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37th PARLIAMENT, 1st SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Wednesday, May 29, 2002

1530

The Chair (Mrs. Sue Barnes (London West, Lib.))

The Chair

Ms. Caplan

1535

1540

1545

The Chair

Mr. Charlie Penson (Peace River, Canadian Alliance)

Ms. Elinor Caplan

Mr. Denis Lefebvre (Assistant Commissioner, Canada Customs and Revenue Agency)

Mr. Charlie Penson

Ms. Elinor Caplan

Mr. Charlie Penson

Ms. Elinor Caplan

Mr. Rob Wright (Commissioner, Canada Customs and Revenue Agency)

1550

Ms. Elinor Caplan

Mr. Charlie Penson

Ms. Elinor Caplan

Mr. Charlie Penson

The Chair

Mr. Charlie Penson

Ms. Elinor Caplan

Mr. Charlie Penson

Ms. Elinor Caplan

1555

Mr. Charlie Penson

Ms. Elinor Caplan

Mr. Charlie Penson

Ms. Elinor Caplan

Mr. David Miller (Assistant Commissioner, Assessment and Collections Branch, Canada Customs and Revenue Agency)

The Chair

Ms. Pauline Picard (Drummond, BQ)

Ms. Elinor Caplan

Mr. Rob Wright

1600

Ms. Elinor Caplan

Ms. Pauline Picard

Ms. Elinor Caplan

1605

The Chair

Mr. Roy Cullen (Etobicoke North, Lib.)

Ms. Elinor Caplan

Mr. Rob Wright

Mr. Roy Cullen

Ms. Elinor Caplan

1610

Mr. Rob Wright

Mr. Roy Cullen

Ms. Elinor Caplan

Mr. Denis Lefebvre

Ms. Elinor Caplan

Mr. Roy Cullen

Ms. Elinor Caplan

1615

Mr. William V. Baker (Assistant Commissioner, Compliance Programs Branch, Canada Customs and Revenue Agency)

The Chair

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP)

Ms. Elinor Caplan

1620

Mr. Lorne Nystrom

Ms. Elinor Caplan

Mr. Lorne Nystrom

Ms. Elinor Caplan

Mr. Lorne Nystrom

Ms. Elinor Caplan

Mr. Lorne Nystrom

Ms. Elinor Caplan

Mr. David Miller

1625

Mr. Lorne Nystrom

Ms. Elinor Caplan

Mr. Lorne Nystrom

Ms. Elinor Caplan

Mr. Lorne Nystrom

Ms. Elinor Caplan

Mr. Lorne Nystrom

Ms. Elinor Caplan

Mr. Lorne Nystrom

Ms. Elinor Caplan

1630

Mr. Bill Baker

The Chair

Mr. Gary Pillitteri (Niagara Falls, Lib.)

Ms. Elinor Caplan

1635

Mr. Rob Wright

Mr. Gary Pillitteri

Ms. Elinor Caplan

Mr. Denis Lefebvre

Ms. Elinor Caplan

Mr. Gary Pillitteri

1640

Ms. Elinor Caplan

Mr. Denis Lefebvre

The Chair

Ms. Carolyn Bennett (St. Paul's, Lib.)

Ms. Elinor Caplan

1645

Ms. Carolyn Bennett

Mr. Roy Cullen

Ms. Elinor Caplan

Ms. Carolyn Bennett

Ms. Elinor Caplan

Ms. Carolyn Bennett

Mr. David Miller

Ms. Carolyn Bennett

Mr. David Miller

Ms. Carolyn Bennett

Mr. David Miller

Ms. Carolyn Bennett

Mr. David Miller

Ms. Elinor Caplan

Ms. Carolyn Bennett

Ms. Elinor Caplan

The Chair

Ms. Carolyn Bennett

1650

Ms. Elinor Caplan

Mr. David Miller

Ms. Carolyn Bennett

1655

Ms. Elinor Caplan

The Chair

Mr. Grant McNally (Dewdney—Alouette, Canadian Alliance)

Ms. Elinor Caplan

Mr. Grant McNally

Ms. Elinor Caplan

Mr. Grant McNally

Ms. Elinor Caplan

Mr. Grant McNally

Ms. Elinor Caplan

Mr. Grant McNally

The Chair

Mr. David Miller

1700

Mr. Grant McNally

Ms. Elinor Caplan

Mr. Grant McNally

Ms. Elinor Caplan

Mr. Grant McNally

Ms. Elinor Caplan

Mr. Grant McNally

Ms. Elinor Caplan

Mr. Grant McNally

Ms. Elinor Caplan

1705

Mr. Grant McNally

Mr. Bryon Wilfert (Oak Ridges, Lib.)

Ms. Elinor Caplan

Mr. Bryon Wilfert

The Chair

Ms. Elinor Caplan

1710

The Chair

Ms. Elinor Caplan

Mr. Denis Lefebvre

Mr. Bryon Wilfert

Ms. Elinor Caplan

1715

Mr. Denis Lefebvre

The Chair

Mr. Discepola

Ms. Elinor Caplan

Mr. Discepola

Ms. Elinor Caplan

Mr. Discepola

Ms. Elinor Caplan

Mr. Denis Lefebvre

Ms. Elinor Caplan

1720

Mr. Rob Wright

The Chair

Mr. Roy Cullen

1725

Mr. Bill Baker

The Chair

Ms. Elinor Caplan

Mr. Rob Wright

Ms. Elinor Caplan

1730

The Chair

CANADA

Standing Committee on Finance

NUMBER 106

1st SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, May 29, 2002

[Recorded by Electronic Apparatus]

¹ (1530)

[English]

The Chair (Mrs. Sue Barnes (London West, Lib.)): Welcome, everyone.

Pursuant to Standing Order 81(6), main estimates for the fiscal year ending March 31, 2003, we have appearing before the committee the Honourable Elinor Caplan, Minister of National Revenue. Welcome to our committee, Minister.

[Translation]

Hon. Elinor Caplan (Minister of National Revenue): Thank you very much. I'm very pleased to be here today.

[English]

The Chair: Joining you are your deputy minister, Mr. Rob Wright, and Stephen Rigby, a senior official with the Canada Customs and Revenue Agency.

Minister, I'll give the floor to you to make your opening comments.

Ms. Elinor Caplan: Thank you very much. It is a pleasure to be here.

I'd like to introduce the senior officials who are here: Mr. Rob Wright, who is the commissioner of the Canada Customs and Revenue Agency; Mr. Stephen Rigby, chief financial officer and assistant commissioner, finance and administration branch; Mr. David Miller, assistant commissioner, assessment and collections branch; Mr. Denis Lefebvre, assistant commissioner, customs branch; and Mr. Bill Baker, assistant commissioner, compliance program branch.

Madam Chair, I welcome this opportunity to bring you up to date on activities at the Canada Customs and Revenue Agency, known as CCRA. The past year has been a very productive period for our agency, and I'm proud of our progress on a number of fronts, progress that is detailed at length in our main estimates submission. I'd be pleased to speak on any of these issues following my introductory remarks.

But first I'd like to focus briefly on a few priority areas that have dominated our activities, specifically increasing border security in the post-September 11 world, while continuing to improve our programs and services for Canadians.

Let me start by describing our response to the new customs challenges posed by last fall's terrorist attack. The events of September 11 changed the work of CCRA in two ways: one, we accelerated the implementation of planned improvements to our customs operations, and, two, we redoubled our efforts to work with our American counterparts on a harmonized approach to border issues.

I'm pleased to say that we already had a solid plan in motion to improve the way we manage our border. Since introducing the customs action plan in 2000, we had instituted numerous initiatives to address threats to Canadians and to our economy through significantly enhanced risk assessment and risk-based processing. We were already working smarter, streamlining our processes and using technology to ensure an open border between the United States and Canada to keep our economy strong and to maintain our standard of living and way of life.

September 11 underscored the need to accelerate our plan, to move farther and faster in introducing improvements to border management. In response, the 2001 budget dedicated significant new resources—more than $1.2 billion across government—to make Canada's borders more secure and efficient. These new funds are equally divided between increased border security and facilitation and improved border infrastructure.

We also entered into a strengthened partnership with our American neighbours, recognizing that the well-being of our economies and societies depends on ensuring that people and goods can flow freely across our shared border. Our two governments signed the smart border declaration last December, which outlines a 30-point action plan for the two countries to collaborate on ways to identify risks and facilitate trade.

On our side of the border we've introduced and reinstated a number of important initiatives. The CANPASS private and corporate air program and private boat program resumed operation nationally on April 2, 2002. To alleviate border congestion in Niagara Falls, the CANPASS dedicated commuter crossing at Whirlpool Bridge was re-opened on May 1, 2002.

Recently we announced the expansion of the NEXUS pilot for low-risk travellers to major crossings at the Canada-U.S. land border. We are on track to implement the NEXUS program at three border crossings along the British Columbia-Washington state land border by this summer. We're also working to implement NEXUS at high-volume border crossings in southern Ontario, New York state, and Michigan, and ultimately to ensure that all high-volume border crossings across the country have appropriate access.

¹ (1535)

We are finalizing an expedited passenger processing system, or EPPS. EPPS will streamline the flow of low-risk, pre-approved air travellers into Canada by using kiosks with advanced technology recognition systems. This will eliminate the need for travellers to line up in the normal customs clearance lanes. EPPS also positions us well in our discussions with the United States as we attempt to develop a program equivalent to NEXUS for air travellers.

We've made significant progress in streamlining and strengthening security through enhanced screening at U.S. and Canadian seaports. At some seaports, joint targeting for in-transit marine containers arriving in Canada and the U.S. has begun through the exchange of information and customs officers. Under a program launched March 25, 2002, U.S. Customs inspectors are working at our ports in Vancouver, Montreal, and Halifax at the container-targeting units, and Canadian inspectors are working in Newark and Seattle at container-targeting units.

At airports, the advanced passenger information and passenger name records program, called APIPNR, will obtain advanced data to assess the level of risk of international travellers when they depart from a foreign airport en route to Canada. Canada is implementing APIPNR this summer.

Since October, the CCRA has invested $25.5 million in contraband detection technology used to protect Canadians. An example is we've purchased seven gamma ray detection systems that will be used to examine marine shipments at major ports across Canada. We've invested in 24 more mobile scan X-ray systems to be used at our high-volume airports, seaports, and major highway border crossings. We have also invested in other types of equipment used to detect contraband such as ion mobility spectrometers, cargo and baggage inspection systems, and new detector dog teams. Only the detector dog teams are not high tech.

Future investments in high-tech equipment will detect hazardous materials such as radiation, nuclear, chemical, and biological hazards. This includes hand-held survey meters and more sophisticated equipment that can be placed on cranes and at terminal gates to monitor goods and baggage entering Canada.

As well, $20 million has been allocated towards more high-energy X-ray equipment to enhance examinations at seaports, airports, and border crossings. Investments will be made on smaller items such as underwater vehicles to examine the hulls of commercial vessels, hand-held ion mobility spectrometers, and on technology to detect contraband by analysing the vapours drawn from marine containers.

In December, we implemented customs self-assessment for low-risk, pre-approved shipments entering Canada from the United States. This new system simplifies the requirements for releasing low-risk goods into Canada and significantly reduces the cost for importers. We're also very close to a harmonized commercial process with our U.S. counterparts that will ensure trade continues to move swiftly across our borders in a safe and secure environment.

Madam Chair, when we compare the slowdowns we experienced at major border crossings just six or seven months ago with the situation today, there's no question we've made remarkable progress. What is even more impressive, in my view, is the fact that we have not sacrificed our quality of service to Canadians while contending with these increased pressures.

Quality of service is of equal importance on the tax files as it is on the customs files. We continually seek to review and improve all programs and services to offer the very best to Canadians. I think we're all aware that the tax system is an effective vehicle for delivering benefits to Canadians. The best example of this is the Canada child tax benefit, which is delivered by CCRA. My agency also delivers 17 important benefit programs on behalf of the provinces.

¹ (1540)

I'm very proud of the efforts we make to promote voluntary compliance by Canadian taxpayers and to ensure that our social benefits remain available to those who need them most. We take this responsibility very seriously. That's why the CCRA initiated a review last summer for people who have been receiving what is commonly known as the disability tax credit since the period of 1985 to 1996 to determine their ongoing eligibility.

There's a common misconception that this tax credit is available to anyone who has a disability. This is not true. It is actually known as the credit for mental or physical impairment for Canadians who are markedly restricted in their ability to perform the activities of daily life.

This misconception has led to a fairly high rejection rate of claims to that credit—15% to 20%. For this reason, we have been conducting a 100% upfront review of all claims to this credit for some time. Last year we went back to before 1996 to determine whether clients who had filed at that time were eligible to receive the credit.

I was happy to receive an excellent report from the subcommittee on persons with disabilities. I have asked my officials to ensure that we communicate and consult more effectively before initiating any further review.

Let me assure you this is a routine review being conducted in order to protect our social benefits for those who need them most. And it is being conducted fairly and equitably.

When reviewing these programs and services, we aim to be innovative and responsive to the needs of Canadians. For example, CCRA's record during this year's personal tax filing season illustrated our success in improving our services to Canadians. We recorded an increase in Internet filing of almost 60% compared to the same period last year. As of May 15, more than 2.29 million Canadians had filed their 2001 tax returns by Internet.

Another outstanding service is the national 1-800 inquiries service. We handled more than five and a half million calls in the ten weeks of this filing season.

In summary, on the customs side, we've come a very long way in a short time in exceptionally challenging circumstances. While there is still much to do in terms of implementing the various action items of the smart border declaration, I am proud of all that we have achieved to date.

On the revenue side, I want to underline the progress we have made in improving service to Canadians, especially over the telephone and the Internet.

All this success is directly attributable to the very professional and dedicated employees at Canada Customs and Revenue Agency.

I'd be pleased now to answer any questions the committee members may have.

Thank you.

¹ (1545)

The Chair: Thank you, Minister. We'll start 10-minute rounds.

Mr. Penson.

Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you, Madam Chair.

I'd like to welcome the minister and her officials here today.

The minister will appreciate, I'm sure, the importance of a free flow of goods between Canada and the United States, given the integration of our economies. That is a very big part of our everyday life with a trade flow of a billion dollars a day back and forth across that Canada-U.S. border.

I see the Toronto Sun had an article on May 8 that suggested Canada Customs and Revenue Agency hadn't spent a dime of the $433 million that was given to beef up our border security in the wake of the September 11 terrorist attack.

How would you, Madam Minister, respond to that?

Ms. Elinor Caplan: Well, I would suggest you not believe everything you read in the newspapers. I know you'll find that hard to believe.

If you like, I'll give you a breakdown. CCRA's new expenditures, as listed in the 2001 budget, were $433 million over the next five years. That's for enhancing security for Canadians, in that envelope. The spending plan, which will accelerate and expand on the customs action plan, covers four strategic priorities.

But you asked specifically about what we've done to date, and the reason I mentioned this first is that there are four areas of expenditure as they relate not only to the security agenda but also to the trade and facilitation agenda—and they go hand in hand. Our goal is to make it safer and faster.

To date, I can tell you that both for people and equipment for border security 2001-2002, in the summary we have set aside $62.8 million in 2001-2002.

Stephen, did you want to stand on that number?

Denis, did you want to go first?

Mr. Denis Lefebvre (Assistant Commissioner, Canada Customs and Revenue Agency): In the year 2001-2002, we expended $44 million for increased vigilance on the border, hiring some new officers, mainly at airports and seaports. Also we have implemented an integrated primary inspection line system at eight more airports, which brings integrated information to officers on the front line.

Also, we have spent some money on programs and systems design and development. We've also contracted out for seven high-energy mobile gamma scanners and three pallet X-ray machines, for a total amount of $17 million. We've also—

Mr. Charlie Penson: I'm sorry to interject, Mr. Lefebvre, but I don't have much time. May I just ask if those processes have been put in place, or has the equipment just been ordered? What's the status?

Ms. Elinor Caplan: How much have we received?

My understanding is we have actually spent $33.7 million on additional detection equipment, security initiatives, and new staff. We are awaiting an additional $11 million, for a total of $45 million in 2001-2002 just on the customs side. Then there's the rest of the package.

Mr. Charlie Penson: Okay. What's really my major point here, I guess, is this. Has this process started to kick in, or are we still at the point of gathering up the equipment?

Ms. Elinor Caplan: Perhaps the commissioner would like to expand on this.

Mr. Rob Wright (Commissioner, Canada Customs and Revenue Agency): Thank you very much, Madame Chairman.

We are working very diligently, and we will use all of the resources that have been allocated to us. We've been doing it in a timely way, but not so much as to provoke the best possible value for money. That's why we took our time to understand the first shipment of high-energy VACIS machines, for example.

But we have attained, after nine bilateral meetings Mr. Lefebvre and I had with our American counterparts, a common agenda with the U.S. We are actually moving faster and spending on many of the issues from the budget, such as the IT infrastructure investments and personnel, for example, working on advance passenger information and using this tool that was approved in Bill S-23 last year.

So we do have a plan. We're right on target, and we're going to effectively utilize the resources.

¹ (1550)

Ms. Elinor Caplan: There are four components of the spending—people, equipment, technology, and then program design and implementation. It's important to look at all aspects of that; you can buy the machines, but you need the people to run them.

Mr. Charlie Penson: Yes. I wonder, just to follow up with that, if you could provide the committee with what is in place at this moment and what you expect to have in the next few months. I gather you're starting to put a process in place. It would be helpful to the committee, I think, if we could find this out from you.

Ms. Elinor Caplan: Are you talking equipment or people as well?

Mr. Charlie Penson: Both. My question is really to do with enhanced security at the border. What is currently in place as part of the new initiative, and what has been ordered or what processes are currently being gathered up to be put in place at some point down the road?

The Chair: Perhaps this is something you would like to have submitted in writing to the clerk after this meeting. The clerk can then circulate it to the committee. It's not something you have to have detailed right now.

Mr. Charlie Penson: I have one other question.

The Chair: Certainly.

Mr. Charlie Penson: It has to do with the disability tax credit, Madam Minister.

I have a constituent who was involved in this myself, and I think there are many of us who heard from constituents who had their disability tax credit taken away as a result of the test that your department put in place. Some of these people, as you know, have been claiming this disability tax credit for years and all of a sudden were declared ineligible. Essentially, in the case of my particular constituent, he was asked by his doctor when he went for a check-up.... This fellow happens to be missing a leg, and he works in the oil patch in a very rough environment that makes it hard to get around in winter conditions in many cases. He was asked if he could walk 50 feet without somebody helping him. He said, “Of course I can.” These are proud people. But yet he has very much a disability that affects his ability to do his job.

I'm wondering why the department was so insensitive and cut people off after being on this disability tax credit for so many years. Shouldn't there be a little bit better testing without having to cut people off? It seems to me there's a problem here.

Ms. Elinor Caplan: The question is an important one that has been addressed by the committee as well, and I know they've been briefed a number of times.

We start from a basic principle, and it is that we want people to receive the benefits from the Government of Canada they are entitled to in a fair and equitable way. In the past there has not been, as there is today, 100% determination at the time of application, and that has resulted in a number of programs having to be audited from time to time. This is the responsibility of our department, from time to time to check programs to make sure people are receiving what they are entitled to, and if they're not, to notify them.

On this particular program, because of the importance and the sensitivity, the review was begun. We agree there's a need, and I agree there's a need, for important consultation and communication so that people understand why the program is being delivered and what the law says, because we don't have any discretion; we have to interpret the law. When I say “interpret”, we have to uphold the law.

There are some who would like the law changed so that there can be more people included, and that is a policy discussion for another day. The role of CCRA is to enforce the law and to see that people receive the benefits fairly.

Mr. Charlie Penson: Madam Minister, I don't have a problem with some type of screening and checking to see if it's still required, but I think you have to be sensitive to people. In this particular case, I don't think the test was a very good test at all, and I think it has to be rethought. The option for this fellow was “What do I do now? Do I withdraw, and I don't have a job any more and I go on some type of government help?” This person is trying to make a living. He has a disability. And I understand that it cuts right across the board, that there are a great many people affected by a process that was not well designed. I think you need to rethink it.

Ms. Elinor Caplan: Let me make this point: the actual decision on eligibility is made on the advice of professionals who are asked to fill in forms, and I know the forms themselves have been a cause of concern. There are two forms. The first form, which is the simple yes/no type of form, was recently changed after consultation with the Canadian Medical Association. If that form is insufficient, there's a longer form, which takes a lot more time and is more onerous to fill out.

¹ (1555)

Mr. Charlie Penson: There's a problem here, I can tell you that. There's a problem here that needs to be fixed, and I would ask that you and your associates look into it.

Ms. Elinor Caplan: I think everyone would agree that we don't want to treat anyone unfairly, and that means no one should be receiving the benefit if, by law, they're not entitled to it. On the other hand, there may be people who are entitled to the benefit who aren't receiving it, and we should let them know that they have the right to apply for that benefit.

That is the goal of the administration of the program. It's to make sure it's properly done.

Mr. Charlie Penson: Thank you.

Ms. Elinor Caplan: I can assure you that the report from the subcommittee, which did some excellent work on this, is being thoroughly considered, and we've taken to heart their advice as far as reviewing those forms that I was referring to, because I know there's been a lot of frustration from a number of people.

David, did you want to add something to that?

Mr. David Miller (Assistant Commissioner, Assessment and Collections Branch, Canada Customs and Revenue Agency): No, Minister, that's fine.

[Translation]

The Chair: Would you like to begin, Ms. Picard, please?

Ms. Pauline Picard (Drummond, BQ): Thank you, Madam Chair.

Good afternoon, Minister. Welcome to the Standing Committee on Finance.

The last time the former minister appeared before the Standing Committee on Finance following September 11, there were huge problems at the border with the circulation of goods. Truckers were backed up in a line stretching many kilometres at the borders. At that time, we were told that changes would be made. I would like to know whether there are still problems with the circulation of goods at the border. What changes have been made? How can we say that the circulation of goods is now more efficient and safer?

[English]

Ms. Elinor Caplan: Thank you. That is a very good question. I've been visiting the border crossings personally to see what's happening. I know some of you are from border communities and also visit them. It's about both the movement of people and of course the commercial processing.

When I was in Windsor, I actually saw what we call the customs self-assessment program in place. It is a high-tech, secure program where the drivers have cards because they've been pre-approved. The businesses have pre-registered, so we know what's in the containers.

I don't like the term “customs self-assessment” because it doesn't actually describe the enhanced security features of the program. But I think it's a kind of model for screening out the low risks, so we can focus our attention on the high risks and speed, and see that the lineups we experienced at the border are kept to a minimum.

One of the important things I've noticed in some of the border crossings, particularly the busiest ones, is they let people know what's happening—how busy it is and whether there are delays and tie-ups—so if there are alternative routes, people can take them.

I think there has been an improvement, but there's more to do. It's not only important for the trucks to be able to move efficiently and safely into Canada; we want Canadian truckers and cargo to have equally good access into the United States. That's what the 30-point border initiative plan is all about, and that's why we're looking at similar processes, sharing experience, and looking for best practices.

Many of those best practices have been identified in Canada, where we have computerized databases and targeting that allow us to speed through those containers and shipments, where we have advanced information. So we're using high technology to improve security and move goods more efficiently across the border.

Commissioner, do you want to add to that?

Mr. Rob Wright: That's right, Minister. Since September 11, everyone has been working very hard to move the traffic that's now there. As the minister said, we implemented the customs self-assessment program last December.

[Translation]

Things move more quickly with a program of this type. We try to check all the commercial products before they reach the border. In addition, we have had a number of meetings with our American counterparts in order to improve the American system.

º (1600)

[English]

But the essence is to try to identify a lot of the volume of low-risk travellers and trade and do the compliance for that travel and trade away from the border. Once we get that agreement with the U.S.--and we're very close to it--for common programming of low risks, we can dedicate lanes to move that traffic very quickly and focus on the unknown.

Together we will build a much better system. We're some ways away, but I think we've made very good progress. The minister has spoken a number of times with our colleagues in the U.S. and has announced particular elements. We're working toward common programming that will move large volumes very quickly, and let us focus more effectively on the unknown.

Ms. Elinor Caplan: If I could make one more point, it is important to remember that the border concerns we have had about efficient and safe movement happened before September 11. The customs action plan I mentioned was developed in 2000.

We had begun implementing new practices, so we could have a more efficient and secure border. September 11 pointed out to all of us the need to accelerate that plan and work more closely with the Americans. But this didn't start September 11; this work began a long time ago. There were problems at the border because of an increase in volume—thankfully due to the good economic activity—that had to be addressed and continues to need to be addressed.

[Translation]

Ms. Pauline Picard: Have you been able to increase the resources? In my riding, for example, there are customs officers working at small border crossings, where a secondary highway is located not far from the border crossing. I remember that when cigarette smuggling was going on, they told me that it was impossible to arrest people on this road because customs officers are not armed and do not have the resources they need, they work alone or in teams of two, and have to deal with these activities mainly at night. We are short-staffed, we do not have the resources we need, and this is happening right under our nose. Has there been any improvement in this regard?

[English]

Ms. Elinor Caplan: Thank you again for the question. It is a good one.

I have visited some of those border crossings between Montreal and Quebec City, along the Canada-U.S. border. What I've discovered is that each border situation is very special.

I saw one where there is a joint Canada-U.S. installation on a country road far from Montreal, far from the next big city. It's very interesting the opportunities that those kinds of remote situations offer us. I was very impressed. This facility was 20 years old. Down the road they had cameras, and I asked exactly the question you just asked me. They said the people in the area watch, and they know what's going on. There is very good security on those roads because they hear from the neighbours, who, if they see anything unusual, help and assist.

We know the overwhelming majority of traffic is at seven border crossings across Canada. Those small, more remote locations are used by local people who cross back and forth. I saw them come to the border. The customs officer knew who they were, how many children they had, how many times they had crossed, what their pattern was, and the whole community comes together to identify something that looks unusual.

It's important for us to understand the culture of those crossings as well and the good cooperation that takes place with the American colleagues in those small border crossings. However, we have added 120 additional personnel at the border crossings. The additional equipment, technology, and so forth, has been part of it, not just the big machines but some of the small equipment as well. But we have added additional personnel.

You did mention that our customs officers don't have guns, and you're right. They are not police officers. They do a very important job on behalf of Canada. The Commissioner of the RCMP has said it would not be a good idea to arm Canadian customs officers, and I take his advice. However, there is a job hazard survey that is being conducted now, and since we have brought in the officers' powers, there have been a good number of arrests with successful convictions. But officers' safety and a safe work environment is a priority for the government, for the agency, and for me.

º (1605)

The Chair: Merci.

Mr. Cullen, you have ten minutes.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Madam Chair.

Thank you, Minister, and officials.

I have a few questions. I may not get to them all, but in terms of the border initiatives, would it be a fair assumption that the U.S. customs will eventually have a system that is similar to ours in terms of pre-clearance? I'm not talking about the harmonization, but in terms of results, that low-risk traffic, whether goods or people, will essentially go through a kind of pre-clearance, pre-authorization process. Are we going to have something very similar in terms of objectives, and how soon are we going to get there?

Ms. Elinor Caplan: A great amount of work has gone into sharing expertise. I saw it when I visited the borders. We have kiosks with computer systems, where the customs officers have the licence plate flash up on a computer screen, and that is plugged into our databases. There are watch lists for immigration, for the RCMP, and for the FBI.

The whole goal of the smart border initiative is to have...I'm going to use the word “compatible” and harmonized approaches, where we can do as much as possible away from the border so that we don't have congestion at the border, so that we can improve security, use technology, share information, identify the high risk, and expedite the low risk that we have confidence in.

There are four components to the smart border plan. Those are secure movement of people, secure movement of goods, important infrastructure, and sharing of information. We've made tremendous progress, and I have to give credit where it is due; that is, to the excellent work of Commissioner Wright and his team, who have been working very closely with their American counterparts.

Do you want to add anything further to that?

Mr. Rob Wright: I'll just add that we have had an excellent set of meetings. Mr. Lefebvre and I have had nine meetings with our counterparts. We share the same objective: to identify low-risk commercial shipments as well as people and expedite them. The U.S. has the same enthusiasm for that approach, and we are looking toward a common approach.

It's a little different in the back end, as you say. We will look at accounts, and they will want something they call “line release”, but the objective will be to have a common program very soon where, for established exporters and importers, you do the commercial verification away from the border. This is appropriate, given the fact that we've had free trade for 15 years.

Focus on security by getting business to be partners in enhancing security. That's what we do in Partners in Protection, a program that a number of Canadian companies and enterprises have signed up for. That's what the U.S. does in a program they call C-TPAT—Customs Trade Partners Against Terrorism. We are identifying companies and shipments where companies are ready to ante up additional security, and we will screen commercially away from the border.

Mr. Roy Cullen: Now, let's say that we have the unfortunate circumstance where there's another terrorist attack. Will they withstand a test like that? I have the Ontario Trucking Association in my riding, and they say things are moving fairly well right now, but if something else comes along, things could get jammed up pretty darn quickly. I'm talking about trucks getting into the U.S.; trucks coming up here are fine.

Ms. Elinor Caplan: That's why I made the point about us working to—we use the term “harmonize”, but I like the word “compatible”. There may be slight differences between the two, but if we can have the same kind of safe and speedy access to the U.S. that trucks have coming into Canada, certainly that is the goal of the 30-point plan.

As to your question of the hypothetical in the future, I can tell you that we will be as prepared as we can be and that we will have worked as well with the Americans as anyone could expect to ensure that we are prepared, and we've been in the highest state of alert. The fact that we have new technology and a sharing of information will, we think, go a long way to ensuring the highest level of security and efficiency. I know this is supported by the associations I've met with; they believe we've taken the correct course of action.

Did you want to add to that?

º (1610)

Mr. Rob Wright: Yes. The truckers have been great partners, and the CSA program, as the minister noted up front, is the most secure commercial program in the world.

Mr. Roy Cullen: Yes, they've been quite complementary, and I encourage you. Good luck, and keep it going.

I wanted to talk a bit about GST compliance and the underground economy. Before I get there, the duty deferral...in the 1999 budget, I think, there was the distribution centre concept, which was established at the urging of a few colleagues and myself, my riding being close to the GTA airport. Basically, we have always had duty free, but the GST was a stumbling block. That impediment was removed, I think, in the 1999 budget.

There was a protocol that was part of the policy. I think 90% has to be exported, and there's a maximum limit in terms of value added. It basically gives us the opportunity in Canada to develop duty-free zones.

I'm just wondering what the take-up has been, because there would have to be regimes set up with the CCRA. We've heard about Mirabel, and I've heard about Hamilton. In Toronto I'm working with a developer; it's slow going, but we might get there yet. Is there any kind of take-up across the country in this type of regime?

Ms. Elinor Caplan: I know that this is quite technical. I have had discussions with a number of members who are aware of the program and who are concerned about the communication of it so that people can participate.

I'm going to ask Denis if he'd like to give you an update on where we're at today, because it's quite technical in how it's all put together and how we've advertised to let people know that they can apply.

Mr. Denis Lefebvre: Thank you, Minister.

The legislation was amended following the 1999 budget, where there were some proposals to amend the legislation to make it more attractive for companies around the world to come to Canada to do some assembly or distribution. It was also a package of administrative measures; a single operator would be responsible for obtaining permits and doing a number of things. We've made some good progress; we had a team that was touring the country with all the investors-to-be who would locate in Canada, and there is an ongoing discussion.

Many businesses have taken advantage of single programs. You did deferral for a single program, but thus far we don't have an operator who has created a zone. We are still working on the roadblocks and trying to make the package more interesting. We are working very closely with all the experts in the field, and we are confident that very shortly we will have some success.

Ms. Elinor Caplan: Could I make one point?

As I listen, I know this is technical. Not everyone listening and tuning in is going to be really excited about this. For people who are interested, officials would be willing to meet to be as helpful as they can be in getting this operational.

Mr. Roy Cullen: Yes. I'd like to do it. I don't know if you have swung through Toronto. If you haven't, I can assist. We can set up a meeting with some developers there.

For me, it's quite important. Being by the airport, there are a lot of business opportunities here. Right now, we have a lot of duty-free zones in Buffalo and all around the world. We don't have too many that are operating very successfully in Canada.

I don't know how much time I have, Madam Chair. Do I have a couple of minutes?

The Chair: Yes.

Mr. Roy Cullen: Thank you.

There has been a lot of talk over the years about the underground economy and not enough compliance with GST. It seems to me I remember seeing something about more resources going into the revenue agency to seek more compliance.

How successful is it? How is it progressing?

Also, on the development of purchasing through the Internet, it seems to me it raises questions on compliance with GST. I've only studied it very peripherally.

Could you fill us in, in terms of where the initiatives are and what the current thinking is?

Ms. Elinor Caplan: Of course, the goal of tax administration in Canada is voluntary compliance. If everyone pays their full share, we can not only keep taxes down for everyone, but can feel good that no one is cheating. We do audits, and so forth, wherever we have information that someone is not fully complying.

We also do public outreach and education. There are a number of initiatives that have been suggested in the form of pilot projects working in partnership with industries and also with some unions. They want a level playing field for everyone so no one pays more than their fair share, and yet everyone participates fairly.

For us, it's part of the integrity of the overall system to do what we can. There's a task force that has been struck.

I'm going to ask Bill to bring you up to date on the issues of the underground economy as it relates particularly to GST.

º (1615)

Mr. William V. Baker (Assistant Commissioner, Compliance Programs Branch, Canada Customs and Revenue Agency): Yes, thank you. I could respond to two points that were raised.

One is on resources for the underground economy and the GST in particular. It's true, beginning last year and for the next two or three years, we are investing some additional resources. In the case of the GST audit in particular, we will be increasing it by about 25%. It is largely focused at the underground economy area. It tends to be the place where we have a lot of non-compliance-related issues.

Certainly provinces, such as the maritime provinces, that have a harmonized sales tax agreement with the Government of Canada are very interested in our doing sufficient compliance work. Of course, it's money for them and it's money at the federal level.

The Internet or, more generally, electronic commerce implications on GST are quite profound, as I think you're getting at. We're doing a lot of work, domestically and internationally, to clarify the rules of the game for business. It does change things remarkably in terms of where a transaction takes place. You could have computers in one country, buyers in another, suppliers in another, and all sorts of intermediaries. We're working primarily with the OECD, the Organization for Economic Co-operation and Development, to clarify the international rules of the game.

Secondly, we are also doing work domestically with experts in the field to make sure we have a compliance regime that is fair, makes sense, and achieves the objectives as set out in the law.

The Chair: Thank you.

Mr. Nystrom, please go ahead. You will be followed by Mr. Pillitteri and then Dr. Bennett.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): Thank you very much, Madam Chair.

I welcome the minister and the officials here this afternoon. I'd like to ask you questions in two or three areas, if I could, Ms. Caplan.

In March of 2002, the Subcommittee on the Status of Persons with Disabilities of the Standing Committee of Human Resources Development and the Status of Persons with Disabilities tabled a report on the disability tax credit and made a number of recommendations.

We've had people refer to the fact that we have complaints from people in our ridings about people who have disabilities and have lost the disability tax credit. I have some in my riding as well.

One of the recommendations made was there should be an apology coming from your agency to the 106,000 Canadians who received what they call in this parliamentary report, “a poorly explained letter from the Agency indicating that they were no longer eligible for the DTC, despite the fact that these individuals have been receiving this credit for anywhere between six and seventeen years”.

This is a subcommittee report of Parliament. It's an all-party committee, Ms. Caplan. It's not a partisan issue one way or the other. What is your response to the recommendation?

Ms. Elinor Caplan: Well, I've received the committee report. There were a number of recommendations we've taken action on, specifically related to further consultation and commitment to review of the forms. The full reply to the committee report is being drafted at this time. I replied to a letter that was initially sent to my predecessor in the portfolio and I've reviewed the file fully.

CCRA has an obligation to conduct periodic reviews to ensure the integrity of self-assessment systems. In this particular case, because of the sensitivity of these files, the decision was made not to go backwards on assessment but to assume that people had applied in good faith, and that if it was determined they were not eligible according to the law, then they would not be able to claim in the future, but we would not go backwards to try to reclaim.

I think that was fair. I read the letter you refer to, and it sounded a little bureaucratic to me, but to be honest, nobody likes to get a letter that says, “We're checking the files”. I don't think CCRA or the government should, in any way, feel they should apologize for doing their job, which is making sure those people who are entitled do receive the benefit and those who don't meet the requirements of the legislation are informed they either have to provide additional information or not.

I understand the committee's concern. I share the concern that people be treated fairly and equitably. The commitment I've made is, rather than spending time and energy looking backwards, to look forward. I have made a commitment that I will review correspondence before it is sent out and that we would consult with all those who have an interest in this very important credit.

º (1620)

Mr. Lorne Nystrom: I wonder specifically about the apology. Do you rule that out?

The reason I raise that is, it's very rare you'd have a parliamentary committee ask a government agency to apologize for something they've done. I know you're fairly new in the department. Do you rule that out as a possibility, or are you still looking at that as well?

I didn't ask that question by simply--

Ms. Elinor Caplan: Frankly, if you look at what is past and where you move from, I think we're best to put our energy and resources into moving forward, into the future, rather than spending a lot of time looking backward.

I think it's important for us to consult further, and with the resources that are available we should be doing that, communicating well with people. But to be honest, I reviewed the file and didn't see anything that was—other than being a little bureaucratic—something a minister should apologize for.

Mr. Lorne Nystrom: She's looking in your direction. You're a little bureaucratic.

A voice: Well, I'm a local bureaucrat.

Ms. Elinor Caplan: They mean well, and I think the letter was well-intentioned. When you're upset about getting a letter from the former Revenue Canada, or now CCRA, sometimes you get a little nervous and worried when you shouldn't be, unless of course you haven't given all of the facts you should have given, in which case you're given an opportunity to do that.

Mr. Lorne Nystrom: I have just one more question on this. Another recommendation made by the all-party subcommittee was that there should be compensation for expenses of those who successfully recertify.

Ms. Elinor Caplan: In fact, that's one of the misconceptions in this whole program. Any costs incurred in getting forms filled out can be deducted on the tax form for medical expenses, so there is an opportunity already for anyone who incurs expenses to put that through their tax form. Isn't that correct? David, do you want to clarify how that works?

Mr. Lorne Nystrom: The reason I ask this question is because we're getting a lot of questions back from constituents on this.

Ms. Elinor Caplan: No, it's important to clarify it, so I appreciate the opportunity. David is the expert on how this works.

Mr. David Miller: It is of course deductible as an expense. I think it's important to put this study in the context of what happens every year with the disability tax credit. The evidence we've provided to the subcommittee is that we get between 150,000 and 180,000 applications each year. About 20% of those are not eligible. In other words, even though they may be missing a limb, they can use an artificial limb to walk or to perform other daily functions, so they don't qualify.

Every year we have a significant number of Canadians who go through the process thinking they may end up with a particular tax credit. It's unfortunate, because, as the minister mentioned, this is not about having a disability; this is about having a significant impairment to your ability to do the functions of daily living. That's what the legislation indicated. Oddly enough, for the Income Tax Act, it is quite clear in those measures. By going back and validating for what amounts to, so far, 106,000 people—because of the time and the process changes we don't have sufficient information in our files, which is what the letter said—there's very little that we could apologize for as part of our normal processes of validating what is a life-long deduction. But this is not something we have to repeat, because now I'm sure that information is on file going into the future.

º (1625)

Mr. Lorne Nystrom: Two other questions, if I may—

Ms. Elinor Caplan: The point on this one is that once you are validated, as far as qualifying, it is a life-long deduction.

Mr. Lorne Nystrom: That's right.

Ms. Elinor Caplan: Once we have all the data in the file that says you qualify, then you qualify. But if we don't have the data, then I think it's a reasonable expectation that people will provide it, because it's a generous deduction.

Again, to repeat, it's not a disability tax credit in the sense that you have just any disability. It is very specifically targeted to severe restrictions on abilities as far as daily living activities.

Mr. Lorne Nystrom: Sure, and there's always going to be a bit of controversy where you draw the line for any of these programs.

Ms. Elinor Caplan: We have to take the law and make sure the law is obeyed. There are some who would like to have the law and policy changed. That is a debate for another day.

Mr. Lorne Nystrom: These are my two other questions. Yesterday in the House of Commons I was asking the Minister of Finance a question about people who are deaf or hearing impaired. Apparently, now, when they hire a sign interpreter or a captioner, they get a tax bill for this and they have to pay taxes on that. It seems to me that's unfair if you want to create a level playing field among people who have disabilities and people who don't have disabilities. Mr. Martin said in the House of Commons yesterday he'd be looking into this in a positive way. I wonder if you have any comments on whether or not we should be changing the law.

Also, a presentation was made to another committee, not ours, by people who are hearing impaired. I think of Gary Malkowski, for example, from Toronto, who was an MPP—you may have known him—one of your former colleagues.

Ms. Elinor Caplan: Yes.

Mr. Lorne Nystrom: I think he was the first deaf Canadian ever elected to a legislature in this country. He was an MPP out of one of the Toronto ridings. He certainly has discussed this with me. It's a question I raised yesterday and got a very positive response from the Minister of Finance. I wonder if you can elaborate a bit on it in terms of what is your position and where we should go. Can we give people like Mr. Malkowski some hope that there might be some action?

Ms. Elinor Caplan: I served in the provincial legislature in Ontario with Mr. Malkowski. He played a very important role in raising the awareness and consciousness of not only members of the legislature in Ontario but also the population, of the challenges and the abilities—

Mr. Lorne Nystrom: Both.

Ms. Elinor Caplan: —of individuals when given the supports they need to be able to participate.

The issue you raise is a policy issue. As you know, all of those kinds of policy issues are ultimately the decision of the government. As a member of the cabinet, I want to assure you that I will support the decision that is made by the government when this matter is considered and given due consideration. The recommendations will come to the cabinet from the finance committee. If there is any change, it will be announced at the appropriate time.

Mr. Lorne Nystrom: I'm aware of all of that—and you'd obviously support a government decision—but I'm just wondering whether or not you can say publicly what your position is on this. Can we expect support from you around the cabinet table?

Ms. Elinor Caplan: The only thing I can tell you is I think the Prime Minister says it well. When we look at really important issues to Canadians, we go step by step. We see what we can do, what we can afford. There are many pressures and demands on government. We have to set priorities and make those difficult choices. But certainly anything we can do to enhance and support the lives of Canadians who are disadvantaged and have talent and ability, anything that would assist them to achieve their potential, we certainly would all like to be able to do that. The question is when and how, and can we collectively do it sooner or do we have to wait a little longer to do it?

If you look at the progress we've made just in the time since we've balanced the budget, I think the priority of the child tax benefit, as one example--

Mr. Lorne Nystrom: I have just one very quick question.

I've run out of time here, but the issue of deductibility of fines as a business expense has been a bit of an issue recently, with this court ruling. Can you shed a little bit of light on what your feeling is about where we are about to travel, whether or not you can deduct fines as a legitimate business expense? If somebody gets caught for speeding, you can't deduct that from your income tax. Where do we go?

Ms. Elinor Caplan: This was a court decision, and the court was very clear as to what was and what was not deductible. This decision is still under review. What we are doing as part of the review is monitoring what is actually happening, because the court didn't say all fines.

Mr. Lorne Nystrom: Yes, I know. I am aware of that.

Ms. Elinor Caplan: In the decision following the review of the court decision, ultimately, if there is going to be any change, again that would come from Finance. But CCRA, in the administration of the tax laws today, is also reviewing and monitoring what is actually occurring since that court decision occurred.

Do you want to add anything further to that, Bill?

º (1630)

Mr. Bill Baker: Yes, perhaps just to clarify for the sake of members that the decision drew an interesting and helpful line. As the minister points out, we're attempting to articulate this through our administrative guidelines, but it's not all fines and all penalties. There are certain kinds of fines and penalties that are intended to be monetary in nature, essentially to level the economic playing field.

The case in point was someone who had sold too many eggs, exceeded a quota and paid a fine, and we disallowed it as an expense. The court had said that kind of fine was legitimate, whereas a fine that's intended to be more punitive and is intended to say, “Look, you're engaged in an activity that is truly offensive”, like polluting a lake, or a fine for something that's in a truck that shouldn't be in a truck, or something like that, for health and safety reasons.... Those kinds of fines would not be allowed as a deductible expense. We're still sorting through it. There's always a fine line.

The Chair: Thank you very much.

Mr. Pillitteri, go ahead.

Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you very much, Madam Chair. My questioning will be mostly to Minister Caplan.

I have accompanied you many times in Niagara, of course at the customs self-assessment launch in Windsor and in Niagara when you visited there. Thank you for the opportunity to see the availability and the system we have in place here in Canada in order to see how we could best expedite what we call the truck traffic and movement of people.

As you know, we constantly have a specific case in the Niagara Peninsula. That is the 7/24, what you call the outbound of the United States checking people leaving the United States, 7 days a week, 24 hours a day. Although the infrastructure is there for not having any lineups, they are actually creating artificial lineups on the American side. Sometimes, by having those artificial lineups in the United States, it's the perception out there that it's Canadian customs or Canadian immigration that is creating these problems. I've heard it said by many that even though right now the season is starting to heighten as far as tourists coming from the United States, they still don't really understand that it's not Canada keeping those people out.

Do we have anything in place? I know they're trying to work in cooperation with the other side. Do we have anything in place, not necessarily to lobby on the other side, but to inform Americans? As the tourist season picks up, specifically in Niagara Falls and Buffalo, where the tourist industry is what you call targeted specifically, what you call the “rubber trade” specifically--Michigan, New York, Pennsylvania, and Ohio.... People are coming to those points, and all of a sudden when they see that.... Do we have anything we can do, any information we can give that it is not Canada? How can we put pressure on the American side to start alleviating this trouble?

Since they do that, if it comes about that you're starting to loosen that up and they would be creating artificial bottlenecks on our side, would you be ready to have more resources put on the borders in order to try to accommodate this? Niagara Falls specifically is a city that almost lives and dies by that border.

Ms. Elinor Caplan: The thing I've learned in the five months since my appointment as Minister of National Revenue is that the issues as they relate not just to the border but to customs generally are very complex. We administer a number of different pieces of legislation, over 70 pieces of legislation, I think.

One of the things I found out recently is that both Canada and the United States have the authority on export as well as on import. There are certain obligations under some legislation for those who are exporting to make sure this information is declared at the Canadian border. What has happened and what you're referring to is that they have become a little overzealous on the American side in doing export examinations—particularly, we've heard, looking for money leaving the country.

I know Commissioner Wright has raised this issue directly with his counterpart, Commissioner Bonner, as part of the smart border discussions, because we agree on both sides that we want to target our resources to where we're dealing with high-risk and important issues.

Niagara is an anomaly with what's happening. We had hoped that the opening of the Whirlpool Bridge would offer some relief, because it's my understanding that the traffic is moving safely and smoothly across the Whirlpool Bridge in both directions. That has been since May 1; it's now May 29—a very warm day here in Ottawa with no air conditioning. But there are a number of issues we have to work on, and we're aware of that.

I'm going to see if the commissioner wants to add anything further to that.

º (1635)

Mr. Rob Wright: As we discussed, Minister, I did raise this with Commissioner Bonner. It is anomalous, and it's not very smart to have two checks. There has to be a better way for us to get our job done.

So Commissioner Bonner has undertaken to check with his people in the field, and we will have a discussion of this particular aspect at our next meeting, tentatively scheduled for June 10.

Mr. Gary Pillitteri: To follow up, Madam Chair, again, thank you for the implementation unilaterally of the CANPASS, but it's only 16 hours a day. I'm wondering, first, if that is to be extended in the future.

Secondly, if we extend it from us, the 16 hours, of course the Americans would have to put customs on the other side. So possibly, indirectly, it would alleviate some of the backup on the other two bridges that I have there.

My second question--

Ms. Elinor Caplan: Let me address that first.

The goal throughout the high-volume ports is to move to NEXUS, which is a two-way, secure, low-risk, identified pass.

We use terms like NEXUS. For anyone who's listening to this, CANPASS is the ability to pre-clear by applying for a special card from Canada. On NEXUS, the application is to both Canada and the U.S. The NEXUS pilot project has been piloted very successfully in Sarnia, using high-tech computer information, where you've done complete security clearances.

This spring, hopefully next month or within the next few weeks, we're seeing the beginning of implementation of NEXUS at the B.C.-Washington border crossings. There are three of them there. The next is the rollout in the high-priority, high-volume crossings of the east as well, Ontario and so forth.

Denis, do you want to add anything to that?

We think the way to go is to get to NEXUS—

Mr. Denis Lefebvre: To NEXUS, yes—

Ms. Elinor Caplan: —because it's two-way rather than CANPASS, which is one-way.

Mr. Gary Pillitteri: Minister, that was part of my question that you answered beforehand. Actually, I would like to go one step further; that is, when do you think there could be implementation of NEXUS in Niagara Falls? I understand that with CANPASS some of those people are actually able to roll over into NEXUS.

There's one more point I'd like to ask about, and I get asked this a lot. Do those people who are trying for NEXUS have to be Canadian citizens? I understand this was one sticking point with the Americans, that it was to Canadian citizens only, and it would have excluded students from abroad. Has this been resolved, and when can I expect it in Niagara Falls?

º (1640)

Ms. Elinor Caplan: Let me start with the timing issue first. There's a big challenge, because in order to register and qualify for the NEXUS program, it's a security check by both Canada and the United States. We're going to have a compatible, harmonized program, where once you've been cleared, it's for both countries. There will be spot checks to ensure the integrity of the program. This program is designed not for the casual, occasional tourist but for people who cross the border on a regular basis. We know who they are.

It's my understanding that we have agreement that people who will be eligible for the NEXUS program will be citizens and permanent residents of Canada and the United States, which is appropriate because permanent residents of Canada have all had security checks before they were granted permanent resident status. So in fact you could say we know more about them than we do about someone who was born in Canada and has never had a security check as a Canadian citizen. That's the answer on that, first.

On timing, we know that, for example, in British Columbia we have to register 165,000 people. We're starting that registration procedure within the next few weeks. If that goes as well as we expect it will, our hope is that before the end of the year we will see the other high-volume ports in southern Ontario added to the list. But I don't want to give you a firm commitment and guarantee, because this is a program that is new and we want to see it working properly. So our goal is to move it to the high-volume posts as quickly as we can in a safe and efficient manner.

Denis, do you want to add to that?

Mr. Denis Lefebvre: I will only add that following discussions with regional managers, we are confident that in the interim, on the Canadian side, we will keep both trucks and people moving within our service standards.

Mr. Gary Pillitteri: Thank you.

The Chair: Dr. Bennett, ten minutes. Then we'll be going over to Mr. McNally for five, then to Mr. Wilfert for five, and then Mr. Cullen.

Go ahead, Dr. Bennett.

Ms. Carolyn Bennett (St. Paul's, Lib.): Thank you very much.

I wanted to finish a little bit of what Mr. Nystrom had said about the letter and your apology. I think our committee felt that it was indeed the tone of the letter. Whether it's bureaucratic or not, as it's coming from the minister, I think we would hope that you would see that given the power differential of somebody receiving a letter from CCRA, the tone of the letter is really important. The problem is that it made some people feel the agency thought they were fraudulently receiving it. As you well know, some of the people who received that letter were holders of a CNIB card such that they knew they were disabled.

There seems to be some need for the minister to actually say she's sorry that the tone was the way it was and that we have learned and we won't do that again, just as a.... I think you probably know from your own constituency office how upset people were in receiving this letter. Some of these people were well entitled to it, and it was our paperwork that had let them down, not their lack of qualification for the credit.

You can take that and do whatever you want, but I think we have to do better than have that tone in a letter. And whether or not they should feel that way...I have learned as a family doctor that feelings are feelings, and we should be able to be explicit that this does not necessarily mean you don't qualify, but we need the paperwork. We should be explicit that it's our problem, not their problem in terms of being fraudulent.

Ms. Elinor Caplan: Let me be as clear as I can be. Nobody likes getting a letter from CCRA, Revenue Canada, saying their accounts are being checked. I think that's fair to say.

I've read the letter over, and if I could, let me read it into the record, just so that everyone knows what we're talking about in terms of the letter that went out. It says:

We are currently updating our records and have noted that you were allowed—

º (1645)

Ms. Carolyn Bennett: No, it's other places; we don't have to worry about reading it into the record.

Mr. Roy Cullen: I haven't seen the letter. I'd like to hear what it says.

Ms. Elinor Caplan: I'd like to take a minute and read it, if I could.

The Chair: Okay.

Ms. Elinor Caplan: It says:

We are currently updating our records and have noted that you were allowed the Disability Tax Credit (DTC) in previous years. After reviewing your file, we have determined that we do not have enough information to continue to allow your claim in 2001 and future tax years. Please note that this review does not affect any DTC claim we approved for you in 2000 and earlier years.

In order for us to re-evaluate your eligibility for the DTC, you need to send us a new Form T2201, Disability Tax Credit Certificate.

If you feel that you still meet the requirements for the DTC, please complete Part A of the enclosed certificate. Part B, including the section called Duration, must be completed by a medical doctor or other qualified person (as defined on Form T2201). Without this information we cannot confirm your eligibility for the DTC.

Once the form has been completed, we encourage you to submit it to us at the address provided with this letter. If you meet the eligibility criteria, we can update our records before you file your 2001 tax return. This will enable you to take advantage of our electronic filing services. If you wish, you can wait and submit the completed certificate with your 2001 income tax return.

In reviewing your new Form T2201, we may need to contact you, the medical doctor or the qualified person who certified your form to get additional information.

We appreciate your co-operation and understanding in this matter.

Ms. Carolyn Bennett: It obviously didn't have the desired effect on all of the people who came before us.

Ms. Elinor Caplan: I understand that nobody likes getting a letter from CCRA saying it needs additional information. I thought the letter was a little bureaucratic, and I said that in the future I'll try to warm it up a bit. But to put a whole lot of money and look backwards.... I think it was a well-intentioned letter. I can understand that people didn't like receiving it, but I don't think we should put a lot of energy into the past.

Ms. Carolyn Bennett: This question may be for David Miller. For the people who were charged $150 to fill out this new form, you are promising that will be approved for the medical expense credit if they send in the bill.

Mr. David Miller: I should qualify that. When we asked the professionals responsible for completing the application through a major survey in 1999, they indicated to us that they would not charge. That's a general comment made in general circumstances.

I cannot confirm that there aren't individuals out there who were somehow charged up to $150 for going through this process, remembering that the form has seven lines on it. If you have an ongoing relationship with a physician or other specialist, that's one thing, but if you have to go and see one for this specific requirement, then there may be a fee. Those moneys--

Ms. Carolyn Bennett: It's very specific in the fee schedule that you cannot--

Mr. David Miller: You cannot charge--

Ms. Carolyn Bennett: If you get that letter and show up at your doctor's, you have to pay. The doctor is not allowed to bill OHIP or the--

Mr. David Miller: Our survey indicated that doctors would not charge their patients, period. If they were charged--

Ms. Carolyn Bennett: I don't think the doctors were surveyed. I think the association was.

Mr. David Miller: Perhaps. I was--

Ms. Elinor Caplan: I think that is an important differentiation. In good faith the consultation was with the Canadian Medical Association. The indication was that there wouldn't be charges for this and—

Ms. Carolyn Bennett: There's a bit of a debate as to whether the medical association thinks it was consulted. There is ongoing lack of institutional memory there.

Ms. Elinor Caplan: Just a minute—

The Chair: Let's have a question and then hear the answer from the minister and her officials.

Ms. Carolyn Bennett: When the officials appeared before the subcommittee, the view was that before the agency took over in 1996, this wasn't properly managed. Therefore, this needed to be done in the period before you were in charge.

Since you've been in charge, how do you validate the entitlements for those who apply for a DTC? What guidelines are used? For the extra staff who come in at tax time, what is the nature of the training and documentation given to them? What we didn't ask for, and I'd like to ask for now, is a copy of the disability tax credit section of the taxation operations manual that's used by your staff in validating the DTC entitlements and taking into consideration the clinical diagnosis. I think we were a bit worried that the qualifications for looking at these forms were less than those for filling out the forms.

º (1650)

Ms. Elinor Caplan: Madam Chair, I'd like to acknowledge the important advocacy work that Dr. Bennett has done. The leadership on the subcommittee has been very important work and it has helped the agency to guide us in going forward into the future.

These are very important questions. We will table with the committee what you've asked for. And I'm going to ask David Miller to answer the questions on process.

It's my understanding that we have a procedure in place where we try to be as responsive and sensitive as we can be. We have said we would consult on the forms. I've made the commitment since I arrived five months ago that we would delay the next tranche of review to ensure that this consultation takes place and that it's done as sensitively as possible.

Having said that, I think everyone around this table would agree that when you're administering a program, it is important not only to do it responsibly and sensitively, but also to ensure that those who are entitled receive that benefit and that those who are not entitled are not receiving the benefit. That's part of the integrity of the tax system.

David, do you want to explain the procedure of how this works?

Mr. David Miller: Thank you, Minister.

I should point out that the form we use currently has been in place for about five years. The consultation with the Canadian Medical Association and others was done with the introduction of that form five years ago. And with the exception of updates and changes that have been made because of changes in legislation, that's essentially the same return.

We tried to make it very straightforward and simple so that when the medical expert was filling it in they could say yes or no. So when those forms are received--is your patient blind?--and they say yes, there's no further work required. That's very clear, and it's very much of a clerical function for us to process that. The medical practitioner also indicates whether this is permanent or temporary, and how long it's likely to go on in the case of temporary. But that's really the form.

Where we run into trouble is always in the grey areas, as Dr. Bennett knows, of trying to understand, in line with the legislation, which has words like, and perhaps if the committee would not mind, I'll read one phrase, and I quote:

markedly restricted only where all or substantially all of the time, even with therapy and the use of appropriate devices

This means that if someone is missing a leg and they're able to walk with the use of an artificial leg, they do not qualify for this benefit. That's the legislation passed by Parliament.

So when we go through the process, it's very clear from what the physician says or from what the medical expert says, and that goes through a group who is trained in actually reviewing the applications. It is a distinct part of all the work that's done in validating individual tax returns. Those items and questions are referred to headquarters, where we have registered nurses who are trained in understanding the application of this act and who interpret the words of the medical expert or practitioner.

In many of those cases, because it is not clear, we are then forced to go back with a second form, which the minister mentioned, to clarify exactly what was said in the words—it wasn't a yes or no; it was somewhere in-between—and exactly how we could interpret that.

So there are specially trained registered nurses to work with the medical experts in understanding the determination they've come to. We do not normally interpret any information on the form as long as it relates to either a yes or a no, that particular individual qualifies or does not qualify under one of the seven activities of daily living.

Ms. Carolyn Bennett: In consultation with the disability community and with the medical professionals, there's obviously a place for an advisory committee to help with this kind of training, as we're looking at in the Canada Pension Plan and in some of the others. To have in place somebody who reviews the training and can explain the fibromyalgias or the more difficult things...it's my plaintive wail.

º (1655)

Ms. Elinor Caplan: Could I make one comment? That was one of the recommendations in that committee's report.

The Chair: Okay.

Ms. Elinor Caplan: I think there's a general agreement, and when there's a final response to that report, I think you'll be happy.

The Chair: We have four more questioners.

Mr. McNally, go ahead.

Mr. Grant McNally (Dewdney—Alouette, Canadian Alliance): Thank you, Madam Chair.

I'd like to follow up on Dr. Bennett's line of questioning, and then I have a few questions about NEXUS for you.

It seems to me that the discretionary side of this form is perhaps where things are falling through the cracks. In cases where doctors are being able to perhaps give more information, it seems almost cut and dried, whereas, in effect, because of the nature of the disabilities that individuals have and the gradient...perhaps that is something that needs to be addressed.

Prior to this process being in place, what was it that individuals had to do? Obviously, there were 106,000 people who qualified; they had the letters.

Ms. Elinor Caplan: This system still exists, I understand, in Quebec, where it's a self-assessment. It's only when you're audited later that there's a determination made.

We changed that. In 1996 we did a 100% upfront audit so that anyone who applies for this credit.... The self-assessment, frankly, was not in line with the legislation too many times, but it was very important that people be treated fairly. If we were doing 100% for those who applied from 1996 forward, it was felt it was only fair that we go back and make sure we had adequate information in the files of those who had self-assessed before that. That's why the review was begun and the letters were sent out.

There's another group yet to be assessed where there has not necessarily been all of the information in the files. CCRA has an obligation to ensure that programs are properly audited to determine whether or not individuals who have self-assessed are entitled.

I want people who are qualified for this program to get the benefit. Someone with a sprained ankle is not eligible. We have had cases where someone with a sprained ankle put in an application and, because there wasn't a 100% check at that time, they received that benefit.

Because of the sensitivity, it was determined that we would not go back to reassess because we hadn't been clear enough at that time. And the legislation is complicated, which is why I think it's important that this be done as sensitively as possible. But it is an integrity issue. It's not right for someone who.... This is not the kind of program that you want to qualify for.

Mr. Grant McNally: No, obviously not.

Ms. Elinor Caplan: This is a severe disability that hampers activities of daily living.

Mr. Grant McNally: Do you have any numbers?

Ms. Elinor Caplan: We've heard the number who apply each year.

Mr. Grant McNally: From the letters that were sent out, how many people have you found through this process--or maybe you don't have a final determination on that--who were qualified in the...?

Ms. Elinor Caplan: Or thought they qualified.

Mr. Grant McNally: Thought they were, or were previously.

Ms. Elinor Caplan: They were receiving the benefit. They thought they qualified.

Mr. Grant McNally: And now are no longer. You don't have a number yet. Will you in the future?

The Chair: Mr. Miller.

Mr. David Miller: Perhaps I can comment briefly on that. I think the appropriate words are “those who thought they qualified”. Again, roughly 200,000 individuals are still getting the disability tax credit who actually started that process before 1996.

We looked through the rest of our files, or other ways, so we could determine the eligibility, using in some cases CNIB records or whatever else was available. The group that we want out of 106,000, as the minister mentioned, was the group making a sufficient income so that they could in fact benefit from this claim directly. This is one of the claims you are allowed to transfer to a spouse or another family member if you do not generate sufficient income, so they can take advantage of it.

The numbers—and again, it may be misleading, because, as the minister indicated, in the letter itself it said you could file ahead of time or you could file with your tax return. We still have several million tax returns from this season to finish processing. But a substantial portion of the ones we have reviewed were in fact no longer entitled to that tax credit.

Oddly enough, we received dozens of letters from people indicating that while they appreciated the support while they had a particular problem, they no longer have reason to claim that disability tax credit, and they thanked us for the period under which they were receiving it.

» (1700)

Mr. Grant McNally: I'd like to switch to talking about the border for a moment, and first of all, pass on some congratulations to employees at the Sumas-Abbotsford border crossing. We had an event there this past weekend to commemorate the incident of September 11, and a twin towers memorial was set up. I know that staff--both on the American side and the Canadian side--were very helpful. Because we had the ceremony right there at the crossing, they had to divert traffic and whatnot. It was an excellent event.

Ms. Elinor Caplan: Did you cause a delay?

Mr. Grant McNally: No. There were no delays because staff did such a good job of planning ahead and expediting that. It was on a Sunday as well and not a high-traffic period of the day.

I do want to talk to you for a moment about NEXUS and CANPASS. My riding is close to the border, not next to it but approximately 20 kilometres away. We have a fair number of people using those programs.

You made a comment earlier in an answer about permanent residents and citizens being able to qualify for NEXUS, and security checks are done on permanent residents. Are you saying if a Canadian citizen applies they would not go through a security check?

Ms. Elinor Caplan: No. The question was raised whether only citizens are eligible. I said permanent residents are also eligible.

Mr. Grant McNally: Right. And they go through a security check.

Ms. Elinor Caplan: In fact, permanent residents had a security check before they were granted permanent resident status, whereas Canadians born in Canada may never have had a security check.

Mr. Grant McNally: But they will have one before they qualify.

Ms. Elinor Caplan: Everyone will be required to have a security check before they are qualified for NEXUS.

Mr. Grant McNally: As a follow-up to that, obviously the effects of September 11 are lingering on, and rightly so. How has that impacted the implementation of NEXUS and CANPASS? I know things were slowed down right after September 11, but are we on track? You mentioned that in a few weeks some of the programs are going to be coming online. Have there been significant changes to getting these programs on the go because of the events of September 11?

Ms. Elinor Caplan: What we did as a result of September 11 was initially suspend and review all our programs to ensure they were secure. Then as we were confident we could reopen, we did. We reviewed not only the land borders; we reviewed the airports; we reviewed the boats and ports—the pleasure boats as well.

The NEXUS program is a land border program. We're also talking about a NEXUS Air. NEXUS is a two-way program jointly with the United States. When it's one way, it's CANPASS—that's into Canada—and the U.S. have a couple of programs with other names going into the U.S.

What we're attempting to do through the discussions of NEXUS is have a consistent, harmonized approach so that individuals who regularly cross back and forth can apply once, be security-cleared by both Canada and the United States, and receive their NEXUS card.

We started in Sarnia with a pilot project. It worked extremely well. On September 11, Sarnia was suspended for a short period of time. The results of Sarnia were that it was an excellent model, and through the discussions and the smart border initiative-—the 30-point plan between Commissioner Wright and Commissioner Bonner—the decision was made that we would expand NEXUS, starting on the west coast with the three border crossings at B.C.-Washington state, and we would then expand the program nationally to all high-volume border crossings.

The reason it's important to remember “high-volume” is that it will have a dedicated lane. That's where the delays occur, at the high-volume crossings. You don't need this kind of program at a low-volume crossing that moves smoothly.

The hope is to move as quickly as we can to implement this, recognizing that there is going to be a challenge in registration and that once we have the volumes of people registered, we'll be able to open dedicated NEXUS lanes.

We are implementing the EPPS program, which is, we hope, the precursor of NEXUS Air. EPPS is into Canada. We're hoping we will be able to introduce it for the small-plane commercial and pleasure flyers. We have reinstated the CANPASS boat/marine for the summer for private recreational boaters.

We are encouraging people to sign up for CANPASS, whether it's CANPASS Marine or CANPASS Air. We've opened, I believe, 177 CANPASS airports. There are some that have not been opened, and we are now looking to see, where volumes don't warrant, what we can do in the way of cost recovery, because we know how important these programs are to smaller airports as well as airports where we have large volume.

» (1705)

Mr. Grant McNally: So many questions, so little time, Madam Chair.

The Chair: I'll move on to Mr. Wilfert for ten minutes, and then to Mr. Discepola for ten minutes.

Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Madam Chair, for your generosity in expanding the time. I have five questions, which I've written out, and I'd like to get, probably, a written response to all of them. Normally I don't do this, but I asked my staff, who deal with CCRA on a regular basis--probably more on a regular basis than I'd rather have them deal with CCRA--

Ms. Elinor Caplan: Stephen Rigby has not spoken yet, so I hope all of these questions are financial in their scope.

Mr. Bryon Wilfert: If he can read my writing, I'm sure he'll be more than able to answer them.

Let me go through them.

Why is a simplified tax return form for seniors only generated automatically from Ottawa but not available from any local CCRA office? It makes it difficult for seniors to fill out the usual T1 form when the simplified form is not available.

The second question is, if an individual is liable to pay for outstanding taxes, but cannot afford to pay for the whole sum at once, usually an expense form is given to the taxpayers to fill out to list the monthly expenses, but the completion of this form does not guarantee anything that the taxpayer will be, let's say, repaying at a monthly payment he or she can afford. How does CCRA justify that?

A constituent receives a GST return—this is an example—for registrants, which is not due until June 17, and on April 24 CCRA sends a notice of assessment telling her she owes interest and penalty on top of the projection, which is not even due until June 17. She is already penalized with interest and penalty for a projection that is not yet due.

The fourth question. The refundable medical expense supplement does not apply to seniors and pensioners whose annual income does not exceed $30,105. Therefore, such seniors and pensioners with limited income cannot claim and benefit from the refundable medical expense supplement according to paragraph 452 on page 43 of the General Income Tax and Benefit Guide, 2001. These people are the ones who really need the benefit.

Finally, on standardized customs signage for Canadian citizens at international airports in this country, this is actually my question, and it's about something that bugs me. I land in Vancouver and I can go through the sign that says “Canadian citizens”, and a sign for “visitors” is also posted. I arrive at Pearson International Airport, and you obviously don't allow Canadians in; it's all visitors. I would like to know why we don't have standardized signage across the board. I've actually had constituents, and a lot of business people as well, complaining about that.

Madam Chair, customarily I'm not so long, but I've written it all out.

The Chair: You can pass that over, and if there are written replies we'll circulate them through the clerk.

Mr. Bryon Wilfert: Thank you.

The Chair: But maybe just take the answer to the last question.

Ms. Elinor Caplan: In fact, that's exactly what I was going to suggest. Thank you, Madam Chair.

I'm really happy because some of those questions were for Stephen Rigby. We will reply in writing.

Mr. Bryon Wilfert: Thank you.

Ms. Elinor Caplan: After I've answered the first one, if he can think of something he would like to say, I really want to give him the chance to do that.

» (1710)

The Chair: That's okay, it's in my time.

Ms. Elinor Caplan: With regard to the issue you raise about the airports, I visited Vancouver and I saw the sign that says “Canadian citizens and permanent residents”. I visited Pearson and I didn't see that sign and I asked them why. Apparently at one time they had tried that in Pearson and they had a couple of concerns. They found that it actually created confusion, for whatever reason, and that the line was often empty because people didn't realize that if there was nobody there they could move in. But I've asked them if they would try it again, that I had a number of people tell me that Vancouver was working really well and would they talk to colleagues in Vancouver.

The other thing they told me—and I was at Terminal 2 when I visited—is that the configuration of the room is different. In Vancouver it's one big, open room; there are no pillars. In Pearson there are these big pillars in the middle of the room. They have actually considered having what I thought was a great idea, which is a bank queue. Nothing is more aggravating than standing in a line and you get behind a person who has to stand there for ten minutes and talk. That's the aggravating thing. If you're in the bank line type of queue, where it's the next available person, everybody goes to the next one and then you haven't had to make the decision of which queue you're going to stand in, trying to figure out who is likely going to take more time than someone else, which leads to frustration and to the question, why can't you just give me a line for Canadian citizens and permanent residents? So they're considering it; they're looking at it.

I will send the transcript of Hansard from the committee.

Did anyone want to add to that?

Mr. Denis Lefebvre: You have basically answered it, Minister. I will only add that because the configuration, as you mentioned, of each airport, is different, as is their volume, their mix of clientele, visitors versus Canadian citizens, and given the resistance of people once they are in one line to move to the other, even if it's shorter, and once they are in one line they don't move, all this makes airport managers in all airports do it a bit differently. Many, if not most, have tried separate lines for visitors and Canadians. In the end they are trying to go for the best use of resources and to do what's best for the totality of the people. They have that flexibility to use the best method; nothing restricts them. But we are going to engage all airport managers to look at it again, and hopefully we'll come up with a better procedure.

Mr. Bryon Wilfert: Madam Chair, I appreciate that they're going to do that. I just find that we're probably the only country in the world that I've ever visited that doesn't have lines for its own nationals. Quite frankly, it's very frustrating for some of my constituents to be in a line where people are not nationals. As you know, they can be quite time-consuming. Time is money. People want to get through and be welcomed back to their own country. I don't care what the configuration is. I expect to see Canadians being able to go through lines that say “Canadian citizens”. With electronics these days, they can change--and they do--so that if you don't have many people coming through, that can be changed to say “Visitors”. I don't think there's anything that would restrict that. I hope we will see that soon, because, as you know, Madam Minister, being my neighbour, I know where you live. I will be after you.

Ms. Elinor Caplan: Not only that, but the reason I'm going to take the Hansard is that the speech you've just made is exactly, word for word, the discussion I had with officials at Pearson within the last two weeks.

Mr. Bryon Wilfert: I thank you for that.

Ms. Elinor Caplan: What we all want is to have things move as smoothly and efficiently as we can. If there are best practices and good ideas on how to do that, we have to be open to listening to that. If it doesn't work for some reason, then we have to change it, but my view is let's look at what's working and see if we can improve service.

One point I want to make, Madam Chair, which I found out only five months ago, is that there is a service standard, which is that no one should have to wait more than 20 minutes when he or she is in a customs lineup at an airport. We don't achieve that 100% of the time, but my understanding is that with the exception of when large jumbo jets arrive, either late or early, and all come at the same time....

I don't know if you know what the percentage is, Denis, but—

» (1715)

Mr. Denis Lefebvre: I have a report every week of whether we exceed the time standards. Basically we meet the time standards, although I'll admit that occasionally--about once a week--in Vancouver there is a time of the day where, for the reasons mentioned by the minister, there will be a longer lineup, in excess of 20 minutes. It can happen in other airports too, but it's occasional as opposed to regular.

The Chair: Mr. Nick Discepola has been waiting patiently for his time, so it's his turn now.

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Minister, while you're in the mood to take a shopping list, I'll give you my recommendation. It is along a similar line as Mr. Wilfert's recommendation. If you're going to add lines, add a line for “Something to declare”, and “Nothing to declare”. There is nothing more embarrassing for a member of Parliament to go into a line to pay his fair share of duty and GST that he or she wants to declare after a trip and to stand in line with everybody else, fearful of being recognized, because he or she went in a line and has probably been stalked by customs officers, even though you volunteered to pay the GST or the duty on goods you've brought back. While you're reorganizing Pearson, you might want to consider that one.

Ms. Elinor Caplan: It's my understanding that we do have a “Nothing to declare” line in some of the facilities. I'm not sure which ones, but I know we're checking them out.

Mr. Nick Discepola: You're not sure if it's at Pearson. This happened to me at Pearson.

Ms. Elinor Caplan: I'll check and see which terminal and get back to you, but I'm sure I did see that. We could be piloting it or it could be in place now. I'll let you know.

Mr. Nick Discepola: I want to compliment the minister on the measures introduced to try to have a freer and faster movement of goods and services. Prior to September 11, we were headed to a more rapid integration of this, but September 11 seems to have curtailed that a bit. I'm happy to hear that your ministry is advancing it.

On the question of identification and biometrics that are used, I was wondering why you seem to be, or your officials seem to be, favouring iris detection versus fingerprint detection. It's like killing a fly with a sledgehammer. I think the security needs that you require can very reasonably be handled through single fingerprint detection as opposed to having to go to the added expense of iris detection. I'm wondering why you're choosing one versus the other.

The other question I have is this. When we had this whole debate of the bill that established and created the CCRA, one of the objectives of that bill in the creation of the CCRA was that it would hopefully one day become the single collection agency for all levels of government, if possible. I've heard rumblings recently from your own home province as well as another province that the two provinces might want to go their own way because they might not be satisfied. I'm wondering what you're doing to prevent or pre-empt that and how any negotiations have gone with the provinces in terms of collecting the HST with them.

Ms. Elinor Caplan: Excellent questions. I'll try to answer as briefly as I can.

Let me start with the biometrics. The plan for the NEXUS card is to use the one digital fingerprint. Where they have any concern, or just on a random basis, they may request full fingerprints if they feel it's necessary, but the intention is to move to the single digital fingerprint on the NEXUS.

The EPPS, which is the retina.... That's the iris scan for the EPPS program. That's the NEXUS precursor, we're hoping. We're trying out the iris scan. The reason is that we can use a kiosk in remote airports that can identify that biometric. It's a little more expensive, but we believe it's more secure for remote locations.

Do you want to add to that, Denis?

Mr. Denis Lefebvre: On the iris scan, we've been experimenting with hand geometry in Vancouver. There is a kiosk with hand geometry. What happens is that people may have oily hands or sweaty hands, and it's difficult to have technology that works. The iris scan is right now the technology that will best do the job for us.

Ms. Elinor Caplan: The other thing is that as technology evolves and develops, these cards and these technologies are not forever and ever. We have to remain open to changing technology to determine which is the most effective and cost-effective and to try different things out, which is why I pointed out that we are using two different technologies and two different programs so we can see which one does work better as we add biometrics to the card.

On the question of federal-provincial-territorial relations, one of the goals of CCRA is to provide really good service so that taxpayers will not have to deal with multiple agencies and organizations. As I have visited my counterparts in many of the provinces, I can tell you they're very pleased with the relationship. We have signed framework agreements and service contracts with a number of provinces, and it's in the taxpayers' interest to deal with one administration.

We have the largest information technology unit of any government agency or department, and therefore we're able to do things for the provinces that would cost them a fortune if they tried to duplicate it. So we're working very hard to further that goal, and we're working with the provinces that are interested in working with us in an open, transparent, and accountable way, given the opportunities that the CCRA legislation has given the agency. But it's only two and a half years, and I would caution members of Parliament to be realistic in what can be accomplished as far as relationships. We have to continue to prove that we can do it better, faster, cheaper than anyone else can do it themselves.

The last point you made was on the customs action plan. The only point where I would disagree is that September 11 slowed things down. It slowed things down for a very short period of time, but in fact the events of September 11 have accelerated both the 30-point action plan and the implementation of the customs action plan—all the initiatives to see that the border functions in a safe and efficient way, because that's in the interests of both of our countries.

Before September 11, we were working more by ourselves, implementing our own plan. The customs action plan was a Canadian plan. The result of September 11 has been greater cooperation and intensified efforts in working with our American colleagues and partners because of the interests of both countries in sharing information, having security programs in place, and seeing that low risk is identified and that commerce moves as efficiently as it can move.

While there was a slowdown for a short period of time, in fact the resources we have received and that the Americans have put into border security and facilitation have actually been accelerated because of September 11.

» (1720)

Mr. Rob Wright: Can I make one comment, Minister?

The Chair: Yes, of course.

Mr. Rob Wright: On the issue of serving the provinces better, we do more for provincial governments every single year. As the minister said in her opening statement, we administer 17 provincial income support programs at a very modest or no cost.

We administer Workers' Compensation premiums in two provinces, and many other provinces are interested in doing that. It removes overlap and duplication.

We are piloting the collection of provincial sales tax on imports in British Columbia, and many other provinces are interested in doing that.

And we are signing service contracts with commitments for a level of service to be more accountable for the provinces, and we meet them every year for that accountability. So we are making progress.

The Chair: Mr. Cullen, the last question is to you.

Mr. Roy Cullen: I know people are anxious to finish off. I think it was Mr. Baker who dealt with the e-commerce questions, and perhaps he can give us a little more detail on that.

I want to say, Minister, I'm glad you read that letter into the record for the credit on mental or physical impairment. I didn't find the letter particularly offensive at all. And frankly, in my own judgment, it would be a waste of money to send out a whole pile of new letters.

The calls that I've had on this, and I haven't had a lot of calls, were largely from people who felt that because they had put it through their tax return they were automatically eligible and now someone was asking them for information. So I think my perception is that that's where the problem lies.

On e-commerce, Mr. Baker, I know you gave a very general answer and we didn't give you much of a chance to expand. If e-commerce is creating some tax challenges in terms of commodity taxes, GST, I know that you're having a lot of meetings and discussions. This is an international phenomenon, but are we losing revenues in Canada while we discuss these things? Is this happening across the board? Are there any measures that we are taking or that we can take, or is there any consensus being developed within the international community, and if not, what's the timeframe? How are we going to get a grip on this sooner rather than later?

» (1725)

Mr. Bill Baker: First of all, there is no indication that we're presently at risk for any substantial amounts of revenue lost, mainly because most electronic commerce, 90% of it, is business to business, and we know where those businesses are. The issues about location and nature of goods and who the principals are is well-established. There's a greater risk with business to consumer. This is someone who gets on their PC and orders digital products, for instance, in the U.S. or another country. And the risk is when it's a digital product. If they're simply ordering a windbreaker from a company in the U.S., it's going to be delivered and we pick up the duties and tax. So we're not at risk at this point in time for a lot of revenue lost.

Progress is being made on clarifying the international rules. For instance, the OECD has recently put out a publication indicating that by virtue of a computer being resident in a country does not necessarily establish a fixed base of operations for tax purposes. And that benefits Canadians as well, because we're active in the provision of electronic services around the world.

So it is moving. On overall timeframes, I would say this is the type of issue that will probably take several more years before we have consensus internationally around the rules of the game. I can assure the member that officials in both the Department of Finance and CCRA are extremely involved in shaping that agenda with Canadian interests at heart.

The Chair: Thank you.

Ms. Elinor Caplan: The commissioner wants to make one comment, and then I'd like to conclude.

Mr. Rob Wright: At the CCRA we hosted an OECD conference here in Ottawa four years ago, and last year in Montreal we hosted an international conference on electronic commerce for every tax administration in the world. It was very well attended.

David is leading an OECD group on taking the best advantage of e-commerce for tax services, and Bill Baker is leading in OECD and PATA work on compliance.

The biggest risk of linkage from e-commerce business to consumers is actually on provincial sales tax. So we're using that in our pitch for a greater harmonized administration in Canada as well.

Ms. Elinor Caplan: I just want to conclude, if I may, Madam Chair and members of the committee, by saying how pleased we are to be here. I understand it's been six years since a minister has appeared on estimates.

This is a very interesting and important time for CCRA. We're on the leading edge. We have an outstanding team, with, at tax time, over 50,000 employees who work very hard in the interest of all Canadians, providing service not only at our borders but in tax administration.

I wanted to acknowledge one individual as well who's an important member of the team and a member of your committee, and that is Parliamentary Secretary Sophia Leung. We work as a great team, and I wanted to thank Sophia publicly for the support she's given me in the last five months. My predecessor also told me that I could rely on her for help, not only for her good judgment and her assistance, but for the approach she's taken in visiting offices and talking to employees to let them know on behalf of all Canadians how much their work is appreciated.

It's the sort of often thankless job we all have, but I wanted that to be acknowledged, and as well to mention that the leadership of CCRA is, I believe, second to none in the government. They were given an opportunity two and a half years ago to move from a government department to an agency, to take the challenges of innovation, and to do things differently. They've risen to that challenge. After two and a half years we can all be proud of CCRA and what we've accomplished to date.

This is really just the beginning, and it's because of the outstanding leadership team and the dedication of our employees that we've been as successful as we have. But I wanted to say we're not perfect; we're going to try to be better tomorrow, and we subscribe to the theory of continuous improvement.

We appreciate the opportunity to come and share with you the challenges and the achievements. On behalf of Sophia and myself, I want to thank you for this opportunity.

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The Chair: Minister, on behalf of all of the members of the committee, I want to thank you very much, both yourself and your officials.

We are adjourned.