Public Accounts Committee on June 8th, 2021

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

Madam Chair, I can come back. I'll be in the next slot, so I will come back and ask this question again.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Lawrence.

We will now go to Mr. Blois for six minutes.

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you, Madam Chair, and thank you to our witnesses for appearing before our committee again. You've been very generous with your time. Obviously we have a role as parliamentarians to hold the government to account, but to Mr. Sabia and Mr. Gallivan and others, we know you're busy trying to drive government programming today as well.

Perhaps I'll just continue with Mr. Gallivan, because he was answering some of the questions from Mr. Lawrence. Mr. Lawrence was talking about some of the early projections or numbers relating to the CEWS program and some of the concerns around the uncertainty that existed.

Is it fair to say that the numbers that were being quoted on those pages were from the early midst of the pandemic, when there was a lot of uncertainty about the extent of the economic harm that could have been caused to the economy and also about what this was going to represent for small businesses across the country?

[Ted Gallivan]

That's correct. That document was dated August 2020. I think we were still before the second wave, still unsure of how long the programs might last, and I think also still trapped in the twin pressures of sustaining Canadians and the Canadian economy and making quick payments, and then exercising our role and my role as head of compliance at the CRA to make sure there was no leakage in the system. We were kind of balancing the two. It was an August 2020 report that was being quoted.

[Kody Blois, Liberal, Kings—Hants, NS]

Okay. That's helpful in terms of the date.

I think all parliamentarians can appreciate the nuance of not knowing every month how the health response was going to pan out across the country and how that would really dictate some of the viability of those small businesses and their ability to pay back the money that the government was trying to provide to bridge businesses through to the other side of this pandemic. Based on the vaccine rollout and the way we're moving forward, that will be relatively soon, hopefully.

Obviously we're talking about the report from the Auditor General about the wage subsidy, so I had the ability to go back. Of course, as parliamentarians, we only get a short time to ask questions—five or six minutes per round—so I want to revisit some of the elements that were in that report. One of the recommendations was recommendation 7.35, which talked about a full auditing and accounting of these programs.

Again, as Mr. Sabia mentioned in his remarks, these programs are still ongoing, at least until September. I understand that there's a legislative authority to extend them if necessary. Hopefully, that won't be the case. Can you speak to the full accounting? I presume that work may already be started, but it's going to be largely finished once the actual program winds up in September, presumably.

Maybe that's a question for Mr. Sabia.

[Michael Sabia]

Yes, that's correct. This has been a major initiative of the government. I think that by the time all is said and done with this program, its total contribution to the Canadian economy and to protecting Canadian jobs will be something in the order of $100 billion to $110 billion. It's a very substantial contribution.

As a result of that, we are very supportive of the recommendation from the Auditor General that we do a thorough analysis of the program, and that is our intention. Our intention is to publish that analysis in a report that we prepare, the report on federal tax expenditures in 2022, which will give us time to have the program wind down. As you say, hopefully it will be winding down on schedule, consistent with continuing rollout of the vaccination program as we put this pandemic behind us. That will give us some time to assess the program, and we will publish a complete economic analysis of the wage subsidy program at that time.

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you, Mr. Sabia.

I'll move to Mr. Hamilton.

I don't have the blues right in front of me, but one thing that caught my interest last time was that a lot of committee members were talking about social insurance numbers and whether that was something we could tie in to make sure there was an accounting. I know the government systems are complex. Even department to department, there is not always perfect harmony between the systems that we operate. Certainly, I know that the government is working to be able to bridge those gaps.

Can you speak about the nuances and what your perspective was and what you remember back during this time in late March, early April, when things were really changing day by day? Every time that we put a particular nuance on a program, I presume it could slow the program in its response even by a day or two, depending on the nature of said nuance, as we try to make sure we have that accounting in place.

[Bob Hamilton]

At the time, we did think about whether it would be prudent to ask employers to provide employees' social insurance numbers so that we could match them up with CERB recipients. There were basically three reasons that we thought we could not do that, and you've referenced at least one of them.

The IT build to do that was going to be significant, so we would have had to delay the implementation of the CEWS, the wage subsidy. That was one factor: how long the delay would be at a time when people were anxious to receive money to keep employees on strength.

The second was the burden that it would place on the businesses to be able to generate that information for us and send it to us in a way that was useful in a timely manner. At that time, there was a consideration of how much of a burden we wanted to place on the businesses in order for them to be eligible for this relief.

I think the third factor that was in our minds was that we knew we would have a capacity, even if we couldn't do the match right up front, to come back later. We've always said that a part of our integrity plan on this issue was to do whatever verification we could up front in the context of what was feasible, but knowing that we'd have an opportunity to come back after the fact and compare the information to make sure that the right people got the money.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Blois.

We will now move on to Ms. Vignola for six minutes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you, Madam Chair.

Ladies and gentlemen, thank you for being here today.

Approximately 28% of employers who applied for the subsidy in 2020, equivalent to roughly 62,000 applicants, did not file a GST/HST return for 2019.

For 2020, 15% of recipients who had to file a GST/HST return between January and June 2020 were non-filers.

If the CRA did not have all the information required to verify that the business needed the subsidy, shouldn't the agency have just waited until it had the information to issue the payments, instead of trying to recover overpayments afterwards?

[Bob Hamilton]

Madam Chair, I will answer first, and then, I will ask Mr. Gallivan to provide additional information.

There is no doubt that we did not have all the necessary information at the beginning. As you mentioned, some employers had still not filed their GST/HST returns. However, we had to start delivering the program and have a process in place to confirm the business's eligibility.

There are reasons why a business would not have filed its GST/HST return. Some employers submit the forms annually, and others do it on a monthly basis.

Overall, we agree with the Auditor General's recommendation that the agency should examine its processes and ensure it adopts a more efficient approach. If any improvements are needed, we will make them. That is part of our action plan.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

Report 7 states that 28% of the subsidy applicants were annual non-filers, and 15% were monthly and quarterly non-filers. Are those numbers comparable to non-pandemic years?

[Ted Gallivan]

The answer is no, Madam Chair. The numbers went up. They were already higher than we would have liked. The reason is that we extended the deadline for filing returns because of the pandemic.

Coming back to your first question, I want to point out that we also used payroll deduction information to validate applications. Since the wage subsidy was tied to payroll, source deduction information really helped us eliminate the risk prepayment.

Given that we had extended the deadline for filing GST/HST returns because of the pandemic, we had to be consistent and proceed on the basis that we would not have them.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

I see. Thank you.

Do you have an idea of what it will cost to recover overpayments?

[Ted Gallivan]

I'm reluctant to answer because it covers a number of categories.

Yes, we have an idea of the marginal cost of program administration, legitimate errors and aggressive planning. A single figure covers a variety of errors or discrepancies.

That makes it difficult to break down the extra costs arising from dual applications alone. That said, we certainly have estimates of the additional costs incurred as a result of administering the program.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

What do your estimates say? What will it cost to recover the overpayments?

[Ted Gallivan]

To help you better understand the estimates, I would prefer to provide a cost breakdown, because different numbers reflect errors and payment recovery.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you for providing that.

My fellow member brought up the risks stemming from Canada's COVID‑19 economic response plan and your tax risk exposure estimate of $20 billion, including $1 billion at risk of default.

Why did you not set up a direct collection system? After all, such a system is already in place for the employment insurance program.

[The Chair, Conservative, Kelly Block]

Please provide just a short answer.

[Ted Gallivan]

Given the sheer volume of applications, an unprecedented number, the agency had to set up an emergency program to support the existing program, which could not handle the volume.

[The Chair, Conservative, Kelly Block]

Thank you very much, Ms. Vignola.

We will go to Mr. Green for six minutes.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you very much.

Through you, Madam Chair, to Mr. Sabia, according to the OAG report on Finance Canada, the department “performed a partial analysis of the initial Canada Emergency Wage Subsidy program because the department had only a few days and did not have the full information required to provide a formal analysis.”

Did Finance Canada propose this program and its main parameters to the government, or vice versa?

[Michael Sabia]

Madam Chair, I will pass this on to my colleague Andrew Marsland, who was there. He lived through this period, and of course I did not.

Just very briefly, however, these things are always a combination of effort between the government and the public service. I think that was very much the case here. There was clearly a need to address the issue of maintaining the employment connection between employers and their employees. We've seen in the rebound of the Canadian economy the value of having maintained that relationship, which has greatly reduced the period of time for bringing people back to work, as the economy has at least partially reopened to date.

From our point of view, from a macroeconomic point of view, this program is certainly delivering on what was expected at the time. I think from both a government point of view and a public service point of view, there was a need to provide something that would protect that relationship.

If I can, I'd be more than happy to—

[Matthew Green, NDP, Hamilton Centre, ON]

No, that's quite all right.

Through you, Madam Chair, to Mr. Sabia, the first page of 151 documents that were provided to us with data on the Canada emergency wage subsidy talks about “eligible employers”. The second bullet point caught my eye: “Canadian-controlled private corporations, including co-operative corporations, with less than $15 million in taxable capital in the preceding taxation year”.

Mr. Sabia, can you help explain that to me? It sounds like companies such as Air Canada, Imperial Oil and many of the other megacorporations that took wage subsidies and then paid out astronomical CEO bonuses and dividends to shareholders wouldn't necessarily fit that description. Would you care to comment?

[Michael Sabia]

Madam Chair, I'd like to turn to my colleagues Andrew Marsland or Maude Lavoie on that point.