:
I'll call the meeting to order.
Pursuant to Standing Order 108(2), we are studying the subject matter of interim estimates 2018-19: votes 1 and 5 under Canada Revenue Agency.
From CRA with us today, we have Ms. Ramcharan, the Chief Financial Officer and Assistant Commissioner; Mr. Gallivan, Assistant Commissioner, International, Large Business and Investigations Branch; and Mr. Vermaeten, Assistant Commissioner, Assessment, Benefit, and Service Branch.
Before we begin, we do know there will be 30-minute bells around 4:40 for a vote, with a vote at 5:10. Would it be okay if we go to five o'clock, and then suspend for the vote, so this group would be completed by five o'clock? Is that agreed?
Some hon. members: Agreed.
The Chair: Ms. Ramcharan.
:
Good afternoon, and thank you for the opportunity to appear before the committee to present the Canada Revenue Agency's interim estimates for 2018-19, and to answer any questions you may have on the associated funding.
[Translation]
As you are aware, the CRA is responsible for the administration of federal and certain provincial and territorial tax programs, as well as the delivery of a number of benefit payment programs.
Each year, the agency collects hundreds of billions of dollars of tax revenue for the governments of Canada, and distributes timely and accurate benefit payments to millions of Canadians.
[English]
In order to begin the 2018-19 fiscal year, the CRA is seeking a total of $822 million through these interim estimates. This represents the funding required to cover expected payments that will occur in the first quarter of the fiscal year for ongoing operations. This amount would have historically been included as part of the main estimates interim supply bill.
The funding being requested as part of the interim estimates is roughly one-quarter of the voted appropriations that will be sought by the CRA through the 2018-19 main estimates. It does not reflect incremental resources for announcements made by the in the February 2018 budget. The funding required for the implementation and administration of these measures is currently being evaluated by the CRA, and will be presented to Treasury Board ministers through formal submissions in the coming months.
[Translation]
The resources being requested through these estimates will allow the CRA to continue to deliver on its mandate to Canadians by making it easier for the vast majority of taxpayers who want to pay their taxes, and more difficult for the small minority who do not, as well as ensuring that Canadians have ready access to the information they need about taxes or benefits.
[English]
To give you a sense of the kinds of programs this funding supports, let me touch on some service improvements the CRA introduced last year.
At the beginning of the year, the 2017 T1 tax forms and guides were mailed directly to the homes of Canadians who filed paper returns in 2016. People no longer need to pick up guides and forms to fulfill their tax obligations at service centres, which is helpful for people with mobility problems, or who live in remote areas.
Also, in January 2018, the CRA launched an automated phone system called File My Return. This phone system helps more than 950,000 Canadians, particularly those with low incomes or fixed incomes. After identifying themselves on the phone system, the users will answer a series of short questions, and their income tax returns will be filed. For people using this system, there is no need to fill out forms, or make complicated calculations.
The CRA continues to promote another Canada-wide program called the community volunteer income tax program, and a Quebec component called the volunteer program. Through these programs, trained volunteers help people file their income tax returns and receive benefits and credits to which they're entitled. These free clinics serve people with low incomes and simple tax situations, including seniors, students, indigenous people, newcomers, and people with disabilities. These programs help ensure Canadians receive what they are entitled to, in ways that are respectful, and meet the needs of individuals, while at the same time helping people meet the obligations of the Income Tax Act.
At this time, we would be pleased to respond to any questions you may have. Thank you.
:
I'll talk quickly at three levels.
At the first level, which is people paying voluntarily in the first place, I'll look back to last fall's “Fiscal Monitor”. In the November report, they showed that multinationals paid 7.5% more tax in the six months ending November 2017 than they did previously. The economy grew at 3%, so they paid 4.5% more corporate tax than the economic growth would seem to suggest. Non-residents paid roughly 20% more tax in the similar period. Strategically, I think there's some sense that the people we're targeting are getting the message, and they're starting to do the right thing.
Now, with the second level, the audit yield, what we identified through audit, there was an expectation that we'd find $380 million in fiscal 2016-17. We found $500 million. This fiscal year, which is going to close in a couple of weeks, we expected just over $1.1 billion. We had hit that by the third quarter. In terms of the immediate revenue generation, we expect that to be exceeded again this fiscal year.
In terms of the right taxpayers, that's where we talk about people with offshore money. We talk about 40 criminal investigations in terms of offshore, and over 1,000 audits of individuals who had money offshore. Now, we have been talking about audits and not results yet, because those are complicated audits. We have taxpayers who are refusing to be audited. We have a number of cases before the courts where the taxpayers aren't co-operating with us. It will be a number of years for those criminal investigations to be finalized and the audits to be finalized.
I would say that at the level of strategic voluntary payment with the revenue generation we committed to and the target action on offshore, we have a track record of results.
:
There haven't been any funding cuts. The budget is stable.
It turns out that the agency made the strategic choice in 2013 to reduce the number of offices and to focus on highly sophisticated schemes, overseas schemes and the practices of financial professionals, and to no longer go after convenience store owners or the average person. We are targeting more serious cases of non-compliance. For that, we needed auditors with more experience and more skills, which is more expensive. So with the same budget, we now have a smaller number of investigators, but they have much more experience.
This same strategic decision explains the drop in the number of cases. We went from one or two files overseas to 40. These files are much more complex, so we assign many more auditors to them. There are exchanges at the international level.
For the criminal investigations program, we chose to have fewer auditors, but they are more experienced, and we are focusing on more sophisticated files.
This doesn't mean that we are moving away from other areas of non-compliance, but we are taking a civil audit approach with them. If the owner of a convenience store sells lottery tickets but doesn't pay the tax, we ask the owner to pay the tax, but we no longer initiate criminal proceedings in this situation. We are pursuing people who have very sophisticated accounting strategies.
It's a pleasure to be here to discuss “Budget 2018: Equality and Growth for a Strong Middle Class”, and to speak about the investments our government is making to keep Canada's economy strong.
First, I'd like to thank the Standing Committee on Finance for its work in pre-budget consultations. Your work helped us to create a 2018 budget that takes further steps toward building an equal, competitive, sustainable, and fair Canada.
I also want to thank the Canadians who took the time to submit their ideas to us in person and online.
[Translation]
We must and we want to make Canada a more equal, more competitive and fairer country, with a more sustainable economy. This is necessary because Canada needs the work and creativity of all Canadians to meet the challenges of today and tomorrow.
In return, the government must ensure that these same Canadians can benefit from the spinoffs of economic growth. In concrete terms, this means well-paying jobs for the middle class and for those working hard to join it.
That's precisely what budget 2018 does.
[English]
With budget 2018, we're building on a plan that respects the choice that Canadians made a little over two years ago—a confident and ambitious approach. That plan is working. Thanks to the hard work of Canadians, combined with the government's historic investments in people and communities, the Canadian economy created almost 600,000 jobs in the last two years, most of them full-time. The national unemployment rate is near its lowest level over the past 40 years.
However, while the Canadian economy is doing well, we know we still have more work to do. Through budget 2018, the government is taking the next steps in its plan to grow and strengthen the middle class by promoting equality and investing in the economy of the future. Providing all Canadians with the opportunity to realize their full potential is the right thing, and the smart thing, to do for our economy.
Budget 2018 introduces investments that will help make sure that everyone has an equal and fair chance at success. Simply put, when more people contribute to the economy, the economy is stronger.
For example, the budget introduced the new Canada workers benefit, or CWB. This is an enhanced version of the working income tax benefit. This new program will benefit more people than the one it replaces, and will put more money in the pockets of low-income workers. Moreover, the government will make it easier for people to access the benefit that they've earned. Starting next year, everyone who can benefit from the CWB will receive it when they file their taxes, even the tax filers who haven't claimed it.
[Translation]
The new Canada workers benefit will provide real help to over two million Canadians who are working hard to join the middle class and will lift 60,000 Canadians out of poverty by 2020.
Starting next year, all taxpayers entitled to this benefit will receive it when they file their tax return, whether they have applied for it or not. These measures will encourage more people to join the labour market. It's good for everyone.
The 2018 budget also contributes to increasing women's participation in the workforce. This will promote economic growth and benefit everyone.
According to the McKenzie Institute, by taking action to promote equality, such as employing more women in technology and increasing women's participation in the labour market, Canada could add $150 billion to its economy by 2026.
[English]
A study by the Royal Bank of Canada shows that increasing the participation of women in the Canadian workforce could increase Canada's gross domestic product by 4%. Full and equal participation of women and men in Canada's economy is essential for our future. Our economy cannot succeed when half of Canadians are held back.
[Translation]
The government is showing leadership and, this year, will introduce pay equity legislation in federally regulated sectors. We are committed to ensuring that women and men receive equal pay for work of equal value.
[English]
The new employment insurance parental sharing benefit offers parents more flexibility. It adds additional weeks of leave, weeks of benefits when both parents share the parental leave. This use-it-or-lose-it incentive allows for more equity in parenting and more flexibility for parents, especially women, to decide when to return to work.
The budget also takes further steps to ensure Canada and indigenous peoples can forge a new relationship built on trust, respect, and co-operation. Budget 2018 will help close the gap between the living conditions of indigenous peoples and those of non-indigenous peoples, facilitate self-determination, and advance reconciliation of rights. With new investments included in the budget, several long-term drinking water advisories on public water systems on reserve will be lifted even earlier than originally forecast.
There is more. Through the budget, the government is investing in indigenous peoples, removing barriers to their success, supporting their skills, and helping them fully participate in the economy and strengthen their communities.
[Translation]
Canadians believe protecting the environment is important, and the government does, too. Budget 2018 supports the development of a sustainable, low-carbon economy. The government is also promising to ensure that tariffs will be imposed on carbon pollution across Canada.
[English]
We know that science and innovation spur economic growth. That's why, through budget 2018, the government is making a historic investment of nearly $4 billion over five years in support of the next generation of Canadian research, providing increased support and training opportunities for about 21,000 researchers across Canada every year by 2021-22. These investments will give our world-class scientists the support and the tools they need for their important work that will help to drive our economy forward.
Budget 2018 offers real progress for the middle class. As Canada's economy continues to grow, the government will ensure that all Canadians share in and benefit from this success. The budget's growth-generating investments, some of which I've outlined today, are being balanced by sound fiscal management that includes a declining debt-to-GDP ratio. The federal debt-to-GDP ratio, which is our debt relative to the size of our economy, is not only on a downward track, but it's projected to be near its lowest level in nearly 40 years. Canada's net debt-to-GDP ratio is the lowest among all G7 countries.
The federal deficit-to-GDP ratio is on a downward track. It is projected to reach 0.5%. As a point of comparison, that of the United States federal government is currently at 3.5% and could reach about 5%.
In other words, Canada's fiscal house is in order, which means that we're resilient to shocks and uncertainty in the economy.
[Translation]
The indicators show that Canada's fiscal position is sound. This means that the government can confidently make investments to strengthen and grow the middle class.
Budget 2018 will stimulate growth and productivity in Canada, which is a good thing. The jobs of the future will depend on the ability of Canadians to innovate in a rapidly changing and increasingly globalized economy.
[English]
Budget 2018 focuses on Canada's future and the things that truly matter to Canadians. Guided by a new gender results framework, it ensures that every Canadian has a real and fair chance at success.
Mr. Chair, I'd be happy to answer questions from members of the committee, either on budget 2018 or on the Department of Finance interim estimates for 2018-19. We also have officials from the department in attendance if there are any very specific questions.
Thank you.
:
You're right; Phoenix is a big challenge, and we decided it was very important to invest to improve the situation.
[English]
I guess the frame of reference I would take in thinking about Phoenix is one that considers the context that we found ourselves in when we came into office.
In my private sector life, I have been involved in many implementations of human resource systems, pay systems, and pension systems. I really had never encountered a situation where the people who were intended to actually implement the new system were let go in advance of the new system being put in place. We found ourselves in quite an unfortunate situation, one where the talented people who were required to implement the new system frankly just weren't there. This made it a very difficult situation. Obviously, the Phoenix implementation has created enormous problems for a huge number of people who work for the federal government.
We've taken this issue very seriously. We've already made significant investments. We made a commitment in this budget, not only that we would rethink how we can best deliver pay services to federal government employees to ensure they get paid appropriately and on time, but also that we would have the right system going forward for the long term.
In that regard we made a significant commitment in Phoenix over the long term of hundreds of millions of dollars, knowing that we need to get this right. It's not acceptable that federal government employees aren't paid properly, and the fact that we found ourselves in this difficult situation doesn't relieve us of the responsibility of getting it right, and that's what we're going to do.
I will tell you that we will stay on this until every single employee is appropriately paid and until this continues to be the case every single bi-weekly pay cycle.
:
Minister, thanks for being here.
Minister, your budget is your responsibility and whether or not you succeed on the gender aspect is going to be at your feet. The word “gender” is mentioned 358 times on 368 pages, so I understand fully that this is something you are putting forward, but it's going to be your leadership and your willingness to implement that are going to matter. Otherwise we're going to have lots of very disappointed Canadian women out there.
Now, Minister, it makes sense for us to take a look at your track record when we determine whether we can trust you to implement what you say you're going to do. I would start with Morneau Shepell, where you were executive chairman, and—as you know because you know your own statistics—at most on your board, you had three out of nine positions occupied by women. In your senior management team, you had three out of 11 senior managers who were women. In your current board mandate, in your governance charters, in your nominating charters, there is no mention of diversity, inclusion, or gender. The focus is on competence, capability, and qualifications. In your annual report, going all the way back to 2011 never once in the analysis of risk to your former company did it ever mention not hiring women. I say this is important because you wrote in your budget that the main focus areas are more women in senior management positions and more company board seats held by women because it leads to better decision-making.
When did you determine that it was better decision-making to have women around the boardroom table, Minister?
:
The frame of this is always the situation that we find ourselves in. We look back over the last 40 years and consider how our economy has grown. A third of the growth over the last 40 years has been women entering the workforce. Then you have to consider whether we have gone as far as we can go in this regard.
Women in Canada are in the workforce at a 61% workforce participation rate. Men are at a 70% workforce participation rate. That means we're eighth out of 29 OECD countries. In my estimation, we can do better than eighth out of 29.
In terms of equal pay for equal work, we have women earning about 88¢ on the dollar compared to men, for an equal amount of full-time work, if you want to look at it that way. That's about 15th out of 29.
What we're saying is that as we face a significant demographic challenge, because we're having more people retiring as the baby boomers retire, we need to make sure that all Canadians who want to work and have the capacity to have an impact are able to meet up with their full opportunities. That's the challenge we're facing. We think we can do better for women in this country, and we think that will have a really important impact for all Canadians.
It will also have a specific impact for women who actually find themselves in these advantageous situations. For the parental leave that you were talking about, the five-week “use it or lose it”, the idea is that we're going to get more second parents—and typically, it's men—taking time off. This is going to enable women to go back to the workforce more rapidly or in greater numbers.
The idea that we're putting in an additional amount of money through the BDC and EDC for women entrepreneurs means that there are more opportunities for women business leaders to be successful. It means for young women today that they'll see more opportunity in the future.
The fact that we put a significant amount of money into science and research and say that we want to tilt that towards younger, more female, more interdisciplinary work means that when a young girl is thinking about what field she might want to go into, she's likely to see more researchers who are going to be in science and engineering down the road because they will have more grants that will have been given to them.
These are all about the long-term idea that we want to see more success for women in our economy. It won't be done overnight, but I think the starting point that we began right at the very beginning of our government, where we looked to fill leadership positions with an equal number of men and women, and the continuing focus on how we can do better are going to have an impact.
Whether it's for the young women of today or a girl who's just thinking about what she's going to do, she'll see that she'll have more opportunity in the future, and that will end up being better for her. That will end up being better for our economy. Even for the people who don't buy into this, it will be better for them, so we're going to keep on it.
:
Welcome, Finance Minister.
Minister, our record for the last two and a half years speaks for itself, and I would say it's a great record. As you said, we have the lowest unemployment rate in 40 years; hundreds of thousands of new jobs have been created; and the Canada child benefit is lifting literally tens of thousands if not hundreds of thousands of children out of poverty. In my riding of Vaughan—Woodbridge, it delivered $60 million of funds to families that needed it. Thank you for indexing the Canada child benefit and doing it two years ahead of schedule, because that's going to continue to benefit families in my riding, and they can use that to pay for their kids' sports activities, save for their kids' future, and maybe pay for some hockey, soccer, or ballet lessons.
In the riding that I'm blessed and privileged to represent, we're blessed with a number of what I would call barometers. We have the busiest intermodal facility in the country—the Canada Pacific intermodal facility. CN rail has its largest facility in the country there. Recently the joined UPS Canada in the announcement of their $500 million investment, and that facility is located in the city of Vaughan. The Home Depot distribution centre for all of eastern Canada is located there. We also have Martinrea and Magna in the York region. We want to continue to make sure that our investment competitiveness is maintained, and that these companies that are making these announcements, including UPS, continue to choose Canada, as many companies are, to invest in with their people and organizations.
I want to hear your thoughts—and I can bring back these thoughts to the riding and constituents that I represent—about how we're going to continue maintaining Canada's attractiveness to international companies and domestic companies, of course, to invest.
:
Thank you, Minister, for being here today.
Minister, there is a growing perception, not just around our country, but definitely in the Okanagan and throughout my riding, that the government does not have a firm grasp on its expenses. People feel that you're spending a lot of money in a lot of different areas and it is adding to the debt.
I'm sure that reasonable people can agree that some of this may be good, but when people see extravagances and excesses, I would hope you'd agree, this is not good for anyone, because we need to have faith in our institutions, which are supposed to be spending this money correctly and with all prudence.
I have to say, I'm slightly alarmed that you won't even utter the words, “balanced budget”. It's almost like these are dirty words for you. Previous Liberal and Conservative finance ministers would work very hard to be able to say to the people's representatives that they had succeeded, or at least that they had worked towards a balanced budget. It worries me. I will say, Minister, that this may not concern you, but I tell you what, there are people in this country who are getting concerned because you will not even say to the people's representatives when you will turn in a balanced budget or how much money you're going to be putting us into debt. None of this causes confidence.
Minister, I spoke with a pensioner from the Okanagan. Her name is Donna. Donna's quite concerned about her grandchildren inheriting a lot of debt—debt that mainly is being applied, not during a war, not during a recession, but for ideological reasons and contrary to certain promises. Donna has given me a cheque written out of her own pocket. She's estimated the consumer price index on her old age security, and she has said that she wants to see it go towards the debt and not towards other spending.
Minister, will you, first, accept this cheque, and second, ensure that it goes entirely towards paying down the debt and not towards other spending?
My questions will likely be directed to you, Mr. Leswick, in part in reaction to some of what you said earlier in response to a question, but more to what the said in his remarks. He talked about the debt-to-GDP level, and how low the federal debt-to-GDP was in Canada, and then compared it with other jurisdictions, such as the United States and G7 countries.
Is that really a proper comparison, given that in the United States, for example, almost all significant social program expenditures, including medicare, medicaid, social security, and so on...? They have a federal department of education, and other services are funded federally. Is it proper to then not include provincial debt in that calculation to compare those two countries?
Do you know, and can you tell the committee, the debt-to-GDP level of all government debt, including crown corporation debt, which is important to consider as well?
:
I gather that this Saturday we will reach a real milestone. Bill Morneau will become the trillion-dollar man, as Canada will reach a trillion dollars in borrowing at the end of this week.
Now, the government has talked a lot about its new debt promise, distinct from the old one. The old one was that they would balance the budget by 2019 and that the deficit would never exceed $10 billion. The new one is just that the debt-to-GDP ratio at a federal level will decline.
I want to ask you whether that measurement is really complete if we're trying to determine what level of debt the Canadian economy can withstand. The federal government is one level of government. We have provincial governments, which have additional debt, and then municipalities, which in some cases do issue their own debentures that have to be paid by payers of property tax.
On top of that, we have corporate debt and personal debt. These other levels of debt are important because the same taxpayers who will be expected to shoulder the higher servicing costs that you anticipate in the federal budget framework are carrying their own personal debt. The $2-trillion economy we have is not just supporting the $651-billion federal debt. It's also supporting the provincial debt and the household debt.
Gluskin Sheff's chief economist, Dr. Rosenberg, did a calculation a month ago now showing that the combined Canadian debt—personal, corporate, and government—as a share of GDP is higher than debt levels in 15 or 20 other countries, including Greece, Italy, and Spain.
Do you not believe that the government should look at the overall debt burden of the Canadian population when determining how much the federal government can afford to borrow?
:
Mr. Sorbara made the mistake of confusing the Canada Mortgage and Housing Corporation with a mortgage lender. It's not a mortgage lender, it's a mortgage insurer, so the Canadian people don't owe the money for their houses to the Government of Canada, as he had stated. They owe it to lenders for whom, sometimes, the insurer is CMHC.
There is a corresponding liability with that insurance in that if there is a mortgage default loss, that loss goes to CMHC. There are certainly billions of dollars in the coffers of CMHC to protect against those losses, but that is distinct from believing, as Mr. Sorbara apparently does, that Canadians will be paying CMHC mortgage payments, with the exception of about $75 billion of mortgages that the CMHC purchased during the financial crisis in late 2008. That is not something CMHC does.
That being said, I am glad he highlighted CMHC because across the spectrum, financial experts agree that we have overpriced housing in very large markets across this country, particularly Toronto and Vancouver. That is a major risk, particularly as interest rates rise.
The ability of Canada to withstand a significant rise in interest rates, and the consequential reduction in housing prices in those markets is really at question. That kind of risk should lead us now, while times are good in the world economy, to store away our financial resources rather than building up debt that future generations will have to withstand.
I wonder if the assembled witnesses are interested in commenting on risks that are associated with Canada's high level of personal debt and the inordinately high housing prices in major Canadian markets.