Auditor general of Canada Karen Hogan holds a press conference in Ottawa on Dec. 6.Sean Kilpatrick/The Canadian Press
In the economic freefall of spring 2020, the federal government faced the unenviable choice of either suspending its fiscal safeguards to rush emergency benefits to households and businesses, or following established protocols that would have limited fraud but delayed critical aid.
Ottawa made the right call two years ago to expedite payments, a lifeline to millions of individuals and to hundreds of thousands of businesses. The decision to rely on an honour system kept the Canadian economy from crumbling, and staved off bankruptcy, poverty and homelessness for many.
But that decision created a responsibility to ensure that benefits were not paid out mistakenly, not to mention fraudulently. Ottawa had a duty to trust, but then to verify with all due speed.
As this week’s Auditor-General report on pandemic benefits makes clear, the Liberals failed in that duty.
The report found that $4.6-billion was paid to ineligible individual Canadians. That is a significant amount on its own, but it could just be the start. The Auditor-General also says another $27.4-billion merits further scrutiny, including $15.5-billion in payments under the Canada Emergency Wage Subsidy to businesses that were not hit with revenue declines large enough to qualify under that program. And there is an additional $1.6-billion in questionable payments to individuals who quit their jobs, were imprisoned – or were dead.
All told, more than $33.6-billion may have been misspent. That eye-popping total is not the most disturbing part of the Auditor-General’s report. More disquieting is the federal government’s indifference to recouping those billions of taxpayer dollars.
The Liberals have demonstrated that baffling insouciance previously, refusing for instance to close an obvious loophole in the CEWS program that allowed companies with handsome annual profits to secure payments based on a lousy month or two of sales.
Despite the lack of prepayment screening for individuals, Ottawa did not set up a “rigorous and comprehensive approach” to verify after the fact if benefits were paid out properly, the report said. And it has no plans to do so: the Canada Revenue Agency says it’s not cost-effective to pursue all potentially ineligible claims, and that it has not been given enough funding for a full-fledged effort.
The Auditor-General found that the CRA’s strategy to reclaim individual pandemic benefits consisted of waiting for debtors to phone the agency and volunteer payment. And the agency has only recently started to take the obvious and obligatory step of withholding future payments or tax refunds from individuals wrongly paid pandemic benefits.
There has been a more vigorous auditing of payments made to businesses under CEWS, but progress has been glacial. That task has been made more difficult by both the agency’s failure to take the elementary step of comparing revenue data that businesses reported under CEWS with sales data submitted by those same companies in GST/HST filings.
Employment Minister Carla Qualtrough claims the government is reviewing all files and working on individualized payment plans. If only. The government’s official response to the Auditor-General flatly contradicts Ms. Qualtrough’s airy assertions. To be fair to Ms. Qualtrough, her claims are part of a pattern from this Liberal government of preferring to paper over incompetence with platitudes. Airport security, passport lineups, visa applications: we can now add pandemic debt collection to the sorry parade of federal ineptitude.
As large as the sums are, more than just the government’s reputation for fiscal management is at stake. Also at risk is Canadians’ belief in the fairness of the tax and benefits system, a bedrock principle that underlies the voluntary compliance at the heart of public finance.
A haphazard approach to debt forgiveness is unfair as well. Why should those forthright enough to contact the CRA be expected to pay, while those who ignore Ottawa’s gently worded letters get off scot-free? Lastly, Ottawa’s trust-and-forget-about-it approach is fundamentally unfair to all individuals and businesses who played by the rules and did not apply for benefits to which they knew they were not entitled.
If the Liberals truly believe these debts should not be collected, they should say so explicitly and bear the resulting justifiable criticism. Failing that, the government should direct the CRA to redeploy whatever resources are needed to recoup those undeserved billions of dollars.