Canadian employers who experience a COVID-19-caused revenue loss of at least 30 per cent will now be eligible for a subsidy of up to 75 per cent of each employee's wages, the Government of Canada announced March 30.
Today's announcement is the fourth version of the federal government wage support program, now dubbed the Canada Emergency Wage Subsidy. The content was announced orally by the Prime Minister in the morning. At the time of this bulletin, the Government has not confirmed the announcement in writing or posted details online.
According to the oral announcement, this current iteration of the subsidy will:
- Provide a subsidy of up to 75 per cent of an employee's wages (up from the previously-announced 10 per cent).
- Extend to charities, non-profit organizations, and "large and small" businesses. (Previously, the only business corporations eligible were Canadian-controlled private corporations that qualify for the small business deduction.)
- Benefit employers that have experienced a revenue decrease of at least 30 per cent due to COVID-19. (This is the first mention of a revenue test.)
- Apply to the first $58,700 earned per employee –equivalent to up to $847 per week per employee. (Under earlier versions of the program, the subsidy was to be capped at the lesser of $1,375 per employee and $25,000 per employer.)
- Be retroactive to March 15.
The fourth iteration of the subsidy differs significantly from the second iteration, which was included in the COVID-19 Emergency Response Act that Parliament approved last week. There, the specific mechanism used to deliver the subsidy was an Income Tax Act amendment allowing an eligible employer to reduce the amount that the employer would otherwise have to remit to the Canada Revenue Agency in respect of payroll withholdings.
While it is expected that the same approach will be used to deliver the new version of the subsidy, further legislation will be required. The COVID-19 Emergency Response Act allows the federal Cabinet to determine the amount of the subsidy, but fixes in statute which employers are eligible. To extend the subsidy to companies that are not small businesses, or to implement a revenue-loss test, would require legislative amendment. However, in the case of tax measures it is conventional for the Government to implement a program as announced and later to seek Parliamentary approval of retroactive enabling legislation. We expect the same will occur here.
Fasken continues to monitor developments. We expect technical details of the program to be released at some point. It is presently unknown whether additional criteria or procedural requirements will be applied. It is also unclear whether or how the subsidy will apply should an employer have insufficient work for its employees in the first place.
We caution that, to date, both federal and provincial responses to COVID-19 have often involved implementation details and legal instruments that differ materially from initial announcements.
The program as announced is not intended to permit employers to pay workers only the 75 per cent covered by the federal subsidies. Employers may only claim a credit for 75 per cent of what they actually pay their employees. Claiming a tax credit under false pretences is an offence under the Income Tax Act.
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