October 2006 Archives

CRA News Release: $2 million program for charities, non-profit organizations

The Canada Revenue Agency (CRA) web site has issued a news release indicating that the Minister of National Revenue, the Honourable Carol Skelton, has announced that registered charities and non-profit organizations can apply for funding through the Charities Partnership and Outreach Program. Successful applicants will deliver education and training to registered charities on Canada's Income Tax Act.

“Canada's New Government supports this innovative program which ensures Canada's charities are thoroughly educated on the legislative and regulatory obligations of the Income Tax Act,” said Minister Skelton. “It is important that Canadians are confident that charities are following the rules, and their donations are used for the intended charitable purposes.”

For more information, please see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2006/oct/nr061031b-e.html

CRA News Release: Warning: Tax shelters are risky

The Canada Revenue Agency (CRA) has issued a news release on its web stie warning Canadians of the financial risks associated with participating in certain tax shelter gifting and donation arrangements. These include gifting trust arrangements, leveraged cash donations, and buy-low, donate-high arrangements.

“Be wary of any ad that uses tax savings as a key selling point, said CRA Commissioner Michel Dorais. The CRA reviews all tax shelters and challenges any arrangement that does not comply with the Income Tax Act. We will audit the tax returns of investors who participate in these tax shelters.”

The CRA has indicated that it is currently auditing many gifting arrangements.

For more information on this news release please see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2006/oct/nr061031-e.html

An Indefensible Junket

Colin Kenny, Chairman of the Senate Committee on National Security and Defence, is applying a time-tested military tactic: A strong offence is a smart defence.

At a Parliament Hill news conference last Friday and on yesterday’s National Post comment page, he scolded journalists, editorial writers and Canadians for daring to question why his Senate committee spent tens of thousands of dollars on a recent trip to the Middle East. Indeed, a defiant Sen. Kenny instead characterized the story as “cartoon journalism.” He blew the opportunity to explain how taxpayers receive value for their money from this committee’s work.

At issue is not whether lawmakers should travel to perform their duties. Clearly, they must. Rather, it is why four senators and three staff members traveled to Dubai last month to wait seven days for permission to travel to Afghanistan on a fact-finding trip. When the story erupted last week, Conservative Senator Michael Meighen told CTV National News that committee members had stayed in Dubai because they were waiting to travel to Central Asia. “We shouldn’t have cancelled Dubai as long as there was a chance we’d get into Afghanistan,” he said.

It turns out that some senators knew the committee would not be traveling to Afghanistan. We know now Canadian military officials met with Sen. Kenny in his office beforehand to explain “for reasons of personal safety,” traveling to Afghanistan was not an option. (Operation Medusa, which was then underway, had Canadians soldiers engaged in battle against insurgents. NATO said hundreds of Taliban members were killed. Sadly five Canadians died as well.)

Rather than modify their travel plans before departure or along the way at stops in England or the Netherlands, the committee pressed on. The senators gambled the military situation in Afghanistan might improve and their trip could proceed as planned. Yet they ended up waiting around in Dubai for a week, attending one three-hour meeting with port officials and spending nearly $30,000 on posh hotels. Sen. Kenny now claims the military’s “warning had come late.”

Sen. Kenny sees goblins everywhere. One minute, he says this is not about accountability and oversight of tax dollars, but is a campaign to discredit the upper house in the voters’ eyes. The next, he claims criticism is about making Senate reform an election issue. He also insists a further motivation is that the Conservative government does not want its handling of security issues questioned.

Senate testimony paints an altogether different picture. Other senators have been critical of this committee’s budget and travel costs for some time. The Dubai junket is simply the straw that broke the camel’s back.

In March, 2005, the security and defence committee requested a $914,000 budget for the 2005/06 fiscal year. Liberal Senator Serge Joyal expressed concerns about the proposed budget: “When I voted in favour of creating the Standing Senate Committee on National Security and Defence, it was not inherent that the committee would spend $1-million per year to travel around the world.” Senator Joyal pointed to another senate committee studying anti-terrorism legislation and noted it heard testimony from around the world via teleconference.

In the end, the Senate clipped the committee budget to $657,000, an amount still regarded as high by some. Sen. Lowell Murray, for instance, asked what this $657,000 represented as a proportion of the total of all budgets for all senate committees. Sen. Paul Massicotte, then-chairman of the Senate’s board of internal economy, replied, "I believe the answer would be one-third."

The public’s demand for greater accountability and transparency includes the Senate. Its Board of Internal Economy now owes it to taxpayers to call Sen. Kenny to account for the spending and changing story. Pressure should be applied for the senators to return the Dubai trip money. Failing this, the committee’s budget should be reduced by the amount spent in Dubai.

It simply does not hold that revelations about the junket were an attempt to discredit the Senate as a whole (although it did just that). Not with Conservative, Liberal and independent Senators all raising concerns about this committee’s budget. Indeed, Committee Vice-Chair Sen. Meighen is a loyal member of the Conservative caucus. Moreover, the committee’s strong bipartisan support for the Canadian Forces makes it an unlikely target for the Conservative government.

Throughout this entire episode, Sen. Kenny has never been shy about trumpeting his committee’s work to provide solutions to improve our country’s security. What he does not seem to grasp is that good work does not give any parliamentarian – elected or otherwise – license to spend tax dollars recklessly or balk when called to account for such spending.

John Williamson
Federal Director
Canadian Taxpayers Federation

’Til Debt Do Us Part?

’Til Debt Do Us Part? – With a Plan Ottawa’s Debt Can be Eliminated
By Adam Taylor

Finance Minister Jim Flaherty recently revealed last year’s federal surplus was $13.2-billion. The government immediately announced the entire amount would be put toward reducing Canada’s national debt. This was a good move, but a much more concentrated effort will be required to eliminate the half-trillion dollar debt successive governments have rung up since the 1960s.

The new Conservative government and previous Liberal government should both be commended for paying down $81.4-billion of Canada’s national debt over the last nine years. As a result, billions of dollars are saved every year on reduced interest costs. However, Ottawa must go further by shifting from its record of debt elimination by accident to debt elimination by design. With the national debt standing at $481.5-billion, Canada cannot afford to not take debt repayment seriously.

Last year, Ottawa spent $33.8-billion on debt servicing. Another $34.8-billion will be spent on interest this year. That works out to $95-million a day. Paying the interest on Canada’s national debt is the federal government’s single largest expenditure. That’s right, Ottawa spends more on interest charges than it spends on any other big ticket budget item like senior entitlements, health care or national defence. Every dollar that goes toward debt interest is one less dollar for health care, infrastructure, pensions for seniors, or tax relief. In other words, Canadians today are paying for yesterday’s fiscal recklessness. Without a change of course our kids and grandkids will be paying the interest on yesterday’s spending.

Taking debt elimination seriously will help ensure future generations are not saddled paying for past program expenditures. Debt elimination also frees up tax dollars. By paying down $13.2-billion in debt, the federal government will save over half a billion dollars in debt interest payments it is no longer required to make. This is a savings of over $500-million each and every year.

Between 1961 and 1996, Canadian governments spent more money than they could afford, piled up budgetary deficits, and increased the national debt from $14.8-billion to $562.9-billion in 1996. Since 1961, interest and service charges on the debt has cost taxpayers almost $1-trillion. That’s twelve zeros after the $1 folks. This figure will continue to increase until the debt is eliminated.

With a dedicated effort, paying off Canada’s national debt is possible and it should be made law. Yes, it is an immense task but it could be done if Ottawa added a mandated debt repayment line-item in each budget. The Canadian Taxpayers Federation (CTF) first advocated such a policy in 1997, one year ahead of the budget being balanced. Today, we recommend a phased-in line item worth 5 per cent of revenues, which would begin next year at 1 per cent of revenues and increase by 1 per cent a year until a full 5 per cent debt elimination schedule is reached. That would guarantee a debt repayment of $2.4-billion next year, rising to $13.3-billion by 2011. Ottawa’s current policy on reducing the national debt is to do so only if a surplus exists at year end. If there is no surplus, the debt is not reduced.

As of April 1, 2004, Alberta became Canada’s only debt-free province. This was accomplished the old fashioned way: restrained spending and through steady resolve – the province passed CTF-inspired legislation to eliminate its debt. The same ingredients should be applied in Ottawa to wipe away Canada’s debt. Assuming revenue growth of three per cent a year, and by dedicating 5 per cent of revenues to debt relief, Ottawa could be debt-free by 2034, less than thirty years away. It could be done even faster if the federal government began the sale and divestiture of Crown assets – many of which were acquired in times of budget deficits.

Focusing greater attention on paying off the debt would have other immediate benefits. As the national debt declined, significant savings would be realized through reduced debt interest payments. That money could be used for a variety of things – tax relief or additional spending for health and pension benefits in response to rising demand from retiring baby boomers.

Since the books were first balanced almost ten years ago, politicians have once again ramped up spending and made multi-billion dollar surpluses seem like a sign of fiscal competence. Debt repayment has become an afterthought. This is a mistake. With the political will and a plan, Canada’s debt could be eliminated. This would be good for all – it would tackle yesterday’s mistakes head on, and ensure that we don’t completely handcuff and sell out the taxpayers of tomorrow.

Adam Taylor is research director of the Canadian Taxpayers Federation

John Williamson
Federal Director
Canadian Taxpayers Federation

CRA Fact Sheet: CRA & 2D Bar Coding

Now available on the Canada Revenue Agency website:

In October 2006, the Canada Revenue Agency (CRA) will introduce two-dimensional (2D) bar codes for T2 returns, which will be used to process computer-generated paper returns filed by corporations. The 2D bar code technology is presently being used for T1 Individual returns and has proven to be highly effective.

For more information please see the CRA website at:
http://www.cra-arc.gc.ca/newsroom/factsheets/2006/sept/fs060925-e.html

CRA Fact Sheet: My Business Account

Now on the Canada Revenue Agency website:

"The Canada Revenue Agency (CRA) has expanded its suite of e-services to provide business owners with convenient and secure on-line access to their personalized business account information through a new on-line service called My Business Account."

For more information see the full fact sheet at:
http://www.cra-arc.gc.ca/newsroom/factsheets/2006/sept/fs060925b-e.html