Public Accounts Committee on Jan. 26th, 2023

[Bob Hamilton]

Thank you, Mr. Chair.

I would certainly say there was a recognition that in going into an attestation-based approach, you were adding additional risks to the system. That was a decision that the government and others felt was a good balance. We needed to get the money out. There was definitely a recognition that this would require more compliance efforts down the road after we paid. I would say that particularly for the CERB and for the CEWS, but we felt like we had an opportunity to get a bit more prepayment control into the CEWS.

I'm not aware of any estimate that we produced. Had we done one—and I could check—it probably would have been based a bit on experience that we have, because we have a lot of experience with the income tax system, GST and others. We would have had to augment that a bit, but nobody knew quite how the pandemic was going to unfold and how many benefits were going to be there.

Again, I'm not aware of an estimate. I could certainly check.

[Adam Chambers, Conservative, Simcoe North, ON]

Would you classify, though, a 15% error rate as something that deserves additional scrutiny?

[Bob Hamilton]

If you looked at a program and said you were going to put out 15% of the money to ineligible people, that would be high.

[Adam Chambers, Conservative, Simcoe North, ON]

That would be high.

The Auditor General also produced an interim report about benefits and made some recommendations. Members of multiple opposition parties also raised some concerns about the potential for ineligible recipients. There are lots of stories about those in prison, etc.

Did you produce another estimate of what might be an acceptable error rate, or what you thought it might be, when the Auditor General released an interim report?

I'm trying to understand what the discussions were in the department and how a political decision is made to continue with a process that's obviously more risky than others.

[Bob Hamilton]

Mr. Chair, I think you have to recognize that as the pandemic went on, there were adjustments made to the compliance program and to different controls brought in place to try to make sure that we learned from what was going on. We put more controls in place to limit the amount of money that went out.

The other thing is that the Auditor General mentioned the GST data earlier on as being something to look at. We tried that in the rent subsidy study we did and found it wasn't a very good indicator for that one. That had some similarities to the CEWS.

Yes, we were trying where we could to introduce new controls, or change methods on the fly as the pandemic evolved. Benefits got extended and new benefits came in.

I would say to your point, though, when I look around internationally—I'm the chair of a forum of tax administrators of all my colleagues around the world—I think you would find a lot of similar experiences with trying to get money out the door fairly quickly. Everybody is dealing with the same reality.

[Adam Chambers, Conservative, Simcoe North, ON]

Just quickly, because I have one minute left, I have a very quick question for you.

Are you able to provide to the committee how many payments you did stop with the prepayment controls for the wage subsidy? Is that something you could follow up with—yes or no?

[Bob Hamilton]

I would perhaps turn to my colleagues. They might have it here. If not, we'll—

[Adam Chambers, Conservative, Simcoe North, ON]

Just a yes or no is okay. I don't need the number now. Thank you.

[Bob Hamilton]

We have it, if you want it. We'll get it to you.

[Adam Chambers, Conservative, Simcoe North, ON]

I'll take that in writing. Thank you.

[The Chair, Conservative, John Williamson]

That will be submitted. Thank you.

[Adam Chambers, Conservative, Simcoe North, ON]

Auditor General, just briefly—I have about 30 seconds left—we all recognize that the attestation base was required in a time of crisis. We're past that now. Are you concerned that we're continuing to rely on an attestation-based approach to deliver rent subsidies and dental subsidies in a non-crisis time?

[The Chair, Conservative, John Williamson]

Could you give us a very short reply? If you have more to say, we'll have to come back to you.

[Karen Hogan]

Something I think I mentioned in our first reports back in 2021 was that we recognize that the limitation of prepayment controls is the best practice in the time of crisis, but I agree that even as the pandemic continued on, and now that the pandemic is sort of at the back end, a different approach is likely needed. I would have liked to see more rigour put into some of the prepayment controls, especially around key eligibility criteria like revenues.

[The Chair, Conservative, John Williamson]

Thank you, Ms. Hogan. We appreciate that.

Ms. Shanahan.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you very much, Chair.

I thank all the witnesses who are here with us today—Auditor General, Mr. Hamilton and your teams, and I wish everyone around the table a happy new year as well.

It was quite something to be back in my riding these last few weeks during the Christmas period, because it almost felt like normal. Stores were open. Restaurants were open. We were able to entertain. We were able to visit salons de coiffure and manicure places, boutiques and so on and so forth. I'm struck by the fact that you mention in your report, Auditor General, that the individuals from groups that were most impacted by the pandemic—low-income persons, women, visible minorities and youth—benefited from the programs to a much higher degree. We're talking about businesses here today. The businesses I've mentioned—the restaurants and the hairdressing establishments and boutiques and so on—largely would be owned and operated by exactly those vulnerable groups, and they were very pleased to be open again.

My concern back in March and April 2020 was that it would be difficult for these groups to access programs, and I was one of the people advocating for the minimal red tape, if you will. I know that's a favourite term with my Conservative colleagues—eliminate the red tape so those programs would be more accessible.

Auditor General, some prepayment verifications were applied, as is prudent for any program going out to businesses. Do you believe the government made the correct choice in the types of prepayment verifications that were made for the wage subsidy program, and do you think that these verifications helped overall compliance?

[Karen Hogan]

I'll keep my comments to looking at the Canada wage subsidy program, which was a business program, versus one for individuals, given the focus of today's hearing.

There were prepayment controls for some of the wage subsidies. There was a check that a business had an active payroll account or an active business account, so there were some automated and some manual prepayment controls. I acknowledge that, in line with the member's comments about limiting it at the beginning of the pandemic when there was a lot of uncertainty and chaos. However, in my view, that needed to be adjusted as the pandemic continued. There were opportunities, as the program was extended and businesses were open and a little more able to operate, to bring in some controls.

The control I would have liked to see would have been one around revenues. That is the main eligibility criterion for the wage subsidy program and that was based solely on attestations. With limited information on monthly revenue of businesses, a very rigorous postpayment approach is required, because there is no way to verify eligibility other than by doing those postpayment audits.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

I heard your answer to a previous colleague's question referring to the fact that other countries have real-time data. That would represent a significant investment, but it's one that personally, as a former tax practitioner, I would certainly look forward to as well.

I'd like to turn now to Commissioner Hamilton. I want to thank you for the work that the CRA performed in this regard, because we don't typically think of the Canada Revenue Agency as being a service agency. There was a lot of care, from what I could see in the casework that we were involved with in helping our business owners access the program.

You have provided some progress reports to this committee in regard to previous questions. Can you please go over that and put it on the record for the committee? Perhaps you could go over those comprehensive verification steps that recipients underwent.

[The Chair, Conservative, John Williamson]

I'll need a fairly brief response, please.

[Bob Hamilton]

First off, in terms of the prepayment controls on the wage subsidy, yes, we did have some. Could there have been more? Sure. It was what it was, and we tried to adjust it as time went on.

The other thing we did at the beginning to try to make it more accessible was we had a lot of outreach with businesses—CFIB and others. We actually produced a calculator that said here's how you calculate it, because this was a complex program. That was on the prepayment side.

I take your point and that of the Auditor General that an e-payroll system, a real-time payroll system or an invoicing system would be advantageous. We're doing work on both of those, with very significant work being done on the e-payroll side. I know that a couple of countries that sit on the global table I'm on have found it to be helpful. That is a recommendation that we agree with, and we're actually far along on the e-payroll side, but it's a big system.

On our progress report—

[The Chair, Conservative, John Williamson]

We'll have to come back to that in the next follow-up. Thank you.

Ms. Sinclair‑Desgagné, you have the floor for two and a half minutes.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Thank you, Mr. Chair.

I'd like to continue along the same lines as my previous questions.

Mr. Hamilton, you mentioned something that I'm a little concerned about. You said that it was too early in the process to be able to estimate the overpayments. Isn't it actually too late?

As you know, since you chair an international committee, other countries have quite complex tax systems. If other countries are more advanced than Canada, it's probably because they started earlier and put in more effort to do so.

How is it that we started trying to recover the amounts so late, in July 2022?

[Bob Hamilton]

First, I don't entirely agree that Canada is behind other countries.

It's true that it's very early in the process. We're going to continue the audit process until 2025. That will give us plenty of time to complete the audit process. That's why I said that it's a little too early to give an estimate of the final amount.

In auditing, it's important to take into account the situation that prevailed during that period. Economic sensitivity has to be taken into account. In some cases, businesses are more vulnerable because of the difficulties created by the pandemic. We are taking that into account in our audit efforts.

As mentioned earlier, we are trying to increase the number of services, even in terms of audits. During the time period we're looking at, some individuals and businesses were struggling. That delays the audit process somewhat. However, I'm very comfortable with our objective.

We'll have the opportunity to complete the process. It is not a question of resources. We need to look at the slightly more complex cases of some larger businesses.

[The Chair, Conservative, John Williamson]

Thank you very much. Time is up again.

Mr. Desjarlais, you have the floor for two and half minutes. Go ahead, please.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Chair.

I'm going to go back to Mr. Hamilton in regard to my previous statement. If we were to follow through with the Auditor General's recommendations and ensure that all of the $15.5 billion was further investigated by the CRA's auditors, would it jeopardize the CRA's ability to address other long-standing issues, such as the tax gap due to corporate evasion?