Thank you, Mr. Chair. Good afternoon.

I'm joined here today by Mr. Geoff Trueman, who is general director in the tax policy branch; Maude Lavoie, director of intergovernmental policy and evaluation and research; and Miodrag Jovanovic, the director of the personal income tax division.

I will begin my remarks today with a brief overview of the role of the tax policy branch. I'll then say a few words about the Department of Finance's reporting on tax expenditures and the steps we're taking to address the recent recommendations by the Auditor General to improve our reporting on tax expenditures.

The main responsibility of the Department of Finance with respect to taxation is to support the government in the development of federal tax policy. For the tax policy branch, this involves developing, analyzing, and evaluating potential tax measures or adjustments to existing measures. It also involves drafting legislation and supporting its passage through Parliament.

Our analysis is guided by sound tax policy principles in line with the objectives of ensuring a competitive, efficient, fair, and simple tax system. The analysis, review, and evaluation of either new or existing measures are carried out by highly qualified Finance Canada employees with in-depth knowledge of the Canadian tax system.

The branch's analytical and evaluation work is systematic and thorough. Our analytical framework incorporates several elements. These elements include, for example, a detailed assessment of the need for policy intervention; an assessment of the effectiveness of a measure in meeting its policy objectives; assessment of whether measures meet fundamental policy objectives of efficiency, fairness, and simplicity; consideration of alternative delivery mechanisms; a review of gender or environmental concerns as well as potential provincial or territorial impacts; and assessment of potential fiscal implications.

We also consider administrative, compliance, and legislative concerns, and we consult other departments, stakeholders, and other jurisdictions.

After a measure is implemented, the department monitors the performance of the tax system on an ongoing basis, meets stakeholders, analyzes trends in relevant data, monitors jurisprudence, and consults the Canada Revenue Agency, other departments, agencies and the general public.

When issues are identified, they are carefully reviewed by the department and decision-makers are briefed when appropriate.

Although it may differ in some respects from the rules applicable to direct program spending, the review process for tax expenditures is effective in identifying potential issues with the tax system. It is also effective in leading us to the desired outcome, which is to ensure that the tax system performs as intended.

Allow me to give you a few statistics that illustrate the scope and breadth of the branch's work.

In the course of the four last federal budget exercises, the branch prepared detailed analyses of about 400 different tax proposals, and about 110 of these measures were either implemented or on course of being implemented. The department prepared 1,274 pages of new tax legislation in 2013, and 363 pages in 2014. Since 2006, more than one third of all existing income tax expenditures were either adopted or modified to some extent.

Let me speak now, briefly, about the department's reporting on tax expenditures. The department first reported on federal tax expenditures in 1979 and was one of the first countries to do so. Since then the department has been proactive in providing extensive information on tax expenditures to Canadians in a manner that contributes to transparency and accountability.

Through its annual “Tax Expenditures and Evaluations” report and its companion reference document “Tax Expenditures: Notes to the Estimates/Projections”, the department provides valuable information to the public. This includes information on the objectives and design of federal tax expenditures as well as their actual and projected costs.

Canada is also one of a handful of countries that publish evaluations of tax expenditures on a regular basis. The Organisation for Economic Cooperation and Development and the International Monetary Fund have recognized the high quality of Canada's reporting on tax expenditures.

We're pleased with the Auditor General's finding that the department does a good job of analyzing new tax measures and monitoring existing ones. While the department is of the view that we have a robust approach to the management of tax expenditures, we recognize there is always room for improvement, and it's in this spirit that we welcome the Auditor General's recommendations.

Starting next year the department will be providing two additional years of information as recommended by the Auditor General. Also, as recommended, the department will add information in the companion reference document to better inform readers on government spending programs.

The department is committed to continuously improving the public information available on tax expenditures. We'll make sure that high-quality analyses and evaluations of tax expenditures continue to be performed.

Thank you, Mr. Chair.

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