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User fees are just another tax grab

 So-called private member's bills introduced by backbenchers usually don't get far in Parliament. Some aren't even designated as votable. But Bill C-212 on government user fees is -- and deserves all-party support. It would make user charges for government-provided services subject to parliamentary scrutiny and approval, the same as required for taxes.

There's growing and legitimate discontent in the business community over the explosion in government user fees imposed on companies in recent years. Many businesses regard steep increases in what's charged as an unfair tax grab.

Introduced last fall by Toronto-area Liberal MP Roy Cullen, the proposed legislation would make Parliament rather than government departments and agencies ultimately responsible for approving new user fees or raising existing ones. It would ensure public debate over whether services delivered actually give value for money.

There has been a big increase in user fees for a diverse range of government services since the mid-1990s when an aggressive departmental cost-recovery program was launched as part of Ottawa's deficit reduction plan. The intention was sensible -- to defray the costs of government services that provided a commercial and sometimes exclusive benefit to businesses. Examples: food safety inspections, ice-breaking operations, pharmaceutical product approvals, some kinds of weather forecasting.

Fees were only supposed to be charged if there was a direct business or individual benefit from the government-provided service. The trouble was that government departments used the umbrella of deficit reduction to go on a user-fee spree. Ottawa now rakes in $4-billion a year in fees levied by about 50 departments and agencies in connection with some 400 cost-recovery programs. Many charges were set by way of regulation with little real consultation on their business impact or how they compared internationally.

This raised the hackles of many business groups. They don't think departmental officials have properly justified the level of new or increased user charges or done enough analysis of how they affect business competitiveness. They also accuse some departments of just trying to expand revenues without caring about an adequate relationship between what's charged and the cost and quality of the delivered service. It's also not as if businesses have a lot of choice in the matter. Government departments are often the sole providers of necessary services. Certain kinds of companies couldn't stay in business without them. An example: mandatory food safety inspection services.

Business groups also complain that, in some cases, while fees have gone up, services have deteriorated. As an example, they say charges introduced in 1996 for reviewing new veterinary drug submissions are twice as high here as in Britain or Australia, but the process now takes twice as long as it did in the mid-1990s.

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More than two years ago the all-party parliamentary Finance committee also was highly critical of the fee-setting process and made several recommendations for change. These included giving departments less autonomy to impose user fees and setting up an independent dispute resolution process. However, the federal Treasury Board, which has an important role in the government's financial affairs, pretty much rejected all the committee's main proposals. This dismissal came despite criticisms of the present system by the Auditor-General of Canada.

Meanwhile, business groups continue to object, through a Business Coalition on Cost Recovery group that represents 15 industry associations. Garth Whyte, executive vice-president of the Canadian Federation of Independent Business, says that, like most other associations, his small-business organization supports user-pay cost recovery in principle. But hefty increases in the fees are hurting many small firms, he says, and in some cases companies are required to take services they do not want or need. Business groups are also concerned about cross-subsidization of government services. And they want more adequate notification of intentions to set, raise or broaden user charges.

Mr. Cullen's bill addresses these issues. It has support in principle from the opposition parties and from many other Liberal MPs. They agree that some user fees are much higher than the cost of services provided and that many services are not cost effective. Some have labelled user fees as hidden taxes or a tax with another name.

The government itself admits faults with the present system. It acknowledges that improvements can be made to the system and it wants more explicit guidelines for departments and agencies. A revised policy is being worked on and should be announced soon. But the government's executive branch remains loath to give parliamentary committees the right to approve the setting and amending of fees for government-provided services. It prefers ministers to retain this responsibility.

The crux of the problem is that present policy is vague, fee-setting is inconsistent and the government has been reviewing the issue for long enough. At the very least, it should agree to some form of mandatory ongoing parliamentary oversight on user fees and an independent dispute settlement system. Better still would be all-party co-operation in making Mr. Cullen's constructive bill workable, then get it passed and give Parliament a wider role in how government raises revenues.

 








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Copyright 2002-2008 by Roy Cullen.
Questions, comments or concerns: CulleR@parl.gc.ca