Public Accounts Committee on April 22nd, 2021

[The Chair, Conservative, Kelly Block]

Yes.

[Michael Sabia]

Madam Chair, for the specifics of that question, I'll turn to my colleague Andrew Marsland.

[Andrew Marsland, Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance]

I'll make a couple of observations on that point.

Of course, with a program of general application, you have to have rules that will apply simply across the economy, and it's very difficult to accommodate every circumstance.

That said, a number of adjustments were made to the program as we went along. For example, we added a potential different reference period, so you could look at January and February 2020 as opposed to the corresponding months in 2019. However, as I said, when it's a program of general application and you're looking for certainty and a degree of simplicity, or the highest degree of simplicity possible in the rules, it's simply not possible to recognize every single circumstance.

[Matthew Green, NDP, Hamilton Centre, ON]

Who in the small business community—I'm talking mom-and-pop shops—did you consult with when you were dealing with your adjustments?

[Andrew Marsland]

We consulted broadly with a number of groups and associations representing both large and small businesses, as well as with individual associations and businesses in general.

[Matthew Green, NDP, Hamilton Centre, ON]

I see that my time is up. Hopefully the folks who are watching will try to make some sense of that, and we'll continue to try to find the answers.

Thank you.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Green.

We will now go to our next round of questioning.

We'll start with Mr. Lawrence for five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you. I'll start the discussion with the Auditor General.

I want to go back to the topic of the pre-vetting and post-vetting. My challenge here is that I'm trying to understand whether or not this was a good decision on some of the things, even a simple thing like a social insurance number. I still don't understand what the delay or what the cost would have been up front to pre-vet it. I don't understand what the cost would be afterwards.

Did your office do those calculations? Can you shed some light on that for me, please, Ms. Hogan?

[Karen Hogan]

During our audit, we did not look at the costs of choosing one option over another. It really was a policy choice to prioritize speed and then put work on the post end of the subsidy.

I guess all I would offer up is that the Canada Revenue Agency has already started some of that post-audit work. It had a phase one that it has done. It can perhaps comment on whether or not it was difficult for employers to provide all of the information that was needed and how much documentation was needed. That would give you a sense of the time and involvement from both the recipient and the agency going forward. Our focus was not on that, unfortunately.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Okay.

I'll go back to Mr. Hamilton on this.

I appreciate your commitment to provide us with the analysis, but everything is in degrees, right? If it was a two-day delay to get this in and it would have cost $100 million not to do that, then that was a bad decision, but you haven't given me any parameters whatsoever as to the time and the cost of taking these other steps.

There must have been analysis. You didn't just flip a coin and say “Yes SIN” or “No SIN”, but I have no data, no information, in front of me that allows me to make that decision.

[Bob Hamilton]

Madam Chair, I'll just respond to that.

I think, as I said in my earlier response, there's cost, and one could do a cost-benefit analysis, but there's also the element of time, so we have to....

If we go back to that moment in time, we were building a brand new system. This wasn't running off of our existing CRA system; we built a new system. In terms of the time that would have been required to make sure that the employers could provide the SIN and build into our IT system the ability to use that information effectively, we're certainly talking about way more than a couple of days. We would have been having to delay for a period of time. Now, can I put a cost on that? I'd have to think a little bit more about how one would cost that.

On the other side, we knew we'd have an opportunity to get that information and come back at the back end.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Okay.

Maybe Mr. Sabia would be the best to respond to this.

I appreciate your thoroughness, Mr. Sabia, but they do say that brevity is the soul of wit.

The Department of Finance must have done a projection. How much money was it projected the treasury would lose by not having this pre-vetting? How many millions is it? Is it hundreds of millions, tens of millions, that the treasury has forgone by not having this pre-vetting?

[Michael Sabia]

I think the quickest way to respond to your question, Mr. Lawrence, is to pass it to my colleague, Andrew Marsland, who was there at the time.

[Andrew Marsland]

Madam Chair, I'm sure the committee will appreciate that in designing these programs and in designing this one particularly quickly, we were looking at a balance of issues in terms of the speed with which the program can respond—which was particularly important in this case—and the risks associated with layering on additional requirements before payment.

There are two core elements to the program. One is the salaries paid and the other is the revenue decline on a period-by-period basis. In terms of the salaries paid, there is information available to the Canada Revenue Agency through the normal reporting of source deductions and so on to demonstrate that there are salaries being paid, albeit not necessarily in advance of the payment of the subsidy.

I think that in terms of balancing the speed of response and the risks involved, that was the calculus involved.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I understand all that, but there have to have been projections. You didn't just say that you needed to get money out quickly. You must have looked at the numbers. There must have been a forsaking of $10 million or $50 million or $100 million, but I'm not going to get a clear answer here. I'm hopeful you'll provide it to the committee.

One last question for you—

[The Chair, Conservative, Kelly Block]

I'm so sorry, Mr. Lawrence, but we are over time. I know there will be another opportunity for questions.

We will now move on to Ms. Yip for five minutes.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Mr. Hamilton, I want to commend the quick turnaround the CRA employees have done during this pandemic. I know it must have been a very difficult time for everyone. I've heard from many businesses in my riding that have said this wage subsidy has been a real lifesaver for their business, as well as for their employees.

Why couldn't the CRA just put on the application form when businesses applied that the social insurance number was required?

[Bob Hamilton]

Thank you, Madam Chair.

I'll go to one of my colleagues to provide some details, but I think what I've said thus far is that it was not feasible in practice to do that and still respect our ability to get the benefits out the door in a timely way. To build the IT system to be able to use that information and incorporate it was going to push us off course. I'm not saying it couldn't be done, but it would have slowed the system, and it seemed very important at the time to get the money out the door.

In terms of the cost-benefit analysis we talked about earlier, one has to recognize that in not collecting the information up front, it's not like the money is gone forever. We always have that backstop of back-end verification. I think that's an important consideration when we think about revenue lost or what have you. We're talking about can we make it more efficient to collect it upfront versus going at it at the back end? But we always have the back-end ability, and so that factored into our thinking extensively.

I don't know if any of my colleagues want to add more specifically on what we would have done and what we could have done.

[Ted Gallivan]

If the chair allows it, just briefly, I don't want to leave the impression there were no front-end controls. We had historical data on the size of businesses' payrolls, and we found that sufficient to flag businesses for risk. If there was a significant discrepancy between the historical payroll paid, not at an employee level but in the aggregate, and what was being claimed on the wage subsidy, that resulted in these manual reviews that represented 40% of the dollars. Those manual reviews were done by the level of auditor who usually deals with it. In some cases they went to the most senior-level auditors in the agency.

I don't want the impression to be that because we didn't have the SINs, we didn't match the historical payroll, because we did.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

In other audits of small businesses previous to the pandemic, did the agency not have an up-to-date registry of employees' social insurance numbers linked to the business number of the companies?

[Bob Hamilton]

Again, I'll ask Ted to respond to that, but obviously employees in an enterprise change over time. Even if we had that information, how relevant it would be at that moment would be a consideration.

I think the point that Mr. Gallivan made is an important one. We've been focusing on the SINs, and that was a decision we made, but we had a bunch of other things that we talked about at the time. We have experienced auditors, as you point out—we've audited these businesses in the past—and they looked at the business and did what I would call a smell test. Does the payroll number match with what we know about the payroll? It's not as if there was nothing. We used the intelligence we had to do something, to do as much as we could up front without delaying the payments inordinately. We did make a calculation ourselves as to how many we could hold up for that more detailed manual review and how many we were comfortable letting through the system and would catch up on later.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

In your opening statement, you mentioned there could be “potential legislative changes that could support filing compliance.” Could you elaborate on that?

[Bob Hamilton]

I can elaborate in concept.

We are going to look at this area to see.... We have a delinquent filers program for the GST, and it's been running. We use a risk-based system and we actually collect a fair amount of money once we identify a delinquent filer and catch them, but it is risk-based. We don't go after everybody.

Part of what we are doing is to look at our system. Do we have the right data and information there? Are we using it to optimize our efforts? Then, at the end of the day, we always look any legislative changes that would help us in this regard with what we learned from this experience, such as whether we could recommend to our colleagues at the Department of Finance a legislative change that would help us to deal with this.

I don't know what they are right now, because we haven't—

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Hamilton.

We will now move to our next round of questioning. It is a six-minute round. We'll start with Mr. Berthold.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you very much, Madam Chair.

I first want to tell all the officials from the Department of Finance and the Canada Revenue Agency that all the work they did in record time deserves to be recognized. We're talking about a period that has been very difficult.

Today the committee must analyze the Auditor General's report on the initial steps taken to roll out the wage subsidy program on an urgent basis. We must also assess the departments' ability to react quickly in times of crisis. Another study recently revealed to us that certain departments were simply not ready, a fact that somewhat discouraged the Auditor General, particularly in the case of the Public Health Agency of Canada. What we would like to determine here is whether the Department of Finance and the Canada Revenue Agency were sufficiently prepared to deal with that crisis.

I would like to introduce a motion to enable the committee to determine what steps the Department of Finance and the Canada Revenue Agency took and whether they were prepared to respond to the crisis. With your permission, I will read the motion:

The committee request that the Department of Finance and the Canada Revenue Agency provide the committee with all studies, data and analysis used for the implementation of the Canada Emergency Wage Subsidy.