Forgiving CERB debt for ineligible Canadians who received ‘unclear’ information to cost government $240M
CERB #CERB
OTTAWA – About 30,000 Canadians will be able to keep $240 million in Canada Emergency Response Benefits despite originally being ineligible for the money, according to government estimates.
The Liberal government has decided to forgive the debt of all self-employed Canadians who claimed an average $8,000 in CERB overpayments — worth a total of $240 million. The claimants did not meet the benefit’s eligibility criteria due to confusing government messaging, according to information quietly published in the Canada Gazette two weeks ago.
But of those people, roughly 6,500 already voluntarily reimbursed the government after receiving an “educational letter” from the Canada Revenue Agency (CRA) in December warning they may not have been eligible for CERB.
In those cases, the government will take the unusual step of sending them back about $52 million in total CERB payments they weren’t qualified for in the first place, so long as they meet all other eligibility criteria. The agency said the process to apply for reimbursement will be released “soon.”
According to details in the government’s official publication, the move comes because it considers that it “would be unreasonable and unjust for the Crown to collect the debt.”
The increasingly Kafkaesque saga began with a miscommunication by the CRA last spring as to how much income self-employed Canadians needed to have made in order to be eligible for the $2,000 a month emergency payment.
At launch, CERB eligibility criteria required recipients to have made at least $5,000 before taxes in either all of 2019 or in the 12 months leading up to their application.
But due to “unclear and incorrect” information on the government’s website, an estimated 30,000 self-employed Canadians took that as total income before deducting expenses (gross income), as opposed to their net income after deductions (which is historically how self-employment income has always been calculated.)
To make things more confusing, CRA’s call centre agents were also originally provided a script that mistakenly said that CERB eligibility was based on gross income. That message was changed only a few weeks after the program was launched.
But impacted Canadians began to panic when they received an “educational” letter from the tax agency last December saying it needed proof they had made at least $5,000 in net income in 2019, or they should be prepared to pay all CERB money back. It was then that the government’s mixed messaging came to light.
In February, Employment Minister Carla Qualtrough announced that those self-employed applicants could keep the money.
“Given that the eligibility criteria with respect to self-employment income were initially unclear and that individuals applied on the basis of these criteria, these individuals may be facing hardship if required to repay these monies,” reads the Gazette.
According to the government’s official publication, the objective is “to limit the financial hardship” of Canadians who applied to CERB in good faith after possibly “receiving incorrect or inaccurate information” from the federal government on self-employment income eligibility criteria.
The government is also erasing the $240 million in overpayments in order to continue to “provide income support to workers who were unable to work for reasons related to COVID-19.”
But any Canadian who intentionally or mistakenly applied for CERB without meeting any other eligibility criteria are not impacted by this decision and will still have to repay those sums.
In a press release Wednesday, the CRA also reminded Canadians who still may not have filed their 2020 taxes to do so as quickly as possible, or risk waiting up to two months to receive any COVID-19 financial aid going forward.
That is because the agency is now doing additional eligibility verifications up front, instead of checking after the money was issued like it did at the beginning of the pandemic.
In a recent report, Canada’s auditor general found that the lack of initial verification measures, such as blocking duplicate applications in a single month, cost the government roughly $500 million CERB overpayments in just a matter of weeks.
“The CRA has implemented up-front verification measures for COVID-19 recovery benefits to help prevent fraudulent applications and ensure that those receiving the benefits are eligible. Beginning on May 31, 2021, the CRA will begin to gradually expand these up-front verification measures for individuals who have applied to the Canada Recovery Benefits,” CRA warned in a statement.
“As a result of this verification, some applicants may be required to provide additional information to support their eligibility, potentially delaying the approvals process.
The generosity of CERB has already come under scrutiny with Statistics Canada revealing that Canadians experienced “extraordinary changes in their economic well-being” during the pandemic as they gained thousands of dollars more from COVID-19 support payments than they lost in wages.
During one three month period last year, young and middle-aged households generally gained around $3,000 more through support measures, particularly CERB, than they lost in earnings. At the same time, middle-income earners in the second-lowest quintile earned additional income at roughly $2,500.
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