Public Accounts Committee on June 8th, 2021

[Maxime Guénette]

Thank you.

Very quickly, we emphasized communications to the media on our website, made sure the call centre agents had clear information when dealing with taxpayers online and made social media posts as well. I think those are the measures I would highlight.

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

Are you concerned at all with this pandemic? Not only has it been a good part of 2020, but it will be a good part of 2021 before our economy fully recovers. Of course, the government announced they wouldn't charge any interest or penalties on folks who had income from the benefits in the pandemic. To me, there's going to be a lot of tax coming owing from people who may still be in difficult economic circumstances. Are you concerned at all about the collection that may need to be done and the burden that will be placed on Canadians as they come out of the pandemic?

[Bob Hamilton]

Madam Chair, I think that relates to a conversation that we had earlier on how sensitive we need to be about those kinds of compliance and collection issues.

One thing that is true from the agency's perspective is that these kinds of programs have a longer tail to them. Some people think, “Well, the program's over, so our work is done”, but we have to think about how we are going to ensure compliance and collection in the longer term. We are conscious of that, and we're thinking ahead to what the future issues will be that we'll have to sort through.

To your point, I would agree that this is an issue on our horizon, and we'll see how the pandemic unfolds.

[The Chair, Conservative, Kelly Block]

Thank you, Mr. Hamilton.

We will now move to Mr. Longfield for six minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, Madam Chair.

You're doing a great job of chairing in person while we're all virtual. Some day, hopefully soon, we'll be back in the same room together to follow our body language and know who is over time and not over time. Thank you for coordinating the discussion.

Also, thank you to the officials who are here.

I want to take us back in time. I was looking at a communication string that I had with one of our local businesses in Guelph with about 100 employees. The business contacted me on March 19, 2020, to say that they had some concerns about what they were going to do with their staff. Were they going to have to lay off or not lay off, and were there government programs that might be coming? We went back and forth between March 19 and March 27.

In one of the communications on March 25, the owner said that they were going to go ahead and do the layoffs because it looked like government programs might be put in place. It was a big risk for them to let their staff go. They had a lot of engineering staff who would have been hard to replace.

On March 27 they said that they had their application in. On April 2 he said it was looking good. By April 21 he sent me a note to say that CEWS was in place and that they were starting to bring back some of their staff and that it looked like their business was going to get through it. There were some issues around rent recovery, and we were working on other issues. That was one of many—and I am going to say hundreds—calls that we have received as members of Parliament.

The Prime Minister made his presentations at 11:15 every morning, and we knew that. We had conference calls every night from 5:30 until 7 o'clock to talk about what was working and what wasn't. On this call that I had with this business, they weren't qualifying initially; we changed the program, and they were able to qualify going forward.

Could you give us a snapshot on what things were like on your side of the telephone? When we were trying to handle these calls coming from our constituents, how were you able to develop programs virtually overnight?

Mr. Sabia, maybe we could start with you. I know you were new to the department, but maybe you could reflect on your department.

[Michael Sabia]

Madam Chair, I wasn't new at that point—

[Lloyd Longfield, Liberal, Guelph, ON]

I know.

[Michael Sabia]

I didn't exist at that point.

I think perhaps to give you the kind of colour commentary play-by-play that it sounds like you're looking for, perhaps it's best if I turn either to you, Andrew, or to Maude.

Andrew, why don't you lead off?

[Andrew Marsland]

I think it's difficult to describe the circumstances. I think many people were going through a difficult time at that point.

I suspect that one of the challenges always faced by businesses and governments in circumstances like that is really a lack of foresight. You can't really predict whether this is going to be a one-month, a three-month, a one-year or indeed a 16-month situation.

You're obviously dealing with imperfect information and you're trying to understand what the implications are, both from a public health perspective and from an economic perspective. In the public policy context, as you always are, you're trying to predict the reaction of economic actors to interventions, and so on.

Really, it's understanding the capacity of the system and working very closely across government to understand the art of the possible and understand what the effects of interventions will be and how successful they will be. It's really just trying to understand the context and the tools at hand and the capacity at hand to respond.

[Lloyd Longfield, Liberal, Guelph, ON]

I think that's the context of the redacted documents that we have. Those discussions were happening and things were being documented and reviewed for what was going to work best, and then they might have to change in the next week until we landed on something that we saw was giving people the benefits they needed.

Mr. Hamilton, this was happening in March, which any accounting firm knows is the busiest month of the year. CRA being the mother of all accounting locations, how was it in the first month of your experience, and what happened when all of a sudden tax filing deadlines were shifted and you had to change staff work responsibilities to work full time on this, although some tax returns, I'm sure, were still coming in?

[Bob Hamilton]

Madam Chair, I could probably go on for a couple of hours about that experience, but I will just hit a couple of the highlights and pick up on what Andrew said.

Obviously it was a time of imperfect information, and for us there was a confluence of events. It was tax-filing season, as you've indicated. We were having to send people to work remotely, virtually all of the agency, while we were keeping some people in the offices to process tax forms, because the information was flowing in. We focused on making sure we had as tight a connection as we could with people like Michael and Andrew, at finance or elsewhere, who develop the policies, so that we could put something in place that was administrable. That was one feature.

The second was talking to businesses, as you were doing, as we designed the website for the CEWS. How could we get information to people so it would be as clear as possible in that uncertain environment? We set up a calculator. We did a lot of consultation with CFIB and other businesses to ask what they needed from us to access this program.

We left the policy side to finance, but in terms of implementing it, I think stakeholder feedback was quite important for us in terms of trying to design something that could actually be accessed.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

I wanted to trap in our discussion that these aren't just static documents. These were done in extraordinary circumstances, and your departments were extraordinary in the way that you responded to Canadians. Thank you on behalf of us.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Longfield.

We will now go to Ms. Vignola for six minutes.

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

Thank you.

I want to turn to exhibit 7.1 in the Auditor General's report. The table indicates how many applications were submitted, how many were automatically approved, how many were manually reviewed and so forth. Clearly, a single employer may have submitted more than one application.

The total number of applications was 1.7 million. That's huge. Kudos to you for administering them all. According to the table, just 6,201 applications were manually disallowed or cancelled, equivalent to $210 million.

Would the amount have been higher had more applications been reviewed manually? Was that the maximum number of applications you were able to review manually?

[Bob Hamilton]

We really had to find a balance, and that was it. Should we do more manual reviews and slow down the process, or have no process and make sure the money goes out in a timely manner? We used the information we had at the time to determine that balance.

Mr. Gallivan may be able to provide more information.

[Ted Gallivan]

To answer your question, I should point out that we processed more than 300,000 applications manually and identified 6,000 that were problematic. Conversely, we identified 1,500 cases where the business was entitled to receive a lot more. In the end, we verified 40% of the amounts to be paid out before proceeding. By relying on the business's historical data, the number of errors identified and the size of the errors, we are fairly sure that we conducted enough reviews so as not to undermine the tax system.

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

Will you be conducting more audits on the automatically approved applications?

[Ted Gallivan]

If I may, Madam Chair, I can answer that.

Yes, we will. The first phase is to examine the value of the application against the number of employees and the wage paid, but we did not conduct any detailed audits based on revenue. We have been performing follow-up audits since August 2020, and we will be undertaking a second phase, but the scope of those post-payment audits has more to do with how the revenue drop was interpreted.

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

Several newspaper articles, including one from La Presse, published on January 18, 2021, have mentioned businesses associated with organized crime that have obtained the Canada emergency wage subsidy, without being entitled to it, of course. How is this possible? How many of the automatically accepted applications do you think were from these illegal businesses?

[Ted Gallivan]

I'll talk about the administrative side first.

We did a manual audit of all applications from businesses that had a history of fraud or criminality and did a thorough review.

With respect to eligibility criteria, the nature of some businesses, their history or the fact that they had changed ownership prevented us from providing the subsidy. Our mandate is not to question the history of businesses, but we did verify that the businesses had employees, and therefore were businesses. When that was the case, we would release the subsidy to them.

By law and eligibility criteria, we are not able to use subjective values to review applicants' backgrounds and deny applications. However, we did conduct extensive audits on these businesses to ensure that they were indeed eligible for the subsidy.

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

Okay.

Some businesses or individuals who have been convicted of tax fraud by Revenu Québec received the Canada emergency wage subsidy.

Do you work with Revenu Québec, for example, when you do manual audits to determine whether the business has a history or fraud or not?

[Ted Gallivan]

We have an excellent collaboration with Revenu Québec. We exchange information on businesses that should be of interest to us. That's one factor among many that help us determine which accounts to audit.

That said, it is important to remember that this program was intended to assist employees by subsidizing their wages. That was our focus. This program was really about helping employees by providing subsidies to businesses.

As I mentioned, under the eligibility criteria, we were able to take into account company history and context to do more vetting, but not change decisions that had already been made.

[The Chair, Conservative, Kelly Block]

Thank you very much, Ms. Vignola.

We will now move on to Mr. Green for six minutes.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you.

I want to go back to the early stages of this program when I understand there was a partial analysis of the initial design of the subsidy program.

Through you, Madam Chair, to whomever, because I know Mr. Sabia wasn't around at that point, when you were doing the comparators to the other countries and the decision was made to put it out in the way you did, did you not take into account that countries like Denmark made private corporations commit to no permanent layoffs? Why didn't Canada adopt that policy?

[Andrew Marsland]

Perhaps, Madam Chair, I can take that question.

We did look across at various different models. There were very different experiences and different contexts and different objectives and programs that changed, and so on. We tried to be informed by all of those to come up with a model that was as responsive as possible to the circumstances at hand.