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payroll.ca December 23, 2019

The Honourable Diane Lebouthillier P.C, M.P. Minister of National Revenue Ministry of National Revenue House of Commons Ottawa, Ontario K1A 0A6

Via email: [email protected]

Re: Helping you achieve your mandate

Dear Minister Lebouthillier,

On behalf of the Canadian Payroll Association, I would like to congratulate you on your re- appointment to the position of Minister of National Revenue. The Canadian Payroll Association is eager to aid you in the fulfillment of your mandate. We applaud your Government’s stated commitment to modernizing government services and regulations in a manner that improves transparency and efficiency, and simplifies how individuals and organizations interact with government. Over the past few years, our collaboration with the Federal Government has resulted in many significant advances in these areas1 and we look forward to working with you and your staff to make living, working, and doing business in Canada easier and more affordable.

REPRÉSENTATION LA DE ET FORMATION LA MOYEN DE AU PAIE LA DE CONFORMITÉ

Our membership is intimately aware of the opportunities and challenges presented by the various ● government services and regulations affecting workers and employers. While processing $970 billion in wages and taxable benefits and remitting $272 billion to the federal government last year, Canadian payroll professionals work with the (CRA) and numerous federal government programs including Employment Insurance and Canada Pension Plan. Payroll ADVOCACY impacts and intersects with Canada’s economic and social development in countless ways: payroll is

involved with the administration of employment benefits, tax collection, labour data collection, AND workforce training and productivity development all while contributing to the modernization of business administration in Canada. Payroll professionals are also experienced when it comes to analyzing economic regulations. The administration of payroll is subject to over 200 federal across Canada. It is our hope that we can work

and provincial/territorial regulatory requirements EDUCATION together to leverage our members’ unique perspective and expertise on economic and employment policy to modernize government services and regulations to the benefit of all Canadians.

Minister Lebouthillier, many of the initiatives that have been identified in your mandate letter align THROUGH with, or relate to, the Canadian Payroll Association’s goals:

1 Electronic T4s relieving firms of $100 million in paper costs with no expense to government is one such example. COMPLIANCE More recently, the Payment on Filing initiative will save employers millions of dollars in in interest, penalties, salaries, and other administrative costs.

PAYROLL

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 “Reduce burden on Canadians by leveraging data and emerging technologies”

This goal could be achieved with respect to Canadian employers via the implementation of a voluntary real-time e-payroll system. Under the current system, payroll professionals must manually translate payroll data (which exists in various forms and formats within different payroll software programs) into forms and formats used by the Federal Government. This current process imposes time consuming and redundant tasks on employers. A well-constructed e-payroll system would leverage the data that payroll professionals already have available to report accurate and timely information to the Federal Government.

 “Work with the Minister of Digital Government on additional steps as required to meaningfully improve the satisfaction of Canadians with the quality, timeliness and accuracy of the services they receive from the CRA”

Simplifying the administration of the Income Tax Act would improve both individual taxpayers’ and employers’ satisfaction with the CRA’s services. From time to time, tax changes are introduced that are unclear or untimely in that they are introduced and enforced before payroll professionals and payroll service providers have the time to amend their systems accordingly. For example, the recent late introduction of a complex basic personal income tax exemption has created significant operational uncertainty and confusion for employers at a time of year when they are already busy processing their last payroll of this year and first payroll of the next. The manner and timing with which this change was introduced will also require over 18 million working Canadians to complete new and confusing TD1s during the last week of the year. When these such changes occur, tax compliance can become difficult. As a result, employees and employers may experience significant difficulties, including the possibility of facing audits. Unclear or untimely changes can also generally cause significant operational uncertainty and administrative costs for employers. The Canadian Payroll Association has a productive and longstanding working relationship with the CRA and we would be glad to assist with any steps that may be taken to improve Canadians’ satisfaction with the agency’s services.

 “Support more Canadians who wish to file taxes using no paper forms”

In 2017, the CRA worked with the Canadian Payroll Association and other stakeholders to implement an e-T4 solution that enabled employers to provide electronic T4s to employees by default. This initiative saved employers an estimated $100 million annually in paper burden costs, plus an additional $40 million for Quebec employers because of harmonization with Revenu Québec. Now that your government has made it its mandate to develop an e-Payroll system, the prospect of digitizing or even eliminating many major tax forms is within reach. A well-constructed e-Payroll system has the potential to eliminate the need for T1, T4, T4A and Record of Employment forms. The Canadian Payroll Association stands ready to assist the CRA in repeating the success of the e- T4 initiative by applying the same modernization strategy to other forms in a way that balances potential cost savings with the needs of employers, employees and individual tax payers.

 “Look for more opportunities to invest resources that help crack down on tax evaders”

The Canadian Payroll Association was proud to be part of the CRA’s consultations on reducing participation in the underground economy. Throughout the consultation it became apparent that some who evade paying their taxes do so out of a lack of understanding of their compliance obligations rather than out of maliciousness. The Canadian Payroll Association submitted four recommendations that were oriented towards increasing tax compliance awareness. Our full submission has been included in the appendix to this letter for your convenience.

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 “Work with provinces and territories to identify new ways of simplifying federal and provincial tax forms for individuals and businesses”

A significant proportion of payroll professionals’ day-to-day work is consumed by tax compliance and working with federal and provincial tax forms. Needlessly complicated tax forms can lead to costly errors and an increase in labour hours required to remain tax compliant. That is why the Canadian Payroll Association has always made the simplification of tax forms one of its highest priorities. Committees and membership outreach initiatives often results in the production of viable suggestions on the simplification of federal and provincial tax forms. For example, we have identified that cost savings and the elimination of redundancies would result if the provinces and territories followed Nova Scotia’s lead in entering into an agreement whereby the CRA administers the collection of employer workers’ compensation premiums. Nova Scotia’s model has increased government revenue and capacity, raised compliance rates, and reduced administrative burden on employers We would be happy to share these insights with your ministry at any time to help you achieve this component of your mandate.

Accurate and timely payroll administration is integral to ensuring that Canadian workers enjoy financial wellbeing and Canadian employers enjoy operational stability. Payroll professionals have valuable insights on how your Government’s initiatives can improve services, reduce administrative burden, simplify regulatory requirements, and modernize government’s tools and processes all while elevating the financial condition of everyday Canadians and unleashing the productive capacity of Canadian businesses. Congratulations again on your re-appointment as Minister of National Revenue. We look forward to continuing our productive working relationship with you and your ministry.

Please do not hesitate to contact me or our Director of Government and Legislative Affairs, Rachel De Grâce at 416.487.3380 x 126 or [email protected]

Peter Tzanetakis President The Canadian Payroll Association Tel: (416) 487-3380 ext. 101 Toll Free: 1-800-387-4693 ext. 101 Fax: (416) 487-3384 [email protected] http://www.payroll.ca

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Appendix

May 29, 2019 Mr. Ted Gallivan Assistant Commissioner for Canada Revenue Agency Assistant Commissioner’s Office Canada Revenue Agency 344 Slater Street Ottawa, ON K1A 0L5 Via email: [email protected]

Re: 60-Day Challenge: Innovative ways the Canadian Payroll Association can work with the CRA to help reduce participation in the Underground Economy

Dear Ted, Thank you for the opportunity to provide input on how the Canadian Payroll Association (CPA) can work with the Canada Revenue Agency (CRA) to help reduce participation in the Underground Economy (UE). It was my pleasure participating in last month’s meeting of the Minister’s Underground Economy Advisory Committee. I have since had time to discuss this important initiative with the CPA’s senior management team, resulting in the following recommendations that address increasing tax compliance awareness and understanding for all Canadians. 1. The CRA and CPA should co-develop a program for individuals new to the Canadian workforce to better understand their rights and responsibilities as tax payers. 2. The CRA should expand its RC4110 Employee or Self-Employed Guide by incorporating supporting components of the CPA’s Employee or Self-Employed Worker Best Practices Payroll Guidelines, and co-deliver to HR and accounting bodies. 3. The CRA should develop a separate form/format to report fees for services to clearly identify, distinguish and capture the billions of dollars of undeclared payments. 4. The CRA should enhance its Voluntary Disclosures Program with a dedicated stream for unreported employment income.

The following provide details to each of the recommendations above.

1. The CRA and CPA should co-develop a program for individuals new to the Canadian workforce to better understand their rights and responsibilities as tax payers. In order to raise tax compliance awareness for all students and new Canadian residents, this required course would include the following: • The difference between an employee and a self-employed worker (using an easier to understand explanation that currently provided in the CRA’s RC 4110 Guide) • The benefits of employment, including employer contributions and coverage under the Canada Pension Plan and the Employment Insurance program • The importance of paying a fair share of Canada’s total tax revenue and the programs these taxes collectively fund • Legislation holding every wage earner and every employer accountable for proper employment classification and treatment

This would be an expansion of the CPA’s Understanding Your Pay (UYP) program that includes a series of three short animated shorts directed at students in an effort to increase financial literacy amongst Canadians. The UYP material includes information regarding the importance of protecting the individual’s own Social Insurance Number; filling out the TD1 Personal Tax Credit Return; receiving a pay statement and T4 for employment earnings; a high level of government use of [5]

personal income taxes received; basic employment standards; and the importance of budgeting and savings for the future.

The CPA encourages the CRA and the Federal and Provincial/Territorial governments to expand on the UYP presentations to co-develop with the CPA a mandatory course that all high school students would need to pass before achieving their leaving certificates. This could be expanded to newcomers to Canada. The CPA has experience with developing and delivering high level educational material with its three certifications: Payroll Compliance Practitioner, Certified Payroll Manager, and Spécialiste en conformité de la paie du Québec.

2. The CRA should expand its RC4110 Employee or Self-Employed Guide by incorporating supporting components of the CPA’s Employee or Self-Employed Worker Best Practices Payroll Guidelines, and co-deliver to HR and accounting bodies. Human Resources and Accounting are usually the departments responsible for determining a worker’s status. Arrangements are often made to pay an employee as a “consultant” or “self-employed worker” with no payroll withholdings, and without the payroll department’s knowledge. Greater education in this area is needed. The CPA’s Guidelines clearly explain the criteria used by the CRA (and RQ) in order to help a payer determine the relationship of the worker. The Guidelines are written using easy to understand language, and are illustrated with real-life examples. The Guidelines are interactive, and include an online tool to help a payer test their knowledge about compliance requirements. These resources are currently password protected as a benefit of CPA membership; however, the Association is willing to freely share these tools with HR and Accounting organizations through co-delivery with the CRA.

3. The CRA should develop a separate form/format to report fees for services to clearly identify, distinguish and capture the billions of dollars of undeclared payments. For workers classified as self-employed, the CRA should develop a separate form for declaring fees for services that is easy to use and administer. The current requirement to report these fees on the T4A Statement of Pension, Retirement, Annuity, and Other Income is not widely understood or applied. Part of the problem is that the T4A requires a payroll account for filing, even though the CRA has agreed these are not payroll earnings. The test should be: if no payroll remittances are required, the payer should not require a payroll account for filing.

An alternative format should also be explored, such as the sharing of an employer’s accounts payable payments to each vendor above a realistic threshold (for example, $50,000/year). The CRA should conduct jurisdictional research into how such payments are reported in other countries. Because of the enormous volume of fees not reported, it is imperative that the CRA develop a form/format that clearly describes requirements for both the payer and recipient, instead of using the T4A form that an employer’s accounts payable department is unfamiliar with since it is mostly used to report pension income.

4. The CRA should enhance its Voluntary Disclosures Program (VDP) with a dedicated stream for unreported employment income. The CRA should adopt an administrative policy for the next five years that voluntarily disclosed income (up to a certain amount) be capped at a certain maximum for penalties and interest. The CRA should also co-develop (with the Canadian Payroll Association and the Chartered Professional Accountants of Canada), targeted communications regarding this ability for a worker or payer to voluntarily disclose unreported income under an enhanced VDP. Communications should include:

• Webinars • Fact sheets/Q&As on the CRA’s website • Social media [6]

Involving Revenu Québec to adopt similar VDP enhancements is also recommended.

The CPA looks forward to continued collaboration with the CRA and the UE Advisory Committee to explore these and other recommendations to promote greater tax understanding and compliance.

Peter Tzanetakis President, The Canadian Payroll Association