Event: Canadian Payroll Association’s (CPA) 33rd Annual Conference and Trade Show
Venue: Québec City Convention Centre, Québec City, QC
Date: June 4, 2015
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It's a pleasure to be here today. Thank you for that kind introduction.
In your day to day dealings with tax and benefit administration, the Canadian Payroll Association is an organization that echoes the complexity of the Canada Revenue Agency's (CRA) operations. One could say CPA and CRA are kindred spirits!
I am sure you are aware of the staggering numbers CPA deals in. Each year, Canada's employers count on payroll professionals to administer:
- $865 billion dollars in wages and taxable benefits;
- $163 billion dollars in health and retirement benefits;
- $290 billion dollars in federal and provincial statutory remittances;
- 26 million T4s and 9 million T4As;
- all while complying with innumerable provincial and federal statutory requirements.
Your vast experience and expertise makes you invaluable collaborators for the CRA. We seek your help in reaching our shared goals of cutting administrative red tape, and improving voluntary compliance with our tax laws.
I'd like to talk today about our joint efforts and achievements on those two fronts.
Reducing Red Tape
Running a business means long hours and selfless sacrifice. Our Government believes an entrepreneur's time is best served growing their businesses, rather than bogged down in taxes and red tape.
That is why cutting red tape is a priority for action, particularly in my department at the CRA.
The One-for-One Rule and other reforms have brought a new level of discipline to how our Government regulates businesses. The One-for-One Rule demands that when a new regulation is added, one of equal weight must be removed.
This rule alone saved businesses an estimated $22 million last year, along with 290,000 fewer hours dealing with red tape.
Following CRA's recent biennial cross-country consultations with small businesses, bookkeepers, accountants and stakeholder associations like the CPA, our new Red Tape Reduction report will be released later this month. It will outline a clear and achievable action plan to continue to cut red tape where it will make the biggest difference for small and medium businesses.
We are taking measurable and meaningful actions. For example, in Economic Action Plan 2014, our Government revised the remittance thresholds for employer source deductions.
Over 50,000 small and medium-sized employers now have the maximum number of required payments on account of source deductions cut in half. This eliminates the requirement for more than 800,000 payments.
That's 50,000 businesses that now have less frequent reporting to government, and therefore less red tape.
That's 50,000 entrepreneurs who now have more time to focus on growing their business, employing Canadians, and supporting our economy.
The impact of this minor administrative change had such a positive impact on small business that the CFIB - Canadian Federation of Independent Businesses - awarded me with their prestigious Golden Scissors Award in January.
The CPA championed this initiative from the early stages - and you also proved to be instrumental in helping us effectively communicate and implement this change.
Thank you for your honest input. We are getting better together.
Economic Action Plan (EAP) 2015 builds on these successes to reduce the tax compliance burden faced by businesses.
Beginning in 2016, new employers will be eligible to make quarterly - rather than monthly - payments to the CRA. This applies if their employee source deductions are less than $1,000 per month, and they maintain a perfect compliance record.
This reduces remittance frequency by two thirds for the smallest employers. That's valuable time business owners can reclaim and reinvest in both their operations and their families.
A recent study from PricewaterhouseCoopers and the World Bank Group ranks Canada in the top 10 countries worldwide - and 2nd among OECD member countries - for ease of paying corporate taxes.
We are committed to maintaining that status.
We are also improving electronic services. As Minister, my mission is for the CRA to meet the needs of businesses on their terms: that means flexible service, reliable answers, and a collaborative relationship.
Last year, the CRA "got an app for that"!
We launched our first ever mobile reminder app for CRA remittances, and expanded online payment options with the launch of pre-authorized debits.
The CPA was an important collaborator on both initiatives.
In fact, business owners can now complete more than 50 different kinds of transactions online. Consultations confirm that we are on the right track, but these services could still be more user friendly.
In response, our new red tape reduction action plan includes targeted improvements that will both simplify and streamline the user experience, while expanding the range of online tasks available.
Your feedback and input will continue to play an important role in our process.
Consultation participants also asked for greater coordination and collaboration among regulators. Federal adoption of the Business Number as a Common Business Identifier will make it much easier for businesses to interact with the government.
The Business Number currently allows businesses to be identified by one number while working with six provinces and programs with the CRA, Public Works and Government Services, Industry Canada, and Canada Border Services Agency.
Economic Action Plan 2015 committed to make this happen.
I thank CPA for having been a strong advocate on this initiative.
As you will see in the upcoming Red Tape Reduction report, we have a wide range of specific red tape reduction commitments in place through 2017. These commitments address the highest priorities identified by small and medium businesses during the consultations.
I am proud of the CRA's progress on cutting red tape, but we know there is still work to be done. We are making it easier to comply with Canada's tax laws and regulations for those who wish to comply, but we are also making it more difficult for those seeking to skirt the rules.
Canada's tax system can only work effectively if the CRA maintains public confidence in the fairness and integrity of that system.
That's assured when everyone pays the taxes they owe.
EAP 2015 contains a $200 million dollar investment in CRA compliance measures over the next five years. These measures will safeguard public confidence in the fairness and integrity of our tax system.
That includes $118 million dollars to magnify the CRA's underground economy specialized teams. Another $25 million is allocated to expand activities to combat international tax evasion and aggressive tax avoidance.
And $58 million will be directed to CRA programs that combat aggressive tax avoidance in Canada by the largest and most complex business entities.
This investment will pay off. The revenue impact of these new compliance measures is expected to be $831 million over five years. That's a 315 percent return on investment.
The CPA has been an important partner in promoting voluntary compliance with tax law.
CPA is working with the CRA to reduce the social acceptability of, and participation in, the underground economy.
Last fall, I launched a three-year strategy to combat the underground economy in high-risk sectors of the Canadian economy.
The underground economy exists in Canada. For CRA's purpose, we define the underground economy to include both unreported and under-reported income. This may involve:
- failure to file or register for taxes,
- failure to report a business activity,
- failure to report part of a business activity of income,
- or, failure to report employment income.
Statistics Canada estimates that the value of the underground economy is 2.3% of our Gross Domestic Product.
This is lower than most developed nations, but the mere existence of black market activity flies in the face of our Canadian values of integrity, honesty and hard-work.
Finalizing the strategy to combat the underground economy was the first order of business last November, when I chaired the inaugural meeting of my Underground Economy Advisory Committee.
My Advisory Committee is comprised of academic expertise, and key business associations whose members compete against the underground economy.
Your President and CEO, Patrick Culhane, has been an active participant at each meeting, ensuring I, and CRA officials, are aware of specific issues your members and your industry face.
I met with the committee again in late April to affirm the key themes that emerged in our initial discussions.
These same themes have been echoed in provincial/territorial UE roundtable discussions.
Our Committee has examined how using social marketing techniques to educate and inform consumers is helping to reduce the social acceptability of participating in the underground economy.
Revenu Québec has been broadcasting regular advertising campaigns on the underground economy since April 2012.
Revenu Quebec's campaign goal is to raise awareness of the public cost of tax evasion and tax avoidance.
Cheating the system means fewer resources to invest in public services, and an unfairly larger burden placed on the shoulders of compliant taxpayers.
Our Underground Economy Advisory Committee looks forward to exploring opportunities to develop similar consumer focused campaigns.
Such campaigns would complement the CRA's new graduated approach to tax compliance — founded on in person guidance and targeted interventions. I call it an "attitudinal culture shift".
The Liaison Officer Initiative is an excellent example of our new education-first approach. We provide business owners with solid information and guidance in-person at key points in the life cycle of their business.
That way, they get it "right from the start."
The Registration of Tax Preparers Program (RTPP) is another important component of our innovative approach to compliance.
RTPP links tax returns to the individual tax preparer and business they work for. This allows CRA to identify, support, and correct those who are preparing erroneous or non-complaint files on behalf of their clients.
These are just a few of the ways we are working to educate and increase Canadians' understanding of their tax obligations and their reporting responsibilities before compliance actions occur.
Ensuring accessible, clear and understandable tax information is a key priority in our Red Tape Reduction Action Plan, and a personal priority of mine.
As I say, no one likes receiving a letter from me… not even me!
But when you do communicate with the CRA, it is our job to make these letters clear and concise. Our plain language initiative makes certain that the average Canadian can understand what is being asked of them, and act upon it easily.
We will be engaging CPA and other stakeholders to help us identify the guides and forms that need to be simplified and clarified. … I regularly remind my officials - to keep it simple!
In many respects, red tape reduction is itself a compliance initiative - since reducing the administrative burden helps Canadians and Canadian businesses promptly and accurately fulfill their tax obligations.
Creating and Protecting Jobs and Economic Growth
Before I close, I want to share our plan for jobs and growth.
That is why our Government has cut taxes for job-creating business; invested in research and innovation; expanded markets for Canadian businesses abroad; committed unprecedented support for job-creating infrastructure; and responsibly developed our natural resources.
Our strategy is working.
Since the depths of the Great Recession, over 1.2 million net new jobs have been created—overwhelmingly full-time, well-paying, and in the private sector.
Indeed, Canada has had one of the best job-creation records in the G7 over the recovery. We have created 20% more jobs on a relative basis than our closest competitor.
Total business tax costs in Canada are the lowest in the G-7, and 46% lower than those in the United States.
Low taxes encourage capital investment, which in turn spurs job creation. Bloomberg today ranks us one of the most attractive places for business in the world.
Helping Small Businesses and Entrepreneurs Create Jobs
Small businesses are the lifeblood of the Canadian economy.
They account for 99% of all businesses in Canada, and employ half of the working men and women in the Canadian private sector.
We have cut taxes significantly for entrepreneurs.
We introduced the Small Business Job Credit. This credit is expected to save small businesses more than $550 million over 2015 and 2016.
To encourage small business growth, Budget 2015 reduces the small business tax rate to 9 per cent by 2019.
This measure will reduce taxes for small businesses and their owners by $2.7 billion over the next four-year period.
When this reduction takes full effect in 2019, we will have achieved an impressive milestone.
Because of actions taken under our government, the small business tax burden will have been cut in half by 2019.
That's right - half.
This means an annual tax reduction of up to $38,600 that can be reinvested in each business.
By reducing taxes year after year and enhancing benefits to Canadians, our Government has given families and individuals greater flexibility to make the choices that are right for them.
Whether they want to purchase a new home or car, start a new business or save for retirement, Canadians have many reasons to save at every stage of life.
That is why our Government introduced the Tax-Free Savings Account.
Canadians have embraced the TFSA for their savings needs. As of the end of 2013, nearly 11 million individuals had opened a TFSA.
The TFSA is a popular means of saving for Canadians at all income levels. Individuals with annual incomes of less than $80,000 accounted for more than 80 per cent of all TFSA holders and about 75 per cent of TFSA assets as of the end of 2013. About half of TFSA holders had annual incomes of less than $42,000.
In order to provide Canadians with greater opportunity to save on a tax-free basis, we have increased the annual TFSA contribution limit to $10,000, effective for 2015 and subsequent years.
Our Government recognizes that a well-functioning tax system is essential to keep Canada positioned as an attractive place to work, invest, and do business.
By ensuring an increasing majority of people are playing by the rules, our Government is deepening Canada's tax base while simultaneously lowering Canadians' tax burden.
I very much support and appreciate the working relationship that CPA has developed with the CRA, and the thoughtful, honest input CPA members provide on a range of topics.
Together we are building a stronger, healthier tax system and a more prosperous, competitive Canada.