Public Accounts Committee on Jan. 26th, 2023

[The Chair, Conservative, John Williamson]

That is the time, Mr. Hamilton.

Mr. Chambers, you can return to that line of questioning if you like.

We turn now to Mr. Fragiskatos.

It's good to see you, sir. You have the floor for six minutes.

[Peter Fragiskatos, Liberal, London North Centre, ON]

It's good to see you, Mr. Chair.

Happy New Year to all colleagues. Thank you to all of you for being here today.

I'll begin my questions with Ms. Hogan.

Ms. Hogan, your report is extensive. There's no question about that. One of the things that stand out in the report is your point on what could have potentially happened—we can't know with absolute certainty—if the various emergency programs, of which the wage subsidy is one—admittedly a very important part of the overall picture, a signature response program on the part of the government—had not been introduced. As you said in the report and you articulated again here today, poverty would have increased very significantly, and the same is true for income inequality.

Can you expand on that?

[Karen Hogan]

What we looked at was whether the programs were meeting some of their stated objectives. The ones to support individuals and businesses combined helped to mitigate an increase in poverty. We also looked at whether people were able to stay home and stay healthier and then allow the economy to bounce back. All of the statistical information that we analyzed supported that. The subsidies followed the severity of health measures that were there, and so they allowed Canadians to stay home and allowed the economy to bounce back. We identified that there was an income disincentive to potentially going back to work, but we saw the government adjust for that as well.

[Peter Fragiskatos, Liberal, London North Centre, ON]

A former governor of the Bank of Canada, Stephen Poloz, is on record as saying—both in finance committee testimony when he appeared there when he was governor, and in subsequent interviews, writings and things of this nature—that had it not been for the emergency programs, Canada would have seen a situation approximating a depression.

Are you in a position to comment on that? Would you agree or disagree with that?

[Karen Hogan]

We analyzed the information that Statistics Canada had available and we provided that information. I believe that the Governor of the Bank of Canada is in a better position to talk about inflation and depressions, so I'll defer to his knowledge on that.

[Peter Fragiskatos, Liberal, London North Centre, ON]

In your report, in fact, you cite Statistics Canada, and you cite that between February and April 2020 the economy experienced an overall decline of 17% in GDP, and in dollar terms that is $350 billion in terms of the decline for the overall economy. It's of quite a magnitude that we haven't seen, certainly in our lifetimes. Whether you disagree or agree, I take your point. I think a variety of economists and others have said that the situation was quite grave and that the emergency programs played an enormous role in helping Canadians get through.

Perhaps I could go to the CRA now. Thank you to all of you for being here again, because we've heard you at this committee before. Thank you, of course, for your service to Canadians during this time.

My first question goes to Mr. Hamilton. The types of businesses we're talking about are mom-and-pop businesses. We're talking about small businesses. I hesitate to speak for the entire committee, but I think all of us have small businesses in our communities that really looked to the wage subsidy as something that helped them get over to the other side, if I can put it that way. Are these the sorts of business that partook?

[Bob Hamilton]

Thank you, Mr. Chair.

If you look at the businesses that benefited from the wage subsidy, you see a very broad cross-section of size of businesses in the economy.

I think the Auditor General, if I recall correctly in the report, has a table that shows the numbers by size of business. Certainly in number, lots of them are small businesses that are out there, as you've referred to, and certainly we take that into account in our compliance efforts as we sort out what we need to do and when. However, there are big businesses in there as well—multinationals. It's a spectrum. Some of the bigger value amounts are in the bigger businesses, but lots of the numbers are in the small businesses.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Well, we've especially heard from restaurant owners in London, Ontario, about how valuable and important the wage subsidy was.

I'm low on time, so I will ask you this, because I think it's important to understand the policy design here. You talked about the wage subsidy. You talked about the verification system that in fact was set in place to ensure that eligibility was met. Can you talk about that, because sometimes there could be a perception out there that there wasn't a verification system with respect to the wage subsidy?

[Bob Hamilton]

Yes. If your time is short, so is mine, so let me just try to give you a very quick answer.

[The Chair, Conservative, John Williamson]

There is a minute, so you can—

[Bob Hamilton]

Okay. That's perfect.

Yes, sometimes we don't talk about that as much. There were prepayment controls, particularly on the wage subsidy, where we took a look. I think we examined 100% of the applications automatically, and then put some aside. We said we were going to take a closer look at these ones if the people in the agency, based on whatever knowledge we had, said that something didn't look quite right. We'd look at them more in depth and either let them go through or hold them up. Those prepayment controls were used to try to control the money from going out in the first place.

I think, as indicated, we were operating in a very time-pressed environment, so maybe there weren't as many prepayment controls as we might have on the regular income taxes per se. We have compensated for that by having a little more on the postpayment controls, but there definitely were—certainly more than with the CERB—prepayment controls before businesses got the money.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much.

Ms. Sinclair‑Desgagné, you now have the floor for six minutes.

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

Thank you, Mr. Chair.

Good afternoon from afar, dear colleagues.

I'd like to begin by thanking the Auditor General and her team, and I wish them a happy new year.

I'd like to raise a point that may be important for today's meeting. When the Auditor General's report was released, comments by the Minister of National Revenue contradicted the figures that had been developed, studied and then presented by the Auditor General.

I'd like to quickly reread what was said in the House.

Mr. Speaker, the CRA does not agree with the Auditor General's calculations concerning recipients who were not eligible for the wage subsidy. The CRA's actual audits indicate that compliance with the subsidies was high and that the Auditor General's figure is exaggerated. This is not the Auditor General's fault. We all know that she was pressured by the opposition to produce this report.

In this context, there are eligibility criteria. An agency, an effective government, is able to determine how many people have qualified for the subsidy and how many have not. This has been done elsewhere in the world. In the United States, they have been able to determine the number of people and the amount of the overpayment. This is also the case in the United Kingdom, where they have been able to estimate the number of people who had received overpayments. I find it absolutely incredible that we have two versions of history in Canada. The question here is quantitative, not qualitative, so there is no room for interpretation. The criteria are strict.

So my first question, Madam Auditor General, is this. How do you explain the fact that today, in January 2023, we still don't know how many people and businesses have been overpaid?

[Karen Hogan]

I'd like to begin by saying that I found the minister's comments disappointing. I was asked to do the benefits audit under the provisions of an act passed by the Senate and the House of Commons. So all of Parliament asked me to do the audit that we're discussing today.

To answer your question, I will say that it's due to the decision to limit the information required of businesses and individuals when they were applying for benefits, as well as a lack of real-time information. For these reasons, we made two recommendations that the Government of Canada consider a system for obtaining real-time payroll and revenue information from businesses.

As you said, other countries use that system, and that's why they have a little more information about how much has been paid out to ineligible recipients.

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

Can you tell us more about what other countries have done to recover these funds and whether they have used more resources to do so?

[Karen Hogan]

I admit that in our audit, we didn't really check to see what other countries were doing to recover the funds. That said, I know that several countries had access to real-time information, which had the effect of limiting payments to ineligible individuals or businesses. It has also sped up the process to identify payments made by mistake.

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

Mr. Chair, how much time do I have left?

[The Chair, Conservative, John Williamson]

You have two minutes left.

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

I would like to direct my next questions to Mr. Hamilton of the Canada Revenue Agency.

It seems we have a twofold problem here. Clearly, a large amount of these public funds were overpaid. We can agree that this was to be expected in a context where demands had to be met quickly. We were in the very unique context of a pandemic.

The problem is that, at this point, we're unable to estimate how many individuals and businesses received money by mistake, and how much they received. Another issue the Auditor General has raised is that it seems we're unable to recover those funds. Other countries, for example, have created a commissioner position specifically for this purpose. They have put in the effort and, more importantly, they established the process to recover the funds long before July 2022.

How is it that we're unable to say how much was overpaid at this point?

[Bob Hamilton]

Mr. Chair, I will answer the question first. I will then ask my colleagues to add their comments.

The main reason we can't estimate the amount paid to ineligible recipients is that we're not far enough into the audit process. We're still analyzing taxpayer files and developing our risk model. It's too early, which is why the Auditor General has tried to come up with an estimate. We don't have an estimate because it's too early in the process, but we do have experience. It's early. As I said, about 6% of ineligible taxpayers received amounts for which adjustments or denials would have been necessary.

Then—

[The Chair, Conservative, John Williamson]

I'm sorry, Mr. Hamilton, but the member's time is up. We may have an opportunity to come back to this during the rounds of questions.

Mr. Desjarlais, you now have the floor for six minutes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Chair.

I want to thank all of the witnesses for being present and for their statements today.

I want to begin by acknowledging the tremendous human suffering that's taken place throughout the pandemic. I know people in my community and right across the country from coast to coast to coast have had to deal with this. They've had to deal with the huge debt loads that they've been taking on due to the lack of assistance from other levels of government.

I am very pleased to see that in many ways this benefit, the Canadian emergency wage subsidy, and other benefits for COVID-19 were able to help people. I meet some of these people every single day, and the audit suggests that it was a good thing. I know that, on behalf of Canadians, this was a very good thing to do, particularly for our economy as it bounces back.

Of course, the work of continuing to ensure that there's accountability is the process that we're all here for today and one that I share.

I want to also recognize the folks, particularly within the Canadian Revenue Agency, the regular, everyday workers who were doing the work of making sure these benefits were provided to Canadians. They were there. When asked for assistance during one of our country's greatest times of need, the CRA did, in fact, do its job and did it well. I want to recognize that before I get into some of these questions.

I also want to recognize that the Auditor General clearly demonstrated in her audit that the programs that were offered—the Canadian emergency wage subsidy and others like the CERB—were really helpful for our economy. I want to keep that context in mind while talking specifically about work that we need to do to make sure there is further accountability for those who may have taken funds and may not have needed them.

I in particular want to recognize that the audit in many aspects was accepted by the CRA. One area that was not accepted by the CRA and was talked about by previous members of this committee was the conversation on capacity. Capacity, of course, is limited. The CRA does not have infinite resources. It does not have the ability to do everything that could be demanded of it in this scope. I want to recognize that as a real limit to this.

I also want to recognize that the CRA has a job to do in the sense that it not only has to do the work of making sure that there is, in fact, a risk-based approach in the analysis of the recovery of these funds, but there is also work to be done in making sure those who are going to be doing this work are best supported.

There's no question that the public service has, in fact, taken on far greater responsibility than we've ever asked it to. The pandemic forced every single one of us to step up, including and especially our public service. Public servants made sure they had the ability to do the things Canadians needed of them in one of our greatest times of need. The hard work of the civil service workers, with their skill and dedication to delivering this relief, is the reason Canadians got it. They provided critical support through a time when many folks couldn't find support elsewhere. The audit shows that Canadians, in fact, owe a great debt to the workers and the everyday folks of the CRA.

Now, more than ever, we need these workers to be respected. There are 35,000 employees at the CRA who are not getting that from their employer. We are hearing it time and time again. I'm concerned about this.

I'm concerned that the CRA's capacity could be even further limited in the investigation of this work, in particular the workers' conditions. The workers at the CRA have had no contract for over a year now. I can't anticipate how we can find ways to make recommendations on this audit without giving great consideration to the fact that our civil service is in desperate need of attention.

The CRA is being presented with shockingly low salary offers currently, right now. I can't foresee in the next little while how we're going to make sure our civil service this year is able to do the work that the Auditor General recommends. I recognize that the CRA has recognized that in its lack of acceptance of that recommendation in full.

I'd like to ask Commissioner Hamilton to please recognize that fact. Recognize that members of our national Parliament, me included, are concerned about our civil service. We're concerned about its stability and whether or not CRA employees will in fact have the future resources to do the job we're going to be asking them to do. That's an important and very worthwhile aspect to mention when we're talking about the recovery of these huge amounts of funds.

We just heard the Auditor General mention $15.5 billion in the Canadian emergency wage subsidy payments that her office demands further scrutiny on from the Canadian Revenue Agency. That is a massive task and one that will require the great co-operation of management and labour to ensure that we have those outcomes. I agree with many folks, including the Auditor General, that we need those outcomes.

While I have no doubt that the CRA's auditors have incredible skills and perseverance in this work, I am concerned that the government isn't going to give the CRA and its workers the tools they need to do the work Canadians need them to do. The CRA, like I mentioned before, does not have unlimited resources. We must consider this, as parliamentarians and as members of this committee.

Recent reports from the CRA said there are extremely large amounts of uncollected taxes. There's already an existing capacity issue. A 2021 report estimated that the years between 2014 and 2018 saw uncollected corporate tax revenues of between $4.6 billion and $7.3 billion a year.

Commissioner, these are shocking numbers. The overwhelming majority of this is in relation to large-scale corporations. This was even before the unprecedented strain from the pandemic was placed on the CRA in terms of its workload, let alone the implications of verifying these payments after the fact that the CRA's capacity has been limited.

My questions are for the CRA commissioner—

[The Chair, Conservative, John Williamson]

Mr. Desjarlais, I will cut you off right there, because there's no time for a response. You will have another round shortly.

Thank you very much.

We're turning again to Mr. Chambers. You have the floor for five minutes this time.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

Commissioner, the Auditor General has identified about $27 billion or, say, $32 billion. We'll call that a potential error rate. You may not agree with the number, but that's a potential error rate of ineligible payments. That's about 15% of the total COVID payments from the wage subsidy and the CERB.

When the government made the decision to proceed with an attestation-based process to distribute benefits, were there any estimations made by the CRA about what error rate might arise from using what I will call a riskier process to distribute benefits?