Standing Committee on National Finance (NFFN) - November 19, 2024 - Minister's binder

Opening Remarks

OPENING REMARKS FOR THE HONOURABLE MARIE-CLAUDE BIBEAU, MINISTER OF NATIONAL REVENUE

Standing Senate Committee on National Finance 

Appearance on several topics involving the Canada Revenue Agency

Ottawa, Ontario

November 19, 2024

Check against delivery. 

Mr. Chair, thank you for the opportunity to discuss the Agency's work regarding several topics that involve the Canada Revenue Agency.

First, I can assure you that both the Government of Canada and the Agency have a zero tolerance policy for fraud in all its forms.

This includes zero tolerance for privacy breaches, identity thefts and tax schemes of any kind. And this “zero tolerance” also applies to any Agency’s employee suspected of misconduct.

Regarding privacy breaches, first, it must be recognized that in an increasingly digital world, the increase in fraud and identity theft has become a global trend.

To combat this phenomenon, the Agency has robust systems and tools to monitor, detect, investigate and neutralize these constant and persistent threats.

As soon as fraudulent activity is discovered, the Agency acts quickly and uses all the tools at its disposal to stop any further fraudulent activity and recover any money obtained illegally. This also includes criminal investigations that may be referred to the Agency’s Criminal Investigations Directorate or to the RCMP.

This “zero tolerance” also applies to employees suspected of having improperly applied for the Canada Emergency Response Benefit while working for the institution.

I can assure you that the Agency has processed more than 600 allegations in this regard, and the review process is now nearing its conclusion. Among the results, more than 300 employees no longer work at the Agency as a result of this review.

That said, it must be said that the actions of certain individuals should in no way undermine the honesty and integrity of the tens of thousands of employees at the Agency. These people work in an exemplary manner every day to serve Canadians.

And finally, the Government of Canada and the Agency also have a “zero tolerance” for taxpayers who use tax schemes to defraud or avoid paying what they owe to the government.

Those who willfully choose not to meet their tax obligations can face serious consequences, including criminal charges, prosecution, court-ordered fines, jail time and a criminal record.

For obvious security reasons, I am unable to disclose any information here about the schemes used by the fraudsters.

However, it should be noted that the Agency has specific audit programs—and specialized resources for this purpose—that focus exclusively on tax schemes in order to stop them, and hold fraudsters accountable for their crimes.

In addition, to thwart the plans of these fraudsters, the Agency also uses all the communication channels at its disposal to warn Canadians about frauds and scams of all kinds.

For example, since January 2020, the Agency has published 23 tax tips, which include practical measures that taxpayers can take to improve the security of their own information.

I would now like to return to the COVID-19 pandemic. As you know, the Agency was called upon to quickly develop emergency financial support programs for individuals and businesses.

The benefit application processes had to be both efficient and easy to use in order to quickly pay benefits to millions of Canadians in difficulty.

The Government of Canada determined that an attestation-based application process was the only way to quickly provide critical support to Canadians.

This meant that individuals self-reported the information they provided when applying for benefits, with the understanding that the Agency would verify that information at a later date.

And here we are. The post-verification process is well and truly underway within the Agency, and these efforts are expected to continue until 2025.

In this regard, it should be noted that debts incurred for programs administered by the Agency are the result of individuals’ ineligibility or duplicate payments. The Government of Canada has made it clear from the outset that while no penalties will be imposed on individuals who applied for these benefits in good faith, those affected will be required to repay the benefits they received and to which they were not entitled.

In its collection activities, the Agency remains committed to demonstrating fairness, empathy and flexibility to help Canadians who may have received benefits for which they were not eligible.

Finally, I would like to point out that in Canada, as abroad, all government institutions are currently under significant pressure in terms of service to the public. In fact, it is mainly the Agency’s contact centres that are experiencing significant pressure. That said, the Agency can improve its service delivery. Concrete solutions are already on the table, starting with the increased implementation of self-service options that will relieve the pressure on contact centres.

I will conclude by reminding you that the Canada Revenue Agency is a world-class tax and benefits administration. Its vision is to be helpful, fair and trustworthy, in keeping with its service philosophy that puts people first.

Furthermore, in the spirit of tax justice, which is a Canadian value, it is rigorously committed to ensuring that everyone, without exception, pays what they owe to the government’s coffers.

Mr. Chair, thank you. 

Issues

Adobe Analytics

Key Messages :

• While Employment and Social Development Canada (ESDC) is the contract authority, the Canada Revenue Agency (CRA) is also a user of Adobe Analytics
• In 2021, instances of personal information were collected inadvertently through Adobe Analytics.
• However, the personal information was not structured in a way to identify individuals.
• At no point was any information accessed other than by a limited number of authorized government staff. Adobe did not have access to any of this information.
• The CRA concluded that the confidential information of Canadian taxpayers  was not compromised, as none of the data could be attributed to any individual. As such, it was unnecessary to notify taxpayers.

False T4A slips

Key Messages :

• To preserve the integrity of the tax system, the CRA does not release specific information related to our monitoring strategies that could jeopardize our efforts.
• We take all enforcement action at our disposal to return these funds to the Crown and hold the offending parties responsible. A large portion of the fraudulent payments have already been intercepted or recovered.
• Taxpayers who claim false expenses, credits or rebates from the government are subject to serious consequences. They are liable not only for corrections to their tax returns and payment of the full amount of tax owing, but also to penalties and interest. They may also face criminal prosecution.
• While we do not discuss threats publicly so as not to compromise our security efforts, we do thoroughly pursue issues related to potential fraud and have dedicated teams to promptly address these matters when they arise. 

Fraud-Prevention Measures

Key Messages :

• The CRA has zero tolerance for fraud. The vast majority of Canadians are honest, and the CRA has effective systems in place to manage the small percentage of people who submit fraudulent claims.
• Canada's tax system is based on voluntary compliance and self-assessment. The confidence and trust that individuals and businesses have in the CRA are the cornerstones of Canada's tax system.
• The CRA has robust systems and tools in place to identify, investigate these threats, and to neutralize threats when necessary.
• The CRA combines advanced data analytics and business intelligence gathered from many sources, including law enforcement agencies and financial institutions, and leads to support these efforts.
• No organization is immune from fraudulent activity. As soon as fraudulent activity is discovered, the CRA acts quickly and uses every tool at its disposal to stop any further fraudulent activity and recover any money fraudulently or illegally obtained.
• The CRA continues to adjust and improve its security measures in response to an ever-evolving threat environment. As scammers adapt their practices, the CRA has adjusted to introduce new measures and controls to address suspicious activity. Dedicated subject matter experts work diligently to counter the activities of threat actors.
• The CRA takes the abuse of Canada's tax laws seriously and encourages members of the public to contact the CRA's Leads Program. The CRA Leads Program gives the public the opportunity to come forward and anonymously report suspected cases of non-compliance with the tax laws administered by the CRA.

Unauthorized use of taxpayer information by a third party (UUTP)

Key Messages :

• Sophisticated criminal elements are attempting new and innovative approaches to bypass existing security measures to access Canadians' tax accounts, change direct deposit information, produce fraudulent tax information slips and fill fraudulent returns.
• The CRA has implemented security measures to protect the personal information of Canadians, including multi-factor authentication throughout CRA login services, and proactively revoking user IDs and passwords that may have been obtained by unauthorized third parties through a variety of external sources.
• We have made strategic investments to proactively detect, report, and address external fraud and the unauthorized use of taxpayer information by a third party (UUTP).
• These UUTP breaches often involve personal information, in most cases obtained from external sources, used to help bypass existing security measures to access or modify taxpayer information.
• The CRA routinely monitors accounts for suspicious activity to detect, prevent and address potential instances of fraud and identity theft. The CRA combines advanced data analytics and business intelligence gathered from many sources, including law enforcement agencies, financial institutions, and leads to support these efforts. We also continue to collaborate with domestic and international partners to inform our strategy and stop breaches from persisting.

Delay in reporting identity theft-related privacy breaches

Key Messages :

• In 2020 there was a significant increase in the number of identity theft cases and unauthorized use of taxpayer information by a third-party (UUTP) following the announcement of the COVID-19 emergency benefits. Later that year, the CRA also noticed a marked increase in external data breaches and cyber threats as external threat actors attempted to capitalize on a unique and lucrative set of circumstances.
• At that time, the CRA prioritized protecting accounts, improving security and protection measures and contacting affected taxpayers.
• The delays in reporting these breaches between March 2020 and December 2023 can be attributed to the need to develop a reporting process for these types of privacy breaches and to the fact that we give priority to protecting accounts and informing the taxpayers affected. They can also be attributed to external factors beyond the Agency's control, such as difficulty communicating with taxpayers to confirm the breach. The CRA has been involved in ongoing consultations with TBS and the OPC on the reporting of these types of privacy breaches.
• All confirmed UUTPs from this period have now been reported. 

Third Party fraud for 2024 tax season

Key Messages :

• The Agency works closely with third parties, exchanging information when there is sufficient concern that the taxpayer's information in its possession has been compromised.
• If a UUTP has been confirmed, the CRA takes necessary actions. This includes contacting the impacted individuals directly to make them aware of the incident, advising them of the measures the CRA is taking to protect their information, and outlining the steps they can take to further protect their account.
• In cases where a privacy breach may result in an immediate risk to the broader Canadian public, the CRA may choose to alert Canadians so that they can protect themselves from possible harm. For instance, in 2020, the CRA issued a general warning about credential stuffing attacks, and strongly encouraged Canadians to avoid reusing passwords. However, the priority is to notify affected individuals.
• The CRA's continual vigilance combined with reinforcement of  individual cyber hygiene habits creates a strong barrier against those seeking to gain from fraudulent activities.
• The Agency will continue to improve its security and adapt to changing threats, while being transparent in its relations and communications with affected taxpayers. More information is available through recent tax advice or on the site.

Cybersecurity

Key Messages :

• The CRA's continual vigilance combined with reinforcement of  individual cyber hygiene habits creates a strong barrier against those seeking to gain from fraudulent activities.
• The Agency will continue to improve its security and adapt to changing threats, while being transparent in its relations and communications with affected taxpayers. More information is available through recent tax advice or on the site.
• To preserve the integrity of this tax system, we do not release our playbook. Releasing specific information related to our monitoring strategies could jeopardize our efforts.

Internal security

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Carousel Tax Fraud

Key Messages :

• The CRA remains committed to combatting aggressive GST/HST schemes that circumvent the spirit of Canada's tax laws.
• Carousel schemes involve GST/HST registrants colluding in order to claim unwarranted refunds and intentionally avoid complying with our tax laws.
• Previous budget investments in business intelligence, auditors, and data analytics tools will continue to allow the CRA to better target potential areas of non-compliance.
• Building on a strong international network, the CRA's approach is responsive to lessons learned by other countries who face the same challenges.
• The Agency uncovers approximately $1.7 billion annually in unjustified GST/HST rebates.
• The confidentiality provisions of the Excise Tax Act prevent the CRA from discussing specific taxpayer information and ongoing audits or litigation.
• The CRA continues to work with partners in Canada and internationally to develop innovative solutions to improve our compliance approaches to address these schemes.

Issues Regarding T1135

Key Messages :

• The CRA has conducted a thorough review of all its T1135 Foreign Income Verification Statement procedures and systems and found no evidence of any delays, irregularities, system outages, failures or malfunctions by EFILE software or CRA T1135 E-filing processes.
• Form T1135 must be filed by Canadian resident individuals, corporations, partnerships, and certain trusts that, at any time during the year, own specified foreign property costing more than $100,000.
• The deadline to file a T1135 is on or before the filing-due date of the taxpayer's income tax return.
• The late filing penalty is calculated at $25 a day up to a maximum of 100 days.
• Based on the CRA review, there were no software or system issues that would have prevented a taxpayer or their representative from filing Form T1135 on time.

CERB Repayments

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Canada Revenue Agency (Agency) “by the numbers”

Employees / full-time equivalents (FTEs)

• The CRA is a large national organization. As of August 2024, the total of CRA employees nationally is 59,045 employees.
• The CRA is comprised of 5 regions (including Headquarters). The regional distribution of CRA employees across the country (as of August 2024) is as follows:
• The CRA's Western region (including the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, as well as the Yukon and Northwest Territories) makes up 12,402 employees.
• The Ontario region (including Ontario and Nunavut) makes up 12,618 employees.
• The Headquarters region (located in Ottawa, Ontario) makes up 22,240 employees.
• The Quebec Region, which makes up 6,507 employees.
• The Atlantic region (including New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador) makes up 5,278 employees.

At-A-Glance

(Source : SIIB, and FAB in consultation with SB and CPB) / Source: SIIB

a. For many Canadians, the main interaction with the government is their tax filing experience

Key facts and figures 2023-24

• 94% of Canadians participated in the tax and benefit system
• 92% of individual income tax and benefit returns and 94% of corporation income tax returns were filed digitally
• 96% of GST/HST returns were filed digitally (excluding Revenu Québec)
• 89% of individual tax returns were filed on time

b. CRA revenue collections

Key facts and figures 2023-24

• Administered $662.6 billion in revenue and pension contributions, including $400.2 billion on behalf of the federal government.

c. The economic and social well-being of Canadians is supported by the delivery of benefits and tax credits

Key facts and figures 2023-24

• 205 services and ongoing benefits administered
• $52.7 billion in benefits issued
• 758,540 people helped through the Community Volunteer Income Tax Program (CVITP)

(Source : FAB in consultation with SB and CPB)

d. Individual tax revenue

• In 2023-2024, the Agency administered over $430B in individual tax revenue.
• The Agency processes over 32 million individual tax returns in a year.
• This represents approximately $1.6B in revenues and 124K transactions per business day.
• Over the last tax season, the Agency issued $43B in payments relating to individual tax returns (19M transactions).

e. Benefits

• In 2023-2024, the Agency issued close to $55B in benefits (federal and provincial) through close to 214M transactions.
  OR
• Rounded figures option: In 2023-2024, the Agency issued over to $50B in benefits (federal and provincial) through more than 210M transactions.

f. Individual income tax

• Revenues were extracted from 2023-2024 financial statements as per below:

• Although revenues include estimates, tax returns processed also include volumes which may include previous years.
• The number of returns (32,775,962) was extracted from this page. Although it represents transactions between Feb 5 and Oct 27, 2024, it represents most of the volume processed in a year and provides a representative order of magnitude.
• Data relating to individual tax refunds was also extracted from this page.

g. Benefits

• In 2023-2024, the Agency issued 213,851,854 federal and provincial benefit payments to Canadians totaling $54,680,849,083.

h. Disbursements and Deposits

(Source : FAB)

• The Agency disburses more than 200 billion dollars annually in benefit payments and tax refunds.
• The Agency also deposits roughly 800 billion dollars annually into the Government Consolidated Revenue Fund.
• Combined, this represents close to a 1 trillion dollars of cashflows being processed by the Agency annually.

i. Community Volunteer Income Tax Program (CVITP)

(Source: SIIB and ABSB)

• 758,540 people benefited from the Community Volunteer Income Tax Program (CVITP) (2023-2024)
• Between February 19, 2024 and September 27, 2024, CARES (Client Assistance Referral and Enquiry Service) agents made 1,262 referrals to participating CVITP clinics either directly or through the website, resulting in 657 returns filed
• Between April 1, 2024 and June 30, 2024, there were 185 super clinics where:
  • over 230 activities took place resulting in 3,619 returns filed for 2,670 individuals
  • 1,787 instances of direct services provided by outreach officers resulting in 3,757 unique people being helped by an outreach officer and/or having a return filed at a super clinic
• To improve community engagement, the CRA is providing tailored training to CVITP and outreach officers to increase their proficiency on residency and immigration status.

j. Statistics: Free tax clinics

k. ABSB key program volumetrics – Calendar year 2023 (as of April 2024)

Source :  ABSB

Tax Filing Intake

The data shows number of submissions/returns weekly (monthly for T2 and GST/HST)

• Over 32M Individual T1 Returns
• T4 Information Slips (Weekly Data): Annual Intake~ 1.4M Submissions containing multiple returns/slips
• T1 Individual Returns (Weekly Data): Annual Intake  ~ 32M Returns Peak: Late Feb to Apr 30th
• T2 Business Returns (Monthly Data): Annual Intake ~ 3M, Peak: ~ 550k in June, Intake occurs throughout the year
• GST/HST Returns (Monthly Data): Annual Intake ~ 8M, Peaks Quarterly between 820 - 990k, Intake occurs throughout the year
• T3 Trust Returns (Weekly Data): Annual Intake ~ 184k, Peak: late Feb to mid Apr, Intake occurs throughout the year

Benefits Output

The data shows number of benefit payments monthly

• Over 164 Million Payments worth $51 Billion
• Benefits Annual Determinations Processing Period : ~ 690+ Million Transactions

Portal Logins
The data shows number of portal logins daily

• Over 143 Million Logins

Contact Centres

• The data shows number of calls received daily: Over 24.7 Million Calls

l. ABSB key program volumetrics – calendar year 2024 (as of August 31, 2024)

T1 Filing Deadline - April 30th

Tax Filing Intake

The data shows number of submissions/returns weekly (monthly for T2 and GST/HST)

• Over 32.4M Individual T1 Returns
• T4 Information Slips (Weekly Data): Annual Intake~ 1.4M Submissions containing over 30.2M slips
• T1 Individual Returns (Weekly Data): Annual Intake  ~ 32.4M Returns Peak: Late Feb to Apr 30th
• T2 Business Returns (Monthly Data): Annual Intake ~ 2.3M, Peak: ~ 438k in June, Intake occurs throughout the year
• GST/HST Returns (Monthly Data): Annual Intake ~ 6.2M, Peaks Quarterly between 900k – 1.2M, Intake occurs throughout the year
• T3 Trust Returns (Weekly Data): Annual Intake ~ 380k, Peak: late Feb to mid Apr, Intake occurs throughout the year

Benefits Output

• The data shows number of benefit payments monthly- YTD: Over 122M Payments worth $37.1B
• Benefits Annual Determinations Processing Period : ~ 690+ Million Transactions

CRA Portal Logins

• The data shows number of portal logins daily
• YTD: Over 131 Million Logins

Contact Centres

• The data shows number of calls received daily: YTD: Over 24.3 Million Calls

Term Employees (response issued on November 14, 2024 following a media request for information)

Throughout the pandemic, the CRA received a large increase in resources to deliver crucial COVID programs.

As a result of that added capacity, we were then able to help administer a number of new initiatives, such as the Canadian Carbon Rebate and the interim administration of the Canadian Care Dental Plan.

As we transition away from pandemic operations, the CRA safeguards responsible use of public funds while providing quality service to Canadians.

As a result, the CRA has decided to release approximately 600 term (meaning contract or temporary) employees early across the CRA, in accordance with the terms of employment contracts.

The affected term employees have been notified with four weeks notice, regardless of the length of service. The contract end date for these term employees will be December 13, 2024.

We carefully reviewed our term workforce and decisions were made to reduce term employees where we had the flexibility in program areas to do so.

The CRA prioritized maintaining the workforce for the tax filing season.

The CRA notified both the Union of Taxation Employees (UTE) of the Public Service Alliance of Canada (PSAC) and the Audit, Financial and Scientific (AFS) Group of the Professional Institute of the Public Service of Canada (PIPSC) of this decision.

We recognize that the early end of term notification can surprise many employees and managers. There is no easy way to share this news, and we recognize that this can cause stress especially so close to the end of the year. The CRA does not take these decisions lightly. We continue to analyze how to manage our operations within our approved budget while limiting human resources impacts.