Proceedings of the Standing Senate Committee on
National Finance
Issue 27 - Evidence
OTTAWA, Wednesday, March 10, 1999
The Standing Senate Committee on National Finance met this day at 5:30 p.m. to examine Bill C-43, 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: We are continuing our hearings on Bill C-43, and in that regard we have with us Mr. Garth Whyte, Vice-President of the Canadian Federation of Independent Business. With Mr. Whyte is Mr. Brien Gray, Senior Vice-President, Policy and Provincial Affairs.
Please proceed.
Mr. Garth Whyte, Vice-President, Canadian Federation of Independent Business: It is a pleasure to be here on behalf of the Canadian Federation of Independent Business, which represents more than 93,000 owners of small and medium-sized businesses. I thank the Senate Finance Committee for asking us to appear before it today to discuss Bill C-43. This bill is important to CFIB and small business owners because Revenue Canada touches every Canadian business.
Last year, we presented to the House of Commons Finance Committee the results of CFIB's survey on tax policy, which was sent to our members in May 1998. Today, we will be referring to a section of the survey that dealt with Revenue Canada and the proposed revenue agency. I will be referring to the graphs attached at the back of our brief. They are based on more than 7,000 responses from owners of small and medium-sized businesses from across the country and from all sectors.
Before we touch on that, it is important to talk about the small business sector's relationship with Revenue Canada. When examining the issue of tax administration in Canada as it affects small operators, it is useful to reflect on the recent history of the relationship between Revenue Canada and its clients and how that relationship evolved.
In the early 1980s, small business in Canada had a disastrous relationship with Revenue Canada and its staff. From our perspective, the department's decisions that impacted on small and medium-sized enterprises were made arbitrarily and with no consultation. Small business owners felt that they were treated as guilty until proven otherwise by the department.
In the mid 1980s, a few change agents working in Revenue Canada attempted to move the department to a more client-centred orientation. Unfortunately, with the introduction of the GST, small business and CFIB still had a rocky relationship with Revenue Canada leading into the 1990s. The department was still insensitive, at best apathetic, to small businesses' concerns.
In November 1992, CFIB made a presentation to the Subcommittee on Regulations and Competitiveness of the Standing Committee on Finance. At that time, we said that the costs and time wasted to deal with these problems with Revenue Canada alone had a significant impact on Canadian firms' competitiveness.
Soon after that presentation, CFIB's relationship with Revenue Canada began to steadily improve. We worked together along with the Department of Finance to develop initiatives to reduce paper burden and costs for small businesses such as the simplified input tax credit for firms, improvements to the quick method, the T4 short tax form, and the single business registration number.
Over the years, we participated on several Revenue Canada advisory committees, such as the small business advisory committee, and most recently as a member of the revenue agency ministerial advisory committee.
Recently, Revenue Canada used CFIB's year 2000 checklist for its own Y2K pamphlet that was sent to Canadian businesses. Today, I would say we have a good working relationship with the department. A large part of the credit should go to several senior officials in the department and the minister, who have strived to improve conditions for small and medium-sized enterprises.
However -- and this is a major "but" -- despite this good working relationship, it is important to note that the department has a long way to go to improve service to the small business sector. Although CFIB was a member of the revenue agency advisory committee, we are not here to defend or sell the proposed new revenue agency. As an organization representing small and medium-sized enterprises, CFIB is cautiously optimistic about this new agency. However, the proposed act and the proposed board of management must ensure that mechanisms are put in place to ensure the revenue agency better serves Canadian taxpayers.
Figure 1 gives our members' ratings of Revenue Canada's performance. When we asked about speed and consistency of rulings by Revenue Canada, over one-third of the respondents gave the department a poor rating. Less than 5 per cent said it was good, and 58 per cent said it was adequate. One-third of the respondents said the knowledge level of Revenue Canada staff was poor, and almost one out of two, or 48 per cent, said accessibility of Revenue Canada staff was poor. Finally, 58 per cent of the respondents said readability and simplicity of information received from the department was poor, and one-third said that availability of information was a problem. These issues need to be addressed whether or not a revenue agency is established.
A very good first step to addressing these issues is 7-Point Plan For Fairness released by the Minister of Revenue last month. This document shows that there is a willingness at the senior levels to address the problems identified by our members. To date, the current Department of Revenue has been unable to respond at the ground level as quickly as we would want.
It is even more disconcerting that, in our experience, provincial revenue departments are even less responsive than Revenue Canada. We feel that significant improvements at both the federal and provincial levels of government are needed.
If the federal government does create a new federal revenue agency, then the board of management and the commissioner, with the support of the federal and provincial governments, should monitor and report on a regular basis the above performance ratings. They should report it in the corporate business plan with the aim of improving service and accountability to the Canadian taxpayer. Measures must be taken to ensure that we do not return to the difficult times experienced in the 1980s. That means there must be a better balance, with more emphasis on improving education, compliance, and service performance rather than simply focussing on revenue collection, which we are concerned is an increasing priority for both the federal and provincial governments.
[Translation]
Mr. Brien Gray, Senior Vice-President, Policy and Provincial Affairs, Canadian Federation of Independent Business: As for the potential advantages of the proposed Revenue Agency, earlier this year, we asked our members what they thought about replacing Revenue Canada with a new Revenue Agency. As figure 2 shows, there is a mixed response from our members -- 36 per cent are neutral, 33 per cent are positive and 31 per cent are negative. In fact, there is not very strong opposition or support for the Agency with only 15 per cent of respondents who were very negative and 8 per cent who were very positive. We suspect most Canadians are like our members who know very little about the proposed Agency and therefore do not have a strong opinion in favour or against it.
[English]
The devil you know versus the devil you don't know.
[Translation]
When we asked our members about the potential advantage of the new Revenue Agency (figure 3), the top three benefits identified were the ability to complete all taxes on a single return (56 per cent), simultaneous registration for all taxes (55 per cent) and more efficient use of government resources (53 per cent). Other benefits identified were remittance of all funds owing with a single cheque (45 per cent), the ability to use a refund on one tax to offset another payment (45 per cent) and similar administrative rules and filing deadlines (39 per cent).
It is our view that provincial governments who choose to eliminate their responsibility for sales tax collection, as well as the elimination of audit requirements, should see substantial savings from the new Revenue Agency, if it is properly utilized. Since the implementation of the harmonized sales tax in Nova Scotia, the provincial sales tax commission has been eliminated as all sales taxes have been rolled into the HST. This is collected by Revenue Canada and rebated proportionally to each of the three participating provinces.
Last year the province of Nova Scotia and Revenue Canada entered into an agreement whereby Revenue Canada will become responsible for the collection of workers' compensation premiums on behalf of the Nova Scotia Workers' Compensation Board. Both levels of government anticipate that the Revenue Agency, once established, will actually do the collection. This means that premiums will be collected monthly on actual salaries and not forecasted and paid annually in February. In the past, inaccurate forecasting of employment levels have led to annual penalties to business of approximately $5 million. These penalties will disappear once the new regime is in place. For many firms, the ability to pay premiums on a monthly basis will have a positive impact on cash flow and will certainly be beneficial. We will be meeting with other jurisdictions in Atlantic Canada in the near future urging them to consider entering into similar collection arrangements with Revenue Canada.
[English]
On the possible disadvantages, the main disadvantage identified by our members, as shown in figure 4, is the concern that it will be costly to create a new agency; 56 per cent of members feel that way. CFIB has been assured by the department that there will be modest net savings initially. Hopefully, with the reduction of overlap and duplication between the federal and provincial departments as the agency becomes established, there should be a greater savings over the time, to both government and businesses, in terms of reduced compliance costs and improved services.
The next two concerns were: political accountability not as clear, 45 per cent; and less privacy, 44 per cent. We believe that these concerns, which were not clearly addressed last spring when the survey was conducted, have been adequately dealt with by the proposed legislation.
I might just add, as an aside, that in the small business community there is nothing quite as visceral in the mind of an entrepreneur than tax rates and tax administration. It is the feeling of our membership that there has to be absolute political accountability and transparency, and that a minister has to be able to be accountable and answerable in the legislatures and in Parliament for the administration of Canada's tax laws.
CFIB is very supportive of the minister maintaining ultimate responsibility, along with the agency being required annually to submit a corporate business plan and report to the provinces. The proposed new act will ensure that the same privacy provisions in the current legislation are continued. One-third of our respondents expressed a concern that the provinces will have less flexibility and control. The bill states that the mandate of the agency is to implement agreements arranged with the provinces and does not give the agency the power to change federal-provincial tax and fiscal arrangements. The agency is required to consult with the provinces and annually meet with provincial ministers. The taxpaying public expects, and should continue to receive, full ministerial accountability to Parliament and the provincial legislatures, as I mentioned a few minutes ago.
There are some concerns that directly impact on business. Almost one in four said the change in business routine caused by the new agency would be a disadvantage. Thirty-seven per cent of the respondents identified the agency's ability to target companies to audit as a possible disadvantage. Interestingly, 38 per cent of the respondents identified a single auditor for all taxes as a potential advantage of the new revenue agency.
Mr. Whyte: In conclusion, it appears that Bill C-43 addresses the main concerns of political accountability, privacy and political autonomy identified by our members. However, if the new revenue agency is to achieve the potential advantages that business want, several conditions must be met.
First, the directors on the board must represent a wide range of expertise necessary to oversee the stewardship and accountability of the agency, rather than just being partisan political appointments.
Second, the agency's corporate business plan should include goals to markedly improve its service performance in areas such as speed and consistency of rulings, and availability and quality of information. We have offered to the department to continue with our surveying on an annual basis, to use that as a benchmark, if they choose.
Third, the agency should strive to develop and train its staff to improve their knowledge level and accessibility to the clients they serve.
Fourth, the agency should not be used to better target companies to audit, a concern identified by over one-third of CFIB's respondents.
Finally, cooperation and coordination of tax administration between the federal and provincial governments must occur if the agency is to realize the ultimate goal of reducing the paper burden, compliance burden and unnecessary expense caused by overlap and duplication by levels of government.
The establishment of a new revenue agency is only the first step to improving Canada's tax administration system. We must be vigilant to ensure that, over time, the agency will not only meet the needs of government, but also the needs of business and all Canadian taxpayers.
The Chairman: Thank you, gentlemen.
Senator Carstairs: First, let me give a special warm welcome to Garth Whyte who, when I was in my other life in provincial politics, in fact represented the Canadian Federation of Independent Business as the Saskatchewan and Manitoba representative. It is good to see you again. I remember when you attended before provincial committees that were dealing with bills of interest to your organization. It is good to see you in this context.
One of the issues that clearly is of concern to everyone is the issue of accountability. The original document, the first white paper, if you will, that was distributed by the government seemed to eliminate that sense of political accountability. It has now been put into the legislation.
Are you fully satisfied with the way in which it has been placed in the legislation, sufficiently so that you believe that the Minister of National Revenue will still be responsible at the political level, to be accountable to the taxpayers of Canada?
Mr. Whyte: The short answer is yes. The background to that answer is that we were one of the groups most concerned about that. We met several times with the minister. I, as CFIB representative, was a member of the ministerial advisory committee on the revenue agency, and we made that major point, because this is tax collection. This is not the post office. Even though we have a lot of concerns about the post office, we did not want the post office model. We still wanted ministerial accountability. In our view, accountability is actually enhanced because with the new proposed agency they have to report on an annual basis, which is not done right now, and they have to come up with a corporate plan.
There is also a board of directors, which we believe will enhance the accountability as well with provincial representation. Yes, we are satisfied.
Mr. Gray: We have talked to successive ministers about this issue. Jane Stewart was the minister when this first came out. From our perspective, this is the key element.
Frankly, if the accountability function as designed in this bill does not work, the government will surely find out quickly, and I am convinced that it will pay a huge political price if the proper accountability mechanisms are not in place.
Senator Carstairs: My second question has to do with the directors on the board. You indicate that they need a wide range of expertise. I assume, therefore, that you support the idea that they should put several names forward rather than only one, because if all of the provinces only put forward CAs, for example, you would not have the breadth of experience about which you are talking. I am assuming you support the concept that the provinces should put forward a group of names from which the government would choose so it could get that broad representation?
Mr. Whyte: You are hitting the hot buttons. Some of the provinces with which we have spoken have said that they will be upset if the candidate they choose is not accepted. As individuals reviewing the agency, we believe that we need a mix. We cannot have all CAs. We need someone with a human resources background, for example. We need someone who knows about clients issues, service and marketing. We lean to having more than one presenter, but we are also reluctant to tell the provinces what they should and should not do. However, you do want to be able to choose appropriate members.
Mr. Gray: Coming from the provincial jurisdiction, I think it is fair to say that, if you are going to make this agency work, this may not be the thing that you want to stick on from the top. If you cannot agree on how to appoint the members of the board, you have a long row to hoe.
Senator Carstairs: Would you explain to the members of the committee how complicated it can be for a small business owner in dealing with various levels of government and the various forms. For those who have not been in small business, filling out an income tax form is essentially the only connection they have had with Revenue Canada.
Recently, I have been dealing with an aged father-in-law and I write cheques every month for Revenue Canada, CPP and EI and tax deductions. Then I write another cheque to Workers Compensation and the Province of British Columbia in order that his care workers are provided for. None of the forms is simple. The tables are relatively simple once you have become used to them.
Can you give us a basic idea of what it is like for many small business people?
Mr. Gray: It is exceedingly difficult for small businesses to comply. Most people do not understand that approximately 75 per cent of all small businesses in Canada have five employees or less. These operations do not have a financial comptroller or a human resources department. The owner is responsible for everything. On average, these people work in excess of 60 hours a week in order to comply with government requirements at every level, not only the federal level.
In addition to my experience as a co-chair of the working committee on small business in 1994, I subsequently worked on regulatory reform and paper burden reduction, which was a joint initiative between the government and the private sector to try to reduce the burden. At that time, it was clear that the monsters at the federal level, for most entrepreneurs, were Statistics Canada, record of employment forms, which is another tax-related form, and anything related to Revenue Canada in terms of remittances, audits, et cetera.
That experience was a very great success. We hit some pretty big targets. I regret that it did not maintain itself in a permanent form, but the T4 short form that resulted got rid of a bunch of boxes that no one could possibly comprehend or use. We also moved to a system on remittances of sales taxes so that, if you are beneath a certain threshold, as are many firms across Canada, you can remit on a quarterly rather than monthly basis.
To give them their due, Revenue Canada came forward with many of these initiatives themselves.
There was developed a structured penalty system whereby, if you were innocently and occasionally a late remitter, you would not be harassed and struck down with massive penalties and interest costs beyond what was reasonable. They went to a regime under which, if you were not a chronic offender, you would not get penalized too much. However, if you became a chronic offender, you would be penalized big time.
These are all common sense approaches which, to their credit, Revenue Canada developed.
I would submit that all government departments, not only Revenue Canada, ought to have a data base approach to complaints, whereby if there is huge repetition of a problem you can move for solutions based on those indicators. Proctor & Gamble has a 1-800 number to which customers can call to ask about products and indicate if they do not like a particular product. Surely service-related departments such as Revenue Canada ought to have a means of gathering information on where the shoe is pinching and addressing those issues immediately.
Mr. Whyte: As Mr. Gray was speaking, I was reviewing in my head all the things that have to be filled out, and there are many. There is CPP remittance, employment insurance remittance, record of employment, which you must keep for current employees and dig up for past employees, Workers Compensation premiums and municipal taxes. In many jurisdictions there are business and commercial property taxes at two levels -- provincial sales tax and GST. When they are not harmonized, you have to pay different penalties, deal with a different set of auditors and different remittance schedules. There are business registration fees and forms that must be filled out annually. There are fees for service. There is a coalition with which we are involved on cost recovery, and it is quite onerous.
On the positive side, as we said in our report, the way in which Nova Scotia is working with the revenue agency on Workers Compensation premiums and the way in which British Columbia is working with the child tax credit is very positive.
Mr. Gray: We are not only interested in tax administration at the federal level. We have been doing a lot of work at the provincial level with Quebec, New Brunswick and Ontario. I will leave a copy of this document for you. The appendix is five pages of testimonials about how complex the Ontario tax administration is. Their ambit is somewhat more restricted than the federal ambit, but nevertheless, when you accumulate the impacts of remittances at the federal, province, municipal -- and sometimes regional -- levels, not to mention all the licensing agencies, the impact is huge.
The Chairman: With that list that you developed, do you actually believe that it will become much simpler, shorter and more comprehensive? Do you believe that this agency will do for business people what you expect it to do?
Mr. Whyte: That is the hope. We think it will. As trust builds between the provinces and the federal government and as people start seeing the agency work, we believe that you will see more and more harmonization. Referring back to the Nova Scotia example where the revenue agency will collect workers compensation premiums, it will still appear as the Nova Scotia government, but it will make it much easier for our members on remittance schedules. They can pay on a monthly basis instead of having to project it for one year. We hear that Newfoundland may be going in that direction also. With the child tax credit, again, people in B.C. assume that they are remitting to the B.C. government but it is being collected by the revenue agency. As long as it sticks to the principles that are being put in place and there is accountability, we see a removal of an extra layer in many tax jurisdictions of the compliance burden, which can be quite positive.
Mr. Gray: At the end of the day, there is one tax remitter. As I said earlier, if the agency turns out to be a dud, politically, everyone will know it quickly and there will be a move to rectify it quite quickly.
The Chairman: We hope.
Mr. Gray: There will be a political imperative, and political prices will be paid. Tax administration and tax rates are the most visceral issues. There is no question about it. Our organization was born as a result of the tax protest and it was reinvigorated several times by tax protests. In a space of 27 years, we have 94,000 members. That tells you something.
In the past, we have had disasters on tax administration or harmony. A notable example was the first efforts at harmonization between Quebec and Ottawa on the GST. We had a situation there because we tried to force-feed it and move too quickly. You had a different definition of what an input tax credit would be at the federal and provincial level. Can you imagine that for the entrepreneur to figure out, namely, that the input tax credit definition for provincial purposes was quite different from the federal definition? There were differences in remittance schedules, in audit schemes, and across the board. It was an unmitigated disaster. Thankfully, both the Quebec and the federal governments understood and rectified it quickly. As a result of that, the HST in Atlantic Canada was actually a good initiative and one that went through fairly seamlessly.
With those kinds of experiences, governments must move quickly to fix them or they will pay a huge price.
The Chairman: In my previous life, I managed a couple of small business enterprises. I think we were a member of your organization. I know what you are speaking about.
Senator Tkachuk: My questions address some of the advantages that you talked about earlier. Revenue Canada is actually doing those things now without having an agency. In other words, all of those things that we all want to see happen, for example, a more efficient tax system and all the rest of it, can be done in their present form, can they not? They are presently doing all the things you mentioned today.
Mr. Whyte: They could do a lot, but we feel that many provinces were reluctant to buy into this type of process where it was solely a federal entity.
Senator Tkachuk: Why is that? I do not understand the difference. Why would they be less reluctant to work with an agency than they would with a department?
Mr. Whyte: I cannot explain that.
Senator Tkachuk: I know, but I am trying to get at our business people's views.
Mr. Whyte: Many of us asked that question. I suppose the board of directors is an important criterion, in terms of having some input. The need to have an annual corporate plan was an important entity, as was the need to have benchmarks for service.
The current system is not working; it is improved but it has hit a wall. There still is competition, whether it is Alberta and its corporate income tax collection versus the feds doing it. Why can they not do it together? We are hoping this will nudge that process along. However, that is a good question.
Senator Tkachuk: As a parliamentarian and as someone who is in business today and has been in business in the past, I have a concern that, by centralizing all these things into one big agency, which will be doing provincial stuff, federal stuff, GST, PST, and perhaps collecting sales taxes and collecting fines, they will become horribly bloated and inefficient because they have no competition.
Mr. Whyte: We believe in competition. However, if they became bloated -- and they could not be efficient in this respect -- we would not mind. We would not mind it if they could not collect our taxes.
Senator Tkachuk: I would not mind that, either.
Mr. Whyte: To be fair, we think that they are streamlining. There is another issue here. We must get our collective acts together. As a country, we need to be able to deal with e-commerce. We need to have electronic filing. We must become more competitive. We can do it. We think Revenue Canada is in the position to do it. However, we need to have the provincial governments buying into this process. We think that is the way it will go, that is the way it will happen.
Mr. Gray: My understanding of the legislation is that provinces are not compelled to join this; that they can participate if they so wish.
The costs will surge as we go into the new world of electronic commerce and tracking taxes on that level. Whether or not the provincial systems in, perhaps, the smaller provinces will be able to cope and keep current with respect to that at affordable is questionable.
As much as you could say that the system could become bloated and inefficient -- and, certainly it is a concern that that could happen -- I would also argue that, where you currently have a tax administration in a major province that in some degrees is not working well and the federal model is actually a lot better, then, perhaps, that province would benefit from being part of an agency where the attitude is, perhaps, more oriented toward compliance rather than enforcement -- that is, the carrot rather than the stick.
Our members tell us continually that getting consistent interpretations on tax rulings, getting consistent information from people is difficult. They are saying, "Help me comply. Help me get there. Do not make it rough on me. Do not spend all your time on audits and enforcement." There is a culture in Revenue Canada that came about because of a tax protest in the 1980s, concerning the way Revenue Canada operated. As a result, there have been marked improvements in the way Revenue Canada operates, and I think this can be transmitted into an agency. However, you must always be vigilant. It took change artists to come into that administration, change artists with courage, and they were given permission to make changes. To the government of the day's credit, they permitted it to happen.
These cultures can reverse themselves just as quickly. It is something one would hope would never happen, but I will not tell you that it could not.
Mr. Whyte: Mr. Gray raised a concern. It is important to note here that tax administration must still be divorced from tax policy. That is a key point as well. If this turned into either an IRS-type scenario, or another similar entity like that, we would have a major concern. That is why ministerial accountability and board representation is important. More transparency than we have currently with a corporate plan is also important, but tax policy still must remain in the hands of provinces and federal government. All this agency should be is a collector or a deliverer of service.
Senator Tkachuk: I know how I would respond if I were asked the following question, but I am not sure how all the businessmen would respond if they were asked whether they received better service from their provincial sales tax people over, say, their federal sales tax people; or from their municipal tax collector over their federal tax collector. What do you think their opinion would be?
Mr. Whyte: Our studies show that, by and large, the federal revenue agency seems to have a better track record than some of the provincial agencies.
Mr. Gray: There is a good example of that in Quebec, where we have done a great deal of work. We have a member services function in every province as well. Revenue Canada is viewed more favourably in the province of Quebec than Revenue Quebec, according to information we have received from data gathering that we have done in the Province of Quebec and through testimonials from people who deal with members on a day-to-day basis. However, to give Revenue Quebec their due, they are starting to respond.
Mr. Whyte: The same is true for Ontario.
Mr. Gray: That is right. Latterly, we found the same to be true for Ontario.
Senator Tkachuk: I am also concerned about the governance of this. What kind of people can we expect to see as board members? Will they be accountants? I know you said a wide range of people representing different interests.
Mr. Whyte: The board would be made up of some accountants and some tax people, but there is a customs side as well. There is also someone with a service marketing orientation. There are some large Crowns -- I will not list them -- that seem to have a product orientation rather than a marketing or service orientation.
I imagine they would need someone -- this is off the top of my head; take it for what it is worth -- who has experience in running such a large entity, someone who at least has some human resources experience.
The advisory board would be a mix of good people in whom there would be confidence.
Senator Tkachuk: Would businesses and accountants not all be in a conflict of interest?
Mr. Whyte: That is a very good point. You need to have someone who is not in a conflict of interest position. You need people who are not in a dependency relationship with Revenue Canada.
Senator Tkachuk: That is the problem. Most accounting firms have some closeness to Revenue Canada. If you were in the customs brokerage business, you definitely are in a conflict of interest position because you are governing the very people with whom you do business.
Mr. Whyte: You could put in place -- and I think they were talking about this -- certain key principles for setting up the board. If there is an issue with which someone is specifically involved, they can excuse themselves. One has to say, "I cannot be involved with this"
I do not think the board will be dealing on an issue-by-issue basis; they are looking at stewardship. There is also an accountable management team. They should do the day-to-day operations of the agency.
Senator Tkachuk: They are a board. They will have cocktail parties with management; they will go for dinner with management; they will go on excursions to Banff with management. That will happen. It will not take long for this to become a problem.
As well, if they are managing large institutions, those kinds of people will have a problem on Revenue Canada. That is why this whole thing is so political. They, themselves, might be audited. My view is that if you have only had one auditor, he or she will be auditing a lot. You have all these auditors working for all the provincial governments and no one will get fired or laid off here. Let us be serious, this never happens. All the provincial people that used to work on it will all be working for the big federal agency. They will be the same people working for a new agency. You do not really believe you will have a lot less people?
Mr. Whyte: I think there will be.
Senator Tkachuk: I will not argue with you, but let us look at the Parks Canada Agency, which two years ago promised that it would cost less to operate. I have not looked carefully at the estimates for the fiscal period 1999-2000, but I did note that their costs have gone up.
I have never seen a government department that actually follows through and reduces costs when they say they will. Costs always seem to increase. What happens if costs are not reduced? Do we review and start all over again?
Mr. Whyte: That is a very good point. If there is more co-ordination, then there would be less justification for actions such as the Ontario government hiring another 100 auditors to do something the revenue agency could be doing as well. And with the workers compensation example we keep bringing up, or the child tax credit example, or Saskatchewan corporate taxes, there is no need to have separate entities. There has to be some reduction in numbers of employees.
At same time, that is why ministerial accountability is so important and why an annual plan corporate plan is critical. They will be doing that. Hopefully, we will have the stakeholders; but also we will have the provinces and the federal government all working together to deal with that one taxpayer. Right now, it is death by a thousand cuts because there are multiple tax collectors and auditors and penalties. You are right; it can go either way, and we will have to see how it goes.
Mr. Gray: If the efficiencies do not accrue, if you do not have fewer people dealing with more tax forms and in a more efficient, effective, and user-friendly service way, why go there? There has to be a public policy rationale for this. To me, one of the most serious ones is to cut the cost of government -- for government as well as for the taxpayer. If you cannot be assured of that, then, in my estimation, you ought not go there.
The Chairman: Perhaps, senator, you could remind them of what the costs of gun control implementation is now versus what it was promised to be.
Senator Tkachuk: Eighty million, 300 million.
Senator Cools: On this particular matter, I will support the chair.
Senator Tkachuk: One more question. As I understand, they will be charging percentages of income. They will turn themselves from a government department to some form of business. I am opposed to this bill as a business plan and as a politician and a Conservative. This causes me a lot of concern. Do you not fear that they will be like commission salesmen, collecting taxes that will make them ruthless people? They will not be providing government services; they will be ruthless people.
They will be picking up commissions for the agency and getting bonuses for more collections. That is what will happen. It is human nature for that to happen.
Mr. Whyte: First of all, ministerial accountability is critical. As well, there is also provincial accountability in the mix. Put them in one corral at same time.
Some of those performance measures, which is why we keep saying this, have to be on service. We have been told repeatedly by those proponents and the minister and senior officials that they will be on to improve service, that there will be a reduced compliance burden, and some of those performance measures have to be on that. You are right; if there is a quota system on how many audits you can get or if we see pay police, which we have seen in the past, then there will be a big problem. We are hopeful. We do not anticipate that that will happen.
Senator Tkachuk: We will see you in a few years. I hope we will be celebrating that it is really running well.
Mr. Gray: I think it is a legitimate point. This whole business of upping the ante and focusing far more on enforcement and collection than on getting people to comply is of concern. Historically in Canada, we have been fortunate because we have had a system to which people adhere and comply -- by and large. The whole system is predicated on a couple of things. First and foremost, people must see and believe that the tax system and the rates of tax are fair and equitable. Once you start to lose the grip on that, you start to have a huge collapsing of compliance and honesty. Notably, it can be seen in the European nations and in parts of the subcontinent, and other jurisdictions like that, where the game is to beat the tax department -- catch me if you can.
On the enforcement side, there is a legitimate point. We pointed out in Ontario, for example, that they crow in their annual report that their target was $4.60 of enforcement revenue for every one dollar collected, but they in fact exceeded that. They were earning around $7.10. That was in their annual report. There was nothing discussed about how they would help and encourage taxpayers to comply and make good with the system. That is way out of whack, way out of balance. It is the absolute wrong emphasis for the agency as well.
Mr. Whyte: We are putting some of our trust in the fairness initiative and we will be holding that agency to that 7-point fairness initiative.
Senator Tkachuk: We will do the same.
Mr. Whyte: Collectively we need to do that.
Senator Cools: I am interested in the standards by which the public feels they should live, according to what the government does to them. You were talking about the game becoming "how to beat the taxman." There is evidence that people hold certain standards for themselves and for their government, and if the government seems to violate those standards, then the people also adapt.
That is what happened with he cigarettes: people saw taxes getting too high and, as such, started to amend their behaviour.
My question relates to the point you were making earlier in response to Senator Carstairs. You said that the small business person works an average of 60 hours per week. You were telling us about the number of forms and processes they have to complete in order to comply with regulations. Of the 60 hours that an individual works in a small business, how many of those hours are spent doing the tasks you described?
Mr. Whyte: We do not have those numbers, but we will. However, in our previous presentation, in 1992, there was an interesting observation concerning tax burden and how taxes hurt job creation. There were studies that showed that it is not tax burden but paper burden that kills new firms. That is an important concept, because five years from now 50 per cent of the net new jobs will come from firms that do not exist today. That is a hard concept to get your head around.
Mr. Gray: That was a study presented to a conference in Quebec City on factors that inhibit the start-up opportunities of small firms. It was not taxing nor financing, it was paper burden.
Mr. Whyte: That can kill a company because of the amount of time spent on paperwork. Often, the small business owner does not know the rules or what forms to fill out and, as such, spends too much time on paperwork instead of working on his or her business.
Mr. Gray: Also, they do not have access to professionals like accountants or lawyers, who are expensive. This issue is very important to job creation, to small businesses and to the country.
Mr. Whyte: When I visited an incubator business centre in Prince Edward Island about 10 years ago, they talked about how eventually the firms would have to graduate out of the centre and become normal businesses; that while they were in the centre, they were protected from local taxes and many other requirements that most businesses would have. When they left, they had no experience in this regard. They got hit like a tonne of bricks by all the requirements of the system.
It is interesting that you talk about compliance and honesty. It reflects back to when Paul Martin made his first remarks after the Liberal's formed their government in 1993. He used some interesting words to describe how Canadians had effectively removed the right to govern from Canadian governments, because there had been abuses of debt, deficits, administration, tax administration, the gamut. I believe he was right. You have to be careful about how you set this thing up so that you maintain honesty, integrity and the desire in people to comply with the system.
Also, to refer back to the 60-hour week we talked about earlier, a huge debate is commencing on the issue of productivity in this country. Let me talk about tax compliance as it inhibits productivity in the system. You can reduce the compliance requirements of Revenue Canada and its various other agencies at other levels. Government compliance is a huge factor in productivity enhancement in the economy, and it ought not to be looked at as just a small step.
Senator Mahovlich: I was in the travel business a number of years ago. Are you familiar with the travel business at all?
Mr. Gray: Somewhat.
Senator Mahovlich: The government goes into your bank accounts and scoops it up. How more efficient can anyone be? They take the GST, the PST and their cut right off the bat. I had to have my money in there every 15 days. Then, I had to go in the back room and do all the book work to reconcile what was taken out. We also had to keep the paper work for seven years. You are right about the volume of paper work in a small business. Not every business will take advantage of this or become more efficient.
Mr. Whyte: The Province of Nova Scotia is now working with Revenue Canada, letting them handle their Workers' Compensation premiums. Revenue Canada collects the premiums. What does that mean to the entrepreneur? Nova Scotia did not have the capability to do a quarterly remittance. The problem was that in February you had to predict what your payroll would be for a year.
Mr. Gray: And you would be held to it.
Mr. Whyte: If you were off by 25 per cent because there was a downturn or something like that, you then paid a penalty for underestimating or overestimating what those premiums should be. Not only that, you had to pay the money up front. So there is also a cash flow issue. Now, because of the system and the capabilities of a larger entity, rather than do it in five different provinces -- Workers' Compensation applies to all provinces -- we have one entity that has the capability and you can remit on a monthly basis. You can pay actual premiums rather than estimating cash flow. That is a classic example of how it could work with everybody taking advantage of it.
Mr. Gray: The records retention issue was a serious issue that we discussed in the paper burden forum, but not as well as we ought to have. At one time, I asked the government to produce for us a list of all the forms that a typical business would have to complete at the federal level in a given year, and we never received it.
Retention of records is a serious issue, one that and all governments should look at it. After seven years, what is your property and casualty insurance cost on fire insurance and things like that? I have been in basements of small firms that are full with papers, and no one has a clue as to why they still have them, especially now that electronic record keeping is possible.
The issue that we brought to the fore to the federal government in the working committee on small business was the burden of government issue, not so much the paper burden. Paper burden is an element of it, but just because you cut out paper does not mean you cut out burden. You still have to go through all the work to try to calculate, keep records, remit, and keep on top of it. The burden of government is a very serious issue with or without electronic solutions.
[Translation]
Senator Robichaud: You stated in conclusion that we must be vigilant to ensure that over time the Agency will not only meet the needs of government, but also the needs of business. What role will you play in this process, since you serve as a link between small business and this Agency? In some respects, you will be representing these people. What approach do you propose to adopt?
Mr. Gray: That is precisely the role of the federation. The Canadian economy was in need of an organization to lobby on behalf of SMEs across Canada. One of the biggest issues, as far as SMEs were concerned, was not just taxation levels, but the administration of the taxes levied. In the coming years, the Federation will continue to be extremely vigilant about administrative matters, regardless of the kind of agency created. We survey our members on a regular basis.
Senator Robichaud: Then you plan to continue doing surveys.
Mr. Gray: Yes, we do. These surveys are different every time because indicators are constantly changing. For instance, this year, businesses may be unhappy about the sales tax. Next year, the survey could focus on the employment insurance form, as was once the case. Forms used to be extremely complicated and businesses had to spend a considerable amount of time completing them. After surveying our members, we brought this up with the committee and the problem was resolved several years later.
Senator Robichaud: Things need to be done, but was wait for someone else to do them. You have provided an invaluable service in recent years by sharing your survey results with us.
Mr. Gray: I am not speaking for myself here, but for SME owners who are required to submit all of these completed forms to the government every month.
[English]
Mr. Whyte: We have offered to the revenue agency that we will keep doing this. We will not take money because we do not want to be in anyone's hip pocket. We will be stridently independent of government or any party, however, we will continue to do these performance ratings to see how it goes, to track performance and determine if there are any improvements.
The Chairman: I would like to refer back to figure 4, the concerns of your members. Of the 7,375 responses, the top concern was the cost to restructure and re-organize, at 56.3 per cent.
As I alluded to, and Senator Tkachuk asked the question, we were assured by Minister Rock that the cost to implement gun control would be $80 million, and it is now purported to be $300 million. What assurances do you have that the cost to implement this new agency will not run be out of sight? You, I understand, are on the minister's advisory committee?
Mr. Whyte: Yes. We have not met for quite awhile. I should make the proviso here that working with us is like working with a hand grenade.
We raised that issue many times. We have been assured -- and I am sure you have been assured by the minister and by the department -- that there will be modest cost savings initially. We must take that at face value, but that is something else we will be monitoring. If all of a sudden we see a major increase, then we are back to the accountability process.
Furthermore, the annual corporate plan should be another accountability measure. Revenue Canada, of course, does not do that right now. A corporate plan involves estimates -- here is where we are going, and why -- which cards on the table so that we can evaluate, as taxpayers, whether or not we are getting proper efficiencies and effectiveness for our dollars.
The Chairman: With regard to user fees, you have been assured that will not be the case? How will we account for this and will you be the watchdog on that as well?
Mr. Whyte: Absolutely. We did not talk beforehand, but that is another concern that we have put on the table. I raised the concern that now we will have an agency where we will have fee for service. The answer was, no, that this is not a revenue-generating enterprise. There will be fees in terms of a relationship that is worked out between the provinces and the federal government, but not in terms of fee for service.
We met with the deputy minister yesterday on a particular issue and we have agreed to work it out. We were concerned that one of the fees was a cash cow to generate revenue. We have been assured that that is not the direction they are taking. As a matter of fact, they will work with the stakeholders; a commitment has been made to ensure the best way and to improve service.
That is an issue that we are chasing on cost recovery generally. There is a coalition on cost recovery, and our concern is that there is not an overview of the policy. No one is looking at the overall policy, and it is being seen as a revenue generator. Fees are now up to $4 billion in revenues. That is something about which we will be vigilant as well.
Senator Tkachuk: You mentioned that the agency would be charging fees to other governments.
Mr. Whyte: We were concerned when the proposed legislation mentioned user fees, or fee for service. If they were to collect taxes for a particular provincial jurisdiction, a fair arrangement regarding fees would be negotiated, so that they can recover their costs. As far as fee for service as it relates to individuals, or on businesses, we were told that that is not one of their mandates. That was a major concern of ours.
The Chairman: The third concern listed on figure 4 was less privacy. It was rated at 43.9. How were you assured, because I am not assured?
Mr. Whyte: We looked at the current provisions. From what we could see, the current provisions have been folded into this proposed act and there are no real changes.
Mr. Gray: There is one other thing that is important to examine. I would argue that any national revenue agency that may be established ought to be situate in the Ottawa region and not somewhere else. It does not make any sense to shift it from its current location. For this agency to work it must be divorced from tax policy. At one time, we had a hard time getting Finance to walk across the street to talk to Revenue Canada on the GST. There are some problems, we suggest, with the Ontario system, where all of a sudden the revenue collection agency is in Oshawa. Why is it in Oshawa? Why not next door, close to the people who are developing tax policy? This is fundamental. This is different from other types of agencies. If the provinces and the federal government are developing tax policies on a national level, we think the corporate office or head office should be beside or close to the decision makers.
It ought not to be a political or a job development chip in a broader game. This is far too important to all taxpayers.
The Chairman: You also must recognize our concern that, if we have less fortunate regions in the country, we must look at every opportunity to locate agencies in those locations because it represents an ideal situation to create long-term permanent jobs.
Mr. Whyte: We understand that. The revenue agency is a big entity. There will be regional offices, that is part of the tool, but at least there should be a head office functioning fairly close to the policy people who are developing finance policy.
The Chairman: Thank you very much, gentlemen.
Our next witness is Bob Armstrong from the Canadian Importers Association. Please proceed with your presentation.
Mr. Bob Armstrong, President, Canadian Importers Association Inc.: I am proud and honoured to be here today to speak about the agency on behalf of the members of the Canadian Importers Association. Our members represent approximately 80 per cent of the goods that enter Canada. Our members are manufacturers who import components, raw materials and the like, and ultimately sell domestically and abroad. They can also be importers who import finished goods. As well, we have members of the service sector, such as the customs brokerage industry and trade lawyers and accountants, who specialize in international trade.
I also, like Mr. Whyte, served on the minister's advisory committee to the agency, so I have been heavily involved since its beginning. I will address the customs side of the agency, if you will, because, while it represents 20 per cent of the agency, it is a very important component. All of us in this room and most Canadians travel in and out of Canada, so we are impacted by the services that Canada Customs provides. It is a productivity issue on the goods that are imported to keep our factories humming and our economy alive. You may not be aware, but imports account for 38 per cent of the GDP of this country.
The international trade community sanctions the Canada Customs and Revenue Agency with some reservations and some concerns, which I should like to mention to you today. We are very outward in our thinking. I will draw an equation of what our businesses look like today and how we consider they will look tomorrow under the agency. I could be a Canadian company that is both an importer and manufacturer. I am visited today. From the customs side, I could have a customs auditor looking at the value of my goods, my transfer pricing. I could have a customs officer who comes from the customs investigations branch who may be determining whether or not I unlawfully entered goods into Canada. I could have a customs inspector come to look at the tariff. I could have a GST auditor come in to check my GST. I could have a Quebec sales tax or Ontario sales tax auditor come in. I could have, of course, the federal auditors.
Under the agency concept, we envision the day that our businesses in Canada, large and small, would be visited by one audit team. We would be completing one tax form per month, probably electronically, but that form would account for and offset all of the customs, duties and federal and provincial taxes we would owe. That would be a great concept, and I believe the agency is a great first step toward giving us that concept. Hopefully, down the road as the agency proves itself and improves upon the efficiencies of its service, it will attract more provincial business and eventually be the sole tax collector. The members of our association feel that it would be far cheaper to do business under that concept.
I have been listening to some of you talk about your businesses in the past. You know what I am saying. If we could have one audit team visit us, a team that knows our business and audits us for all the various forms of taxes and Customs duties, it would draw efficiencies, and of course we need efficiencies in terms of how we do it. We do not want so much paper.
We see the shift toward an agency structure being designed to reduce the overlap and duplication we see today in the administration, both provincially and federally. In the future, if we see federal tax, trade and customs laws administered more effectively, the efficiency gains should translate into improved services and reduced compliance costs for taxpayers. While we are importers, we are taxpayers whether it is customs, duties or taxes, of course.
The recognition that rigid, centralized and standardized structures are incapable of meeting governments' contemporary needs underpins the agency concept. Increased flexibility would enable the agency to respond to the taxpayers' needs, to prevention requirements, and an evolving business environment. The ability to organize and manage itself according to its own needs and requirements should facilitate the objective of efficiency. That is one of the fundamental issues we see.
This agency should be able to manage itself better than the current structure because it would be able to look after more of its own needs from a human resource perspective as well. There are approximately 40,000 employees in Revenue Canada today, of which about 20 per cent are on the customs side. We believe the agency would have the critical mass to support its own management functions, so there may be cross training of employees. You could be a customs officer and become part of the audit team. We could cross-train, and the agency then would have autonomy and flexibility.
Of course, the agency is tempered by what we pushed for from the beginning, which is the notion of the ministerial accountability. The original document did not have that, and part of our role on the agency advisory committee was to push for that, so we were pleased when the amendments come out. I know that many of the amendments came from the Senate as well. The minister's accountability is important to our members.
With regard to the concept, the agency ultimately depends upon the private sector to achieve its goals of heightened efficiency and cost effectiveness. After all, the agency's rationale for existence hinges upon us in the private sector. It is essential that the agency's services be delivered in a cost-effective manner for the users or the private sector. The success of the agency cannot be evaluated exclusively in terms of its effectiveness in reducing government costs. Its ability to reduce the private-sector costs is also crucial in terms of evaluating the agency's efficiency.
While we all talk about reducing cost, we still want a high-level service, in fact, a higher level of service than exists today, although I should tell you that, from a customs point of view, our customs service is one of the finest in the world. We have made great gains, and we are getting better all the time. Today, more and more goods are entering Canada. More people are crossing our border every day than there did the same day last year or the year before. Again, in simple terms, our members worry about that. We know there are more goods, we are importing more, we are exporting more, and more of us are travelling to and from Canada. We want to ensure that there enough people are there in the end to service us. Today, we can clear customs relatively fast. With the efficiency gains that have been made there in electronic commerce and the like, the release of the goods is very fast. We do not want to see that hampered by services if the government cuts its services.
For example, when the Canadian Food Inspection Agency was formed, when they had their budget cut, the first thing they did was cut people. They cut inspectors so that when our imported meat and beef hit the border, and the same with our factories that produce beef, we had to wait for inspectors because they did not have enough. That will not get us productivity. That decreases productivity.
We want to ensure that government can also ensure that the agency engages in cost avoidance before cost recovery.
We do not like the practice by government departments of routinely downloading costs to the private sector because the departments are inadequately funded by the government. The Treasury Board does that, for example. My role in the agency is to ensure that that does not happen, and I will be talking to the Treasury Board about that. It is of paramount importance that the agency have the funding it needs to ensure both the stability of its systems and the equitable treatment of the agency's personnel or its human resources team.
We hope that the government will not look at this and say, "Let us form an agency. Now we will cut their costs by $50 million." There is a start-up cost for this agency just as there is for us in business. We are undergoing changes in the customs process. We have to spend a lot of money making our capital investment, both in systems and in people. Likewise I would submit to you that, for the agency, the minister will have to ensure that he makes the proper investment in technology and in people and in the education of those people. If the minister is to achieve the objectives set out for the agency, then it needs to be properly funded and the people need to be treated in a proper, professional manner and paid a proper wage.
My members are concerned about cost recovery. Mr. Whyte and I did meet with the deputy minister last night and we were assured again, just as I should tell you we have been assured in our advisory meetings, that there will be no cost-recovery programs. We will take the agency and the minister to task if they try to implement cost recovery, because that would not be fair.
The new agency must also adhere to any proposed consultation plans. The agency people need to listen to the concerns of their stakeholders. We are their customers. They have said it in their document. From the importers' perspective, it is essential to the preservation of the agency's legitimacy. We want to ensure that we are working together so that an innovative and effective customs program becomes an integral part of the agency.
That brings me to our concerns with respect to the board of management. It is my understanding that the provinces will elect a representative. We would submit that in all probability it will be an ex-deputy minister or minister of finance -- in other words a tax-related person. We also understand that the federal minister, or the Prime Minister, would be able to name three federal appointees. We would submit that someone with experience in the import-export sector needs to be on that board, because the customs side of this agency amounts to 20 per cent and is a major player in the productivity of our manufacturers and exporters.
Above all, we want to ensure that this does not become a tax agency, which is one fear of the import community: Where do we fit in? The minister is an honourable and forthright man, but we want to ensure that all government understands our position on that. It is important, because we are curious as to the role that customs will play in the new agency. So we are constantly looking for additional information.
We believe that the board of management is vitally important. We want to be assured that it is not just tax management. The board needs to include business people, or people who understand the import-export world, who can add credibility to the board of management to ensure that the agency stays on the path that it says it will be on and keeps the wheels of business humming in this country.
Senator Tkachuk: You mentioned that we have the most efficient customs clearing system in the world.
Mr. Armstrong: Yes, in terms of quickness of release. We have a cumbersome process, which in many respects is after the fact. That is because the release of the goods is far different from the acquittal of the goods, where you account for them. In some instances, as in the auto industry, we have what we call line releases. We have quick release of the goods subject to the importer paying the duties and taxes and accounting for them within five days.
Senator Tkachuk: Why would we change that?
Mr. Armstrong: I hope we do not. We are going through a process right now. There is a customs blueprint on the table to modernize, and we are looking for efficiency gains there. What they are more worried about today -- and they should be -- is contraband. The customs officers want to spend more time ensuring that contraband does not enter Canada. That is a good thing. We do not want drugs to get to our children. They want to devote more of their resources to contraband inspection and less to the customs process, which we applaud, because our businesses can be audited. In the end, the release of the goods could be a given, because the agency people could go into the receiving department of any business in this country, from an accounting or audit perspective, and learn what goods had entered and determine whether or not you had accounted for the entry. Much of it is duty-free in any event.
Senator Tkachuk: My understanding is that Canada Customs has a system called CADEX, which is an on-line system for clearing goods.
Mr. Armstrong: The CADEX is where we pay them. It is really the accounting side of it.
Senator Tkachuk: Was that set up by the government to make it more efficient to do customs and collect?
Mr. Armstrong: Yes.
Senator Tkachuk: Were they not contemplating a charge?
Mr. Armstrong: They do not call it a cost-recovery fee.
Senator Tkachuk: It is a user fee. That is what they were planning to do, were they not?
Mr. Armstrong: Yes. The government pays for the line. There are 702 importers and customs brokers using the CADEX. When they talk on the CADEX line, it is at no cost. They are giving the government the information electronically. The government is getting everything electronically. However, they have now come up with a plan, which is why we met with them yesterday, to get us to pay for it beginning on July 1. We would pay for the line.
It is the only place, incidentally, in Revenue Canada where the line is not paid for by the sender. We understand that, and they have always told us it was coming. We just did not like the way they did it, but we resolved some of that yesterday with the deputy minister. We agreed that it would come into place on October 1 instead. We will then have time to work with them to find a cost-effective alternative.
We would like to use the Internet more, for example. If you saw Industry Canada's study, you would have seen how little the Internet costs versus paper, fax, mail, or anything else. We have been given an opportunity to work with customs between now and October 1 to find a solution. We will work with the customs brokers and service providers to see if we can find a more cost-effective, simple system. Our real goal is to make the customs process reflect the following key words: speed, accuracy and simplicity. It is not always simple.
Senator Tkachuk: You seem to have a good relationship with the department. You have a very efficient system, from what you say, although no system is perfect and I am sure you are always struggling to make improvements.
Why would you be supportive of this bill? You say that things are moving along well, and you are making tremendous progress as time goes on. You say we have the most efficient clearing system, although you have a few things to worry about on the end run. This agency, this new administrative nightmare, runs the risk of perhaps ruining some of the good work that your association and Revenue Canada have achieved.
Mr. Armstrong: I should tell you, first, that part of the system is good. That is what we call the release system. It is the accounting portion afterwards that is the problem. Importers do not get the same cash-flow advantage that domestic companies get.
Senator Tkachuk: That has nothing to do with the agency.
Mr. Armstrong: The system itself, after the fact, is where the cumbersome part comes in. Our hope is that the agency will marry the two together so that, for a company, customs is not as much of a cost centre as it is today. You would marry the two together with your tax, so that one form would go to Revenue Canada, which would account for the duty and all taxes. It is really to simplify that next step. We believe that what the agency can do for us is to take us to that next step and give us that one simple process in our company. That is really our goal, sir.
Today, customs works well.
That is why I say that, while we support the agency, we also want to ensure that they do not wreck what we have. If we marry the two in a proper fashion, they can do that.
Senator Tkachuk: Mr. Whyte gave us some graphs concerning what his members felt, and that is important to politicians. Does your board support you in your support of this agency?
Mr. Armstrong: Yes, sir.
Senator Tkachuk: Are your members supportive of your position?
Mr. Armstrong: Yes, sir. They are supportive, although they do not totally understand what it means ultimately. They are concerned about what the Canada Customs side and the agency mean. They are relying on us as an advisor to the minister to assure them that we are not the forgotten entity of the agency, and that we do not go backward while the tax side goes forward. That is the fundamental concern. They do not want to see resources taken out of the customs side of the agency and given to the tax side, such that our service levels drop.
Senator Robichaud: You seem to have a very good relationship with Revenue Canada right now. You also seem quite confident that this relationship will be maintained, even though there is an agency into which you will have some input. Can you speak to that?
Mr. Armstrong: Our consultative process has improved greatly from what it was two years ago. We asked to visit the deputy minister yesterday because we had some concerns. We are finding that they are reacting better than they used to react. A week ago we put in a submission on an issue and the very next day they gave us the indication that within 48 hours they would give us an answer. In the end, we did not totally agree with the decision. However, we felt they gave us something that we could take back to our members to work with.
If we can continue in that manner with the customs service, as well as with the tax side, then I suggest that the efficiency of the agency will be more effective.
Senator Robichaud: As the new agency works with you, will you ensure that you have a contact and that you are listened to, as Mr. Whyte was saying?
Mr. Armstrong: Yes.
Senator Robichaud: You have a close relationship with Mr. Whyte. I suppose you will be doing the same with your members.
Mr. Armstrong: That is right, sir. If we find the process slows down or becomes cumbersome or costly, we intend to be in there as quickly as possible to find a solution.
Senator Robichaud: I hope you will be vigilant in that regard. If this is a better way of serving you, then we will all be winners.
Mr. Armstrong: We realize, as do you, that we still must stay on top of everything.
The Chairman: Thank you, Mr. Armstrong.
The committee adjourned.
OTTAWA, Wednesday, March 10, 1999
The Standing Senate Committee on National Finance met this day at 7:30 p.m. to examine and report upon the expenditures set out in the Supplementary Estimates (C) for the fiscal year ending March 31, 1999.
Senator Terry Stratton (Chairman) in the Chair.
[English]
Mr. Rick Neville, Assistant Secretary, Expenditure Analysis and Operations Sector, Treasury Board Secretariat: Mr. Chairman, I am appearing before you today to discuss the government's Supplementary Estimates (C) for the fiscal year 1998-99, which were introduced in Parliament on March 5, 1999. From a fiscal planning perspective, those amounts are provided within the revised planned spending levels of 1998-99 as announced in the February 16, 1999 budget. Specifically, these Estimates seek Parliament's approval to spend $1.8 billion on expenditures provided for in the February 1998 budget, but which were not specifically identified or sufficiently developed in time to ask Parliament's approval in the 1998-99 Main Estimates and on new expenditures identified in the February 16, 1999, budget.
These Estimates also provide information to Parliament about a decrease of $277 million in changes to projected statutory spending that Parliament has already approved in legislation. These items include, for example, a decrease of $2.1 billion in public debt charges and an increase of $1.6 billion in fiscal equalization payments to provinces.
[Translation]
As I already said, the total amounts set out in the Main Estimates, in the Supplementary Estimates (A) and (B) and in the current Supplementary Estimates do not exceed forecast and revised expenditures for 1998-99 announced by the minister in his February 16, 1999 budget.
Some of the most important items for which supplies are necessary include: expenses affecting more than one organisation, 522.1 million dollars, split between 76 organisations for compensation under collective agreements signed recently and related adjustments. Collective bargaining resumed at the beginning of 1997. This amount will cover wage increases and retroactive payments for 1998-99.
You have 166.3 million dollars, split between 18 organisations, for resolving problems related to the year 2000 bug. That financing will meet the needs of departments and agencies for systems compliance and horizontal issues such as private sector awareness, international state of readiness, centralized coordination and emergency planning.
[English]
Under the subject "Items affecting a single organization," there is $205 million for the Department of Finance for transfer payments to territorial governments. This increase reflects changes in the forecasts of factors upon which these payments are based, such as population, provincial/local spending and revenues generated by the territorial governments.
There is $200 million for Industry Canada for the Canada Foundation for Innovation, as announced in the 1999 budget to modernize research infrastructures in the areas of health, environment, science and engineering.
There is $155 million for Health Canada for strategic investments in health research and information as announced in the 1999 budget. These include grants to the Canadian Institute for Health Information to ensure a coordinated approach to health information in Canada and to the Canadian Health Services Research Foundation in support of the Canadian Institutes of Health Research and to create a Nurses Using Research and Service Evaluations Fund.
There is $123 million for the Canadian International Development Agency, as announced in the 1999 budget, for a variety of United Nations organizations, and for international humanitarian assistance, such as the aid provided following Hurricane Mitch.
There is $90 million, non-budgetary, for Transport Canada, for a contribution to the capital of Canada Ports Corporation to facilitate the restructuring of private sector debt in Ridley Terminals Inc., which is, as you know, a wholly-owned subsidiary.
[Translation]
The main items above-mentioned represent 1.46 billion dollars out of the 1.8 billion dollars for which parliamentary authority is requested. The balance is split amongst a certain number of departments and agencies. The details can be found in the current Supplementary Estimates.
[English]
Under "Update to Parliament on forecast statutory expenditures," the statutory adjustments included in the Supplementary Estimates (C) reflect a net decrease in expenditures of approximately $277 million from the amount in the 1998-99 estimates.
The major statutory items to which there are changes in the projected spending amounts are:
[Translation]
As for reductions, you have a 2.1 billion dollar reduction in the public debt charges in the 1998-99 Main Estimates. We had forecast that those charges would be around 43.5 billion dollars, but they will amount to 41.4 billion dollars only because of interest rate reductions in the short and long term.
A net reduction of 174.5 million dollars in employment insurance payments is forecast because of improvements in the labour market.
You have a net reduction in the order of 117 million dollars in payments made by Human Resources Development Canada under the elderly benefits, old age security, spouse's allowance and guaranteed income supplement programs following the revision of the forecasts upon which payments are calculated, especially the consumer price index and the number of beneficiaries.
[English]
In terms of increases, there is an increase of $1, 572 million for the Department of Finance for equalization payments to provinces. The increase reflects changes in the forecasts upon which these payments are based, such as provincial tax bases, population and tax revenues.
There is an increase of $277 million for the Department of Human Resources Development for Canada Education Savings Grant Payments made in respect of Registered Education Savings Plans. The increase is due to a greater than forecast update. There is $94 million for the Department of Finance for Alternative Payments for Standing Programs to offset lower recoveries than forecast in the Main Estimates. The lower level of recoveries reflects changes in personal tax yield. There is an increase of $53.2 million for the Department of Finance for payments to the International Monetary Fund's Enhanced Structural Adjustment Facility, which provides financing for low-income developing countries undertaking major reform efforts.
There is an increase of $50 million, non-budgetary, for an investment in the Business Development Bank as announced in the February 1999 budget. The investment will enable the bank to provide additional financing to two key target markets, knowledge-based and export-oriented businesses.
The above major items represent an overall increase of $345.3 million which, when offset by increases of $67.9 million spread among a number of other organizations mentioned in these Supplementary Estimates, amounts to a net decrease of $277.4 million.
[Translation]
This concludes my introductory remarks. I will be happy to answer all the questions you might have on the Supplementary Estimates (C).
[English]
Senator Lynch-Staunton: Thank you, Mr. Neville, for your presentation.
I do not understand how the 1999 budget affects the 1998-99 Estimates. For instance, on page 3 of your presentation you mention the $200 million for the Canada Foundation for Innovation (CFI), which was announced two budgets ago. Of course, there was that dispute with the Auditor General, which has nothing to do with our discussion today. In your presentation you say "was announced in the 1999 budget". Was it repeated again in Mr. Martin's budget? If so, have we had it twice?
Mr. Neville: Let me go through a reconciliation. The question is basically how these Supplementary Estimates can be considered to be consistent with the 1998-99 budget.
Senator Lynch-Staunton: Yes.
Mr. Neville: The February 16, 1999, budget set out a revised budgetary spending level of $153.5 billion for 1998-99. These budgetary Estimates of $152.8 billion for 1998-99, including Supplementary Estimates (C), are within this amount.
The best way to explain it to you is that there are two factors. The first is spending which, for accounting purposes, is identified in the budget for 1998-99 when the obligation was incurred but which is not included in the 1998-99 Estimates because payments will be made in the future; for example, the $3.5 billion in the budget for the CHST supplement and the $600 million for agriculture income disaster assistance. There is also spending in the 1998-99 Estimates which again, for accounting purposes, was reflected in the budgets of and charged to prior years.
There are two specific examples. The first is spending in the 1998-99 Estimates for the early departure and early retirement incentives in support of program review, and the second is payments in 1998-99 to the provinces under the disaster financial assistance arrangement related to disasters such as the January 1998 ice storm.
That gives you the explanation for how you can reconcile the budget of February 16 with Supplementary Estimates (C) or 1998-99.
Senator Lynch-Staunton: If we can focus on the Foundation for Innovation, which was announced two budgets ago, the dispute being that the money would not be spent for at least one year, if not two, why does that reappear as an announcement in the last budget?
Mr. Neville: That is because in the last budget the announcement was a supplement to that specific account, so that is over and above what was originally provided for.
Senator Lynch-Staunton: What was the original amount for this foundation?
Mr. Neville: It was $800 million, and an additional $200 million has been provided.
Senator Lynch-Staunton: It is not $200 million out of the $800 million; it is another $200 million on top of the $800 million?
Mr. Neville: It is $200 million on top of the $800 million.
Senator Lynch-Staunton: I find it hard to reconcile how Estimates relating to a previous fiscal year are being explained by a budget for another fiscal year.
Mr. Neville: Perhaps I can spend a minute on that. It is a very good question. When the budget is formulated during the period of October to January, and then finally tabled in the House in February, the current year is not over yet. It is still ongoing. Therefore, the budget provides for some changes that affect the current year that is still ongoing.
Therefore, although we talk of it as the 1999 budget, which one would normally expect would apply only to the next year, there are components that actually year; in this case, the 1998-99 fiscal year.
As an example, the $3.5 billion for the CHST supplement and the $600 million for agriculture income disaster assistance for fiscal 1998-99 that was announced in the 1999 budget falls into that category. You do allow for that.
In each of these cases, although the payment will be made in future years, the economic events, which are key to the changes I am trying to explain, have already taken place in 1998-99. Therefore, in accounting terms, you would be booking these expenditures to the previous year, but the payments would only be made in the forthcoming year. That is probably an easier way to understand it.
The budget is very complex in the sense that it does not just deal with the year that you are talking about, 1999-2000 in this case. Some components are covered in 1998-99 and we are seeing that as part of the Supplementary Estimates.
Senator Lynch-Staunton: That is very helpful and I thank you for that. Just to stay on the foundation, has any of that $800 million been spent? Why do they need another $200 million?
Mr. Neville: That is a government decision to increase the amount of funding.
Senator Lynch-Staunton: Is the foundation up and running at the moment, or is this just to increase its budget for when it does start?
Mr. Andrew Lieff, Director, Expenditure Operations Division, Treasury Board Secretariat: Basically, $800 million was provided through the budget bill in 1997. That money was given as an endowment to the foundation.
Senator Bolduc: It was not created at the time.
Mr. Lieff: It was created through the budget bill for the 1997 budget, I believe. The additional $200 million, which was announced in this budget and included in the Supplementary Estimates is a top-up, if you will, to that original endowment. It goes into the endowment fund where it will earn interest and provide for future funding for many years for the purposes announced.
Basically, the money has left the government and is now in this foundation. The $800 million went in in 1997 and the $200 million is now going in The organization has been up and running and I believe we have some data on the expenditures made to date.
Mr. Neville: This foundation is an arm's length organization under the guidance of an independent board of directors. The CFI depends on the expert advice of leading researchers in Canada and other countries. The CFI is accountable to Parliament through the Minister of Industry who tables annual reports on its activities. In that sense, it is quite a distinct and third-party entity.
I believe that your question is how much money CFI has been awarded thus far. Thus far it has made expenditures of $66 million to 42 universities and research institutes across Canada to fund 345 projects. In 1999, because the consultation, application and review processes will have had time to be completed, the CFI expects to award a further $420 million. The CFI funds approximately 40 per cent of the total costs of projects in partnership with public research institutions, other governments and the private sector. Its investments are expected to leverage another $1.5 billion investment in Canada's research infrastructure.
I have the regional distribution. In the Atlantic provinces, there is a 9 per cent distribution.
Senator Lynch-Staunton: I should like to know how the books were being handled and how the expenditures were recorded. I am getting a better idea.
[Translation]
Senator Robichaud: That money is deposited into a fund, is it not?
Mr. Neville: Yes.
Senator Robichaud: The interest from that fund goes into the financing of some research projects?
Mr. Neville: Yes. The capital can also be used to that end. You must not forget that when the government has given those funds to a third party, they can distribute them as they choose. They use the interest first but can go into the capital afterwards.
Senator Fraser: So 400 out of 800 million dollars have already been used?
Mr. Neville: To date 66 million dollars have already been spent and 420 million more dollars have been committed.
Senator Fraser: This year?
Mr. Neville: For 1999.
Senator Fraser: Will all that money be spent this year or will we have to commit for the future because we are very far from the subsidies coming from the interest? The capital flows like water.
Mr. Neville: The 420 million for 1999 represents an allowance to universities or research firms. It does not mean that it will be spent in 1999. It could be on a two, five or ten year basis, but there will be an allowance up to 420 million.
Senator Robichaud: To keep the fund afloat, it was decided to invest another 200 million?
Mr. Neville: That's right. The February 16, 1999 budget added another 200 million, so that the total is now up to one billion.
[English]
Senator Bolduc: I wish to come back to the creation of the foundation. That was in the budget of 1997. However, was the foundation itself established through a law or just a budgetary decision?
Mr. Neville: No, it is a law. It is an actual piece of legislation.
Senator Bolduc: That bill was passed when exactly?
[Translation]
Mr. Neville: In June 1997. It was tabled a few months after the February 1997 budget.
[English]
Senator Bolduc: It became effective in 1998, did it not?
[Translation]
Mr. Neville: It became a bill the very moment it was approved, that is in June 1997.
[English]
Senator Bolduc: Is it after the budget year, but within the delay, before closing your books in October?
[Translation]
Mr. Neville: It's what we're doing. There were three very important conditions. First, in order to account for it in 1996-97, it had to be in the budget. Second, a bill was tabled in the House and passed before we closed the books for 1997-98. Third, there was a payment of 800 million dollars to a third party, which is therefore no longer under government control. When those three conditions were met, we accounted for that amount in 1997-98 rather than 1998-99.
[English]
Senator Lynch-Staunton: However, the thing did not get running until 1997-98. The dispute is that it should be in the 1997-98 budget.
Mr. Neville: Except that, as I said earlier, it was announced in February 1997, which was still in the 1996-97 fiscal year. It was tabled in the House prior to March 31, 1997, and is still in the 1996-97 fiscal year. It was approved before we closed the books for 1996-97, and the payment was actually made before we finalized.
Senator Lynch-Staunton: That was before you closed the books in another fiscal year, and that is the same argument with the millennium fund, which has not shovelled out any money yet.
Mr. Neville: Those conditions were all met prior to us accounting for that transaction in the year concerned, i.e., 1996-97 fiscal year. We feel quite confident that the accounting has been appropriately dealt with.
We have set it up as a liability, and therefore, as you can appreciate, we now have payments to be made against it. As the payments are incurred we will accordingly decrease the liability.
Senator Lynch-Staunton: If I could get on another specific topic now, it is on page 101, under the Justice Department. There is an additional $13,705,000 for the Firearms Control Program. Will you tell us how much that program has cost thus far? Is this the registration program that is to cost about $85 million, or is this something else?
Mr. Neville: With respect to the Firearms Control Program, the department is seeking approval to include an item of approximately $13.7 million in these Supplementary Estimates. This amount includes $4.1 million in new spending authority within amounts previously approved by cabinet to assist in implementing the firearms program, as well as a realignment of existing resources between votes to reflect changes in how the funds are being spent. I believe that answers your question.
Senator Lynch-Staunton: What is the Firearms Control Program? I thought that was the registration feature of the gun control bill.
Mr. Neville: The enhanced Firearms Control Program is part of the government's Safe Homes, Safe Streets agenda.
Senator Lynch-Staunton: It is something completely different. I thought it had something to do with the registration of firearms.
Mr. Neville: That is what that is. The enhanced firearms control is part of the government's Safe Homes, Safe Streets policy agenda. The Department of Justice, if you recall, as the project sponsor, was seeking funds to implement Bill C-68, an act respecting firearms and other weapons, or the Firearms Act passed by Parliament in 1995, which aims to license firearm owners to register firearms and other weapons. Is that the one to which you are referring?
Senator Lynch-Staunton: Yes.
Mr. Neville: The Department of Justice carries the overall responsibility for managing this initiative. It does so not only from a project management perspective, but it also handles the financial and operating responsibilities for implementing and operating the firearms program until the end of the project phase. The Canadian Firearms Registration System, CFRS project, was effectively initiated in December 1995, and will terminate in January 2003, when ongoing operations will continue. This act provides for the licensing of firearms users and the registration of guns. All users must be licensed by the year 2001.
Let me get to the specific question. The cost of operating the existing firearms control system was approximately $12 million per year. The cost of setting up the new system was originally estimated at approximately $85 million. This has increased due to additional elements requested by Parliament regarding the spousal notification, the additional screening of applicants, and some external elements, such as the cost of setting up operations in provinces that have opted out of the administration of the Firearms Act. The total cost of setting up the system is now expected to be $120 million. The figure of $133 million was the maximum budget for this year that was disclosed in the spring. These Supplementary Estimates do not increase the total budget for the firearms program, which was announced by the Minister of Justice earlier this year.
Senator Lynch-Staunton: The $85 million is now up to $133 million. Is that correct?
Mr. Neville: That is right; $120 million is forecast to set up the registration system, but we have a maximum ceiling of $133 million for 1998-99 for the Firearms Control Program, which, for example, includes the costs of operating the system.
Senator Lynch-Staunton: Who imposes a ceiling? There are stories going around that the thing is up to $200 million if not $300 million. That is why I am asking the question. What are the official figures? It was to be $85 million and it suddenly blossomed to well over $100 million about a year ago. Here it is written down as $120 million, with a Supplementary Estimate of $13 million. Hopefully, the rumours are wrong and your figures are right. Or maybe your figures do not include everything.
Mr. Neville: At this point, we are forecasting that the cost of setting it up is approximately $120 million. If you want to take that out over X number of years, there are ongoing costs for operating the system that will be continually incurred. If you want to take it out over three to five years, you could expand on that. At this point, we are talking about setting it up, and the budget number that we have as the number being put forward is.
Senator Lynch-Staunton: As I recall, the $85 million was justified because the registration fees would recoup it over the five-year period, and so the government would come out even. Now, if I hear you correctly, we are up to $120 million, plus $13, which is $133 million. The cost may go up over the next few years, so the original recouping feature is no longer valid, is that correct?
Mr. Neville: First of all, I think you are looking at an estimated 3 million firearms owners, and they have until January 1, 2001, if my memory serves me correct --
Senator Lynch-Staunton: We are getting into a political discussion, but when the control bill was being argued, we were told that there were 7 million gun owners in Canada.
Mr. Neville: Our records show an estimated 3 million.
Senator Lynch-Staunton: It is like the hepatitis-C victims. Suddenly their numbers drop when the program is challenged. I will try to restrict myself to your bailiwick. Now, we are talking three-and-a-half million gun owners?
Mr. Neville: We have 3 million. Let me make sure we are clear here. There are about 3 million gun owners, and there are approximately 7 million firearms. Maybe that is where you had heard the 7 million.
Senator Lynch-Staunton: I think you are quite right and I stand corrected.
Senator Robichaud: It will bring your blood pressure up.
Senator Lynch-Staunton: It is not affecting my pressure. I like this committee because I come here to learn. I appreciate very much what these two gentlemen do and how they help others and me.
Mr. Neville: May I clarify that one point? If I left you with one uneasy response, it would be about the $300 million. You said there are rumours. Let me expand.
We are talking of $120 million in setting it up at this point. But you can appreciate that costs will be incurred as we progress. If you were to read year 2, 3, 4, and 5 and then you were to take those costs in total, I think you might be very close to -- well, I am not sure --
Senator Lynch-Staunton: You are probably right but the impression was left at the time that the whole program would only cost $85 million -- during the whole course of the registration period.
Mr. Neville: I certainly remember being concerned, as you were. And I remember the $85 million number. That $85 million has now translated itself into $120 million.
Senator Lynch-Staunton: And it may go higher over the next period, as needed.
Mr. Neville: Exactly. Today, it is at $120 million. If you expand that over the four-or five-year horizon, it will be higher for maintenance and everything else. Obviously that number will be higher, it all depends on the time frame. But I think the fair assessment is $85 million versus $120 million.
Senator Lynch-Staunton: Fair enough. And $85 million should be considered the start-up cost as opposed to a total cost. And it may have been embellished at the time, for whatever reason.
Mr. Neville: That is exactly right.
Senator Bolduc: I was not here when you began your presentation. I notice that, in some areas like the Royal Canadian Mounted Police, the correctional service and some other places where you have a lot of civil servants, there is a new additional estimate. That means, I suppose, that you have had new collective bargaining agreements and that you have to pay the civil servants increases. How much is it for the entire amount that has been negotiated, let us say, in the last three months?
Mr. Neville: Insofar as the compensation collective bargaining --
Senator Bolduc: I see people in the street with placards. I suspect that you still have some other problems with another group of civil servants.
Mr. Neville: I will answer the last question first. Eighty-five per cent of unionized public servants have had their contracts ratified, so we know what those costs are. The other 15 per cent have not yet ratified, and they are obviously expressing themselves in terms of their presence in all parts of Canada over the last several weeks, maybe even months in some cases.
To answer your question, we are doing the best we can to try and ratify that, and in the next short period, we hope that we can announce that ratification has taken place. That is to answer your second question.
Going back to your first question, in the 1998-99 Supplementary Estimates (C), $522.1 million is being provided towards compensation for collective bargaining and other wage-related adjustments. That is broken out between $164.4 million related to 1997-98 wages and $357 million for 1998-99.
The costs associated with the 1997-98 fiscal year have already been provided for in the public accounts for that year-end, and as such, are not a draw on the surplus deficit for 1998-99. Collective bargaining resumed in early 1997. As you know, we have not had bargaining for quite some time. Funding was set aside for retroactive and ongoing incremental salary costs for all Treasury Board employees, which is two-thirds of the public service; those working for separate employers in Parliament; and those working for fully and partially appropriated dependent Crowns.
As of January 19, 1999, settlements had been reached with 21 of the 30 bargaining tables for this round. All employees represented by PIPS, 88 per cent of those represented by other smaller non-PSAC and non-PIPS unions, and 75 per cent of employees represented by PSAC are now covered by new settlements. That gives you 85 per cent of all employees.
New contracts included minor improvements to their respective benefits, some revisions to salary scales for specific groups, and an average increase of 2.5 per cent and 2 per cent over two-year contracts.
As you are also probably aware, members of executive categories have seen their salaries adjusted in line with the recommendations made in the Strong report on executive compensation. Uniform members of the military and the RCMP have seen economic increases in line with those given to civilian employees.
Senator Bolduc: Do Defence salaries form part of the new Supplementary Estimates?
Mr. Neville: That is correct.
Senator Bolduc: Is it correct that one-third of what you are asking for now is for salary increases?
Mr. Neville: Yes, and that is the message we wanted to leave with you. I am glad you have picked up on it.
Senator Bolduc: I understand, also, that you are giving money to the Canadian Institute for Health Information. That Institute has been, or will be, created. I did not know that it existed. I wonder if it is a refinement of the Minister of Finance's attitude? He now gives the money to existing organizations, instead of organizations to be created next year, or at least before you close the books in the fall.
Mr. Neville: Let me share with you. I have a lot of information on that.
The Canadian Institute of Health Information was established in 1994 to improve the quality and availability of health information in Canada.
Senator Bolduc: My third question has to do with the fact that we are forgiving some of the debt of foreign countries. I thought the policy in that respect was mostly for poor countries in Africa. However, this time we see that it is for South America, including Colombia. Do you know why we are forgiving Colombian debt? I can understand doing so for Honduras because of the hurricane.
Mr. Neville: CIDA is requesting approval of debt forgiveness in accordance with the Latin American debt initiative. That is part of the answer. This initiative was launched at the 1992 Rio summit on the environment.
This initiative involves having Latin American debtor countries repay an agreed-upon share of their outstanding debt in local currency in exchange for the forgiveness of their debts. Local funds created from this initiative are then used to help finance environmental and other sustainable development projects.
Agreements with the countries of this initiative range from one year to six years in duration. To date, yearly forgiveness totals for 1993-94 have been $6.65 million; for 1994-95, $32.38 million; for 1995-96, $11.91 million; for 1996-97, $12 million; and for 1997-98, $23.5 million. What is being requested for 1998-99 is $24.6 million. That adds up to $124.91 million.
Peru, El Salvador and Nicaragua have all met the full requirements of the agreement. Following the request of 1998 debt forgiveness, Honduras, Colombia and the Dominican Republic will also be complete. Based on existing approved agreements, Costa Rica alone will have remaining debt in 1990-2000 in an amount of $13.9 million.
The total forgiveness of $124.91 for the Latin American development assistance debt is indicated in the table. This year's forgiveness has no deficit impact on the funds expended in previous years.
Senator Bolduc: Does it include all the countries of South America? I do not understand this policy for countries such as Argentina, Brazil and Colombia.
Mr. Neville: It includes Honduras, Colombia, Costa Rica, the Dominican Republic, Nicaragua, El Salvador and Peru. It does not include Brazil and Argentina.
Senator Bolduc: But other countries are included in that agreement, I suspect.
Mr. Neville: They might be, but they are not covered by our agreements.
Perhaps I could give you the Colombia extract. Are you interested in that?
Senator Bolduc: Yes.
Mr. Neville: With respect to Colombia as of August 1993, the total ODA debt to be forgiven was $16.5 million; to be paid by country and local currency, $16.5 million over six years; debt forgiven to date, $13.83 million; debt to be forgiven in 1998-99, $2.75 million. That brings their debt down to zero. This would be the last amount we would be providing for Colombia.
Senator Bolduc: Do we do that for Southeast Asia as well? I can understand doing it for some parts of Africa, but are we doing it all over the place?
Mr. Lieff: This was a particular package of initiatives.
Prior to 1996, CIDA, as part of its program, gave loans in some cases instead of giving contributions and grants. They would fund that type of thing through a grant or a contribution. They are recognizing the change in approach from loans to aid, in part, and the difficulty those countries are having in dealing with the repayments. It does not relate to the facilities provided through the International Financial Institutions, such as loans for Asia. It is a different kind of program.
Mr. Neville: There were 10 eligible countries in the Rio summit. Brazil was one of those countries. That being said, we have signed no agreements with Brazil.
Senator Bolduc: I can understand that because they are subsidizing the aircraft industry, which is in competition with our industry.
[Translation]
Senator Robichaud: You are talking about a net reduction of 174.5 million dollars in employment insurance payments forecast because of improvements in the labour market. Over what period of time? How would you explain that?
Mr. Neville: First, one has to know that in the Estimates (C), at the end of the year, we indicate the amount that was forecast at the beginning of the year. It is a forecast from the Department of Finance regarding the employment fund. It is an adjustment in the context of the improvement in the economy. There was no major difference. We try to close the books with as precise a number as possible. The difference is only 1.3 per cent for 13 billion dollars.
Senator Robichaud: This is a forecast but it has nothing to do with employment gains or the bettering of the unemployment rate?
Mr. Neville: In fact, there are several factors but with such a minor difference in percentage given the scope of the fund I could not tell you if it is one or another without a detailed analysis. Having done the calculations and having established the amounts that we are going to pay in 1998-99, there is an adjustment to specify the information that we give to Parliament. It is in a statutory context. It is for that information that we present it.
Senator Robichaud: If the situation gets better, will you be getting more money out of the premiums as more people will be working? Is your projection right?
Mr. Neville: It is only for payments. It only reflects payments, the net amount, in fact.
Senator Robichaud: You are talking about payments while here you are talking about money that you will be spending.
Mr. Neville: Yes.
Senator Robichaud: First, you talk about reductions. Is that fund not subject to the same applications as everything else you talked about?
Mr. Neville: Changes have happened in the expenditures related to employment insurance which are the net result of a reduction in benefits and an increase in the administrative costs. There were 460 million dollars less in benefits and 285 million dollars more in administrative costs.
The number of unemployed workers was lower than expected and payments were supposed to amount to 12.1 billion dollars in 1998-99, that is a reduction of 460 million dollars or 3.7 per cent compared to the 12.56 billion dollars initially accounted for in the Main Estimates.
The unemployment rate was not as high as expected and if we translate that in terms of payments, this gives us lower expenses of 460 million dollars. Administrative costs were incurred and they were higher than expected; they go as high as 285 million dollars and, in that context, the net amount is 174.5 million dollars.
Senator Robichaud: This means that your net amount of 174.5 million dollars is not only due to the improvement of the situation but that it takes the other expenses into account?
Mr. Neville: Right, that net amount is the difference between 460 million dollars less in employment insurance benefits and the unexpected supplementary administrative costs of 285 million dollars for employment insurance. In that context, the net amount -- the difference between the two -- is 174.5 million dollars. On the other hand, if we had talked about a reduction of 174.5 million dollars in the payments for employment insurance because of the improvement in the labour market, it would have been false to say it in that context. We are talking about a net reduction. This suggests that there can be a higher amount and, taking into consideration increases in other sectors, it gives us a net amount.
Senator Robichaud: Right, but are you taking into account the extra money that you will be getting in premiums as more people are working?
Mr. Neville: No, we are only talking about employment insurance, premiums and additional operational expenditures.
Senator Robichaud: Why are you not taking it into account?
Mr. Neville: We are only talking about expenditures, not revenues. If we were talking about revenues, it would be entirely different. You will find the revenues minus the expenditures and the balance in the public accounts that we will table in September. In that document, we only show expenditures regarding employment insurance payments.
Senator Robichaud: Those were your projections, right?
Mr. Neville: Exactly, we are only talking about employment insurance payments and not about revenues and payments.
Senator Robichaud: The next item describes a net reduction in the order of 117 million dollars in payments incurred by Human Resources Development for elderly benefits, old age security, spouse's allowance and Guaranteed Income Supplement. Following revision of the forecasts the payments are based on -- in particular the consumer price index which probably was not as considerable as expected and the number of beneficiaries and we hear that the elderly population is growing rapidly -- does that mean that the number went down?
Mr. Neville: If you will recall, Senator Robichaud, I said that at the beginning of the year we give Parliament a forecast of our evaluation of payments.
Senator Robichaud: Your forecast is based on projections of the number of beneficiaries given a determined increase.
Mr. Neville: That is right. They noticed during the year that the forecast was higher than it should have been. It is only a question of forecast and it is statutory in that context.
Senator Ferretti Barth: I thought everybody stayed young!
[English]
Senator Fraser: On page 41, we see that the CBC is receiving $36 million more. That is just a transfer. It is not new within the total spending budget. Is that new money for the CBC that it was not expecting? What is it for?
Mr. Neville: Basically, this is a realignment of resources for additional capital-related projects. If you recall, from 1995-97, the CBC went through a major downsizing initiative. Over 3,000 people were cut from the payroll and it reduced its budget by about 25 per cent. In order to cash manage, the corporation froze several capital spending projects, except for the most essential ones. It transferred a total of $93 million from capital to operating in those years. It now wishes to increase its capital spending above the normal $100 million level for maintenance and replacement of obsolete transmission and production equipment, which had been deferred, and in order for that equipment to become Y2K compliant. In effect, some capital rust-out has taken place. This is to re-establish the capital. This is within the fiscal framework.
Senator Fraser: It is within the original planned fiscal framework.
Mr. Lieff: That money is actually being transferred from their operating vote that was approved in the Main Estimates. They are asking for $1 as a result.
Senator Fraser: On page 108, for National Defence, we see compensation for collective bargaining at $91 million. Under the title, "Additional resources in respect of employee departure programs," we see the sum of $35 million. How many soldiers are we firing?
Mr. Neville: The program was set up several years ago to allow for either early departure or early retirement incentives. We are now at the point where $47.1 million is included in these Supplementary Estimates for employee departure programs. The breakout of that is available. As you stated, senator, the bulk of that is for National Defence.
Basically, National Defence had a separate program from the rest of government, which was even earlier than that. We had set up a fund so that departments would not be adversely affected as a result of this happening, because we wanted to have the reductions. National Defence is now coming in to claim the amount that they are entitled to based on the calculation of X number of soldiers or civilians -- because it includes both -- who have a right to have received that amount. It is now up to us, as a central agency -- that is, Treasury Board -- to give them the money back. It reimburses the department for the expenses that they incurred.
Senator Fraser: These departures are already agreed to and organized and not new, are they not?
Mr. Neville: That is correct. It covers as much as three or four years in terms of arrears. National Defence is now coming to claim that amount of money.
The Chairman: I have a supplementary question. In "Public Works", on page 124, we have vote 6c, 7c, 8c and 9c, all concerning employee departure programs. As with National Defence, is this pretty well over now?
Mr. Neville: Yes; the program ended for the fiscal year 1998-99.
The Chairman: If it has ended, do we now know the total amount spent on employee departure programs?
Mr. Neville: I have asked myself that question a couple of times.
The Chairman: Mr. Neville, I love your straightforwardness.
Mr. Neville: Let me tell you how it has been recognized in "Public Accounts", which we treat as the official document. For 1994-95, when we conceived the plan, we booked it right then and there. Again, I could spend a good half-hour explaining this to you. If there are any accountants in the room, I would be pleased to do that.
Let us say that the economic event took place because all these public servants have worked for many years. They have already accumulated the years of service, on which we are doing the calculation. It was perfectly legitimate to charge that to 1994-95. We booked $2.3 billion. That is the first number. We then booked another $.7 billion in 1995-96. We are now up to $3 billion. We then booked another $.2 billion in 1996-97, and another $.5 billion in 1997-98. That comes to a total of $3.7 billion.
We will have to finalize the public accounts for 1998-99, and that will give us our final number. I know those numbers seem high, but the break-even period was originally forecasted to be 12 months. It is now, in fact, 15 months. That is a very good pay-back period on any investment. We pay out someone's salary and we get it back within 15 months and, from that point on, forever after. In any calculation, one looks sometimes at three years as being exceedingly good; at five years you may still want to invest. However, seven years is getting out there. So that 15 months is a good return on investment.
The fact that we have done that says a lot in terms of our financial decisions. As well, Early Retirement Incentives (ERIs) and Early Departure Incentive (EDIs) allowed a lot of sensitivity to be given to our employees when they actually left the public service.
The proof is in the pudding. You all know or have read about some who have left. The media has covered this extensively. I think it is fair to say that we have not had the problems that one would have anticipated at the beginning, prior to us putting this in play. The fact that we put it in play alleviated a lot of problems. Many individuals who had the buy-outs certainly appreciated it and left with something that allowed them to continue in their own lives.
The Chairman: Does that include National Defence?
Mr. Neville: Yes, it includes National Defence.
Senator Bolduc: How many of them are coming back through contracts? I say that because in Quebec, they said to the nurses and doctors, "We will give you $200,000 and you may leave." They took it and they left but now they are coming back at their own expense.
Mr. Neville: We have conflict of interest guidelines that must be respected. We trust that those guidelines are being respected within departments. That is where we are at.
Senator Bolduc: I think we will ask the president of the Treasury Board to change those guys because they forecast our questions too much. They know exactly what we will ask. They must be ready for promotion into other departments.
Senator Cools: Once again, I should like to welcome the witnesses to the encounter that we go through so many times in a year and I should like to thank them for their openness.
Mr. Neville, you have heard some of these questions before. Please turn to page 68 of Supplementary Estimates (C), regarding CIDA. I have a lot of interest in the judges' international activities and payments to the judges across the world.
In any of those votes on that page, are there any sums of money that were paid from CIDA to the Commissioner of Judicial Affairs for judges' international activities abroad? It is a persisting point with this committee.
Mr. Neville: We had an inkling that you would ask that question, so we asked for confirmation on that.
Senator Cools: I am impressed.
The Chairman: You are getting to know us too well.
Mr. Neville: It is our understanding that the expenditures that are in Supplementary Estimates (C) with respect to CIDA for planned expenditures do not include any funds for lawyers for travelling abroad for training purposes.
Senator Cools: We had the Commissioner of Judicial Affairs here before this committee on Thursday, December 10. There are many outstanding issues from his testimony. To the extent that there is nothing there, I accept your response.
Coming back to CIDA, there is an organization called SAKSHI. Somehow, it is involved in teaching gender equality to judges in India and Bangladesh. Do you have any information on this organization?
Mr. Neville: Going back to what we are here to defend, namely, Supplementary Estimates (C), in terms of the content of the additional requests from Parliament, the items that have been provided do not include, as far as we know, that particular item.
Senator Cools: I have never heard of this and I am thinking that it is a different initiative.
Mr. Neville: It could be within the overall CIDA envelope and they are spending money on it. However, within these particular Supplementary Estimates (C), they are not spending money on it.
Senator Lynch-Staunton: On page 65, under Foreign Affairs, there are three items. First, there is $31 million for compensation for currency losses.
Mr. Neville: Senator, the amount requested is $31 million. The Department of Foreign Affairs and International Trade is requesting these through the Supplementary Estimates to maintain but not increase its purchasing power abroad as a result of fluctuations in the Canadian dollar relative to 90 other currencies in which DFAIT incurs costs abroad.
Fluctuations of the Canadian dollar cannot be controlled or influenced by the department. The impact of these fluctuations on the budgets of missions abroad is both unpredictable and unmanageable from a departmental point of view.
Senator Lynch-Staunton: You can stop there. That is what I assumed it was.
In a year where the government guesses right, is there a plus figure that would appear?
Mr. Neville: In years of currency gains, the gains are remitted to the Consolidated Revenue Fund.
Senator Lynch-Staunton: Those are not shown here.
Mr. Neville: There is an agreement between Treasury Board Secretariat and DFAIT, which is that Treasury Board will cover them in years when it is negative, but in the years when there is a gain, it comes back to us.
Senator Bolduc: Is there an allowance for professional people who are, for example, in Tokyo where it is more costly?
Mr. Neville: An adjustment takes place.
Senator Lynch-Staunton: On the same page, there is $1.4 million for Canada's tenure on the United Nations Security Council. That can be interpreted any way; however, I would rather hear your explanation.
Mr. Neville: I agree that the wording could have been different. DFAIT requests this amount of money by way of the Supplementary Estimates for incremental funding requirements associated with Canada's seat on the United Nations Security Council from January 1, 1999, to December 31, 2000.
Incremental funds are required to staff positions at DFAIT headquarters and the PCO as well as Canada's mission in New York. A portion will also be used for travel and the purchase of new electronic systems.
Senator Lynch-Staunton: When we discussed Bretton Woods last time, we had these international agreements where we were committed to put up more funds. We have entered into a few open-ended agreements, however on Bretton Woods you said we were limited.
What brings that to mind is the increased contribution to the Organization for Security and Cooperation in Europe (Kosovo), of $12 million. I imagine that we are contributing to the 2,000 observers who are there. As a member of the OSCE, that is our obligation. Is that an open-ended commitment? If they came back to us for another $100 million or our share of the figure, are we obliged? Is there a cap on these commitments?
I will ask a question tomorrow about the IMF. We are being asked to increase our contribution to a fund by another $53 million, which is double the original estimates.
When we make these commitments, do we leave ourselves open to providing additional funds? Is there a moment where we say, "No, sorry, our agreement says that is it"?
Mr. Neville: DFAIT is seeking $12 million through these Supplementary Estimates to fund an increase in Canada's assessed contribution for its role in the Organization for Security and Cooperation in Europe (OSCE), related primarily to activities in Kosovo.
As a member of the OSCE, Canada contributes a certain percentage of the organization's budget as determined by a single schedule of assessments. Canada's assessed share is currently 5.45 per cent. That being said, if there is a change in the budget and the partners agree to it, then obviously we pick up the difference. If there is no change, our share is 5.45 per cent of whatever the budget is for that period of time.
DFAIT's assessed contribution to the OSCE in 1999 has increased markedly due to the funding of the Bosnia elections and the OSCE Kosovo Verification Mission, the KVM. This was a direct result of the Holbrooke-Milosevic agreement of 1998, which charged the OSCE with modifying the agreement. I think that is the response you were looking for.
Senator Lynch-Staunton: That is not the one I wanted, but it is the one I expected.
Mr. Neville: The key is that we have a percentage of the budget. If we do not buy into the budget, that gives us an out. If we buy into the budget, that implies that we will pick up our agreed percentage.
Senator Lynch-Staunton: I do not think Canada minds contributing to the UN and to the OAS, where it feels it has an input. However, on this one, it is completely out of its hands. Yet we generously made a commitment, and we are probably paying more than we ever realized at the time.
Mr. Neville: I am defending the amounts that are in the budget.
Senator Lynch-Staunton: I am not quarrelling with the amounts. I am quarrelling with Canada's openness and willingness to support just about every international organization and not taking the precautions to ensure that its commitment, financial and human, does not go beyond its capacity.
Mr. Neville: We did sign the agreement. Therefore, we would have given due consideration to the implications prior to signing.
Senator Lynch-Staunton: This is another political question. We are in for 5.45 per cent of the budget.
Mr. Neville: Yes, we are in for 5.45 per cent of the estimates for that period of time.
Senator Robichaud: In answer to Senator Lynch-Staunton, you said that we are committed to 5.45 per cent of the budget if we commit or if we agree with the budget.
Mr. Neville: No, I said that we are in for 5.45 per cent of the budget. That is what we signed up for. I would expect that if we were not satisfied with the budget, we would not be signing the agreement or agreeing to that next period of time.
Senator Lynch-Staunton: Do you think that 5.45 per cent can be renewed every year?
Mr. Neville: I am not sure, but I think the budget is assessed every year.
The Chairman: Thank you, senators and witnesses. It is 8:50, and Senator Cools would like to discuss other issues with respect to the committee. Gentlemen, I will ask you questions tomorrow. I want to know the status of Y2K and how much money was spent, if we could.
How do you wish to proceed, Senator Cools? There are two issues here.
Senator Cools: I think our plan would be to complete our study of Supplementary Estimates (C) tomorrow and report tomorrow afternoon.
The Chairman: Yes, that is the objective.
Senator Cools: We said last week that we would report the Supplementary Estimates tomorrow.
The Chairman: But we have to write the report and get it translated.
Senator Cools: We shall vote on the Supplementary Estimates tomorrow and vote to report them tomorrow.
The Chairman: Yes, along with the Main Estimates.
Senator Cools: That was my next point. We will report those to the Senate chamber on Tuesday.
The Chairman: Yes.
Senator Cools: We have to do the appropriations bills. We have two of those. With that in mind I move that we complete Supplementary Estimates (C) tomorrow and report them on Tuesday.
The Chairman: Is that necessary?
Senator Cools: Yes, it is.
The Chairman: Why? We have never done this before.
Senator Cools: We are going to report them tomorrow.
The Chairman: I am not disagreeing.
Senator Cools: There is a motion on the floor.
Senator Fraser: I second the motion.
The Chairman: There is a motion on the floor. You want to report it by Tuesday. I do not have a problem with that. Does anyone object?
Hon. Senators: No.
Senator Cools: You put the question, and we voted.
The second and larger issue before us is the remainder of our work on Bill C-43. Last week, we were quite optimistic and had hoped we could have completed our work on Bill C-43. Last week, just to remind us, we had agreed that we would allocate today, being Wednesday, and tomorrow, being Thursday, to Supplementary Estimates (C). If perchance there were time, we would move into a clause by clause examination of Bill C-43.
I understand that you want to continue to study Bill C-43, and I am quite prepared to support that.
The Chairman: I appreciate that. Part of the problem with being on television is that it increases the interest, and it is a controversial bill, so people get interested and they want to appear. That is what is triggering this. More witnesses have come forward.
Senator Cools: I understand that, and that is information to be shared with all of us. As I said before, it was my wish that we would report tomorrow. That is what we had agreed, informally. However, I am prepared to hear more witnesses. I think we should discuss who those witnesses should be, and then I think that we should also set a time line as to when we want to report the bill.
We have heard to date, it seems to me, seven witnesses, including the minister, and I am quite prepared to have us hear more next Wednesday, but I think we should discuss and agree on who they should be. As long as we report that bill by next Thursday, I am okay.
I can move a motion to that effect.
The Chairman: I do not have a problem with your timetable, but if there are legitimate witnesses who come forward as a result of these events being televised, would you chop them off? That is really the question.
Senator Cools: Not exactly, Mr. Chairman. I have been quite open and generous. As I said before, we have heard a substantial number of witnesses. We are prepared to hear more. I just want us to come to an agreement as to who they are. I do not believe we ever intended to study the bill too much past mid-March. That is what we had always said.
The Chairman: That was your objective.
Senator Cools: Maybe so.
The Chairman: I concur with you. However, if other witnesses come forward, they should be discussed.
Senator Cools: We are discussing it.
The Chairman: I think in this instance, that is why we carried on as we did.
Senator Cools: A fairly extensive list of witnesses has been presented here. Perhaps I should move a motion. I move that we complete consideration of Bill C-43 and report the bill to the Senate by or on March 18, which is next Thursday.
If I may speak to the motion myself, with your permission, it seems to me that we owe it to our colleagues in the chamber to give them an opportunity at third reading to have a fulsome and a wholesome debate. It is my understanding that colleagues are hoping or planning to be adjourning the week ending March 25. If we were to report the bill on Thursday, March 18, then the debate at third reading could begin the following Tuesday, and that would give colleagues in the chamber an opportunity to have a fulsome debate.
If we were to hear witnesses, for example, next Wednesday, and then we complete this process, we can figure out who the witnesses will be. We can hear witnesses on Wednesday, and then Thursday we will have clause-by-clause examination and a wholesome debate on it. If colleagues wish to bring amendments, we can allocate and plan, as long as we can agree that the bill is reported on the afternoon of Thursday, March 18.
Senator Cools: Is that okay with you, senator?
Senator Lynch-Staunton: Not with me, no.
The Chairman: I cannot agree with that, for if witnesses come forward, we can make the decision as to whether or not we should hear them. However, I view the bill as affecting the lives of 40,000 people.
Senator Cools: I could not agree more.
The Chairman: You are affecting the lives of 40,000 people, and this bill has been profiled on CPAC. Therefore, why tell individuals or groups coming forward that they cannot, because we are reporting? What is the rush?
Senator Cools: There is absolutely no rush, and there has been no rush to date. We have been studying the bill with considerable leisure, I think. The way I see it, we are just operating in the spirit of genuine dialogue and discussion.
The fact of the matter is that there will always be witnesses. Perhaps you could tell me then, and I presume that we are on the subject of my motion, what these witnesses have to tell us that we have not heard. Based on that, we can make a decision on which ones we should hear. Alternatively, perhaps we could meet all day Monday and hear all the witnesses.
The Chairman: I cannot meet on Monday.
Senator Cools: I have raised a few propositions. As I said before, I am prepared to hear witnesses next Wednesday. We can sit well into the evening hours, if you want, on Wednesday. I am quite prepared to do that, but I do believe that at the outset we more or less understood that we would be reporting that bill by March 18. That was my understanding. You may say that it was my hope, and I am prepared to admit that. It is still my hope.
The Chairman: You have to take into consideration that amendments will be brought forward. Have you done that?
Senator Cools: I have. That is why I am saying that we could hear witnesses. I have contemplated that. Believe you me, Mr. Chairman, I have contemplated most of what you are going to say. That is precisely why my proposal is that we hear witnesses next Wednesday and then give over Thursday's meeting to clause-by-clause study. There can then be a full debate and those colleagues who have amendments can bring them and there will be time to debate them in full.
Outside of that, if we want more witnesses and so on, then we will have to encroach into more time earlier in the week.
Senator Ferretti Barth: Is there a motion on that?
Senator Cools: There is a motion on the floor. I move that we complete our study of Bill C-43 and report the bill to the Senate by or on March 18.
You may report it before. That is not a question of concern for me, so long as the bill is reported on the afternoon of March 18 so that third reading debate can begin in the chamber on Tuesday. I believe one day's notice is needed.
Senator Bolduc: Independently of the quality or the importance of the witnesses, you wish to use your majority here to tell us that Thursday is the end of it.
Senator Cools: No, not at all.
Senator Bolduc: That is what I understand.
Senator Cools: Senator Bolduc, you know me better than that. I am not invoking a majority at all. I am merely suggesting that we set some boundaries to our work so we can both know what we are doing. That is all I am proposing. I am being very cooperative.
Senator Lynch-Staunton: This is not a government priority bill. They have a list of four for the end of March. Three have already passed, and the fourth one is the equalization payments bill, which I believe the House has voted on tonight. This is not a priority bill. It is certainly in order but highly irregular to take advantage of the absence of opposition members, at the end of a meeting at the end of a long day, to propose what, in effect, is closure. So be it, if the government side wants to do it, but it would not increase cooperation. It is unheard of. I did it once, as a matter of fact, but all Liberals and Conservatives were there at the time in committee. It was a drug bill and we were struggling to get it through, and I made a motion at the time when the full committee was in attendance. However, to do so when there is only one regular member from this side here is, I think, to take advantage of a situation. That is unfair, particularly when no advance notice was given, and particularly when, if the subject were to be brought up, it should have been brought up at the time the bill was being discussed.
Senator Cools: It was. I raised it then.
Senator Lynch-Staunton: Perhaps you did. I am talking more as an observer than a participant. I would urge you not to move the motion and to reflect on the fact that the government is not pushing this bill.
Senator Cools: I want to assure Senator Lynch-Staunton that I am not attempting to take advantage of the fact that there is only one member of the opposition present. The record can show very clearly that we have a pretty full house here. As a matter of fact, it was not made clear for the record that there was only one member present until you just so stated. I want to assure you, Senator Lynch-Staunton, that I am not in any way attempting to take advantage of what you are saying to me in a weak moment. If you want me to wait and move this motion tomorrow, I fail to see what difference one day will make.
Senator Lynch-Staunton: But I do not see the purpose of cutting off study.
Senator Cools: If that is what you are asking --
Senator Lynch-Staunton: I am not going to get into an argument. I do not see the purpose of it. I do not understand why this bill has to be reported by a certain date. It is not that we want to delay it because it is controversial and there are problems with it, but why March 18?
Senator Cools: It is because, Senator Lynch-Staunton, at the outset, when we agreed to hear other witnesses and to allocate the time, it was clear to me that we were working on a timetable. Perhaps I should have been a bit more pushy. Perhaps instead of having one or two witnesses, we should have crowded and had four witnesses per meeting. Perhaps we need not have been so generous with our time. There are endless reasons. The fact of the matter is that, at the outset, when we set out to study the bill, all the agreements that we made on this side were based on the fact that we were looking to complete our committee phase of this work by around mid-March, and we have gone past that, to March 18. If you think I am being unfair, you are quite free to say so. I do not think I am. I think everything I am saying right now is quite consonant with everything we have agreed to so far.
The Chairman: With one exception, that exception being that if there were additional witnesses, then that time could change. That was the proviso.
Senator Robichaud: If I may, Mr. Chairman, you said a few minutes ago that, because these meetings are televised on CPAC, more witnesses have come forward. If they are just coming forward to be on TV, I have problems with that.
The Chairman: I agree with you. However, these are legitimate organizations. I felt that another couple of days of hearings would not destroy the intent of having the bill completed by the end of March. That was my understanding.
Senator Cools: Mr. Chairman, the committee could meet on Friday to hear more witnesses. I am not opposed to hearing more. You can hear as many witnesses as you wish. We can sit on Friday. We can sit on Monday. I am attempting to set some boundaries so we can all know where we are going.
The Chairman: I do not disagree. I am making a point. If there is a legitimate request for someone who wants to appear, a legitimate advocate on one side or the other, and that person cannot make it on a specific day, what are we supposed to do, just say "no"?
Senator Cools: I do not think we are just saying "no," Mr. Chairman.
The Chairman: I hope not.
Senator Cools: Do not underestimate our humanity. All I am trying to say is we should set a boundary to what we are doing. Having said that, my motion is on the table.
The Chairman: Do you want to vote on it tonight or tomorrow?
Senator Cools: I am prepared to vote on it right now. If you have different reasons as to why we should not --
The Chairman: We have stated our reasons. I disagree with you because it appears to be cutting off our study arbitrarily.
Senator Cools: It should not.
The Chairman: This has been on TV, so witnesses keep coming forward.
Senator Fraser, did you want to say something?
Senator Fraser: I was going to suggest that we could do next week what we have done this week, sit into the evening, hear a long list of witnesses, although perhaps discipline ourselves slightly in the length of time we devote to each witness.
Committees can be quite effective without keeping each witness for over an hour. I know that this committee is capable of that too because I have seen it do that. I think we could hear all the witnesses on your list if we did that.
Senator Cools: Could we hear them next Wednesday?
Senator Fraser: Sure.
The Chairman: We could, barring any others coming forward.
There are two legitimate concerns. The first is whether the provinces have any concerns and the second is whether the Privacy Commissioner has any concerns.
We want to ensure that we are thorough in our work. That is our responsibility. We do not simply let people come forward willy-nilly. We must do our homework and ask people legitimate questions. Then at least we can say afterwards that we gave them the opportunity.
The provinces may not even be aware that we have this bill before us; it may be brought to their attention by the media. We have to ask. That is the only proviso I have, and it is a legitimate proviso. We should be aware of that when we make our decision.
Senator Cools: Mr. Chairman, what you are saying is not inconsistent with what I am saying. I am speaking about a date, which is a full week and one day away, so there is a fair amount of time. You talk about the provincial governments and the Privacy Commissioner coming forward. I observe that they are not on the list you presented to us today.
The Chairman: The provinces are on that list. They have not confirmed. Only Quebec has said no. The others have been asked, as is our responsibility.
Senator Cools: When were they asked?
The Chairman: I believe it was a week and a half or two weeks ago.
Senator Cools: Perhaps you could tell us exactly when they were asked. If they were asked a couple of weeks ago and they have not responded, I would take that as a strong indication that they are not interested in coming.
The Chairman: They may have been asked last week. I will not argue this with you. As you go through the process with a bill, you become aware of concerns. If the concerns are legitimate, we should at least ask.
Senator Cools: Very well. I still stand exactly where I stood before. We have until one week and a day from now and we can use that time as we see fit. I am prepared to sit in this committee all day Friday, all day Monday, and much of Tuesday. There is absolutely no obstacle to hearing witnesses.
The Chairman: The only obstacle is availability.
Senator Cools: Not quite so. At any rate, the motion is before us.
The Chairman: Are members ready for the question?
Senator Lynch-Staunton: I would like to put on the record that what this Senate committee is doing, which to my knowledge has never been done before, is copying the House of Commons, which acts on instructions and decides in advance how much time will be given for the study of a bill, regardless of how important or unimportant it is. The purpose of the Senate is to allow people who have not had the opportunity in the House of Commons to give us their views in order that the Senate can reflect on them and improve the bill if it needs to be improved.
This bill is not a priority bill. As far as I know, the government is not pushing on it. The minister would like to see it passed, but he has not established a deadline, as far as I know. If Senator Cools speaks for the government, and in particular for the minister, that is another matter, but I do not think she is.
I do not know the validity of the witnesses because I have not participated in the debate on this bill, but I do know how committees here are supposed to function. An important aspect of our work is to take all the time necessary, without being obstructionist, to examine the bill, and to report to the chamber.
Perhaps there are witnesses on that list who could increase the intelligence of this committee on the bill, and perhaps there are not, but the chairman believes that they are worth listening to. Senator Cools is suggesting that, no matter how valid they are, we are out of here March 18. I find that both unnecessary and demeaning to the role of the Senate, and particularly its committees.
Senator Cools: I am only saying that we should use our time wisely and prudently to ensure that people who have concerns about this bill are well heard, well studied and well listened to. I am attempting as well to ensure that those senators in the chamber who are not privy to the debate within this committee have a full and sufficient opportunity on the floor of the chamber to be able to debate the issues completely.
As a matter of fact, Senator Lynch-Staunton, I am, in a way, supporting what you are saying. If there are so many more witnesses who have so many more valid things to say, perhaps we could persuade the chamber to continue these hearings in the Committee of the Whole. My motion addresses itself to the boundaries of debate within this committee. The committee has moved along at an extremely reasonable pace so far. I believe that we have given witnesses a generous amount of time.
I believe that to date the committee has done an excellent job of studying the bill. It has certainly given witnesses ample opportunity to bring forth their concerns.
My concern on this particular issue is that, if those witnesses have been able to persuade members of this committee to bring forth amendments, those amendments will be amply debated, both in this committee next Thursday and in the Senate chamber once the bill is reported.
Having said that, I am quite prepared to have you put the question.
Senator Bolduc: I have been on this committee for 10 years and I have never seen anyone on the other side so rigid. I think this is not wise. Perhaps you wish to think about it.
Senator Cools: I am always willing to reflect.
Senator Bolduc: We have been repeating ourselves for the last half hour. It seems to me that this is not wise.
Senator Cools: I appreciate your concerns, Senator Bolduc. I hear them and I value them. I am saying that perhaps we should have had this discussion at the outset of our committee considerations. Then, as Senator Fraser was saying, perhaps we would not have spent so much time and so many questions on each individual witness. Perhaps we could have heard twice as many witnesses.
I am ready for the question.
The Chairman: It is moved by Senator Cools, seconded by Senator Ferretti Barth, that the committee complete its consideration of Bill C-43 and that the committee report to the Senate by or on Thursday, March 18, 1999.
Will all those in favour of the motion so indicate?
Will all those opposed to the motion so indicate?
The motion is carried on division.
The committee adjourned.