putting pressure on senior Mint officials in an effort to boost profits?
Mr. Gagliano: Certainly the corporation does have a commercial mandate. Each year, we expect to turn a profit and pay dividends to the government. That is our mandate. As the minister responsible for this Crown Corporation, I expect it to make a profit. However, circumstances do come into play because we operate in a global market where fluctuations can occur. However, as you pointed out, I am surrounded by competent people who work to the best of their ability. So far, we are pleased with the results we have achieved. I cannot say that our profit margin is the same every year. Some years it is higher, and some years lower.
Senator Bolduc: We heard earlier that over the past thirty years, the Mint has made profits in the order of $160 million, which represents approximately $4 million or $5 million annually.
Mr. Gagliano: I do not have the specifics with me, but I do know that some years, we did not turn a profit. Some years, profits were up, while in others, they were down. However, in recent years, we have been on the right track.
Ms Danielle Wetherup, Master-President, Royal Canadian Mint: Four years ago, the Royal Canadian Mint was in a deficit situation. Profits have been increasing every year since then. I am very optimistic that next year, we will report that profits are up from $4.5 million to hopefully, a minimum of $5.4 million.
Senator Bolduc: You produce coins not only for the government, but also for 17 other countries and for private citizens. When you manufacture coins for the Government of Canada, do you sell them below cost and recoup your profits abroad, or are you bound by international trade agreements which dictate that you must market your product at a fair price?
Ms Wetherup: Every five years, we renegotiate a supply contract with the Department of Finance. The Royal Canadian Mint is a fully commercial corporation, unlike several of my counterparts who are entitled to collect a seigniorage. This is the difference between the face value and the intrinsic value of coins minted. It costs us 13 cents to mint a $2 coin and the cost difference is known as the seigniorage.
As a result of advances on the production front -- and the Mint has in recent years increased productivity by 30 per cent -- we have been able to lower our production costs. The benefits flow back into the federal coffers in the form of the seigniorage. We renew our contracts every five years and even with increases in productivity, this money still flows back to the government.
Senator Bolduc: With respect to national treatment, do you deal with the Government of Canada the same way you deal with the Government of Thailand?
Ms Wetherup: We negotiate terms and conditions which allow us to be competitive.
Senator De Bané: I am very happy to welcome you here today. We had an excellent meeting last week with the Master-President of the Royal Canadian Mint. The message that stuck in my mind was that Bill C-41 is critically important if the Royal Canadian Mint is to compete in a highly competitive world with other similar organizations that have tools, methods and means that the Mint does not have. The proposed legislation will give the mint the operational structure it needs to have a reasonable chance of competing with these other organizations. I think all committee members got this message loud and clear.
While you are here, I would like you to reiterate something that was said by some committee members, including the Chairman.
[English]
About the procedure for approving new coins, would Bill C-41 allow the Royal Canadian Mint to decide to replace the $5 banknote with a coin without the approval of the minister or Parliament, or will that have absolutely no bearing on it whatsoever because parliamentary approval will always be necessary for that?
Mr. Gagliano: First, the mint deals only with coins. The Bank of Canada deals with paper money.
In terms of the bill that is before you, there is no change. The mint may propose the addition of a new coin for circulation in the market, or a new denomination, or a withdrawal of a coin or a bank note. For example, last year there were some media reports about eliminating the 1-cent coin. The Minister of Finance must make that decision. The mint cannot make a decision to eliminate the 1-cent coin. However, the Royal Canadian Mint could put forward a recommendation to eliminate the 1-cent coin.
Presently, we have a $1 or a $2 coin. Some people are suggesting that we should have a $5 coin. We must go before the House of Commons and the Senate before we can add any coins for circulation.
Senator De Bané: Mr. Minister, as Ms Wetherup has explained to us, this bill would allow for an increased borrowing authority. We had a clear explanation for that rationale.
I wish to ensure that the minister's approval will still be necessary to borrow money when the mint will have projects that make that borrowing necessary. Will that ministerial approval and authority be necessary?
Mr. Gagliano: The actual system will continue in place. We are changing the amount of coinage from 50 to 75. The necessary approvals will always be required. I can assure you of that, as a minister.
The president of the mint always consults and wishes to know the opinion of the minister before she proceeds. We have a good management system.
[Translation]
Senator De Bané: Thank you. The senior officials from the Royal Canadian Mint who were here last week in conjunction with our study of this bill made a very good impression on the committee.
Senator Lavoie-Roux: In answering one of Senator DeBané's questions, you answered the question I was going to ask. For goodness sake, please do not go ahead and produce a new $5 coin. Our pockets are already weighed down with the $1 and $2 coins, not to mention other loose change. You would have to come up with a very good reason if you expect me to ever support a proposal like that.
[English]
Mr. Gagliano: At this point, I do not know if the Master of the Mint has any intention in that regard. I have none.
Senator Callbeck: I have a short question on the special edition coins. They contribute a great deal to our culture and history. If a province or an organization wishes to have a coin to represent a certain event or celebration, anniversary or whatnot, how do they go about that?
Mr. Gagliano: Again, I will try to keep my answer short. We put in place a special process for the millennium celebration. In terms of other events, we are requested to have coinage to celebrate a special occasion. From that point on, the mint has maintained its own process of looking at the issue if it is valid and important.
The other thing is -- and I will allow the president to explain the internal process -- that when it comes to commemorative coins, I believe the mint is very aggressive and does not wait for a province, people or organizations to come up with ideas. They are welcome, but most of the time they are one or two years advanced in their own program. We have a good series of coins.
Senator Callbeck: Who makes the decision?
Mr. Gagliano: The mint makes the preparations, but it must have a final approval by order in council.
The Chairman: I have a brief question about coin plating, which I asked the Master of the Mint last week.
She assured us that there was a growing market for this and that the private company Westaim, located in Fort Saskatchewan, Alberta, could not fulfil all the needs of the Royal Canadian Mint. Being a westerner and a believer in private enterprise, my concern is that this company should not be threatened by what the Royal Canadian Mint is doing in Winnipeg by expanding their coin-plating potential. Can you give me the same assurance, sir?
Mr. Gagliano: Yes, I even met the president of the company to which you referred, and assured him that the working relationship would continue. They have a good reputation.
The Chairman: If there is such potential in this business, has Westaim any plans to expand its production? If there were a potential for that, they could expand their business, you would think.
Mr. Gagliano: It is not up to me to tell a private company what their business plan should be. At one point Westaim gave notice to the mint that it was thinking of withdrawing from the market. They then came back; there was some change of management and so on.
We need to be assured that we will continue to have coin supply. At the same time, because of the international market, there is a great deal of work. They can compete and there is business for them.
We have the assurance that if Westaim for whatever reason might decide to not meet our needs, we must ensure that Canadians will continue to have coins.
The Chairman: I understand that it is a very competitive business and that you have trouble filling contracts at times. You even have to put bids in and buy blanks from the British mint in direct competition with them so that you do not get a good price. However, I do not wish to cut off any expansion to a private company. You have satisfied my concern.
Senator Mahovlich: Last week you told me that the Americans were going to come up with a coin for their dollar. When will that happen?
Ms Wetherup: Yes. It is planned for this year. The Congress is looking at three designs. The president of the U.S. mint expects to launch the coin this year, most probably.
Senator Mahovlich: Do you think the exchange will present a problem, or will we need to carry a bag of quarters?
Ms Wetherup: Their coin will be very attractive but will look very different from our dollar coin.
Senator Mahovlich: With the exchange rate, it could present another problem.
Ms Wetherup: Few people carry coins internationally for exchange. We tend to carry paper money. Any honest retailer will give you the bank rate of the day.
I also remind you that the United States is one of the few countries in the G-10 group that does not have high-denomination coins. When you go to Europe, a $10 coin is very current, whether you are in France, Germany, England or Italy.
Senator Cools: I wish to thank Ms Wetherup for being very open. I would also like to thank her for a rapid response to my questions of last week. I thank her especially for clarifying my need for knowledge on the value of the old Canadian 20-cent piece.
I wish to thank the minister for his willingness and his readiness to meet our committee and also for coming here today to discuss and debate senators' concerns. I know that the minister is very aware that senators feel strongly about ministers coming before them. I am very pleased that you have honoured that fine tradition.
I would ask you to ensure, as always, that the mint continues to operate in mint condition.
Mr. Gagliano: Yes, it will. I wish to thank you for giving me this opportunity to appear before you. It is an honour and a privilege. If you had not asked me to come, I would have been disappointed.
The Chairman: I should like to welcome Minister Dhaliwal, Minister of National Revenue. We will now proceed to consideration of Bill C-43.
Please proceed, Mr. Minister.
Mr. Herb Dhaliwal, Minister of National Revenue: Mr. Chairman, honourable senators, with me today is my Deputy Minister, Robert Wright, as well as my Assistant Deputy Minister, Bill McCloskey.
I feel privileged to appear for the first time before the Standing Senate Committee on National Finance. In fact, this is the first time I have appeared before any Senate committee.
I recognize and appreciate the role that the Senate plays in the parliamentary process, and I welcome your deliberations. As parliamentarians, each of us has a responsibility to uphold the shared values and principles that define us as Canadians. They include fairness, partnership, service and accountability.
The legislation we bring forward is a reflection of these principles. It is legislation that makes sense and makes a difference.
Three years ago, our government made a commitment to establish a new tax agency. It was a commitment sealed in the Speech from the Throne. It was echoed in our past federal budget and reaffirmed during the last election campaign. It was a commitment we made to Canadians which, with your support, we intend to meet.
Three years ago, we started a process that could only succeed with the support and involvement of senators, members of Parliament, stakeholders and our employees. We sought the input of Canadians from every region and every walk of life.
Not once, but three times, we consulted with the provinces, the territories, the tax, customs and trade professionals, and business organizations, on the appropriate framework, structure and organization of the agency. In fact, some of these groups saw us so often they were wondering, "Can you leave us alone? We have heard enough from you." As Minister of National Revenue, I saw more of the provincial finance ministers than any other Minister of National Revenue.
We set up a special advisory committee to provide ongoing feedback. We reflected on the comments and suggestions made during the formal consultation sessions in which close to 10,000 of our employees participated. We rewrote, reviewed and revised this legislation in the light of the concerns raised and the valuable input received during the extensive consultation process.
Honourable senators, the bill before you today has evolved and improved, primarily because Canadians made it so.
We consulted a wide range of associations, labour unions, small businesses, tax experts and taxpayers. We took the agency proposal to the Canadian Federation of Independent Business, the Canadian Institute of Chartered Accountants, the Canadian Bar Association and the Canadian Tax Foundation, to name just a few.
We listened, we learned and we acted on their advice.
Today, every single one of the organizations I just named has indicated their support for this legislation. We also have the support of the Tax Executives Institute, the Canadian Society of the Customs Brokers, L'Association de planification fiscale et financière, and Canada's Alliance of Manufacturers and Exporters.
Honourable senators, the Canada Customs and Revenue Agency is a concept born from a comprehensive consultation process that is uniquely democratic and forged from a model that is uniquely Canadian. I have travelled extensively across the country consulting Canadians. More recently, I have travelled across B.C. I also toured different cities in the lower mainland. Everywhere, I spoke with small business owners burdened by massive compliance costs and mountains of paperwork.
The Canada Customs and Revenue Agency will infuse new flexibility and simplicity into the tax process. That means lower administrative costs and reduced overlap and duplication for Canadian small businesses. I also spoke with business owners and executives whose companies depend on easy access to international markets. The new agency would respond to this need by streamlining the customs services.
Before I went into politics, I worked in business for over 25 years, so I know first-hand the kind of challenges Canadian businessmen and women face every single day. The new agency seeks to cut waste and promote the growth of Canada's economic landscape. Small businesses are the engine of our economy and a wellspring of innovation. As trade barriers fall, communications expand and technologies advance. We need a tax system that can keep up with the growth; that does not impede electronic commerce but encourages it; that does not hinder international trade but strengthens it; that does not hamper the power of the split-second communications but harnesses it for the good of all Canadians.
The Canada Customs and Revenue Agency will take advantage of new technologies to reduce paperwork, speed up decisions and respond to the needs of Canadians. That means Canadian businesses can spend less time and money dealing with government and more time and money pushing our economy, our country, forward and creating jobs.
It is one thing to promise that things will be different. It is quite another to deliver on those promises. However, now more than ever, Canadians demand accountability from their politicians and their public institutions. For that reason, ministerial accountability is a cornerstone of this legislation. Many individuals and organizations alike are adamant that the Minister of National Revenue retain the primary stewardship role, and I will. They are telling us that the Canada Customs and Revenue Agency must remain a part of the Public Service of Canada, and it will. They are also telling us that when a senator or a member of the House of Commons has an inquiry about a specific case, as Minister of National Revenue, I must be there to respond. Let me assure you that I will be, because we have heard these messages loud and clear.
The agency, which is subject to the standard reviews of the Auditor General, will be obligated to submit corporate business plans and performance reports to Parliament. Its staffing procedures will be subject to regular review from the Public Service Commission. Also, Parliament will conduct a legislative review after five years.
We also heard of the need to streamline the process, and get governments to work together to reduce overlap and duplication and provide better service to Canadians. The new agency will meet this need. According to estimates from the highly respected Public Policy Forum, the compliance cost savings for business from single administration would be between $116 million and $193 million annually. The annual administrative cost savings to governments could reach as high as $62.5 million.
In Canada, we know that anything built right is built upon bonds of trust, fairness, accountability and partnership. In creating the new Canada Customs and Revenue Agency, we want to forge new partnerships with the provinces and territories. We want to give provincial governments the options they need to better serve Canadians. We want them to have a greater say in tax administration. That is why we have ensured in this legislation their right to nominate 11 of the 15 positions on the agency's board of management.
I wish to emphasize that the participation of the provinces and the territories in this new system is completely voluntary. The provinces and territories will maintain control over their tax policy, while the new agency will create new options to administer these policies. Nobody ever said that partnership is easy. There are no simple answers or quick fixes. Partnership turns on consensus and accommodation. It rests on a delicate balance of give and take. We intend to work closely with the provinces and territories to find that balance. Canadians want their governments to work together for their citizens. They do not want us to build parallel systems across the country. Revenue Canada's agreement with the Province of British Columbia to manage the British Columbia Family Bonus on its behalf is a great example of the type of partnerships we want to enter into with the provinces and territories. The program's administration cost savings to British Columbia are significant. These savings are in addition to those of a single tax administration noted by the Public Policy Forum in its report. Our successful management of the British Columbia Family Bonus has paved the way for expanded federal-provincial cooperation in the delivery of programs. Once this program was delivered to B.C., we had Alberta, New Brunswick, Nova Scotia and other provinces also wanting us to participate in delivering their child tax and benefits programs.
Revenue Canada signed a service contract with Nova Scotia in anticipation of the new agency, to explore the possibility of administering provincial programs such as the Workers' Compensation Board payments on behalf of the province. Another five provinces are currently working with Revenue Canada to determine the feasibility of the agency administering additional programs.
The new agency will allow for the delivery of a broader range of services, tailored to the needs of the provinces and territories. Quite honestly, I understand if the provinces choose to wait and see what this agency can deliver. Signing on to the genuine article makes good business sense. I encourage my provincial colleagues to continue their careful examination as the new agency takes shape.
Like our nation itself, the Canada Customs and Revenue Agency will be a living institution that will adjust, mature and improve to meet the changing times and the changing needs of Canadians. Throughout this process, we have already witnessed several examples of this ability to evolve and improve. Such an example includes the Fairness Initiative that we launched in the spring of 1998 to solicit the views of Canadians on how to enhance the department's fairness practices. We partnered with the Conference Board of Canada to ensure that the entire process would be objective. In its draft report on the results of the consultations, the Conference Board states, "Revenue Canada -- is well regarded among Canadians and among international customs and revenue agencies as a leader, an innovator and an effective organization." It also reports that, "Revenue Canada is well equipped to provide fairness to Canadians." That is truly a strong vote of confidence.
On February 9, we reiterated Revenue Canada's commitment to provide fair treatment to Canadians by issuing our Seven-Point Fairness Plan and its accompanying Fairness Pledge. Honourable senators, I can assure you that fairness will not only be a practice of the agency, it will also be one of its fundamental values.
Furthermore, we have ensured that Canadians will receive service anywhere in the official language of their choice. That is right in the legislation. We have also ensured that the agency will conform to the Federal Identity Program guidelines. We will maintain federal government visibility across the country.
We have endowed the agency with the flexibility to deal with the fundamental personnel issues of hiring, training and retaining quality employees within a modern, human resources framework that works not only for the agency but also for our employees. Like all of you, I believe that our Canadian system of government and especially our Canadian tax and customs administration, is among the most respected in the world. That is the legacy that has been forged over time from the hands, hearts and minds of thousands of dedicated and talented public servants.
Our public servants are an integral part of national tax and customs administration that is second to none. I have no intention of leaving them in the lurch. The new agency will be designed to provide faster, simpler and more transparent human resource processes. It will make it easier for employees to move between jobs. Vacancies will be filled faster. Promotions and transfers will take less time to process. Recourse options will be more accessible and efficient.
From the very beginning, the development of Bill C-43 has been founded on a premise of fairness and a premise of openness. Our tax system has succeeded over the years only because individual Canadians have lived by those principles.
As Minister of National Revenue, I feel a special responsibility to uphold that example. That is why I am committed to developing strategies in the very near future to implement each of the seven steps outlined in our Fairness Action Plan. We want to ensure that our tax system continues to live up to the honourable standard. I intend to continue seeking advice from individual Canadians and Revenue Canada employees about how we can make the system even better.
Honourable senators, Bill C-43 is indeed about creating a uniquely Canadian model of customs and revenue administration. It is about progress towards better serving Canadians. It is about innovation based on partnership. It is about accountability entrenched in our parliamentary traditions. It is about fairness embraced by our shared values.
Honourable senators, it is an honour and a pleasure to participate in your review of this important legislation, and I welcome any questions that you may have.
Senator Callbeck: I should like you to explain your role with this new agency. I know that you will not be involved in day-to-day decisions. I suppose you will not be involved in decision making within the agency. What exactly will be your role?
Mr. Dhaliwal: Let me explain how the original model was to show where we have come in our evolution.
During the consultation process, this was originally seen as an arm's length agency from government. When I consulted across the country, Canadians said that they wanted this agency to be accountable. The tax collection function is very important. I strongly agreed with them.
We took it from being an arm's length agency to being a federal agency with a minister fully responsible and accountable to Parliament. I will be responsible for the program authority. We did not take any of the program authorities under the Income Tax Act or the Excise Tax Act that the minister maintains at this time. I will have full authority over the agency. I can give a directive under the legislation to the board of directors if I feel they have made a decision that does not follow government priorities or government policy. They cannot say no to this directive.
The board of management is there to deal with day-to-day management, real property concerns, and with human resources in terms of negotiations. However, the overall direction and the program authority are still maintained by the Minister of National Revenue. We are making a very strong federal agency.
Senator Callbeck: You said that you can give a directive that they must follow. For example, if the agency brings in new user fees or increases them, will you have any say in that? Can you turn that down?
Mr. Dhaliwal: The legislation does not allow the board of directors to institute user fees. They would have to go through the same process as I would now as Minister of National Revenue, which is to go through the Governor in Council. The agency would not have the ability to administer user fees in any way. That was part of the legislation. It would be done just as it is now, but we do not have any intentions of instituting user fees.
There are some user fees right now where people might want a special advance ruling on a tax implication. That is very minor, and we do not see it changing. The agency cannot go out and institute user fees. They must go through the current process.
Senator De Bané: Mr. Minister, it is a pleasure to have you here with your senior officials. I wish to take this opportunity to ask you a few questions that concern the people I have consulted.
You have emphasized that this agency will be in a position to enhance and augment services to the Canadian taxpayer. Would it be possible for you to give us examples of how this agency can do things that today the Department of National Revenue is not in a position to do? That would go a long way to getting the support of the Canadian people.
Mr. Dhaliwal: Thank you for that important question, senator.
In building the agency, we are building a vehicle so that we can work in cooperation with the provinces. Let me give you some examples.
We are attempting to get the provinces to build on having one business number for small businessmen who deal with both the federal government and a provincial government. They would then have only one business number instead of many business numbers to deal with. That would save them many compliance costs.
The Workers' Compensation Board is another example. We are working with Nova Scotia. Currently, Workers' Compensation Board premiums in that province are based on payroll. They must pay a premium based on their estimated payroll. They must put cash up front. If their assessments are off by 25 per cent, they must pay a penalty at the back end. The business community has payroll deductions every two weeks, which they send to Revenue Canada. Why can this not be part of that WCB premium? We would save all the paperwork, financing costs and penalties. These are the types of things we can do for business people to save them compliance costs.
Right now, business people spend $3.4 million on compliance costs. We are building a vehicle whereby we can work with the provinces to reduce the compliance costs to business.
In terms of the way we operate, we want a human resources framework that will be more flexible for our employees so that if we need someone, it does not take us six months to hire them. When we promote people, we do not want it to take two years for them to get the promotion. We want to be much more responsive as an organization.
We want to build a vehicle where we can work with the provinces to create a single tax administration. We currently collect about 50 per cent of the taxes for the provinces. However, there is a tremendous opportunity to do more. For example, in British Columbia there is a corporate capital tax. When people fill out their corporate tax returns, there is no reason why they could not do that at the same time.
There is currently no option for us to collect a provincial sales tax that is not harmonized. However, the agency could go to the province and say, "We understand that you do not wish to harmonize the sales tax, which is fine, but now you can ask us to collect your provincial sales tax at whatever it cost you." In that way, business people would only have to fill out one form and deal with one organization instead of many.
These policies create new options that did not exist. They will reduce administrative costs and also reduce compliance costs.
Why is that important for us? Productivity is very important to Canadian business. If we can reduce the compliance costs to business, we make their products and services more competitive. We are a trading nation, which is important: therefore, we can help to build a more productive economy.
Senator De Bané: As a lawyer, a particular issue is of great interest to me. The legal department within your ministry gives legal advice. They stand between the taxpayers and the corporate objectives of the department. They try to ensure that the work of the department is consistent with our Constitution and the law of the land.
If tomorrow we have a separate agency, would that legal staff be as independent within the context of their obligations, et cetera, to give legal advice to the department? If the taxpayers are legally entitled to an exemption, or whatever, will they be free to defend that position and not be just a rubber stamp to the narrow corporate interest of the agency?
Mr. Dhaliwal: Right now, the Department of Justice does all our legal work and advises us in legal matters. That relationship will not change. Justice will still provide legal advice. If we wish to get legal advice or work outside, it must go through Governor in Council, so that relationship does not change.
Senator De Bané: I am happy with that answer.
On another issue, you have said that this is not the way to lay off people in your department. On the other hand, I believe that you are not ready to give a guarantee longer than two years to those who are term employees or who hold an indeterminate position for more than two years.
Is there not some contradiction between that expressed intention of not using this corporation to reduce the manpower, but on the other hand you do not wish to give them more than two years?
Mr. Dhaliwal: First of all, I believe that no one else in the public service is giving a two-year guarantee; we are therefore being exceptionally generous. Second, the whole concept of a single tax administration is to encourage the provinces to let us do more of the work. If that happens, in fact we will have more responsibilities and more work to do with the provinces. I do not anticipate that as a result of the agency we will need to reduce the staff. However, it is normal for technology to do that, and technology will be very important in revenue collection.
One of the things I said earlier is that Canadians do not want us to build parallel systems across the country. Building technology platforms is expensive. It can cost $140 million to build a new platform so that corporate tax can come off electronically and that people can pay their GST electronically, as well as all other taxes. We do not wish to build parallel systems across the country.
Let me give you an example regarding the child tax benefit. It is a benefit in B.C., like the Canada Child Tax Benefit. When they asked us to administer the child tax benefit for Canadians with low and modest income, we told them how we could do it. It is a $400-million program. We are delivering that program for $2 million. It would have cost them probably $20 million to set it up. Why? We have the information, the infrastructure and computer systems available, therefore, we started delivering their program at a much lower cost than they could. Once that happened, other provinces wanted us to do the same for them. They would therefore not have to build these parallel systems in their own provinces as we already had a national infrastructure that we could utilize. We are making investments that will help the provinces. That is what I mean by better service to Canadians.
Also, electronic commerce will make a huge difference to how we do business. People do not realize that this whole industry will explode with electronic commerce. The provinces, however, are not engaged because if someone is selling a product in Quebec to someone in B.C., who will be responsible to collect the provincial tax for B.C.? You will also have a problem where the provincial sales tax may not get collected, therefore, the tax section must be able to work nationally and also internationally. The electronic commerce system is here and we must maintain the integrity of our tax system.
I wish to go back to my original comment. This is not a layoff exercise, it is about better service to Canadians and it is about creating options and opportunities to work with the provinces that do not exist now.
Senator De Bané: My last question, Mr. Minister, concerns ministerial responsibility. This is really the heart of the whole malaise, if I may say. As you know, the legitimacy of the minister's position derives from the fact that he holds his position because the government has the confidence of the House of Parliament. If ever they lose that confidence, they must tender their resignation forthwith. Of course, all Canadians know that when we receive our assessment from the department, no political intervention would be in order. On the other hand, every Canadian knows that if ever his rights or his opinion are not respected, he can always go to the minister as a court of appeal of last resort because the minister and the government are accountable to the people.
All I want, Mr. Minister, is that you reiterate that the creation of that agency would not make Canadians lose that opportunity to go to the elected representative of the people if ever they think that they have been unfairly treated by the officials.
Mr. Dhaliwal: First of all, let me say, senator, that what you have articulated is what many Canadians have articulated to me, including provincial finance ministers. They wish to go to someone who will be accountable for the agency.
In the legislation, the original concept has been changed. I changed it to include full ministerial accountability to Parliament and to all parliamentarians. Any member of Parliament can come to me and I will be fully accountable for the actions of the agency. Full ministerial accountability is built into the legislation and that is important for Canadians. That sentiment was echoed by Canadians across the country and by parliamentarians.
I also added a five-year review by a parliamentary committee of the objectives set out for this agency. Too often we pass legislation in Parliament and we do not look back to check its efficacy. This agency will have a five-year review so that Parliament can ensure that it is functioning as envisioned.
Senator De Bané: It was a great pleasure having this dialogue with you.
Senator Carstairs: As a former provincial politician, the most exciting part of this legislation is that we are finally giving the provinces some participation on the board of Revenue Canada.
Just consider the number of taxes that Revenue Canada has been collecting for individual provinces. I think New Brunswick is in the lead with six different forms of taxation being collected for them. If I am not mistaken, about 49 per cent of all taxes collected in that province are collected through Revenue Canada. It seems quite appropriate then that someone from New Brunswick should sit on the board, and that that person should in fact be appointed by the province and not by the federal government.
In light of that, if a province chose to have no taxes collected by Revenue Canada or by this new revenue agency, would that province still be entitled to have a representative on the board?
Mr. Dhaliwal: We are collecting 80 per cent of taxes for certain Atlantic provinces. Part of the harmonization process within the Atlantic provinces involved creating an agency where they could make representations. They wanted to have some say and that is why 11 of the 15 members will be nominated. The province will nominate three people, one of which we will appoint.
If a particular province is not willing to put a name forward, we can appoint a person to make sure that there is regional representation across the country. We have the power to have that included in the legislation.
Senator Carstairs: My second question deals with the overall policy of your department. My husband's father is 86 years old. Each month, I send a cheque to Revenue Canada for the deducted taxes and CPP and EI payments for the employees who care for my father-in-law. I must tell you, Mr. Minister, it is not easy to go through all of the booklets to make those tax and CPP and EI calculations.
Then, in addition, I must send a Workers' Compensation cheque to the Province of British Columbia. Can you give me a guarantee that you will make the system simpler?
Mr. Dhaliwal: Simplification is one of our key objectives. You have an idea of what business people must go through every single day.
Senator Carstairs: However, I am not making any profit.
Mr. Dhaliwal: Not all businesses make profit, either. Imagine dealing with three or four tax jurisdictions. The number of forms to be filled out is amazing. It would be nice if a computer program could take the gross amount, do the calculations and send the cheques by computer to all the organizations.
We want to create options. Our long-term goal is to have a single tax administration to pay all taxes. Some day that might include municipal taxes. Why not create an option for you, if you wish to pay your municipal taxes through your payroll? This will work towards creating new options. If governments can work together and create a single tax administration, we will all be better off in terms of having a more productive economy and providing better service for Canadians.
The Chairman: With your permission, sir, we will adjourn now because we wish to go in camera to discuss other issues pertinent to our committee.
Could we ask you to return at 10:45 tomorrow morning?
Senator Cools: I wish to thank you and congratulate you, Mr. Minister, because I am very well aware that this is your very first meeting at a Senate committee. I am glad to see that you have mastered it so quickly. You seem so willing and able to meet with us.
I also wish to thank you for bringing forward a very progressive bill. I echo Senator Carstairs' desire for simplification on behalf of individual Canadians.
I echo some of Senator Callbeck's concerns as well. Quite often we welcome these initiatives and innovations. When they happen, the minister tells us that ministerial accountability will be maintained. Then, a few years down the road, we hear that it is not proper for members of Parliament to approach tribunals such as the National Parole Board and so on.
You have satisfied my concerns. Thank you for that. I thank the Parliamentary Secretary as well.
Did I understand you to say that we wanted the minister back tomorrow morning? The minister has informed us that he is available tomorrow, but perhaps we could accommodate the minister's need for his own house duty.
The Chairman: We are meeting at 10:45. We have two other witnesses at that time. If you could possibly come at noon, Mr. Minister, that would be wonderful because that is within our time slot for this room.
I will move ahead because we are very pushed for time. We will revert back to Bill C-41, to amend the Royal Canadian Mint Act and the Currency Act. We need to go through clause by clause.
Senator Cools: I move that we go into clause-by-clause examination of the bill.
The Chairman: Shall the title be postponed?
Hon. Senators: Agreed.
The Chairman: I do not believe that there is a problem with this bill. Shall clause 1 carry?
Hon. Senators: Agreed.
The Chairman: Clause 1 is carried.
Shall clause 2 carry?
Hon. Senators: Agreed.
The Chairman: Clause 2 is carried.
Shall clause 3 carry?
Hon. Senators: Agreed.
The Chairman: Clause 3 is carried.
To do this more expeditiously, shall clauses 4 through to 15 inclusive carry?
Hon. Senators: Agreed.
The Chairman: Clauses 4 through to 15 inclusive are carried.
Shall the schedule carry?
Hon. Senators: Agreed.
The Chairman: The schedule carries.
Shall the title carry?
Hon. Senators: Agreed.
The Chairman: The title carries.
Shall the bill carry?
Hon. Senators: Agreed.
The Chairman: The bill carries.
Shall I report the bill without amendment?
Senator Cools: I move that you report it without amendment tomorrow.
The Chairman: Thank you. I will adjourn the public meeting and go in camera.
The committee continued in camera.