Special report,
Provincial Auditor: Chapter 4 (3.04), land transfer tax
program
Ministry of Finance
Dr Bob Christie, Deputy Minister
Ms Pauline Goral, director, motor fuels and tobacco tax
branch
Mr Arno Agur, manager, land transfer tax, motor fuels and tobacco
tax branch
STANDING COMMITTEE ON
PUBLIC ACCOUNTS
Chair /
Président
Mr John Gerretsen (Kingston and the Islands / Kingston et les
îles L)
Vice-Chair / Vice-Président
Mr John C. Cleary (Stormont-Dundas-Charlottenburgh L)
Mr John C. Cleary (Stormont-Dundas-Charlottenburgh L)
Mr John Gerretsen (Kingston and the Islands / Kingston et les
îles L)
Mr John Hastings (Etobicoke North / -Nord PC)
Ms Shelley Martel (Nickel Belt ND)
Mr Bart Maves (Niagara Falls PC)
Mrs Julia Munro (York North / -Nord PC)
Ms Marilyn Mushinski (Scarborough Centre / -Centre PC)
Mr Richard Patten (Ottawa Centre / -Centre L)
Substitutions / Membres remplaçants
Mrs Leona Dombrowsky (Hastings-Frontenac-Lennox and Addington
L)
Mr Garfield Dunlop (Simcoe North / -Nord PC)
Clerk / Greffière
Ms Tonia Grannum
Staff / Personnel
Mr Ray McLellan, research officer,
Research and Information Services
The committee met at 1033 in room 151, following
a closed session.
SPECIAL REPORT, PROVINCIAL AUDITOR
MINISTRY OF FINANCE
Consideration of chapter 4
(3.04), land transfer tax program.
The Chair (Mr John
Gerretsen): I'd like to call this meeting to order.
Welcome to everyone. Today we're dealing with the 2000 special
report, section 3.04: the Office of the Provincial Auditor's
report dealing with the land transfer tax program. It's a chapter
4 follow-up. I'd like to welcome Dr Bob Christie, the deputy
minister, and the rest of your delegation. Maybe you could just
introduce them.
Dr Bob
Christie: Sure.
Ms Pauline
Goral: I'm Pauline Goral; I'm the director of the motor
fuels and tobacco tax branch, which administers the land transfer
tax.
Mr Arno
Agur: My name is Arno Agur; I'm the manager of the land
taxes section in the motor fuels branch.
The Chair:
Good morning. If you have a short opening statement or
presentation to make, this would be the appropriate time, and
then it will be followed up with questions from the various
caucuses.
Dr Christie:
This is discussion A that we're passing out.
The Chair:
Go ahead, sir.
Dr Christie:
It's our pleasure to appear here to talk to you about the land
transfer tax. As was noted, this tax was audited by the Office of
the Provincial Auditor in 1998 and followed up in the 2000
report. Based on the recommendations from the 1998 report,
changes were made to the administration of the program, which
we'll review as we go along.
Just by way of background,
land transfer tax raises about $580 million a year. That's
projected for this year. To put that in perspective, our largest
statutes-personal income tax, retail sales tax, corporate
tax-raise respectively $18.9 billion down to $8.8 billion for
corporations tax. Regardless of the size, it's important to
ensure that all taxing programs, including land transfer tax, are
fairly and correctly applied and collected.
Looking at the history of the
tax briefly, it was enacted in 1921. The first significant change
was in 1974, to address issues around non-resident purchase of
land in Ontario. A 20% rate of tax was imposed at that time on
non-resident purchases. In 1997 this portion was repealed because
the non-resident purchasing no longer was an issue and the 20%
tax was interfering with normal business activity.
In 1989, the act was revised
to impose tax on transfers of land not registered at land
registry offices, and this was a change designed to address tax
avoidance and tax engineering mechanisms that were being put in
place for large commercial transactions.
Over the years there have
been a number of refund programs. The most recent was in the 1996
budget, aimed at helping first-time homebuyers. The refund has
been very popular since 1996. Over 80,000 families have
benefited; the average refund has been $1,300. This refund was
made permanent in the 2000 budget.
The tax is collected at the
time the land is purchased and it's paid by the purchaser. It's a
relatively low rate that rises with the value of the property.
The rate on the first $55,000 is 0.5%, from $55,000 to $250,000
it's 1%, and above $250,000 it's 1.5%. For single-family
residences above $400,000 it's 2%. So, for example, on an $80,000
home the land transfer tax would be $525; for an $800,000 home
the land transfer tax would be $12,475. There are few exemptions.
It's intended to be a broad-based, low-rate tax, so there are few
exemptions to this tax.
The tax is administered
co-operatively by the Ministry of Consumer and Commercial
Relations, the Ministry of Finance and the Ontario Property
Assessment Corp. We have memoranda of understanding with the
Ministry of Consumer and Commercial Relations and the Ontario
Property Assessment Corp that set out the rules of the various
players in this collection. The Ministry of Consumer and
Commercial Relations operates 55 land registry offices, and these
land registry offices are the vehicle for collecting almost all
of the land transfer tax. The land registrars will collect two
copies of the land transfer tax affidavit. One copy goes to the
Ontario Property Assessment Corp, and it is of use to them in
terms of maintaining continuing information on all the properties
and keeping up to date on those properties.
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The Ministry of Finance has
overall responsibility for administering the tax. Because of the
way in which it's collected, because of the use of other partners
in the collection of the
tax, there are about 30 Ministry of Finance staff involved in
land transfer tax administration. Part of what they do is provide
rulings to taxpayers and solicitors. They advise the land
registry office staff on interpretations and they sometimes will
become involved in some large, complicated commercial
transactions, as well as doing land transfer tax audits.
In terms of the 1998
auditor's report on land transfer tax and the subsequent
follow-up, in 1998 an assessment was made to determine whether
the ministry had appropriate policies and procedures to ensure
that the correct amount of tax was collected, refunded or
exempted in accordance with the statute. The auditor's office
concluded that adequate procedures were in place to ensure that
the appropriate amount was collected and deposited to the CRF but
improvements were required to ensure that the declared values of
consideration and other information were reasonable and to ensure
that the appropriate amount of tax was paid and collected.
Recommendations in the report
related to a number of matters: assessing the information
provided, involving training and informational materials being
needed; enforcement activities, which related to audit work
performed, audit revenues, penalties and fines etc; accounts
receivable; and refunds and exemptions. I will briefly address
each of these.
Under assessing information
provided, the auditor noted that the memorandum of understanding
between the Ministry of Finance and the Ministry of Consumer and
Commercial Relations provided for a level of review of the
transfer tax affidavit that was really in excess of the review
provided and in excess of the review expected by the ministry. He
recommended that the Ministry of Finance express clearly and
communicate clearly its expectations regarding this function at
the registry offices and revise the memorandum accordingly. We
have done so.
It was also recommended that
the ministry should periodically provide training to the registry
office staff and ensure that they have the current manuals,
current guidelines, bulletins etc. We've developed in conjunction
with the Ministry of Consumer and Commercial Relations a full
training package and schedule. Eight of the 55 offices have
received in-house training and the remaining offices will receive
that training over the next 12 months. The tax bulletins are
being communicated to all the land registry offices and we've
prepared a comprehensive manual that will be distributed shortly
to all land registry office staff.
With respect to enforcement
activities, it was recommended that the ministry develop audit
programs or checklists, and we have done that. There was a
recommendation for increased audits. We've increased the audit
complement from eight to 12, and the value of audit assessments
has increased by 76%, from $6.6 million reported in 1996-97 to
$11.6 million in 1999-2000 and $9.5 million for the first three
quarters of 2000-01.
The auditor also recommended
that the ministry consider additional penalties to deter tax
avoidance, evasion. The land transfer tax was amended to provide
a civil penalty in the amount of $500 or 25% of the unpaid land
transfer tax. The penalty is considered whenever an assessment is
issued, and to date it has been applied once.
The Provincial Auditor
recommended that tax appeals decisions be analyzed for trends so
we can determine imperfections and where additional work is
needed. We're doing this on a quarterly basis, and outcome from
this analysis is being used to change procedures and, where
necessary, to make recommendations for policy and practice
changes.
With respect to accounts
receivable, the auditor recommended that the ministry ensure that
our receivables information is complete and accurate and that the
appropriate collection activity is occurring. We are taking more
timely collection action and progressive action on assessments
which remain unpaid, and staff have been assigned to collect
outstanding accounts.
With respect to refunds and
exemptions, the auditor recommended that the ministry arrange to
obtain Canada Customs and Revenue Agency-formerly known as
Revenue Canada-data which are used to audit land transfer tax
refund recipients on a more timely basis. We've done this and
we've accelerated the issuing of these assessments by some
30%.
In conclusion, we're
gratified that with respect to the follow-up recommendations in
this report, the Provincial Auditor's office noted that the
ministry was in the process of implementing, or had implemented,
the recommendations of the 1998 report.
The Chair:
Thank you very much. What I propose to do is maybe have three
rounds of 20 minutes and we'll see where we go from there. Shall
we start off with the Liberal Party?
Mrs Leona Dombrowsky
(Hastings-Frontenac-Lennox and Addington): Good morning,
Dr Christie. A couple of questions. With regard to the training
plan that you made reference to, and it was recommended that the
ministry should periodically provide training to land registry
staff, I'm curious about that term "periodically." What does that
mean to you? Is that once a year, once every two years, whenever
staff changes hands? I would really like to understand what that
term means for you in your office.
Dr Christie:
Perhaps Pauline or Arno could answer.
Ms Goral:
"Periodically" to me means when it's appropriate. It would
depend. If there are changes in legislation or changes in
procedure, we should be going out there training. There is a lot
of turnover in staff with MCCR, so we would have to go out on a
fairly regular basis. Periodically could be once a year; it could
be once every two years. It really depends upon the change in
legislation and the change in the staffing.
Right now we're in the
process of going out the first time and making sure we give equal
training to all 55 of those and then we will go back, we'll be in
touch with MCCR to help determine any new training needs that
might arise and go out on an as-needed basis as well as being
proactive to ensure they are getting the training that we feel
they need. Does that cover it?
Mrs Dombrowsky: Is there a
mechanism in place if within the land registry office there is a
sense that their staff-because of significant turnovers or leaves
of employees, can they contact you to say that they need that
additional support?
Ms Goral:
They certainly can. There's no problem. We have continuous
communication with them. It's not a problem.
Dr Christie:
If I might add, as was noted earlier, there has been a manual
prepared and it will be distributed shortly to all of the land
registry office staff so they'll have the information. If they
don't feel they've got enough from that, then certainly, as
Pauline noted, we would undertake to follow up with them and deal
with any questions.
Mrs
Dombrowsky: The manual will be based on the training you
have provided to the eight centres and that you will provide to
the remaining of that group of 55.
Mr Agur:
Yes. The manual contains a number of sections, which include a
copy of the act, the bulletins and notices that we send out to
them. But, in addition to that, there is a section in the binder
that is a training package and it contains essentially the parts
that we deliver currently at the registry offices. As time goes
on and things change and new issues arise, we will be updating
that section of the manual.
Mrs
Dombrowsky: Dr Christie, when you were going through
your presentation and you made reference to the land transfer tax
history, in 1996, refund for first-time home purchasers was made
permanent in the 2000 Ontario budget. I am of the understanding
that there is a refund for first-time home purchasers if they
purchase a newly built home, but if they are a first-time
homebuyer purchasing an existing home, then they would not
qualify for a refund. Is that correct?
Ms Goral:
The old program that used to be in before this new one was
first-time purchases, and they had to open an OHOSP that was
related to their income. That was the old program. A new
temporary program was brought in in 1996, which was for
first-time new homebuyers. It was not geared to income, and
that's the one that was made permanent.
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Mrs
Dombrowsky: You've just said something that piqued my
curiosity. Was it "new temporary" program you said?
Ms Goral: It
was in 1996 and it was enacted for one year, and then it was
extended for a year, then it was extended and, finally, in 2000
it was made permanent.
Mrs
Dombrowsky: Made permanent. What is the difference in
terms of the revenue you would collect by excluding those
first-time homebuyers who no longer qualify but used to
qualify?
Ms Goral:
Give us a second. Arno probably has the figures right here.
Mrs
Dombrowsky: All right. I guess for me the issue that I
hear from individuals is that they're buying their home for the
first time and if it's not a new home, they don't qualify for the
exemption-
Ms Goral:
That's true.
Mrs
Dombrowsky: -and that's an inequity for young people who
are starting out. Or they may not be young people; it might be
any individual who is buying a home for the first time, and it
would suggest to me that they are certainly stimulating the local
economy by purchasing a new home. I'm just curious about the
savings that have accrued to the government by excluding those
people from that program.
Ms Goral:
Now you're asking how much we saved by not having first-time
homebuyers. I thought at first you were asking how much we were
giving back under the new program.
Mrs
Dombrowsky: No.
Dr Christie:
Do we have that information?
Mr Agur: We
don't have the information here.
The Chair:
How much is it under the new program that you're actually
refunding?
Mr Agur:
From the beginning of the refund it's been $110 million that has
been refunded. In the current fiscal up to January 23, we have
refunded $28.4 million to 19,277 applicants.
The Chair:
But you cannot give us what that number would be if all
first-time-because you don't know who a first-time homebuyer is
unless they're part of the group that actually makes an
application for a refund. Sorry, go ahead.
Mrs
Dombrowsky: Thank you. That did make it more clear for
me and I do appreciate that.
Another question I have is
with regard to the audit revenues. It has been indicated that the
ministry has recruited additional audit staff to increase audit
coverage. I think in your comments you indicated that that has
increased from eight people to 12 people.
Interjection: Yes.
Mrs
Dombrowsky: Are these people permanent full-time staff
that have been added to your team for this purpose?
Ms Goral:
Yes, they are.
Mrs
Dombrowsky: So they are there on a regular basis and
it's not a contracted role?
Ms Goral:
No, it's not a contract. They're permanent employees.
Mr John C. Cleary
(Stormont-Dundas-Charlottenburgh): You had mentioned
earlier that your revenue was $580 million per year. Is that
pretty stable year after year, and could we have any figures to
that effect?
Dr Christie:
The land transfer tax revenue obviously depends on the state of
particularly the new home market. If that is less healthy than it
has been in the last couple of years, that will obviously have an
impact on the revenue. But just to give you a sense of the
revenues for the past few years, in 1999-2000 it was $515.5
million; the year before that it was $486 million. The lowest I
see here over the last 10 years or so was about $314 million or
$315 million in 1993-94, again reflecting the state of the
housing market. But that's both the level and the year-to-year
change.
Mr Cleary: I understand. I kind of
figured maybe the figures would be somewhat like that. You had
mentioned that eight of the 55 offices are trained now. Does this
training take place at a seminar where they all get together to
be trained, or do you do it in-house at the registry offices, or
how does this work? I'm going to be asked.
Mr Agur: We
do it in co-operation with MCCR and we ask their regional
representative to set up the meetings for us. In some cases
they're able to bring two or three offices together to one office
so we can more effectively use our own staff. In other situations
where it's not possible for them to bring the staff together, we
visit the individual offices.
Mr Cleary:
You had mentioned this just happens when legislation has changed,
or is that an annual event or a quarterly event?
Mr Agur:
Currently, we have a schedule we have worked out with MCCR where
every office is to be trained over approximately the next 12
months. After we have completed the first round where everybody's
received the training, we're going to plan for future years, and
we're looking at doing roughly a third of the offices per year in
the future.
Mr Cleary:
The other thing you had mentioned earlier about collecting
outstanding debts, is that collected through Revenue Canada?
Ms Goral:
No, that's collected by the Ministry of Finance. There is a
collections branch within our ministry, so we have a collections
branch that does that.
Mr Cleary:
The federal government won't have anything at all to do with
this?
Ms Goral: We
can take some liens from them, take some money from them, if we
want. Say there's a student loan. That's probably a bad
example.
Mr Agur:
There is one area where Revenue Canada assists us. That's with
individuals who have been assessed who have received
OHOSP-related refunds that they weren't entitled to. Revenue
Canada will hold back, in certain circumstances, income tax
refunds to pay their assessments at the Ministry of Finance
here.
Mr Cleary:
That's what I wanted to hear. Thank you. Those are my questions
for now.
The Chair:
Do you mind taking the chair, and I'll ask some questions?
The Vice-Chair (Mr
John C. Cleary): I'll think about it.
Mr John Gerretsen
(Kingston and the Islands): I just have a few questions
about how you actually do your audit procedures. Just to be sure,
in the earlier questions that were asked, your function with
respect to training of the registry office people only deals with
the land transfer tax aspect of it. The Ministry of Consumer and
Commercial Relations is more involved with the other registry
office work. Is that correct?
Mr Agur:
That's correct.
Mr
Gerretsen: How do you actually audit to make sure the
proper land transfer tax has been paid on a particular
transaction?
Mr Agur:
There's a number of different ways we select audits. With land
transfer tax audits, selection is the big challenge. We don't
have sort of a stable tax roll we can select from, as you would
in many of the other statutes. We look for transactions, and one
source of the transactions is by the land transfer tax affidavits
that go to OPAC. OPAC uses the affidavits to update their
database. In the course of updating their database, they select
affidavits for us to review further. We have specific criteria we
have provided which they use for selecting transactions for
us.
Mr
Gerretsen: For example, if they show that in their
assessment a property is worth, let's say, $200,000, and a land
transfer tax affidavit comes in at $100,000 or $80,000, that
would sort of ring a bell in their mind that maybe there's
something not totally right here. Is that correct?
Mr Agur: No,
we wouldn't select on that basis, but we do have criteria which
we have provided them. That's just the values of the
transactions.
Mr
Gerretsen: Right.
Ms Goral:
It's the size, not the value compared to the property value.
Mr
Gerretsen: Oh, the size. In other words, once it's above
a certain amount, you're more likely to audit than if it's below
a certain amount. OK.
You stated that the number of
people you employ within your audit division for this purpose has
increased from eight to 12. Do I take it then you are auditing to
a larger extent than you did, say, three or four years ago?
Mr Agur:
Yes.
Mr
Gerretsen: What's the likelihood of a transaction being
audited now as compared to, say, three or four years ago? Is it
twice as likely?
Mr Agur: I
would say so, yes. We've increased our audits by more than twice,
so yes, there is an increased chance of being audited.
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Ms Goral:
But there's also sort of a segregation of the type of
transactions we would normally audit. If you have a lot of
small-time home purchases going back and forth, you have lawyers
involved on both sides, representing the seller and the
purchaser. For the likelihood of any transaction happening that
is going to cause a problem, there has to be collusion between
two lawyers. So those types, you wouldn't see as much of that
happening. We wouldn't be touching those. So when you say twice,
if there's a lot of those increasing, we're increasing the
percentage of ones that we do on the other types of transactions,
doubling those.
Mr
Gerretsen: Would you also audit those situations where
land transfer tax is paid directly to the ministry rather than at
a registry office?
Mr Agur:
Yes, we would do a pre-audit on the payments made directly to
us.
Mr
Gerretsen: There was some talk about a new accounting
system being set up by April 2001. Is that ready to be put into
place now, or where are you in that?
Ms Goral: No, it's not. You have
to imagine that at the motor fuels and tobacco tax branch we
handle about 13 different statutes. Each of these statutes is on
a separate type of system. The system we're trying to develop is
one that brings them all together so we have one accounting
system to handle all the statutes, and it's become a very complex
matter. We now have released one which has all our tax roll on
there, but we don't have the receivables. It won't be until maybe
March or June of next year before it will be ready.
Mr
Gerretsen: The last major change in the amount of land
transfer tax that was imposed, when does that go back to? About
1994, 1993?
Mr Agur:
No, that was back in 1989 when the higher rate was applied to
single-family residences over $400,000. For the single-family
residence over $400,000 it was an additional one half of 1% on
the portion over.
Mr
Gerretsen: Do you have any opinion at all with respect
to the question that was posed by my colleague earlier as to
whether or not first-time homebuyers who buy existing homes
should be exempt as well? What would your advice be to the
minister in this regard?
Ms Goral:
We'll leave that to Dr Christie to answer.
Mr
Gerretsen: I think that's a question for the deputy,
definitely.
Dr
Christie: Absolutely, sir, that's a question for the
deputy.
Like any other tax, this
tax is reviewed as part of the annual budget process. Possible
changes to this, as well as a number of other taxes, are ones
that will tend to be looked at during the budget process, and the
minister will decide and announce that as part of the budget.
Obviously not all taxes are looked at every year because they're
so complex.
Mr
Gerretsen: What kind of audit do you do on first-time
homebuyers? I realize an application is made after the fact. What
kind of assurances are you being given, other than the affidavit
that's being provided for at that point in time, that they are in
fact a first-time homebuyer? Do you do any audits in that regard
at all?
Mr Agur:
Yes, we do. What we do is we select transactions for audit. We
will do searches on various databases that are available to us to
find out if these individuals had a previous address and whether
it was an address where they owned the home. Obviously we're not
checking 100% of them, but we do have a selection process that we
use.
Mr
Gerretsen: Finally, I know there's a certain number of
exemptions, inter-family transactions and things like that. Do
you anticipate any changes in that in the near future at all?
Dr
Christie: I'm not aware of any changes that have been
announced for the exemption side.
The
Vice-Chair: Ms Martel.
Ms Shelley Martel
(Nickel Belt): Thank you for being here this morning. I
just want to follow up on a question Mr Gerretsen asked, and that
was the criteria you provide to the land registry staff for files
you want pulled. You said it was based on price. I'm assuming
that means higher levels of prices would be more likely to be
files that would be targeted for audit. Why would you do that
versus any other level of price?
Mr Agur:
That's just one criterion. There are other situations we look at
where there has been no price paid at all for the land. That's of
interest to us as well. We do use other methods of selecting
transactions for audit. We have access to the database that is
used by OPAC. We can go in there with various criteria to select
properties.
Ms Martel:
Do you do a certain percentage at each price range? Is that part
of the equation?
Mr Agur:
No, that isn't the approach we use. We would use things such as
types of properties. We were finding that individuals who were
purchasing co-op units were not paying land transfer tax, so we
went in and used the criteria of a building which was a co-op
structure and we selected them for audit and looked to see
whether they paid the appropriate taxes.
Ms Martel:
I just wanted to follow up on some of the responses you provided,
Deputy, to the auditor's recommendations, some that I missed. The
memorandum of understanding was signed when?
Mr Agur:
In December 2000.
Ms Martel:
You talked to us about the increased audits, and I understand the
numbers around the increased permanent staff. It was the
increased audit numbers that I didn't understand. I think you
provided them as a percentage. You mentioned a 76% increase, I
believe, in the number of audits, but I'm not sure-
Dr
Christie: No. That was in the value of the audits.
Ms Goral:
The assessments.
Dr
Christie: Yes, the value of audit assessments, from $6.6
million in 1996-97 to $11.6 million in 1999-2000.
Ms Martel:
What does that represent in number terms in terms of actual-
Ms Goral:
I believe Arno has those numbers with him.
Mr Agur:
The number of audits associated with those-
Ms Martel:
With those percentage increases.
Mr Agur:
The number of audits has increased from 1996-97, which was 223
audits, to 673 closing the first three quarters of 2000-01.
Ms Martel:
With the increased staff, would that be the average you
anticipate you're going to get? Were the new staff incorporated
into the changes that resulted in the 673?
Mr Agur:
Yes.
Ms Martel:
So you presume that's going to be your average from here on in
over the next number of years?
Mr Agur:
Yes.
Ms Martel:
Deputy, you mentioned that you were, as the auditor requested,
observing trends; you were doing that on a quarterly basis. Can
you give the committee an example of what you may have found and
what change would have resulted from observing that trend?
Dr
Christie: Perhaps I could ask the actual observers of
the trend.
Mr Agur: One of the trends we
found was that a number of our assessments that were based on the
fair market value of the land were being overturned by the tax
appeals branch. We found that the values we had gotten from the
regional assessment offices were being overturned because the tax
appeals branch was going for a second opinion to OPAC head
office. What we decided to do or how we resolved that was, in
cases of dispute, before issuing an assessment, we went to the
OPAC head office for a second opinion before assessing, and that
has reduced the number of assessments that have been overturned
for that reason.
Ms Martel:
Do you have any idea of how many?
Mr Agur:
In the course of a year about 12 or 15 were overturned.
Ms Martel:
Not really huge numbers. OK.
I understood what you were
talking about in terms of your system, and I was going to ask
about that. Have you completed your 1999 refunds, then, for
OHOSP?
Mr Agur:
No. Actually, we're expecting to get the output from the Revenue
Canada match within weeks.
Ms Martel:
So it's still running on a two-year time lag, as it was
previously, when the auditor first looked at it. There has not
been a significant change in terms of your ability to get data on
an earlier basis from the feds.
Dr
Christie: As Arno notes, the variable under control
there is how rapidly the federal collection agency can turn
around the tax assessment and tax return information and get it
back to us.
Ms Martel:
Otherwise, Deputy, the auditor's comments were very positive, so
I don't have any other questions for you. Have a good day.
The
Vice-Chair: Government members now, please.
Mr John Hastings
(Etobicoke North): Dr Christie, starting off with Ms
Martel's comment and your comment about the federal government
and RevCan taking up to 24 months to send back the monies for
1999: that's common standard performance from them, is it not, in
all our relationships with the federal government? I remember a
year ago-you weren't here then, I don't believe-the committee was
looking at the lag time from the collection of personal income
tax provincially. It takes up to 21 months. They are holding
back, still do, and we get no interest compensation for it.
That's still going on as well, I assume, because of their
rapidity of response.
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Dr
Christie: Over the last few years there has been some
improvement in the rate at which they forward personal income tax
money, but the final assessments do take quite a while to get to
us. There is the interest cost associated with that, as I think
the auditor has noted in the past, under those arrangements. They
also retain all the fines and penalties that are levied through
the personal income tax system; those are not forwarded
either.
With respect to their role
in this discussion and in the OHOSP refunds, we pay the refunds,
but we do so based on information they provide to us. They do the
assessments of the tax returns and verify income, those things,
and then they send the information down to us so we can process
the refunds. It's the information they send to us that is on such
a long time lag. That means we're just processing the 1999
returns, or will be.
Ms Goral:
Yes. The refunds have actually been under the OHOSP ones and they
are decreasing in numbers because that's a fading-out program.
The refund is given up front if the person applies, but we can
reassess if we find out they didn't qualify under the OHOSP with
the $40,000 to $80,000 income. It's that reassessment of an
already given refund that is sometimes delayed because of not
getting the information.
Mr
Hastings: From us or from-
Ms Goral:
From CCRA.
Mr
Hastings: In that regard, can you communicate to your
counterpart in Ottawa to see if we can speed up this minor facet
of getting refunds back to the people who qualify?
Dr
Christie: I will take note of the interest of the
committee and raise at the next opportunity the general question
of the rapidity of both information and monies.
Mr
Hastings: That will be much appreciated. I'd like to
focus next on your training programs. You've now got eight
offices trained, but what is your turnover rate of personnel in
the offices that are either trained or are about-some of them-to
get trained in the next 12 months?
Mr Agur: I
don't know what the turnover rate is in the offices.
Mr
Hastings: OK.
Ms Goral:
They're not our offices.
Mr
Hastings: They're MCCR, or now MCBS, I guess: consumer
and business services. Can you implement or can you push MCBS to
intensify its training program-I guess it's a tripartite training
program-for the staff in the land registry offices who aren't
trained, or is that outside your purview and outside the purview
of the protocol you have established?
Mr Agur:
We've arranged the schedule with them that they're comfortable
with and that we have the resources to deliver, and that is, as I
said, to train all the offices within roughly 12 months.
Ms Goral:
I think too we should probably note that to say "trained" doesn't
mean that they aren't already trained. There has been
information-
Mr
Hastings: Training updating.
Mr Agur:
Yes.
Ms Goral:
Yes. So it's not that you've got untrained staff out there who
don't know how to collect our tax. They are collecting the tax.
We're just saying we're going out there to make sure they have
more updated information and they have a chance to actually
discuss issues with us.
Mr
Hastings: Are you folks planning to talk to your
counterparts-because you're the lead ministry in tax
collection-about a different way of training people, and that
would be starting to move toward on-line training? That wouldn't
be just for this program. This could be for, I presume, new staff
coming in, for auditors, whoever you're hiring, because people move on. There's
probably a huge cost involved in doing so, but do you have any
consideration of thinking about moving in that direction, I
guess, using education and training or the community colleges or
whatever outside resources you would have to bring in to start
developing a strategy around that idea?
Dr
Christie: That's actually a very interesting question.
In some of my former activities I've looked at on-line training.
It's a fascinating area; it's a rapidly growing area. In the
short run we have not built that into the centre of our plans for
training, in part because of the cost of developing new training
modules etc. But as we go on, we're going to have to assess all
of our staff training and updating, not just in this tax but in
all of our tax areas. I think my colleagues in other ministries
would say the same thing about their customer service and
front-line functions. We are looking for ways to do those
functions better; we're looking for ways to help the staff do
those functions better. Actually, I'm glad you raised that,
because it's an area that we're going to have to get into. We're
not looking at it now, but I think we should take a look at
that.
Mr
Hastings: That leads me to my next question, about the
retail sales tax and collection thereof; it's a little outside
the land transfer tax context. Some US states, Virginia being the
primary one-probably in Canada it's BC-have plans. I know in the
case of Virginia they've already allowed for their state retail
tax to be sent in on the Internet, and also the motor fuel tax,
whatever they call it down there; the gasoline tax, I guess. My
question would be, do you have any plans in the immediate future
to team up with the Service Ontario kiosks so the people who are
in retail or wholesale/retail-some are in both functions-could
actually post their-what do we call it?
Ms Goral:
Returns.
Mr
Hastings: -returns, earnings, to the ministry, to the
government of Ontario on-line in a highly secured fashion so that
your tax inspectors, the people who go out and check up on
trends-you can thereby start utilizing your staff in a more
appropriate, more focused enforcement fashion? I can remember
years ago this was under consideration, I believe. But I don't
know where we are in that whole area of trying to get better
enforcement of some of the tax collection under the retail sales
tax that my colleagues brought up.
I guess at the weekend
shows, in the jewellery industry, a lot of those areas where
there are a lot of cash transactions, a lot of people actually
who are in so-called home sales have a garage sale once a week,
all year, but they're not paying. I know it's a very minor area
in terms of the monies, but those are examples. I'm just
wondering where you are, Dr Christie, in that whole area, what
your strategy is to get some of these things done, where you
could have people pay their retail sales tax on-line. Your people
would get better used in terms of getting out to see that we're
getting enforcement in all these areas.
Dr
Christie: That's an area that we are looking at as part
of a broader use of the Internet, both for information and for
exchanging information with taxpayers etc, but it's not in a
phase where we'd be able to do that immediately. We're looking at
how to do it, how to do it in a secure way, how to secure all the
taxpayer information. Obviously, as you noted, it would have to
be completely secure. So we don't have plans to do that, as I
say, in the very short term, but we are working on plans to
develop the capacity, both in that area and in other areas, to
deal both with remittance and with customer service and customer
inquiries etc in an automated-
1120
Mr
Hastings: Would you say we're two years away, three?
Dr
Christie: Depending on the pace at which we can move
forward and how broadly we set the targets, it would probably be
in that order of time.
Mr
Hastings: Should we not be trying to speed it up a bit?
We're going to end up being one of the last provincial
governments in Canada to do this.
Dr
Christie: I will ask when I get back to have the folks
tell me how fast other people are going. If there are other
jurisdictions that are moving ahead faster, we can learn from
them and adopt some of the techniques they've adopted.
Ms Goral:
I was going to say, just to add to what he said, there is
electronic filing for corporation tax but it's not the actual
remittance of the tax. But there is electronic filing that's done
in conjunction with Ontario and Alberta and CCRA.
On your issue with the flea
markets and the garage sales, the sales tax is working in
conjunction with CCRA on underground economy initiatives,
including education and training and going out to these places on
as regular a basis as they can. That's not my branch.
Mr
Hastings: Does that include weekends? That's when they
function.
Mr Agur, you were talking
about trying to capture trends as to whether somebody is getting
another free house, so-called, in terms of qualifying for being a
first-time homebuyer. How do you deal with the problem of
somebody who lives in another province who bought a house in
Alberta or Newfoundland and then moved to Ontario? Do we rely on
CCRA to tell us that the status of the address in St John's or in
Edmonton was actually an ownership? Or is there really no way of
capturing that kind of person who wants to be that inventive?
Mr Agur:
In that situation we may not catch them, but the fact of their
being a first-time purchaser is only one of the elements we look
at when we audit a transaction. We also want to ensure that the
home being purchased is a newly constructed home. So there are
various tests that we could apply to a transaction, but obviously
all tests can't be applied because we have a limit to the
information we have to use for testing.
Mr
Hastings: Those tests or criteria that you use I assume
are confidential. You wouldn't want to tell us any more than the
price as being one of the items you use in your trends
analysis.
Mr Agur: I
would prefer not to.
Ms Goral: You phrased the question
to make it easy to say no.
Mr
Hastings: I know it's a sensitivity item.
How much time do I have? Am
I finished?
The
Vice-Chair: You have six minutes.
Mr
Hastings: I guess a question I would have noted from the
commitment of the minister, who has now moved on to better and
more exciting things-your previous minister: in the annual report
of key achievements for 1999-2000 I notice, Dr Christie, that one
of the items that's highlighted is developing a declaration of
taxpayers' rights, which is an original idea brought up by the
Canadian Federation of Independent Business. I presented it in a
private member's bill to a lesser extent. I'm wondering whether
you could give us some detail as to how that proposal is
proceeding.
I recall about three years
ago meetings with your ADM, Roy Lawrie, when we were looking at
this item. Some small business people, at the retail level
particularly, but there could be other areas, used to remark to
me and to other members in that committee back in 1997, I think,
as to the way in which some of the audit people or the folks who
went out to check, in dealing with our small business people,
could be a little more professional. I'll use that approach. I'm
wondering what the ministry has done in terms of dealing with
that specific item as part of this whole declaration of
taxpayers' rights. I know it sounds a bit bizarre: you're trying
to enforce and collect money that's to be remitted because of
statutes, but also trying to deal with those people in a
professional way, because they're really our customers and are
collectors of the money, and if we didn't treat them well I guess
they behaved in certain different ways to you.
Dr
Christie: There are a couple of things there. On the
declaration of taxpayers' rights, we have been looking not only
at what other provinces and the federal government do but what
other countries do. We need to talk to people like the CFIB and
others who have been interested in this to make sure we have
their concerns appropriately captured, but we expect to see real
progress on that in the next six to nine months. I think that's
sort of the time frame we're looking at.
With respect to the
professionalism issue, one of the things, for example, we're
looking at particularly in terms of our tax auditors, the people
who go out in the field-most of them will want to give good
service to their customers. It's like any workplace: most people
want to do a good job. I'm sure in some circumstances where
people are under pressure they don't do quite as good a job as
they might want to do. One of the things we're looking at very
closely, one of the kinds of things the federal collection agency
has begun to do, is having anonymous feedback from the company,
so the auditor doesn't necessarily associate it with the company,
for obvious reasons, in terms of, was the person courteous, were
they on time, did they provide all the appropriate information,
if you had a question, did they answer the question in a
reasonable amount of time, things like that, and conducting a
quality service survey, if you like, in terms of the sort of
interaction the people have. Those are the kinds of things we're
looking at.
Mr
Hastings: What kind of money do we pay them now? Is it
about $500? Is there not some compensation-
Ms Goral:
It's up to $2,000 a year.
Mr
Hastings: Per business?
Ms Goral:
It's a percentage of the tax collected, up to $2,000 a year, if I
remember correctly.
Dr
Christie: That sounds right.
Mr
Hastings: Does that apply to the motor fuel tax as
well?
Ms Goral:
We give compensation to some of our staff, not all.
Mr
Hastings: So anything where there's a like-minded retail
sales tax component, we have some compensation in place for
them?
Ms Goral:
Yes.
The
Vice-Chair: Do any other government members have any
questions? We'll move on to the official opposition.
Mr
Gerretsen: We don't have any further questions.
The
Vice-Chair: Ms Martel? No? Everybody is so
agreeable.
None of the committee has
any more questions for the deputy or the staff. If that's the
case, I would like to thank the deputy and the staff for bringing
this information before the committee. This committee will stand
adjourned until tomorrow morning at 10 o'clock. I thank you.
