Finance Committee on Feb. 18th, 2021

[The Chair, Liberal, Wayne Easter]

I will call this meeting to order.

Welcome to meeting number 20 of the House of Commons Standing Committee on Finance.

Pursuant to the committee's motion adopted on Friday, February 5, 2021, the committee is meeting to study all aspects of COVID-19 spending and programs. That should be a short issue, you would think.

Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, 2021, and therefore, members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website. The website, as we all know, will only show the person who is speaking.

I have to indicate again, because I understand there have been some problems in the past, that people should not take screenshots or take photos of their screens. It's the same rules as in Parliament.

We have 12 witnesses today, but before I get to them we have a couple of motions that we need to adopt. We missed, when we were dealing with Bill C-224, giving the independents the opportunity to provide amendments so I'll read the motion we require and if somebody wants to move it, we'll move ahead.

That, in relation to Orders of Reference from the House respecting Bills,

a) the clerk of the committee shall, upon the committee receiving such an Order of Reference, write to each member who is not a member of a caucus represented on the committee to invite those members to file with the clerk of the committee, in both official languages, any amendments to the Bill which is the subject of the said Order which they would suggest that the committee consider;

b) suggested amendments filed, pursuant to paragraph (a), at least 48 hours prior of the start of clause-by-clause consideration of the Bill to which the amendments relate shall be deemed to be proposed during the said consideration, provided that the committee may, by motion, vary this deadline in respect of a given Bill, and

c) during the clause-by-clause consideration of a Bill, the Chair shall allow a member who filed suggested amendments, pursuant to paragraph (a), an opportunity to make brief representations in support of them.

That's the motion.

Does somebody want to move that? It is so moved by Mr. Ste-Marie.

(Motion agreed to)

Thank you.

The second motion we need to deal with is a budget to deal with the study of Bill C-224. Gabriel is not a very expensive guy, because we're only asking for $1,275 for this study. Does somebody want to move that budget? It is so moved by Ms. Dzerowicz.

(Motion agreed to)

We'll move on to witnesses. I believe everyone has the witness list before them.

From the Canada Revenue Agency we have Mr. Vermaeten, assistant commissioner, who has been here many times; and Mr. Gallivan, assistant commissioner. From the Department of Employment and Social Development, we have Elisha Ram, who is associate assistant deputy minister; Mr. Groen, senior assistant deputy minister; Mr. Perlman, chief financial officer and senior assistant deputy minister; and Atiq Rahman, acting assistant deputy minister, learning branch. From the Department of Finance, we have Tushara Williams, associate assistant deputy minister; Galen Countryman, director general; Evelyn Dancey, associate assistant deputy minister; Soren Halverson, associate assistant deputy minister; Alison McDermott, associate assistant deputy minister; and Mr. Jovanovic, associate assistant deputy minister.

I don't know if there are any opening presentations. You'll have to let me know.

Ms. McDermott.

[Alison McDermott, Associate Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance]

Mr. Chair, we thought we would just go straight to questions.

[The Chair, Liberal, Wayne Easter]

All right. That's very good.

We will now start a six-minute round of questions. The lineup for the first round will be Mr. Kelly, Mr. Fraser, Mr. Ste-Marie and Mr. Julian.

The floor is yours, Pat.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

It's difficult to even know where to start. Perhaps I will begin with the CRA and talk about self-employed workers who did not qualify but applied for CERB due to misleading or confusing information, either in the written criteria or, more particularly, when given incorrect information about qualification over the telephone from the call centre or from employees at CRA.

Do you know how many workers this was? Can you quantify the number of people?

[Frank Vermaeten, Assistant Commissioner, Assessment, Benefit and Service Branch, Canada Revenue Agency]

It's impossible to quantify how many people would qualify for this relief at this point, because we don't know at this point who wouldn't have qualified without this relief provision. That's because we'd need their 2019 tax return and their 2020 tax return. We'd need to see the income they made in those two years and in the 12 months prior to application.

Therefore, in terms of who would have needed this relief, we won't really know until we have all that information and we have done the compliance to verify the information.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

That's only part of what my question was. We do know that thousands of Canadians received letters demanding repayment. We know that some of the people who received those letters thought they did in fact qualify. Many even called and spoke directly to employees at the CRA and came away from those conversations misled about their eligibility for the program.

Do you have any numbers you can give to the committee about that?

[Frank Vermaeten]

Yes, certainly. I want to just clarify that in terms of getting incomplete information or not correct information, that certainly was very early in the pandemic. We were rolling out these programs very quickly. The program began on April 6, and it took us around three weeks to clarify that issue of gross versus net. Certainly, in those three weeks there were definitely people who got the wrong information or a lack of clarity in that information.

With respect to the number of letters that were sent out to these individuals, the letters that went out asking people whether they were sure they were qualified, approximately 30,000 individuals who were in that gross-net range received those letters.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

These are people who, based on past filings, the agency knew did not qualify, and were therefore sent the letter?

[Frank Vermaeten]

It's not quite as clear as that. It's not that we said they didn't qualify; it was that they may not qualify.

Remember, at the time the letters were sent out, all we had was the 2019 tax return. They still may have qualified. If you recall how it works, you can meet that $5,000 threshold, whether it was in 2019 or the 12 months prior. To the extent that individuals actually earned money in the 12 months prior to making the application, they may still have qualified.

The letter was in fact what we'd call more of a nudge letter. Rather than saying that you don't qualify, it was more saying that preliminary data shows that you may not qualify, and if you don't, you should consider repaying. It was more of a nudge letter, I'd say. It was certainly not a demand to repay.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

A tax filer getting nudged by the CRA will tend to put tremendous weight on what they receive. What may be thought by the department to be a nudge is often taken very hard by the recipient, especially small business owners.

If I have time, Mr. Chair, I'd like to shift a little and ask the finance officials about businesses that did not qualify, and still do not qualify, for the wage subsidy or the rent subsidy because they don't meet the loss criteria. They either opened in March 2020 as a business or in 2019 had severely reduced revenue because of retooling a plant, rebuilding a restaurant, being closed for much of 2019 and not having the comparable year-over-year loss to qualify for these programs. These businesses have been completely left out in the cold with catastrophic results.

I wonder if I can have the finance officials comment on whether there was any consideration of these businesses or if there will be any future consideration.

[Miodrag Jovanovic, Associate Assistant Deputy Minister, Tax Policy Branch, Department of Finance]

What the various changes that have been made to this program confirm is that the government is attentive, in an ongoing manner, to any gaps that may exist with respect to support to businesses and individuals. This is obviously still a consideration as one of the gaps that has been identified along the way, and certainly the government continues to consider it as we speak.

The wage subsidy is still based on the qualifications as of March 15, having a payroll account, for instance. We have to understand this is instrumental and critical to the integrity of the system. This approach has been chosen primarily for these reasons. It is difficult to help all types of situations and maintain proper integrity. At the same time, the government recognizes that the system is not perfect and that there are gaps, and the government continues to consider these gaps. That's all I can say.

[The Chair, Liberal, Wayne Easter]

We are at time, but I want to be absolutely clear. Are you saying that some of these flaws are still under consideration by the government, Mr. Jovanovic?

[Miodrag Jovanovic]

I'm saying the government has never stopped considering how best to adjust the various support programs to make sure that businesses and individuals are supported to the best of the government's ability.

[The Chair, Liberal, Wayne Easter]

Thank you. That is an issue that I think we all as members are getting some calls on, and we do know it's complicated.

I'll turn to Mr. Fraser. Before I do, I want to remind members that the Library of Parliament has prepared a fairly substantive document on the programs and the expenditures, so if you have that available to you, it will be helpful.

Mr. Fraser.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you very much, Mr. Chair.

Before I get into my questions I want to start with a message of thanks. I don't think many people appreciate the work that the public service has put in to develop many of the emergency measures that have supported Canadians, particularly in the early days of the pandemic. To have seen behind the curtain to some degree, I want to say that your effort was noted and so greatly appreciated. There are people in my community who were able to keep food on the table and a roof over their head because of the work you've done, so please, on behalf of people who live in Central Nova, I want you to know how appreciated your work has been.

To start off, I want to ask a question on where we might be had some of these emergencies not been advanced. A year ago, no one knew what the coronavirus was except for the snippets we were starting to see on TV.

Mr. Chair, I think we have someone jumping in. I think Pat needs to mute his microphone.

[The Chair, Liberal, Wayne Easter]

Can you hear us, Pat Kelly?

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I'm sorry about that.

[Sean Fraser, Liberal, Central Nova, NS]

I was just on a roll, too.

Mr. Chair, I hope you'll indulge me with the few seconds that we lost there.

It wasn't much more than a year ago that the coronavirus was first on the international radar. Obviously, as we got into March and April of last year, it became the only thing anybody was talking about. In those early days, I remember taking calls from people who didn't know where their next paycheque was going to come from or were worried about losing their home, and from businesses that were worried about keeping the doors open or workers on the payroll.

I'll give a quick summary of some of the main programs that people may be familiar with. CERB helped almost nine million people so far. The student CERB helped hundreds of thousands more. The wage subsidy is keeping over four and a half million Canadians on the payroll. CEBA and the regional relief and recovery fund together supported nearly a million businesses.

Although I hear a lot about the quality of life that people were able to maintain because these supports were coming in, I'm wondering if you have any quantitative data on the actual impact of these measures. Where would we have been had these measures not been advanced in a timely way to help keep people and businesses afloat during the emergency?

[Alison McDermott]

I can say a little.

I'm reaching for my notes from the fall economic statement. We did quite a bit of analysis to try to estimate those impacts. For example, if you look at page 38 of our fall economic statement, we have some estimates of how the real GDP and the unemployment rate would have been different on a very significant magnitude, in our estimation, in the absence of some of this support. For example, direct support measures are expected to result in economic activity being 4.6%—

[The Chair, Liberal, Wayne Easter]

Alison, I hate to interrupt, but can you pull your mike up or down just a little? You're popping.

[Alison McDermott]

Is that better?

[The Chair, Liberal, Wayne Easter]

Yes, that's great.

[Alison McDermott]

We estimate, for example, economic activity being about 4.5% higher in 2020 and 4.5% higher in 2021, compared to a scenario that would have occurred in the absence of that support measure. We estimate that this translates into about 1.2 million full-time equivalent jobs protected as a result of these.

Of course, these are just rough estimates, but we know that the impacts are significant.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you very much for that, Ms. McDermott.

One of the reasons I ask is that sometimes the argument is made that these measures are so expensive that we can't afford them. My view is that we couldn't have afforded not to implement them in a timely way.

I believe it was Professor Kevin Milligan when he testified before this committee previously who made the point that the virus created significant costs. The federal government was faced with the decision, effectively, as to who should bear that cost and whether the government should step up with emergency supports or whether it should be passed on to households and businesses that, in my mind, could ill afford those measures.

I'm curious, from your perspective, based on the fiscal position that Canada held entering this pandemic and the impact that this pandemic has had on already low interest rates.... I'll simplify the question. Can we afford the emergency response?

[Alison McDermott]

You're absolutely right that interest rates are at an all-time low and that certainly makes these kinds of investments a lot less costly than they would otherwise be.

I'll note that we're really not alone in Canada in this kind of a response. This is the kind of advice we've received from the IMF and the OECD. It's very consistent with what all other major economies are doing in terms of seeing that value and providing support to businesses and individuals in order to avoid longer-term economic scarring that might indeed be more costly over the long run.