Opening remarks

Speech for Diane Lebouthillier, Minister of National Revenue

Finance Standing Committee

Main Estimates for the year 2023-2024
and Supplementary Estimates (C) for the year 2022-2023
from the Canada Revenue Agency

House of Commons
Ottawa, Ontario
March 30, 2023

Mr. Chair, thank you for the opportunity to appear before the Committee to present the Canada Revenue Agency’s Main Estimates for 2023-2024 and the 2022-2023 Supplementary Estimates (C).

As the Chair has already pointed out, I am accompanied today by senior managers from the CRA.

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.

In recent years, this has included a number of new benefits and services to help Canadians and businesses facing hardship as a result of the global COVID-19 pandemic.

The CRA listens to Canadians; it changes its way of doing things and improves its services.

Regarding the Main Estimates 2023-2024, the CRA is seeking a total of $14.9 billion. Of this amount, $4.5 billion requires approval by Parliament. The remaining $10.4 billion represents statutory forecasts that are already approved under separate legislation.

The 2023-2024 Main Estimates represent an increase of $2.4 billion when compared with the 2022-2023 Main Estimates. Of this amount, $1.9 billion is related to statutory forecasts for fuel charge proceeds to be returned to the province or territory of origin, primarily through the Climate Action Incentive payments.

Other significant increases will be used:

• to administer measures to combat tax evasion and tax avoidance;
• to ensure the post-pandemic sustainability of the CRA’s call centres;
• to administer the federal fuel charge program and the rebate of pollution pricing proceeds.

In addition, through the Supplementary Estimates (C), the CRA is seeking an increase of $337.2 million in its voted authorities for eleven items.

In the interest of time, I would only highlight these important elements:

• for call centres;
• to administer measures to help Canadians save for the purchase of their first home;
• to implement modifications to its systems as well as make necessary publication and procedural changes for the administration of the Underused Housing Tax, usually by non‑resident foreign owners;
• to administer the luxury tax;
• for the administration of the Canada Recovery Hiring Program, which was introduced to encourage employers to rehire workers previously laid off as a result of COVID-19 and help better position the Canadian economy through the recovery process. The funding is required to perform validation reviews;
• and for administration of measures related to international tax reform, to reduce the incentive for multinational enterprises to shift profits into low-tax jurisdictions, and to limit the use of excessive interest deductions to reduce Canadian tax.

You will notice that this budget forecasting exercise is tinged with a major event, namely the global COVID-19 pandemic.

The CRA administered a total of 12 Government of Canada emergency programs related to COVID-19, and all portals are now closed.

But as you can well imagine, CRA employees are currently deploying their extensive compliance plan in relation to all these programs; a compliance plan which included, from the outset, an important post-payment verification component.

The CRA has also resumed its activities aimed at offsetting the debt of taxpayers. In effect before the pandemic, this measure involves proactively applying tax refunds and benefit payments to tax debts that are due. These deductions could apply, in particular, to debts relating to benefits related to COVID-19.

In 2022, the CRA was also called upon to deploy two Government of Canada affordability measures intended to support Canadians who need it most during these still difficult times.

Despite the colossal challenges created by the pandemic, the CRA has improved in many areas over the past year. That said, there are areas where the CRA fell short of its ambitious goals. However, the CRA remains firmly committed to excellence it is determined to meet the commitments it has made for 2022-2023.

In closing, I want to recognize the exceptional and dedicated work of CRA employees during this difficult time; hard work that continues to this day.

Thank you. We will be happy to answer your questions.

Minister's placemat

Main Estimates (General)

Redirect: Hugo Pagé

Messages:

• The Agency is seeking $14.9 billion through the 2023-24 Main Estimates.
• Of this amount, $4.5 billion requires approval by Parliament, while the remaining $10.4 billion represents statutory forecasts already approved under separate legislation.
• The Agency's 2023-24 Main Estimates are $2.4 billion higher than last year.
• Of this amount, $1.9 billion is related to an adjustment in the statutory forecast of fuel charge proceeds to be returned to the province or territory of origin, primarily through climate action incentive payments.
• Other major increases are a result of:
• funding to administer measures to combat tax evasion and tax avoidance
• funding to address the post-pandemic sustainability of CRA contact centres
• funding to administer the federal fuel charge program and the return of proceeds from the price on carbon pollution

Supplementary Estimates (General)

Redirect: Hugo Pagé

Messages:

First, the Agency is requesting $213.8 million in funding for call centres, given the ongoing impacts of the pandemic and security risks. Although COVID-19 benefits are being phased out, heightened security measures will remain as the risk of fraud continues to increase. Temporary funding will help ease short-term pressures, allowing call centre agents to be extended beyond the tax filing season, ensuring Canadians receive the support they need.

Second, $43.5 million is requested to administer measures to help Canadians save for the purchase of their first home. Most of the funding will be used to implement and administer the tax-free savings account for first-time home buyers. The CRA is working with financial institutions to put the infrastructure in place for individuals to start contributing in 2023.

Third, the Agency is requesting $21.2 million to implement changes to its systems, publications and procedures to administer the tax on non-productive residential use in Canada by non-resident foreign owners. The underused housing tax will require all owners, other than Canadian citizens or permanent residents of Canada, to file a statement on the current use of the property.

Fourth, $18.2 million is requested to administer the luxury tax, which applies to the sale and importation of certain vehicles, aircraft and vessels. The funding will allow the Agency to expand its processing systems to accommodate the new tax and put in place the related framework necessary for its administration.

Fifth, the Agency is requesting $17.4 million for the administration of Canada's Recovery Hire Program, which was put in place to encourage employers to rehire workers laid off due to COVID -19, and help better position the Canadian economy for the recovery process. This funding is necessary to carry out our validation work.

Covid-19 Benefits Audits (Dec 2022 OAG report)

Redirect: Cathy Hawara (CEWS) / Marc Lemieux (CERB/CRB)

Messages:

The CRA was called on to quickly develop emergency financial support programs for both individuals and businesses. Processes that would usually have taken years to develop were delivered in weeks.

The application processes for individual benefits and for business wage subsidies had to be efficient and easy to use in order to quickly deliver benefits to Canadians already suffering from job losses or business slowdowns and shutdowns.

From the start, the CRA made it clear that eligibility verification for COVID-19 income-support benefits for individuals would mainly occur after the benefits were issued, given that the attestation-based application process selected did not allow for complete pre-payment verifications and that current income data was not available at the time.

Many eligibility reviews have been completed for the income-based eligibility criteria using the risk based approach, starting with pre-payment reviews in June 2020. The CRA's compliance plans remain subject to adjustment as needed, and work is planned to be ongoing until 2025.

Covid-19 Repayment (Low income canadians)

Redirect: Marc Lemieux / Gilian Pranke

Messages:

It is not an easy task to ask Canadians to repay amounts if they were deemed ineligible, especially when dealing with vulnerable populations. However, it is essential.

We are using necessary discretion in asking Canadians to repay their debts. While we are practicing sound stewardship of public funds, we are also taking a compassionate and realistic approach to repayments.

We understand that there will be those who are not in a position to pay their debts, and we will work diligently to avoid placing people in financial hardship.

Tax Evasion and Tax Gap

Redirect: Cathy Hawara

Messages:

The Government of Canada is committed to protecting the integrity of the Canadian tax system by combating aggressive tax avoidance and tax evasion domestically and internationally.

This commitment includes tightening the net around wealthy individuals, promoters, corporations, and entities who try to avoid and evade taxes and who conceal assets and income offshore.

CERB (Employee fraud)

Redirect: Hugo Pagé

Messages:

The CRA is proud of its role in delivering emergency programs, such as the Canada Emergency Response Benefit (CERB), to millions of Canadians in their time of need.

All CRA employees are expected to uphold the values and obligations set out in the CRA’s Code of Integrity and Professional Conduct and the Values and Ethics Code for the Public Sector. The CRA takes employee misconduct very seriously and has measures in place to ensure that the highest standard of employee conduct is upheld.

As of February 23, 2023, the CRA can report that a very small number of CRA employees were found to have received CERB payments while also being employed by the CRA.

Panama Papers/ Paradise Papers

Redirect: Cathy Hawara

Messages:

The Panama Papers have led to over 240 audits resulting in more than $61 million in federal taxes and penalties. Another 160 audits are ongoing. There have been 5 criminal investigation cases related to the Panama Papers.

The Paradise Papers have led to approximately 30 completed taxpayer audits, resulting in assessments of more than $1.6 million in federal taxes and penalties.

It is important to emphasize that, typically, less intricate audits are among the first to be concluded. As such, additional federal taxes and penalties owing are anticipated in the future as the more complex and challenging audits are completed.

PBO – Information sharing

Redirect: Maxime Guénette

Messages:

The CRA supports the Parliamentary Budget Officer’s (PBO) role in contributing to government decision-making and is collaborative with the PBO when information is requested.

As such, the CRA provides the PBO with any requested information it is legislatively allowed to while protecting the confidentiality of Canadians’ information.

The CRA understands the PBO’s need for timely and most up-to-date available tax information and is committed to providing his office with the information requested in a format that protects Canadians' privacy.

Underused Housing Tax Act (CRA administration)

Redirect:
Cathy Hawara
Geoff Trueman
Gillian Pranke

Messages:

The Canada Revenue Agency (CRA) understands that there are unique challenges for affected owners in the first year of the Underused Housing Tax Act (UHTA) administration.

To provide more time for affected owners to take necessary actions to comply, the Minister of National Revenue is providing transitional relief to affected owners. The application of penalties and interest under the UHTA for the 2022 calendar year will be waived for any late-filed underused housing tax (UHT) return and for any late-paid UHT payable, provided the return is filed or the UHT is paid by October 31, 2023.

This transitional relief means that although the deadline for filing the UHT return and paying the UHT payable is still April 30, 2023, no penalties or interest will be applied for UHT returns and payments that the CRA receives before November 1, 2023.

CRA Audit of Muslim Charities

Redirect: Geoff Trueman

Messages:

The Government of Canada stands with and supports Muslim communities across Canada and reaffirms its commitment to take action to denounce and tackle Islamophobia, hate-fuelled violence, and systemic discrimination whenever and wherever it occurs.

As part of this commitment, the Canada Revenue Agency (CRA) and I welcome the Office of the Taxpayers’ Ombudsperson (OTO) report. We want to thank the Ombudsperson and his office for this important work.

I take the recommendation outlined by the OTO very seriously. I’m pleased to note that the CRA has recently begun taking steps toward ensuring that Muslim charities are treated fairly and that no equity-deserving organization is subject to bias. The CRA must enhance unconscious bias training for its officers and will work to implement more tailored training for auditors in the Charities Directorate as recommended by the Ombudsperson.

On March 14, 2023, the National Security and Intelligence Review Agency (NSIRA) announced that it will be commencing a review of CRA’s Review and Analysis Division. The CRA welcomes this upcoming review and will fully cooperate with the NSIRA. We are confident that NSIRA will complement the Ombudsperson’s report and offer a comprehensive and rigorous examination of the issues raised.

Both the CRA and the OTO seek to ensure that all taxpayers are provided with the best possible service, while being treated fairly and with respect.

Dental benefit and rental supplement (CRA Administration)

Redirect:
Gillian Pranke
Cathy Hawara
Marc Lemieux

Messages:

Dental

Since its launch on December 1, 2022, the new Canada Interim Dental Benefit has helped over 238,000 children get the dental care they need and paid out over $146 million (as of March 15).

The Agency will use its full suite of existing compliance tools to verify an applicant's identity and eligibility, including pre-verification of the applicant's income, child's age and relationship family and confirmation that he is receiving the Canada Child Benefit for that child.

Parents and guardians must keep their dental receipts for six years in case the Agency contacts them in the future to validate eligibility. Claimants, who may be deemed ineligible for the benefit during the verification processes, will be required to repay the benefit they received.

The CRA continues to improve the security of its digital services to protect Canadians from fraudulent activity. Security features include multi-factor authentication and making email addresses mandatory for those using My Agency Account.

Rental

Since its launch on December 12, 2022, the allowance has helped more than 658,000 low-income tenants and paid out more than $325 million (statistics as of March 15)

The CRA has implemented verification and security measures from the outset that will help ensure that payments are made only to people who are truly eligible.

The CRA validates key eligibility criteria at the application stage, including income, age and residency, and will conduct selective verification reviews after payments are issued. Anyone deemed ineligible will be required to repay the benefit.

Advance Pricing Arrangements

Redirect:
Cathy Hawara
Geoff Trueman

Messages:

The Advance pricing arrangements program is a service offered by the CRA to assist taxpayers to prevent transfer pricing disputes.

The main objective of the program is to provide increased certainty for transfer pricing methodologies to be applied to future intercompany transfer pricing transactions in a manner consistent with the Income Tax Act, the CRA and the OECD’s guidance.

The program fosters a collaborative and co-operative relationship between taxpayers and other tax administrations and offers a vehicle to improve tax certainty and minimize double taxation.

It demonstrates that communication, transparency, and compromise permit mutually agreeable resolution of complex transfer pricing issues on a proactive basis.

The program provides an opportunity for taxpayers to openly discuss the challenges they face in trying to comply with the tax laws of multiple jurisdictions.

Improved Outreach to Non-Filers

Redirect:
Maxime Guenette
Gillian Pranke
MARC LEMIEUX

Messages:
The CRA is committed to supporting vulnerable Canadians in filing their taxes to ensure they receive the benefits and credit payments they are entitled to like the Canada child benefit, the GST/HST credit, and the solidarity tax credit from Revenu Québec.

The individual tax filing assistance initiative supports those who have: a modest income and a simple tax situation and/or who have used free tax clinics in the past or are eligible for those clinics.

If pressed
In summer of 2020, the CRA increased its focus to support vulnerable Canadians by offering direct assistance to help these individuals file their taxes. This was done because it was determined that vulnerable Canadians were more at risk of not filing due to challenges resulting from the COVID-19 pandemic.

We have extended this initiative into 2023 to support those who have continued to experience financial challenges following the height of the pandemic.

Canadians who qualify for this phone service will receive a letter from the CRA, as early as April 2023, with important details, including a phone number to reach out to CRA filing agents directly. We encourage eligible Canadians to contact the CRA through the given number.

CRA/REVENU Québec Cooperation
Déclaration unique

Redirect: Maxime Guenette

Messages:
The CRA and Revenu Quebec have a long history of collaboration. This collaborative relationship continues to grow, namely through the exchange of information and sharing of best practices.

The CRA works with all provinces and territories to identify new ways of simplifying federal and provincial tax forms for individuals and businesses.

The federal government is working with Quebec to reduce the administrative burden on taxpayers so that they receive the best possible services.

The CRA, with the support of Finance Canada, is working with Revenu Québec to develop concrete measures to make tax filing simpler. The solutions being considered will support common goals focused on a fair and efficient administration of the tax system, for the benefit of all taxpayers.

If pressed
With respect to Bill C-239, the Minister of Finance and Deputy Prime Minister of Canada, are leading the discussion on this bill, and will be responsible of asserting the government’s position. However, it is important to note that:

The CRA has significant expertise in administering the provincial and territorial taxes it currently administers for the provinces (other than for Quebec and corporate income tax for Alberta), territories, and some Indigenous governments. As a tax administrator, the CRA benefits from a significant economy of scale.

The CRA has the tools and capacity to take advantage of new global collaboration and data sharing to combat tax avoidance. Also, Canada’s administration of collaborative agreements to share tax information allows for the greatest consistency and cost effectiveness in their application across the country and the effective use of our international partnerships.

The CRA’s main focus is to ensure that all taxpayers and benefit recipients in the country receive the best services possible. As such, it is important to consider the potential impacts on the efficiency of the tax administration and the tax revenues that depend, in particular, on the CRA’s specialized expertise.

Canada Child Benefit Offset

Redirect: Gillian Pranke

Messages:
Set-off is a standard procedure that was already used before the pandemic by the Agency to collect outstanding debts from taxpayers.

In May 2020, the CRA proactively halted most compensation mechanisms in response to the COVID-19 pandemic. The hiatus was temporary, like other COVID-19 relief measures, and was intended to support taxpayers during a difficult time.

It is important to note that unlike other benefits, the Canada Child Benefit (CCB) payment can only be used to offset a CCB-related debt. Other types of child benefit payments can only be used to offset a debt related to the same benefit.

While the Agency is responsible for collecting taxpayer debts, it understands that individuals and families are still experiencing significant financial hardship. Debt set-off may impact taxpayers who have already established a payment arrangement with the Agency. Anyone facing these financial difficulties is encouraged to contact the Agency without delay to discuss their options.

The Canada Revenue Agency remains committed to helping Canadians and understands that some people may have difficulty meeting their financial obligations. The Agency wants to help resolve any issues, and its officers will work on a case-by-case basis with those affected.

Potential Labour Disruption – Impact on Tax Filing Season

Redirect: Hugo Pagé

Messages:
The Canada Revenue Agency values the important role its employees play from across the country in delivering services to Canadians.

The CRA respects the collective bargaining process, remains committed to meeting and pursuing meaningful negotiations with the PSAC-UTE with a view to conclude a new collective agreement that is both fair for employees and reasonable for Canadians.

The CRA has also developed a Strike Contingency Plan to mitigate the risks and impacts on the services it provides to Canadians. Given the sensitive nature of this information, it cannot be shared publicly.