I owe CERB – what can I do?
“I owe CERB what can I do?” is a question we are hearing more and more often. The simplest answer is “pay it back”, but that is not an option for most of the people who received the benefit when they ought not have. This is an important topic for many recipients, according to media reports hundreds of thousands, who got the benefit when they should not have.
The issue is that the Federal Government hastily rolled out the benefit and knew, or ought to have known, it would have been taken up by people who did not qualify. They CRA could easily have verified eligibility but deliberately neglected to do so, following government directives.
Eligibility was not clearly defined, with people being unclear if the income eligibility criteria was gross or net income or even what the difference is between gross and net income. The CRA calls your “gross” (pre-tax) income “net income” while you think of “net income” as being what you get after deductions and the CRA’s net being gross. Even accountants have been befuddled by eligibility criteria for the benefits that were made available for individuals and small businesses. Certainly, Provincial and Municipal Social Benefits Administrators were confused. Our office has had many anecdotal reports of ODSP Administrators advising benefit recipients to apply for CERB.
None of which makes it “O.K.” to get money you are not entitled to but is does make it clear how overpayments were so easily obtained. Some recipients were undoubtedly aware they were not eligible, but believing the world was about to end and everyone would soon fall victim to humanity’s greatest plague, they grabbed the money anyway.
Ironically the CRA has already advised hundreds of thousands of Canadians, by mail, they will have to repay the benefit – even though tax returns have not yet been filed. That action alone begs the question “why didn’t they start their reviews nine months ago?”. Obviously, there was no logical reason for this predicament to have been created in the first place. The Federal Government was aware of the monster it created and tried to shift the blame for its ineptitude to unqualified recipients quite early in the process.
In fact, the Federal Government proposed the Passage of Bill C-17 as early as June of 2020. C-17 would, had it passed, have included severe penalties on unqualified recipients including requiring them to repay three times the amount of money received plus penalties and interest, creating a deemed fraud (meaning the debt could not be discharged by bankruptcy) as well as the prospect of fines and jail time. Yet, in spite of this awareness the Government continued to issue funds, apparently knowingly, to unqualified recipients, and clearly having shown its intentions with respect to overpayments.
Had Bill C-17 passed and become law, the CERB programme would, in effect, have become almost self funding. If 25% of recipients received money they should not have, from an accounting perspective at least, the recoveries would have paid for the other 75% of legitimate beneficiaries. Now the Government is going to have to make some hard decisions about how to proceed.
In cases where there is a clear criminal intent to defraud charges may yet be bought. The Government has said that it will not pursue “penalties” against people who have received the money in error as a result of a mistake on their part. But that is code and again completely unclear. Do they mean they will not pursue charges of fraud or do they mean they will not charge penalties and interest on taxes payable? Perhaps they mean something entirely different. What they have not said is that there will be a complete “amnesty and if you received funds you shouldn’t have you will not have to repay them at all”.
For people who receive Social Benefits or Government Pensions repaying tens of thousands of dollars is completely unrealistic. At some level, like it or not, the Government is inevitably going to have to take its lumps. In Canada about 140,000 people each year file a bankruptcy or proposal to get out from under a variety of debt problems, most typically institutional consumer debts such as loans, lines of credit and credit cards. In some cases, the debt problem is driven by Government debt, taxes, or student loans. Student loans are dischargeable in bankruptcy if they are seven years old (from the last day of study) and tax debts are also dischargeable. Benefit overpayments are also dischargeable in bankruptcy, so, it stands to reason that CERB overpayments ought to be as well. And, until new information is received it indeed appears that they are.
The dilemma faced by the Government is the sheer volume of overpayments, to say nothing of tax liabilities, penalties, and interest, that this programme has created. The CRA has already sent out over 200,000 letters for overpayments and there will be significantly more going out for tax debts. Theoretically, that could raise the number of bankruptcy filings to triple the usual number of annual filings. Faced with that prospect, the Government will undoubtedly seek alternative remedies.
There has been speculation, supported in large part by rhetoric from the Government, of a “great reset”. It seems that the notion of debt forgiveness is ensconced in the academic theory of Klaus Schwab, of which the Trudeau government is an advocate. Far from being some sort of wild conspiracy theory the United Nations is actively promoting the idea. Intriguingly, the World Economic Forum is comprised not only of politicians but also the billionaire benefactors of the perpetuation of lockdown measures and Governmental fiscal policy. So, perhaps the Government will leverage the opportunity to forgive these debts in exchange for votes, or personal property in order to further this strange agenda?