Public Accounts Committee on Jan. 26th, 2023

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Thank you, Mr. Chair, and thank you to our witnesses today, from both the Auditor General's office and the CRA.

This far out from the onset of the COVID pandemic—I think it's two and a half years out—it's easy to forget what a time of great uncertainty that was for Canadians. It was a very stressful time. As we look at these things now, it's important to keep in mind that this was really a bit of a crisis economically, or it could have been much worse. I just wanted to put that in perspective.

There has been a lot of reference in previous questioning to the prepayment verification process. I was wondering, Commissioner Hamilton, if you could perhaps elaborate on that. There were both the automatic and manual processes. What was involved in that prepayment process?

[Bob Hamilton]

I'll ask one of my colleagues to elaborate a bit on what I'm going to say.

I would just mention that on the prepayment side—this is the wage subsidy we're talking about, which I would distinguish from the CERB—we had people who are very familiar with corporate tax filings, the corporate tax community and small businesses, look at the applications as they came in. We did a 100% review of them. A lot went through, because nothing looked too bad in the first run. We did kick out some, but then those experts looked at them and said, “Well, I don't know. Does this payroll number match up with what we've seen?” We did that. That was the nature of the prepayment controls.

I would just add—because it gets lost—that on the prepayment side we also communicated with taxpayers. I said, “Put a calculator out.” That's a bit like the software for people who do their taxes. It eliminates a lot of errors and mistakes. We found that was helpful. I know the business community found it....

Let me turn to either Cathy or Marc to elaborate, if there's more to be said about that prepayment. Again, I'm talking about the wage subsidy here and not some of the other programs.

[Cathy Hawara]

The commissioner has covered the most important parts of this, but just to reiterate, 100% of the applications that were received for the wage subsidy were automatically reviewed for risk indicators. We looked at things like how reasonable the number of employees was and the remuneration that was being claimed based on T4 filings that we had for the entity. We looked at the lists of high-risk taxpayers as potential flags, for example.

We also had a monetary threshold. If the claim was over a certain dollar amount then it was automatically sent for manual review. That was the second part of the prepayment control process we had in place, the manual review. We had our officers look at the files considering past compliance history, information that we had on file, and the GST data at that phase of the process. When necessary, they could communicate with the claimant and obtain additional information to allow them to determine whether they were eligible and whether the amounts were accurate.

It was an opportunity, again, to review. About $33 billion out of the $100 billion that was paid out as the wage subsidy was manually reviewed by the agency.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

It certainly wasn't an attestation process. There was a process that went through...a review.

[Cathy Hawara]

I would say the attestation process was the first part—the first step as part of the application, in addition to providing the information that was required. The claimant had to attest that they were eligible and that the information was accurate. That was the first step.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

It wasn't just granted.

[Cathy Hawara]

No. Then it went through the automated review and, where appropriate, where risk was identified, it went through manual review as well.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

That's great. Thank you for that clarification.

What percentage of CEWS went to small businesses as opposed to larger corporations? Can someone give us some idea?

[Bob Hamilton]

Mr. Chair, I don't have the figures right in front of me, but I know that they are in the Auditor General's report, so she may be able to beat me to the punch on this one.

[Karen Hogan]

Absolutely: I would point you to page 80 in the report. Exhibit 10.F–6 will show you the percentage of subsidy paid to businesses based on size and based on the number of employees.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

In the interests of time, because I don't want to take time looking it up now, can you give us that figure for the record?

[Karen Hogan]

The figure of how many went to small businesses...? What would you deem a small business? Fewer than 500 employees...?

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Yes.

[Karen Hogan]

If my math works, it's about 20-odd per cent.

[The Chair, Conservative, John Williamson]

That is the time. Thank you very much.

We have our next full round.

Mr. McCauley, you have the floor for five minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks, Chair.

For the CRA, previously you were talking about risk indicators when we were doing the applications. I want to get back to that. Is a high risk of insolvency one of the risk indicators that CRA used?

[Bob Hamilton]

Mr. Chair, I'll ask Cathy to elaborate on that, but I don't think that the defined financial condition of the company was a consideration—

[The Chair, Conservative, John Williamson]

Just hold on. Just so everyone knows, we're all on the clock now, so when your time's up, your time's up.

[Kelly McCauley, Conservative, Edmonton West, AB]

I'm fine. I think I have the answer there.

Did the CRA recognize that would be a risk issue? Did they push that forward to Finance or the discussion group in saying that we shouldn't have made the subsidy available to people who owe billions to the Government of Canada, because it's a high-risk indicator of insolvency?

[Bob Hamilton]

Mr. Chair, I keep getting pushed to talk about what recommendations we might have made within the confines of discussions, so I'm not going to go there, but suffice it to say that we were part of the discussions and as we saw things we took note of them.

You're right: If a company looks like it's going to be insolvent, that makes the prospect of collection, should there be a problem, riskier.

[Kelly McCauley, Conservative, Edmonton West, AB]

Yes, it's throwing good money after bad.

Do we know how much money went to these companies? How much went to them and how many are actually still solvent right now?

Also, how much do these companies still owe the Government of Canada? If you don't know, maybe you can get back to us.

[Bob Hamilton]

Yes. I guess we may need to go back and forth about exactly which companies you're talking about at risk of going insolvent—

[Kelly McCauley, Conservative, Edmonton West, AB]

They're the ones that haven't remitted their GST or HST, or that owe the Government of Canada.

[Bob Hamilton]

Yes. Maybe all I would say is that how one judges whether a company is about to go insolvent is a judgment call in terms of where you sit. I don't have that number here with me.

We can go back and see if we can construct, but again, I think it's going to be loose. How do you determine, “This company looks like it's going to go insolvent”? That's a judgment, and then, how many of them actually went.... We may be able to get some figures on that.

[Kelly McCauley, Conservative, Edmonton West, AB]

It doesn't look like we're coming to a solution today between the AG's recommendations and the CRA's agreement.

Let me ask you this. The minister intimated that the AG's report...that how much went to ineligible companies was politically motivated. Do you agree with that?