Mr. Speaker, with respect to the above-noted question, what follows is the response from the Canada Revenue Agency, or CRA, as of February 14, 2023, the date of the question.
With regard to part (a), given the nature of the mandate of the CRA in administering Canada’s tax system, the Minister of National Revenue does not intervene in the operations of the CRA or in specific taxpayer files or audit processes. The CRA’s approach to audits is based on its assessment of compliance or non-compliance with existing legislation and regulations. Furthermore, as stated in the January 26 follow-up document tabled with PACP on page 12, the CRA has conducted audits of some of the CEWS recipients identified as being at risk by the Auditor General and to date has found that 97% of the amounts claimed of the examined files complied with program rules.
With regard to parts (b)(i) and (ii), the CRA employs a risk-based approach, in alignment with international best practices and with existing audit programs, that incorporates many elements, including cost-benefit considerations. The reason for this is that a risk-based approach ensures that the highest risk cases are addressed with appropriate compliance actions and optimizes recoveries while adhering to principles of sound stewardship of public funds. This approach ensures the CRA’s efforts are focused on claims that are of highest risk of being ineligible or overstated and allows the CRA to focus on risk without creating undue hardship for Canadian business owners as they continue to recover from the COVID-19 pandemic.
The CRA’s risk-based approach uses business intelligence tools and algorithms to assist in identifying claims that are considered high-risk and warrant a further review. These algorithms take into consideration a variety of data elements, including GST/HST, payroll and income tax filing information, claim-by-claim comparisons, compliance history and accounting methodologies, among others.
With regard to parts (c), (d), and (e), the CRA is interpreting these questions as relating to the $15.5 billion in CEWS payments identified in the Auditor General’s “Report 10—Specific COVID-19 Benefits”.
The CRA considered the “Report 10 —Specific COVID-19 Benefits” observations and can confirm that all CEWS claimants, including the 51,049 employers, representing $9.87 billion in CEWS payments identified by the Office of the Auditor General, were risk-assessed by the CRA using business intelligence tools. In addition, the CRA can confirm that a segment of the 51,049 claimants, 92% of which are small and medium businesses, has also been identified by the CRA for audit. Of the audits that have been completed so far, 97% of the amounts claimed have been approved without changes.
“Report 10—Specific COVID-19 Benefits” did not identify any businesses associated with the additional $5.6 billion in estimated payments. The CEWS audits completed to date demonstrate high levels of compliance and suggest that the number of ineligible claims may be significantly lower than estimated in “Report 10—Specific COVID-19 Benefits”.
As of January 3, 2023, the CRA has reviewed $33 billion through prepayment work and is auditing $14.7 billion, which is currently in progress or completed. The CRA is planning to continue this work until 2025 using a risk-based approach to target the claims with the most risk to ensure the integrity of the tax and benefits system.
The CRA is also carrying out additional postpayment validation reviews of approximately 70,000 businesses across all business subsidies. A specific breakdown for each subsidy is not available, as this information is not captured in this manner. Where intentional non-compliance has been identified, the CRA is pursuing these cases to the fullest extent.
The CRA conducts its compliance activities and allocates its resources commensurate with the risk, complexity and population segment of the business. As it relates to CEWS postpayment audit programs, resources were allocated following a risk-based model, in alignment with international best practices and other existing audit programs, that incorporates many elements, including cost-benefit considerations. Overall, results of CEWS compliance audits are demonstrating a high level of compliance. As noted above, cost-benefit considerations are incorporated into the risk-based approach model as factors for consideration.