The Liberal government’s plan to impose retroactive penalties for fraudulent Canada Emergency Response Benefit claims is raising concerns about fairness and constitutionality from tax experts and civil libertarians.
Policy experts say it is highly unusual for a federal law to impose financial penalties retroactively, meaning an individual would not have been fully aware of the consequences of their actions at the time of an allegedly fraudulent claim.
Michael Bryant, executive director and general counsel for the Canadian Civil Liberties Association, said the proposed law is a potential violation of the Canadian constitution, which states that people can’t be found guilty of a crime unless the action was against the law when it occurred. Mr. Bryant also noted that fraud is already a crime.
“It, in theory, means that activity that wasn’t criminal one day, after the conduct is over, gets criminalized the next day, even though it wasn’t a crime the day before. So it violates principles of due process, liberty and the presumption of innocence unnecessarily, because they could be charged with fraud in any event," he said. “[The government] must know that by making it retroactive, they increase the risk of a constitutional challenge.”
Mr. Bryant said the bill’s strong language about enforcement appears to be a politically motivated attempt to win support from Conservative MPs in the minority Parliament, where the Official Opposition has repeatedly raised concerns about abuse in the CERB program.
The draft bill includes new penalties for fraudulent CERB claims. One section would impose retroactive fines, while a section that is not retroactive includes harsher consequences, including up to six months in jail.
The retroactive provisions outline penalties of up to three times the improperly claimed amount, while the section that is not retroactive states that an offence could lead to a fine of not more than $5,000 plus not more than double the amount of the income support payment “that was or would have been paid” or "the fine and imprisonment for a term of not more than six months.”
The Liberal government has recalled Parliament to deal with new legislation on Wednesday afternoon. The Globe and Mail obtained a draft version of the bill, which has not yet been made public.
The government launched the CERB as a short-term alternative to Employment Insurance (EI).
Jennifer Robson, an associate professor of political management at Carleton University who specializes in tax and social policy, said the draft bill replicates some of the EI penalties.
But she noted that, unlike the EI rules, the proposed CERB changes are silent on penalties for employers.
The bill states that people are not eligible for the CERB if they fail to return to work when it is reasonable to do so and the employer requests it.
Prof. Robson said this raises questions of how the term “reasonable” would be interpreted in workplaces where employees question whether it is safe to return.
Allan Lanthier, a tax expert and retired partner at Ernst & Young, said the government should not impose penalties after the fact.
“Retroactive legislation is used sparingly in Canada," he said, adding that he never dealt with such a situation in his 45 years of practice on tax-related issues. "Many taxpayers may now face significant fines for what they view as innocent errors under CERB rules that were changing from one news conference to the next.”
Conservative MPs said on Tuesday that they are reviewing the bill before taking a position, but noted that their party has raised concerns about fraudulent CERB claims, and that it is time for the government to focus on restarting the economy.
“The solution is to get people back to work so that they can earn a pay cheque rather than relying on a government cheque,” Conservative finance critic Pierre Poilievre said.
The Bloc Québécois said on Tuesday that its support for the bill is conditional on the government tabling a fiscal update this month, agreeing to a first ministers meeting on health care transfers, and a pledge that the Liberal Party will return all COVID-19 wage subsidies it received.
NDP MP Jagmeet Singh said the harsh penalties would put low-income people at risk, including racialized Canadians, just days after the Prime Minister joined a protest against racism in the justice system.
“They’re not criminals. They’re people who are desperate and in need of help,” Mr. Singh said to Mr. Trudeau during a committee meeting in the House of Commons on Tuesday. “While the Prime Minister took a knee one day, the same day his government was putting in place a law that would criminalize people who were desperate. How does the Prime Minister think that makes any sense?”
Mr. Trudeau replied that the CERB was put in place quickly to provide money immediately, with minimal upfront paperwork or verification.
“Of course, if people make good-faith mistakes, there are not going to be punitive consequences for them," he said. "But we need to make sure that we have the responsible measures in place to go after fraudsters and criminals. But our focus has been on helping Canadians.”
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