Proceedings of the Standing Senate Committee on
National Finance
Issue 29 - Evidence
OTTAWA, Wednesday, March 17, 1999
The Standing Senate Committee on National Finance met this day at 4:45 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: Honourable senators, our first witnesses this evening are representatives of the Customs Brokers Association of Canada.
Please proceed.
Mr. Levon Markaroglu, Director, Operations, Customs Brokers Association of Canada: Thank you for graciously giving your time to hear from the Customs Brokers Association of Canada. The association represents small and medium-sized customs brokers across Canada. We are not here to promote or to oppose the proposed Canada Customs and Revenue Agency that will be formed pursuant to Bill C-43. However, we are before you to express some of the concerns of the association as events seem to unfold toward forming a new Crown agency.
Customs represents approximately 20 per cent of the current Revenue Canada structure. It is assumed that the Customs function in the proposed agency will be comprised of a comparable percentage of the proposed agency. This 20 per cent of the total is extremely important for the commerce of Canada. Canada's imports and exports combined represent close to 80 per cent of Canada's gross domestic product. Imports and exports each approximate about 40 per cent of the GDP.
Given that Canada's trade has more than doubled in the last five years, the double imperatives of policing Canada's borders for the safety of our citizens and children and of moving the nation's commerce require a delicate balance. We cannot help but wonder what new role the proposed agency will be ascribed to play in this environment.
We are a trading nation. Please note that one in three jobs in Canada is dependent on trade. For the record, on a per capita basis, Canada exports three times as much as the United States and twice as much as Japan.
The association is aware of the various studies and publications that estimate the efficiency gains from the elimination of duplication between various levels of government under the proposed agency. That is an admirable objective. However, those initial studies of the proposed agency had very little to do with the Customs side of the House. In fact, very little, if anything, had been said about Customs when those studies were conducted.
In our discussions, the authors indicated that in their estimation and determination of future efficiency gains under the proposed agency, only the GST component of total revenue collection associated with Customs functions was factored into potential savings estimates, as all imports are subject to GST at the border. The name of the proposed agency, however, is the Canada Customs and Revenue Agency. We should like to know the specifics about Customs under the proposed agency structure.
Specifically, what is the proposed resource allocation to Customs? Would the importing public be better served under the proposed agency? Are there any efficiency gains related to Customs under the proposed structure? Who will pay for the setup costs, and who will pay for the services of the proposed agency?
As my earlier comments suggested, the real concern from the association's point of view is "user fees" or "cost recovery" under the proposed agency that will ultimately have to be passed on to the end user, the customer. We have reservations about the system becoming more efficient through the initial expenditure of public funds to set up the proposed agency, only for the agency to "download" costs to private industry in order to realize efficiency gains for the government -- gains realized at the expense of private enterprise.
If that is the direction the proposed agency is headed, if a "public good" is now going to be priced for sale or, at a minimum, for cost recovery, then we beg to ask the following questions: What will be the price for service? Who will determine the cost of service? Will it be determined under regulation? Will it be the private sector formula where marginal cost equals marginal revenue? How will those prices affect private industry competitiveness? Finally, what are the net gains in what appears to be a zero-sum approach?
Honourable senators, we are in the midst of public consultations with Revenue Canada on a Customs blueprint, a vision from Revenue Canada for the future. For the record, we have appended a copy of our input to the Assistant Deputy Minister of the Customs and Trade Administration Branch regarding the blueprint.
The association should like to state that we wish to decouple the blueprint consultative process from discussions about the proposed agency. In other words, while the two subjects are not mutually exclusive, one is not necessarily the complement of the other.
We believe that the agency is intended to collect taxes for the federal government under a harmonized sales tax environment in which most provinces have harmonized their sales taxes as Nova Scotia, New Brunswick and Newfoundland have done. Alternatively, non-harmonized provinces would pay a fee to the federal government for the federal government to collect taxes on behalf of those non-harmonized provinces. The proposed agency may be a precursor to fulfil this mandate, although federal-provincial discussions to put in place such a mechanism do not appear resolved at the moment.
Customs, on the other hand, is a relatively small player in this big picture. However, this smaller player would have a disproportionately large and direct impact on our day-to-day operations in the most effective way. That is why we are here before you today.
In closing, the association wishes to reiterate that conventional wisdom indicates that agencies, in general, tend to be more self-reliant. Therefore, it is hoped that the proposed Canada Customs and Revenue Agency, in its quest for self-reliance, will not unduly compete with private enterprise using a privileged position through user fees while no other alternate service delivery mechanism can exist. Such a development would undoubtedly run counter to the Revenue Minister's fairness initiative launched in March 1998 and published in a Conference Board of Canada report entitled "Setting a New Standard: A 7-Point Plan For Fairness."
The Chairman: Mr. Markaroglu, could you expand on your statement that you wish to decouple the blueprint consultative process from the proposed agency discussions?
Mr. Markaroglu: We have a brand new proposal from Revenue Canada that looks into the future of conducting customs business in Canada to strike a delicate balance between interdiction and enforcement as well as compliance on the revenue side. We are dealing with this on its own; however, there are concerns regarding user fees and cost recovery. We are finding some obstacles currently, not necessarily under the blueprint but in general. We wonder: What if the two were combined? We may not be able to deal with it in its totality, however. It is better to deal with it in bits and pieces.
Our response to the blueprint is appended to the presentation. You will perhaps be able to look at it in isolation because the user fees and cost recovery are a concern both in the blueprint and under the agency.
The Chairman: The minister has given assurance to this committee, I believe, that there will be no user fees. I would expect that the agency, in its consultative process with you, would have informed you of that as well. Do they have that on the record with you?
Mr. Markaroglu: Perhaps this is the forum for us to bring it out, to state and write in the record that this is the situation. Perhaps the word would be binding in a public forum and/or in legislation and/or in regulation.
Senator Lavoie-Roux: It seems that the maritime provinces have succeeded in harmonizing their taxes, but that is not the case for the other provinces. In your brief you state that the proposed agency may be a precursor to fulfil this mandate although federal-provincial discussions to put in place such a mechanism do not appear at the moment. Do you expect any problem from any specific province? You seem to feel that this could be worked out, if I interpret your statement correctly.
Mr. Markaroglu: Thank you for asking that question. In Ontario, we recently received Customs Notice N-266, which says that amendments have been made to the Ontario Retail Sales Tax Act to provide Revenue Canada with the legal authority to collect and remit PST and to detain goods should an individual refuse to pay the applicable PST. That will be effective on April 16, 1999, for travellers and on June 1, 1999, for all non-commercial importations entering through postal and courier streams. It could easily apply to commercial goods. In the maritime provinces, the HST, the harmonized sales tax, does not apply to commercial goods at the moment.
Senator Lavoie-Roux: Do you expect that a province like Quebec might see this as an interference on the part of the federal government? Would the federal government be seen as trying to "dictate" new ways of functioning for Quebec? My worry is that we should avoid creating useless bones of contention with the provinces. I am not sure, as I read this, that we will be immunized against such a disaster.
Mr. Markaroglu: I am not privy to federal-provincial relations. Perhaps it is very insensitive for me to answer because it does not relate to my subject matter. Of course, the indication from Revenue Canada is that any province that does not harmonize will have to pay a fee to the federal government for those taxes to be collected.
Senator Lavoie-Roux: Do you know where they are in their process?
[Translation]
Mr. Markaroglu: I am sorry, madam, I do not know exactly.
[English]
Senator Lavoie-Roux: Do you foresee any problem? Do you feel it could be settled with discussion? Do you expect that another problem might arise in the delicate federal-provincial relations?
Mr. Markaroglu: Perhaps I could answer the question from a commercial point of view. The moment that this tax applies to commercial goods, then we have other problems to deal with that would generate their own problematic situations.
Senator Lavoie-Roux: In other words, it is far from being clear, actually.
Mr. Markaroglu: It is not clear at all right now and we are watching, like everyone else.
The Chairman: For the record, while the minister has given us assurance that there will be no user fees, that is not yet law. In other words, it must be incorporated into the regulations.
Mr. Markaroglu: We would be delighted if it were, sir.
The Chairman: I appreciate that. I want to reinforce the fact that it must be in the regulations because the ministers change over time. Thank you for your attendance and for your presentation.
We will hear now from the Fraser Institute.
Mr. Owen Lippert, Director, Law and Markets Project, Fraser Institute: Honourable senators, my comments do not reflect the position of the institute in that the institute itself does not take positions but hires people like me who do to speak out on these issues. I must also add that the Fraser Institute does not lobby one way or the other on these bills. Indeed, it is part of the condition of our charitable status that we do not do so. However, we do provide commentary on certain aspects of proposed legislation.
There are two general areas of concern about Bill C-43 and the proposed Canada Customs and Revenue Agency that I hope to address in my presentation. The first issue deals with accountability and the second deals with the slightly more complex issue of potential involvement of the CCRA as a competitor in private markets, particularly those involving electronic networks, software and such things as network access.
Accountability has been a major concern throughout the life of Bill C-43. Indeed, going through the Web sites and other material you can see that the minister has undergone extensive consultations, and the bill has changed as a result.
For the purposes of today, I should like to define accountability using the model provided by Margo Priest and William Stanbury in some of their recent work that has been presented to the Canadian Centre for Management Development. They identify six major elements: delegation of authority by the principal to the agent; principal's instructions to the agent; criteria for measuring the agent's performance; flow of information to the principal about the agent's performance; evaluation of the agent's performance, explicit and implicit; and reactions by the principal closing the loop.
I will highlight issues under each of those categories. By no means should my comments be considered definitive. I reserve the right to make the occasional mistake.
The interesting thing about the delegation of authority in Bill C-43 is that it gives greater scope for the CCRA to be an independent agent. As an independent agent, it offers something of the best of both worlds. However, that usually must be dealt with cautiously because of the potential for arbitrary behaviour.
Perhaps I can make this clearer by way of example. The bill provides indemnity for members of the board of directors should an action be brought against them. Should they be found liable, the amount will be paid out of the consolidated revenue fund; that is, the money will be paid in right of the Crown rather than coming from the budgets of the CCRA. That has been standard practice across government. However, it has been identified as leading to abuses. I remember hearing the former Attorney General Allan Rock say on several occasions that this subject ought to be addressed.
The possibility of abuse is fostered in the strange set of incentives that are created. For instance, when an action is brought against a department, the resources of the Department of Justice may be called upon. Lawyers in the Department of Justice are then paid half by the initial department and half by the Department of Justice. As a result, defendant departments are not spending as much money as the plaintiff is on legal counsel.
Moreover, the incentive not to settle quickly is further exacerbated by the requirement that when a final judgment is awarded, it is paid by the Crown out of the Consolidated Revenue Fund rather than by the department out of its budget. Indeed, if a settlement is reached before a final judgment, the costs do come out of the department's budget. That has been identified as contributing to unnecessary and costly litigation. By some estimates, tax litigation is perhaps up to 40 per cent of the litigation with which the federal government is involved.
One would expect in the CCRA that those incentives would be addressed. The CCRA should not receive the benefit of a half-price Department of Justice lawyer. They should pay the full freight. Moreover, the Department of Justice should probably bill them as if those justice lawyers were private counsel rather than salaried employees. In essence, the plaintiff and the defendant, in this case the CCRA, would be on the same foot in terms of costs.
My point in raising that particular issue is to say that in the balance between being an independent agent and being an agent of the Crown, with greater autonomy comes greater responsibility. There should be more attention to potential problems such as that.
Clearly, Bill C-43 reduces the scope of the principal's instructions to the agent. That is, if Parliament is the principal and the CCRA is the agent, though it is not exempt by any means from legislative and ministerial oversight, the principal must no longer adhere strictly or legally to many existing legislative instructions transmitted through past legislation, for example, the Public Service Employment Act and the Department of Public Works and Government Services Act.
The rationale for those strictures of past instructions or past legislation has become counter-productive to the cost-effective function of revenue collection. That raises the question: If it is true for revenue collection, is it not true for other government functions? If the CCRA wants to be more of a modern, knowledge-based organization rather than a mass production bureaucracy, how is that not true of the Department of Finance or Industry Canada?
In some ways, the release of the CCRA from the Public Service Employment Act is an admission that there has been a dysfunctional employment regime created in the government and that it must be addressed. I would point out that the specific prohibition of including staffing levels in collective agreements involving the CCRA is a good step and one that ought to be universal across the civil service.
However, the issue of labour, and there are others coming who will speak to this item, perhaps from a different view, obscures the single most important instruction sent by Parliament to an agency, which is its budget. To the degree that the CCRA can augment its own budget through fees, property sales and multi-year budget allocations, it will receive less direction from Parliament. That puts a particular onus on the minister to ensure that those instructions of Parliament are directed, especially if he or she is to be assisted by a board of directors.
The issue of the board of directors raises an interesting question regarding the CCRA's mandate to try to seek out opportunities to collect taxes on behalf of provincial governments. The board of directors cannot be members of a provincial government. If you are trying to attract a business from provincial governments, and hoping to be paid accordingly, you would want to offer representation on the CCRA board because they would have a better chance to have oversight. That may be a requirement of the provincial legislatures. Therefore, that would be something to move that agenda further along.
I now move to the issue of criteria for measuring an agent's performance. Despite all of the elaborate accountability mechanisms outlined in Bill C-43, which we will discuss later, there is no explicit statement as to what they are accountable for, beyond the proper conduct of their internal and financial management. That raises some questions.
There is talk of fairness. I see the minister has launched a fairness initiative. However, there is precious little definition as to what that means. Reference is made to the 1985 Declaration of Taxpayer Rights, but that legislation contained no substantive independent recourse. Taxpayers do have access to the courts when they allege unfair treatment, but they must base those complaints on other legislation such as the Charter of Rights and Freedoms. If the Declaration of Taxpayer Rights is such an important guide, one might expect to find that someone in Revenue Canada is responsible for its implementation. While I may be incorrect on this, all my phone calls failed to turn up a single person specifically tasked with monitoring or directing compliance with the declaration.
There is a need for an explicit definition of the CCRA's accountability to taxpayers. I note that the opposition critic, Jason Kenny, proposed legislation for a taxpayers' bill of rights and an office of taxpayer protection. Those were not accepted. I do not wish to argue his points, but I find it curious that the official Revenue Canada Web site contains several modules to accompany the third reading of Bill C-43 that were meant to be speeches on various aspects of the legislation, presumably for use by government members and presumably written by Revenue Canada. I noticed that in the module on fairness, there was rebuttal of Mr. Kenny's proposals. Although they were not named as being generated by Mr. Kenny, they were identified by their proper names.
That seems to me to be a difficult situation. If civil servants are writing speeches attacking proposals of opposition members, we have identified at least once criterion for a legislated definition of what the CCRA should be accountable for, which is no partisan activity.
Regarding the flow of information to the principal about the agent's performance, to its credit, Bill C-43 outlines several means through which Parliament will continue to be informed. They are all fine. It strikes me though that there is other information that MPs may want regarding, for example, number of lawsuits involving taxpayers, their cost, their dispositions, number of complaints, annual evaluations, and public opinion surveys. That is important because one of the reasons given for not having an office of taxpayer protection, as Mr. Kenny proposed, was to preserve the role of MPs in bringing tax problems of constituents to the attention of the minister, his staff and the department. If MPs are to have the role of tax champions, they must be fully informed. Indeed, that information could go as far as riding-by-riding breakdowns of tax-related action so that problems could be identified, at least in the overall.
The other category is evaluation of the agent's performance. The scope of the Auditor General's responsibility in that regard is not clear in the legislation. It seems that his responsibility is restricted to financial statements, fairness and reliability of information about the agency's performance. However, in recent years the Auditor General has been performing value-for-money audits and other more detailed performance reviews. The CCRA should like to see that continue.
I mentioned that the five-year legislative review seems a bit long. Most of all, there ought to be included a proposal for a statutory civil right to ensure regulatory compliance according to a document such as the Declaration of Taxpayer Rights, which had been identified as critical to the operations of Revenue Canada and the CCRA.
That is not as radical a proposal as it may seem, because similar civil rights to sue are included in the Canadian Environmental Protection Act and the proposed legislation on Canadian endangered species protection. If the government considers that to be an important means to evaluate its performance in terms of upholding environmental legislation, one could argue that it is just as important in terms of revenue collection.
With regard to reaction, rewards and sanctions, it is clear that Bill C-43 is based on the view that in order to be effective, the CCRA must have greater ability to reward and sanction its own employees. It has largely achieved that. The same holds true in terms of parliamentary oversight or reaction to the CCRA. There are few things that can actually be done, but I would propose that the CCRA should report to the Minister of Finance and that the position of Minister of National Revenue be removed, in part because the Minister of Finance has more resources at his control. Indeed, in his deputy, he has someone who can act as an intermediary with the CCRA.
As it stands now, the Minister of National Revenue's deputy would in fact be the commissioner and would have a divided role as both advisor to the minister and functional head of a quasi-independent agency. Having the CCRA report to the Minister of Finance would also have the advantage of greater policy coordination between the revenue function and the expenditure function of government.
The second major issue I should like to address in my presentation is the potential effect of the CCRA as a factor in the market. I noticed that in her speech of December 10, Senator Carstairs made mention of the new opportunities in software development and electronic networks of the CCRA. Of particular note is the issue of electronic filing of tax claims. Revenue Canada officials have made statements about eventually expanding the ability to file taxes electronically directly to individuals. At present, individuals can only e-file through authorized agents who may charge up to $50 for the service.
My understanding is that a pilot project and testing are under way. In doing this, the CCRA should pay particular attention not to place itself in competition with the private sector. That is a very real temptation. If the CCRA did develop tax preparation software or electronic portals, it would have the potential to dominate that market through its regulatory control over electronic portal access, software standards and the like.
Putting aside the question of whether the CCRA has the technical expertise, there are two major concerns. One is data confidentiality. This blurs the line between what the individual owns in terms of his tax information and how long he owns it before it becomes government property. The second concern is that of governments competing with private sectors in general and with electronic network and software companies specifically.
The only justification for government to provide a good or service is the failure of private markets to provide it. That is a longstanding tenet of economics and public administration, yet one that is grossly violated. However, things have improved. Petro-Canada and Air Canada have been privatized. In The Fraser Institute's Economic Freedom of the World index you will see a decline, at least in developed countries, of government-run enterprises and also a correlation between that decline and increased economic growth.
In Canada, we have the example of Canada Post, which has been expanding rather than shrinking its activities in the market, and that is a cautionary tale. Indeed, even Canada Post stories about real estate development, courier services and electronic networks should give plenty of notice for caution.
Given the CCRA's size, its access to government funds, and its ability to charge monopoly fees and reallocate funds, it could in fact initiate and dominate electronic access to a wide variety of public services from income tax preparation to sales tax accounting to electronic commerce portals. That would be difficult because such a dominant position would not be maintained either by consumer choice or by innovation, but by monopoly powers and stable funding supplied to it by government.
It would be very surprising if the government were to allow that situation to arise. First, it has expressed its commitment to encouraging the expansion of private industry and software and other information highway industries. Second, it is also intensely involved in studying the potential harmful competition effects of electronic network industries and major software platforms. In fact, Industry Canada, with the Competition Bureau, is involved in a rather large exercise. Anti-competitive activity can occur when insufficient parliamentary oversight and information as to the activities of quasi-public bodies continues. A case in point is Canada Post's purchase of Purolator Couriers.
I will leave you with this final recommendation or proposal: If the CCRA is going to move into those areas in the mass consumer market, the Competition Bureau should be tasked to provide a competition audit of any such activities. To reiterate how this plays to the major point, if the CCRA is to enjoy greater autonomy in its actions, it also must assume greater responsibility. A key responsibility is to avoid interfering in private markets in which it has an unfair advantage because it is able to ignore, at least to a degree, market signals of price and profit and loss.
Senator Tkachuk: We have had a number of discussions about why we should have an agency instead of a department. What possible advantage would Revenue Canada have operating as an agency rather than as a department?
Mr. Lippert: In my reading, the very clear advantage is in terms of its human resource policy. It can now get out from many of the strictures that are currently in place in the Public Service Employment Act and other such legislation, although some of it still applies. Clearly, the agency would move very cautiously in how far it deviates from that, but the critical point was on salaries. In order to retain qualified auditors, they had to be able to offer them something closer to market wages. They could not do that within the current guidelines of the Treasury Board salary caps. Being an agency would give them the advantage of moving away from those caps.
However, that means that salaries, at least of the very top management, should be published because they might no longer be within the Treasury Board guidelines. It would be useful then to see how far they are deviating from Treasury Board guidelines.
Senator Tkachuk: I will ask those same questions of departmental officials when they come back, but I have heard other witnesses say the same thing you said and I agree. Are Treasury Board guidelines not established by the government?
Mr. Lippert: Yes. The overall story is that it is now evident that living up to the rules as they were implemented in the past has become too expensive and perhaps counterproductive to proper functioning.
Senator Tkachuk: That problem must not be unique to Revenue Canada. We have had the National Parks Agency established as well, and I think the same kind of thing applies there. They went to an agency to get outside of the Treasury Board and the agreements that they had made with the public service unions, and they are just setting up a corporate cover to do what they could not do under normal circumstances.
Mr. Lippert: I agree with you. That is a positive thing. It would be better to come clean and change the legislation, but the second best would be to find a way to do it otherwise.
As an overall point, it is perhaps not just a human resource problem. The whole rationale for these quasi-governmental agencies is to allow them to experience more robustly private market signals in the sense that their budgets are more attuned to what their clients are paying or not paying. The idea is to give them the same kind of feel as a private organization without privatizing the functions. They have to be more competitive and efficient.
Senator Tkachuk: Is the feeling they are striving for not one where public servants can pay themselves way more money, not be as accountable and pretend that they are in the private sector when they are actually protected by the federal government? If that argument is true for them, I should think it would also be true for the Department of Finance because they have to attract high-quality economists. Will that be the next argument?
I fear that. I have not understood the bill from the beginning. I do not understand why they are doing it except to be able to pay themselves more and to escape the very guidelines they set up.
Mr. Lippert: Those are positive motives.
Senator Tkachuk: I agree they are positive motives if you can find a way to be more efficient. But I also think honesty is a positive motive. They are escaping accountability because government sets up the guidelines and passes the legislation. If it does not work, you change the guidelines and change the legislation. Nothing else happens.
In the question of liability, when someone wants to sue the agency, will that person be suing the board members as well?
Mr. Lippert: That is possible. It is difficult to imagine the circumstances under which board members could be sued. Conceivably, someone could make the case that a particular general policy that was undertaken led to a specific discrimination. He or she would seek damages from the board of directors because the board put forward that general policy.
Senator Tkachuk: How would the agency be different from a private corporation? They have a board of directors. I would think that the members of that board would be responsible for running the agency. With a private corporation, if something goes wrong people normally sue everyone. They sue the agency and the board members and the officers.
Mr. Lippert: That is always a good way to start: sue everyone and see who is left after the first day or two in court.
Senator Tkachuk: Since they do not pay any insurance there is no self-interest in anyone acting responsibly or fearing a suit; is there? The Crown will pay all of the fines anyway.
Mr. Lippert: Yes, unless, of course, as the legislation states, they are clearly in breach of their duties. But if they were within the conduct that is expected of them, they would be indemnified for both legal costs and any award.
Senator Tkachuk: If they were not, then they would pay. Might they be liable?
Mr. Lippert: They could be liable, or the agency might find some other mechanism to cover those costs. They could be personally liable if they were found to be in breach of their duties. That is in the legislation.
Senator Fraser: Your presentation says that provincial governments do not get representation on the board. As I am sure you know, clause 14 provides that each province nominate a director. In fact, the provinces and territories would end up with 11 out of the 15 seats on the board.
Clause 16 says that none of the directors may be a senator, an MP, an MLA, or a public servant. However, I am not aware that it is generally considered sound public policy to have MPs, senators or MLAs sit on the board of a Crown agency. I think the general practice is to have those agencies accountable to the government through the minister in the normal parliamentary procedure, not through the board.
Mr. Lippert: What you say is correct, but in the case of the provinces, it is a different relationship now. It is a vendor-buyer relationship, at least in terms of tax collection. It seems to me that if you had a major commercial relationship with a company, you would be on the board. Indeed, that is the practice in many industries. If there is a lot of cross-connection between industries, as a supplier, you would have a member on the board.
In terms of the CCRA being a harmonizing agent of tax collection, why would it not directly involve representatives of the provincial government who are involved in those issues?
Senator Fraser: Interlocking directorships are perhaps another issue.
Senator Carstairs: My question is along the same lines. If you were setting up an independent agency, you would want independent directors. No agreement between a province and the agency can go into force and effect unless both the province and the agency agree that it will go into force and effect. Do you not think it would be a conflict of interest to put public servants and/or MLAs, MPs and senators on this board?
Mr. Lippert: That is a legitimate concern. However, there are probably more tax bureaucracies in this country than are warranted or can be sustained. Someone has to go. The federal government is making a pre-emptive strike by setting up the CCRA to be more efficient than the provincial tax collection bureaucracies. They are moving to preserve their jobs and positions.
The provinces will resist for a long time because they like the control. It would be very difficult to persuade them otherwise, as we are seeing. However, if the harmonization of tax collection is a good thing, and if there are two competing brands -- the provincial brand in local markets and the federal brand nationally -- why would we not bring them together? To do that, we must offer the provinces real input regarding how it will be done.
That goes to the nature of the board. It is not a board of directors as commonly understood in the private concerns. Rather, it is more a board of consultants. It is set up to have sufficient churn that it would probably not be as strong a board as one would expect from a private company that seeks out people with expertise and with clout. However, it could be more effective than just a consultative board. It could really take a hand in guidance if the players on it represented the interests at hand.
I see no particular reason why it would be a conflict of interest for an MP to be on the board of the CCRA. Supposedly, MPs would be involved anyway. Why would there be a conflict if they were more directly involved in the setting of policy? Remember that this board is not to look at specific tax cases, but to look at the overall policies of the agency.
Senator Carstairs: I must indicate that my experience in putting MLAs on boards of provincial Crown corporations has been an unmitigated disaster. They represent only the position of the government or of the party they serve. They do not represent the interests of the public. If that is what you are suggesting the agency do here, then I suggest the agency would be a step backward. I happen to think that agencies are a step forward.
Mr. Lippert: Perhaps I am just cynical by nature. I assume that anyone appointed to this board by the government through this country's political, partisan process of making appointments will represent the interests of the government of the day as much or more than any MP or MLA. Remember that this is not a Crown corporation.
Senator Tkachuk: I agree with you there.
Senator Carstairs: You and I will have to agree to disagree on that point.
The legislation clearly states that the provinces must produce a list. From that list, the Governor in Council can pick an individual. The reason for that is quite clear. If the provinces were each to appoint only one person, we could end up with 11 chartered accountants. By presenting a list from each province, it is hoped that there will be a varied background of representation on the board. However, no one is more partisan, in my experience, than a member of a governing party or a member of an opposition party.
Senator Cools: Mr. Lippert, I have listened to you very carefully. I conclude that other than one or two minor concerns, you quite like the bill.
Mr. Lippert: As I said, I will not lobby for or against the bill. Some of what it is intended to accomplish -- the more efficient collection of taxes, for instance -- is for the greater good. Tax harmonization reduces the cost of collecting taxes in this country, and that is a good objective. As well, it would be positive to get out from underneath 19th century attitudes as to how government employment should be managed. If government agencies or quasi-government agencies are willing to expose themselves more to the risks of how market bodies work, that is also positive.
There is the risk of abuse, and that is why I said that safeguards must be there, particularly for the taxpayer's civil right to sue. There must be an explicit code of accountability. Those safeguards could offset any potential risks.
The Chairman: Do you not think that the public would be outraged if user fees were brought in to this degree? Would that perception prevent that from happening?
Mr. Lippert: The issue of government user fees is tricky. If directly related to the cost of the service, user fees are good if the person has a choice of accessing or not accessing that government service. The last time I checked with my accountant, paying my taxes was not an option. In terms of the collection of taxes, that fee would justly be met with howls of outrage.
If other government services are offered, then fees are appropriate. For instance, a fee is charged for advanced rulings. If that fee is too high, the company will say that it is not worth it to pay the fee. They will then go to court to find out one way or the other.
The trick is this: Does the consumer, in this case the taxpayer, have a choice? If they have a choice, then that can be argued. However, the fee must also bear some relationship to the actual cost of delivering the service. In a recent court case, the probate fee structure in Ontario was struck down because it was being used to raise revenue and bore no relationship to the actual cost of probating wills.
The Chairman: So I understand.
I do not know how much experience or knowledge you have of the IRS in the U.S. Does that agency operate on a user-fee basis?
Mr. Lippert: I am not an expert, but they do have a set of fees. I could look it up. They operate at even greater arm's length than is proposed for the CCRA, for a variety of reasons. The model is not unknown. In England, they have quite an extensive set of fees for tax advisory services but they also have explicit things to be delivered and they will tell you what you will get for that fee.
The Chairman: Honourable senators, our next scheduled witnesses are not here yet as we are ahead of schedule, but we do have two witnesses who were scheduled to be heard later and, with your permission, we will hear them now.
Mr. Neil Crothall, Individual presentation: Mr. Chairman, I am a departmental employee. I have been with Revenue Canada for 18 years. I am currently employed as an auditor in estates and trusts in Hamilton TSO. Since the Senate is regarded as the chamber of sober second thought, I thought it might be helpful for you to hear from one of the front-line workers at Revenue Canada.
After years of wage freezes and increment freezes in the civil service, 45,000 layoffs, proposed legislation to deny arbitration for another two years, and proposed legislation to remove surplus funds from our superannuation plan, my co-workers and I are very demoralized. We feel that we have been asked to sacrifice too much.
Now, to contribute to already low morale in the workplace, we are uncertain of the reason for the creation of the Canada Customs and Revenue Agency. The information that is being made available to us is sketchy and vague at best. Most information has come to us through the departmental publication Interaction and printed agency updates. Management has provided very little information firsthand to staff.
Originally, we were told that the agency was being created to coordinate and administer provincial and federal taxation functions. To date, however, we are aware that few provinces have shown any interest in the agency or are willing to come on-board. What, then, is the perception amongst employees when the matter is discussed?
I am finding an increasing level of fear and apprehension among my fellow workers that the real purpose of this legislation is to reduce worker rights in the workplace and to reduce benefits. There is concern that this legislation allows management unlimited freedom in staffing and promoting and will result in a much more biased and unfair approach. Rights to third-party redress that exist under the Public Service Employment Act and the Public Service Staff Relations Act will disappear.
We fear that, since all existing contracts will have to be renegotiated as if we have a new employer, it will result in a loss of already hard-won benefits. We also note that we will be given a job guarantee for only two years, and we are worried that we will face a situation much like the one that existed at NAV CANADA, where there were 1800 layoffs.
I have no doubt that, in some form, Bill C-43 will eventually pass. I understand that there are four proposed amendments before the Senate committee that would guarantee that the rights enjoyed by Revenue Canada employees would be carried into the agency. The amendment to allow third-party redress is of particular interest to employees.
Consideration of those amendments by the Senate would go a long way to boosting incredibly low employee morale and to easing their fears. I believe that those concessions would mean a great deal in bringing employees on side and guaranteeing a more productive working environment and a more successful launch to the agency.
Ms Barbara Stewart, Individual presentation: Honourable senators, I am from Ottawa and I work at the tax services office here. I have been an employee of Revenue Canada for 23 years. I have managed to survive that long within the government. I work in client services, in an area called problem resolution. I deal with problems that cannot be resolved through the normal channels. I deal with MPs' offices and senators' offices when they have a constituent who calls with a tax problem.
I should like to thank the members of this committee for giving me the opportunity to speak to you about my concerns and those of my fellow workers regarding the proposal for Revenue Canada to become an agency. When this was first proposed, many of us thought the change might be good for us as employees. We saw it as a chance perhaps to improve the staffing regime, get changes to the classification system and generally give Revenue Canada employees a new outlook and better morale. I can tell you that that very quickly changed as management proceeded with the design teams and consultation with the unions decreased and eventually stopped altogether.
I do not believe there is an employee of Revenue Canada who could disagree that changes have to be made to the staffing procedures. We recognize that that must be done, but not at the cost of third-party recourse. We see how many competitions are being appealed under the current system, where we are supposed to have more protection, and we can only imagine and fear how promotions will be handled when there is no recourse. Morale is bad enough now.
I am aware that Mr. Dhaliwal, our minister, has indicated that he has been across the country speaking to employees. I work here in Ottawa, and I am not aware of his having been to visit us. If he did visit us, then it must have been selected employees only who got to meet with him, with very little advertising that he was in the office.
Very little information of any depth is getting to the general rank-and-file employees. Managers in our office recently held information sessions to provide updates and there was nothing that we had not read in the newspapers about the status of the agency. Managers were unable to answer questions about a number of critical issues: why there was not going to be third-party recourse; what would happen to us once the two-year job guarantee provided in the legislation was up; why they would not extend the two years if there was not some intention to downsize; and why we have to go to an agency when most, if not all, of what they propose to do can probably be done under the current set-up.
The employees of Revenue Canada are well aware of what happened to employees at NAV CANADA and the food inspection agency, also know as the agri-food agency, with their two-year job guarantee and the lay-off notices. We did not want to have that happen to us.
The department has spent a lot of money already on this agency concept with the eight different design teams that toured across the country talking to employees who were selected by management. I attended one session on the classification system and everyone talked about everything but classification. That is because classification is a very complex issue and very few people understand it enough to try to improve it.
That was the department's way of consulting with employees and the unions. Rather than putting together a team of informed people who could provide ideas, suggestions and improvements, that method was chosen. The employees began to ask themselves: Who will be protected in this venture? It does not appear to be the employees.
I thought this would help us, but the more I read and hear, the more I am afraid. All we are asking is that you help us keep some of the protection that we currently enjoy as government employees by making the proposed amendments to the legislation. That would go a long way to boost morale and offer some comfort to those of us who have worked for the department for many years and who do not believe that there will be a silver lining in this for us. When she found out I was coming here tonight, one of my fellow employees said, "Tell them it just stinks no matter how you look at it."
With that, I thank you for your time and consideration and for your concerns. We will now take your questions.
Senator Tkachuk: You mentioned that promotions will handled without third-party recourse. What do you fear? How do you think they will be handled?
Ms Stewart: They will be handled by patronage. That is to say, if the supervisor likes you, then you will get the promotion. However, if the supervisor does not like you, then you will not see anything higher than where you currently are now. We see that even under the merit system. There is a feeling that that happens even though we do have both the right to appeal and some protection. We definitely see it as a patronage-type of situation and we are greatly afraid of that.
Senator Tkachuk: When you say "the merit system," you are talking about your record. Do you take an exam, then have interview and go through that whole process?
Ms Stewart: Yes. Normally, competitions have a written knowledge part, then an interview to deal with the abilities and personal suitability aspect for the promotion. Under the proposal, the employee will not have the ability to appeal a decision that has been made. Basically, they will promote however they choose to promote. We fear that with this process there will not be fairness for us.
Senator Tkachuk: I am sure we will hear more about that later. I share your fear, only because this whole concept of making government look like the private sector scares me. In the private sector, if I promote the wrong person it may ruin my business. In the government, however, nothing happens. I have always believed that you need unions to protect workers. You have at least some kind of conflict to ensure that good things are done.
How are they proposing that would happen? Will there not be the same protection?
Mr. Crothall: We do not know. I have a team leader in Hamilton who has worked with the department for 30 years. He has written to Rob Wright because he said that what they are doing with one of the competitions down there is the single most disruptive thing he has seen in 30 years. In his response, Mr. Wright said:
One of our stated objectives in moving to the Agency is to improve the staffing process and give managers the flexibility to hire the staff that they need to get the job done. This will entail some change in traditional staffing policies and procedures.
When that was made public to my unit, my fellow workers read that to mean, "We will do whatever we want to do." If you want the letter entered in the record, I have permission from my supervisor to give you copies of it.
Senator Tkachuk: Yes, I should like it see it.
The Chairman: Mr. Crothall, how many staff are located in Hamilton?
Mr. Crothall: Probably about 300. I am not exactly certain.
The Chairman: Has the minister or anyone been there to talk to you about this?
Mr. Crothall: To my knowledge, no. The last meeting we had with anyone of any significance in management was two years ago, and that was a director. At that time, all he said was, "Do not worry. Be happy." No, there has not been a meeting. As a matter of fact, I have not even had a meeting within my own unit with my team leader regarding the agency. Anything we get, we get through departmental publications. It is certainly not coming down through management.
The Chairman: No one is giving you briefings on a regular basis?
Mr. Crothall: To tell you the truth, I do not think they know. I think they are as vague about this whole concept as we are. I do not think it is possible for them to tell us exactly what the structure or the mandate is at the present time.
Ms Stewart: I would have to agree with that. They do not know what will happen to us down the road. They are being told things by senior managers at the head office or headquarters level, but they have not been given anything definitive as to how this will slow down the pipes come October when this is supposed to take effect. Although you are still looking at it and the bill has not been passed, we have been told that October 1 is the starting date for the agency. You can see our fear about this.
The Chairman: Among the amendments you have proposed, is there one that you feel would be a priority? Do you recall the amendments?
Mr. Crothall: I recall one in particular: namely, the ability to appeal to an objective third party.
The Chairman: You said that before. That is the one that matters most to you?
Mr. Crothall: Yes.
Ms Stewart: Job security counts as well. With the recent signing of our collective agreement for the Table 1 members, we have a work force adjustment appendix to our collective agreement that will carry over for some us of who belong to Revenue Canada. We are not sure how it will carry over, but we have that within our collective agreement, which is to carry forward. However, others within the department do not have that -- for example, those who belong to PIPS, the auditors and the computer services people, or to any of the unions other than PSAC. They will lose job protection and have only the two-year job guarantee as soon as the department becomes an agency.
Senator Carstairs: In your brief, Ms Stewart, you talked about the fact that your view changed as management proceeded with the design teams and consultation with the unions deceased. It has come to the attention of those sitting here that some of the unions chose not to participate in the design teams.
Ms Stewart: Yes, they did. I must applaud them for not choosing to do that. I happen to be involved with the union, but my fellow employees who are not strongly involved with the union feel that the union is supposed to be the bargaining agent representing us.
In the classification session that I sat in on, I probably knew more about classification than anyone else in the room yet I know virtually nothing even though I have been actively involved for a long time. If I know very little, the rank and file employee knows virtually nothing about the classification system. We were not asked, "Who would like to sit in on this?" People were actually selected by local management to sit in and, I believe, it was meant that they would be going there to agree with the various things being proposed, as opposed to those who might raise some ideas and concerns.
When I look at it, I see the way things were handled as an effort to sidestep the unions. Even though they were invited, there are some things that are to be negotiated, such as work force adjustment and the job security aspect and the national joint council agreements. Those are all things in our collective agreements that should be negotiated by the bargaining agent and not by me as a general employee. We have someone who has been elected and who has the right to represent us. They know the concerns and some of the pitfalls whereas I, as an employee, may go in and say, "Oh, that sounds nice." I might not understand that there could be a legal problem with some proposal or that it goes against legislation.
That is why I believe they wanted to try to side-step the union and to get people to agree to things when they were not fully cognizant of all of the implications.
Senator Carstairs: I would suggest that you cannot have it both ways. If you do not want your unions to be a part of the design teams, you cannot then complain because they were not there.
Ms Stewart: We wanted them to be part of the design teams. We did not want general employees to be on the teams where there was a definite legal right only for the union and management to be present discussing the issues.
That is where the concern lies. There is nothing wrong with ensuring that the employees know what is going on and that they are aware of the situation. The concerns could have come back through the union to be taken to the design teams and discussed, providing that the information was getting out. The problem was that the rank and file employees were getting only limited information.
As far as I am concerned, the unions should have been there dealing with the issues. I do not think there is one employee in the department who would not agree that some changes must be made. We do not know why we must go through an agency to make those changes.
Senator Carstairs: I remain confused. If you want the union at the table, they must be there. The union refuses to be at the table, so what is the agency or the potential employer supposed to do?
Ms Stewart: They could have agreed to the suggestions made by the unions for being at the table. They chose to ignore them totally, with all due respect, senator.
Senator Carstairs: My other question deals with staffing. One of the amendments appears to give employees a power over staffing that presently they do not have.
Ms Stewart: You have seen more on the staffing regime than I have seen as an employee.
Senator Carstairs: No, I am looking at the amendment that is proposed by the union.
Ms Stewart: Do you mean the ability to negotiate? I suppose it does give that power, except that there are some situations where the staffing outside of the government can be negotiated. I do not think the intent of the proposal is to sit down and negotiate staffing tomorrow if this were passed. It is there and, as things develop within the agency, we can look at things further. There may be a point down the road when we could negotiate. By putting it in there, at least the possibility is there but it may not be used tomorrow. It still has the veto of the department. Both sides must agree before it can be done. Giving the right does not mean that the right will automatically be used tomorrow nor within the first two years of the agency.
Senator Lavoie-Roux: Mr. Chairman, a great deal of anxiety has been expressed on behalf of these employees. Is our schedule such that we could have time on another date to examine how the employees can be best protected? Employees are always anxious that the worst might happen to them. I do not think there will be very good service unless they can understand. Is there a time, in the coming days, when we could look at this whole problem of personnel and security?
The Chairman: Do you mean to examine it as another issue or as part of this bill?
Senator Lavoie-Roux: I mean as part of the bill.
The Chairman: That is up to the majority of the committee.
Senator Lavoie-Roux: Unfortunately, I must leave, but I think the representations made here are very important. We are here also to protect the personnel.
The Chairman: When we were doing the rBST hearings and the issue of increasing milk productivity, five employees from Health Canada came forward to our Agriculture Committee. I said to them, and I will reiterate the same statement to you, if you have a problem as a result of your appearing before us today, would you please not hesitate to call me?
Ms Stewart: Have no fear.
The Chairman: I should like to hear from you if you suffer any repercussions whatsoever. What you have done has taken much courage.
Mr. Crothall: That is how I got a letter from my supervisor. He told me that if I was willing to stick my neck out this far, then I should have this letter to take with me. There is the feeling.
Senator Tkachuk: In the early 1980s, the Fraser Institute was forbidden to speak at the University of Regina because those wonderful supporters of free speech, those left-wingers at the University of Regina, thought that the Fraser Institute was much too right-wing. They actually, in our country, forbade them to speaking. The students' union invited them but they were not permitted to speak.
It shows how far we have come. Now I see the Fraser Institute agreeing with the Liberal side. I am pretty right-wing but even I do not buy this agency stuff. It is really a fascinating thing for those members opposite. I congratulate them for at least coming on the side of the Fraser Institute. On this issue, it is almost unbelievable.
The Chairman: We will hear now from the Office of the Auditor General of Canada.
Mr. Shahid Minto, Assistant Auditor General, Office of the Auditor General of Canada: Mr. Chairman, thank you for inviting us to appear before your committee as you consider Bill C-43. I have with me today Barry Elkin.
Honourable senators, we understand that your committee has a particular interest in the human resources management challenges faced by Revenue Canada.
For many years, we have conducted value-for-money audits of Revenue Canada's operations. Not all of those audits have specifically addressed human resource issues, although we always take them into account in determining the scope of the audit and the observations we report. Two recent audits dealt specifically with human resource issues, and I should like to comment on them.
Chapter 37 of our 1996 report covered an audit of Revenue Canada's program for auditing the largest corporate taxpayers, the large-file program. Our audit report summarized the strengths in Revenue Canada's program and highlighted some key areas where improvements were needed.
One of our concerns in that audit was staffing. An adequate, competent and motivated work force is essential for the effective and efficient delivery of the large-file program. That is because of the sophistication of the taxpayers and the complexity of the files being audited. Most of the case managers and auditors we talked to take pride in their work and derive satisfaction from the intellectual challenges it provides.
At the same time, we observed a number of staffing issues that needed to be resolved. For example, some regions were having difficulty staffing up to the levels considered necessary by headquarters to deliver the program. Exhibit 10 in the report shows that in 1995-96, in the largest regions, about 14 per cent fewer people were available to do the work than headquarters had allocated. As well, difficulties in filling vacant positions resulted in temporary assignments and acting appointments to fill those positions over extended periods of time. That causes instability and tensions in the workplace that make it difficult for auditors to be their most productive.
Management was aware of the problems and committed to improving those aspects of planning and staffing processes that are under its control. Our follow-up audit in 1998 found that the department had made some progress in addressing our recommendations, particularly through the staffing design team for the proposed Canada Customs and Revenue Agency, although there are still difficulties in staffing positions in some regions.
Chapter 24 of our December 1998 report dealt exclusively with human resource management in Revenue Canada's International Tax Directorate. The International Tax Directorate, which was established in November 1991, is the focal point for all international tax enforcement and compliance issues.
The complexity of the issues the directorate must deal with is daunting, including transfer pricing, electronic commerce, global enterprises and their related-party transactions, tax havens and harmful tax competition, international financing arrangements, tax treaties, and non-residents carrying on business in Canada or disposing of taxable Canadian property. It is clear that the directorate requires staff who are highly skilled and who understand Canadian tax laws and tax laws of other jurisdictions. Our audit showed that human resource issues needed much attention.
Weaknesses in human resource management in the directorate, coupled with the often-cumbersome human resource management rules in the public service, have resulted in long delays in the competition process for staffing positions and finalizing appointments. For example, in paragraph 32 of the report, we note that a competition for senior international officer positions closed in August 1997; the results were issued in September 1998. In another case, a competition for international tax advisor positions closed in October 1996; the eligibility list was established 18 months later.
We noted that the directorate could take action to speed up staffing processes. The report illustrated the unusually long time it takes to mark examinations and establish eligibility lists. Good candidates may lose interest if they have to wait long periods of time before being offered positions.
There are currently five senior positions in the directorate: a director general position and four director positions. As we pointed out in the report in September 1996, the director general was transferred to another branch of the department. A staffing action was undertaken shortly thereafter and an appointment made in October 1997, one year later. Since the completion of our audit, that director general has also left, and in February 1999 the position was being filled through an interim appointment. The four director positions were also being filled through acting or interim appointments.
Despite having recognized since 1994 the urgent need for a human resource plan, the directorate is still developing a comprehensive plan and human resource strategies linked to its business plan. The directorate will need to have a robust human resource strategy to ensure that as people at senior levels retire or transfer, their positions are filled with competent, experienced people. A reliable human resource information system will be needed to support the implementation of that strategy.
The directorate does not have such a system. The department has acknowledged that the need for reliable human resource information systems and databases affects not only the International Tax Directorate but the whole department.
This past month, the department released a seven-point plan for fairness. It noted that fairness requires equal treatment regardless of age, race and status, location, background, sophistication, access to professionals, political influence, assertiveness, or size of business. To provide fairness and a level playing field, a highly skilled and stable workforce is required to ensure that the sophisticated multinational taxpayer with access to expensive professional advice pays a fair share of taxes.
The solutions to a number of the problems such as planning for requirements, developing a recruitment strategy and speeding up the screening and examination process rest solely with the department. Under Bill C-43, the proposed new Canada Customs and Revenue Agency will assume most of the responsibility for human resource management that Revenue Canada currently shares with central agencies. Based on our observations in the two audits discussed, it would be unwise to expect the proposed new agency by itself to resolve the directorate's or the department's human resource problems.
The Minister of National Revenue has already explained to your committee why he is proposing the creation of the new Canada Customs and Revenue Agency. Improving human resource management is one of the reasons. Many of the others are of a policy nature, and it would be inappropriate for us to comment on them. However, I should like to mention that our office was consulted on both the auditing and the accountability provisions of the proposed legislation, and we are comfortable with the provisions as currently drafted.
Mr. Chairman, that concludes my remarks. We would be pleased to answer any questions you may have.
Senator Carstairs: It is unusual for the Auditor General to appear on a particular bill. Would you explain why you are here tonight?
Mr. Minto: Senator, I believe we were invited to appear before you. We are here to provide a service to Parliament, and that is why we are here.
The Chairman: It is because you are to be involved in a review, as I understand it, within the act, and because there were concerns. We felt that we needed to ask if you had comments to make.
Mr. Minto: Certainly, Mr. Chairman, our current mandate to audit Revenue Canada remains intact. In fact, it is enhanced because under the bill we will be providing an opinion annually on the financial statements of Revenue Canada. In addition, we will be providing an assessment on the performance of Revenue Canada.
The Chairman: That is why you were invited.
Senator Carstairs: Let the record show that I think the chairman of the committee decided to invite the witnesses to attend. It was not a decision made by the committee.
Having said that, I have some specific questions about the accountability provisions. This has been a serious issue for many people who have appeared before us. In your last statement, you say that you were consulted and that you are comfortable with those provisions. Would you perhaps elaborate on why your comfort level exists?
Mr. Minto: As I said, the current provisions for auditing the revenues of Canada, which include Revenue Canada and Finance, remain intact. Those provisions have served taxpayers and Parliament very well over the last number of years. We have done a great number of attests and value-for-money audits. In our opinion, and I think in the opinion of most people at Revenue Canada, they have added to the integrity and the strength of the system. Those are very much there.
As the department moved toward autonomy and needed to set up a board, it was felt that there would be a need to provide the board with an annual opinion on its own financial statements, and we are pleased to see that provision in the bill.
In addition, there is an increasing trend now to results-based auditing and to look at performance information, and we will be providing an assessment of that. We are pleased with that.
As far as the auditing regime is concerned, we are more than comfortable with it. I should say that accountability is more than auditing. We are just an instrument of that.
Perhaps if I can go back into history, the first drafts we saw had envisioned a different role for the minister, and the office of the Auditor General was concerned that Parliament's ability to oversee and scrutinize the operations may be diminished as a result. We had input into that; letters were exchanged with the department. We went on record suggesting that we would be uncomfortable with a diminution of Parliament's role. The department reacted positively to that. The minister is now accountable to the house and he heads the agency, as he heads the department. We are comfortable with that.
The other thing we were concerned about was the role of the board of directors. Would they in any way take over the role of parliamentary committees, supersede that? In all our briefings and our reading of the legislation it has been made clear that, as far as the program issues are concerned, their role is an advisory one; however, on the management side, they would have some decision-making powers. On program issues, they would not get involved in individual cases.
The protection to taxpayers under section 241 of the Income Tax Act, which deals with confidentiality, is intact. We have been part of this process with the department for the last two years and, as such, I can tell you that we are more and more comfortable.
Senator Carstairs: My final question has to do with the whole issue of the human resources problem at Revenue Canada.
Obviously, the Auditor General has looked at many departments. Could you indicate whether in your mind this was a particularly acute problem for the Department of National Revenue, or is it a problem across the board of attempting to hire people with, as I think you put it, background skills, sophistication, et cetera?
Mr. Minto: Senator, these particular audits were strictly focused on Revenue Canada. That is where we are coming from. It is no secret that the skills Revenue Canada needs now are in the auditing area -- accountants and computer people. These are the very people who are very much in demand outside.
People are not leaving just because of downsizing or packages; they are also leaving because the outside market is paying higher salaries and because it offers better career opportunities in some cases.
Our point in the chapter was that that is an inherent risk in this business, that there will forever be people who will leave because they can earn more money in the private sector. That is why we were looking for an integrated human resource plan, such that, anticipating that people will leave, how do we backfill, keep training people and keep bringing them up in the system?
Senator Johnstone: We note that you have staffing problems in certain areas. We sympathize with you there. My question is simple. What do you mean by a harmful tax competition?
Mr. Minto: Senator, I would like Mr. Elkin, our expert on tax matters, to answer that.
Mr. Barry Elkin, Principal, Office of the Auditor General of Canada: It is the concept where jurisdictions, jurisdictions that are tax havens, in particular, will try to take someone else's tax base. They will compete in an unfair way. Where the Government of Canada institutes particular rules to deal with a certain situation, a tax haven will alter its rules to enable a Canadian to take advantage of the intent of Canada's tax laws. It is an issue that the OECD is presently deeply involved with. As a matter of fact, the OECD are the people who coined the phrase "harmful tax competition" and have just recently released a report on that subject.
Senator Johnstone: Have you had many problems in this field? Can you give us an instance?
Mr. Elkin: Revenue Canada is continually faced with problems. The government recently introduced foreign-asset reporting requirements because of the concern of the amount of dollars that were invested offshore and the concern as to whether Canada was getting the tax that is rightfully due. That is certainly one example.
There were other examples with respect to the movement of funds offshore where the government has tabled legislation to try to correct that problem as it related to family trusts and other issues.
Senator Cools: I have always been under the impression that it is unusual for the Auditor General or the Auditor General's office to comment on bills that are still proceeding through Parliament. I understand that you said that you came in response to an invitation. Have you in the past ever attended before a committee to speak to a bill? Is this a new process? Perhaps I am just uninformed or behind the times. Is this the first time you have attended before a committee to comment on a bill?
Mr. Minto: For me it is personally, however, I could find out from the office if anyone else has done it before.
As I said in my opening statement, what we have come to do today is to speak about our audits and our chapters. We hope that that information will be useful to you.
Senator Cools: Any information is always valuable and useful. We do hear from the Auditor General a couple of times a year but it is usually under a different question. What I find unusual is for the Auditor General to have an opinion on a bill as it is in progress. If you could just clarify for me that we have established that this is your first time attending before a committee?
Mr. Minto: Yes. For the record, if I could correct one thing, I am not setting out an opinion on the bill at all. We are not here to do that. We really do not intend to give you an opinion on the bill.
We are here strictly to talk to you about the audits we did. They dealt with the human resource management area in Revenue Canada. We understand that that is an area of interest for your committee, and if that helps you on this bill or on any other matter we are pleased.
Senator Cools: I understand the situation in which you find yourself.
The Chairman: Thank you very much, gentlemen, for attending.
Honourable senators, our next witness represents the Public Service Alliance of Canada.
Please proceed.
Mr. John Baglow, Regional Executive Vice-President -- RCN, Public Service Alliance of Canada: Honourable senators, the Public Service Alliance of Canada is the largest public service union, representing 150,000 workers in the federal sector. Our membership is divided into a number of component unions, which for the most part are based around federal government departments. The component unions represent the day-to-day on-the-job interests of their members. You have heard from two of our components already, the Union of Taxation Employees and the Customs and Excise Union Douanes Accise. However, the PSAC is here today in its role as the bargaining agent that represents both UTE and CEUDA members in the contract dealings with the Treasury Board and shortly the Canada Customs and Revenue Agency.
PSAC shares the great number of public policy concerns you have heard from many witnesses regarding the structure and utility of the agency; however, that ground has been amply covered during both the House of Commons and Senate consideration of Bill C-43. Rather, I would like to address the significant human resources and labour relations issues raised by the transformation of Revenue Canada into this agency.
It is our belief that the government and senior bureaucrats are establishing this agency for one overriding reason -- to escape what they view as outdated and cumbersome human resources procedures under the Public Service Employment Act, PSEA, and the Public Service Staff Relations Act, PSSRA. Why do we believe this to be so? What other reason could there be for pushing forward with a vast project that clearly has little justification at this point in time? No convincing cost-savings argument has been made, as these are predicated on full provincial and territorial buy-in to the agency concept.
Other than one payroll tax agreement with Nova Scotia, no concrete provincial or territorial participation has been forthcoming. The cart is way out in front of the horse on this one. In fact, the poor horse may well eventually stagger to a halt under the burden of unfulfilled expectations before ever reaching the cart.
Many of your non-union witnesses pointed to the inadequacies of the PSEA and the PSSRA. You should appreciate, however, that the federal public service bargaining agents are as frustrated with the status quo as is management. These archaic pieces of legislation were enacted in the mid-1960s, and have remained unchanged for almost four decades. Can you imagine a private-sector employer who would leave its human resources regime unchanged for more than a generation? Yet, that is what successive federal governments have allowed to happen. I should add that this has happened despite our best efforts to have the employer address the issue.
The PSAC has been on record for decades in calling for an overhaul and updating of the federal public service human resources regime. While our position is that federal public service workers should be covered by the Canada Labour Code, we were, and are, nonetheless ready and willing to embark upon any good faith exercise that sees a win-win situation emerge for the employer, the workers and the public we serve. During questions, I might be able to speak more about some of the discussions on the Public Service Employment Act, because I have been somewhat involved in that particular sector.
Yet, rather than deal with the issue systematically within the federal public service, the current government seems intent on hiving off ever-larger chunks of the public service into Crown corporations, special operating agencies, and other para-public bodies. With the Canada Customs and Revenue Agency, we are now talking about the amputation of more than 20 per cent of the public service in one fell swoop.
There seems to be a fear, bordering on dread, of agency workers eventually falling into the Canada Labour Code. I personally have great difficulty understanding this. The PSAC negotiates many collective agreements for workers outside the direct federal public service. Many of these fall under the code. I can tell you that, for the most part, our relationship with those employers is more constructive and mutually respectful than with Treasury Board. It is all relative, of course. This is the case precisely because there exists a sensible balance between the powers and responsibilities held by both management and union.
On the other hand, Bill C-43 concentrates almost total control over human resources issues into the hands of management. UTE and CEUDA, along with the Professional Institute of the Public Service of Canada, have collectively put forward several amendments that would largely maintain rights that our members now enjoy.
We had hoped that modesty and reasonableness of these amendments might have resonated with the minister and the government. After all, the agency will be Mr. Dhaliwal's legacy as Minister of National Revenue. One might have thought there would have been greater interest in ensuring the smooth and untroubled implementation period. You have heard that the bargaining agents are highly suspicious of senior management. Unilateral imposition of staffing measures will undermine workforce morale and employee trust and confidence in management at a time when the agency should be making every available effort to rebuild badly strained relations with its principal bargaining agents; not, it appears, in the case of the agency.
So, what are these unpalatable, threatening and outrageous amendments being put forward by UTE, CEUDA and PIPSC?
The first deals with the maintenance of external third-party reviews of staffing actions by agency management. As now drafted, Bill C-43 removes the right to external third-party redress that agency employees now have as a right under the Public Service Employment Act and the Public Service Staff Relations Act, Part I.
The proposed amendment to section 59 would simply allow employees access to external third-party recourse and redress mechanisms in matters of staffing, classification and non-disciplinary demotions and terminations. This provision is an important safeguard against managerial favouritism or patronage -- practices that run counter to this country's ethic of the delivery of public services. This amendment also includes recourse to external third-party recourse to employee terminations or demotions for non-disciplinary reasons. Maintenance of this current right, which is enshrined in section 92(1)(b)(ii), of the Public Service Staff Relations Act, Part I, is also essential to maintaining the merit principle and the highest ethical standards in the agency's staffing and operations.
The second amendment addresses the carryover to the agency of existing employee protections covered by agreements reached between the employer and bargaining agents at the National Joint Council. The National Joint Council is a consultative and deliberative body that brings together the federal government in its role as employer and the various federal public service bargaining agents.
The National Joint Council arrives at numerous binding agreements affecting workforce rights and benefits. Unless Bill C-43 is amended, agency employees will not be covered by the protections now enshrined in existing union collective agreements with the Treasury Board.
Enacted to facilitate the creation of alternate service delivery bodies, provisions of the Financial Administration Act mean that NJC provisions will cease to apply to agency employees the moment the agency becomes operational.
In spite of this, Bill C-43 is silent on this critical matter. NJC agreements cover many administrative matters, including but not limited to health and safety, travel, transfer removal, job security, and isolated-post allowances. These are all matters that must be addressed in any case by the agency. Failure to carry over the existing agreements until such time as new agreements are put into place will result in considerable bureaucratic chaos.
The third amendment deals with clause 54(2) in its absolute prohibition on present or future negotiation of staffing matters. Unless subclause (2) is deleted, the agency and its bargaining agents will be banned from negotiating a staffing regime and having this negotiated regime incorporated in the collective agreements.
Staffing is a fully negotiable item in the vast majority of unionized, private-sector and para-public-sector workplaces. If the new agency is to have the perceived advantages of a para-public environment, should it not also have the appropriate responsibilities? It cannot be stressed often enough that the proposed amendment does not obligate the negotiation of a staffing regime. Rather, by removing any specific prohibition, it simply leaves the option open for the agency and its bargaining agents to pursue.
This prohibition of a negotiated staffing regime is not contained in the enabling legislation for two other agencies brought forward by this very government: the Canadian Food Inspection Agency and the Parks Canada Agency. We ask again, why is there an explicit prohibition in the case of this agency? We are not asking the committee to open the door to the negotiation of staffing, we are simply and reasonably asking that you not erect a brick wall where a door properly belongs.
I spent my public service career as an employee of the Social Sciences and Humanities Research Council. Staffing is a negotiable item within that agency. In the over two decades since SSHRC was unionized, I doubt there have been more than two grievances under this article of the collective agreement, which plainly sets out the rules of the game for both sides in a mere four pages. To nine taxation agency employees, the mere future possibility of negotiating staffing is wrong-headed and, frankly, insulting.
The last of the four proposed amendments addresses the lack of bargaining agent representation on the agency board of management, as outlined in clause 14.
Under clause 31(1):
The Board is responsible for overseeing the organization and administration of the Agency and the management of its resources, services, property, personnel and contracts.
Many, if not all, of these responsibilities directly touch upon the daily working lives of agency employees. Bill C-43 currently calls for a board comprised of 15 directors, including the chair, the commissioner, a director nominated by each province and one by the territories; it does not provide for bargaining agent representation. This denies direct access by the board to invaluable labour relations experience and expertise.
We are suggesting that the government appoint a bargaining agent nominee, jointly selected and put forward by the agency's unions. The resultant reassurance of knowing that its concerns could be addressed at the highest level of the new agency would enhance workplace moral. It would also be a tangible gesture of senior management's commitment to openness and transparency in dealing with its workforce.
Employee representation on corporate boards is a growing trend. The agency should be setting an example and exploiting an opportunity. Inclusion of a bargaining agent representative on the board of management would help repair the serious damage done to union-management relations over the agency's gestation period.
There you have four modest amendments, hardly the stuff of worker revolution. All too soon honourable senators will move on to other issues. Within several years, there is all likelihood that the existing cast of characters, the minister, the deputy minister, and the union leaders, will have changed. What then will be left from this exercise? Agency management will enjoy an unprecedented amount of power and control over human resources and staffing matters.
Honourable senators, it is critical that employees not lose the few counterbalances available to them under federal public service labour legislation.
Senator Carstairs and the minister's staff have been personally assured that, if these modest changes are made, the unions will do everything in their power to make the agency work for all its stakeholders. Should this good faith offer be rebuked, as it seems it might, then all bets are off.
By rejecting these amendments and turning your backs on the willingness of the unions to extend an olive branch, you are bequeathing the Canada Customs and Revenue Agency a bitter and troubled labour relations climate.
As the witness from the Canadian Federation of Independent Business stated to you last week, the government will pay a dear price should the agency not deliver on its promise. That is why the minister and his senior bureaucrats should be courting the bargaining agents, not spurning them.
The minister and his officials should not be so arrogant as to underestimate the cost of profoundly alienating the agency's unions. Less than a decade ago there was another government that too was told by its mandarins that the threat of employee unrest was mere union bombast. The result of that arrogance was the largest public service strike in Canadian history and a legacy of poor morale and bitterness that continues to this very day.
This committee remarked upon this lamentable climate in its recent report on federal public service retention and compensation issues. I would add parenthetically that, at the time of the 1991 PSAC national strike, the governing party was fully in support of our battle against the government of the day and was willing to go to the wall for us. Times have changed. Governments have changed. I suggest the lessons of that strike have not changed and should not be ignored.
Honourable senators are in this place to provide a sober second thought and to act in the public interest. Neither the public nor the agency will be served by running roughshod over the employees' representatives. Do the right thing -- accept these amendments.
The Chairman: Am I correct that you wished for us to pursue the Public Service Employee Act?
Mr. Baglow: One of my portfolios in the PSAC is dealing with the Public Service Commission. I have spent a long time sitting at what was the joint consultation committee and has just become the Public Service Commission advisory council.
About two years ago, we engaged in a consultative staffing review. We explored the issue from the perspectives of the commission, the Treasury Board, and bargaining agents. The question of staffing recourse and redress mechanisms was investigated. The conference was large, and there was a significant amount of input. At the end, a report was issued.
That certainly does not close the door on the idea that negotiating staffing in a collective agreement is a bad thing. I would not press it further than that. I would simply say that there was an openness to this idea because both sides are so incredibly frustrated with the current regime. It takes months to staff a position, sometimes years. The appeal process goes on forever. There is little redress at the end of it. Both sides are tremendously frustrated. We do not know how to get out of the box.
The Chairman: You have proposed four amendments. As Senator Bolduc stated earlier, if you had to list those amendments in priority, which would you put first?
Mr. Baglow: The most important one is the ability to negotiate staffing. It is tremendously important. However, right up there with it -- I would hardly know whether to make this first or second -- is carrying over the existing protections and benefits of the National Joint Council. At the bottom of my list would be having our representative on the new agency board.
Senator Tkachuk: Are the amendments that you are requesting simply to re-establish items that are currently present in your bargaining arrangement that you would be losing by the move to the agency?
Mr. Baglow: That is part of it. The protections that we now enjoy we are afraid of losing; however, as well, the idea that we would never be able to negotiate a staffing regime by law is of concern. Of course, we do not have that right at the present time; we would like to leave the door open for that. However, of more pressing concern is losing the third-party rights that we have at this time.
Senator Tkachuk: What would happen if the government made these changes outside the agency legislation and made them universal throughout the civil service? How would the union react to that?
Mr. Baglow: We would look at it favourably. To be able to bargain staffing in the public service is something we have been requesting for a long time.
Senator Tkachuk: What if the government, through Treasury Board changes or legislation throughout the whole civil service, took away any future right to staffing plus some of the other items that you fear you may lose by the move to the agency? Those four items would be gone forever.
Mr. Baglow: Two of the items we do not have, and it is already in the Public Service Staff Relations Act that we cannot bargain staffing. However, regarding abolishing National Joint Council agreements and eliminating third-party recourse, there would be a problem with labour relations.We would consider this a body blow.
Senator Carstairs: Is it not the case that the Public Service Staff Relations Act will still fit into this negotiation process?
Mr. Baglow: The Public Service Staff Relations Act will not apply in respect of third-party recourse for issues like demotion or release for incompetence or incapacity, for example. That is not there. In fact, it will explicitly disappear, which, of course, is our major concern about this bill.
Senator Carstairs: Clause 54 of the bill guarantees staffing recourse for agency employees, does it not?
Mr. Baglow: I have not memorized all the clauses of the bill, but our real concern is losing the ability to have third-party recourse for issues such as I have mentioned, and those are what we are speaking to. We also lose the NJC agreements, which are incorporated by reference into the current collective agreement. There may well be other forms of third-party recourse in the case of a standard grievance against a violation of a collective agreement, but we are losing something here. We would just like to keep what we have, which is what we are addressing.
Senator Carstairs: Clause 54(1) states:
The Agency must develop...
It is not optional.
...a program governing staffing, including the appointment of, and recourse for, employees.
Mr. Baglow: Yes, but there is nothing there about a third party. It is quite possible for them to establish a staffing regime with someone that they bring in who is paid by them, who is a consultant or is on staff even, who would adjudicate grievances around staffing matters. There is nothing in that particular clause saying that they must agree to a third party. In fact, it is rather the opposite. It says that they will establish the process themselves. That is hardly the kind of third-party recourse that we have in mind.
Senator Carstairs: Essentially, you are saying that you do not trust them to act in the best interests of their employees.
Mr. Baglow: That is why we have unions, senator.
Senator Carstairs: I want that to be clear.
National Joint Council directives is another area that causes you concern. These are agreements that I understand are currently negotiated between the unions and Treasury Board and cover all employees. They include such things as health and safety, travel, relocation allowances, bilingualism bonuses, and other things.
I understand as well that no legislation that separates a group of employees has had this. In fact, the Financial Administration Act of 1996 clearly indicates that those directives are not to be carried over.
How would you propose they be carried over in this proposed legislation when that would be in clear violation of the 1996 act?
Mr. Baglow: You will have to sort out the legalities. The National Joint Council agreements contain certain benefits and rights for employees. I believe that there is nothing that would prevent this bill from simply carrying over those measures themselves, whatever they be called, until a new regime is bargained in various areas. You might not call them National Joint Council agreements, but those agreements have contents and it is the contents we are trying to address. We do not want to lose all the things that we have managed to get through that process -- which, by the way, is not, strictly speaking, collective bargaining at all, but which gets incorporated into current collective agreements under the public service regime.
Thus, if you could find some way to carry over the benefits without violating the Financial Administration Act -- and it seems to me that that should be relatively simple. All we want is a transitional measure until we are up and running in the new agency and are able to rebargain these things directly.
Senator Carstairs: Mr. Baglow, I may be ruled out of order on this question because it does not actually deal with your presentation. However, since you represent PSAC and I represent the Province of Manitoba, I must put this question to you.
I have a copy of your most recent strike bulletin dated March 12. In it your union says:
Two grain elevators on the Vancouver Waterfront were picketed by Table 2 members working at the Canadian Grain Commission, RCMP Garage and Stores, Pacific and Douglas Border Crossing and Taxation. Both grain elevators are down for the rest of the strike. Each day, members will add another grain elevator on their list of picket locations until all the grain coming to the West Coast is shut down!
On behalf of the farmers of Western Canada, I would like to know why you want to punish the farmers of this country.
Mr. Baglow: Mr. Chairman, are you going to make a ruling on order? I am quite happy to respond to the question.
The Chairman: The question is on the record. That is all I will allow. You need not respond.
Mr. Baglow: I will, if you will permit me.
The Chairman: Absolutely.
Mr. Baglow: These things are never simple, and they are not as simple as you have expressed. I will attempt not to be too simplistic about this. When groups of workers are forced, out of desperation, to go on strike because of where they live and because their wages are not in accordance with comparable sectors in their own regions, when they are making very little money, have endured wage freezes for years, and have had almost two years of virtually pointless collective bargaining with a government that is not interested in collective bargaining in a serious way, they will take to the streets, and there will be people caught in the crossfire.
We have causes in common with farmers, too. We have supported many of their endeavours in various ways. We are social partners with the National Farmers Union. I suggest that the way to help those farmers is to put a little pressure on your government to make a fair, honest and decent settlement with the blue-collar workers that are out today. Driving them out and then blaming then for the consequences is grossly unfair.
Senator Cools: Mr. Chairman, I should like to know the precise date of the strike bulletin cited by Senator Carstairs.
Senator Carstairs: The bulletin is dated March 12.
Senator Tkachuk: I would have a lot of problems with farmers being caught in the crossfire by union action. It is not the first time it has happened; it has happened many times. The fact that a civil servant and a union representative would be here commenting on a bill that is on the Order Paper and using a totally irrelevant piece of paper in an attempt to discredit the witness is inappropriate. The senator should have brought it up in the chamber. She can bring it up in the Standing Senate Committee on Agriculture and Forestry. It seems to try to discredit the messenger because she did not like the message. I think she owes him an apology, frankly.
Senator Carstairs: Senator Tkachuk, you may think what you want to think. I will go on the record protecting the farmers of Manitoba any time I have the opportunity to protect the farmers of Manitoba.
The Chairman: Please. I am not going to allow that kind of crossfire. It is not proper. The public who are watching this are not dumb. They know what has taken place, and they will reach their own conclusions. I think we trust in the judgement of the viewing public. Thank you very much.
Senator Fraser: Mr. Baglow, I was very interested in the proposed amendment calling for bargaining agent representation on the board. It strikes me as being unusual. Are there other cases where unions have legislated representation on a board of an agency or a Crown corporation?
Mr. Baglow: Canada Post had a union representative many years ago; that changed. Whether it was in the legislation or just done, I have no idea. In the private sector, in the corporate world, it is not uncommon to have labour representatives sitting on these boards of management. Again, I do not think it is a question of legislation in such a case. The boards of management are not set up that way either. In this case, it is proposed in the legislation for the new agency to actually establish who the board would be. We are simply saying, include us, too.
Senator Fraser: My experience with most unions has been that they would regard that as a conflict of interest. Boards, in essence, represent management; they are ultimately management.
Mr. Baglow: I have undergone an evolution in my own thinking around issues such as this because there was a time when I did not believe in any kind of bipartite forum. I have long since given up that idea. It is important to have dialogue. It is important to communicate. Having a representative of labour on these boards can sometimes bring some light to bear on an issue, maybe head things off, maybe soften a situation that is developing, whatever it might be. There can also be communication, of course, to the rank and file through the labour representative. I would not sit here and pretend that any kind of representation like that would give us equal and opposite status on the board or that it would be co-managed by the union. That is not likely to happen and it is not something that we are asking for. It is really more for the communications aspect.
Having said that, I would reiterate that, if we list our four priorities, that would be in the number four spot. Of far more concern to us is the question of third-party representation and bargaining recourse mechanisms, et cetera.
The Chairman: Thank you.
Our next witness is Mr. Andrew Jackson, who is a senior economist with the Canadian Labour Congress. Please come forward, sir.
Mr. Andrew Jackson, Senior Economist, Canadian Labour Congress: I appreciate having the opportunity to appear before you this evening.
The CLC is the central labour body in Canada, representing more than 2 million working women and men across this country. One of our key responsibilities is to monitor federal government legislation that impacts on the working lives and community well-being of our members.
Among our members are Revenue Canada employees belonging to the Union of Taxation Employees and the Customs and Excise Union. These men and women are affiliated to the CLC through their bargaining agent, the Public Service Alliance of Canada. The CLC has a number of public policy concerns to place on the record regarding the structure and utility of the Canada Customs and Revenue Agency.
Revenue Canada, as it is presently structured, is fully accountable to Parliament and through Parliament to the tax-paying public through the Minister of National Revenue. The department's policies, programs, and activities are open to daily scrutiny during the House of Commons Question Period. The minister cannot forever avoid answering the tough questions, as and when they may arise. We think this is entirely appropriate given the sweeping nature of the federal government's power to tax and to audit Canadians.
On the other hand, the Canada Customs and Revenue Agency poses a challenge to parliamentarians as guardians of the public trust and interest. The promos repeatedly stress that the new agency would be fully accountable to our elected representatives. At best, that is misleading.
We believe that the agency will face far less effective scrutiny from Parliament than is now the case. It is just plain common sense that an arm's length agency will be less motivated than a fully accountable government department to fully respond to questions or concerns raised by the public or by individual senators or members of Parliament on behalf of the public. The agency would find it easier to stonewall the public and Parliament while at the same time providing a pretext for the minister of the day to shift their focus of accountability to the commissioner.
As it is now envisaged, the agency's enabling legislation would permit a full parliamentary review only five years after its begun operation. A lot can go wrong over such a long stretch of time, yet the agency would continue to be funded largely through parliamentary appropriations. In political terms, this is had a case of taxation without representation.
We are most concerned that, by distancing the agency from the day-to-day oversight of the minister's office, the minister himself or herself risks becoming a captive of senior bureaucrats. Under the agency structure, the minister would be presented with a pre-packaged corporate business plan over which he or she would have rather little input.
In our view, there now exists a sensible balance between the formation of taxation policy on the one hand, which rests with the minister and Department of Finance, and the implementation of that policy under the minister and the Department of National Revenue. Agency status would upset this balance. We are concerned that there might be turf wars between Revenue Canada and Finance without that being resolved easily at the political level.
We are told that the agency's primary goal is to enter into agreements with the provinces and municipalities to administer and collect their taxes. Yet, to date, despite a protracted and aggressive campaign by the minister and the deputy minister, there is only one agreement -- with Nova Scotia, regarding Workers' Compensation -- to show for all their effort. Not a single agreement, not even a non-binding letter of intent, has been reached with any other province.
We are aware of the minister's testimony to this committee and we are aware of his spin on the question of provincial involvement.
The minister spent two years wooing the provinces and has met with all the finance ministers as a group. Despite this effort, there are really only anecdotal comments and letters of support in principle, which really mean nothing. The question to be asked is this: Why is a single agreement with the Province of Nova Scotia the best the minister has to show for all of his efforts?
The minister tells us:
This is about creating options for the provinces$about building a vehicle.
However, we are really being asked to support a new bureaucratic structure in the hope that the provinces might participate. To borrow the minister's analogy, the agency concept is a vehicle that seems to be one without an engine.
Let us look at present reality, not future hopes. Quebec and Ontario have refused to consider buying into the agency. In fact, Ontario is actively considering the establishment of its own tax administration independent of Ottawa, as is now the case in Quebec. Luke warm support expressed originally in the West has cooled, and Prince Edward Island has told Ottawa that it is not prepared to cede any further tax authority to the federal government. And, just last week, we learned that the Government of Alberta intends to levy a flat-rate personal income tax rather than as a percentage of federal tax paid. This is a major departure from the status quo and could be a further move away from collaboration with the new agency if they move in the direction of administrating their own tax system.
Revenue Canada's own internal documents report that "the provinces want to see the agency up and running before deciding whether to have it administer more of their tax programs."
The same reasoning holding back provincial participation applies even more dramatically to regional and municipal governments.
The agency's backers early on said that the "biggest savings would come from tax harmonization." However, as we know, extension of the harmonized sales tax has been a non-starter. Neither will the proposed agency require the provinces to pay for the collection and handling of their taxes if the provincial program is "fully harmonized" with the federal tax program. The basic argument, that the agency is needed to be a joint collector of taxes, seems to be very weakly established, to say the least.
Another basic point made for the agency is that it would be a leaner and more efficient deliverer of taxation services than Revenue Canada. Yet, the structure proposed for the new agency actually adds another layer of bureaucracy in the shape of an appointed board of management. While having only a nominal oversight role, the board would still require time, money and staff resources that might be better deployed elsewhere. At the same time, the agency would still be bureaucratically accountable to Treasury Board for such administrative matters as its corporate business plan and human resources plan.
Therefore, the old reporting mechanisms remain in place while new bureaucracy will be added -- hardly the "lean mean tax machine" that supporters would like us to believe.
Above and beyond the question of accountability to Parliament and, through Parliament, to Canadian taxpayers, legitimate concerns have been expressed about the potential for abuse involved in one large bureaucratic entity holding massive amounts of critical personal financial information. Even according to internal Revenue Canada documents that concern is acknowledged, and it is acknowledged that that concern extends to the public.
To these many public policy concerns, we would add our severe misgivings regarding the extreme concentration in management hands of key human resources matters. In the long run, this is both unhealthy and unwise.
Effective labour relations are built on a foundation of balanced rights, responsibilities and mutual respect. Revenue Canada, through this agency, is poised to move into a quasi-private-sector environment. Yet, at the same time, Bill C-43 would remove existing protections and checks and balances without putting in place new ones. Honourable senators, this is a labour relations accident waiting to happen.
This really begs the question as to why the government has not chosen to provide the new agency's employees with the protection of the Canada Labour Code. The code, as you will be aware, was recently amended on the basis of a broad consensus between unions and employers operating under the code and would be seen by the vast majority of experts as a balanced piece of legislation. In the case of amendments to the Canada Labour Code, there were very few areas of disagreement. The vast majority of the changes were done through consensus based on joint input.
Thus, this question is raised: Why, if you are moving to agency status, do you not move protection for the employees of the agency under the Canada Labour Code? Perhaps there is a fear on the part of the government that code protection would somehow lead to work disruptions or give workers too much bargaining power. If that is the case, it is a tacit acceptance of the case being made by the unions that the human resource and labour relations provisions in Bill C-43 are heavily skewed in favour of senior management and not neutral at all.
About 10 per cent of Canadian workers now fall under the Canada Labour Code, mainly because they are involved in trans-provincial operations. Examples of such industries are transportation, telecommunications, banking and uranium mining.
Labour disputes are no more common in the federal jurisdiction than is the case in industries under provincial jurisdiction. As much as we deplore Parliament's unfettered right to legislate Canada Labour Code workers back to work, that power does exist under the code. In other words, from the point of view of the workers and unions affiliated with the Canadian Labour Congress, not to give agency workers the right to be covered under the Canada Labour Code is patently unfair and indefensible.
There is a truism that employers get the respect from unions which they deserve. Poor employers -- those who lack fundamental respect for their employees and their bargaining agents -- do pay the price. Neither the agency workers nor the Canadian public should be asked to pay that price. We believe that the new agency should be established on a sound labour relations basis from the very beginning.
We believe that there are insufficient grounds for proceeding with Bill C-43 at this time. We add our voices to those of other witnesses who have urged the government to get it right before proceeding with such a massive reorganization of the public service before it is needed.
Should a deaf ear be turned to this request, we would urge the committee to restore equilibrium to labour relations with the Canada Customs and Revenue Agency. It is our understanding -- and I sat through the previous presentation -- that Revenue Canada's bargaining agents have submitted a number of common-sense amendments designed to level the labour relations playing field.
The agency's workers should not be called upon or expected to enter unfamiliar territory without, as a minimum, protections equivalent to those Parliament now accords them under federal public service legislation. That is, I think, a very minimal request for amendments to the legislation.
Senator Carstairs: Mr. Jackson, I should like to address the earlier part of your submission with respect to accountability and to ask you whether you were here when the Auditor General made his presentation to the committee, not that you needed to be here.
Mr. Jackson: No, I was not.
Senator Carstairs: I should like to brief you on what he had to say. I think I am summarizing it accurately, but others can certainly give other evidence. He basically said that they were unhappy with the original accountability provisions that had been circulated two and one-half to three years ago in the first white paper. However, they believed that the accountability provisions in the present act met all the standards of accountability they would expect from a government agency or department. Clearly, you do not follow that line of development.
Mr. Jackson: The power of governments to tax is a pretty fundamental power of governance. We all recognize that there are cases of the abuse of individuals arising from that power and that it is extremely important that redress is available to people as and when those abuses occur.
In my experience working for elected politicians, often when individuals deal with public agencies, contacting one's elected member of Parliament or member of the legislature is a fairly effective means of getting recourse from government agencies. Many people do contact their elected officials for that reason. I suspect concerns are raised in the vast majority of cases. A message goes from the member of Parliament to the agency, and the matter is resolved.
In the final analysis, the ability of a member to raise concerns in public, to raise questions before a committee and to raise questions in the House of Commons is very important. To take Revenue Canada and those powers one step removed from that accountability I see as rather a serious move.
Senator Carstairs: Mr. Jackson, I do not read the legislation as doing that. There is nothing in this legislation that would prevent me as a senator asking the Government Leader in the Senate a question about the revenue agency. There is nothing to prevent Members of Parliament from working on behalf of their constituents upon a Revenue Canada matter. There will be nothing to prevent them from bringing that to the minister responsible for the agency.
Mr. Jackson: I would operate on the assumption that, if a member asked a question of the minister, the minister has a ready response in the fact that this is an agency that is operating at a remove from him and that he is not responsible in a direct way for administrative decisions that are made. It is a less powerful means of accountability than would otherwise be the case.
Senator Carstairs: However, the minister is still responsible for the agency to the Parliament of Canada; that is clear in Bill C-43, is it not?
Mr. Jackson: There is a difference between overall responsibility and day-to-day decisions that would be taken within the agency. You do not see in any way that the minister's responsibility is narrowed by the creation of the agency?
Senator Carstairs: I see the minister as still fully responsible for the agency. I guess that is where you and I have somewhat of a disagreement. The way I read the legislation, I still see that.
What I do see in the legislation, though, is something very positive. I know that you and others have made the argument that there are not all kinds of deals signed, sealed and delivered with the government at the present time. That is true, but the agency does not exist at the present time. Despite what Revenue Canada has put on its Web site, it will not exist until such time as it passes this chamber and receives Royal Assent, and there is no guarantee as to when that will happen.
What I like is the fact that there will now be a board of directors representing the provinces. My first 10 years' experience in politics was as a provincial MLA, not as a senator. There was no Manitoba representative in Revenue Canada as it presently exists. There now will be. Do you not think that it will be a benefit to the provinces to have some input?
Mr. Jackson: If we had a high level of agreement between the federal government and the provinces, such that it made sense for both jurisdictions to engage in joint tax collection, then, absolutely, it would make sense to have some body, some board, that had representation from both. Why would we have strong provincial input into running Revenue Canada when 98 per cent of its work will be collecting taxes for the federal government? It takes us abroad from the question. I must say that at the moment I have a strong concern that we are actually moving away from having a harmonized tax system, certainly in terms of our income tax system. Alberta has not crossed the Rubicon yet. The direction we are moving in is much more towards fragmentation of the tax system, which would be unfortunate, than towards consolidation.
Senator Carstairs: It is interesting, and I agree, that the larger provinces would have a tendency to be moving in that direction. However, regarding New Brunswick, for example, the situation is this: personal income taxes are collected by the federal government; corporate income taxes are collected by the federal government; credits and rebates relating to income taxes are handled by the federal government; harmonized sales tax is collected by the federal government; border taxes are collected by the federal government; and provincial benefit programs are handled by the federal government. Nevertheless, presently the Province of New Brunswick has no representative in Revenue Canada.
I would be the first to tell you that they collect more for New Brunswick than they do for any other province, but they collect in five areas for British Columbia, in four areas for Manitoba, and in five areas for Saskatchewan. Do you not think it is reasonable that these provinces should have some input through a representative on a board?
Mr. Jackson: I think we could debate whether the cart is before the horse on that all night. My opinion is that this is putting the cart before the horse.
Senator Carstairs: In your analogy, I think the barn door was closed before these people ever got their horses out.
Senator Cools: I hope the horse was a racehorse or a thoroughbred.
Mr. Jackson, you have raised the issue -- and it has been raised many times this evening -- of ministerial responsibility and ministerial accountability. Obviously, you seem well aware of the unique relationship between taxpayers and the tax collector, being the government. You made an allusion to that. You said at page 2 of your brief:
The Agency will face less scrutiny from Parliament than is now the case.
A couple of paragraphs later, you also add:
By distancing the Agency from the day-to-day oversight of the Minister's Office, the Minister himself or herself risks becoming a captive of senior bureaucrats.
My understanding of the bill -- and I have read it with some care -- is that clauses 6 through to and including 13 speak directly and expressly to the concerns that you raise. Perhaps you can tell me what the deficiencies are in those clauses that support your position.
Mr. Jackson: My concern is more of a general one. I have observed the political process. I suspect it is in the nature of the beast that it is that one step further removed from the minister and there is the ability then to say that actions that have been taken were not within his direct purview and that he will be pleased to communicate the concerns raised to the agency and to ask them to follow up. I do not think the minister will be on the hot seat to the same extent.
I suspect this is not a black-and-white issue. If the agency goes ahead, as seems probable, I hope you are right. I do not want to fundamentally say here that there will be no ministerial accountability whatsoever. However, I think there is a shift that is involved. Before the French Revolution, the government contracted out tax collection to tax farmers, and they did not do a very pretty job of raising it. There has been nothing more fundamental than the principle of no taxation without representation. You are introducing this extra layer there.
Senator Cools: I agree with that, but what we have before us is a piece of legislation. You talk about the nature of the beast. The problem is that legislation is not a particularly useful tool to address certain inadequacies in human nature. From what I can see here, the bill is attempting to speak specifically, directly and clearly to the issues that you raise.
Mr. Jackson: With respect, is there not sort of a contradiction in the questions between yourself and your colleague?
Senator Cools: There is no contradiction in my questions, absolutely. I am asking you clearly to show me where and how these clauses, which are going directly to the issue that you raise of ministerial responsibility, fail.
Mr. Jackson: I do not have the clauses in front of me.
It seems to me that, on the one hand, you cannot say that it is important to have a board that represents the provinces since they should be involved in these decisions and then say, on the other hand, that the direct responsibility of the minister is not undercut. Those are two contradictory positions. If, on the one hand, the agency will be run by a board representing parties other than the federal minister, then how can you say that, on the other hand, the federal minister will take full responsibility for his actions and that is undiminished? I realize that I am attributing the previous questioner's comments to you.
Senator Cools: You are begging the question a little. I think the minister should be commended because clauses 6 through 13 are extremely clear and very well drafted and clearly crystallized clauses. We should have anticipated the problems you have talked about and are granting legal assurance for correction. I would have thought, Mr. Jackson, that those clauses would give you great assurance.
Mr. Jackson: They have not, but I hope you are right.
Senator Tkachuk: To clarify this so that I am not too confused about it, Senator Carstairs mentioned a number of other taxes that the department collects now for other provinces. You are not a departmental official. I do not know how to put this question, but I think it should be clear that those taxes that are being collected are being collected now under the present regime. Is that correct?
First, we are told that we need an agency, and we are now told that we are doing a pretty good as it is. We were just told about a whole litany of taxes being collected by the department. A while back, they were telling us that it was difficult to get these contracts unless they have an agency. I do not know if that makes it any clearer or not, but a wrong impression was left that it was something they were doing when it is something they are doing presently.
The Chairman: On behalf of the committee members, I should like to thank you for your presentation.
Honourable senators, how would you like to proceed? To bring you up to date, as passed by the majority of this committee at our last meeting, other than tomorrow when we will hear from the Minister of Finance regarding this bill, this will be the last meeting with witnesses. We will then go directly to clause-by-clause consideration of the bill.
Senator Cools: I want to make sure that we are still agreed on this.
The Chairman: Yes, we are all on the same wavelength.
Senator Cools: Absolutely. There has been no change here?
The Chairman: The only change was that we introduced Bill C-65 and the presentation from the Minister of Finance.
Senator Cools: I should like to propose a motion. Some of us have had some discussion on this side.
The Chairman: Do you wish to proceed with that now?
Senator Cools: It must be done in public. I have no problem with that.
A number of us have had some discussions regarding future business of the committee. It was the general sentiment that, regarding the business of setting agendas and making determinations about witnesses, et cetera, and the general business of the committee's work, a subcommittee on agenda should be created.
The Chairman: If you are talking about a steering committee, I agree.
Senator Cools: Yes, I am. Having said that, I move, seconded by Senator Carstairs:
That the Subcommittee on Agenda and Procedure be composed of the Chair, Senator Stratton; the Deputy Chair, Senator Cools; and Senator Marisa Ferretti Barth, and
That the committee be empowered to make decisions on behalf of the committee with respect to agenda and procedure; and
That the subcommittee be empowered to invite witnesses schedule hearings; and
That the Subcommittee on Agenda and Procedure report back its decisions to the committee.
The Chairman: Is there any discussion on the motion, honourable senators?
Senator Tkachuk: When I was chairman of the Finance Committee, we did not have all this.
Senator Cools: We did not have it, either. Our side did not think it necessary until a few days ago.
Senator Tkachuk: What has changed?
Senator Cools: In any event, there is a question before us.
Senator Tkachuk: I have a right to know what has changed. You are the one who brought this motion forward.
Senator Cools: I do not take questions here. All questions are directed to the chairman. He is chairing the meeting.
Senator Tkachuk: You are making the motion. I thought we were having a discussion. I am asking you what has caused this change?
Senator Cools: Mr. Chairman, I would say that Senator Tkachuk's question to me is not properly on the motion.
Senator Tkachuk: I think it is.
The Chairman: To be open and above board, I will do the mea culpa, to this degree. Where I felt it was important, particularly regarding a bill such as this, where it is being televised and is of concern to the public and where we are getting responses from the public, I view it as our responsibility -- and forgive me for this -- to ensure that we have invited everyone who can have a possible comment. I do not mean in redundant form, but to the degree that all aspects of the bill are properly examined.
My failure on this was not to communicate that to Senator Cools. For that, I apologize. To that degree, because we have had a friendly relationship, I am sorry to see that relationship go by the wayside. I do not think it is gone, but I have no objection to formalizing it to that degree. We should simply proceed and get on with it.
Senator Tkachuk: I have no objection.
The Chairman: That is the background and my understanding. If I am wrong, then someone else can comment.
Senator Tkachuk: Out of a sense of curiosity -- because I hate to be left out of management secrets here -- who did you invite that Senator Cools did not know about that is causing this?
Senator Cools: It is my turn to respond, Mr. Chairman.
Senator Tkachuk: You would not answer any questions before. I asked you a question and you refused to answer it, so I am not asking you any more.
Senator Cools: You are not the sole "asker of questions" around here. The question you were putting should have been put to the chairman.
The Chairman: And I responded.
Senator Tkachuk: Who was it you invited that caused this to happen?
The Chairman: I had concerns because the Auditor General was being asked to come here and audit. I became concerned about that part of the bill, so I asked him without discussion.
Senator Cools: Now, now, order, Mr Chairman. Order, Mr. Chairman. Order, order. Mr. Chairman, what you are doing is not quite proper; there is a question before us.
Senator Tkachuk: Railroad! It is a railroad here.
The Chairman: There is a question. All those in favour?
Senator Carstairs: I have my hand up.
Senator Cools: We can have debate on the question. We can have debate. We love debate, we on this side.
Senator Tkachuk: For someone who did not want to answer any questions, she is awfully talkative.
Senator Cools: But you are not quite open to questions, and I am never too talkative anyway.
Senator Carstairs: I think it is in the best interests of the Senate and the Senate committees for each committee to have a steering committee. It behoves all of us to ensure as much participation as possible. The witnesses from whom we have heard tonight have been valuable additions to the legislative process, however, they were announced at last week's meeting without any consultation with this side. That has not been the way in which we have generally conducted Senate committee business.
In order, therefore, to put a regular process in place, it has been moved by Senator Cools, seconded by me, that we establish a steering committee of the Standing Senate Committee on National Finance.
Senator Tkachuk: That is reasonable.
The Chairman: That is fair. I have no objection.
Senator Cools: I would like to add that it is the wish of the committee to function well and to function cooperatively and to function in the best interests of Canadians.
The Chairman: You have to realize this is also the first bill in a long time that has been controversial. It is because of that, that we are where we are. For the sake of the committee and to get along, we should adopt this motion.
Is it agreed, honourable senators?
Hon. Senators: Agreed.
The Chairman: Carried.
The committee adjourned.