Ottawa looks at user-fee hikes for potential new revenue

While it is appropriate that the government is reviewing the User Fees Act to streamline the process (and increase revenues), there is a risk in providing departments with too much flexibility and too limited public consultations.

A clear case in point is with respect to citizenship fees, set at $100 in 1995.

The previous government obtained an exemption from the Act in Budget 2013 omnibus legislation which allowed it to avoid lengthy consultations and increase the fees to $300 in February 2014 along side Bill C-24’s revamping of the Citizenship Act. The government then did a further increase to $530 January 2015, with the change buried during the Christmas holidays.

This further increase was never mentioned during the Commons and Senate hearings on C-24, highlighting again the risk to public accountability.

There is also the broader risk that the current government may only look at fees from a cost recovery or private interest perspective, and not take into account that some fees reflect a mix of private and public interest.

I have argued elsewhere that citizenship fees have such a mix (see The impact of citizenship fees on naturalization – Policy OptionsC-6 Senate Hearings: Expected Impact on the Naturalization Rate) given the shared interest in encouraging political as well as economic and social integration.

Passports, also part of IRCC, are IMO more of private than public interest, where full cost recovery makes sense. Passport fees are subject to the Act and in testimony, departmental witnesses indicated that it took about two years to obtain approval:

The Liberal government is eyeing the user fees Canadians pay for federal services as a new source of revenue.

Since 2004, fees for everything from fishing licences to campsites have generally fallen farther behind the cost of providing those services. That’s the year the User Fees Act was passed, compelling departments to justify to Parliament any proposed fee increases or new fees.

The requirements under the law have been so onerous, however, that they effectively discouraged departments from applying for increases even as costs rose. The result is that taxpayers are stuck with higher bills for private benefits enjoyed by individuals and corporations.

The federal Treasury Board wants to fix the law to smooth the way for more fee increases, putting the fee-cost arithmetic back into balance — and snaring fresh revenues that could be worth millions of dollars.

The wide-ranging initiative, called the Modernizing of the Management of User Fees, is outlined in an internal document CBC News obtained under the Access to Information Act.

“While fees have not increased over time, costs have,” says the heavily censored Aug. 8 memo for Scott Brison, the Treasury Board president. (Numerous sections of the document, available below, have been whited out.)

“This resulted in an increase in the rate of taxpayer subsidies for government services that benefit private interests,” it says.

The freezing effect of the 2004 User Fees Act was dramatic, says the memo. Prior to the legislation, there were an average of 10 proposals each year to increase fees. After 2004, that dropped to 2.4 proposals annually.

Increased paperwork

Changes brought about by the legislation added “significant time and effort” in paperwork for fee increases or new fees, which discouraged applications. Departments have also since been wary of a provision that requires them to cut fees whenever they fail to meet performance standards, says the document.

As a result, 84 per cent of existing user fees have not been revised in nearly 13 years, and now cover a diminishing fraction of the cost of providing the services.

The memo cites the example of the Canadian Food Inspection Agency, which in 2004–2005 collected $54,999 in user fees for services that cost government $694,641 — or only about eight per cent of the bill.

Nine years later, at $55,988 in fees versus $877,306 in costs, the ratio had worsened to 6.4 per cent.

Other departments, including Health Canada and Industry Canada, have been more successful in keeping the fee-to-cost ratio in balance.

The released sections of the memo do not contain an estimate of potential new revenues.

A spokesman for Treasury Board declined to provide details or timing for the initiative.

‘Strengthening the accountability’

“While the matter of modernizing user fees is still under consideration, we remain committed to strengthening the accountability, oversight, and transparency of user fees,” Alain Belle-Isle said in an email.

Sheila Fraser, then-auditor general of Canada, found in 2008 that there were about 220 federal fees reported publicly, worth about $1.9 billion to the federal treasury. Fees are charged on a wide range of services, including passports, licences for manufacturing drugs, marine navigation, citizenship, and national park entry.

Fraser’s report, which made headlines that spring, criticized the government for overcharging Canadians for consular fees that were attached to passport application fees.

‘Inappropriately subsidizing’

Less noticed was her warning that the government “may be recovering less than an appropriate amount from fee payers, or, depending on the fee, taxpayers may be inappropriately subsidizing a private benefit …”

Source: Ottawa looks at user-fee hikes for potential new revenue – Politics – CBC News

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About Andrew
Andrew blogs and tweets public policy issues, particularly the relationship between the political and bureaucratic levels, citizenship and multiculturalism. His latest book, Policy Arrogance or Innocent Bias, recounts his experience as a senior public servant in this area.

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