Public Accounts Committee on June 8th, 2021

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

Madam Chair, perhaps I can take this one.

I believe this document is a comparison at a point in time of the wage subsidies in place in various jurisdictions. As I think the committee will recall, there was a predecessor to the Canada emergency wage subsidy, the temporary wage subsidy, which provided a 10% subsidy—

[Matthew Green, NDP, Hamilton Centre, ON]

Is it safe to say about the initial recommendation, then, based on the testimony we've heard today—the initial recommendation being a recommendation from both the government and the public service—that the initial analysis identified that this wage subsidy ought to go to companies with less than $15 million in taxable capital in the preceding year, and then at some point in time a decision was made to expand the program?

If that's fair to say, based on the testimony, my question is this: Who made the direction to expand the program to include companies like Air Canada, Imperial Oil and other megacorporations that took wage subsidies and then paid out astronomical payments to shareholders and in CEO bonuses?

[Andrew Marsland]

Madam Chair, perhaps I can respond to that.

As I said, in the very initial phases of the pandemic, there was a 10% wage subsidy in place applying to small business. As the situation significantly increased, the wage subsidy was expanded into what is now the Canada emergency wage subsidy, which provided significantly more generous subsidies of 75%, up to a certain limit, across the economy. It was more an evolution of programming as the situation developed a year ago—

[Matthew Green, NDP, Hamilton Centre, ON]

Madam Chair, thank you. I'll accept that answer.

What I want to do now is point to page 9 of the Department of Finance's dataset, which is under the GBA+ departmental summary. In it, we see a note that there were indirect beneficiaries, that both genders and demographic groups are expected to benefit indirectly from the proposal. The department, of course, identified higher-income people. Then, in the explanation, despite all the redactions, this one is clear: “Owners of eligible entities could benefit from the wage subsidy via an improvement of their bottom line. While no information is available on the shareholders and owners of entities affected by the proposal, since it has broad application”, it says, “aggregate data", and then it goes into a breakdown.

Is it safe to say that page 9 of the Department of Finance dataset identified early that shareholders would be benefactors of this subsidy? Again, what analysis was put in place to recognize that a program that was ultimately designed for workers would end up being siphoned off to shareholders, who add no labour value to the economic recovery as it relates to the wage subsidies?

[The Chair, Conservative, Kelly Block]

I'm sorry, Mr. Green. We are well over time to receive that answer. Would you like to have that sent to the committee in writing?

[Matthew Green, NDP, Hamilton Centre, ON]

I would love that, and I would suggest that the witness prepare the response for my two-and-a-half-minute round, because I'll go right back to that question. It's important question, and it's important to have an answer to on the record. Thank you.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Green.

We will now go to Mr. Lawrence for five minutes.

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

Thank you very much.

Mr. Hamilton, we'll just go back to where we were. I will remind you that on page 278 there, underneath "Findings", there's a paragraph that's completely redacted. If you can't provide me with what's in that paragraph, I'm hopeful that you can provide me with some of the reasons it was redacted.

[Bob Hamilton]

Sure. Perhaps what I will do, Madam Chair, is just turn it over to Max Guénette, who is the head of our privacy and public affairs branch. He deals primarily with questions concerning redactions, etc., so I'll turn it over to him.

[Maxime Guénette, Assistant Commissioner and Chief Privacy Officer, Public Affairs Branch, Canada Revenue Agency]

Thanks, Commissioner. Thanks, Madam Chair.

There are two sections of the Access to Information Act that were invoked, the principles of which were invoked for redactions in the package that you see.

In the case of the particular paragraph that is being referenced, it would be paragraph 16(1)(c) that applies. This is information whose disclosure could jeopardize our ability to enforce the law, essentially, so the information that you would see redacted, without getting into the details of what's behind that particular paragraph, is information that would telegraph perhaps a bit too much to the general public about the ways in which we'll conduct our audits or the areas where we would focus more of our attention.

The way that these redactions were applied, of course, was by access to information folks within my team with delegated authority. Even though this is not an access to information request, these are the principles that we use, and when we make recommendations, we would check in also with the experts—in this case, in Mr. Gallivan's shop—to validate that the risk of injury is what we understand it to be.

In this case, maybe Mr. Gallivan would have something to add to that.

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

No, I think that's fine. My time is short here, and I do appreciate that answer.

With respect, I understand that there is an obligation, obviously, to enforce and collect, but there's also an equally important obligation to be transparent and report that back to our taxpayers.

On that same page, page 278, another thing that I found of interest was that it said that three million CERB recipients, or almost 40%, had an employer who received the CEWS, and they put the risk of double-dipping high in the report.

I would love to hear, if not now, if that concern was validated by the findings. How is it possible that an employer could be getting CEWS while an employee is getting CERB?

[Ted Gallivan]

Maybe I'll start quickly.

[Bob Hamilton]

Yes. Go ahead, Ted, yes.

[Ted Gallivan]

The most common scenario—you have to put your mind back to the pandemic period—would have been employees who were laid off before the wage subsidy program was announced. Then, when the wage subsidy program was announced, they were brought back retroactively. That was a deliberate design feature of the wage subsidy program to kind of maintain employment.

A very early example of how you could be—legitimately, through no fault of your own—in double receipt would have been if, when you were laid off; you claimed CERB, and then your employer subsequently claimed the wage subsidy and brought you back onto strength retroactively and gave you your normal paycheque. That would be an example.

We're still working through how many of the various scenarios have manifested themselves, so I think it's too early to comment on how many different scenarios there are and what the total dollar value is of the double claims. It's not possible to tell, without a detailed examination of somebody's T4 history, which sources of income came from which employer. Time will tell.

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

However, that's something you will be doing. Fair enough.

[Ted Gallivan]

That's correct.

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

With respect to the CEWS, there was an audit, or at least a pilot of an audit. We actually had an opposition motion against bringing that forward, because it was quite taxing on our small business owners during the pandemic. However, I saw that quite a few of your projections were reliant on those CEWS pilots coming on for post-validation.

What is the plan now? Will we be going forward with a similar audit that, as you said, had pages and pages and was extremely cumbersome for small business owners during a pandemic? What is the solution, now that it appears you've abandoned that pilot?

[The Chair, Conservative, Kelly Block]

We need a very short answer, please.

[Bob Hamilton]

Madam Chair, I think Ted would be able to provide a better answer, but he may come back to it.

I think the pilot did give us some very useful information. We actually think it was an innovation that we will use to try to get more information to help future audits. I wouldn't say that we've abandoned it; I think we're using the information. It is in our action plan to use that information to inform future audits and where we might focus from a risk-based perspective, so we are far from abandoning it.

To your point on burden, we did try to tailor it to something that a business could do within the context of a pandemic. Probably our initial attempt with some auditors was not as sensitive as it could have been, but we fixed that fairly quickly.

[The Chair, Conservative, Kelly Block]

Thank you, Mr. Hamilton.

We will now go on to Mr. Fergus for five minutes.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you, Madam Chair.

I want to follow up on a question Mr. Lawrence asked. I think Mr. Gallivan would be the best person to answer.

Mr. Gallivan, you should know that my question concerns pages 000277 to 000280. I want to give you a heads‑up, so you can prepare.

I, too, would like to thank the CRA and Department of Finance officials for their tremendous work. Their effort should be recognized. The Auditor General pointed that out as well.

Last year, in the midst of a public health emergency, you managed to create two programs from scratch in difficult conditions. Frankly, I tip my hat to you and your colleagues.

Mr. Gallivan, I want to start with page 000277. It states that, 10 months ago, the government was at risk of not recovering $1 billion. In your answer to Mr. Lawrence, you said that was well before CERB had been extended.

Can you give us an update on how much is at risk of default, now that CERB has been extended?

[Ted Gallivan]

Thank you, Madam Chair.

The question has been asked. I want to point out that I will be talking about risk categories.

Since then, the $20 billion has still not been repaid. The money is taxable, so it comes down to the math.

There are various categories. As I mentioned, a number of people who were paid twice, through their employer and through the program, have set aside money. Hundreds of thousands of Canadians have already repaid the money they owed, but we are concerned about low-income individuals; that group was actually the focus of a parliamentary debate. It's an area of major concern. Those who were not eligible for CERB because they had not earned at least $5,000 in employment income will have a very hard time repaying the money they owe.

Right now, we are putting the people who owe money into categories based on their repayment ability and we are coming up with ways to address each of those categories.

As I said, the government is owed $20 billion, and our estimate, based on past experience, is that 5% will never be recovered.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I would think your estimate, which is based on past experience, takes into account the possibility of six-year repayment plans.

[Ted Gallivan]

Yes, absolutely. We have a variety of payment arrangement options, as indicated in the document you referred to. We work with taxpayers so they can spread the payments out over a number of years. It can take four, five or six years to clear the debt owed to the government.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

According to last year's data and given the circumstances, would you say the percentage of debt to be written off rose, fell or stayed the same?

Is it still 5%?

I know it's not an easy question, but I am genuinely curious.