THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, November 19, 2024
The Standing Senate Committee on National Finance met this day at 9 a.m. [ET] to study matters relating to federal estimates generally and other financial matters.
Senator Claude Carignan (Chair) in the chair.
[Translation]
The Chair: Good morning, honourable senators. Before we begin, I would like to ask all senators and other in-person participants to consult the cards on the table for guidelines to prevent audio feedback incidents. Please make sure to keep your earpiece away from all microphones at all times. When you aren’t using your earpiece, place it face down on the sticker placed on the table for this purpose. Thank you for your cooperation.
I want to welcome all the senators and all the Canadians tuning in on sencanada.ca.
My name is Claude Carignan. I’m a senator from Quebec and the chair of the Standing Senate Committee on National Finance. I would now like to ask my colleagues to introduce themselves, starting from my left.
Senator Forest: Good morning and welcome. Éric Forest, Gulf division, Quebec.
Senator Boudreau: Good morning. Victor Boudreau from New Brunswick.
[English]
Senator Pate: Good morning and welcome. Kim Pate. I live here on the unceded, unsurrendered and unreturned territory of the Algonquin Anishinaabeg.
Senator MacAdam: Jane MacAdam, Prince Edward Island.
Senator Ross: Good morning. Krista Ross, New Brunswick.
Senator Smith: Larry Smith, Quebec.
[Translation]
The Chair: Thank you. Honourable senators, we’re pleased to be joined today by the Honourable Marie-Claude Bibeau, Minister of National Revenue for Canada.
Minister Bibeau, thank you for taking the time to meet with us today. We look forward to hearing your thoughts on the various issues and challenges facing the Canada Revenue Agency. You’re joined by Bob Hamilton, Commissioner of Revenue, and a number of other senior officials from the department. We’ll start with the minister’s opening remarks. We’ll then open the floor to questions. Go ahead, Minister Bibeau.
The Honourable Marie-Claude Bibeau, P.C., M.P., Minister of National Revenue: Thank you, Mr. Chair. We’re pleased to have the opportunity to discuss the Canada Revenue Agency’s work and challenges.
First, I can assure you that the agency has zero tolerance for fraud. The protection of taxpayer information remains one of our highest priorities. To do this, the agency has a multi-layered system of defences to identify, protect against, detect and respond to threats such as fraud, identity theft and tax schemes. We’re also successful in protecting hundreds of thousands of fraudulent attempts to gain access to personal and business taxpayer accounts. As fraudsters’ tactics evolve, the agency adapts and remains vigilant in its efforts to stay ahead of them. To do this, we’re continually investing in security by improving our technologies, processes and controls to ensure the safety of taxpayer information.
This zero tolerance also applies to our employees suspected of misconduct. In June 2023, we launched an internal review process to identify all the employees who inappropriately applied for and received the Canada Emergency Response Benefit, or CERB, while employed with us. As we’re approaching the completion of the internal review process, here are some results. A total of 330 employees who inappropriately received the CERB are no longer with the agency as a result of this review. We have 185 cases that didn’t result in an end of employment. Of these cases, 40 resulted in other disciplinary actions, such as suspensions. The remaining cases resulted in administrative actions such as the end of the review, since the employee was no longer with the agency at the time of the review or they were found to be a victim of identity theft. A further 135 employees were found to have been eligible for the CERB. The agency is also committed to combatting tax crimes, such as tax evasion and tax avoidance, or combatting tax schemes of any kind. That said, in order to preserve the integrity of our tax system, the agency doesn’t disclose specific information about tax schemes or its surveillance strategies. This information could compromise our efforts. However, we thoroughly pursue issues related to potential fraud. We have dedicated and skilled teams to promptly address these matters when they arise. I would like to now address the collection issues related to the emergency benefits implemented during the pandemic.
The agency initiated pre-validation reviews in July 2020 to assess high-risk applications before payment issuance, followed by the commencement of post-payment verification reviews in January 2022. The agency adopts a risk-based approach, targeting validation efforts on files with the highest likelihood of ineligibility or significant potential recovery amounts. As of September 30, 2024, verifications have been completed for a total of 768,000 individuals, representing 88% of the total planned workload. We’re aiming for 875,000 verifications.
In addition to reviews, we blocked approximately 700,000 high-risk individuals from applying, resulting in $378 million in halted direct payments and preventing an estimated $5 billion in future benefits from being issued. Now, it must be stressed that the agency has a robust collection program that ensures a high level of collection results. To do so, however, we’re sensitive to the hardship that Canadians may still be facing as a result of the COVID-19 pandemic. The agency works with Canadians to resolve any debt they may have by entering into a mutually satisfactory payment agreement based on their ability to pay. However, if the agency determines that a taxpayer has the ability to pay in full and that the debt remains unpaid with no acceptable payment arrangement, it may take legal action to collect the debt. This includes actions such as the offset of future refunds and credits, the garnishment of wages or other income sources or the use of any other means under the applicable statutes and laws.
Furthermore, offsetting is a standard operating procedure used to collect outstanding taxpayer debt. It involves proactively applying tax refunds and benefit payments, such as on GST credit or other tax or government debts. Finally, rest assured that the agency constantly strives to provide the highest level of service possible to taxpayers. The agency is providing taxpayers with the tools that they need to file their tax returns quickly, simply and securely. Nevertheless, the agency is aware of the increased challenges of our contact centres. Many initiatives are already under way to improve our services. Also note that, from September 25 to December 2, 2024, individuals, representatives, our professionals and tax intermediaries have the opportunity to share feedback on their experiences interacting with the agency’s services through an online questionnaire and through in-person and virtual consultations. On that note, thank you, Mr. Chair. I’m ready to answer your questions.
The Chair: Thank you. We’ll begin our round of questions with Senator Forest. We’ll limit each question to five minutes.
Senator Forest: Thank you for joining us. You talked about hacking threats. According to a CBC/Radio-Canada investigation, tens of thousands of taxpayer accounts at the agency have been hacked in recent years through the use of codes meant for tax preparers such as H&R Block. I just read an article that came out this morning. Imposters took control of the tax accounts of hundreds of taxpayers to change, for example, the bank account on file. At least $6 million in refunds was misappropriated. The amounts are believed to be much higher. Has the agency succeeded in closing these gaps, and what measures have been taken?
Ms. Bibeau: Thank you, Senator Forest. The agency did manage to regain control. However, to put things into perspective, we manage 205 programs at the agency. Moreover, in terms of inflows and outflows, we handle inflows of $663 billion a year and outflows of nearly $60 billion. At the time of the COVID-19 benefits, these amounts totalled $195 billion. For perspective purposes, that’s a massive amount. Every dollar counts. We want all corporate citizens and individuals to pay their fair share. We’re working on this. We have good and skilled teams and the tools and mechanisms to do so.
Yes, some fraud does occur. The agency faces constant fraud attempts given that it remains a high-value target with all the information at its disposal. What steps have been taken? Once we identify potential fraud, we block the accounts considered at risk and call the people concerned to confirm that identity theft has indeed occurred. If so, we take steps with the taxpayer to protect their account. We also begin the search for the fraudster and report back — for the sake of transparency — in line with certain procedures.
Various mechanisms are in place, including what we call multi-layered controls. I’ll show you the overlapping safety nets. If you fall through certain cracks, you can be caught at another level, partly as a result of our partnerships with various national and federal organizations. For example, we share information with banking partners and they form part of this protection system.
The identity thefts that we face and that can lead to fraud are almost always caused by information obtained outside the agency’s system. Fraudsters obtain our identification number and password from outside the agency, such as on the dark web or in other places. With this information, they can enter the individual’s account. We have monitoring systems in place to identify them. A few may get through. The system kicks in and blocks the rest and the measures take hold.
Senator Forest: Desjardins, for example, experienced a major fraud. They set up a protection system with Equifax for the clients affected. Are any more specific measures in place for Canadians affected by fraud?
Ms. Bibeau: Indeed. As I said, our first response to any suspicion of a potential hacking is to block your account and call you. Depending on the situation, we determine what measures to take.
My colleagues can provide more tangible examples, or you can ask the question during the round with the officials.
The Chair: To add an element of clarity, haven’t you implemented a system equivalent to Equifax, where you give affected taxpayers access to an additional form of protection for their account and personal information?
Ms. Bibeau: When it comes to additional protection, I’ll turn to the commissioner. However, credit protection is available. If the identity theft has affected the person’s funds, some protection will be guaranteed. The person won’t face any financial loss as a result of the identity theft.
Commissioner, could you comment on the mechanism equivalent to Equifax?
Bob Hamilton, Commissioner of Revenue, Canada Revenue Agency: I would like to add to the minister’s comments. There are two aspects to fraud or malicious activity. In the event of an impact, we’ll provide credit protection such as Equifax. We have certain measures to protect the accounts of the people affected, such as blocking the account and providing credit protection services.
Senator Forest: Are these measures triggered automatically? Does the individual have to be contacted? In the case of Desjardins, the Equifax protection system was provided to all the beneficiaries concerned.
Ms. Bibeau: At Desjardins — which doesn’t have any direct connection with the agency — they recognized that fraudsters had gained access to their data. They offered their clients a system. In our case, the agency’s system isn’t compromised. The personal information was obtained from outside the agency’s system and used to gain access to the agency.
The Chair: Thank you.
[English]
Senator Smith: Minister, welcome.
I would like to focus on budget reductions and operational efficiency for a couple of questions. The CRA 2024‑25 department plan includes significant budget reductions totalling $65.7 million aimed at improving operational efficiencies. However, the 2022-23 departmental results program report indicates that several key performance targets, such as those related to service delivery and debt collection, were not met. How do you plan to balance these spending cuts while also addressing the agency’s performance shortcomings?
[Translation]
Ms. Bibeau: Thank you. In the agricultural sector, I had the opportunity to speak with shareholders every day. In the agency, this is less common.
Obviously, we’re facing challenges when it comes to service standards for call centres. We won’t deny it. We’ve implemented a number of measures to ensure sound management of public finances.
How can we improve our services with the resources available? For example, our call centres now have a mechanism where people are no longer left on hold for hours on end. When the average wait is around 30 minutes, we offer same-day return calls to the people already on hold. New callers are told about self-service options. Otherwise, we suggest that they call back at another time. We’ve seen the satisfaction rate increase.
We’ve also made major investments to find different ways to respond. The population is growing. The files are more complex. We manage more programs. Security and cybersecurity issues are more critical. For all these reasons, we receive many more calls in the centres, and the calls last longer. We’re looking for ways to reduce the number and length of calls to ensure good quality service. We’ve introduced new ways to activate My Account to prevent accounts from being locked too easily or to ensure that they can be reactivated by the individual. The chat function is now available within My Account, unlike before. The chat was only for more general questions. We’re starting to use artificial intelligence for general answers, but especially for data analysis.
Senator Smith: I want to know whether you have identified the three biggest performance issues. If so, what are they? Do you have any statistics to show us the results? General answers are good, but not helpful. We need statistics to pinpoint the three biggest issues — such as debt reduction or performance targets — and the results. I’m not trying to be rude. Could Mr. Hamilton answer this question if he works on it every day?
[English]
Mr. Hamilton: Mr. Chairman, just to respond to that question, I think we’ll perhaps get to the level of detail you’re looking for when my colleagues come to the table, but I just want to say two things.
Yes, we do have top areas that we’re focusing in on, but when you look at the numbers that you’ve quoted — you’re in the 2022-23 period — there would be a natural reduction in our resources coming out of the pandemic. What we saw at the agency was, as we came into the pandemic, we were handed quite a few programs to administer, so we increased. One would naturally think that in later years, we would come down. Working against that is the fact that there are a number of new measures in the tax system. It’s getting complex, as the minister said. There is a balance there between how much we can reduce and still try to maintain our service standards. I wanted to say the point in time you’re talking about is a specific one.
But on the question, I think the minister talked about contact centres, and that would be one of the top areas in terms of our service standards where we’re not meeting them. We actually have quite a robust exercise, and we have a board of management that pushes us on this to say, What are your service standards, where are you not meeting them, and what are you doing about it? For example, in contact centres, which would be a good one, we’re looking at how we can become more efficient as we try to have a more challenging task with fewer people. What technologies can we use? We’re using artificial intelligence and other ways of making our system more efficient, like training our employees better. We always try to keep track of how much impact those measures are having and what they’re doing to the time that people have to wait.
I would say one thing just in looking at that, focusing on contact centres. We have noticed an increase in the call-handle time which is contributing to — we have a lot of calls, but if each call takes longer, and right now they’re taking about 50% longer than they did pre-pandemic, that means we can answer fewer calls.
Senator Smith: You said your call centres’ length of the calls is taking more time. Can you give us a comparison from what it was and what it is now? Is it improving and getting better?
Mr. Hamilton: Sure. It would be a general answer because it varies day to day, but if you take a rough figure, before the pandemic, we were at about 9 minutes per call, and now we’re up at about 16 minutes. So why is that? I don’t know how far you want to get into it, and my colleagues can do a better job than I, but first is establishing identity. Going back to the question we just talked about, there is more fraud in the system, and we saw increased activity of people trying to penetrate, so we have to spend more time making sure we have the right person. As the system becomes more complex and there are lots of new tax measures people have questions about, that takes a bit longer, too, because the questions are not as easy to resolve. What we’ve seen recently is a lot of new immigrants coming into the system who might not understand the tax system as well, so those are more complex calls as well. Those are all contributing to that roughly 9-minute to 16-minute thing. We’re trying to find ways through technology and others that we can reduce the call‑handle time and then therefore be able to answer more calls.
[Translation]
Senator Dalphond: Welcome to the committee, Madam Minister and Mr. Hamilton. My first question is for the minister. You and your government voted for Bill C-290, which is intended to protect whistle-blowers and improve the act, which has not been updated in 17 years. The goal is to enhance protection for individuals who disclose practices that need to be changed in government institutions.
I read a Radio-Canada report last week by two well-known journalists who said the agency has begun a witch hunt for whistle-blowers to find out who spoke to the media. There is reportedly not only an atmosphere of panic at the Canada Revenue Agency, but also an attempt to silence those who have disclosed certain things. I know you are not responsible for the operation of the agency, but as minister do you still agree that the whistle-blower act is important, that it should be amended and updated, and are you prepared to give the agency instructions to stop the witch hunt?
Ms. Bibeau: Yes, I support the act. I voted for the bill, as the government did. There are situations that must be brought to light. First, with regard to the Canada Revenue Agency specifically, we are subject to the Income Tax Act. Pursuant to section 241, the first thing that the minister and all employees are briefed on when they arrive is the confidentiality of all taxpayer information: for individuals, businesses, corporations and so on. That’s the first thing we are told. We are told right away that if you disclose that, you’re going to jail. That is the first thing we learn upon arriving at the agency.
Secondly, the Access to Information Act also protects certain information for various reasons. With regard to the agency specifically, the tax system and information that can impact ongoing investigations are also protected. Agency employees, unlike the employees of other departments, for instance, have specific confidentiality clauses in their contracts that are binding on them. You have to make a distinction here: What is happening right now isn’t a witch hunt, but a call to order. People have to comply with the Income Tax Act. The tax system has to be protected. Ongoing investigations must not be compromised. It is a call to order, I would say, and not a witch hunt.
There are mechanisms within the agency for disclosing things within those confidentiality parameters.
Senator Dalphond: My next question is for Mr. Hamilton, the head of the agency. In the same report, it says that the agency is looking to find the sources and identify them. Is that true?
[English]
Mr. Hamilton: I would say, Mr. Chair, in response to that question and going back to your previous one, there’s definitely not a sense of panic in the agency. I can say that. There is no witch hunt. We have expectations of our employees that they respect the laws under which we operate and the confidentiality provisions, so it is disturbing if we think that somebody is dispensing that information more publicly. That would be my first thing. What we do say to employees — and we have rules that apply outside of the circumstances — is we have departmental spokespersons to deal with the media, and we have reinforced to people that you have to respect that.
The final thing I would say is, as I said, employees have an obligation to respect ours, and if they feel like they see something is going wrong within the agency, we have general whistle-blower protections. The Public Sector Integrity Commissioner looks after that, and I won’t comment on whether they need to be increased or decreased. We also have a number of other mechanisms. If somebody sees something going on, we encourage them to report it to their supervisor. We also have internal investigation opportunities within the agency. So we have some mechanisms within the agency if you see something that you don’t like, and we respect those and we push hard on that. There is a broader one across the public service, the Integrity Commissioner, and there is the legislative framework that applies on top of that.
Senator Dalphond: I’ll put my question in English to make sure you understand very well. Are you saying that what has been in the papers is inaccurate — in the media, I should say — about the fact that many employees have been reporting these deficiencies in the systems and these potential risks of abuse of the systems, but they were not listened to, that the agency was not responsive, and therefore, they had to go public to make sure that your agency is becoming responsive?
Mr. Hamilton: In that case, much like if we’re talking about a specific aspect of fraudulent activity, we don’t comment on the nature of the reported attack or what we’re doing to prevent it, just because we don’t want to reveal in the public domain what actions we might be taking. Similarly —
Senator Dalphond: — months ago about these problems?
Mr. Hamilton: Similarly, in the case of if there were things that happened in the agency as reported in the article, again, we don’t comment on that. I personally don’t have any indication of what somebody may or may not have said, but we do take it seriously and look to identify, as we would do in any case, what happened and what we can do to make sure everybody behaves properly in the way going forward.
[Translation]
The Chair: I would like to remind the senators that the minister will have to leave soon, but the officials will stay on to answer our questions.
I will ask you to bear that in mind and answer the question specifically. Have you targeted specific sources or people who spoke to the media or blew the whistle, or are you looking for them? To my mind, the answer isn’t clear.
Ms. Bibeau: You will have to ask the commissioner that question, since it is so specific.
If you rephrase the question and ask instead: Did those employees inform their superiors or report their concerns to a higher level in the agency? I would like to say that I am confident that they were heard, except that the way the agency works when trying to improve our systems is not public. Employees are not necessarily aware of all the details of our efforts to tighten up the system.
They might not be aware of all the efforts made to tighten things up. That is my understanding of the situation.
[English]
Senator MacAdam: I have a question on the call centres again. In an article published by Global News in December 2023, it was revealed that Canada’s Auditor General will look again into wait times and responses at Canada Revenue Agency call centres. According to the Auditor General’s website, this audit is anticipated to be published in 2025. That article further identifies the highly critical report done by the Auditor General in 2017.
Minister, your predecessor responded to the report of the Standing Committee on Public Accounts with regard to that report back in 2017, and in that report, all the recommendations were accepted. It was reiterated that government’s commitment to improving the service of the CRA’s call centres was a priority. A press release at that time went on to say that there would be investments in service from Budget 2016. The CRA committed to implementing a three-point action plan to ensure the Auditor General of Canada’s recommendations are adopted, focusing on modernizing technology, improving agent training and updating service standards. That was in 2017.
I would like to know if you could provide some information on the funds and resources that have been dedicated to this effort since 2017. I realize that, in Budget 2024, additional funding priorities for CRA included $336 million over two years, starting in 2024-25, to maintain call centre resources and improve their efficiency. I’m wondering if you can comment on what is being done to improve those service standards. Is there an update? It seems to be taking a long time. It seems there were investments made back in 2017 to support the improvements in the call centres, and here we are still talking about it, so I want to get some information in that regard.
Ms. Bibeau: Thank you.
I will start by saying that we receive more or less 25 million calls to the call centres every year. That’s significant. I can tell you that over the last year — since I’ve been in the position for the last 14 months or so — I’ve seen progress. We no longer see anyone waiting online for more than 30 minutes because when we reach the threshold of 30 minutes, those who are waiting will be offered a callback during the day. The new callers who are calling in will get a message saying that these are the self-serve options that you can access now or to please call later because the call centre is at full capacity now. As the commissioner said a bit earlier, we’ve seen a significant increase in the appreciation of the service.
As you said, we are investing in new technologies in different ways. Actually, we know that about 50% of the calls we receive are related to the access to Mon dossier or My Account. That’s why we put in place, I believe last spring, a mechanism where if you want to connect to My Account for the first time, you do not have to wait for a number by mail. We have new, secure measures so you can open your account right away. We are still working on it, but progress has already been made so that an account won’t be locked too easily. It is always a challenge to find the right balance between service and security. This is our challenge.
We are working hard on facilitating access to My Account because we know it’s 50% of the calls we receive. Now you can chat within My Account, and before we couldn’t. The chat was only for general questions. Now, you can get into My Account and then chat and get specific responses regarding your account, which is helping as well. Artificial intelligence is also being progressively implemented mainly, as of now, to help us compute data because we have so many data within the agency.
We can see significant progress. We obviously have peak seasons. During the spring, during income tax season, we receive way more calls, and in July as well. If you haven’t filed your taxes on time, you might not receive your benefits on time in July, so this brings up the number of calls we receive. The ombudsman is also there to respond. Last year, the ombudsman received 2,800 complaints, which represents 0.01% of the 25 million calls we receive during a year. So it’s not perfect, but considering the volume, I think we are doing well, and we are definitely doing way better this year.
Mr. Hamilton: I think the minister has covered the territory well, but if we go back to the 2017 report, I was actually at the agency at the time. It was one of the first reports I received as the commissioner. Just to identify, there were three basic issues with the report. First was the quality of the responses, with 70% accuracy. Second, we were blocking calls because if we could not get to them in two minutes, we would turn them away. Third was the training we offered to our employees. We did all of those. We replaced the technology with a bigger platform. We are now thinking we have to replace it again. We upped the training for the officers, the agents, and that has brought our accuracy up about 26%. With the new technology, we can record the phone calls, and we could find out where the problems were. And we stopped blocking calls. We let everyone in. We did fulfill and improve the system.
All the fraud we’ve seen in the system through the pandemic and all the additional calls have put pressures on the system. Even though we’ve improved it, there are more pressures coming on. That’s why we continue to work on the kinds of things the minister described. How can we identify people more quickly through our new digital identification? Yes, we’ve made a lot of improvements. Yes, there are still pressures on the system, so we are still having to go through and improve.
[Translation]
Senator Boudreau: I would like to go back to Senator Forest’s questions about the 62,000 or more Canadians who have been the victims of hacking and identify theft. We have to empathize. We have probably all heard stories about people who have been targeted. It is one thing to be hit by that kind of thing, but another to recover from it. I have heard that it can take months if not years to help someone get back on their feet after having their identity stolen.
I know you have talked a bit about how you operate on a case-by-case basis, but do Canadians receive assistance throughout the process? If it takes two, three or four years to recover, does the agency assist them throughout that process? There are stories about how harmful it can be not only to the person, but to their family as well. What does the agency do in the long term to assist those Canadians?
Ms. Bibeau: Thank you. Once again, let me put things into perspective. Identify theft often occurs on another platform and not within the agency. Once that information has been obtained elsewhere, it is used to get into the agency. If we have any doubts, the first thing we do actually is block the account and call the person to see if there has been identify theft. Yes, we do assist them for as long as necessary for the consequences related to the agency, their tax file or any of their other benefits. We do not abandon them. We help them until things have been cleaned up. It depends on the extent of the identity theft. It can be complex in some cases. There is a special phone line. They do not call the general line in those cases. There is a special line for victims of identify theft.
Senator Boudreau: You said that assistance is provided for as long as they have problems with the agency, but if there are other instances of fraud involving other departments or agencies, do you help in that process or do they have to start over with each agency or department that might be involved in the identity theft?
Ms. Bibeau: I might refer you to my colleagues. If it has affected their employment insurance file, for instance, I think each department has to do its part. If the person’s identify was stolen elsewhere — once again, the person’s name and password are in many cases found somewhere else — the agency is responsible for what happens within the agency.
As MPs, that is a service we offer. When people come to see us and have various problems, we try to direct them appropriately, but the agency does not have the authority to access employment insurance files, for instance.
Senator Boudreau: Thank you.
The Chair: Your system isn’t flawed? If you give a code to H&R Block, it’s the same code for everyone. Then you say they got it somewhere else. They got it somewhere else, but you provided it. If you give everyone the same code or readily available codes, it’s as though I was giving my key to everyone. They took the key from somewhere else, but they all copied it.
Ms. Bibeau: Yes. You can appreciate that I cannot talk about specific cases. The majority of identity theft cases the agency is involved in are for individuals. They are not all the same. There are indeed tax preparers where several people might be working with the same agent code, but we are trying to tighten that up. We are learning from our mistakes. Every time a situation arises, no matter what it is, we review our systems to protect ourselves from the situation we have just come up against. Things are indeed checked.
The Chair: Thank you.
[English]
Senator Ross: Minister, I’m interested in the successful or improved interactions between small- and medium-sized enterprises, or SMEs, and the CRA. I know one of your strategic priorities is to offer free tax help and education for small businesses about their tax obligations through the Liaison Officer service and program. I wonder if you can tell me what programs or outreach you are doing to achieve this. What are the anticipated outcomes?
Ms. Bibeau: Thank you. This is a program that I promote a lot when I travel, mainly around chambers of commerce, for example. It is a program that is very much appreciated.
We do have Liaison Officers all across the country who will offer conferences or training sessions to groups. For example, the chamber of commerce can invite a group, or the Liaison Officer will offer services to a specific SME. If they visit a restaurant, they will come to the visit and bring data concerning the sector of activity. They will say, “Okay, well, in your specific sector of activity, a challenge or a mistake that we see often is this and this and that.” So they will explain the situation, educate, if I may say, and give fiscal literacy to this business person. There is absolutely no connection between our Liaison Officers and our auditors, to put the business person at ease.
I know it is very much appreciated. It might be a bit difficult to evaluate the impact, but I know it is better known and utilized more and more, and it helps particularly the young entrepreneurs as well. We encourage them to have a first session with their Liaison Officer when they start the business so they start in the right way. They may or may not have an accountant, but even if they do — because often, that’s the response they give us. They say, “Oh, I have an accountant,” and we say, “Great, and that’s good if you ask the right questions and provide the right information, because if you don’t talk about this or that, then the accountant could not know and they can’t apply the credits that they might be eligible for.” So it is important to understand what it is about and to start on the right foot.
Mr. Hamilton: Just to add to what the minister said, the Liaison Officer program has been very successful in terms of trying to educate and inform people up front. That’s a pathway we’ve been on at the agency for a number of years now. How do we demystify the tax system wherever we can? Because it’s hard to understand and it is complex. The Liaison Officer program does that. We do it because it helps small business, but we also do it for ourselves because if you can get somebody to understand the tax system earlier and be comfortable with it, we think we get good, long-term compliance out of that. We have fewer problems down the road because there is less friction and fewer battles and disputes. That’s an additional feature of the Liaison Officer program.
The other thing, just very quickly, that we’re doing right now is a consultation process called Serving You Better where we go out and talk to small businesses and other communities. The chartered accountants are helpful in that. We ask what they are seeing in the tax system and what they would like to see us do differently. Obviously, we can’t do all of that, but we have that consultative process that is under way to try to uncover what small businesses and other businesses would like us to do better.
Senator Ross: In 2023, the Canadian Federation of Independent Business, the CFIB, did their most recent study on business relationships with the CRA. That study found that 66% of small-business owners were very intimidated by the CRA. They also said that 76% of tax practitioners graded the service provided as a C and said it had gotten worse over the previous three years. What do you make of that?
Ms. Bibeau: I would say being better is always possible, but the Liaison Officers program is definitely a program that responds to the first question.
Do you want to add anything?
Mr. Hamilton: I would say a couple of things in that regard.
First, the CFIB provides us with a lot of valuable insights on what their members are saying. We know we’re not perfect. We don’t pretend to be perfect. They can identify for us some issues that are not working as well as they could.
The other aspect of dealing with small businesses is to disentangle exactly what they’re saying about it. What’s the source of their problem? Sometimes they don’t like the underlying legislation. They may not like the feature of the law that’s causing something to happen. We have to take that, and we can pass that along to the Department of Finance and deal with that.
We try to distill the things that we can really control. Contact centres would be one. The CFIB gives us a report card — I’m not sure if it’s every year, but regularly — to say, for example, they are finding that the help at the contact centres is not good. I know that’s been a source of concern. We’ve tried to put in some dedicated lines. We’ve tried to make changes along the way as we’ve described and to have a better dialogue with small business.
I don’t expect a perfect report card from the CFIB, but it does give us valuable insight in addition to the consultations we do. We want to understand what small businesses are looking for and what we can do to help. We can’t do everything, but there are things like their accountants, how they deal with them, the ease or difficulty with which they can get access to us, especially if they’re going through a representative. Again, we come back to the tradeoff that the minister mentioned. We have to balance service and security. Sometimes, if we see a lot of bad actors out there, we have to do certain things differently and that may impede service —
The Chair: Thank you.
Senator Pate: I have a number of questions.
First, a lot of discussions about the pandemic benefits have tended to focus on individuals, particularly some of the fraud discussions, in a context that I would argue risks perpetuating myths and biases about poor people as being the source of this, given that in our province of Ontario, we saw, for instance, people on disability benefits being told by their social workers that they had to apply for CERB as part of the requirement through that program to pursue any other financial resources in order to still qualify for their benefits. Many of those cases resulted in fraud charges.
I want to juxtapose that to the situation for businesses. The report in 2023 by Canadians for Tax Fairness showed that 37 of the 74 companies with a tax gap of $100 million or more received the Canada Emergency Wage Subsidy for businesses. They showed that 30 of these companies have at least one subsidiary in a tax haven and that $173.5 billion was spent on dividends, share buy-backs and acquisitions, which all essentially transfer money from the corporation to equity owners, who are overwhelmingly the wealthiest members of society.
Given the significant concerns associated with companies claiming public subsidies while also dodging taxes, can you please clarify what concrete measures are being taken to investigate and make accountable these companies either as part of the CRA’s compliance audits related to the wage subsidies or through other measures? In particular, how many companies with tax gaps of $100 million or more received the wage subsidy? Canadians for Tax Fairness suggest it is 37. How much money did they receive? How many were audited as part of the compliance measures? How much money has been recovered from those companies, and how are those companies being held accountable?
Beyond the wage subsidy, can you provide any updates about what concrete steps the CRA is taking generally to ensure wealth disparities do not continue to be exacerbated by the manipulation of public funds by some of Canada’s most wealthy corporations?
In addition, I’m very pleased to see, in March 2024, the updates on pursuit of folks through the Panama, Paradise and Pandora Papers. I would be curious as to any updates you have since March 2024 in terms of the number of audits and any tax recovered. The last time I asked the question at this committee, no money had been recovered and a number of investigations had been abandoned. Thank you.
[Translation]
The Chair: Could you provide a general answer and further details in writing? I think it will be hard to answer in three minutes.
Ms. Bibeau: Yes, there were a number of questions there.
[English]
If I focus on the wage subsidy for businesses, we have done investigations based on risk. We have focused on the more risky as far as the information we got, for example, on businesses who have a history of noncompliance, and also following complaints.
[Translation]
We actually did a risk analysis for wage subsidies to identify businesses that we considered at greater risk, either because of their compliance history or because of a disclosure. To some extent, we also randomly tested the approach.
We found that just 5% of the companies were non-compliant. That includes calculation errors, errors made in good faith.
We found a weakness in the system involving a few tax preparers who might have encouraged certain companies to make a request or not to do so properly.
We identified a very specific weakness and it was investigated. Nonetheless, a rate of non-compliance of 5%, including errors made in good faith, is understandable as compared to the number of individuals who applied for CERB where the rate of non-compliance was higher.
For companies, compliance was very high because most of them work with accountants, are familiar with the Income Tax Act and understand the programs. There was a high level of compliance with the program.
Public accounts reports are submitted regularly to the committee, to Treasury Board, to the Auditor General, not necessarily in that order. That relates to one of your main questions.
The latest information I have regarding tax havens is very detailed. It might be easier to answer in writing, unless you want to discuss it?
The Chair: Quickly, because these matters are very important and quite specific, so we would really appreciate written answers.
[English]
Mr. Hamilton: I could add something to what you said about the pandemic benefits and the CERB versus the CEWS. We have some officials here who could provide more detailed responses in terms of what we did for individuals and what we did for businesses — what the minister said is exactly right — and what we’re doing on tax evasion more generally. But even with the officials, there probably will be some written answers where we have to come back to you on some specific questions.
[Translation]
Senator Loffreda: Welcome, Madam Minister.
[English]
Mr. Hamilton, welcome to our Finance Committee this morning.
[Translation]
I want to continue our conversation about security threats and the protection of Canadians’ personal information, as regards not only external threats but internal threats as well, if there are any. We know the agency has the largest workforce in the public service, with close to 60,000 public servants in 2024. Should we also be concerned about internal threats? Can you tell us what investments the agency has made in new technologies — that you have not already mentioned — that is, tools and resources to proactively monitor internal and external security threats? These are serious matters and I would like you to elaborate.
Ms. Bibeau: Thank you. First of all, I have great confidence in the team at the agency, but confidence does not rule out monitoring. Measures are indeed taken because we recognize the sensitivity of the information to which the agency has access. As I said earlier, it is a high-value target. One of the measures taken is that the information is highly compartmentalized, so that few employees have access to complete files. That compartmentalization of information prevents fraud to some extent.
I would also say — and this has been discussed a lot in the media — that the time that was the most conducive, easiest and most sensitive was when CERB was created, a benefit that could easily be obtained by making a statement. To prove the team’s integrity though, the agency audited every single agency employee who received CERB benefits. Some received the benefits legitimately because they had to stay home to look after their children, because they were caregivers or for various other reasons. Some received those benefits entirely legitimately, and less than 1% of them collected them inappropriately. Every administrative measure was taken, all the files were monitored. That shows you just how seriously the agency takes the integrity of its team, and even when it was extremely easy, it was less than one half of 1%, which unfortunately is the case in many organizations. There is a weakness somewhere. That is the reality, bearing in mind that the agency has 58,000 employees, so about 300 of them, all things being equal.
Senator Loffreda: We have confidence in the agency, but we still have to worry about the half of 1%, and that is where investments are needed. Fortunately, 99% of people are honest, and that is why our society functions.
As to the concerns about services, the agency launched public consultations in 2024 to get input from Canadians on improving services. That is evidence of the current problems and a commitment to resolve them, so thank you for that. I do have a question, however. Why are there service problems? We have 58,000 employees. In the United States, the IRS had 93,654 employees in 2022 and the U.S. population is ten times the size of ours. Why do we have problems, with those 58,000 or 60,000 employees? In my previous life as a banker, various clients called me and said there was no communication, that they were too aggressive or not aggressive enough. You can’t win, it seems.
Ms. Bibeau: People who want to cheat the system sharpen their skills, and it is always evolving, we are always evolving. Sorry, let me get back to what I was saying; I should have taken notes.
Senator Loffreda: The important thing is that there are 93,000 employees in the U.S. and 58,000 in Canada. Looking at things from the outside, we can see there are service problems and that is unacceptable.
Ms. Bibeau: There are two main differences between the Canada Revenue Agency and our American counterpart: For one thing, we have to manage the GST and the HST for nine out of ten provinces.
Senator Loffreda: They also have a number of things to manage in the United States.
Ms. Bibeau: Secondly, the Canada Revenue Agency administers a great many benefits: Not only do we have to manage taxes, we also manage the Canada Child Benefit, the dental benefit, the rental benefit, the low-income earners’ benefit. We are now working on the next benefit for persons with disabilities because our government’s approach is to support those who need it the most, which by definition means providing benefits that are geared to income, including the Canada Child Benefit, which is inversely proportional to income. Every we time we do that, it has to go through the Canada Revenue Agency. That is where the information is held and we cannot share that information. The agency’s role is not limited to taxation; it also includes issuing benefits to the most vulnerable. That is part of the answer. When I became the minister, to help me find my comfort zone, I used to call it the “wealth redistribution department”.
The Chair: I also have a few questions. There have been articles in the media, and the Standing Senate Committee on National Security, Defence and Veterans Affairs has been studying Bill C-26 about cybersecurity, which would force companies to report any cyberattacks or breaches of confidential data. You have the information — H&R Block, for instance — and what we see in the media, this is not a disclosure. Talking points are prepared for the minister and perceptions are managed. You are conducting a witch hunt to identify the whistle-blowers, you are telling us it is confidential, but I don’t think they disclosed confidential information about taxpayers. Rather, they reported issues and you are conducting a witch hunt. The information that Canadian taxpayers provide you is strictly confidential. You have a fiduciary duty; that is sacrosanct. It seems that you are more concerned about managing perceptions and protecting your jobs than protecting the confidential information of Canadian taxpayers. Am I mistaken?
Ms. Bibeau: With all due respect, yes, you are wrong. We are definitely more concerned about managing public funds effectively, about making sure that everyone pays their fair share of taxes and about issuing benefit payments to those who need them most. The information that was disclosed was not confidential, but it did compromise system integrity. You don’t talk publicly about how to defraud the government. That compromises the integrity of the system as well as ongoing investigations.
I believe you’re referring to the 31,000 cases of identity theft. It is true that there was a reporting lag. The situation was quite serious, and the priority was to trace the breach, identify the cases, block the accounts, and individually contact those whose accounts were compromised.
Yes, I admit that a wave of incidents occurred, and the reporting was delayed. There were also various steps in the process.
Previously, the agency had an obligation to report every incident within seven days, but given this situation, a change in approach was requested, and agreed to. Going forward, cases will be reported on a quarterly basis. There is a lag between when incidents are reported and when they are made public, meaning that the agency first reports the information to the Treasury Board. The Treasury Board reports the information to the Auditor General, who then produces a report, at which point the information becomes public. There is a lag between the three steps and when the information is made public. I want to assure you that the people affected were notified quickly.
The Chair: You said you learned from your mistakes. That means there were people who made mistakes. Were they let go? Were there people responsible, people who mishandled confidential information or who administered payments or refunds improperly?
You gave people who fraudulently applied for tax refunds tens of millions of dollars. Certain people did not do their jobs. Were they let go? If so, how many people were fired?
Ms. Bibeau: I said that we learn from our mistakes. Mistakes can happen, and administrative actions are taken to address those situations. That happens in-house. Mainly, what we see are new schemes popping up. When a new way to commit fraud emerges, it may go undetected in a certain number of cases before a red flag goes up and payments are halted. We do checks, and we learn going forward. Not only do we learn from new schemes we see, new types of fraudulent activity we come across, but we are also very active internationally when it comes to sharing best practices.
Here, in Canada, we have a network of partners we work with, including federal institutions —
The Chair: I don’t mean to be rude, but did you identify individuals responsible for those failures? If so, were they fired, and how many people were fired because of those mistakes?
Ms. Bibeau: I’m going to ask the commissioner to answer that, but I do want to point out that, while I did refer to mistakes, what I meant was that new situations crop up, new schemes emerge. Is it possible that mistakes were made? It’s important to make a distinction. A mistake is one thing, but fraud or a deliberate mishandling is another.
The Chair: There are people whose job it is to foresee those kinds of schemes and make system changes to prevent them from happening, so there were failures and mistakes.
Mr. Hamilton, can you tell us whether anyone was fired? The minister doesn’t seem to know.
[English]
Mr. Hamilton: No, I can’t tell you the answer to that question. What I can say, just to reinforce, is that we obviously take the security of information very seriously at the agency. We do have mechanisms in place through the codes of conduct that our people have to abide by and the training that we offer them, and we also have ways of noticing if something inappropriate has happened. I feel very confident in our system. That is not to say that we’re perfect, because we go back to the insider threat. There is always something that can happen, and we have to make sure we are prepared to deal with it when it does. I would use the example of the employees who claimed CERB. We did a full investigation, and we came out on that.
I think the point you’re trying to make is with respect to if somebody comes up with a scheme to defraud the government and what we could do to prevent that from happening. We do have a number of things we do to pry to prevent that, but if it happens or if some get through, as the minister said, before we fix it, I wouldn’t necessarily count that as a mistake. It could be. It could be that someone could have done something better. If we find that person did actually do something inappropriate, then we have various levels of discipline which could lead to firing if we really felt it was that extreme.
I think it’s important to say that in a lot of the cases that we see, it is just that there are a lot of bad actors out there that are trying to be very innovative as to how they penetrate us. I’m the chair of the Forum on Tax Administration, which is a global organization. This is something that all tax administrations are dealing with. As we work to digitalize and make our systems more efficient, we’re sending money out quicker, and we have to ensure we have systems — I wouldn’t necessarily call it a mistake, but if it could be, and we would have mechanisms.
[Translation]
The Chair: I take it, then, that no one was fired. Quickly, does anyone have any important questions for the minister before she leaves us? We will carry on the meeting with the department officials.
Senator Forest: One thing that really concerns me is that 10% of Canadians do not file income tax returns. These are the most vulnerable people because they have no support or access to programs. We are really talking about the most marginalized and vulnerable Canadians.
Does the agency have a specific strategy to bring down that number? I have no doubt that some of the people who make up that 10% are trying to cheat the tax system, but the vast majority of them are people without means. Often, they aren’t able to maintain a fixed address or they struggle to understand tax forms. The situation is of the utmost concern to me. Is it something that concerns the department?
Ms. Bibeau: Absolutely. The Community Volunteer Income Tax Program is the best tool. The program is a way to reach people. The most vulnerable people all over the country have taken advantage of the program and received $2 billion in benefits. The program has a tremendous impact, so that’s the first thing I would say.
The other thing I would say is that, in our most recent budget, we announced a partnership with Prosper Canada, representing a $60-million investment over five years. The purpose of the partnership is to support the most economically disadvantaged communities and individuals. Some 3,400 organizations participated in the Community Volunteer Income Tax Program, with nearly 16,000 volunteers helping close to 760,000 people file tax returns last year. As a result, the most vulnerable members of society were able to access $2 billion worth of benefits.
The Chair: Are there any other questions? I have a quick one. It’s something my accountants would like to know.
It has to do with the capital gains inclusion rate. The legislation hasn’t been passed, so the measure is just an announcement at this point. However, my accountants have to file tax returns for companies whose fiscal year ends in July, August or September, and they don’t know how to handle the capital gains inclusion. Is it two thirds or half?
Ms. Bibeau: A technical interpretation on that will be coming out very soon, if it hasn’t already come out. It’s something the agency is working on.
The answer is both simple and complex. The agency is ready to administer the new measure because the government’s intention is sufficiently clear and developed. Depending on whether accountants or companies choose to file under the old or new system, a review will be carried out if the legislation is passed or receives Royal Assent.
The Chair: If the legislation is not passed, refunds will be issued or recovered as appropriate.
Ms. Bibeau: Precisely. The agency will make the necessary adjustments. You mentioned two thirds. However, we again raised the lifetime capital gains exemption. Clearly, it’s more complicated than that.
The Chair: I see.
Ms. Bibeau: Above a certain amount, the inclusion rate goes from half to two thirds. I repeat, that is the inclusion rate, not the tax rate.
The Chair: Exactly.
Ms. Bibeau: Thank you.
The Chair: The minister is taking her leave, but her officials are staying with us.
The meeting is resuming. Some of the officials who were already here have moved to the front so they can answer more technical questions.
From the Canada Revenue Agency, or CRA, we have Bob Hamilton, Commissioner of Revenue, who is staying with us. Also with us are Gillian Pranke, Assistant Commissioner, Assessment, Benefit and Service Branch; Marc Lemieux, Assistant Commissioner, Collections and Verification Branch; Sonia Côté, Assistant Commissioner, Human Resources Branch and Chief Human Resources Officer; Sophie Galarneau, Assistant Commissioner, Public Affairs Branch and Chief Privacy Officer; Cathy Hawara, Assistant Commissioner, Compliance Programs Branch; and, finally, Harry Gill, Assistant Commissioner, Security Branch and Agency Security Officer.
Good morning and thank you for helping us this morning. We are going to continue with questions and answers. If you’d like to provide more information on anything that was raised earlier, you may do so when answering questions. We have a half-hour left, so we should be able to go around the table quickly.
Senator Forest: Thank you for being here today. First, the CRA launched public consultations in September of this year to gather feedback on its services. The agency recognizes that it has challenges and is looking for ways to make service improvements. I think that’s commendable.
What exactly is the purpose of the consultations, and what are the main customer service indicators you’re looking at?
The Chair: The question is for whomever is most qualified.
Mr. Hamilton: I believe I mentioned the fact that we are in the process of consulting businesses to find out what we can do better starting now. Is there a better way to communicate with CRA agents about verification issues or compliance? Are there things we can do more effectively?
First, the purpose of the consultations is to find out how the agency can do a better job of communicating with businesses. Second, the purpose is to identify businesses’ needs and make clear the agency’s needs in the course of those interactions.
[English]
I think in that domain, we don’t have particular objectives going in. We’re there to listen to what businesses tell us are their main concerns because there are a number of potential things that people may want to improve in how the tax system operates. As I mentioned earlier, we do try to disentangle where people have policy concerns — where they might not like the way the tax system is designed — versus administrative concerns. We pass the former on to the Department of Finance, and we try to deal with the other ones. Examples would be if we could use electronic signatures in certain cases. Are there things that we could do to allow businesses to get us information in a more efficient manner, whether that is electronic or what have you? Those would be the kinds of things that we would try to uncover during those consultations. But there, we are mostly in listening mode, just to ensure there is a good understanding between us and the taxpayers.
[Translation]
Senator Forest: Have you identified ways that the agency could be more efficient? You’re in listening mode, but you’ve started the conversation. The consultation is focused on businesses. At this point, however, nothing has emerged in terms of changes the agency could make to be more effective and efficient.
The Chair: Each senator has three minutes for questions and answers, so please be quick.
Mr. Hamilton: Certainly, we’ve put some very tangible measures in place. For example, we had a lot of discussion on the R&D credit with the responsible or eligible communities. Are there ways we can make the process more efficient, perhaps a simpler form or an explanation in the agency’s materials that would improve people’s experience? We made changes to the process to access the R&D credit. That is just one example. We always report on what we heard during the consultation process and the corresponding actions we will take to address those concerns. The R&D credit is just one example, but there are others.
I want to be clear that we aren’t able to implement all the suggestions we get. Some things are more complicated than others, but we have a clear objective, which is to come up with tangible measures.
[English]
Senator Smith: Mr. Hamilton, I would like to talk a little bit about the COVID-19 benefit audits that you folks did, the Canada Revenue Agency’s audit activities for COVID-19 benefits, such as the Canada Emergency Wage Subsidy, or CEWS, and the Canada Emergency Rent Subsidy, or CERS. It identified significant issues with ineligible claims — over $325 million in CEWS claims and $14.8 million in CERS claims denied or adjusted. What specific systemic issues or fraud schemes have been uncovered? I would like to get some feedback on what you learned from these two situations and how they can be utilized going forward in the future.
Mr. Hamilton: Thank you, Mr. Chair. I will respond, but some of my colleagues may want to add with some of the more specific lessons learned.
If you talk about the business side of the COVID benefits — so CEWS and the rent subsidy — what we learned was that, yes, there were some places where people had to have their returns adjusted or their claims adjusted, but overall, as the minister said, we found pretty high compliance within the business community.
I would say that if you go back to that time when we implemented the Canada Emergency Response Benefit, or CERB, and the CEWS, the CERB came in very quickly at the beginning, in three weeks. By the time we got to the wage subsidy part, a little bit more time had passed, and we were all adjusting to that world, so we had a few more up-front protections in the wage subsidy than we did with the CERB, and we spent more time on the back end validation. We found a better experience with the businesses, one, because they were more used to dealing with the tax system, and, frankly, our communication was a bit clearer on that one. We had more interaction. We talk about consulting with businesses. We had some questions and answers and some opportunities to tell businesses what we were expecting.
Overall, it was a pretty good experience, but there were examples. Some were calculation errors that people made. Sometimes people or organizations were actually trying to mislead us, and we covered that. The minister referenced the promoters. We did uncover through our work that there were some promoters that were actually trying to promote inappropriate claims, and that’s an area that we continue to pursue. We focused on it because that was one place where we did see some bad behaviour that we needed to get on top of.
Like I said, overall we felt that the program probably had a little bit more time to get implemented. It was not a lot; it was still quick. We probably got away from some of the up-front problems, and we focused a little bit more on the high-risk cases. That’s the way we approach all of these audits. We do take a risk-based approach. We can’t audit everybody, so we use our intelligence that we have in dealing with these taxpayers to focus on the high-risk cases. That’s what we have been doing, and we actually still continue to do it. The compliance efforts on those are not done yet, although they are coming to an end.
[Translation]
Senator Dalphond: My questions are about the pandemic relief benefits.
Last year, you told us that you were two-thirds of the way through the verification process. I can’t recall the exact number, but I believe you had finished reviewing about two-thirds of files. Can you give us an update? Have you finished reviewing all the files?
Mr. Hamilton: I’m going to ask my colleagues to answer that.
We are always transparent about our progress on the verification of benefits. We still report on our progress so that everyone is aware of where things stand. We are very transparent on that issue.
Now, I’m going to ask Mr. Lemieux to provide more information.
Marc Lemieux, Assistant Commissioner, Collections and Verification Branch, Canada Revenue Agency: Every quarter, we submit a report to the Standing Committee on Public Accounts. Our September 30 report indicates that we’ve completed the review for 88% of files. We intend to complete 875,000 reviews of files involving individual benefits. When we review an individual’s file, we look at all the pandemic benefits the person received. In the report, we include the level of non‑compliance and the non-compliant payment amounts. We also report on benefit amounts that were validated.
Senator Dalphond: You are saying that you completed verifications for 88% of files in October or November?
Mr. Lemieux: As of September 30, 2024, we had completed 88% of our planned verification workload, which was 875,000 files. Specifically, we have completed the verification of 768,000 files.
Senator Dalphond: Do you expect to be done soon?
Mr. Lemieux: The plan is to finish the reviews by March 2025. Work will continue after that. There are always people who request a second verification, and some cases end up being reviewed by the courts. That means this effort will continue for another year after March 2025.
Senator Dalphond: Once the verification process is complete and the agency has determined that the person was not entitled to some or all of their benefits, you negotiate a repayment agreement, if I’m not mistaken. How many repayment agreements have you signed so far, and how much have you recovered as a result?
Mr. Lemieux: In terms of the amount that’s been recovered, I do not have the number of people who made repayments or the number of repayment agreements that were signed, but I do have the total. As of September 30, a total of $2,483,169,688 had been repaid to the government. That includes voluntary repayments that people made after realizing their mistake. Others have repayment agreements in place and continue to make payments.
Senator Dalphond: Last year, it was determined that some $7 billion in overpayments had been made. Is that still accurate?
Mr. Lemieux: No. We continued our review, and, to date, we have identified $10.41 billion in overpayments to people who were not entitled to receive the benefits.
Senator Dalphond: Last year, the figure was thought to be $7 billion, but you hadn’t completed your review. You are nearing the end of the process, so this is normal. The amount to be recovered is around $10 billion, you say?
Mr. Lemieux: We are at about $10 billion. We still have around $2 billion in benefits to review.
[English]
Senator Pate: I want to talk a bit about the work that you’ve been doing on tax filing. You’ve previously informed the committee that this past summer, in the summer of 2024, the CRA was starting to pilot SimpleFile digital and paper options in all the provinces and territories and that the digital and paper options of the service are said to target lower-income individuals who do not file their tax returns or who have gaps in their filing history. I would love to receive, if you have it, updated data on how effective SimpleFile digital and paper has been, specifically for lower-income individuals and those in rural and remote areas.
As well, you previously explained that you’ve been working on distinct service strategies for Indigenous peoples, youth and newcomers. I would be very interested if you could elaborate on these service strategies and how they have been incorporated into, I am presuming, the SimpleFile digital and paper options that were rolled out this summer.
Finally, the PBO found that in 2023, about 7% of the individuals were invited to use SimpleFile by phone service and that 89% of the invitees chose another filing method. I am curious as to what you are doing to try to increase the number of users — this is also following up on the question by my colleague Senator Forest — utilizing the various SimpleFile options. Do you think that transitioning to pre-populated returns would be a viable option moving forward?
Mr. Hamilton: Thank you. I will start a response, and then I will turn it to my colleague Gillian, who works in this space in much more detail.
I would draw the link between your question and the one that came up earlier about what we are doing to help hard-to-reach populations file their returns. Of course, we are interested in them filing returns in any event, but in that particular case, it is mostly to file returns so they can be eligible for the benefits that run through. It is something that the Auditor General has commented on for both ourselves and the Department of Employment and Social Development Canada. We work together to try to first identify who these people are and then to find ways to make it easier for them to file.
The minister mentioned the community volunteer program. That’s one aspect. Another part, as you’ve mentioned, is we are trying to think of how we can make it a simpler process. SimpleFile is something we are trying out both to get to these people and to make it simpler for them to file returns. We feel like it has been a good success.
As for the PBO comment that says individuals filed but they used a different way, in the end, that’s still good for us. They still filed. Maybe it could be better and we could encourage them in a particular way, but getting people to file their returns so they can get the benefits is a win almost no matter which way they use.
In your question, you pushed it to an auto-file or pre-populated return, and that’s an interesting one that we’re also working on. How can we move forward to make it automatic so that people file? Some countries do have that, such as Scandinavian countries, et cetera, where the government fills out the form for you, sends it to you, and you can say “okay” or make a change, and it comes back.
We have a variant of that in that we do pre-populate certain areas where we have the information, such as your T4 slips or financial information from your bank, but we don’t have all the information to pre-populate a return, and it gets complicated when the tax system is complicated. For example, you have discretion in which credits you may claim in a particular year or whether you want to carry something forward. We can’t make that choice for you. As long as the tax system has that discretionary component to it, it will be hard to get all the way to auto-file. One thing that is for sure in my mind is that the simpler you can make the tax system, the easier it will be to get to a pre‑populated return. That has been the experience in other jurisdictions.
I think it is a continuum of things we are trying to do to make it easier for people, but maybe Gillian will have a couple of brief comments on SimpleFile.
Gillian Pranke, Assistant Commissioner, Assessment, Benefit and Service Branch, Canada Revenue Agency: If I could pick up on one thing the commissioner made reference to with respect to low filing rates, I believe we’ve shared this previously with the committee, but the community volunteer income tax program that the minister spoke about is instrumental. To date, we have over 900,000 individuals who have been helped by that program in the current tax year, and over $2 billion — the minister made reference — has been allocated through that program. I would like to point out the fact that we specifically target geographic areas where the filing rates are lower. We are looking for pockets across the country where the rates are lower, and we focus in on those areas.
With respect to SimpleFile, this year, we issued 1.2 million invitations to individuals. They are continuing to file, and they have until the middle of January to continue filing, so we will have firm figures then. We are seeing increased takeup over previous years, but the takeup rate isn’t where we would expect it to be. Next year, we are looking to issue invitations to a million individuals. We are conducting research to find out what is stopping people from leveraging the solution we have identified. It is a solution that takes minutes to complete over the telephone, and it is very easy to use. We are working on that within the Canada Revenue Agency.
Lastly, there is a pilot we’ve been running. This year, it was open to all provinces and territories. We’ve issued 500,000 notices to individuals where they are in receipt of provincial or territorial benefits but they didn’t file a federal return. We are actually quite eager to get results from that, but it won’t be until the end of the calendar year before we get a line sight on that.
Senator Loffreda: I would like to further explore the rationale behind the agency’s recent decision to cut about 580 temporary workers from the workforce. As reported in the news, most of these jobs appear to be in the debt collection section of the CRA. I would like to know about the agency’s success rate in collecting debt. What amount is being collected? Are we seeing an upward trend from year to year? Do your officials have any data on the amount of debt the agency is owed outstanding? How many individuals and Canadian businesses are subject to debt collection procedures?
Mr. Hamilton: Thank you. I will start on that one, but I will again turn it to Marc, who is the head of our verification and collections area.
Yes, it’s true that right now, in an era of greater fiscal restraint, we are having to look at our operations and take actions to make sure that we can deliver the savings the government is looking for from the agency. I would say that some of that — I think I said it earlier — is natural coming out of the pandemic. You would expect us to be reducing somewhat as some programs expire, but it seems like there’s always new programs to administer, so there’s a bit of a balancing act there. What we’ve done recently is in areas where we have term and contract employees in certain parts of the agency, we have ended those operations. It is not indeterminate people but people who are term or contract. It is always unfortunate to have to do that, but we have a budget to meet, and we have to do certain things. What I would say about those activities is that we have consulted with the unions and informed them on that. We’ve tried to be as humane as we can be in the circumstance, but at the end of the day, we do have to respect the new financial constraints we are under. It covers a broad range of people across the agency, and that will continue going forward.
Now, to come to the debt collection part, the only thing that I would say before turning it to Marc is that we do see the debt going up over time. Coming out of the pandemic, the economy is growing. Financial circumstances are such that people are accumulating more debt. We actually feel like we’re being more efficient in our debt collection activities but, nevertheless, it is hard to keep up. That’s why we are looking at things we can do better, but also, how can we possibly resource this better, because the debt is not declining.
I will turn to Marc to give you some numbers.
Mr. Lemieux: As the commissioner was saying, the tax debt is growing. We continue to invest in new technologies, new procedures and new ways to address the debt for businesses and also for individuals. The level of debt in Canada is pretty high, and tax debt is correlated to the general level of debt for businesses or individuals. That’s the reality that we are facing. But we are constantly looking at whether we can have better business intelligence or can we do automation of some tasks so that we could provide more value in terms of the dollars that we collect?
In the last two years, we have collected more than we’ve ever been able to collect in the agency because we received additional amounts in Budget 2021 for example, and we are successful. We committed to deliver $1.2 billion more of money collected when we received that money, and we have exceeded those targets year after year. Still, the challenge is there, and it is growing.
When it is time to look at rationalization of our expenditures, we will look at which part of our organization is the most efficient, and that’s where we will redirect the resources. It is a constant evolution of those programs.
We could report in writing on the level of debt and how much we have collected, but we continue to have a good performance on that side.
Senator MacAdam: CRA’s mandate includes working to modernize the CRA to provide a seamless, empathetic and client-centred experience, including by making information easier to find and understand. I notice on the CRA’s website, the agency is engaging in Financial Literacy Month this November through promoting the importance of improving tax literacy, which is an important part of financial literacy. Can you speak about how the CRA is measuring engagement and progress with respect to advancing tax literacy?
Mr. Hamilton: Let me start on there, and I might ask my colleague to talk about how we make it easier for taxpayers and also to communicate better. You mentioned the website. How can we coordinate?
On the first question of seamless experience, we’ve been spending a lot of time over the last number of years trying to improve the client experience for us, recognizing that people have different ways of contacting the agency; it might be by phone or through the portal or other mechanisms. How do we make it so that no matter how they contact us, they can have a seamless journey? And we have made good progress. We are not all the way there yet, but we are trying to take that experience. The way we improve that is by doing some consultations with people. We ask, “What part of the journey is causing you the most problem, and where could we fix it better?”
For example, they might point to the website and say, “I wanted to go to the website —” which is very efficient for us — “but I just couldn’t find what I needed there.” That was definitely a valid complaint, that the website could be hard to navigate, so we actually did some work through consulting with people to say, “If you want to go to the website to perform this task or get information on this task, how was it? What was your success rate? If we changed something, could we make it better?” We had some good experience. We started with the most frequently used aspects of the website and tried to streamline and simplify them to make it easier for people. That process continues because, as you know, the tax system is a very complex piece, and it is no easy task to distill that into something that makes it easier for regular people to get through but also recognizes that some very sophisticated people will be looking at that.
So maybe, Sophie, you could say a couple of quick words on how we are trying to approach that communication side of the experience.
Sophie Galarneau, Assistant Commissioner, Public Affairs Branch and Chief Privacy Officer, Canada Revenue Agency: Thank you, commissioner, and thank you for the question.
As the commissioner mentioned, there is a significant effort that has gone into improving the website presence. We are engaging Canadians in doing user testing so that we are actually measuring how Canadians do with specific tasks at the front end with the original content, and then we have experts to improve that content and make it clearer and simpler, present it in different ways. Then the improvement in the end product with users is demonstrably improved throughout those top tasks or those top pages which are the most visited.
I will add that we have a number of other initiatives to help Canadians understand their taxes and have tried to be innovative in that way. Certainly, the learn about your taxes initiative is a whole campaign with tools which are provided to Canadians to simplify things for them.
I might also just mention that we have a series of podcasts that have been put out in the past year to explain and reach a different audience in a way that is of interest to them so that we can explain the benefits of doing your taxes, getting your benefits and how to do so.
We continue to be creative and innovative, I think, in providing that literacy service to Canadians.
Senator Ross: Circling back on Senator Loffreda’s question, I was reading media reports that said that debt collectors generally collect between $1 million and $5 million each, with a salary of $65,000 to $73,000. I am curious about the lay-off of nearly 600 temporary employees in that capacity.
Mr. Hamilton: We definitely think we get good value for the money from people who do collections and other activities around.
In this case, it was an instance where we had to reduce our expenditures. We had to look across the agency and see where we could we turn to. We were focusing in this instance on term and contract people. We have places in the agency where we have term employees. One in the debt collection side, and the other in the contact centres, which is a cyclical place where we are always hiring and letting people go as the tax system unfolds.
It was really just a case where there was probably nowhere we could cut that would not have an impact on something. This was an example where we felt we could take an action and reduce expenditures. Hopefully, we can recoup that activity as we go forward, but we had to do it this year.
We are about 80% people’s salaries; if you look at our budget, it is about 80% salaries. It is hard to cut expenditures without impacting people. Those people do good work, so the cuts will have some impact on the service, compliance or collections.
Marc, does that cover it?
Mr. Lemieux: I think it covers it.
[Translation]
The Chair: I have a question about security. I was flabbergasted to see a type of fraud where someone uses another person’s identity to apply for a tax refund. However, in the tax return, they include information that does not exist, say Tomato Street, in Montreal. Everyone knows there is no such street, but apparently the computer system or someone on your end failed to flag the situation. However, there are security systems, software programs, that verify huge amounts of information in real time, things like street names in Montreal. Credit card companies and others use systems like that.
I am shocked that the agency’s systems aren’t able to detect that kind of fraud. Where do things stand when it comes to implementing AI systems capable of checking information against major databases in real time and validating wrong information on its face?
Mr. Hamilton: That question is very apropos. Certainly, there are opportunities for bad actors to do things that are difficult for us to detect. We do have strategies, but we aren’t perfect. Now we have the chance to improve our systems. We’ve put some things in place. First, we set up a branch focused on security after the pandemic. That gives us the ability to apply a security lens to all of the agency’s activities, and Mr. Gill is the person in charge of the Security Branch. Second, the agency has a lot of interactions with people, and from time to time, it is hard to verify in real time information that someone has provided and to stop them from doing what they’re doing.
[English]
We quite proactively look for where potential problems might be and try to proactively stop them when they happen. If they slip through our controls — I think our controls are quite good, but they’re not perfect — we take action right away to identify and stop it and take the actions. As you know, the bad actors are very sophisticated. They do adapt to techniques. That’s why we don’t like to talk too much about what we’re doing. We do take action quite quickly. We do have partnerships. This came up earlier. We work with financial institutions and others to try to work together to identify where there is a problem.
The aspect where we’re less far advanced is what you’ve raised on artificial intelligence. We have some technology that helps us identify where we can see something that’s happening, flag it and take action on it, but we have more room to go there. I referenced our discussions with other tax administrations. It’s something all of us are reflecting on.
One of the things making it difficult is we have done a lot of work to process things quickly for Canadians, good service, make it easier for you to have a client represent you and for you to get your refund quickly. We’re in the process of looking at how do we find the right balance there between quickness in response and ensuring security. There is more we can do to do better risk assessment up front, because that’s just the nature of the world we’re in. I wouldn’t have said that 15 years ago when things just took time. We are trying to exploit technology and learn how others are doing it.
If there is time, I could ask Harry to elaborate.
The Chair: Yes.
Harry Gill, Assistant Commissioner, Security Branch and Agency Security Officer, Canada Revenue Agency: To reiterate a couple of points the commissioner made, we’re obviously not immune from this. You made the point about banks and the AI they’re running, or their algorithms and whatnot. There still is credit card fraud. There is still fraud in every sector, mortgage fraud, all that. There was a sea change that happened after the pandemic. Before the pandemic, we didn’t have a centralized security branch. We have put all security services under one branch. We’ve created an entire directorate just for external fraud and account security. A lot of progress has been made. Our adversaries are very well resourced. They’re very persistent and motivated. We need to put in that same level of effort, and we are putting that same level of effort into fighting fraud.
The commissioner talked about the self-assessment tax system. That’s another thing. People need to understand that we have a self-assessment tax. A self-employed person files a tax return. They might get stopped up front, but by and large, they go through the system, get assessed, and then we do audits and verification after. The vast majority of Canadians are honest. They file their taxes. They pay their taxes. We could grind the tax system right down to a halt by putting in so many controls that people can’t interact with the system and are constantly locked out of their accounts. That’s not where we want to go. That would have economic impacts and a service impact as well.
Is it perfect? No. Are we learning? Yes. We’ve organized ourselves around this internationally accepted standard of identifying fraud risks and protecting against those fraud risks that we identify, understanding that sometimes the fraud risks are actually going to materialize. Despite our multilayered, multifaceted system of protections, sometimes a transaction is going to get through, the same way a credit card transaction is going to get through or you are going to get phished. When that happens, we detect it.
There have been media reports. I can’t talk in detail about what is in those media reports for the reasons the commissioner said. We detected those. That’s something Canadians need to understand as well. We’re finding fraud. If I was a Canadian, I would be much more concerned if CRA was not finding any fraud. We know fraud exists, and we know it exists in every country, sector and industry. The fact we’re finding it means we’re able to stamp it out, learn from it and respond to it. Part of that response is learning what the vulnerability was, learning what it is that the fraudster exploited, and then back to the first pillar: identification. Now we’ve identified how they came in, and now we can protect better. The cycle continues like that.
The Chair: That is the end of the meeting.
[Translation]
Thank you very much everyone. Some of you have to get back to the committee with information, especially further to Senator Pate’s questions. You have until December 2 to send us that information.
Our next meeting is on Wednesday, November 20, at 6:45 p.m. Thank you very much. Thank you to the witnesses for being here and for answering the committee’s questions.
(The committee adjourned.)