Public Accounts Committee on June 8th, 2021

[The Chair, Conservative, Kelly Block]

I call this meeting to order.

Good morning, everyone. Welcome to meeting number 37 of the Standing Committee on Public Accounts. The committee is meeting in public today and is being televised.

Pursuant to Standing Order 108(3)(g), the committee is meeting today to study “Report 7, Canada Emergency Wage Subsidy”, of the 2021 reports 6 to 9 of the Auditor General of Canada.

Today's meeting is taking place in a hybrid format pursuant to the House order of January 25, 2021. Therefore, members may be attending in person in the room or remotely by using the Zoom application.

Though I know we are all familiar with how our meetings work, I do need to remind members and witnesses of a few rules that we must follow.

Interpretation services are available for this meeting. You have the choice, at the bottom of your screen, of either “Floor”, “English” or “French”.

Before speaking, click on the microphone icon to activate your own mike. When you are finished speaking, please put your mike on mute to minimize any interference. When speaking, please speak slowly and clearly. Unless there are exceptional circumstances, the use of headsets with a boom microphone is mandatory for everyone participating remotely.

Should any technical challenges arise, please advise the chair, and note that we might then need to suspend for a few minutes as we want to ensure that all members are able to participate fully.

Now I'd like to welcome our witnesses.

Joining us today from the Office of the Auditor General are Andrew Hayes, deputy auditor general, and Philippe Le Goff, principal.

From the Canada Revenue Agency, we have Bob Hamilton, commissioner of revenue and chief executive officer; Ted Gallivan, assistant commissioner, compliance programs branch; and Maxime Guénette, assistant commissioner and chief privacy officer, public affairs branch.

From the Department of Finance, we have Michael Sabia, deputy minister; Andrew Marsland, senior assistant deputy minister, tax policy branch; Isabelle Jacques, assistant deputy minister, law branch; and Maude Lavoie, director general, business income tax division, tax policy branch.

I have been informed that Mr. Hayes won't be making an opening statement, so, Mr. Hamilton, you have five minutes, and then I'll go to Mr. Sabia for five minutes.

[Bob Hamilton, Commissioner of Revenue and Chief Executive Officer, Canada Revenue Agency]

Thank you, Madam Chair.

I am happy to be with you once again, to discuss “Report 7—Canada Emergency Wage Subsidy”, released in spring 2021 by the Office of the Auditor General of Canada, or OAG.

With me today are Ted Gallivan and Maxime Guénette, whom you already introduced.

My focus today is on the response of the Canada Revenue Agency, or CRA, to the motion adopted during meeting 27 of the Standing Committee on Public Accounts related to its study on report 7.

The motion requested that both the Department of Finance and the CRA provide the committee with:

all studies, data and analysis used for the implementation of the Canada Emergency Wage Subsidy, that these documents be provided to the committee with redactions for Cabinet confidence and personal information, and that these documents be provided to the committee no later than May 27, 2021.

Upon adoption of this motion—

[Lloyd Longfield, Liberal, Guelph, ON]

I'm sorry to interrupt, but we need translation, please.

[Bob Hamilton]

Should I pause?

[The Chair, Conservative, Kelly Block]

Yes, please.

Mr. Hamilton, can you start again from where you left off, and we'll see if we've corrected the problem?

[Bob Hamilton]

I'll start where I left off. It's getting close to the end.

Upon adoption of this motion, the CRA immediately set to work to meet the committee's expectations. I acknowledge the efforts of numerous employees across the agency, representing both a significant and a necessary time investment to perform this work within the stipulated deadline. Their effort underscores the seriousness with which the agency takes its duty to be both transparent and accountable to Parliament and to Canadians.

Thank you again. We welcome any questions you might have today.

[The Chair, Conservative, Kelly Block]

Thank you.

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

[Michael Sabia, Deputy Minister, Department of Finance]

Thank you, Madam Chair and members of the committee, for your invitation today.

I am pleased to be here along with some of my colleagues from the Department of Finance: Andrew Marsland, whom you all know from previous meetings; Isabelle Jacques, our chief counsel; and Maude Lavoie, the director general of business income tax in the department.

We're here today, obviously, in relation to the committee's request for studies, data and analysis used for the implementation of the Canada emergency wage subsidy.

Through this initiative, more than 5.3 million Canadian employees have had their jobs supported. Since its introduction, the program has been improved to make it accessible to a broader range of employers by including those with a revenue decline of less than 30% and providing a gradually decreasing subsidy to all qualifying employers.

Most recently, budget 2021 proposed to extend the program, so that it would continue supporting Canadians until September 2021. This would be accompanied by a gradual decrease in the wage subsidy rate, beginning in July, to ensure an orderly phase-out of the program as vaccinations are completed and the economy reopens.

The department's provision of the documents requested by the committee clearly—and obviously, I think—reflects our recognition of the importance of the role of the public accounts committee in providing oversight to government programs and initiatives.

In providing you with these documents, we have been guided by the committee's request, and I quote, “that these documents be provided to the committee with redactions for Cabinet confidence and personal information”.

The department's approach also respects our legal obligations and duties as public servants, while of course respecting the principles of the Access to Information Act.

I should say that it has been and continues to be quite a substantial exercise to review the hundreds—indeed, thousands—of pages that are relevant here. Andrew's team has worked and continues to work flat out. On that basis, we do intend to provide you with a final set of documents, essentially highly detailed spreadsheets—en français, les feuilles de calcul—by the end of this week.

In doing this work on behalf of the committee, we have retrieved all the studies, the data and the analysis provided to the Auditor General in its audit of the analysis and implementation we undertook in the Department of Finance and the Canada Revenue Agency related to the wage subsidy. I want to emphasize that all of these documents have been provided to the Auditor General in a manner consistent with the Auditor General's right to access cabinet confidences and secret documents. This has, we believe, and evidently, enabled the Auditor General to fully assess the department's performance, as is her role as an officer of Parliament mandated to perform this important work on behalf of parliamentarians.

Let me just reiterate that of course we are pleased to note the Auditor General's conclusion that the department worked within very short time frames to provide decision-makers with information to assist them in developing the wage subsidy and that it subsequently provided sound and complete analysis to inform adjustments to program.

In the department’s initial work in designing the wage subsidy, it collaborated intensively with the CRA to assess how the program could be implemented quickly. I wasn't there, of course, but clearly, officials conducted this analysis with unprecedented speed. The imperative at that time was to get help to our workers and businesses when they needed it. As I have previously conveyed to the committee, I firmly believe this was the right priority.

Following the initial launch of the program, the government also proposed subsequent adjustments to the subsidy that were informed by the department’s sound and complete analysis, as concluded by the Office of the Auditor General, as well as input from businesses and other employers.

As you can see from the quantity of material provided to the committee, this analysis was extensive in its scope.

As I said a moment ago, this analysis supported important improvements to the program. The department's agility and that of Revenue Canada in moving this program into place quickly have played a very important role in helping to stabilize the Canadian economy through what has been obviously a very difficult period.

I very briefly want to again give credit to the public servants in both the Department of Finance and the Canada Revenue Agency for their efforts in making this a reality, and making it a reality quickly.

To finish up, at the finance department we remain obviously very focused on supporting Canadians and Canadian businesses through the COVID-19 pandemic. At the same time, as the vaccination process continues to move forward, we are also increasingly very focused on what comes next on the step-by-step opening of our economy, the return to work for many Canadians and a full economic recovery.

With that, Madam Chair, I and my colleagues would be very pleased to respond to any questions you or your colleagues may have.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Sabia.

We will now go to our first round of questioning, starting with Mr. Lawrence for six minutes.

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

Thank you very much. Thank you for your time today. I appreciate the witnesses' testimony there so far.

My questions will start with Mr. Hamilton.

For your benefit, Mr. Hamilton, I'm going to be referring to pages starting at page 276 in the documents, as I have them, and going to page 280.

On page 277, it says that there was about $77 billion of CERB payments and there was a total potential exposure of tax risk of up to $20 billion. I understand that to be the amount of money the CRA would suspect that they would collect against these CERB benefits. Is that correct, Mr. Hamilton?

[Bob Hamilton]

I believe that is correct.

I have the document electronically, so I'm just trying to pull up page 276. Perhaps I'll ask my colleague, Ted Gallivan, to take that on while I search for the number.

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

Yes, that's no problem. That's why I wanted to give you a heads-up. I tried to stall there for you, Mr. Hamilton.

[Ted Gallivan, Assistant Commissioner, Compliance Programs Branch, Canada Revenue Agency]

Madam Chair, what I would say is that this is an internal document that we produced based on a number of assumptions. Our own internal analytics folks would have made a number of assumptions to produce that analysis. That is an estimate to help guide the level of effort that was necessary. It's not a projection but perhaps an outer limit that we used for planning purposes to allocate resources. It's based on assumptions, and only time will tell whether those assumptions will be proved to be correct.

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

That's actually my next question. I'm wondering if time has started to tell, as it were, as a majority of Canadians have now filed their tax returns. How much in tax revenue did you actually collect on the CERB benefits, if you have those numbers? If not, I assume that's a number you could access for us.

[Ted Gallivan]

That's correct. Returns still continue to be processed and reassessed, so it would be a number that we could provide through the clerk of the committee to the members.

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

Perfect.

Further to that, you said that there was $1 billion considered at risk of default. I'm wondering if you gentlemen would be kind enough to unpack what that means. Does that mean that Canadians are just not paying their taxes, or what was the risk that you highlighted there?

[Ted Gallivan]

I'm not sure if the commissioner wants to come back or if he wants me to take this one.

[Bob Hamilton]

That would be fine, Ted, if you wanted to take that question.

I think the general point that will apply to questions in this domain is that, as Ted said, these are not estimates but rather indications that we set up at the beginning to guide our activities. We are still in the process of receiving tax returns. More data is coming in all the time.

With that backdrop, Ted, go ahead.

[Ted Gallivan]

This information that we would have provided to the OAG again reflects again our planning. We would have looked at the historic behaviour of people at these income ratios in terms of their ability or propensity to pay, and run it through analysis.

In other words, as we gained experience with who was claiming these benefits and what the amounts were, we back-tested that against historical data to see what the profiles of those kinds of taxpayers were. That led us to a $1-billion number. Again, this led us to consider whether we would need 50 people on this, or 5,000 people. That was the purpose of that kind of analysis.

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

I'm sorry. I didn't quite follow that last comment. It intrigues me a bit that you needed 50 people or 5,000. Do you mean in collecting the taxation?

[Ted Gallivan]

That's correct. It would have been relevant for our accounts receivable folks to have a heads-up around how much debt they would have to collect and how much debt would have been uncollectible. What we were trying to do with these early estimates was decide how much of a workforce we needed to assign to the different parts of administering the CERB.

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

Okay.

As per the earlier question, I'd like to know what the actual amount defaulted was, even if you have a partial number. I realize that you may not have it with you today, but perhaps we could get that within three or four weeks, or whatever the standard is for our committee. I'm sure the chair could direct us. It's just to get that number on where we are right now. I understand that not everyone has their tax filing in.

Would that be appropriate?

[Ted Gallivan]

If I could clarify through the chair, at this point we would probably have the accounts receivable, the gross amount. Usually it takes several years until we start to do writeoffs or writedowns, but we can absolutely get you the numbers as they stand today.

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

Thank you. I appreciate that.

Then, because I'm a Luddite and still using paper here, if I flip the page, I have on page 278 a large portion of redacted documents underneath “Findings”.

Some of the redactions clearly make sense. There are names and there are technological services that you can sort of read into, and I understand why the minister would not give this away, but this redaction doesn't make any sense to me prima facie, and I'm wondering if you can provide me with some information to reassure me that this is a reasonable redaction here.

[The Chair, Conservative, Kelly Block]

We need a very short answer, as we are running out of time.