CRA Shies Away From Full Review Of $15 Billion In Ineligible Payments

The Commissioner of Canada Revenue Agency (CRA), Bob Hamilton, has stated that it is not worth conducting a full review of over $15 billion in pandemic wage benefits that may have been sent to ineligible recipients, according to the December audit report by Auditor-General Karen Hogan. 

The report states that the Auditor-General found $4.6 billion in overpayments to ineligible recipients and an additional $27.4 billion might have been sent to ineligible people and businesses that should be investigated further. This includes $15.5 billion for employers that received the Canada Emergency Wage Subsidy (CEWS), which was the focus of the recent hearing.

Hamilton told MPs on the House of Commons public accounts committee that the CRA stands by its existing “risk-based” approach to enforcement and will continue to review only a sample of cases deemed most likely to be of concern. 

“When we see something that’s wrong, we go after it,” Hamilton 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 Auditor-General insisted that a more aggressive and expansive review is necessary, given the limited safeguards in place to screen applications during the pandemic, saying that the agency needs to go beyond its usual approach.

“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.

READ: Union Representing CRA Employees Wants A 30% Pay Increase Over 3 Years

Hamilton added that the CRA is only going after individuals suspected of fraud and preliminary reviews have suggested that the entire $15.5 billion flagged by the Auditor-General does not require the agency’s focus. Hamilton also said that the CRA uses a “spectrum” of responses to potential violations, ranging from educating taxpayers to referring matters for criminal investigation.

The commissioner also claimed that there is “a bit of confusion” on the $15.5 billion figure, and questioned the usefulness of the methodology, which he described as an estimate based on sales tax data. 

The CEWS, which was paid directly to employers, accounted for $100.7 billion of the $210.7 billion spent on pandemic benefits. The rest of the payments were given directly to workers through the Canada Emergency Response Benefit (CERB) and the program that succeeded it, Canada Recovery Benefit.

The approach to focus on individuals while corporations are dismissed to “not require the agency’s focus” has been criticized. If the argument is about whether going after the potential errors is worth the effort, wouldn’t chasing after individuals take far more effort for a smaller potential yield? CRA recently sent over 800,000 debt notes to individuals it believes may have received excess or were ineligible to receive Covid-19 benefits from either CERB or CRB. 

Hogan insisted that the CRA needs to go beyond its usual approach and clearly identify payments that went to ineligible recipients. The government can then decide whether to attempt to reclaim the money or forgive some of the payments on compassionate grounds. She also encouraged the government to be more transparent and do more work.

“This is a huge amount of potential money,” said Conservative MP Kelly McCauley, who was “aghast” at Hamilton’s apparent lack of concern. “Who in the CRA is making the decision that we’re willing to risk writing off 15, 20, 25 billion dollars of taxpayers’ money?”

“I think we are doing the work that’s necessary to uncover where there are risks and where there is money,” Hamilton maintained.

Information for this story was found via Financial Post, The Globe and Mail, Twitter, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.