Canadian businesses of all sizes face financial hardship as a result of the COVID-19 pandemic. To support and provide flexibility to these businesses while also sustaining liquidity in key financial markets, the Government of Canada has developed an Economic Response Plan. These measures, set out in the COVID-19 Emergency Response Act, passed into law on March 25, 2020.
Canada's Economic Response Plan includes supporting Canadian businesses through:
- the Canada Account;
- measures to help businesses keep their employees by avoiding layoffs;
- flexibility for businesses filing taxes;
- ensuring businesses have access to credit; and
- supporting financial market liquidity.
Each of these measures is intended to support Canadian businesses during these challenging economic times.
The Canada Account
The Canada Account is used to support exporters when doing so is deemed to be in the national interest. Recent changes have been made to the Canada Account to allow the Minister of Finance to determine the limit. This change will allow the Minister of Finance to deal more effectively and efficiently with exceptional circumstances, including offering Canadian companies loans, guarantees, or insurance policies. By participating in this program, Canadian companies involved in exporting goods can offset the financial impact of COVID-19 on their businesses.
The Government of Canada intends to make funds immediately accessible to small businesses over the next three months to alleviate the impact of revenue losses and to help prevent lay-offs.
Employers are eligible to receive a 'Temporary Wage Subsidy' if:
- they are a Canadian-controlled private corporation (CCPC), non-profit organization, or registered charity;
- they have an existing business number and payroll program account with the CRA and have had the number and account since, at the latest, March 18, 2020; and
- they pay salary, wages, bonuses, or other remuneration to an employee between March 18, 2020, and June 20, 2020.
Eligible small employers will have access to the Temporary Wage Subsidy for a three-month period. The subsidy amounts to 10 per cent of the remuneration paid during that three-month period, up to a maximum of $1,375 per employee and $25,000 per employer.
Importantly, CCPCs are only eligible for the subsidy if their taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, is less than $15 million.
Access to this subsidy is immediate. Eligible employers can simply reduce the remittance of income tax they withhold on their employees' remuneration between March 18, 2020, and June 20, 2020. If the income taxes deducted are insufficient to offset the value of the subsidy, future remittances can be reduced instead.
The Government of Canada announced on March 25, 2020, that it is currently reconsidering the wage subsidy, and suggested that wage subsidies would soon be boosted to avoid mass layoffs. As discussed, Canada is currently offering a 10 per cent subsidy, however, it is looking to countries like Denmark and Britain, which are offering wage subsidies of 75 and 80 per cent respectively, to determine whether those models are feasible for Canada.
Support for Workers Following Layoff
Employees who have been laid off may apply for Employment Insurance benefits. However, depending on the relevant regional rate of unemployment and the employee's number of hours of insurable employment in the qualifying period, not all employees will qualify for EI benefits.
For those employees who are ineligible to receive EI benefits, the Government of Canada has announced a Canada Emergency Response Benefit ("CERB"). The CERB is a taxable benefit of $2,000 that is paid monthly. After taxes are deducted, the CERB amounts to $1,800 per month. At this time, the CERB can be collected for up to four months between March 15, 2020, and October 3, 2020.
The CERB was designed to be more accessible to a broader range of Canadians than EI. The CERB is currently being made available to:
- workers who must stop working due to COVID-19 and do not have access to paid leave or other income support;
- workers who are sick, quarantined, or taking care of someone who is sick with COVID-19;
- working parents who must stay home without pay to care for children that are sick or need additional care because of school and daycare closures;
- workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work; and
- wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance benefits.
To be eligible to receive the CERB, applicants must be at least 15 years old and have earned an employment income of at least $5,000 in the 12 months before applying or in 2019.
The portal to access the CERB is anticipated to be available to workers in early April (tentative date: April 6, 2020), and applicants are expected to begin receiving payments within 10 days of applying.
The CERB is available to employees regardless of their eligibility for EI, and so the Government of Canada has suggested that those employees who are eligible for EI may also consider applying for the CERB given the backlog in processing EI applications at this time.
Other supports newly available to individuals to temporarily alleviate financial hardship include:
- assistance to families with children through a temporary increase to the Canada Child Benefit payments;
- additional assistance to individuals with low and moderate incomes through a top-up payment under the GST credit;
- a pause on the repayments of Canada Student Loans; and
- protection for seniors' retirement saving by reducing the required minimum withdrawals from Registered Retirement IncomeFunds by 25 per cent for 2020.
Flexibility for Businesses Filing Taxes
Businesses are now given the option to defer income tax amounts that become owing between March 18, 2020, and August 31, 2020. Specifically, businesses are not required to pay their tax balances due for that time period, in addition to instalments, until August 31, 2020. These measures are offered without interest or penalties incurring between those dates.
Further, for four weeks following March 18, 2020, the Canada Revenue Agency will not be contacting small or medium businesses about post-assessment GST/HST or Income Tax audits.
Access to Credit
The Government of Canada is also making over $10 billion available to small and medium businesses in the form of credit. This credit is in addition to $300 billion of additional funds now available for lending through Canada's banks.
Moreover, the Bank of Canada has also now lowered the interest rate to 0.75 per cent in order to allow financial institutions to continue to extend credit to businesses.
Lastly, the Government of Canada launched the Insured Mortgage Purchase Program (IMPP), and then purchased $50 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation under the IMPP. This will allow long-term, stable funding to flow to banks and mortgage lenders, encourage continued lending to Canadian consumers and businesses, and add liquidity to the mortgage market.
The measures implemented through Canada's Economic Response Plan will be important in supporting the resilience of Canadian businesses of all sizes through these challenging times.
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