COVID-19 benefit repayment is hurting low-income Canadians, report says

The Canada Revenue Agency reported that as of last November, it was owed more than $10 billion in COVID-19 benefits paid out to those who were ineligible. (Sean Kilpatrick/The Canadian Press)Social SharingOver six years after the COVID-19 pandemic started, the federal government is still trying to track down billions of dollars sent to Canadians who were later found to be ineligible for benefits.

According to a report from Maytree, a think-tank and advocacy group that studies poverty, those recollection efforts disproportionately affect low-income Canadians who can't pay, and ultimately cost more than they recover.

It calls for an end to the government's efforts to recover pandemic benefits.

In total, Ottawa distributed about $14 billion in COVID-related benefits to individuals who didn't meet the Canada Revenue Agency's income requirements. Most of that sum was provided under the Canada emergency response benefit (CERB) and later the Canada recovery benefit (CRB).

By the end of last November, the CRA reported that $10 billion was outstanding, over $8 billion of which was owed on CERB and CRB payouts. CBC News reached out to the CRA for updated figures, but the agency was unable to provide them after more than two weeks of requests.

"This is not a story about fraud," the report says. "It is a story about what happens when a government moves fast, makes mistakes and then hands the bill to the people least able to pay it."

John Stapleton, co-author of the Maytree report and a social policy expert, says his group acknowledges some people knowingly applied for benefits they shouldn't have received.

"We're not asking them to absolve those people," he said. "[But] there's some people out there that got caught in this net who are really suffering as a result."

In Budget 2025, Ottawa provided $123 million to support the government's collection of its pandemic response benefits over two years, starting in 2026-27.

According to Stapleton and Tyler Meredith, a senior fellow at the Munk School of Public Policy and a fellow at Maytree, many Canadians who still owe a debt on pandemic benefits are low-income.

"By the time you asked them to repay that benefit, they would have already, frankly, used that money," Meredith said. 

Meredith was the head of economic and fiscal policy under former prime minister Justin Trudeau and a main architect of the federal government's economic response to the COVID-19 pandemic. 

"It was always clear, I would argue, that the intent of the program was to be for people who had lost income," Meredith said.

While he said the government needed to provide certainty to Canadians that support was there if they needed it, the program was misunderstood as a form of universal income.

"Most people don't check the fine print," Meredith said.

CERB was in place from March to October 2020. Applicants had to have earned at least $5,000 in income in the last 12 months, lost income as a result of the pandemic and not been receiving EI in order to be eligible. They received $2,000 every four weeks.

Meredith said the government didn't have a plan to recover ineligible benefit payouts when it was initially launching its pandemic relief programs.

"Our goal, in all of the programs we were designing, was to have something that was like 80 to 85 per cent ready, knowing that we would amend and adjust the program as we went," Meredith said.

"We just didn't have time to wait."

According to Meredith, the government's initial plan was to deliver benefits by traditional means like through the quarterly GST tax credit — now the groceries and essentials benefit — or Canada's employment insurance system. But Meredith said the EI system would have been overwhelmed as millions of Canadians were set to lose work during the pandemic.

Because of this, the government drafted the Canada Emergency Response Benefit Act to create a new system, legislation Meredith said was put together in "a matter of a couple days."

The government allows for interest-free repayment over time.

But CERB's legislation "doesn't have a mechanism inside it to say the government is permitted, or CRA's officials are permitted, to entertain some form of settlement," Meredith said. "From their point of view, their hands are tied."

"The Federal Court has confirmed that the CRA is required to apply the eligibility criteria established by legislation and does not have discretion to depart from those requirements," the CRA told CBC News in a written statement.

The CRA said it is not legally obligated to pursue all ineligible CERB payments. According to Employment and Social Development Canada (ESDC), the CRA can allow payment deferrals if a client is facing financial hardship. If it determines that hardship is permanent, the CRA can recommend a debt for writeoff to ESDC.

But Meredith says simply writing off the remaining debt owed by those ineligible for benefits is "not a realistic option" and "probably politically unpalatable for any government, at any point in time."

He pointed to the government's use of partial forgiveness on loans from the Canada emergency business account program (CEBA) as a possible guide, and suggested it develop an option to "spread out repayment costs over a much longer period of time." 

In its report, Maytree outlined a plan to wind down the collection of pandemic benefits along a suggested timeline. It also recommended the Office of the Parliamentary Budget Officer examine the cost of the government's collection efforts.

Other recommendations include amending the Income Tax Act to give the CRA discretion to make deals on the remaining debt and for the CRA to resolve over 1,200 outstanding cases by the end of 2026.

"I think it's incumbent upon government to set out a framework," Meredith said.

"Up to now, they've largely avoided making or entertaining any of that, both because there will eventually be some fiscal costs associated with doing so, but also because, I think the reality is people have harsh attitudes towards this.… If you used a program that you shouldn't have, they don't think that you're deserving usually of amnesty."

David Cummings is a reporter for CBC News.