Proceedings of the Standing Senate Committee on
National Finance
Issue 26 - Evidence
OTTAWA, Thursday, March 4, 1999
The Standing Senate Committee on National Finance met this day at 10:45 to examine Bill C-43, An Act to establish the Canada Customs and Revenue Agency and to amend and repeal other Acts as a consequence.
Senator Terry Stratton (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I call the meeting to order. Our meetings are to discuss Bill C-43, an act to establish the Canada Customs and Review Agency and to amend and repeal other acts as a consequence. Mr. Walter Robinson will proceed with an opening statement.
[Translation]
Mr. Walter Robinson, Federal Director, Canadian Taxpayers Federation: I am very pleased to be here this morning to voice our suggestions and concerns regarding Bill C-43, to Establish the Canada Customs and Revenue Agency. I will make my presentation in English, but I will try to answer your questions in the language of your choice.
[English]
Before we move to the legislation under study, allow me to give you a brief overview of the Canadian Taxpayers Federation. We are a decade old, non-partisan, and federally incorporated not-for-profit research and advocacy organization with a three-fold mandate. First, we act as a watchdog on government spending. Second, we advocate fiscal and democratic reforms. Third, we mobilize taxpayers to exercise their democratic rights and responsibilities. We are proud to represent the common interests of 80,000 Canadian taxpayers to all three orders of government from offices in five provinces. We are planning to expand our presence in Atlantic Canada and Quebec over the next two years.
The notion of a super tax collection and administration agency from a conceptual point of view is a positive one. The goal to simplify administration and reduce overlap and duplication is one that we wholeheartedly support. We also support the government's desire to operate in a more business-like fashion. The apparent move to an agency structure, which reflects our long-standing demands for greater alternative service delivery across the public service, is laudable. However, I appear before you this morning to lay out several of our concerns.
Before embarking on my current career as an advocate for taxpayer emancipation, I worked in the private sector in a business development and program management capacity for an international outsourcing contractor. In this capacity, I counselled governments of the three main criteria to be upheld in any move towards alternate service delivery. First, you must demonstrate a value, usually cost savings and/or better service for taxpayers. Second, you must ensure continuity of the service that is being proposed to be structured or changed. And third, you must always have a consideration of affected staff interests. It is these three categories, plus recent observations of the Auditor General, and our concern about future business endeavours that the agency may undertake, that form the basis and substance of my testimony before you this morning.
In our view, the value of this agency, in terms of cost savings, is extremely tenuous. To date, to the best of our knowledge, not a single province has signed on to this agency or even communicated a public desire, through memoranda of intent, to seriously consider the merits of the Canada Customs and Revenue Agency (CCRA) bill. And the Canadian Tax Foundation has noted that Ontario and Alberta are extremely suspect given the federal government's objections to adopt a less progressive personal income tax structure. The department has produced a study that points to impressive savings arising from the CCRA, especially in the realm of reduced compliance costs. This study is based on complete provincial buy-in to the CCRA concept. I reiterate, to the best of our knowledge, no province has signed on. Turning to the continuity of services, our offices are increasingly receiving letters of complaint from taxpayers who perceive that they have been dealt with in an unfair or arbitrary manner by Revenue Canada. In addition, we have recently received several unsolicited manuscripts from former Revenue Canada employees detailing some of the management and collection processes within Revenue Canada, which we plan to make public closer to this year's tax season. Therefore, we support the creation of an Office of Taxpayer Protection as outlined by the official opposition in the other place to alleviate taxpayer concerns about a potentially unresponsive and behemoth tax agency.
Please do not misinterpret this: it is not a blanket condemnation of Revenue Canada. By and large, the system works but we can always strive to make it better.
In regard to staff interests, I would urge the members of this committee to seriously consider the objections raised by the various employee groups at Revenue Canada -- employee groups like the Professional Institute of the Public Service, and the Union of Taxation Employees. These groups have raised some real concerns about the creation of this super agency. It is our contention that their concerns should be mitigated through greater cooperation, as opposed to rushing this legislation through both Houses of Parliament.
To move forward with the agency proposal in the context of the serious employee concern that exists at present, and that in fact has existed since day one, would be a mistake. The tone and level of this concern is much greater than that which many of us saw with the NAV CANADA proposal or the move to create the Canada Food and Inspection Agency. I urge you to consider the recent comments of your esteemed chairman of this committee and his grave misgivings about the festering and deep moral crises across the federal public service.
At the beginning of my presentation this morning, I alluded to our support for Alternate Service Delivery initiatives in government to deliver the same or better services for lower costs and their use to meet the changing needs of Canadians in their demands for government services. I urge you to consider the cautionary words of the Auditor General this past December when it was noted that there is a lack of a clear process in various federal ASD initiatives, including this one.
Successful ASD initiatives are reliant on two critical success factors. There must be both a concise, transparent, and encompassing process and a respected champion to drive this process.
From the protestations of the affected employee groups and the lack of public debate on this initiative, we question the efficacy of the process. To us, it is obvious that the champions of this move to a super agency are within the bureaucracy and not at the visible, elected and accountable level.
Finally, allow me to raise our fears with respect to the future mandate of the agency. If it is to adopt more business-like practices, such as seeking new markets or offering incentive-based pay, that is a positive step. But we see no evidence that Revenue Canada will not engage in direct competition with private sector providers of tax services. The explanatory information provided by Revenue Canada through its Web site notes that "it is not the intention under the agency to charge user fees for basic tax customs and trade administration services." We certainly hope not.
We would encourage you to ensure that any amendment you make to this legislation expressly forbids such measures. The idea of an arm's length revenue collection agency has merit, but more work needs to be done.
Honourable senators, if you were starting a business, you would seek to identify your market, strategic partners and prospects to business success through studies, focus groups and competitive analysis, just to name a few techniques that could be employed. You would ensure that you could draw from a committed and well-trained human resources pool to deliver superior customer service. And you would ensure that all the regulatory hurdles, contracts and financing were well in place. We urge the government to do a little more homework with respect to its target market, namely, provincial buy-in. The provinces will also be the partners.
We urge the government not to march blindly ahead with an uninvolved, uncommitted and hostile workforce. More work must be done to bring employee groups on side.
Taxpayer concerns must be assuaged through the adoption of the official opposition proposal for an Office of Taxpayer Protection. It would represent bad public policy to proceed at this time.
The goals of saving taxpayers money, operating in a more business-like fashion, and providing one point of contact for tax filers remain laudable. We support them entirely. However, we feel that Bill C-43, as it is presently structured, will not achieve these goals.
Honourable senators, we would be pleased to answer your questions.
Senator Carstairs: You seem to think that this is speeding through very quickly. I understand that it was first announced in the 1996 budget. Moreover, there have been two nationwide consultation processes involved since that time. This legislation has now been before Parliament for three months. Why do you think this is a rush job?
Mr. Robinson: I think that way because of the media analysis surrounding this, and some of the protestations of the various labour groups, which began at the outset. Many of the concerns about this issue dealt with governance and accountability. Since then, the minister, his staff and the department have done a great deal to address some of those concerns. In that sense, it was brought in and it was improved. Perhaps, from our point of view, it was ill-conceived on some of those governance and accountability issues. If you are going to devise public policy, your first rule as a legislator is to have those frameworks in place. With respect to the nationwide consultations, it is our understanding that we have received less than 3,000 submissions, but I could stand corrected on this number. I compare that number to the Ontario Fair Tax Commission in the early 1990s, which received over 20,000 submissions in the province of Ontario alone.
I do not think that the consultations have been nationwide and encompassing. They have been nationwide with a very limited group of stakeholders. I would venture to say that nine out of 10 Canadians in the streets today would not know what is happening with this piece of legislation. I do not see a broad public outcry in support of moving this legislation through. With respect to rushing it through the Houses of Parliament -- I can only point to the time allocation that was used in the other place.
Senator Carstairs: In terms of 3,000 submissions I would suggest to you that there are very few pieces of legislation that get 3,000 submissions. I would think that the typical piece of legislation would be lucky to have 100 submissions. There is always legislation like the gun bill, for example, that received large, broad, general submissions. However, 3,000 submissions across the country on a piece of technical legislation like this, is a very broad representation of the body politic.
In terms of involvement by the provinces, the Western premiers have been calling since 1996 for such an agency. They did so at their Western Premiers Conference in June 1996. The three Atlantic provinces that signed on with the harmonization of the GST did so on the basis of establishing such an agency. There have not been many signed agreements; although there was a recent one with Nova Scotia regarding workers' compensations. I would argue that in fact there has been broad provincial support for establishing the agency. Do you have any evidence to the contrary? Have the provinces made statements that they are opposed to the establishment of such an agency?
Mr. Robinson: This is not simply a technical piece of legislation. I would argue that this is a fundamental overhaul of the tax collection system and the tax administration system in this country. I again say that the Fair Tax Commission drew 20,000 submissions. The CPP, which dealt with the future of one of our most cherished programs, future pensions, drew over 6,000 submissions in a much shorter time frame than the three-year window that we are now dealing with on this piece of legislation, in its various incarnations.
Various governments and premiers have called for efficient, single coordination: one collector, one set of forms, efficacy and better service for Canadian taxpayers, for quite some time. However, I see no memoranda of intent to buy into this agency concept; no supportive measures, no public statements from various provincial finance, treasury or revenue ministers -- depending on the nomenclature they use in various provinces -- to indicate that support. If I may add, in terms of the technical piece of legislation, the government is going about it a bit backwards. Fix the tax system first: simplify the forms, simplify the credits. That is what the government must do first to improve its service and product offering. Then build a structure and an agency to reflect those changes. Do not do it the other way.
Last spring, around April, we surveyed 81 of the elected members in the other place and found that 80 per cent of them do not do their own taxes. They do not do them because the system is either too burdensome, too complicated or they do not have the time. I would venture to guess that I would find similar results in this place. I would ask the government to take a step back. We agree with the notions of what the government is trying to do, but do not rush it through; get it right, get the provinces on board, get your employee groups on board. You would not start a business when all your employees are threatening mutiny. That does not make good business sense, and it does not make good public policy sense.
Senator Carstairs: I do my own income tax form. I take great pride in being able to do it and find it relatively easy to do, even though I have quite a complex return. I would like to hear your comments on the Fairness Initiative, which is indirectly related to this matter.
Mr. Robinson: We were invited to participate in the Fairness Initiative and unfortunately we could not. That initiative has been a positive step forward, with the government dealing with the various stakeholder groups and trying to simplify the tax collection, administration, and interpretations of various pieces of the legislation. The Income Tax Act is an unruly piece of legislation, if I could say that. The governmental aid in the department has been very forthcoming and I commend that initiative.
Senator Tkachuk: Did the western premiers support the concept of a more centralized collection or was it the concept of a collection agency -- something that would be further away from government, like a government department?
Mr. Robinson: My understanding is that it was a bit of both. You may wish to take that up with Senator Carstairs, given that both of you have western roots. The issues that concerned the western premiers in 1996 were simplification and an agency to remove the politicization of tax collection. Both are issues that we and the Canadian Tax Foundation have insisted on for quite some time. One of the main things we want is one point of contact for taxpayers. It would be great to fill out only one set of forms. Let technology do the rest.
Senator Tkachuk: I am concerned that this agency would remove even more responsibility from Parliament. It is a powerful instrument, with powers that no other federal government department has. Is there a reason why they would need an agency to do this? I do not understand why an agency would be better than a department. What is the difference? Why would they want that?
Mr. Robinson: I cannot speak on behalf of the government.
Senator Tkachuk: I am asking you as a former consultant.
Mr. Robinson: In terms of restructuring the way governments deliver services; the agency concept, special operating agency, arm's length or whatever method is chosen will be seen as a clean break. It would show that there can be new structures, and that you can free yourself from some pieces of legislation that restrict staffing flexibility within the public service. Those are some of the reasons to do it. I agree with your assertion that Revenue Canada has powers unmatched by any other government department. It has police-like, police-state powers: it can seize assets, garnishee bank accounts and conduct investigations. The evidence to date on some other agencies with similar, but not as broad-scale, encompassing powers, like the Immigration and Refugee Board, Corrections Canada, and the National Parole Board, is that Canadians have reason to be suspect of moving agencies outside of the direct jurisdiction of Parliament.
However, as I reiterated in my remarks to Senator Carstairs, I did not touch on the governance a great deal in our presentation because, to the credit of the minister, his staff and the department, I think they have improved the legislation significantly from when it was first presented.
Senator Tkachuk: I have read all the government documents and I have reviewed the bill. As was the case with previous agencies, they talk about their lack of flexibility and worker incentives. It seems that you support the concept of an agency, yet you support a more efficient government. If this is a problem, why would we not solve the problem universally? As a citizen, I find this whole process scary. We have far too many agencies. Maybe we should move the entire government into one giant Crown corporation in order to make it really efficient.
Mr. Robinson: Senator, in my private sector career we figured out that you could contract everything out except elected representation, and we were working on that as well.
With regard to the most efficient model, it all depends upon the service you are giving. The Government of Canada delivers a variety of services. Some institutional structures lend themselves better to agencies. With others, reforms should be made within. The National Capital Commission, for example, did a variety of things. It downscaled its programs; it used employee takeover corporations for some of its services; it kept other things in-house; and it privatized certain things. There is no one best method.
I believe that the method the government has chosen for Revenue Canada is one of the ways to go. There may be others. However, there has been a lot of work done on this and, being a realist, I do not think we will stop it entirely. My objective today is to ask you to consider the issue of tax simplification, not to rush into this, and to perhaps bring more people on side to make this agency more effective in delivering its services.
I also raised the issue of the Auditor General's reports. Throughout the industrialized world, governments have decided to do things differently. Examples are New Zealand, the United Kingdom and Eastern European nations. There are two keys to the success of their models: a well-defined, transparent, accountable and clear process; and a champion. I do not think this process has been very transparent or well defined. The Auditor General makes the same assertions on many of these initiatives in his December 1998 special report to Parliament on achieving objectives, accountability, transparency and protection of the public interest; and I do not think there has been a champion of this initiative, with all respect to the minister. We have had three ministers of National Revenue during the incarnation of this idea. There has not been one who has taken ownership of the idea and sold it to the Canadian public -- Canada's 22 million tax filers and 15 million taxpayers. Again, I would venture to guess that nine out of 10 of them do not know this is happening.
Senator Tkachuk: I have some questions on efficiency and the view of the western provinces.
Individuals fill out income tax forms and send in their money. Corporations fill out income tax forms and send in their money. It cannot be much more efficient than that. It is the system of taxation that is complex, not the method of collecting it. That is pretty efficient. It is deducted from your cheque. It goes to the federal government. The federal government pays the provinces. That is pretty simple. You file your return. The form is complicated, but not the method of taxation.
Outside of eliminating taxation completely, or making it voluntary -- which would not be a bad idea -- how could it be made more efficient? How will centralizing it make it more efficient?
Mr. Robinson: Some of the provinces have contracted out the collection of other forms of taxation, for example, speeding fines, fines for criminal offences and those sorts of things, to Revenue Canada, which, because of its national scope, has an economy of scale. They have determined that it can be cheaper to contract that to a super agency than to collect the funds themselves.
We have some concerns about that. In terms of efficiency in government, that probably makes sense in order to reduce your collection and compliance costs. On the other hand, there are some very serious privacy concerns about data mining -- marrying a driver's licence with a tax form with a criminal record. Those are some of the things they can do better.
Also, you can move outside traditional collective agreements and work toward mult-skilling your workforce. You can offer pay that is not determined on years of service in a Crown corporation, government department, or private sector employer for that matter, but on what you do, how productive you are, what your experience is, and how you add value to the corporation.
Those are some of the reasons government departments choose to move to agency and different type structures. Again, some of those things can be accomplished within the existing structure. You heard that very clearly from the employee groups. They are well placed to speak for their members. I will not speak for them. However, you can do it through this vehicle as well.
Senator Tkachuk: I thought you might answer that question in that way. We come to the nub of this.
Does the Taxpayers Association believe that we should use an instrument as powerful as Revenue Canada to collect parking fines and other things that have nothing to do with taxes? Does the Taxpayers Association truly believe that we should allow this powerful instrument, now a Crown corporation even further removed from Parliament, to seize citizens' money without due process?
Revenue Canada knows everything that everyone in my family pays. Do you believe that it is efficient for Revenue Canada to have the right to seize my money for municipal and provincial fines?
Mr. Robinson: I am a pretty big libertarian in terms of limiting the role of the state. That being said, driving is a privilege that the state confers on me; it is not a right.
If I break the laws of the road, the due process is set up in the highway traffic act. In this province, if I do not pay my fine for turning left on a forbidden lane within a certain period, it is a summary conviction if I do not appeal. It is a negative option due process so to speak. That is the system.
Again, as I pointed out, we have some fundamental concerns on the protection of privacy of data and data mining: putting those things together. However, to be fair to the government, there has been a protection of privacy of data to a certain degree between customs and excise, and the GST and Revenue Canada collection people. It was not until a few years ago that people could marry together your business number and your social insurance number. It should be remembered that our system works on a voluntary compliance method.
We do not preach tax evasion. We think that tax avoidance is an economically rational behaviour. You and I seek to limit the amount of tax we pay through every legal avenue possible. We find every nook and cranny and anything we can do to reduce our taxes. It is a voluntary system and it works well in that respect. I would not want it to change. As I said, I believe that to a certain degree the government has made those accountability and governance measures a little more transparent. It would be very duplicitous for us to preach alternative service delivery in a variety of venues -- the Department of National Defence, fleet management across the federal public service, contracting out of switchboard dispatching or many of the IT services -- and not look at it from a philosophical and pure ideological sense within Revenue Canada. There are examples throughout the world where the government has gone much further than this bill purports to go. Customs and excise in the United Kingdom is an example. It has served to reduce tax collection costs. It has served, in certain areas of customs and excise in the United Kingdom, to improve service. Private sector providers have actually given better customer service than public servants according to the satisfaction surveys.
I am not in favour of an all-encompassing and powerful state. We are remaining consistent and pure to our principles. This piece of legislation may provide the most efficient organization. Our main concerns are that you bring your employees on board, take your time and work for tax simplification. I cannot look at this in isolation.
Senator Tkachuk: Do you really believe the government when they say that they have included the possibility for user fees in the bill but that they would never use it?
Mr. Robinson: I mentioned that in terms of the information that has been provided for the public. They said that the agency has no intention of collecting fees for tax administration and tax collection. There are various Treasury Board guidelines, which already outline user fees. As you are well aware, there has been an alliance of business groups that have come before both Houses of Parliament to state that the government's user fees do not relate to any sort of value that people are being charged. It would be useful if there were anything that you could do in your clause by clause, line by line review of this piece of legislation to strengthen that exclusion of fees. We pay our taxes by compulsion, in a sense. I would support anything you can do to ensure that user fees are expressly forbidden for those core services.
Senator Carstairs: I have one point of clarification that comes from Senator Tkachuk's question. I was very concerned about your statement of being able to enter a place without any kind of a warrant. I asked my staff to check, particularly because we are on television and this is going to get some wide coverage. Apparently, they can enter a business at any time and make copies of documents. They cannot take those documents without a search warrant and they cannot enter a dwelling place unless they have the consent of the occupant or they have a search warrant.
The Chairman: From my experience in business, I know that they give you a phone call and announce that they will come in a couple of days and would it be convenient? I know that we always said yes.
Senator Tkachuk: I thought they could do it in the home, too. My experience has been in business and they just walk in and there is nothing you can do. I wondered if it applied to the home.
The Chairman: I am a little hung up on the super agency collecting taxes for provinces. I agree with the efficiency and the lowered costs. I am also concerned about privacy. I am also really concerned about this whole concept of big brother -- to use old words. A libertarian would fundamentally disagree with this. I am not necessarily a libertarian, but it bothers me to the degree that it almost means that, in time, you will not be able to go anywhere and do anything without the sense that someone is always over your shoulder, that any offence, minor as it may be, will be monitored, watched, and boom, you are a dead duck. How do you respond to that? I know you responded to that but to me it is still fundamentally unacceptable in terms of freedom and the right of privacy.
Mr. Robinson: Mr. Chairman, I share your concerns on that and allow me to give you a bit of a flippant or sound bite answer. Our organization predominantly exists to monitor and comment on these types of activities. Federal taxes, parking fines, criminal levies -- whatever the case may be as you run the gauntlet of government imposed fees and fines -- stem from an insatiable government appetite for tax revenues. Our job is always to limit the tax and expenditure powers of government through balanced budget legislation and other things that we proposed across the country and to the federal government. We have appeared before the House finance committee and before you, I believe, on some pension legislation. We keep up the fight to ensure that that appetite for better income taxes or parking fees or licences or levies is put on a radical, slim-down diet. That is what we keep fighting.
However, at the end of the day, taxes are the price we pay for a civilized society. People always point to us and claim we are an anti-tax organization. No, we are an anti-waste, anti-inefficiency, anti-corporate welfare type organization. We are looking for government to concentrate on its core public responsibilities for what we elect people to do. This is presumably what you are here to do as well. Again, I share those privacy concerns. They must remain paramount.
The Chairman: If there are no other questions, I thank you very much for attending. You have been most informative.
We have with us today Robert Spindler, the Chair of the Canadian Institute of Chartered Accounts, Chair of the Joint Taxation Committee; Catherine McMillan, past Chair of the CICA Commodity Taxation Committee and Sal Badali, with Government Affairs.
Mr. Spindler, CA, Co-Chair, CICA/CBA Joint Taxation Committee, Canadian Institute of Chartered Accountants: On behalf of the Canadian Institute of Chartered Accountants (CICA), we would like to thank the National Finance Committee for allowing us to appear and comment on Bill C-43, the draft legislation that has been introduced to create the Canada Customs and Revenue Agency.
I am here today with Catherine McMillan and Sal Badali -- as a group we have been involved with the CICA in looking at the agency issue. I will say a few words about the government's overall proposals while Sal and Catherine will provide you with some comments on specific issues.
Representatives of the CICA have been working with Revenue Canada officials for the last 18 months to provide input to the government's proposals for the agency. As well, we were pleased to provide additional feedback on this initiative by nominating a representative to sit on the Minister's Special Advisory Committee on the Agency: Mr. Jack Vicq of Saskatchewan. Over this period of time, we have focused our commentary on a range of governance and accountability issues.
We were very concerned with initial proposals that the agency be placed at arm's length from government. We recommended that the existing ministerial oversight of the revenue system exercised by the Minister of Revenue be maintained. We said that it was vital that MPs, speaking on behalf of taxpayers, be able to hold the Minister accountable for the workings of the system. It is clear that the comments provided on this issue during the consultations were heard and taken into account. We are pleased to see that under Bill C-43 the Minister of Revenue will retain responsibility for the agency and that it will be structured to allow for close ministerial oversight -- and in particular, that the minister's power of inquiry into any activities of the agency will be maintained.
Sal Badali will now talk about issues related to the governance of the proposed agency.
Mr. Salvatore M. Badali, FCA, Deloitte & Touche Consulting Group: In providing feedback on the agency we took a close look at the roles being proposed for the boards of management, the commissioner and the minister. We wanted to ensure that there was appropriate accountability built into the proposals for the overall directions taken by the agency. We said that the minister should retain responsibility for matters of public policy relating to it. We also said that the board of management should be responsible for developing the agency's day-to-day administrative policies. We thought it was important that these respective responsibilities be spelled out in the legislation. We are pleased that Bill C-43 clarifies these roles: the minister will be able to issue written directions to the agency on matters of public policy, while the board of management is responsible for its overall administration -- in effect, able to manage the resources, services and personnel.
In this regard, we know that the agency is intended to have the flexibility to tailor administrative arrangements to meet its operational requirements. In light of this, we have already provided the Minister of Revenue with two publications prepared by the CICA -- "Guidance on Control" and "Guidance for Directors: Governance Processes for Control." These publications address matters relating to control -- all the elements of an organization that taken together support people in the achievement of the organizations' objectives. These elements include resources, systems, processes, culture, structure and tasks. Looking at control means looking at all these elements and how they are inter-related and aligned with objectives. The publications describe the control responsibilities of a board of directors, how they can fulfil these responsibilities and set out criteria for effective control in an organization. We have urged the agency's board of management to refer to them in creating the administrative framework for the agency.
I am now going to ask Ms McMillan to address issues related to the board of management and user fees.
Ms McMillan, FCA, Past Chair, CICA Commodity Taxation Committee: We said that getting the composition of the board of management right was an absolutely fundamental issue in determining the agency's success. With respect to the qualifications of directors, we recommended that they be selected for their talent, expertise and accomplishment, looking at characteristics such as integrity, informed judgment, teamwork, financial literacy, absence of conflicts of interest and high performance standards. Selection criteria should ensure that core competencies needed on the board are addressed in areas such as: tax, accounting and corporate finance, business judgment, leadership, human resources, facilities management, crisis response and strategy and vision. To address these considerations, we strongly recommended that rather than nominating a single candidate for the board of management, each province be asked to put forward a list of nominees -- perhaps four or five candidates -- from which the government could select the board with appropriate overall balance. We believe that this will serve to promote the long-term success of the agency and we are pleased to see that this recommendation was incorporated into the legislation.
We also said that there was some concern that a range of new user fees might be introduced by the agency. We thought it was very important that the minister remain responsible for bringing forward all user fees for approval and we understand this will continue under the agency. We also understand that its user fee plan will be part of the annual corporate business plan that is required under the legislation. We also believe that it is essential in the interests of program enhancement that all user fee revenue remains within the agency itself.
I will now turn it back to Rob who will outline some other areas of concern.
Mr. Spindler: Although we have no basis for concern at present, there are two areas of interest that we will be following as the agency develops. The smooth functioning of the administration of taxes is affected by many factors. Of those, two are of particular interest to the CICA at this time: (a) the advanced tax ruling process, and (b) the interaction between the agency and the Department of Finance.
With respect to the first issue, taxpayers and their advisors rely heavily on the advance ruling process to provide timely information on the application of taxes. A well-staffed, well-trained rulings group is essential to the system. Our hope is that the rulings group will not be adversely affected under the new agency. Further, we would hope that the rulings group would be fully supported and developed further so that it can provide improved service in an increasingly complex environment.
As to the second issue, the complexities of business transactions and their propensity to continuously evolve are such that comprehensive, precise tax legislation cannot be drafted, since it would be out of date within a very short period of time. It is a fact of life that legislation must, at times, be drafted using broad wording. As such, the interpretation of tax legislation requires exercising judgment to ensure that appropriate results are achieved based on established and sound policy. The close interaction of the agency and the Department of Finance is essential to the appropriate interpretation of tax legislation. We understand that existing relationships will be preserved and we encourage the agency to interact closely with the Department of Finance on matters of legislative interpretation.
We have appreciated the opportunity to work with the minister and Revenue Canada officials to provide input to the government's proposals for the agency. We are pleased that many of our suggestions have been accepted and are contained in the legislation before you.
The CICA supports the government's current proposals for the agency as contained in Bill C-43. We believe that the government will be well positioned to provide enhanced service to taxpayers under the proposed agency. We also think that allowing the agency greater freedom in tailoring its systems to meet specific needs offers the potential for increasing the efficiency of the tax compliance system. We look forward to these things becoming a reality and would be pleased to answer any questions you may have.
The Chairman: While you support this agency, it was not clear to me as to why this could not be done within the existing system. Is the existing system not working? Is that why you support this? Or what is your rationale for that?
Mr. Spindler: A number of people have echoed these comments. Creating a separate agency allows you to focus your resources and have a certain degree of independence from traditional government structures. This allows you to become more efficient in the selection and dedication of your resources. It is really creating a separate mindset, removing it from traditional government restrictions and giving it a degree of independence that represents a true opportunity. It is theoretically possible to do it inside the government. However, I believe it is easier to do it as a separate agency.
Mr. Badali: We also think it is probably easier in the longer run to have provinces buy into it as well. The agency has great opportunities to expand its horizons and we support it for these reasons. It is not that Revenue Canada is currently inefficient. We are not suggesting that in the least. We are just suggesting that overall, in the future, there are more possibilities for improved efficiency through an agency.
The Chairman: Do you feel that there will be an impact on this agency if Revenue Canada's current employees are put into this agency essentially under duress and with no protection?
Mr. Spindler: When you say "with no protection," my understanding is that they have a union. As in any employer- employee relationship, there will be difficulties in a transition but my understanding is that the agency is intended to make it a better functioning organization and to allow the opportunity to provide better, more focused training and better support for their people. Overall, I see many positives to the agency. There is probably a certain amount of fear and concern, as with any change. They see the down sides more than the opportunities. Surely that is not reason enough to sidetrack the agency, to postpone its implementation. There will be all sorts of difficulties and hurdles to overcome. Dealing with employees is one of those hurdles and it should not stop a good idea from being implemented.
Mr. Badali: I think we all know a number of tax people working in Revenue Canada. There might be the odd issue of change and what it might mean, but no one has ever expressed any major concern that I would call "duress," or anything of that nature. I have not personally run into it.
Mr. Spindler: The CICA has over 500 members that work for Revenue Canada and we have not heard one single issue raised from that part of our membership.
The Chairman: Why, then, are the unions taking the position they are taking, if you are so positive on the other side?
Ms McMillan: I think the unions have had concerns for years with employee morale and salary freezes. I think that they are using this as a way to try to have those issues addressed before there is a move to the agency. However, reflecting on Mr. Spindler's comments, with the greater flexibility within the agency, opportunities for moving into new areas, training, et cetera, there is probably a lot more opportunity for the employee concerns to be addressed faster and better within the agency.
Mr. Badali: We are all creatures of habit to a certain extent. As Mr. Spindler said, we do not necessarily love change. It may simply be that. We are not really qualified to talk about union problems.
The Chairman: I understand that. It has been strongly presented on more than one occasion by the unions. They are not necessarily against the agency -- and that is my understanding of the issue -- although they cannot state clearly that they support the agency. If we could resolve the issue of the problems or concerns and go in with some protection, then I think there would be a higher level of support. However, I am going off on a track that you are not here to discuss, and I do not think either you or I should comment further on it.
[Translation]
Senator Ferretti Barth: First, would it not be a better idea to have the provinces first support this bill rather than pass it without their consent? It would be better to make this bill known and to reach a consensus before going any further with it.
Second, the government expects that the new agency will simplify the management of Revenue Canada and also decrease the document workload. Currently, taxpayers sometimes have to wait several months after having sent in their tax returns before getting their refunds. Do you think that this new agency will simplify the procedure and resolve the problems that it creates for clients?
[English]
Ms McMillan: I do not think that setting up the agency in and of itself does the simplification, but it creates the infrastructure and a newer, more flexible organization that can respond faster, move resources around and address issues that require simplification, whether it is reducing paper documentation or simplification of the act itself. Also, it allows the opportunity for the provinces to buy in and have taxes collected by the agency, again reducing compliance for business and governments and reducing costs.
[Translation]
Mr. Badali: In my opinion, it would be better for the provinces to work with the agency. This is one of the reasons why we support this initiative.
Senator Ferretti Barth: Agencies are a watchdog and they will keep an eye on the government and on Revenue Canada. I saw a TV program that said regarding the Internet or computers: "Watch yourself! We are watching you."
Anyone can be watched over television or on the Internet. This agency does not have a watchdog role. That already exists. We are already being watched in all kinds of places and at all kinds of times. This may be a result of our evolving society.
[English]
Everyone knows where I am from and what I do, if I have a dog or if I do not have a dog. However, that is not my preoccupation.
[Translation]
Will the agencies have a way to simplify the current system to make it more flexible, more convenient for the population or, if you will, more transparent?
[English]
Mr. Spindler: From a business perspective, one of the hopes is a consolidation of federal, provincial, and possibly municipal interaction with revenue authorities.
Currently, businesses have to confront federal auditors, provincial auditors and municipal assessors. There are many interactions between business and government. Having a single auditor who can address issues fairly between the various jurisdictions rather than having a sequence of audits occupying your business and personnel is a great opportunity for simplification, cost reduction and the reduction of disruption.
The Chairman: Despite what Senator Ferretti Barth has stated, I have an inherent fear of more and more oversight. I have a fear of government increasingly looking over our shoulders. It leads to a real fear of a reaction at the other side, such as we are seeing in parts of the United States. I am not trying to plant anything heretical in anyone's mind, but I think the tendency is there. If there is more government and more control, there will be a reaction on the other end.
Mr. Badali: Senator, many ordinary Canadians share your concerns. We do not think, however, that the agency versus Revenue Canada as a department is the issue here. Legitimate privacy concerns are no reason to defer the agency. We think the agency makes good sense. Privacy issues should be addressed separately.
Ms McMillan: With regard to comparisons to the U.S. and "big brother," we expressed concerns when the first draft for the agency came out. We were very pleased that recommendations that we and other groups made were followed and that there is ministerial accountability again. That is key. The agency should be seen in terms of administration rather than tax policy and privacy issues, because the minister will be primarily accountable for those issues.
Senator Tkachuk: I am very troubled by the agency concept of running government. I will go back to my initial question. What is stopping the current department from doing what you say the agency will do? I hear all these buzzwords about more flexibility, et cetera. What is stopping that from taking place at the departmental level?
Mr. Spindler: There are a number of constraints on Revenue Canada. I am not familiar with the exact terminology, but they are required to follow certain standards in terms of salary levels. They have to abide by standards that are set for government as a whole, such as hiring standards. With the agency, those can be separated out and there will be greater flexibility to pay more for the higher level people who are required to conduct audits.
It is perhaps more psychological in some respects to create an agency that operates more as a business and conducts itself more efficiently. For example, the board of management is a terrific way for Revenue Canada to learn how to run the agency more efficiently as a business, dedicate resources, use training, and break free from some of the traditional thinking. Is it possible to do it inside Revenue Canada? It may be. Is it easier to do in an agency? I think so.
Mr. Badali: The agency could fall into a concept known as alternative service delivery, to use one of the buzzwords. We have found that governments throughout the industrialized Western world are moving to alternative service delivery concepts, and very successfully, in a whole series of areas. The goal is to help provide focus. While this is only a 10-year-old concept, so far the results suggest that it is a good thing to do, that it is working in general, that when an organization has the focus and a little more independence, it can be more responsive to its stakeholders.
Senator Tkachuk: You are the ones talking about flexibility and about moving around human resources. Your arguments are not very compelling, aside from perhaps getting out of a few union agreements.
Mr. Spindler: I had not heard that before.
Senator Tkachuk: My point is, why can they not now be more flexible, move people around, and pay more money?
Mr. Spindler: As I understand it, they are under constraints of salary levels based on years of service and job categorization. Under the agency, they will have greater flexibility.
Mr. Badali: Moreover, it is not simply an efficiency issue, although we support that, it is the issue of a national institution. Provinces might have an easier time buying into as well. There are a number of reasons for the agency.
Mr. Spindler: We may have lost sight of the most important point. The most important thing is not necessarily what the agency will be the day after it is implemented; it is what it could be. It is drawing in the provinces and is increasing efficiency in terms of the taxpayers' interaction with revenue collection authorities.
Senator Tkachuk: We are going to talk about that. You are saying that the agency will not be constrained by what a deputy minister makes, for example. So the new head of the agency, the commissioner, can be paid more, as can other senior and smart people. The people sweeping the floors and doing the key punching will not be paid more, but senior managers will be.
Mr. Spindler: We expressed the concern that there be an emphasis on field auditors.
Senator Tkachuk: Do you think that there should be profit sharing so that everyone gets paid more when they collect fines?
Mr. Spindler: That was one of our big concerns and why we wanted to retain ministerial involvement.
Senator Tkachuk: They would be more efficient in collecting fines only so that they can deduct it from my income tax return. They are not efficient because they collect it.
Mr. Spindler: I think we are losing sight of where the efficiencies come from. Many of them will come from reducing the number of revenue authorities with whom the taxpayer has to deal.
Senator Tkachuk: Let us talk about that. What other business can they get into? Currently, I pay federal income tax and provincial income tax with one form, and it is all deducted at source. A businessman sends in one cheque and the federal government sends the province its share. I know that there is GST and PST, et cetera. However, what kind of new businesses will they be able to get into?
Mr. Spindler: I think you are glossing over a point there. There is a serious difference. When you mail in your cheques, the process does not end there. Many of the revenue employees are auditors.
Business has to contend with a series of different auditors, quite often looking at the same information, issues and questions. Business must deal with federal auditors for income tax, provincial auditors for income tax, PST auditors and GST auditors. All these people are asking many of the same questions but at different times. One of the great efficiencies comes from having a single smaller group. If this thing comes together as it should, ideally businesses will confront one set of auditors to look at all the information at one time and to cover off all of those issues.
This greatly improves efficiency. From the perspective of a business, instead of dedicating staff to deal with people in sequence and taking up months of man-hours, they can do it all at once.
Inside the agency, efficiencies can be made in the ability to move people and resources to where the needs are greatest. I understand that will likely be easier in an agency than it is inside Revenue Canada as it currently exists.
Senator Tkachuk: Which provinces now have their own income tax auditors?
Mr. Spindler: You have to look at capital tax as well because that may be changing. Ontario, Quebec and Alberta have their own auditors. Capital tax is increasingly becoming an issue.
Senator Tkachuk: Do those three provinces have their own auditors for filing income tax? Who audits the other provinces?
Mr. Badali: Revenue Canada does.
Senator Tkachuk: What does the agency have to do with that? They are already doing joint work on income taxes.
You are telling me they will be doing all these wonderful things. Right now, in Saskatchewan, one set of auditors handles the income tax. There are GST and PST issues; political and harmonization issues. Those are not agency versus department issues.
Mr. Badali: It would be theoretically possible for a province to have its own PST and to contract, one day, with the agency to collect the PST. There are these opportunities.
Occasionally, you will find provincial finance ministers musing about pulling out of the present joint system. They say that it might lower their tax collection costs and the like. Anything that can be done to improve efficiency and reduce costs is beneficial to us all as taxpayers. We simply think there is more of an opportunity with an agency.
Senator Tkachuk: Do you believe in the concept of a monopoly? Do you think it is more efficient?
Mr. Spindler: That is an interesting question.
Senator Tkachuk: We have a lot of experience in this country with it and we all know the consequences. This is what we are creating here.
Mr. Spindler: I agree with you. I think competition is a terrific thing.
Senator Tkachuk: Competition is what makes business efficient.
Mr. Spindler: At times, yes, but this is not a true business.
Senator Tkachuk: That is exactly right; it is not a business.
Mr. Badali: Senator, the best way for the new agency to attract provincial business is to demonstrate that it is efficient at providing superb service. Otherwise, they will not get it. If I were a provincial finance minister, why would I sign up if I were not getting those things?
Senator Tkachuk: We have 7 out of 10 signed up now, apparently. Only three have their own auditors. With the exception of Quebec, they all collect together at present. These things have already been happening.
My concern is responsibility to Parliament, the democratic process and all those things that we often take for granted, which I feel are being taken away by having little Crown corporations and mini quasi-judicial bodies operating outside Parliament.
Mr. Spindler: I share that concern completely. We may be losing sight of that. When the proposals first came out, one of our greatest fears was an independent agency. I agree with you 100 per cent. If this became an independent agency or if the minister did not take a very active role, we would be sitting here at this table telling you that we cannot have this thing. To have a great big monolith or monopoly completely independent would be an incredibly dangerous thing from our perspective.
That is not how it has evolved. The people responsible for designing this thing have listened to those concerns. They have kept ministerial involvement. It will be the minister's responsibility to make sure that this creature does not become Big Brother. It is the responsibility of this house and the House of Commons to ensure that that does not happen. We as taxpayers are looking to the government to ensure that that responsibility is exercised. That opportunity is enshrined inside the legislation.
Having achieved that goal, that level of protection, why do we not take a reasoned approach to ask if this is a good idea to reduce the cost of compliance or to reduce the burden on taxpayers? Will this make it cheaper and easier for businesses and individuals to comply with the tax system? The greatest opportunities are in the business area.
Ms McMillan: The corporate tax system now has the best integration and efficiency because seven of the provinces are on side. You referred to the fact that GST and PST will probably stay the way they are for a while. It is a very political issue. That is all the more reason to go into an agency and have the provinces consider the option of having the federal government administer their retail sales tax for them. We can at least achieve efficiency in the administration if we cannot move to harmonization.
The Chairman: Thank you, witnesses.
Senators, at 5:30 on Wednesday of next week, we will have televised hearings with witnesses, after which we will look at Supplementary Estimates (C). Come prepared to sit for a long evening.
On Thursday, we will wrap up Supplementary Estimates (C) and the Main Estimates so the report can be completed and tabled in the Senate. In the following week, we will return to Bill C-43.
Senator Carstairs: I understood, Mr. Chairman, that if we did not require next Thursday to complete Supplementary Estimates (C), we might move right then into Bill C-43.
The Chairman: That is correct, but usually we take two days to go through them. The Treasury Board officials do an excellent job and come back to us with answers virtually the next day. Therefore, we can have more full discussions on various issues.
If any senator wants to talk about a specific area, please give us notice early so the officials can prepare. They would appreciate that very much.
The committee adjourned.