Proceedings of the Standing Senate Committee on
National Finance
Issue 9 - Evidence - April 2, 2014
OTTAWA, Wednesday, April 2, 2014
The Standing Senate Committee on National Finance met this day, at 6:46 p.m., to study Bill C-462, An Act restricting the fees charged by promoters of the disability tax credit and making consequential amendments to the Tax Court of Canada Act.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this evening, we will continue our study on Bill C-462, An Act restricting the fees charged by promoters of the disability tax credit and making consequential amendments to the Tax Court of Canada Act.
[English]
This evening, we are pleased to welcome officials from the Canada Revenue Agency: Mr. Brian McCauley, Assistant Commissioner with the Legislative Policy and Regulatory Affairs Branch; and Ms. Nathalie Dumais, Director General, Benefit Programs Directorate. Thank you very much for agreeing to come on short notice. We started looking at this private member's bill yesterday. A number of issues came up, and we thought you would be the best people to help us out.
Mr. McCauley, do you have introductory remarks?
Brian McCauley, Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency: Just simply we hope we leave with fewer issues than when we arrived. We'll do our best.
The Chair: We always like it when you leave with a few and you undertake to bring them back. The sponsor of the bill in the House of Commons is also with us here, Cheryl Gallant. She presented last day, but we've invited her here so she can hear what the Senate is hearing in relation to her bill. We will start with the deputy chair of the committee, Senator Smith from Montreal.
Senator L. Smith: Thank you, witnesses, for participating tonight, especially on short notice. In our study of Bill C-462, we had Ms. Gallant and promoters who participated in our hearing. The promoters brought up the question of the importance of having their services and the complexity of the process for disabled people. I'm wondering if, from the CRA's perspective, you could give us some background.
Do you have an idea of the number of disabled claims that would come through your offices, and how do you perceive the complexity of dealing with this particular issue?
Mr. McCauley: The last full year that we have records for, about 220,000 claims came in. At the end of the day, about 83 per cent of those were recognized as valid, about 12 per cent of those were essentially deemed to be not eligible as part of the process, and 5 per cent were essentially abandoned. Once we went back and asked a few more questions, people just didn't follow up.
There is no requirement right now to identify whether or not it's prepared by a promoter. I've seen in some of the testimony that probably around 10,000 of those are recognized as using a promoter. I think it's important to note that the vast majority are coming in on their own or getting processed through an H&R Block or whatever.
I know my office has received over the years complaints from claimants and individuals and members of Parliament where they see egregious cases of what they believe is overcharging, where the cost of what's being charged or claimed from the individual bears no resemblance to the value of the service being provided.
As my last comment, it was interesting to note that the bill actually contains language about fair market value. There is no question, as I read the bill, about wanting to make the marketplace function and recognizing that, in certain instances, there is a value to the services and that that value can vary. Sometimes you might spend an hour with somebody, and sometimes it might be considerably longer. The whole purpose of the bill was to say there are those exceptional cases that need to be dealt with. Right now, we have no tools to do that. This would provide us with that ability to hopefully ensure that Disability Tax Credit, DTC, claimants are protected, but only after a consultation process where we talk to the industry and talk to doctors and then come back and set an arrangement for fees that is reasonable and does recognize the value of services. That's one thing for us that was very important. It's not to drive promoters out of the marketplace; it's only those who are abusing, frankly, the marketplace. That's the way we read the bill as it's written.
The Chair: Had you seen the bill before it was made public and went through the House of Commons? This is a private member's bill.
Mr. McCauley: It's a private member's bill. As the chair may know, before a private member's bill gets tabled, if a department is going to be asked to administer, then there is an informal process to ask our views. Since the bill has been tabled, we've been paying a lot of attention to it.
The Chair: You don't object to the legislation.
Mr. McCauley: We're not in a position. We will administer whatever the House of Commons and the Senate pass. We certainly have no objections to any elements of the bill from an administrative point of view.
The Chair: Thank you. That's helpful.
Senator Callbeck: Thank you for being here this evening. Is there a way that the forms could be simplified? When was the last time the Canada Revenue Agency looked at that?
Mr. McCauley: That's a great question. There was a fairly significant overhaul in 2004-05 as a result of both a policy and an administrative review. It's probably time to look at that again. We were actually hoping that the consultation process that would be required if this bill were to be passed could be used as part of the process of taking another look at the form as well. We're not there yet, but I would like to think about whether we can make it available electronically in a couple of years. That allows you to put in a lot of prompt things and make it easier and help people make sure they don't get it wrong and submit it more easily. It would be our plan, as we did in 2004, in addition to consulting on the elements that are required to be consulted on under the bill, to also look at whether we can make things easier and simpler — absolutely. That would include both the part that the actual claimant fills out, which, as you know, is very basic and pretty straightforward, but also the doctors' part, to see if there is something more we can do there.
The only observation is that this is a very valuable credit, $700 million a year roughly in terms of the tax implications. We have a responsibility to make sure that it gets to everybody who is entitled to get it, but if you're not entitled to get it, we have a way of making sure that it does not go where it shouldn't go. It's that balance of enough rigour but not that it's a barrier to being able to receive it, and that's the balance we try to strike.
Senator Callbeck: This bill defines a promoter as a person who directly or indirectly accepts or charges a fee in respect of a Disability Tax Credit request. Do you believe that health professionals and tax preparers should be included as promoters, or should there be another word here?
Mr. McCauley: First of all, yes, they have to be captured because, if they weren't, you leave a significant compliance loophole. Unfortunately, you're talking about the 0.01 per cent of people who would try to abuse this, because the vast majority of things are quite fine. I want to keep emphasizing that this is for the few exceptions. Two years ago, we convicted a retired doctor, somebody who was abusing the system. If we didn't have them included as part of the process, all you need to do is hire a retired doctor. He or she charges the $3,000 or $4,000. They are scoped out, and the bill has no effect. You create a loophole. Unfortunately there are a few people out there, as we've seen, who could take advantage of that. We would see that as almost a fatal flaw in the bill. If it works as I understand it's intended to work and you have your discussions on the fee schedule, it's not going to mean anything to physicians because the fee schedule will recognize the value of their fees. A lot of them are recognized provincially. The only people it might worry are those who are looking to abuse the system. That's where we want to get to after the consultations.
Senator Callbeck: I agree that they have to be captured, but calling a health care professional a promoter? That doesn't sit right with me.
Mr. McCauley: It's a word, and that's the word that's used in the bill. If we provide some guidance and instructions and have discussions, as we explained things, if there is a more appropriate word in our guidance with the medical community and after we chat with the CMA, we're certainly open to that. That's the word in the bill. All I'm saying is that we can work with that quite comfortably because the real intent is what's captured as opposed to the label you put on it. We're neutral on that.
Senator Callbeck: Once a person sends in the claims and they get approved, I know they can go retroactive 10 years, but let's say they're approved this year. Do you follow up in five years? Is there any type of follow up, or do they get that Disability Tax Credit the rest of their life?
Mr. McCauley: You have all the good questions. There is part of the form, when the physician fills it out, where they indicate the duration or the potential duration. If the physician says that it may not be permanent, they indicate there is a bit of a sense for how long. Yes, those things get flagged. If it happens to be four or six years, we would flip a letter out saying, "Okay, what's the circumstances? Have they changed?" For younger claimants, there are certainly some things both with medical intervention and devices but also in terms of thankfully growing out of the disability; you no longer would need the benefit of the claim. So yes, there is a system to do that. Usually, as I say, it is triggered by how the physician describes the circumstances.
Senator Callbeck: Do the tax preparers or promoters get involved again?
Mr. McCauley: I'm not sure, simply because right now you're not required to identify if it is a promoter. I would like to think that hopefully, after you had gone through it once, you wouldn't need to use them again, but I can't tell you whether or not the contract that you may have signed with them might require you to.
Senator Callbeck: That's what I was wondering.
I'll go to the next round.
Senator Buth: Thank you very much for being here this evening.
You made the comment that out of 220,000 claims, you think about 10,000 might use a promoter. Currently on our income tax forms we have to indicate that another person has filled out this form. Is that the not the case for the Disability Tax Credit?
Mr. McCauley: That's right. My understanding is that it's currently not required. That's actually one of the things the bill suggests that we add to the form.
Senator Buth: Do you have a sense or could you tell me how many complaints you might get about overcharging?
Mr. McCauley: No. We really don't keep a number. I would say that I'm certainly aware of cases that are significantly egregious and that have been happening. We see enough coming up, popping up each year and we couldn't do anything about it. So when we saw the bill we thought it would certainly help us deal with that, but no, we don't have a number. Again, it could be that there may be a lot of circumstances where it's working fine, the value is there, and that should continue.
Senator Buth: Can you describe the process that you would use for a consultation in order to set the rate, and how do you differentiate the percentage that might be charged versus the type of service that they might receive? Some of the promoters said they clearly provided much more of a service than others.
Mr. McCauley: That's a very good question. I would like to take suggestions if anyone has one. In all fairness, because the bill hasn't passed, we have not been overly active on planning. We did not want to be presumptuous of Parliament's actually making a decision. We have respected that, so we have not done too much of that.
One thing we would like to talk to some of the key groups about is how they would like us to consult. What makes the most sense? In some cases, professional organizations like CMA are very well-organized. They might say, "We have a group. Can you do a workshop for a day or two? That might be the best for us." We might talk to some of the groups that represent individuals with disabilities, and they may suggest another process. We're actually quite open.
There will be a challenge, particularly because the bill says "fair market value" and there will be a need to recognize and try to differentiate a little bit between something that may be simple and straightforward and maybe at the end of the day the value is $100 and, as I mentioned earlier, a file where there is a lot more work. How does that get recognized? It will have to be one of those delicate balances of simple and understandable, but sophisticated enough to recognize the fair market. That's the work we will have to do if the bill gets passed, and then come back and make sure our minister is comfortable with that. Then we would publish regulations, and even those are subject to consultation, review, comments from the public before they are hard-wired into the system.
Senator Buth: Would you say, then, it's more appropriate to have a fee based in regulations than a bill?
Mr. McCauley: Yes. If it's in a bill and we don't get it right, or after a couple of years we find out that's not really working or there's a significant change in the difficulty of applying for a certain kind of disability, trying to get something changed in legislation — as fast as the house and Senate might work — could take a lot of time. If it's in regulation, even though you're going to make a change and get public comment, you will move much more quickly. If you want something that's more sensitive to the reality that people are dealing with, regulations are a better way to go, in my view.
Senator Buth: The witnesses we had expressed frustration regarding Canada Revenue Agency responding to clients that might be having trouble, or that the process was difficult and that's why they needed help. One of the witnesses also indicated that they have suggestions in terms of the form, et cetera, but you have not been open to receiving comments on that. Could you comment on the comments from the witnesses?
Mr. McCauley: There are always exceptions, and in an organization of 40,000 people and 340 million transactions a year, nothing is perfect. I do know that the CRA philosophy is to consult and listen. For example, to put it in context, if somebody was coming in and arguing for the claim to be changed — the form — we know there isn't an opening to do that. Until we have broader consultation and more people have a chance to make observations, we might have said, "Well, you can talk to us, but we really won't be able to do anything for a year or two." Somebody might interpret that as saying we're not open to changing the form. We have had some experience where if we change things too quickly, it sometimes confuses people even more. We were looking at the timing, and now that the bill is here, some reference to perhaps being able to go electronic, if that could all get wrapped together. Certainly the intent, assuming the bill is passed, is that we would use part of that consultation process on the form.
Now, I will acknowledge that we can only do things to make the form administratively simpler. We can't change the policy parameters that the form tries to give expression to. I think senators appreciate that distinction, certainly knowing Nathalie and Michael and others working on the file. We have five nurses who work on the file who phone people about claims to talk to them to try to sort things out rather than send letters. We have done things to try to make it work as best we can, and if there are other suggestions, bring them on.
The Chair: You indicated, I believe, Mr. McCauley, during one of your answers that there is a requirement in the act to identify the promoter. I'm just getting to know my way around this bill, but I don't recall that particular identification.
Mr. McCauley: I think I misspoke. What is in the bill is if the promoter charges more than what is established in the fee schedule they would have to identify that.
Nathalie Dumais, Director General, Benefit Programs Directorate, Canada Revenue Agency: They would have to report to CRA.
Mr. McCauley: So, you're right.
[Translation]
Senator Hervieux-Payette: I would like to be able to identify those who will be affected by this legislation. We are talking about promoters who, directly or indirectly, accept or impose fees for disability tax credit applications. Do you put all the professionals who fill out the questionnaire in that category? Be they doctors, psychiatrists or psychologists, those people have professional fee schedules issued by their association. They do not charge by the hour or based on the magnitude of the case. The form is the same for everyone. Would you associate health professionals with promoters?
Mr. McCauley: I will answer in English to be specific, and perhaps you can help me.
[English]
I think the purpose of the bill is that if you charge a fee directly or indirectly, you're captured. However, I think it's important to think that the next step is that, unless you're charging something beyond a fee schedule that has been established through consultation with everybody, there's no impact on you whatsoever. You're not filling out any more forms. You're not reporting to CRA. It's literally nothing for you. The bill is really only going to impact you if you're doing something outside of the boundaries of what's determined to be reasonable after consultations with everybody.
Senator Hervieux-Payette: Where do you see that? You can say that, but this is not precise whatsoever. If I am a doctor, I feel that I may be associated with promoters. You say that they will be treated according to this or that. Where do I find in the bill that they will be just limited to what their professional corporation fee is giving as the honorarium that they can charge?
Mr. McCauley: Maybe you can jump in, too, Nathalie.
[Translation]
Ms. Dumais: The purpose of consultations is also to determine the criteria for establishing the maximum rate. The opinion of the organizations of people who provide health care services will be taken into consideration. We expect the maximum for that limit not to be an issue, based on the level of effort made in the case.
Senator Hervieux-Payette: Will your flexibility apply to all health-related professions, in all provinces — since the fee schedule varies from one province to the next? Will you have the fee schedules for each province? Will the department ensure that subclause 3(1) is complied with? You say it is prohibited for promoters to accept or impose fees that exceed the maximum fees. If a psychiatrist's fee is $250 and they charge $300, will they be fined $1,000? That is what I want to know.
It is not an easy task for the government to impose all the medical fee schedules. I do not understand why not exclude all health care professionals from the definition of promoter, by linking them directly to their professional association to set fees. This has to be specific.
[English]
Mr. McCauley: As we understand it, what would happen is that it's not a fee schedule where it says, "This is your amount." Again, we have to go through the process to see what makes sense, but it's to set those upper boundaries beyond which the general consensus amongst those communities would be that there's no relationship to what's being charged and the value of services. Particularly in the medical community, there are a lot of other reference points that I think, as you have said, we would look to because the intent is not to draw that fine line. It's actually to simply say that this is where you get beyond the bounds of tolerance in which any Canadian — any medical profession — would say, "There's no relationship between what is being charged, or what's being purported to be charged, and the value of the services."
That's part of the purpose of the consultation process. Are we going to have to talk to a lot of groups? Yes, but that hopefully will mean that we'll get it right. The early observation is that, given that it's regulations, if, after a year or two, we find that it's too tight and it's not reasonable, then we'll go in and adjust it after consulting.
Senator Hervieux-Payette: Mr. McCauley, you have not sat in the house or in the Senate to know that, after two years, things will be changed. Most of the time, five years later, the bill has not been changed, so this is not something that will convince me. Maybe other people are convinced, but, after 19 years, I've rarely seen laws being corrected two years later. So, in this case, if I was a doctor and was called a promoter, I can tell you that I think it's insulting. In fact, they are the pillar for these people to obtain their eligibility. I feel that it's insulting to qualify them and to put them under the same hat as those who have invented for themselves a profession, all of a sudden, and become the person who really did the promotion of that program. In fact, you have created what must be a job-creation initiative. As far as I'm concerned, these people, if they are doing their work correctly, filing the form correctly, which they don't always do as we were told yesterday — sometimes they make mistakes, and you have to go back to them — you have to understand that they don't see somebody who is sick to get some treatment. They are doing some paperwork. I feel that this is quite insulting because you use the same word in French and English — "promoter" and "promoteur." In Quebec, we use the word "promoter" for horse racing. If people go to Blue Bonnets, you say they are a promoter. We're dealing with people with handicaps that will be recognized by some health professionals. Don't you feel that these people should be isolated because they're part of your process, and they are the basis for people to be eligible to have access to the tax credit? We can say that they should charge according to their own professional fee that their order is applying and publicizing, but to be associated with that group is not appropriate, as far as I'm concerned.
Mr. McCauley: I'm not sure if there's a question there, but I will comment.
Senator Hervieux-Payette: What do you think about the medical profession, which includes psychologists and others, being caught under the word "promoter," knowing that these people, contrary to the clause 3 other promoters are people that are not necessarily on the fee schedule of a professional order or association?
Mr. McCauley: My understanding is that, certainly, there's the language that is used in the bill. I'll apologize; my reference for being able to change things was in the regulations and the fee schedule, not the use. So it's my mistake; I apologize for that. That's where we would be able to move more quickly; you're right. You're absolutely right about legislation.
I think we would have flexibility, and, again, it would be good to listen to people's part of the consultation process. There are the words used in the law, but, in our material and other things to talk about medical professionals and others, we may end up not using the word "promoter" for a lot of those groups. If that, for example, is part of the consultation and is something that people think makes a lot of sense, you can do that in how you communicate, how you share all of this information, and that doesn't lessen the authority of the bill in the terms of carving people in. So it is a good take away, not just from tonight but from others, that we're not bound, unless we use some absolute legal text. We can look at being much more flexible and, as you would say, respectful in terms of how we would communicate that, either out to the general public or through the professions. That's certainly something we would be willing to take on as part of consultations.
Senator Hervieux-Payette: Mr. Chair, at the next meeting, I intend to put an amendment to this because I want them to serve the clientele in difficulty, and I want all of these professionals to feel not only happy but also that they're providing a public service and are not people promoting and taking advantage of people with difficulty. The way it's written there is why you want to put a ceiling on what is being charged, but, at the same time, these people don't fit into that definition.
I'm just saying to you that I thought that you would help me a little bit. I know that you want to do it indirectly, but, as legislators, I would like to do things directly.
The Chair: I'd just point out to you, Senator Hervieux-Payette, and to the meeting, that in the form itself, "qualified practitioner" is the term used, which is already an established term. If you were thinking about maybe saying that promoters do not include qualified practitioners, that might solve your problem. But I hear your point.
Mr. McCauley: Just an observation on that, Mr. Chair, if it was the nomenclature — my earlier comment — it would be that you would add that as "promoters" or "qualified" to get captured. Because if they're carved out, then you create that compliance loophole that I spoke to earlier. It wouldn't be to exclude them; to add an additional title into that section, I think, would be the way you could address it. All I'm saying is that regardless of what you do or don't do with the bill, we can certainly undertake, in terms of how we would execute it, to respect some of these views as much as we could.
The Chair: Thank you for that.
Senator Eggleton: Thank you very much. First, I'm happy to hear that you're going to look at simplifying the form, because that may reduce the number of people who go to these third-party whatever you want to call them.
I think equally important is the service you provide. That can also help reduce the number of people who go there. With closure of service counters and difficulty getting you on the phone — I have tried many times; I know — that could drive people into the arms of these promoters.
Can you do something more to improve the service level, at least at the initial instance? I heard you mention something about nurses who call people. That's sounds very good. But there might be a barrier of them getting through at the start.
Mr. McCauley: An excellent point. I think it is somewhat reassuring that out of the 220,000, we think it's about 9 or 10 that use promoters. We think we have a pretty good chunk. It is not like you have 90 per cent of people having to use promoters. It is a small piece of the market. To your point, there are probably cases where they do add value.
From our perspective, if there are things we can do, we are moving how we handle the phones and we're going to try this in the coming years, to allow people to get through our general inquiries line. We are looking at whether we can improve the telephone access for DTCs.
We did find, when we did the survey on the counters, that typically the individuals who are inquiring about the service don't come in to do a physical presence kind of thing in our offices, so that was not seen as a barrier.
One of the things we do is that if we get a claim in and we have some questions about it, we've got five nurses on staff; and they go through it, because they're medical professionals. They will pick up the phone and try to call a doctor, or they'll call the individual to see if they can work it out rather than sending letters.
If, as part of the process, there are affordable tips on the service side, we would certainly be open to that. I mentioned coming up with an electronic form and things like that. We are looking at trying to modernize the service too.
Senator Eggleton: Some of the severely disabled will not be able to go that route and do need that extra help.
Mr. McCauley: If you were going to help them out, it would be easier for you to help out the person, if you wanted, as an individual. The point being that I may be so disabled that I can't use the new electronic form, but if it makes it easier for you to help them make the claim, it may have some value.
Senator Eggleton: I would appreciate your looking at the service level so that you can help people at an earlier stage.
We had some of these promoters, or whatever we want to call them, in here. They indicated that 30 per cent was what they needed. My first reaction is that it sounds kind of high, but they said that's based on the going professional fees. Most of these people are professional accountants, or at least some of them said they were.
What is overcharging? What do you think is overcharging? I know that's going to be the subject of the regulation; you're going to have to get through that. If it's anything less than 30 per cent, these people say they're out of business.
Mr. McCauley: You're right that it's the purpose of the consultation to sort that out. My only observation would be that given that the bulk of the difficult part of the form is filled out by the physician, and the other four or five pieces of biographical information, it will be an interesting conversation about how you establish fair value. But the bill is very clear. It's fair market value. It's not seeking to remove promoters from the marketplace; it's seeking to remove those few exceptional circumstances where there is abuse.
Senator Eggleton: Talking about abuse, some of them said that some of the operators are providing false advertising and misleading kind of information to people. Will that be looked at, too, as part of the regulations? They said it's more than a percentage; in other words, they think there are other things to be looked at. Will you be able to do that as well?
Mr. McCauley: Our first priority would be to consult on what we need to consult on to put the bill into place. As part of that process, we can piggyback, or people can have other observations. We have a mandate to do certain things. Have we issued tax alerts or a few other things on DTCs? That is getting down that road: Would there be some things in terms of "claimant beware"? I don't know if we have gone down that road yet, Nathalie.
Ms. Dumais: We're certainly looking at the way we're communicating the information to individuals who might be eligible. We talked about electronic, but also new ways of reaching out, social media and all of that. Certainly that's something we would be looking into as we're consulting on the pure objective of the bill and what we committed to. Every year we review our programs and forms. Some years it's minor changes. Once in a while we do a more exhaustive review process, like we did in 2007 and 2004.
I think whatever we hear through the consultation will not be limited to what we're going to implement as part of this legislation but also in terms of what program improvements we can bring in.
Senator Eggleton: I'm delighted you're doing this wide consultation with the stakeholders.
One more question, if I might. We've been talking about concern about the terminology "promoter" and whether "physician" should be in here or not. As my colleague said, it sounds like an insult to the profession. There is a provision in the bill, paragraph 9(b), which provides for exempt groups. What might those groups be? Do you have any idea?
Mr. McCauley: No, in the sense that, as we read the bill, it provides that if for some reason, as part of the consultations, there's a conclusion that there is a reason that a group could be considered exempt, and it doesn't create any risk, compliance risk or something, then that's available to actually have the minister say this group is exempt.
To the earlier comment about how difficult it is to change a bill, it's in there that if, for example, there is justification for somebody's being exempt — and I won't speculate as to who that might be — that determination could be made. It's handy to have it there if we came across that as part of the consultations.
Senator Eggleton: It would be by the minister on the basis of your advice?
Mr. McCauley: After the consultations, yes, we would suggest this is what could be considered.
[Translation]
Senator Bellemare: We have heard suggestions from witnesses who have appeared before the committee about the term "promoter". We discussed this with them yesterday. Health professionals identify as health care providers. There was some consensus about using the term "consultant" instead of "promoter."
Whether we are talking about health care professionals or others, those people feel that they are providing a service to disabled individuals by helping them monitor their file, and that this is a service with market value. They do not promote or advertise. It may be a good idea to discuss the term "consultant".
My question has to do with fees and penalties for violations. In subclause 3(2) of the bill, the following is stated:
Every promoter who contravenes subsection (1) is liable to a penalty in respect of the fee equal to the total of $1,000 and the amount . . .
That formula specifies the amount of $1,000. Since no consultations were held, we do not know what the order of magnitude should be. We see a formula were A represents the fee in respect of a disability tax credit request, B represents the maximum fee, and I am wondering what C stands for. I am struggling to understand. The bill states that C is the amount of the fee in respect of the disability tax credit request that is repaid to the claimant within 120 days after notification is given to the minister in accordance with section 4 or any longer period that is acceptable to the minister.
That means the minister or the government will repay the claimant for the fees, and that is part of the equation to determine the penalty for a fee exceeding the maximum fee. I think that is a bit complicated.
Moreover, clause 7 also sets out an amount for offenses. That provision is simple and appears worthwhile to me. It states the following:
Every promoter who contravenes section 3 is guilty of an offence and, in addition to any penalty otherwise provided, is liable on summary conviction to a fine of not less than 100 per cent and not more than 200 per cent of the total of all amounts by which the fee exceeds the maximum fee amount in respect of a disability tax credit request.
In this case, as well, there are details on the offence. I do not know whether it is justified to have this mix of unknown and set values before the consultation is carried out. Is it common to find two types of penalties and these kinds of defined parameters in a bill?
Mr. McCauley: I will try to answer and will then ask Nathalie to complete my response.
[English]
I have to keep things simpler for my own purposes. Again, this is to catch the exceptions, not the 99.9 per cent that are quite acceptable. Let's say that for whatever reason, after the consultation is done, that it was $1,000, and so somebody has charged $1,500. After we asked them about it, there is no real good reason for why they exceeded the limit. There is also common sense. Before you would apply it, you would check to see if there is something we're missing here, particularly if it's from a group or association where is there is no history of this. It may just be an anomaly or even just a mistake. If that isn't the circumstance and it was a case where they clearly did do something inconsistent with what the bill was intending, then it would be the equivalent of $500. If there wasn't something beyond the $500, essentially all you'd be doing is taking back the excess and there really would be no significant consequence on, in this case, the promoter who might have been charging over.
The $1,000, as I understand it, was simply there to say you have to have something a little more than just clawing back what you would have got, because otherwise there is really no risk. The only risk is that you might not get the extra money that you were trying to get. The $1,000 was put in there, and that's per claim so it's not insignificant, to say no, there is a slap on the wrist for that.
The other one is where you're dealing with, as I understand it, a chronic offender, somebody who has repeated cases, like the ones we had to eventually take to court and who were convicted. That took I don't know how many years, and people were caught up in that. This would allow us to move more quickly and impose something on that. I will admit that second part we do use rarely and very judiciously, and we consult with Justice. The second one, the harder fine, is unusual, but it is often styled that way. Do you have any further comments on that?
Ms. Dumais: You expressed it well. It's to recognize the difference between an omission, not having reported something, and finding there is a little bit more in terms of intentions and repeats.
[Translation]
In the first case, they would repay the surcharge plus the $1,000, which serves as an incentive to behave differently next time. However, in the second case, it is more —
Senator Bellemare: In terms of subclause 3(2), you are saying that the consultant or promoter repays the claimant. We are not talking about a penalty for a fee exceeding the maximum fee that the promoter pays to the government.
Ms. Dumais: The repayment is made to the claimant because they were charged more than the maximum fee.
Senator Bellemare: That is not set out as clearly. The following is stated:
Every promoter who contravenes subsection (1) is liable to a penalty in respect of the fee equal to the total of $1,000 and the amount determined by the formula A - (B + C)
But I do not understand what the C in the formula stands for. My understanding is that the government repays the disabled individual who has been charged an amount exceeding the maximum fee. The provision sets out the following:
. . . is the amount of the fee in respect of the disability tax credit request that is repaid to the claimant within 120 days after notification is given to the Minister in accordance with section 4 or any longer period that is acceptable to the Minister.
I am trying to understand this provision, and I am having difficulty grasping the mechanics behind the formula. I may be the only person having such difficulty.
An Hon. Senator: No.
Senator Bellemare: That is reassuring.
[English]
Mr. McCauley: If you could go on to some other question, we'll see if we can get the answer to that and then maybe circle back in a second, just to make sure we get it right.
[Translation]
The Chair: Do you have any other questions?
Senator Bellemare: No. I think I had my answer. My second question had to do with clause 7. I understand that clause 3 concerns a penalty for a fee exceeding the maximum fee, and clause 7 has to do with another penalty.
The Chair: We will see later on.
[English]
Senator Merchant: We had some testimony that people said they really couldn't afford to pay anything. I think there was a woman from Alberta who said that even 10 per cent would be too much for people with disabilities. Is there something that people like that can do to still be able to put in their claim? Do you know if there are many people who are not able to apply because they are not able to pay for the service, or some people never bother to apply? That might be one reason, and another is maybe some of them are not well enough or able to navigate the system, but at the same time they cannot pay very much because every bit of money is important to them.
Mr. McCauley: It's a very important question and goes back to some earlier observations about trying to make it as easy and straightforward and direct as possible on the front end, and that's a permanent mission. I do know, again an observation, that of the 220,000, there are about 10 that fall into that promoter community. There is a lot of stuff happening outside of what the medical professional might charge. Certainly going in, the assumption is that 99.9 per cent of that is quite legitimate and the value is appropriate. There are some provinces that recognize it as an OHIP cost, and others have a bit of a charge. As was pointed out earlier by another senator, that is something we'll have to look at.
I also know that some of the tax preparation organizations do it for free. If you're doing your return with them, they'll fill out the front part for you for free, at no extra cost. You just get the medical side and then you come back. We can't promote somebody else's business. However, if we can help profile that a bit more, then that would be another route and it's good for their business. We specifically know of some that do that. They'll fill out the front end for you and say, "Go see your doctor. Bring it back and we'll file it for you. You don't have to worry about it."
There are a lot of people out there who want to make sure this gets to the right people, and that's encouraging to see.
Senator Merchant: Yesterday, I think perhaps we got some information that might not be quite accurate.
When somebody qualifies and gets a credit, does that go directly to them or does it go first to the promoter, who then keeps his portion of the fee and then gives them the rest? How does that work?
Ms. Dumais: It goes back to the claimant or to the taxpayer who is claiming it.
Mr. McCauley: As far as we know.
Ms. Dumais: My understanding is then there is an agreement about what they are to pay.
Senator Merchant: They are to pay.
Ms. Dumais: Exactly.
The Chair: That was the final information we got yesterday.
Senator Merchant: That was a little bit of a discrepancy.
The Chair: It's good you were able to confirm that for us.
Senator Eaton: Thank you very much. After hearing our last group of witnesses, some of us started to think about the registers and talking to people. What if promoters, consultants, providers — whatever the word is — were to put themselves into an association and set up standards, a bit the way a couple of years ago immigration so-called promoters, consultants, providers had to put themselves into an association and come up with a set of standard and charges? Would it make your job easier if they self-policed themselves a bit? Is that something you would bring up or think about when you did the regulations and were talking to people?
Mr. McCauley: I don't mean this the way it might sound, but this is not to make our job easier. It's to make sure that Canadians who deserve the DTC don't get abused.
Senator Eaton: I couldn't agree with you more.
Mr. McCauley: I guess the question is, how much confidence does one have that that would happen, happen quickly and happen with a degree of rigour so that these things wouldn't happen? It may well be that everyone who would go in that are not the ones who aren't abusing the system and you would have nothing in place for those who are abusing it. Yes, it would probably work great for everyone willing to respect those self-imposed limits. Would that be handy for us? Yes.
Senator Eaton: And other conduct. It's not just the fee. You know how you can circumvent a fee easily by leading people on to get more things or to do other things. It's both the fee and conduct.
Mr. McCauley: At the end of the day, would that be helpful? It certainly would be interesting and would give us another group to talk about. My personal observation is that the individuals or groups, or whatever — I'm trying to avoid the word like you are — that the bill is trying to target are the ones who would not go into that. They would operate outside of that orbit and therefore avoid it.
Senator Eaton: Is there a way of licensing? In other words, somebody could not submit a form and be helped by a licensed practitioner. Is there a way of licensing people?
Mr. McCauley: I'm not an expert on this — there are probably a lot more experts around the table than me — but I think constitutionally the licensing is a provincial authority. I think you would start to run into some constitutional and federal-provincial authorities. I think the licensing authority rests with the provinces. You would enter into a quagmire to make something like that happen.
As we design this going forward, are there more either incentives or disincentives to try to get it right from the start? Sure, we would be open to that. The bill moves quickly to stop the abuse and gives us a tool to do that. Is another process possible? The question would be how long would it take and what kind of effect would it have.
Senator Eaton: My worry is that it seems to be a good remedy, but it's also going to be abused by people who will say "Yes, for 30 per cent we'll get this and that for you. But if you give me another 5 per cent, I'll do these extra steps." This is all I'm saying.
Mr. McCauley: The hope is that, at the end of the day, it deals with those exceptional circumstances where there is abuse. As we move forward, we want to make sure to the best degree possible that we don't establish some new ceiling for charges and that we don't do anything that actually causes a bump in costs because people will sort of start seeing that as the new ceiling.
We're very aware. We've got people on staff; we've got nurses who take the program immensely seriously. That's one of the things we'll want to do regarding the earlier observation.
In a perfect world, it will be simple enough; you won't have to use somebody else. However, there will be those niches where there is value added by the use of — whatever the name is — a promoter, and we will try to be sensitive to that as we go through the consultation and come up with a regime.
Senator Eaton: In closing, I'm glad you both feel it's exceptional.
Senator Mockler: I would like you to walk us through the exercise. First, how much thought was given to improving the current provisions that we want to make instead of drafting the law? Second, why are these amendments that you're looking at on a private bill rather than directly included in the Income Tax Act?
Mr. McCauley: I may not do a good job of this. A private member's bill is submitted and dealt with by the house. We're here to provide observations on the bill and its implications. I don't mean that to avoid the question. This has come forward as a private member's bill. We can provide our observations as to how it can work in the administration and what it might mean for us. However, regarding the legislative route it took, at end of the day we're indifferent. We'll deal with the act whether it gets passed through the ITA or through this.
Senator Mockler: With the experience you have, do you think it would be better to go through looking at amendments to the Income Tax Act rather than going through a private bill? You have the experience. Can you comment on that?
Mr. McCauley: Again, this is a personal view. I think a stand-alone bill probably is better. For example, the Tax Rebate Discounting Act is a separate act that controls the limits we put on general tax returns and the percentages and what happens there. So there is a bit of a precedent. If you're going to do things that affect the market for particular purposes — that niche sort of effect — then you might be better to go with a clearly targeted bill so that you're not running the risk of confusion. If it's embedded in the Income Tax Act, you start to get into issues of whether people will try to ply it elsewhere and will it be controlled. We're certainly not uncomfortable with it as a stand-alone bill.
The other thing is that the bill leaves the responsibility with the Minister of National Revenue to adjust the regulations, and changes to the Income Tax Act are sometimes more difficult. It means that that the regulatory control is left with the minister who will have to administer all of this, which hopefully means that he or she will able to move more quickly and be sensitive to what's happening in the marketplace. We certainly wouldn't be uncomfortable with it as it's positioned now. That would be my personal observation.
[Translation]
The Chair: Do you now have an answer to Senator Bellemare's questions about penalties?
[English]
Ms. Dumais: Yes, we did clarify. Our reading of that penalty is that the penalty would be $1,000, plus the amount over limit if the promoter or consultant did not repay the taxpayers within 120 days.
Senator Eaton: If he hasn't come back within 120 days, it costs the promoter an additional $1,000, plus the amount he overcharged.
Ms. Dumais: That's right. That's our understanding at this point of how this would work.
Senator Bellemare: It doesn't read that way. Maybe we should put some wording.
Mr. McCauley: One thing I might suggest is if there are observations, we would look to the records when we do our interpretation bulletins and notes. So what you have raised here tonight would be helpful. It brings out a feature of the bill that tries to make sure the claimant is restored in full, so there is a nice incentive in the bill to do that.
Senator Bellemare: That's why there are two.
[Translation]
In one case, the payment is made for the offence, and in the other case, we are talking about a repayment.
Ms. Dumais: Once the measure comes into force, we will also have interpretation bulletins. Our publications will also explain this more concretely.
[English]
The Chair: So, as I understand it now, the penalty referred to in clause 3 is paid to the handicapped taxpayer or to the government?
Ms. Dumais: To the government, if you have not reimbursed the taxpayer. That amount is included in the formula.
The Chair: So it's not a reimbursement. We have two penalty sections — clauses 3 and 7. I think we're all starting to understand it.
I will go to round three. We're doing very well on timing.
Senator Callbeck: I have a question that really doesn't pertain to this bill, but it came up yesterday when we had witnesses and it concerns Canada Revenue Agency. We had a doctor here representing the Canadian Psychological Association, and she indicated that in the last budget a change was made, and there is a lot of confusion as to whether they should be charging the HST on certain services or all services. They've been trying to get this clarified, and my understanding is that now some psychologists charge it and others do not. I'm wondering if Canada Revenue Agency has cleared this up, and if not, when might that happen?
Mr. McCauley: It's a good question. I'll undertake to get that information back to the committee because I know we've done some work on it. Part of the work was actually talking to the association and the communities. I'll get you the answer. That's the best way to put it.
The Chair: In this instance, for the rebate, if the qualified practitioner was the doctor and the doctor charged a fee for helping to fill this form out, does HST apply to that or not?
Mr. McCauley: The bill would have no effect whatsoever on what the tax ability status would or wouldn't be of any elements. I know the bill would be entirely neutral on that. I think Senator Callbeck's question is a very distinct one dealing with the last budget change. If it's appropriate, we'll get that answer back through the committee if that's okay.
The Chair: Absolutely.
Senator L. Smith: Mr. McCauley, I'm trying to understand the depth of the problem definition. You mentioned 220,000 claims, 83 per cent valid, 12 per cent not eligible, 5 per cent abandoned, and 10,000 through promoters. That's less than 5 per cent of the total claims through promoters.
How many disabled people are there? How big is the market? Your last policy administration review was 2004. I'm trying to get the size, the context of the problem.
Mr. McCauley: For the last five or six years we've been running around a couple hundred thousand applications each year. That has been moving a little bit. There has been a gradual, steady growth, which in some ways is following demographics because once you go beyond 60 things start to happen or not happen, as the case might be. There is a bit of an increase, so we're seeing that happen. As we've seen, there aren't any jumps, but it seems to be appropriate.
The overall number — I think we're around 650,000 — is what the current claim base is. When you have 220,000 a year, it gives a sense of what the "churn" is in that population. For some people, as we talked about earlier, it was a duration that was not lifetime and therefore will come out of the system. Others will come out of the system for different reasons, so those are the numbers. As I said, we think it's around 10 or so for promoters, but as has been pointed out, because you're not required to identify or things like that, it's not a hard number. That's currently what we know.
Senator L. Smith: We were told that about 10,000 cases are handled through promoters, which is around $20 million. If I look at $20 million versus $700 million, I'm looking at the size of the problem definition, and that leads me to cost. How much does it cost you to administer the program itself? One of the questions we might be asking ourselves is this: We want to make sure disabled people are taken care of properly. Is this a significant problem in terms of the reality? Everything is a problem, I understand, and we want to make sure that we support our citizens, especially disabled citizens, but I'm trying to get a handle on that. How much does it cost you folks to administer this?
Mr. McCauley: The implications for administering the bill, leaving aside what might be some one-time cost to do the consultations, there are no additional monies that the CRA is receiving. So this would be built in to part of the current administration. There are a lot of good reasons for us to be out there, so I don't think we see significant incremental, even in the consultation. Do we have something in the annual report about the cost to administer the program?
Ms. Dumais: If it's not in the annual report, we would have that because it's an isolated program.
Mr. McCauley: We can get that back to the committee. It's on the public records, and we'll pull the right number. I just wanted to make sure that isn't going to change because of this bill.
Ms. Dumais: The other way we were looking at this — and what we thought the intent of the bill was — is that maybe when you look at the volumes and the number of people who are using the services, that's not where the issue is. But if you look at it from an individual perspective and if you go back and claim for 10 years, it could represent a significant amount of money. That's more how I think this was supposed to help disabled people to get most of that money in their hands, or the right proportion of it.
Senator L. Smith: I'm trying to go through the logic in my mind. If you're averaging the cost out through the other services you provide, then it goes back to the questions we raised earlier as the importance of your service levels to be able to handle it, because if you're not increasing the costs to service this particular problem, then it falls within the bailiwick of your other services. That goes to say, how good are your other services? That's just a thought.
It would appear then that if there are 650,000 folks who are disabled and 220,000 annual claims, you said a large number of disabled people are not making claims, then what role can the CRA play in educating people so that if there are other people who are worthy of being taken care of then they should be helped? How do you help them?
Mr. McCauley: I don't believe I did say there were a large number out there who aren't claiming. I was saying there are 220,000 a year come forward. Is that the right number? It's like you don't know who hasn't come forward so you don't know what you don't know, but the point on the awareness side, and again part of the consultations, I've got a list as long as my arm here. We're out with conferences with medical associations, physicians, psychiatrists, health associations. We've got webinars. We've got our phone system. We do news Canada articles. We do MP tax tips, so we give stuff to MPs to put in their folders. We do stuff with the provinces. We try to do everything we can. We're even tweeting now; as was pointed out, not everybody is into the tweeting.
Sometimes, though, we're finding that through third parties and others is the best vehicle, because people will feel more comfortable and use them, given that we're not always necessarily the most friendly voice on some things, so we're quite comfortable if others share and do that.
We've got a long list of people we work with, and if that list can be made longer, all the better.
Senator L. Smith: You discussed last night the refundable versus non-refundable. Is every credit that's given to these disabled folks in cash, or is it sometimes just a deduction off their income tax? Is it dependent upon the amount of income they have? I thought there was some discussion last night about everything should be refundable. Is it refundable? How does it work?
Mr. McCauley: Again, Nathalie will help me. When you're calculating the value of the credit, it's not dependent on your income, but because it's non-refundable you take it off the tax that would otherwise be owing. That's how it's designed.
Senator L. Smith: Like an RRSP deduction, if you have 18 per cent that you could deduct, if you had an amount that's deductible, then it reduces your taxable.
Mr. McCauley: When you do your tax return, unlike some others that can get ground down because of income, this is $1,150 or something, at the end you just do it and it's tax payable. If you owed $3,000 in tax, you get to take this off, right off the bottom line, and then you only send in the $1,950 or whatever it would be.
The Chair: I think we understood yesterday, but the word that you used, the tax implications of the $700 million per year, is that an aggregate of all the taxable income, or is that actually the tax payable, the aggregate of all tax payable that's reduced by $700 million?
Mr. McCauley: I'll give you the number and Nathalie will quickly correct me. My understanding is that that's the actual, the tax that is removed out of the system because you're getting the credit, so it's $700 million out of the fisc that's actually used.
The Chair: As you were describing, the bottom pay, you pay $2,200 in tax this year, the federal government's portion; this is a deduction from that?
Mr. McCauley: Yes. If this wasn't in place, there would be $700 million more in tax being paid and collected.
The Chair: That was my understanding, but the tax implications got me thinking of taxable income before you apply the percentage.
Mr. McCauley: That's just federal. There are a number of provinces on top, so that's just the federal share. The provincial would add another bump to that.
The Chair: What do you mean by "another bump to that"?
Mr. McCauley: The $700 million is the federal. A number of provinces also have a disability tax credit, so you would also then get that provincial credit. I'm saying the $700 million is the federal government's tax contribution, if you wish. There is a provincial one as well, which comes to the point about the value of this. This would ensure that that actually ends up getting to claimants as well, that provincial share.
The Chair: Thank you. We didn't get into the provincial programs, but I appreciate knowing that there are some.
Senator Eggleton: Just picking up on this whole issue of who gets it and who doesn't, my understanding, from the studies I've seen, is that the majority of disabled people do not get the benefit of this tax credit. The reason they don't is they don't pay enough tax to credit against. They don't pay any tax in most cases. That's one of the reasons why this should be a refundable tax. In that way you can get to the most vulnerable of the people who are disabled. You can get to the lowest-income people who are disabled, but that's not the case here.
However, we did learn from one of the consultants — to give them a better title — who were here yesterday that they do put in claims on behalf of some of those people I just talked about, but they do it by identifying relatives who might be eligible if the client has not paid taxes. There might be relatives who pay some of the expenses on behalf of that person who's disabled. Do you get many of those? Is that system used a lot? Who would get it then? If somebody paid it on behalf of the disabled person, would the disabled person still get the cheque or would it go to the relative?
Mr. McCauley: There is, of course, a large number who deal with children and dependents under 18. That's a huge number, and it's obviously the parent or the responsible guardian. There is a big chunk there, as you can well imagine. Nathalie, is there another niche where you're dealing with adults?
Ms. Dumais: Somebody who's supporting a family relative, especially if they can claim the non-refundable tax credit, could benefit from it if the individual with the disability cannot get it.
Senator Eggleton: Who would you issue the cheque to?
Mr. McCauley: Let's say, for example, you had somebody living with you and you were the caregiver and you were doing all the things, then it would go to you because you would be claiming it on your tax return.
Senator Eggleton: Thank you.
The Chair: Is there somewhere I could go in the Income Tax Act to find out who a caregiver is?
Mr. McCauley: I'm sure we have a definition for that. Yes, we do.
The Chair: It's clear that that can't be abused?
Mr. McCauley: In fact, you raise a very good point. It's one of the areas where people have asked for a little more guidance. It's one of the things we're thinking, as part of the consultation, because more and more people are asking about that, maybe providing a little more definition and a few more criteria so people understand. You're exactly right.
Senator Callbeck: I see here where you have an appeal process. Have you had many appeals?
Mr. McCauley: You're talking about, I guess, the 12 per cent where we say no?
Ms. Dumais: We do have an appeals process, like we have in tax situations. People who are deemed to not meet the criteria, want to make a case, file an objection, can go to that next level, and it's another area within the agency that looks at it. Sometimes through time having passed by, people have additional information that they bring forward as well at that point in the process, so we do have cases that make it through the appeals process. We encourage people to come before, if you have additional information, if your situation has changed following discussions with the qualified practitioner, to come back through just our process, but if they want to make an appeal or an objection they have the right to do so, of course.
Senator Callbeck: Are there many?
Ms. Dumais: I don't have the numbers here, but we could provide them for sure as we've provided them before.
The Chair: Are five nurses enough to do the job for 220,000 applications?
Mr. McCauley: Well, nurses work very hard. They perform a particular function in terms of dealing with the difficult, narrow medical issues. That's why we have a medical professional on staff. We're not qualified to have those kinds of discussions with doctors and others. So far, five seems to be working well.
Ms. Dumais: We can adjust those numbers. As Brian was saying, our work is tiered. If somebody calls the call centre to look for the form or basic information — anything in our publications — the call centre agents are trained to provide some of that. If it's more challenging, difficult or specialized, we also have units across the country to do some of that work. The nurses get involved when it's medical information. We try to provide the right level of service at every stage in the process.
The Chair: I wanted to be assured by you that you're not saying, "If we just had the money, we would have 20 nurses to help the 220,000 Canadians who apply."
Senator Hervieux-Payette: May I ask a supplementary to your question?
The Chair: Yes.
Senator Hervieux-Payette: Did you have the same number of nurses one, two, and three years ago, or were there cutbacks because of the cutbacks in personnel in the government?
Ms. Dumais: Actually, we have not seen a decrease in the number of nurses.
The Chair: Mr. McCauley and Ms. Dumais, thank you very much. You came on very short notice with a lot of information that has been most helpful to us. We thank you for that.
(The committee adjourned.)