Cost Recovery Initiative: Consultation Document
9. Appropriate cost sharing between regulated parties and taxpayers
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The CFIA estimates that the full cost of its activities is $824 million per year.
The activities undertaken by the CFIA provide benefits to both regulated parties (private benefits) and taxpayers (i.e. public benefits). Regulated parties benefit from CFIA services, such as receiving export certification and product registrations. These services allow regulated parties to sell their products, either internationally or on the Canadian market. Regulated parties also benefit from other CFIA activities such as compliance verification and surveillance. Such activities support a robust science-based regulatory system that promotes food safety and protects Canada's plant and animal resource base. This in turn enhances market access for Canada's food, plants and animals.
Taxpayers benefit from CFIA activities from a health, safety and security perspective. CFIA activities prevent and manage food safety risks, protect plant resources from pests, diseases and invasive species and prevent and manage animal diseases.
Determining the public and private benefits related to the proposed CFIA service categories and other CFIA activities is important because it helps determine how costs should be shared between taxpayers and regulated parties. In particular, the determination of private benefits derived by regulated parties helps to establish the upper limit for future cost recovery revenues. It is important to note that this alone is not an indicator of what fees should be, since other factors such as economic impacts also need to be considered in the development of a fee proposal.
Table 3 outlines a scale that has been developed in determining the allocation of benefits to the regulated party (private benefits) and the taxpayer (public benefits).
|Share of benefits to regulated parties||Explanation|
|0%||No benefit to regulated parties; virtually all benefits are derived by the public.|
|25%||Most benefits are derived by the public but a portion of benefit is derived by the regulated party.|
|50%||Benefits are shared equally between the regulated party and the public.|
|75%||Most benefits are derived by the regulated party but a portion of benefit is derived by the public.|
|100%||Virtually all benefits are derived by the regulated party; no benefits derived by the public.|
As a basis for discussion during this phase of consultation, Table 4 identifies the proposed benefits derived by regulated parties (private benefits) for each service category, along with a supporting rationale. The table also identifies the potential private share of benefits for compliance verification and surveillance, as well as emergency response activities.
Table 4 - Potential benefits to regulated parties
|Activities||% Benefit to regulated parties||Rationale|
|Applications and official documents||100%||These services involve processing requests from and for the benefit of regulated parties.|
|Technical reviews and training||75%||Most benefits accrue to regulated parties; however, such services can reduce health and safety risks to Canadians (when related to imports and interprovincial trade), meaning that the public shares a portion of the benefits.|
|Requested inspections, laboratory tests and audits related to exports||100%||Such services directly benefit regulated parties that export. While exports contribute to the Canadian economy, this is secondary to the benefits that accrue to regulated parties.|
|Requested inspections, laboratory tests and audits related to imports and interprovincial trade||75%||Most benefits accrue to regulated parties; however, such services can reduce health and safety risks to Canadians (when related to imports and interprovincial trade), meaning that the public shares a portion of the benefits.|
|Follow-up inspections and laboratory tests||100%||When non-compliance is observed, regulated parties are responsible for the costs of follow-up services to verify correction.|
|Activities||% Benefit to regulated parties||Rationale|
|Compliance verification and surveillance||75%||These activities provide benefits to regulated parties, such as consumer confidence and market access. They also reduce health and safety risks to Canadians.|
|Emergency response||0%||Response activities are focused principally on reducing health and safety risks to Canadians.|
Based on the information outlined in Table 4, one can estimate the value of benefits to regulated parties in relation to the full cost of CFIA activities. Of the estimated $824 million annual full cost of CFIA activities, our analysis suggests that $533 million of these costs represent benefits to regulated parties. Under the current cost recovery regime, the CFIA recovers only $55 million (about 10%) from regulated parties. The remaining $478 million (about 90%) is supported by taxpayers.
We are seeking your views on the appropriate level of cost sharing between taxpayers and regulated parties. We also want to understand the impact of potential fee increases on businesses. This feedback is essential for the CFIA to develop a fee proposal that balances the views of taxpayers and regulated parties. This fee proposal will be the subject of the next phase of consultations.
We want your feedback. Please provide your views on the following questions using the contact information identified in Section 12:
- For the various categories of CFIA services, what share of the costs should be covered by regulated parties? What factors need to be considered?
- What share of the cost should be covered by taxpayers? What factors need to be considered?
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