Bill C-43: An Act to Establish the Canada Customs and Revenue Agency and to Amend and Repeal Other Acts as a Consequence (LS321E)

HOUSE OF COMMONS		SENATE
Bill Stage	Date	Bill Stage	Date
First Reading:	4 June 1998	First Reading:	8 December 1998
Second Reading:	27 October 1998	Second Reading:	10 February 1999
Committee Report:	25 November 1998	Committee Report:	18 March 1999
Report Stage:	7 December 1998	Report Stage:
Third Reading:	8 December 1998	Third Reading:

Royal Assent: Statutes of Canada N.B. Any substantive changes in this Legislative Summary which have been made since the preceding issue are indicated in bold print.

BILL C-43, AN ACT TO ESTABLISH THE CANADA CUSTOMS
AND REVENUE AGENCY AND TO AMEND AND REPEAL OTHER
ACTS AS A CONSEQUENCE

Bill C-43 was tabled by the Minister of National Revenue and received first reading in the House of Commons on 4 June 1998. The bill would create the Canada Customs and Revenue Agency (hereafter, the Agency), which would assume Revenue Canada’s existing administrative functions relating to taxation, trade and customs, and its 40,000 to 46,000 full-time and seasonal employees.(1) The government first announced its intention to create the Agency in the Speech from the Throne of February 1996.

The government has offered a number of rationales for the enactment of this bill. It maintains that Revenue Canada’s existing mandate could be administered more efficiently, particularly with regard to its human resources, if it were organized and managed by an Agency with its own tailored systems, rather than systems that apply to the federal public service as a whole. According to a paper produced by Revenue Canada, the Agency would be better placed than a traditional government department to respond to client needs, to provincial/territorial requirements and to a constantly changing business environment.(2)

Furthermore, the Agency would be structured so as to allow increased tax administration on behalf of the provinces. It is believed that a single administration would reduce overlap and duplication between the federal and provincial/territorial governments and reduce costs for business,(3) taxpayers and governments. In support of this statement, the government cites an independent study conducted by the Public Policy Forum (the Forum) that estimated that a single tax administration could achieve savings in compliance costs ranging from $116 million to over $193 million annually for Canadian business and from $37.5 to over $62.5 million in administration costs for provincial governments.(4) The Forum noted that these figures would be higher had Quebec been included in the calculations, with savings on compliance costs of between $171 million and $285 million and savings on administration costs between $97 million and $162 million.(5) The Government of Quebec, however, has stated that it would not want the Agency to administer its programs.

Contrary to earlier plans,(6) the Minister of National Revenue would be responsible for the Agency and would have significant potential control over its operation. The Minister could issue a written direction to the Agency, addressed to the Chair of the Board, on any matter within the authority or responsibility of the Board that, in the Minister’s opinion, affected public policy or could materially affect public finances. Such a direction would not be a statutory instrument for the purposes of the Statutory Instruments Act(7)and would therefore probably not be published. With limited exceptions, the Minister would have the power to authorize the Commissioner, or any employee of the Agency, to exercise any of the Minister’s powers, duties or functions, and could impose any terms and condition on the delegation. Further, the Minister would have the power to direct any person to whom a power had been delegated. The Minister would also be able to inquire into any activity of the Agency and would have access to any information under the Agency’s control.

Clause 38 would require the Commissioner to keep the Minister informed of any matter that could affect public policy or materially affect public finances, or any other matter that the Minister considered necessary. (There is no duty on the Commissioner to keep the Board so advised.) The Commissioner would also assist and advise the Minister in the exercise of his or her duties as a Minister.

The Agency would be directed by a Board of Management consisting of 15 directors: the Chair, the Commissioner of Customs and Revenue (the Commissioner), and 13 other directors, all of whom would be appointed by the Governor in Council (Cabinet) to serve at pleasure. The Chair, the Commissioner and two directors would be selected by the federal government. In a unique provision designed to strengthen accountability to the provinces, the other eleven directors (one director for each province and one director for the territories), although appointed by the Governor in Council, would be chosen from a list of nominees submitted by the minister responsible for revenue administration in the province or territory (or by another minister designated by the province or territory). If a province did not submit a list of nominees qualified for appointment as director within two months after the day on which the Act was assented to, or within six months after the position of director became vacant, the Governor in Council could appoint a director. (This would ensure, for example, that, even without Quebec’s participation in the Agency, the federal government could appoint a director to provide guidance to the Board when that province’s interests might be affected by a decision.)

To be appointed, the directors must, in the opinion of the Governor in Council, have the experience and the capacity required for discharging their functions. In addition, they must:

As a result of the last two requirements, only members of the private sector could be appointed as directors (with the exception of the Commissioner). The government maintains that members with private sector experience would permit the Agency to resolve management issues with in-house solutions. It is also thought that such a Board would bring a strategic perspective to the Agency’s activities and impart a more business-like approach to the management of the Agency’s resources.(8)

Standard clauses specify that directors would be required to act honestly and in good faith with a view to the best interests of the Agency, having regard to its mandate, and would have to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. These duties and conflict-of-interest rules are set out in clauses 42 to 46.

The Chair of the Board would be appointed during pleasure on a part-time basis for a term of not more than five years, which could be renewed for one further term of not more than five years. The Chair would preside at meetings of the Board and would exercise any powers and perform any duties and functions assigned by the by-laws of the Agency.

The chief executive officer of the Agency would be the Commissioner. He or she would be appointed to hold office during pleasure on a full-time basis for a term of not more than five years, which could be renewed for one or more further terms of not more than five years each.(9)

The other directors would be appointed at pleasure on a part-time basis for terms of not more than three years; their terms could be renewed twice. For the 11 directors nominated by the provinces and territories, renewal would be conditional on their approval. The terms of office of the directors, other than those of the Chair and the Commissioner, would be staggered as much as possible so that those of not more than one half of the directors would expire in any one year.

Clause 30 states that the Agency would have authority over all matters relating to:

The Agency would not be subject to any regulation or requirement established by the Treasury Board under the Financial Administration Act(10) with regard to the above matters, except for rules that relate to financial management.

The Board would be responsible for overseeing the organization and administration of matters under the Agency’s jurisdiction, including developing the corporate business plan (see below), and making by-laws. It could advise the Minister on matters relating to the general administration and enforcement of the program legislation, but would be precluded from directing the Commissioner and any employee as to how to perform their duties. Thus it is clear that the bill envisages a strict division between the administration of the Agency (the responsibility of the Board of Management) and the administration of the program legislation (the responsibility of the Commissioner and the employees). It will be interesting to see if such a strict division can be maintained.

The Board would not have access to the identity of any person or corporate body gained as a result of the Agency’s administration of the legislation.

As chief executive officer, the Commissioner would be responsible for the day-to- day management and direction of the Agency and, subject to certain restrictions, could delegate any power, duty or function.

In keeping with the goal of increased accountability to the provinces, the Commissioner would be required to report to any province for which the Agency administered a tax or program sufficient information to enable the province to evaluate the program or tax. The Agency would also be required to consult with such a province on any matters. Further, annual reports to the affected provinces would be required, as would annual meetings with the appropriate provincial ministers.

The Agency would be required to submit a corporate business plan to the Minister for recommendation to the Treasury Board. The Board could specify terms and conditions along with its approval. The minimum requirements of the plan are specified in clause 47(2), and include the Agency’s human resource strategies and their impact on overall salaries and benefits. After receiving Treasury Board approval, the Agency would be required to submit a summary of it to the Minister for tabling in Parliament. The summary would contain references to each of the requirements established in clause 47(2), as well as a statement of the principles to govern the Agency’s staffing program.

As noted previously, one of the main reasons advanced by the government for establishing the agency is to eliminate personnel difficulties currently experienced by Revenue Canada. The Agency would be a separate employer within the meaning of the Public Service Staff Relations Act,(11)with authority to design, develop and manage its own human resource system unfettered by the existing rules governing the public service administered by Treasury Board and the Public Service Commission.(12) Among other things, the Agency could determine classification, training and development, terms and conditions of employment, hours of work, leave, rewards and recognition, discipline, demotion, termination of employment and travel allowances.

The Agency would have the exclusive right and authority to appoint any employees that it considered necessary for the proper conduct of its business. It should be noted that Agency employees would have access to deployments, appointments or closed competitions in the public service on the same basis as federal public servants who are not employed by separate employers.

The Agency would develop its own staffing program governing appointments and recourse for employees. This would mean, among other things, that the Public Service Staff Relations Board would no longer decide cases of demotion and dismissals arising out of non-disciplinary action. The Public Service Commission would retain an oversight role, however. It would have the power to report to the Agency, the Auditor General and the Treasury Board on whether the Agency’s staffing program was consistent with the principles set out in the summary of its corporate business plan and would have the right to review the principles by comparing them with those that govern other public servants under the Public Service Employment Act. Union collective agreements would be explicitly forbidden to deal with matters in the staffing program.

Currently, the Treasury Board negotiates collective agreements for all departments. In contrast, the Agency would have full power to enter into collective agreements with its own bargaining agents. Despite that authority, before entering into collective bargaining it would have to consult with the Treasury Board on its human resource plan, including the total increases foreseen in employee salaries or benefits.

Following its third full year of operations and periodically after that, the Agency would be required to have an outside agent prepare an assessment of the recourse that the Agency provided for its workers, and would be required to include a summary of the assessment in its next annual report.

The Agency would operate on a two-year budget cycle. That is, any money remaining from a parliamentary appropriation in one fiscal year would not lapse until the end of the second fiscal year, although Parliament could make a specific exception to the general rule. The two-year timeframe is intended to give managers greater flexibility in making timely and appropriate expenditures.(13)

The Agency would be entitled to keep all revenues received through the conduct of its operations as defined in clauses 60(2) and (3). This would include such matters as revenue generated from real property, user fees, and payments pursuant to contracts. It would not, of course, include money collected as taxes, duties, penalties or interest under the program legislation.

The Agency would be authorized to enter into certain kinds of contracts, agreements and arrangements with governments, and organizations, including the federal government. This would enable the Agency to broaden the range of tax collection now carried on by Revenue Canada on behalf of the provinces. Certain Canadian agreements and all international agreements would be made specifically beyond the reach of the Agency.

In a departure from the norm for government departments, the Agency could procure goods and services (other than legal services) from outside the public service of Canada. With respect to legal services, the Attorney General of Canada would advise the Agency and would have the regulation and conduct of all litigation for or against the Agency. The Agency could appoint its own lawyers or hire outside legal counsel, however, provided it obtained the approval of the Governor in Council.

The Agency would have full control over the use or disposition of any intellectual property that it held or developed. Employee inventions would vest in the Agency.

The bill provides a detailed scheme for holding, acquiring and disposing of real property. Since the Agency would have the administration of all of its real property, it would not on the whole be subject to the Federal Real Property Act,(14) though certain sections would remain applicable. The Agency would be specifically exempted from certain other federal legislation governing the treatment of real property; the government hopes that this would speed up response times and allow for more effective use of resources in client service.(15)

As the auditor responsible for the Agency, the Auditor General of Canada would be required to conduct an annual audit, and to assess other matters related to the Agency from time to time. Annual reports, with specified required elements, would be given to the Minister of National Revenue, who would table them in each House of Parliament. Within five years following the establishment of the Agency, a parliamentary committee (of either or both Houses of Parliament) would be required to undertake a comprehensive review and assessment of the provisions and operation of the Act and report its findings to Parliament.

Clauses 90 to 105 are transitional provisions, most of which concern the transfer of Revenue Canada employees to the Agency. All positions in the Department of National Revenue would be transferred to the Agency and all present incumbents from the Agency would be deemed to have accepted automatic job offers unless they submitted written refusals to the Agency within 60 days. At that point, specified provisions of the Work Force Adjustment Directive would apply, including any provisions in a collective agreement that replaced the Directive.

Clauses 106 to 185.1 are consequential and conditional amendments. Clause 186 provides that expressions referring to the Deputy Minister of National Revenue or the Department of National Revenue would be read as a reference to the Commissioner of Customs and Revenue or the Canada Customs and Revenue Agency in federal references. Clause 187 would repeal the Department of National Revenue Act.(16) Lastly, in a standard provision, clause 188 provides that the Act or any of its provisions would come into force on a day or days as fixed by order of the Governor in Council.

The government has emphasized that an ongoing concern at Revenue Canada has been the difficulty of finding qualified personnel, especially computer specialists and auditors, in a highly competitive market. One of the goals of the new structure proposed by the bill, therefore, is to enable the Agency to attract, train and retain the expertise it needs to pursue new opportunities.(17) Creation of the Agency with the status of a separate employer would permit development of new classification systems,(18) new pay scales, and faster staffing processes that could compete with those in the private sector.(19)

With the new structure, the government believes that it would be possible to negotiate collective agreements based on the priorities and needs of the Agency, so as to bring improved service to the public. The Agency would continue to rely heavily on information technologies in key service areas, and would need to be able to respond quickly and flexibly to its clients; thus, it is argued that the Agency would need a human resources framework that was more responsive and flexible than that of the rest of the public service and tailored specifically to provide a workforce capable of ensuring electronic service delivery(20) and free from the perceived rigidity of public sector rules.(21)

It is also apparent that salaries for federal employees in the technical areas required by Revenue Canada are much below salaries in the private sector. The government has chosen to create a structure within which it would be easier to offer the salaries needed to ensure the recruitment and retention of essential employees. The question thus arises as to whether it would be possible to have two people with the same technical skills, and in the same type of position, but who would receive different salaries, one being an employee of the Agency and the other a departmental employee.

Some of the unions at Revenue Canada have advanced reasons for opposing the bill. The Union of Taxation Employees has stated that it would pose a threat to Canadians; the Agency, should it develop as the single-window tax collector envisaged by the government, would hold far more taxpayer information in one place than had ever been the case, thereby increasing the risk of the unauthorized release of personal data.(22) It should be noted, however, that the confidentiality rules included in the existing program legislation would continue to apply to the Agency and that the Board would not have access to confidential information relating to Canadians.

The Professional Institute of the Public Service has argued that workers in the Agency structure would forfeit important public service rights and would be subject to the unilateral control of managers. The Institute also maintains that there is no valid business case to make that the Agency would benefit Canadians or save money, especially if the provinces should be reluctant to join.(23)

The unions may be most concerned, however, about job security and conditions of employment. It is understood that their request for permanent job security has been turned down; instead they have received job guarantees for two years.(24)

(1) As originally proposed, the headquarters of the Agency would have been required to be in the National Capital Region. In Committee, this was changed to any place in Canada as might be designated by the Governor of Council.

(3) It is argued that the requirement for most Canadian businesses to provide the same basic business information to several different tax authorities puts an onerous burden on them. The Agency would facilitate better integration of tax information and reporting systems, thereby improving the prospects for single-window reporting and reducing the paper burden on small and medium-sized businesses: Revenue Canada, The Backgrounder, The Business Case for the Agency: Integrating information systems, and simplifying reporting requirements, available on the Internet at:
http://www.ccra-adrc.gc.ca/agency/toc-2000-e.html.

(6) In the planning stages, it was intended that the proposed agency would be constituted at arm’s length administratively from all governments. See Revenue Canada, Canada Customs and Revenue Agency – Progress Report, April 1997.

(9) The Governor in Council could also appoint a Deputy Commissioner in the same manner (clause 26(1)).

(11) R.S.C. 1985, c. P-35. According to section 2 of the Public Service Staff Relations Act, a separate employer means any portion of the public service of Canada specified in Part II of Schedule I of that Act. For example, the Canadian Food Inspection Agency and the Office of the Correctional Investigator are separate employers.

(12) This authority is considered an important element in the ability of the Agency to be more efficient: Revenue Canada, The Backgrounder, Human Resources and Employee Transition: Human resources management authorities, available on the Internet at: http://www.ccra-adrc.gc.ca/agency/toc-5000-e.html.

(15) Revenue Canada, The Backgrounder, The Business Case for the Agency: Real property and material management, as well as tailor-made contracting, available on the Internet at:
http://www.ccra-adrc.gc.ca/agency/toc-2000-e.html.

(18) In arguing for the ability to create a new classification system, the government pointed out that, under the present structure, the 46,000 employees of Revenue Canada are divided into approximately 32 different classification groups and that shifting employees to areas where demand for service is growing is a cumbersome and time-consuming process: Revenue Canada, The Backgrounder, The Business Case for the Agency: Shifting human resources to improve response times and service quality, available on the Internet at: http://www.ccra-adrc.gc.ca/agency/toc-2000-e.html.

(19) At Revenue Canada, it can take between 6 and 12 months to complete a staffing action: Revenue Canada, The Backgrounder, The Business Case for the Agency: Attracting and retaining key personnel, available on the Internet at: http://www.ccra-adrc.gc.ca/agency/toc-2000-e.html.

(20) Projects being planned include the creation of a secure Internet system that would allow the Agency to provide a full range of electronic services, while ensuring that tax, trade and customs laws were being applied appropriately in electronic commerce: Ibid.

(21) It should be noted that the government has been trying for a number of years to reform human resources policies, but with little concrete success to date.