Standing Committee on Public Accounts (PACP) - April 22, 2021

On this page

• Notice of meeting
• Opening Remarks
• Supporting Documentation
  • OAG Spring 2021 Report – Report 7
  • OAG Opening Statement to the News Conference (March 25, 2021)
  • Overview: Impact on CRA (from AERB)
  • News Release: ‘Statement by the Minister of National Revenue OAG performance audit of the CEWS’ (March 25, 2021)
  • Action Plan (to be shared with PACP)
  • CEWS Claims to Date
• Issue Notes
  • How is the CRA implementing the OAG recommendations?
  • What pre-payment controls were used for CEWS?
  • How does CRA use business intelligence to detect fraud?
  • CEWS and small businesses reviews and audits
  • What measures are in place to prevent CEWS misuse?
  • What are the timelines on compliance activities for the CEWS?
  • How is CRA working with employers to ensure CEWS continues to provide support, while balancing compliance efforts?
  • How is CRA working to improve the administration of future emergency benefit programs?
  • How are CRA call centres managing call volumes around emergency benefits?
  • How does the publicly accessible CEWS registry work?
  • How much has the CRA spent on the CEWS (and stats)?
  • How is the CRA ensuring that firms don’t get CEWS in respect of employees that claimed CERB?
• PACP Committee Information
  • Member Profiles
  • Relevant Committee Meeting Recap

Notice of Meeting

Standing Committee on Public Accounts (PACP)
43rd Parliament, 2nd Session

Meeting 27
Thursday, April 22, 2021, 11:00 a.m. to 1:00 p.m.
Room 410, Wellington Building, 197 Sparks Street
Televised

Report 7, Canada Emergency Wage Subsidy, of the 2021 Spring Reports of the Auditor General of Canada

Witnesses

Office of the Auditor General

• Karen Hogan, Auditor General of Canada
• Philippe Le Goff, Principal
• Mathieu Lequain, Director

Canada Revenue Agency

• Bob Hamilton, Commissioner of Revenue and Chief Executive Officer
• Ted Gallivan, Assistant Commissioner, Compliance Programs Branch
• Marc Lemieux, Assistant Commissioner, Collections and Verification Branch
• Frank Vermaeten, Assistant Commissioner, Assessment, Benefit and Service Branch

Department of Finance

• Michael J. Sabia, Deputy Minister
• Andrew Marsland, Senior Assistant Deputy Minister, Tax Policy Branch

Opening Remarks

Speaking notes for Mr. Bob Hamilton, Commissioner of the Canada Revenue Agency

Standing Committee on Public Accounts
Report 7— Canada Emergency Wage Subsidy

Ottawa, Ontario
April 22, 2021

Check against delivery.

Hello,

Madam Chair, I am pleased to be here to discussing the Canada Revenue Agency's (the Agency) action plan in relation to Report 7 of the Office of the Auditor General of Canada (OAG) on the Canada Emergency Wage Subsidy (CEWS).

With me today are the Assistant Commissioners of the Agency, namely, Frank Vermaeten of the Assessment, Benefit and Service Branch, Marc Lemieux of the Collections and Verification Branch, and Ted Gallivan of the Compliance Programs Branch.

First, I want to recognize the excellent work of Agency employees who had the daunting task of developing this wage subsidy, and its calculator, in record time in order to support millions of Canadians businesses and workers in the challenging context of the COVID-19 pandemic. Their speed of execution was remarkable, and I offer them my sincere thanks.

In Report 7, the OAG made three recommendations addressed to the Agency, and we accept them all:

1. To strengthen its efforts towards tax compliance for GST/HST.
2. To use automated validations with a unique identifier across programs.
3. To use business intelligence information as soon as it is available to conduct targeted audits.

With regard to the first recommendation, the Agency will identify opportunities within the GST/HST Delinquent Filer Program to improve filing compliance on the part of GST/HST registrants.

The Agency will review workload selection and prioritization criteria within this program to identify areas of improvement as applicable.

We will determine if program resources are allocated optimally and are sufficient to deliver on program expectations.

The Agency will also identify potential legislative changes that could support filing compliance.

And finally, the Agency will identify additional ways to educate and support businesses regarding GST/HST registration and filing obligations in order to promote future compliance.

In the second recommendation, the OAG suggested that the Agency should use automated validations with a unique identifier across programs in order to improve the integrity and validation efficiency of future emergency programs. In addition, the OAG also noted that the SIN, the unique identifier for individuals, comes with limitations, such as privacy issues and identity theft.

We acknowledge these observations and in collaboration with Employment and Social Development Canada, we are working in partnership with the Treasury Board Secretariat on its Sign-In Canada platform. Sign-In Canada will facilitate access to Government online services through a secure digital ID that is mapped to departmental programs.

We expect the Sign-In Canada platform to be available in the next 24 to 36 months, at which time, the Agency will commence its onboarding activities.

At the same time, the Agency also continues to enhance its authentication and credential management systems through multi-factor authentication. This solution is currently being rolled out to all users of the Agency's portal services. Full roll-out is expected to be completed in June of 2021.

Lastly, regarding the third recommendation, the Agency agrees that the timeliness of compliance actions is important. To this end, the Agency is continuously investing to improve its risk assessment systems and business intelligence, to better focus its resources, in a timely manner, on the highest risk cases of non-compliance at a national level.

The Agency is working with the notable aid of risk assessment algorithms which use data to help the Agency quickly identify applications that warrant more careful examination.

These algorithms are frequently updated and improved as the Agency learns more about common patterns in CEWS applications and also to reflect changes to the CEWS legislation. Phase 1 is underway.

Phase 2, which would begin in September 2021, will maximize the results obtained in Phase 1, which will then inform and improve the risk assessment process for targeted audits as a whole.

As a result, in December 2021, the Agency expects to produce its final report on this recommendation, which will include the best practices learned. These can be used as a basis for future targeted audits.

Thank you, Madam Chair. I would be happy to answer your questions.

Supporting Documentation

OAG Spring 2021 Report – Report 7

2021 Reports of the Auditor General of Canada to the Parliament of Canada

Report 7—Canada Emergency Wage Subsidy

OAG Opening Statement to the News Conference (March 25, 2021)

Auditor General of Canada’s Opening Statement to the News Conference (March 25, 2021)

Overview: Impact on CRA (from AERB)

2021 March Reports of the Auditor General of Canada Report
Report 7 – Canada Emergency Wage Subsidy

Impact on the Canada Revenue Agency

Audit objective

The objective of this audit was to determine whether the Department of Finance Canada (FIN) provided analysis on the CEWS program, taking into account the Government’s objective of providing financial relief to employers and facilitating a return to economic activity, and whether the CRA administered the program in a way to limit abuse by establishing appropriate controls.

Audit scope

The audit focused on the analysis performed by FIN to support the development of the CEWS program and also on the controls implemented by CRA to ensure recipients received the prescribed amount and that CRA made adjustments to the controls where necessary.

The audit covered the period from March 1, 2020 to February 28, 2021.

Highlights

• On March 27, 2020, as part of the response to the coronavirus (COVID-19) pandemic, the government announced the CEWS to help employers retain employees during the pandemic and ensure that workers would have a source of income despite some sectors of the economy being shut down.
• The CEWS program is expected to cost approximately $97.6 billion by the end of the 2021-2022 fiscal year. The subsidy will be available until June 2021.
• Despite facing a historic pandemic, FIN and CRA worked within short timeframes to provide decision makers with information to assist in developing and implementing the CEWS.
• In order to pay the subsidy to employers quickly, CRA made decisions about information to be collected before payments were made and the controls that would be implemented to ensure payments were appropriate.

Positive observations about the canada revenue agency

• The OAG found the following:
  • Despite extraordinary challenges, the CRA was able to effectively build an Information Technology solution that allowed for the quick delivery of CEWS.
  • To deliver the subsidy in record time, the CRA did a large amount of up front work that would have taken much longer under normal circumstances (e.g., consultations with stakeholders, development of risk registers, and creation of CRA website tools for applicants).
  • CRA had a pre-payment review coverage rate, in dollar terms, of 35% (total applications/applications manually reviewed) which positively reflects CRA’s ability to review claims quickly while still adhering to its commitment to rapidly deliver CEWS payments to employers in need.
  • For the 2019-2020 fiscal year, the employees responsible for GST/HST compliance at the agency, had a fiscal impact of $3.2 billion which represents a return of investment of more than 100 to 1. The fiscal impact includes federal tax, provincial taxes, interest, and penalties collected.

Negative observations about the canada revenue agency

• The OAG found the following:
  • 28% of subsidy applicants did not file a GST/HST return for the 2019 calendar year. Therefore, CRA did not have all the information it needed to validate the reasonableness of the applications before issuing payments.
  • Employers were not required to provide employee names or social insurance numbers when applying for the CEWS. This limited CRA’s ability to conduct automated validations before payments were issued.
  • CRA did not have all the information it needed to set efficient controls. The agency would have benefited from additional information about other subsidies as well as tax and payroll data that was more frequent and up-to-date.
  • CRA missed an opportunity by not conducting targeted audits during summer and fall 2020 based on the findings from its June 2020 business intelligence exercise.

OAG recommendations and Agency response

The audit report contains four recommendations. The following three recommendations are addressed to the CRA:

1. Recommendation. The Canada Revenue Agency should strengthen its efforts towards tax compliance for GST/HST in order to ensure that it has information needed to do validations for the programs it is administering.

   Canada Revenue Agency’s response
   Agreed. As noted in the report, in early 2020, the CRA moved quickly to build programs and related infrastructure to deliver financial support to businesses affected by the COVID-19 pandemic. To alleviate pressures on businesses and to support the implementation of pandemic response programs, the CRA shut down most of its compliance programs, including the GST/HST Delinquent Filer Program.

   In light of the new COVID-19 benefit programs, the CRA agrees with this recommendation and will seek to identify opportunities within the GST/HST Delinquent Filer Program of the Collections and Verification Branch to strengthen its efforts to improve filing compliance on the part of GST/HST registrants.

   Actions in response to this recommendation will include a review of workload selection and prioritization criteria, examination of the level and allocation of program resources, identification of potential legislative changes and increased outreach to increase compliance regarding GST/HST filing. The action plan will be completed by September 2023.

2. Recommendation. In order to improve the integrity and validation efficiency of any future emergency programs, the Canada Revenue Agency should use automated validations with a unique identifier across programs.

   Canada Revenue Agency’s response
   Agreed. The CRA is working in partnership with TBS on their Sign-in Canada platform under the Pan-Canadian Trust Framework. Sign-in Canada will give Canadians one ‘door’, through which they can access any secure government service that requires robust identity proofing and authentication. In the meantime, we continue to enhance our own authentication and credential management systems through the addition of services like Multi-Factor Authentication. Sign-in Canada, while contingent upon many factors, is expected to become available in the next 24 to 36 months. CRA will begin to onboard once the platform is proven in production with smaller departments as early onboarders. The CRA’s Multi-Factor Authentication is currently being rolled out to all users of CRA’s portal services. Full roll-out is expected to be completed in June of 2021.

3. Recommendation. The Canada Revenue Agency should strengthen the integrity of the program by using business intelligence information as soon as it is available in order to conduct targeted audits.

   Canada Revenue Agency’s response
   Agreed. The CRA agrees that the timeliness of compliance actions is important; the CRA made timeliness one of its key strategic objectives for compliance programs. In relation to the Canada Emergency Wage Subsidy (CEWS), the CRA initiated post payment audits (phase 1) in August of 2020, in relation to a new emergency program launched in April 2020. These audits were selected based on the results of pre-payment reviews conducted by technical officers, and a random sample from the remaining CEWS population. Starting CEWS audits before the end of the taxation year is an innovative approach that provides taxpayers with earlier certainty and allows for better stewardship.

   In relation to further applying business intelligence, the CRA will use phase 1 audit results to inform and enhance the risk assessment process for targeted phase 2 post payment audits starting in 2021. The CRA is continuously investing to improve its risk assessment systems and business intelligence to better focus its resources on the highest risk cases of non-compliance at a national level in a timely manner. This action plan will be completed by April 1, 2021.

Statement by the Minister of National Revenue the Honourable Diane Lebouthillier, on the OAG’s performance audit of the CEWS (March 25, 2021)

Following the tabling of the 2021 performance audit of the Canada Emergency Wage Subsidy (CEWS) by the Office of the Auditor General (OAG) of Canada, the Minister of National Revenue, the Honourable Diane Lebouthillier issued the following statement in response to the report entitled, "Canada Emergency Wage Subsidy," which included three recommendations for the Canada Revenue Agency (CRA):

“The CRA is continually improving the programs and services we deliver to Canadians, and to this end the Agency welcomes the Auditor General’s feedback and accepts all of the recommendations in today’s report.

To date, the CRA has processed and approved more than 2.7 million Canada Emergency Wage Subsidy applications for businesses, charities and organizations in the not-for-profit sector, delivering over $71 billion in payments to support over 5 million workers. By providing support quickly to employers of all sizes and in all sectors across the country, over 5 million workers have received the support they need during this unprecedented time.

When the CEWS was introduced, the CRA’s priority was to help get Canadian workers back on their employers’ payrolls. The CRA implemented the CEWS program in record time to meet urgent financial and economic needs during the pandemic, which will benefit our economy as we look to recovery. Despite extraordinarily challenging circumstances, the CRA is proud to have been able to quickly design and deliver the CEWS during a time of unprecedented crisis, and while delivering other emergency benefits. This rollout included a number of up-front verifications, with further post-payment verifications.

Since the launch of the CEWS, the CRA has heard first-hand the positive impact this financial support has had on employers and their workers during these challenging times. As of February, with support from programs like the Wage Subsidy, Canada has recovered 80% of jobs lost since the start of the pandemic.

The CRA is committed to addressing the recommendations set out in the OAG’s report. We have developed an action plan to address the OAG’s three recommendations for the CRA which include: strengthening the development of future emergency programs, strengthening tax compliance, and using business intelligence to conduct audits.

We recognize the economic challenges that have resulted from the COVID-19 pandemic, and the impact that the audit process can have on businesses, particularly small businesses. For this reason, the CRA has proceeded carefully in order to protect both businesses and the broader economy. Consistent with the OAG’s recommendation to strengthen tax compliance, ongoing audit and compliance activities will continue over the next several years.

To improve the integrity and validation efficiency of all CRA programs - including future emergency benefit programs - the CRA will assess and determine how best to use automated validations with a common identifier across programs.

In addition, the CRA will continue to work closely with businesses and their representative organizations as it refines the delivery of this program, as well as any new emergency benefit programs the CRA may need to administer should Canada ever face another crisis in the future.

CEWS is intended to support the payment of salary and wages for employees. Should these funds have been misused, the penalties can include repayment of the wage subsidy, an additional 25% penalty, and potentially imprisonment in cases of fraud.

As Minister of National Revenue, I remain committed to ensuring that our tax system is fair and transparent, while protecting the integrity of programs that provide financial support for businesses and communities using Canadian tax dollars.”

Quick Facts

• To date the CEWS has provided over $71B in subsidies supporting over 5 million employees. The CRA publishes detailed data about CEWS claims on our website on a regular basis.
• The CRA has developed comprehensive web content, held regular information sessions with stakeholders and introduced tools including an online CEWS calculator to help businesses comply with the parameters of this emergency program from the outset.
• The CEWS provides employers who have experienced a drop in revenue during the COVID-19 pandemic with a subsidy to cover part of employee wages, retroactive to March 15, 2020. The CEWS will be available until June 15, 2021.

Action Plan (to be shared with PACP)

Canada Revenue Agency detailed action plan

CEWS Claims to Date

CEWS data since launch

Issue Notes

How is the CRA implementing the OAG recommendations?

Key messages:

• The CRA welcomes the report, and is committed to addressing all three recommendations made by the OAG for the CRA.
• The CRA has developed an action plan to address all three of the CRA-related recommendations, as provided to the Committee.
• With regard to the 1st recommendation, the Agency will identify opportunities within the GST/HST Delinquent Filer Program to improve filing compliance on the part of GST/HST registrants – with an expected completion date of September 2023.
• With regard to the 2nd recommendation, in collaboration with Employment and Social Development Canada, we are working in partnership with the Treasury Board Secretariat on its Sign-In Canada platform. Sign-In Canada will facilitate access to Government online services through a secure digital ID that is mapped to departmental programs. At the same time, the Agency also continues to enhance its authentication and credential management systems through multi-factor authentication – with an expected completion date of June 2021.
• With regard to the 3rd recommendation, the Agency agrees that the timeliness of compliance actions is important. To this end, the Agency is continuously investing to improve its risk assessment systems and business intelligence, to better focus its resources, in a timely manner, on the highest risk cases of non-compliance at a national level – with an expected completion date of December 2021.

What pre-payment controls were used for CEWS?

Key messages:

• The CRA designed the CEWS to include up-front verification to help ensure the subsidy was provided to eligible applicants. The CRA also developed comprehensive web content, held regular information sessions with stakeholders and introduced tools including an online CEWS calculator to help businesses comply from the outset.
• Prior to payment, the CRA reviews a significant portion of CEWS claims to verify the information that employers submit to ensure that those receiving the subsidy are eligible.
• To do so, the CRA validates information in an application against existing data holdings, and may also follow-up by phone to verify certain elements of claims upon pre-payment review.
• Before payments are made, low risk accounts are reviewed via system checks to validate employer eligibility and reasonableness of amounts claimed, and high risk accounts are referred to officers for manual validations (which may include employer contact) to verify information included in the application.
• After payments are made, comprehensive post-payment audits are completed on selected files (identified through risk-assessment tools, analytics, leads, and third-party data) to verify eligibility of both the applicant and the amounts received.
• Through a combination of robust pre-payment validations, an improved service capacity on the telephones, and significant self help tools online and embedded in the application process, the CRA sought to realize a high level of accuracy of claims on the part of employers, while showing due diligence to identify and correct cases where the applicant is not eligible for the subsidy.
• When a more detailed review is needed for a CEWS claim, our focus remains on doing so as quickly as practical before the payment.

Key messages – Use of SIN Numbers:

• The CRA explored the option of having employers identify the SIN of employees whose salaries were included in each CEWS claim. However, we determined that it would not have been feasible for employers to provide this information because this requirement would have significantly slowed down the application process and delayed payments of these emergency measures to businesses.
• Additionally, a system to cross-match information would have been time-consuming and significantly more complicated to establish, which would have meant the CRA would have had to delay urgently needed payments to businesses.
• Instead of utilizing the SIN as a verification measure, the CRA determined that it would be feasible for employers to provide this information on their employees’ T4 slips for post-payment verification control purposes for the CERB, and the T4 slip was modified accordingly.

How does CRA use business intelligence to detect fraud?

Key messages:

• The CRA has a strong track record of detecting and addressing non-compliance using business intelligence, which refers to the use of data and data analysis in making business decisions.
• When the CRA processes CEWS applications, it uses an automated validation process, and manually verifies certain elements of the claims when necessary. Manual verification can include contacting applicants directly.
• The CRA has also put procedures in place to identify fraudulent wage subsidy claims before it issues a payment.
• Tax evasion or aggressive tax avoidance is a factor in selecting claims for closer scrutiny, however, per the legislation established for the administration of this emergency program, the CRA cannot deny claims based on tax evasion or tax avoidance unrelated to the CEWS eligibility criteria, as the CEWS aims to provide aid to employees.
• To further evaluate the level of compliance, the CRA began phase 1 of its Post-Payment Audit Program in August of 2020. These post-payment audits were selected based on the results of pre-payment reviews conducted by technical officers, the CEWS business intelligence tool, and a random sample from the remaining CEWS population.
• The CEWS business intelligence tool consists of algorithms, for example “if the amount in field X is greater than Y, then add the business number to this list.”) and key risk indicators.
• The CEWS business intelligence tool also uses key risk indicators which allow files with specific characteristics, such as the presence of affiliated entities in low or no tax jurisdictions (which is often correlated with aggressive tax planning) to be flagged for audit.
• The CRA’s business intelligence tools are continually being enhanced and improved.
• Starting CEWS audits before the end of the taxation year is an innovative approach that provides taxpayers with earlier certainty and allows for better stewardship.
• In relation to further applying business intelligence, the CRA will use phase 1 audit results to inform and enhance the risk assessment process for targeted phase 2 post payment audits starting in 2021.

CEWS and small businesses reviews and audits

Key messages:

• The CRA reviews CEWS claims to verify the information that employers submit to ensure that those receiving the subsidy are eligible.
• That said, we target our compliance measures towards those who are intentionally non-compliant. To do so, we use a combination of risk-assessment tools, analytics, leads, and third-party data to detect and address non-compliance.
• The CRA recognizes the economic challenges that have resulted from the COVID-19 pandemic and the impact that the audit process can have on businesses. For this reason, we have proceeded carefully in order to protect businesses and the broader economy which remains vulnerable due to the pandemic.

Key messages – consultations with small businesses:

• Over the past year, the CRA has consulted with stakeholders to solicit their important insights on the CEWS. We will continue to work closely with businesses and their representative organizations as we refine how we deliver this important program.
• For instance, the CEWS updated webpage and calculator have benefited from input from key stakeholders during user experience testing, including the Canadian Federation of Independent Business, Chartered Professional Accountants of Canada, Association of Fiscal and Financial Planning, economic development groups, financial institutions and bookkeepers.
• Following the launch of the CEWS calculator, we conducted a series of Q&A sessions over several weeks to provide a forum for eligible employers and stakeholder organizations to share their views and have their questions answered.
• Quotes:

  “The Canada Emergency Wage Subsidy will help many small business owners keep their employees during the COVID-19 pandemic. This will remove the stress of losing a job for workers and allow employers to bring their teams back together quickly as soon as the emergency phase is over. CFIB appreciates the work of the Canada Revenue Agency in operationalizing this key benefit. We were pleased to provide feedback to the CRA on its calculator designed to make it easier for firms to access the wage subsidy.”

  “I’m pleased to say that my organization has been working closely with the Canada Revenue Agency behind the scenes to ensure that the templates they put in place and the calculators are as easy as is possible.”

  “In this time of unprecedented uncertainty, Chartered Professional Accountants of Canada is working with organizations such as the Canadian Tax Foundation in providing constant input to the Canada Revenue Agency on important issues relating to the Canada Emergency Wage Subsidy program. It is encouraging to see the CRA putting a new tool in place aimed at helping employers determine required calculations well in advance of the application process being initiated.”

What measures are in place to prevent CEWS misuse?

Key messages:

• When the CEWS was introduced, the CRA’s priority was to alleviate pressures on businesses effected by COVID-19 and help get Canadians back on their payroll. The CRA implemented the program based on timelines established by Parliament to meet urgent financial and economic needs.
• As the OAG points out, despite extraordinary challenging circumstances, the CRA was able to effectively build an IT infrastructure to quickly deliver the CEWS during a time of great need. The Agency was able to accomplish this while also delivering other emergency benefits.
• Since the Spring of 2020, the CEWS has helped employers impacted by the COVID-19 pandemic to keep workers on their payroll or bring back previously laid-off employees.
• While the vast majority of businesses and employers are applying correctly and are making efforts to comply, in any major government support program, there will also be a small minority attempting fraud and/or aggressive non-compliance.
• There will also be some who believe they should qualify, but are not eligible for the program. The CRA is committed to protecting the integrity of programs that provide financial support for businesses and communities using Canadian tax dollars.
• The CRA designed the CEWS to include up-front verification. When the CRA processes CEWS applications, it uses an automated validation process and manually verifies certain elements of the claims when necessary to help ensure the subsidy is provided to eligible applicants.
• After payment, more comprehensive post-payment audits are conducted to further evaluate the level of compliance.
• It is also important to acknowledge that the CEWS program rules are indeed complex and attempt to accommodate many different sizes and types of employers.
• As such, some errors were honest mistakes, potentially related to not fully understanding CEWS legislation. Such examples include:
  • using the wrong payroll information due to the concept of paid vs earned,
  • not considering calculations on an employee-by-employee basis;
  • ineligible employees being included in the CEWS claims;
  • ineligible payroll amounts (e.g. bonuses related to prior year performance) included in the payroll amounts in the CEWS claims
• CRA has provided a popular calculator and has comprehensive guidance on the Canada.ca website: /content/canadasite/en/revenue-agency/services/wage-rent-subsidies/covid-wage-hiring-support-businesses/wage-calculate-amount.html
• As of as of April 11, 2021, the CEWS has provided $74.25B in supplementary income to help Canadians stay on the job during a time of fiscal uncertainty. Statistics on the CEWS can be found online: /content/canadasite/en/revenue-agency/services/wage-rent-subsidies/emergency-wage-subsidy/cews-statistics.html.

What are the timelines on compliance activities for the CEWS?

Key messages:

• Audit and compliance activities are ongoing and will take place over the next several years.
  • The CEWS, launched with prepayment validation in spring 2020.
  • The CRA began Phase 1 of the Post-Payment Audit program in the summer of 2020.
  • It is expected that Phase 2 of the Post-Payment Audit program will start later this spring.
  • The results of the audits performed in Phase 1 and 2 will inform future work in this space.
  • CEWS audits will likely continue on a stand-alone basis or as part of the CRA’s overall tax compliance programs for two to three years.

How is CRA working with employers to ensure CEWS continues to provide support, while balancing compliance efforts?

Key messages:

• The CRA is conscious of the economic situation and will continue to proceed carefully to protect the fiscal base while respecting the fragility of businesses and the economy.
• Over the past year, the CRA has consulted with stakeholders to solicit their important insights on the CEWS, including the application process, the parameters and eligibility criteria of the program and its tools and resources including our CEWS website and calculator.
• The CEWS program has greatly benefited from input from key stakeholders during information sessions and user experience testing.
• We will continue to work closely with businesses and their representative organizations as we refine how we deliver this important program.

How is CRA working to improve the administration of future emergency benefit programs?

Key messages:

• To improve the integrity and validation efficiency of all CRA programs (including future emergency programs) the CRA will assess and determine how best to use automated validations with a common identifier across programs.
• We continue to make improvements to our security systems, including the introduction of Multi-Factor Authentications (MFA) which will soon be available for all CRA account owners.
• The Government of Canada is working on the implementation of Sign-In Canada which will offer Canadians (individuals, businesses and their authorized representatives) secure and private online access to multiple government (including provincial & territorial websites) online services, and will include a strengthened digital identity program that will support departments with digital platform services like the CRA.
  • The CRA will continue to partner with Employment and Social Development Canada (ESDC), Treasury Board Secretariat (TBS) and other stakeholders to develop this service.
• We will continue to work closely with businesses and their representative organizations as we refine how we deliver this important program and future emergency programs.

How are CRA call centres managing call volumes around emergency benefits?

Key messages:

• At the onset of the COVID-19 pandemic, the Government of Canada called upon the CRA call centres to help administer emergency relief benefits to Canadians in need, and call volumes increased significantly as a result.
• In order to manage call demand to the CRA’s general enquiries call centres, and to help maintain service to taxpayers and those in need, the CRA set up a new telephone platform to answer general (non-account specific) questions related to the emergency benefits.
• CRA employees from across the Agency whose workloads were deemed non-essential were called upon to answer general questions on the new telephone line.
• To prioritize incoming calls relating to the emergency benefits, the CRA created new Interactive Voice Response (IVR) routing paths. The CRA established an IVR phone line to help Canadians easily and securely apply for CERB and CESB, without requiring the assistance of an agent.
• To help Canadian businesses receive the help and information they needed regarding the CEWS, the CRA prioritized and fast tracked calls on this topic to reach agents who were skilled to answer them.
• The CRA worked collaboratively with Shared Services Canada (SSC) to increase their telephone infrastructure capacity, allowing the Agency to handle a larger number of calls at a time.
• CRA call centre agents were trained to respond to enquiries with the highest demand, ensuring Canadians were helped as efficiently as possible.
• To increase agent capacity, the CRA reallocated resources from other areas, to assist on the Individual tax and Business enquiries lines.
• In order to respond to the continued call demand, the CRA procured the services of a third party telephone service provider, when CRA employees, who were acting as temporary call centre agents, returned to their regular workloads.
• The CRA continues to hire additional agents to help manage increased call demand as a result of the ongoing COVID-19 pandemic and the emergency benefits.
• The CRA call centres have extended their hours of service on the Individual Tax and Business enquiries lines.
• Earlier this year the CRA implemented a new service enhancement, the automated callback feature, on our Individual tax, Benefits, and Business enquiries lines.
  • To date, we have completed nearly 535,000 callback requests.
  • Callbacks are offered during peak periods, and are dependant on criteria such as wait time, number of calls waiting, and number of agents available. When all criteria are met, callers will be presented with a callback offer after opting to speak with an agent.

How does the publicly accessible CEWS registry work?

Key messages:

• As part of the government's ongoing commitment to transparency, the CRA launched the CEWS Registry in December 2020.
• This public web page allows any Canadian to search for employers who have received or will soon receive the CEWS and can be searched by legal business name, business number or operating name.
• The authority for the CEWS Registry is provided by the implementing legislation (Bill C-14) initially enacted by Parliament in April 2020 – which specifically states that the Minister of National Revenue may communicate or otherwise make available to the public the names of recipients, in any manner that the Minister considers appropriate.
• Currently, in order to protect the privacy of individuals while still providing transparency, the CEWS Registry displays incorporated entities only – a requirement originally put in place after consultation with the Officer of the Privacy Commissioner.
• The initial release of the CEWS Registry contained a view all functionality, which presented users with a complete list view of all corporate CEWS recipients, displaying 1000 entries per page. The demand to access “View full list of employers” was higher than expected and on December 24, 2020, the functionality was suspended due to unexpected IT issues.
• The CRA will continue to make updates to the webpage daily and will continue to improve the search function on an ongoing basis. It is important to note that a name that appears on a given day may not appear on a subsequent day if the status of the application changes.
• The CRA is working towards restoring the public facing portion of the view all functionality, however no specific date has yet been identified.

Background:

• The CEWS Registry was launched in December 2020. Bill C-14 included an amendment to the taxpayer confidentiality provisions in the Income Tax Act (ITA) that authorized the Government of Canada to publish the name of any employer who makes an application for the CEWS.
• Applicants for the CEWS attested, through the application process, of their knowledge that their names may be published.

How much has the CRA spent on the CEWS (and stats)?

Key messages:

• The government introduced the CEWS program to complement its 10% Temporary Wage Subsidy for Employers by subsidizing up to 75% of qualifying wages.
• The program which was originally for 12 weeks up to June 6, 2020 was extended until June 30, 2021.

Facts:

• The CRA is responsible for the administration of the CEWS program, which includes the service delivery, compliance, and collection activities.
• The CRA reported expenditures of $120.1 million (including employee benefit plans) for the administration of the CEWS program in 2020-2021, as at the end of February 2021. The administration costs of $120.1 million reported to the Treasury Board Secretariat through the monthly COVID 19 tracker are publically available.
• Expenditures for the administration of the CEWS include:
  • Development of business requirements for IT solutions
  • IT system changes (implementation, post-launch system upgrades to support pre and post payment validations and verifications)
  • Outreach and information sessions, development of application guides, Canada.ca website and upgrades to Chatbot
  • Costs associated with processing of applications
  • Issuing cheques including postage
  • Costs associated with development of business intelligence/reporting

How is the CRA ensuring that firms don’t get CEWS in respect of employees that claimed CERB?

Key messages:

• The CRA implemented the CEWS program with the utmost urgency, to ensure employers received necessary funds to keep businesses open during an unprecedented health crisis.
• The CRA is committed to ensuring that Canadians receive only the COVID-19 benefits that they are entitled to. This includes ensuring that employees whose wages were subsidized by CEWS payments do not also receive CERB payments for which they are not entitled.
• The CEWS was intended to support employers in re-hiring or hiring staff - such as those who might have been on CERB.
• At the beginning of the pandemic, individuals may have applied for CERB proactively in anticipation of reduced working hours and employment income. If during a specific CERB period they subsequently received more employment income than the maximum allowed under CERB, recipients were informed that they would have to repay the CERB.
• To prevent double payments and in considering the objective of the CEWS program to support the relationship between employers and employees, the CRA chose to base its controls on post-payments of CERB payments using information from all employers on the T4 for 2020.
  • We determined that it would be feasible for all employers to provide this information on employees' T4 slips (after emergency payments were received) for post-payment verification control purposes, and the T4 slip was modified accordingly.
• As with other benefits administered by the CRA, we will take steps at a later time to verify that claimants were eligible to receive payments for any of the new COVID-related economic measures.
  • The CRA has records of those who received the CERB and for what period. These will be used, along with tax slips received from all employers and other relevant information available to the CRA, to validate eligibility.
  • In cases where claimants are found to be ineligible, they will be contacted to make arrangements to repay any applicable amounts.
• Specifically for CERB new T4 reporting requirements introduced for the 2020 tax year require employers to identify employment income paid within defined periods. This information will be used to identify individuals who may have exceeded the $1,000 income threshold while in receipt of CERB.
• We explored the option of having employers identify the employees whose salaries were included in each CEWS claim while we were developing the application process.
• However, we determined that it would not have been feasible for employers to provide this information at the time of application because this would have significantly slowed down the application process and delayed payments of these emergency measures to businesses.

PACP Committee Information

Member Profiles

Chairperson

Kelly Block (CPC)

Key Issues raised in the House of Commons:

• Goods and services tax.
• Harmonized Sales Tax.

Written Questions:

Q-522² — March 10, 2021 — Mrs. Block (Carlton Trail-Eagle Creek) — With regard to government contribution agreements: (a) how many contribution agreements ended or were not renewed since January 1, 2016; (b) what is the total value of the agreements in (a); and (c) what are the details of each agreement in (a), including the (i) summary of agreement, including list of parties, (ii) amount of federal contribution prior to the agreement ending, (iii) last day the agreement was in force, (iv) reason for ending the agreement?

Response prepared by FAB.

Correspondence:

• N/A

Vice-Chairs

Lloyd Longfield (Lib.)

Key Issues raised in the House of Commons:

• Nil for the CRA.

Written Questions:

• Nil for the CRA.

Correspondence:

• N/A

Maxime Blanchette-Joncas (BQ)

Key Issues raised in the House of Commons:

• Nil for the CRA.

Written Questions:

Q-404² — February 16, 2021 — Mr. Blanchette-Joncas (Rimouski-Neigette—Témiscouata—Les Basques) — With regard to government spending in the ridings of Rimouski-Neigette—Témiscouata—Les Basques, Avignon—La Mitis—Matane–Matapédia, Manicouagan, Montmagny—L’Islet—Kamouraska—Rivière-du-Loup, Gaspésie—Les Îles-de-la-Madeleine, Papineau, Honoré-Mercier, Ahuntsic-Cartierville and Québec, since 2015 and broken down by constituency: (a) what is the total annual amount, broken down by year; (b) what is the detailed annual amount, broken down by department, Crown corporation, agency or body; and (c) what grants and contributions have been made, broken down by year according to the source of the funding?

Response prepared by FAB and SIIB.

Correspondence:

• N/A

Members

Luc Berthold (CPC)

Key Issues raised in the House of Commons:

• Nil for the CRA.

Written Questions:

Q-287² — December 2, 2020 — Mr. Berthold (Mégantic-L'Érable) — With regard to contracts issued by ministers' offices for the purpose of media training, since December 1, 2019: what are the details of all such contracts, including the (i) vendors, (ii) dates of contract, (iii) dates of training, (iv) individuals for whom the training was for, (v) amounts?

Reply was tabled on January 25, 2021.

Q-288² — December 2, 2020 — Mr. Berthold (Mégantic-L'Érable) — With regard to polling by the government since December 1, 2019: (a) what is the list of all poll questions and subjects that have been commissioned since December 1, 2019; (b) for each poll in (a), what was the (i) start and end date each poll was in the field, (ii) sample size of each poll, (iii) manner in which the poll was conducted (in person, virtually, etc.); and (c) what are the details of all polling contracts signed since December 1, 2019, including the (i) vendor, (ii) date and duration, (iii) amount, (iv) summary of the contract, including the number of polls conducted?

Reply was tabled on January 25, 2021.

Correspondence:

• N/A

Kody Blois (Lib.)

Key Issues raised in the House of Commons:

• Canada Emergency Response Benefit.
• Canada Emergency Wage Subsidy.

Written Questions:

• Nil for the CRA.

Correspondence:

• N/A

Greg Fergus (Lib) (Parliamentary Secretary to the Prime Minister, to the President of the Treasury Board and to the Minister of Digital Government)

Key Issues raised in the House of Commons:

• Canada Student Service Grant.
• Charitable organizations.

Written Questions:

• Nil for the CRA.

Correspondence:

• N/A

Matthew Green (NDP) (National Revenue Critic)

Key Issues raised in the House of Commons:

• Tax credits.
• Persons with disabilities.

Written Questions:

Q-71² — September 28, 2020 — Mr. Green (Hamilton Centre) — With respect to the tax fairness motion that the House adopted on March 8, 2017: what steps has the government taken since then to (i) cap the stock option loophole, (ii) tighten the rules for shell corporations, (iii) renegotiate tax treaties that allow corporations to repatriate profits from tax havens back to Canada without paying tax, (iv) end forgiveness agreements without penalty for individuals suspected of tax evasion?

Reply was tabled on November 16, 2020.

Q-314² — December 7, 2020 — Mr. Green (Hamilton Centre) — With regard to government business finance programs and government contracts, broken down by funding program, contracts and fiscal year, since 2011: (a) what is the total funding for (i) Facebook, (ii) Google, (iii) Amazon, (iv) Apple, (v) Netflix?

Reply was tabled on January 25, 2021.

Q-541² — March 10, 2021 — Mr. Green (Hamilton Centre) — With regard to the CRA's decision to temporarily suspend, as of March 2020, the programs and services of "high-risk audits", "international large business", "high net worth compliance", "GST/HST audit of large businesses", "audit of complex transactions", "audit of flow-through shares" and "foreign tax whistleblower program", broken down by each of the programs and services mentioned, by month, since March 2020 to the re-establishment of the service of audits, and by risk level of non-compliance: (a) how many audits were suspended as a proportion of total audits; (b) of the audits in (a), how many are still suspended as a proportion of total resumed audits; (c) what duties were performed by the auditors during the suspension period; (d) how many files were closed; (e) of the files closed in (d), what was the average amount of time spent processing each file before a decision was made to close it; (f) of the files closed in (d), (i) how many have been assessed (ii) how many have been transferred to the criminal investigation program; and (g) what was the change in the number of auditors, in terms of full-time equivalent?

Response prepared CPB.

Q-542² — March 10, 2021 — Mr. Green (Hamilton Centre) — With regard to Canada Revenue Agency (CRA) high net worth compliance program, broken down by year, from November 2015 to date : (a) how many audits were completed; (b) what is the number of auditors; (c) how many new files were opened; (d) how many files were closed; (e) of the files in (d), what was the average time taken to process the file before it was closed; (f) of the files in (d), what was the risk level of non-compliance of each file; (g) how much was spent on contractors and subcontractors; (h) of the contractors and subcontractors in (g), what is the initial and final value of each contract; (i) among the contractors and subcontractors in (g), what is the description of each service contract; (j) how many reassessments were issued; (k) what is the total amount recovered; (l) how many taxpayer files were referred to the CRA's Criminal Investigations Program; (m) of the investigations in (l), how many were referred to the Public Prosecution Service of Canada; and (n) of the investigations in (m), how many resulted in convictions?

Response prepared by CPB, FAB, ABSB and CVB.

Correspondence:

• N/A

Philip Lawrence (CPC) (National Revenue Critic)

Key Issues raised in the House of Commons:

• Canada Revenue Agency.
• Tax exemption.
• Canada Emergency Response Benefit.
• Canada Recovery Benefit.
• Goods and services tax.

Written Questions:

Q-32² — September 23, 2020 — Mr. Lawrence (Northumberland-Peterborough South) — With regard to the Canada Revenue Agency’s approach to workspace-in-the-home expense deductions in relation to the COVID-19 pandemic’s stay-at-home guidelines: are individuals who had to use areas of their homes not normally used for work, such as dining or living rooms, as a temporary office during the pandemic entitled to the deductions, and, if so, how should individuals calculate which portions of their mortgage, rent, or other expenses are deductible?

Reply was tabled on November 16, 2020.

Q-283² — December 2, 2020 — Mr. Lawrence (Northumberland-Peterborough South) — With regard to the section on page 116 of the Fall Economic Statement 2020, which reads, "CRA will allow employees working from home in 2020 due to COVID-19 with modest expenses to claim up to $400, based on the amount of time working from home": (a) how many Canadians does the government project will be eligible for the deduction; (b) what is the required amount of time working from home to be eligible for the full $400 deduction; (c) what is the required amount of time working from home to be eligible for a deduction less than $400, and what is the formula used to calculate the eligible deduction amount; and (d) what is the specific eligibility criteria to determine if someone who worked from home is eligible for this new deduction, as opposed to the traditional work from home deductions for individuals who worked from home prior to the pandemic?

Reply was tabled on January 25, 2021.

Correspondence:

• N/A

Francesco Sorbara (Lib.) (Parliamentary Secretary to the Minister of National Revenue)

Key Issues raised in the House of Commons:

• Tax evasion.
• Canada Student Service Grant.
• Charitable organizations.

Written Questions:

• Nil for the CRA.

Correspondence:

• N/A

Len Webber (CPC)

Key Issues raised in the House of Commons:

• Bill C-210 An Act to amend the Canada Revenue Agency Act (organ and tissue donors).
• Income tax returns.

Written Questions:

• Nil for the CRA.

Correspondence:

• N/A

Jean Yip (Lib.)

Key Issues raised in the House of Commons:

• Nil for the CRA.

Written Questions:

• Nil for the CRA.

Correspondence:

• N/A

Associate Member

Luc Desilets (BQ) (National Revenue Critic)

Key Issues raised in the House of Commons:

• Income tax returns.

Written Questions:

• Nil for the CRA

Correspondence:

• N/A

Relevant Committee Meeting Recap

PACP Committee Hearing Recap (April 13, 2021)

Parliamentary Affairs monitored the House of Commons Public Accounts (PACP) Committee meeting held on April 13, 2021. PACP met with the Office of the Auditor General to discuss the March 2021 OAG Reports released on March 25, 2021 – including Report 6 (CERB) and Report 7 (CEWS).

During her opening statement (almost verbatim as the media statement delivered on March 25, 2021), the Auditor General declared for Report 6 “the Department of Finance Canada, Employment and Social Development Canada, and the Canada Revenue Agency rose to the challenge and quickly analyzed, designed and delivered the Canada Emergency Response Benefit … Employment and Social Development Canada and the Canada Revenue Agency are working to start their post-payment verification efforts relating to the Canada Emergency Response Benefit later this year. Their work in this area will be the subject of a future audit” and for Report 7 that “we observed a similar focus on getting help out quickly, in this case to businesses. Once again, the Department of Finance Canada and the Canada Revenue Agency worked together within short timeframes to support the development and implementation of the Canada Emergency Wage Subsidy. The design and rollout of the subsidy highlighted pre-existing weaknesses in the Agency’s systems, approaches and data. These weaknesses will need to be addressed to improve the robustness of Canada’s tax system. To prioritize issuing payments, the Canada Revenue Agency chose to forego certain controls that it could have used to validate the reasonableness of subsidy applications. For example, the Agency decided that it would not ask for social insurance numbers, though this information could have helped prevent the doubling-up of applications for financial support. This decision limited the Agency’s ability to perform pre-payment validations, as did the absence of complete and up-to-date tax information that would have helped it efficiently assess applications.”

During the question and answer portion of the meeting, Report 9 (Investing in Canada Plan) and Report 8 (Pandemic Preparedness, Surveillance, and Border Control Measures) were the primary focus - there was only one question, see below, on Report 7 (CEWS) and there were no direct questions on Report 6 (CERB) during the meeting.

• PACP CPC Member Len Webber asked about the lack of controls to validate CEWS applications (especially not asking for SINs) to preventing the ‘doubling up’ of support; the AG noted that the Department of Finance and CRA worked on tight timelines to design and implement CEWS with a focus on flowing support out quickly and – informed by international best practices in emergency situations - lessened the typical use of pre-payment controls – instead shifting validation to post-payment controls (hence, why the OAG has planned audit work on CRA’s post-payment validation on CEWS and CERB). The AG also explained that SINs were not requested due to CRA’s weak IT systems that could not handle the data for ‘cross-comparability’ and the lack of timely tax information (especially late GST filings from prior years). The AG also noted that the CRA has explained its post-payment work will take “several years to get through”, underscoring the need for the OAG to conduct additional future and early audits to ensure CRA has ‘good’ post-payment controls in place.
• PACP CPC Member Len Webber asked the OAG to clarify that CRA actually had ‘no pre-payment controls in place at all’ for CEWS and simply paid out what organizations applied for; the AG explained that CRA did, in fact, have some automated controls in place for CEWS (and CERB), but not the stronger controls normally seen for payment programs – hence the potential for some payments being made in error to ineligible applicants that will need to be recovered.
• Finally, Webber also complained about some constituents being asked to repay CERB amounts following ‘post-audits that are going through the CRA’ and finding it “very difficult”.

 

PACP Committee Hearing Recap (April 15, 2021)

Parliamentary Affairs monitored the House of Commons Public Accounts (PACP) Committee meeting held on April 135, 2021. The representatives from the CRA and other governmental organizations, along with the Office of the Auditor General, were requested to appear before PACP to discuss Report 6, Canada Emergency Response Benefit, of the 2021 Reports of the Auditor General of Canada.

Question and Answer Portion:

• Jean Yip (LIB) noted that the OAG report found that some applicants were blocked by the CRA because of “suspicious information” on their applications and were then prompted to provide CRA additional documentation, with only 11% of those who contacted CRA actually eligible (as of 20 December 2020), and asked if this finding could be extrapolated to other questionable claims; the CRA noted that most Canadians were honest about applying, but there would always be some degree of inappropriate claims and confusion with such a benefit program. It was also added that extrapolating the 11% might not be advisable, as it was a relatively small subset of applicants. The CRA then emphasized that 2020 tax filing data would allow for back-end verification to better determine ineligible claims.
  • Jean Yip (LIB) then asked for some examples of what front-end verification systems the CRA had in place for the CERB; the CRA, while noting there were fewer than normal, such front-end measures included the attestation and others that were added as the program continued throughout 2020 – like asking those over 75 to call CRA and provide additional information to support their claim, as well as other measures to address outliers without slowing down the flow of payments too much.
• In response to a question from Maxime Blanchette-Joncas (BQ) about the need for verification, the OAG underlined that 2020 tax filing data would provide invaluable information to weed out ineligible claimants – but this could take many years, hence the need for further OAG audit by end of 2021 of post-payment verification plans of CRA and ESDC.
  • Maxime Blanchette-Joncas (BQ) also asked about the 11% of those who contacted CRA actually being eligible and what that meant about the overall level of ineligibility; the OAG explained that the CRA was focused on high-risk applicants at the start of the verification, so hard to draw an analogy based on the blocked payments as those were a subset of applicants deemed higher-risk based on existing CRA data.
• Matthew Green (NDP) briefly commented about issues with CEWS recipients paying out dividends, suggesting it was a more significant issue than CERB fraud.
• Raquel Dancho (CPC) spoke about issues with certain EI applicants being blocked from applying for CERB, which she stated was an issue impacting thousands – as per CRA’s testimony at HUMA earlier in 2021; ESDC answered the question and confirmed the issue was being resolved.
• Francesco Sorbara (LIB) asked how many CERB payments have been repaid by Canadians to date; CRA officials noted it was roughly over 1 million, but would provide a more precise number in writing to PACP.
  • Francesco Sorbara (LIB) wondered how difficult it was for CRA to pivot as an organization from collecting taxes to paying out benefits; CRA officials explained that they had a track record in delivering various benefits (like CCB, GST payments), so it was not foreign territory – but the size and speed of delivering the CERB was a unique challenge.
• Philip Lawrence (CPC) recounted a story of a constituent having difficulty repaying CERB – which included numerous unsuccessful attempts to reach CRA call centres; ESDC answered the question and offered to look into the case.
  • Philip Lawrence (CPC) asked what recovery rate CRA had targeted for ineligible CERB payments; CRA officials stated while no set rate was in mind, it will be looking to ensure support was provided appropriately, but also that CRA’s compliance efforts would need to be sensitive to the difficult personal financial situation of many Canadians currently. It was further underlined that the 2020 tax filing data would be of great assistance in flagging inappropriate CERB recipients.