Record shows federal debt write-offs and forgiveness jumped to more than $18-billion last year, up from $5.7-billion

The federal government wrote off or forgave more than $18-billion in debt and other obligations last year, a sharp increase over the $5.7-billion approved the year before.

 

Of the $18-billion, $10.2-billion was forgiven because of a clause in Ottawa’s pandemic-era, emergency-loan program for businesses, the Canada Emergency Business Account, Treasury Board spokesperson Rola Salem said.

 

CEBA provided a total of $49-billion in loans in 2020 and 2021 to nearly 900,000 businesses, most of which were small or medium-sized. The loans were either $40,000, of which $10,000 was to be forgiven, or $60,000, of which $20,000 was to be forgiven.

 

The loans were to be repaid by Jan. 18, 2024, to have amounts forgiven. The federal auditor-general recently reported that as of March 31, 83 per cent of the loans had been repaid. Some of the loans were repaid early and forgiveness for those loans was booked in previous fiscal years.

 

The government had previously estimated that it would forgive about $13-billion in CEBA loans. The updated amount was lower because not all of the loans were repaid.

 

Canadian Federation of Independent Business president Dan Kelly said the large amounts for forgiveness were expected given the program’s incentives for businesses to pay the money back on time.

 

“CEBA was, over all, a very successful program,” he said. “We can’t evaluate the success of CEBA without putting ourselves back in the context of what was happening early in 2020, when the majority of these loans went out the door.”

Without the program, Mr. Kelly said many more businesses would have gone under during the pandemic.

 

“The writeoff was always going to be huge with CEBA,” he said, in reference to the program’s design.

 

Outstanding CEBA loans currently accrue interest at 5 per cent a year and are considered in default if not paid in full by Dec. 31, 2026.

 

Mr. Kelly said there are still many businesses that could not meet the timelines and won’t be able to repay the loans. “The damage was super deep among small and medium-sized firms. Lots made it, but many, many did not,” he said.

 

The total government-wide amounts for debt writeoffs and forgiveness were revealed with little explanation in the government’s public accounts documents, which were tabled in Parliament on Dec. 17, just hours before the House of Commons rose for a 5½-week holiday recess.

 

The Globe and Mail reported in September that Ottawa approved a significant spike in large corporate writeoffs last year, with 11 companies receiving $1.2-billion in combined writeoffs for tax debt and other obligations. The federal government did not name the companies.

 

The 11 companies accounted for nearly a quarter of the $4.9-billiion in writeoffs approved last year, The Globe reported at the time based on figures tabled in Parliament.

 

The new data in the public accounts show that writeoffs were only part of a much larger wave of decisions related to debt.

 

The public accounts are the final record of what was spent by the federal government in the 2023-24 fiscal year that ended March 31. They break down “debts, obligations and claims written off or forgiven” into four categories.

 

The previously released $4.9-billion figure for writeoffs is repeated in the public accounts. However, it is followed by $10.9-billion for “forgiveness,” $105-million for “remissions” and $2.8-billion for “waivers.”

 

In the previous fiscal year, there was $3.3-billion in writeoffs, $2-billion in forgiveness, $23-million in remissions and $295-million in waivers.

 

Ms. Salem provided more information on the various categories in a statement to The Globe.

 

In the waivers category, she said $2.5-billion is because of a Canada Revenue Agency decision to provide “transitional relief” by waiving penalties and fees connected to the annual federal 1-per-cent tax on the ownership of vacant or underused housing in Canada that took effect on Jan. 1, 2022.

The federal government’s guide to debt deletion is posted online. It says writeoffs are used when debts are determined to be uncollectable, where the expense of collecting the debt would not be justified or when there is a settlement for the debt.

 

Remitted debt refers to waiving taxes, penalties, interest and other debt “and is allowed in cases such as compassionate reasons, unfairness due to errors or that it has been determined not to be in the public interest.”

 

With respect to forgiveness, the federal guide says “there are no set criteria in the FAA [Financial Administration Act] for determining when a debt may be forgiven” because Parliament must have the authority to do so under whatever circumstances it deems appropriate.

 

The rules say a debt that is forgiven is legally extinguished and cannot be reinstated, while a debt that is written off is removed from a department’s accounts but could be reinstated.

 

Waivers are defined as relating to administrative charges.

 

Conservative MP and Treasury Board critic Stephanie Kusie said the large amount of debt writeoffs and forgiveness, coupled with the “mysterious” lack of detail, shows a lack of respect for taxpayers.

 

“This government continues to show complete irreverence for the money of hardworking Canadians,” she said in a statement. “Canadians deserve a government that manages their money and treats their debtors like their own.”

 

 

 

 

This article was first reported by The Globe and Mail