It is not worth the effort to review billions of pandemic wage benefits
Canada Revenue Agency Commissioner Bob Hamilton says it is not worth the effort to conduct a full review of more than $15-billion in pandemic wage benefits the Auditor-General has said may have been sent to ineligible recipients.
Mr. Hamilton made his comments on Thursday to MPs on the House of Commons public accounts committee, which is looking into Auditor-General Karen Hogan’s December audit report.
That report said the Auditor-General had found $4.6-billion in overpayments to ineligible recipients. It said an additional $27.4-billion might have been paid out to ineligible people and businesses and should be investigated further.
More than $210-billion in payments were distributed to individuals and businesses between early 2020 and mid-2022 in an unprecedented effort to avoid a spike in poverty and business bankruptcies as large swaths of the Canadian economy were forced to shut down or scale back during the pandemic.
Federal ministers alredy rejected the Auditor-General’s key numbers, insisting that the final amounts of ineligible payments will be much smaller and that officials are working hard to identify and collect what is owed.
That larger amount includes $15.5-billion for employers that received the Canada Emergency Wage Subsidy (CEWS), which was the focus of Thursday’s hearing.
The CRA said in a written statement in December that it did not agree with parts of the Auditor-General’s findings. Mr. Hamilton expanded on that explanation during a two-hour committee appearance alongside Ms. Hogan.
Mr. Hamilton said the CRA stands by its existing “risk-based” approach to enforcement, in which it reviews a sample of cases it deems most likely to be of concern. Ms. Hogan, meanwhile, told the committee that a more aggressive and expansive review is warranted, given the very limited safeguards that were in place to screen applications during the pandemic.
The CRA is going after individuals who are suspected of fraud, Mr. Hamilton said, but he added that preliminary reviews have suggested that it is not necessary for the agency to focus on the entire $15.5-billion flagged by the Auditor-General.
“In my view, based on what we’ve seen so far, it wouldn’t be worth the effort,” he told MPs. He said later that the CRA employs a “spectrum” of responses to potential violations, ranging from educating taxpayers about their obligations to referring matters for criminal investigation.
“When we see something that’s wrong, we go after it,” he said. “As with all parts of the tax system, we need to have that strong enforcement in cases where people are doing things inappropriately.”
The $15.5-billion figure itself was also a point of contention. Mr. Hamilton said there is “a bit of confusion” around the amount, which he described as an estimate based on sales tax data. He said the agency questions the usefulness of that methodology.
Another critic of the government’s approach to COVID-19 benefits is former Liberal finance minister Bill Morneau, who resigned his post in government in August, 2020. He said in a book released earlier this month that Prime Minister Justin Trudeau and his advisers routinely overruled the recommendations of Finance Department officials and, for political reasons, approved much more generous support payments than necessary.
CEWS, which was paid directly to employers to help cover the costs of keeping employees on company payrolls, accounted for $100.7-billion of the $210.7-billion spent on pandemic benefits. The other payments were primarily sent directly to workers through programs such as the Canada Emergency Response Benefit (CERB) and its successor, the Canada Recovery Benefit.
Ms. Hogan’s report said it appeared that the $15.5-billion was paid to employers that did not meet the program’s requirement that they demonstrate a clear decline in revenue because of COVID-19.
At Thursday’s hearing, she defended her position that the CRA needs to go beyond its usual approach to reviewing whether rules were followed.
“It’s really the amount of work, the extent of work, that we don’t believe is sufficient in order to meet that fairness threshold of treating every taxpayer – whether they be an individual or business – fairly,” she said.
Ms. Hogan said the CRA should clearly identify payments that went to ineligible recipients. After the government identifies those recipients, she said, it can decide whether to attempt to claw the money back, or whether to forgive some of the payments on compassionate grounds.
“I just encourage the government to be a lot more transparent with what they’re doing, and I think they need to do more work,” she said.
Conservative MP Kelly McCauley told Mr. Hamilton he is “aghast” at the agency’s position.
“This is a huge amount of potential money. Who in the CRA is making the decision that we’re willing to risk writing off 15, 20, 25 billion dollars of taxpayers’ money?”
Mr. Hamilton defended the CRA’s position.
“I think we are doing the work that’s necessary to uncover where there are risks and where there is money,” he responded.
Toward the end of the hearing, Liberal MP Brenda Shanahan expressed support for the CRA’s approach.
“I, for one, am feeling very reassured,” she said.
Economists have been generally supportive of the federal government’s decision to intervene with massive support for businesses and individuals during the height of pandemic-related shutdowns. However, in retrospect, it is now widely acknowledged that the emergency spending could have been wound down sooner.
In Mr. Morneau’s book, “Where to From Here”, he provided previously unknown details of the behind-the-scenes work leading up to the March 27, 2020 announcement of CEWS.
He wrote that he and other Finance Department officials worked through the night to deliver a recommended program to the Prime Minister’s Office. Then, he recalled, Mr. Trudeau announced CEWS using “a figure significantly higher than we had agreed was the highest we should go the previous evening! It was one of the worst moments of my political life.”
Mr. Morneau described this as a scenario that repeated itself with many of the emergency support programs announced during the pandemic. He also criticized the generosity of CERB payments to individuals, noting that $500 a week would exceed the regular take-home pay of many part-time workers in low-income jobs.
“I wanted to be generous, but the PMO’s figures, chosen with no regard for our detailed calculations and justifications, meant we would be distributing billions of dollars more than was actually needed under the circumstances,” he said in the book.
“Calculations and recommendations from the ministry of finance were basically disregarded in favour of winning a popularity contest.”
This article was reported by the Globe and Mail.