As they say, good things come to those who wait.
We continue to wait for our collective social isolation efforts to pay dividends.
And, we’ve been waiting for the magic fiscal bullet. In fact, we continued to wait through Monday and Tuesday. Cabinet met multiple times over the past few days to continue to develop a fiscal stimulus aid package and to try to get it as right as possible.
We found out today what this aid package will look like – the quick summary is, it’s massive, and it has a name – Canada’s COVID-19 Economic Response Plan. $27 billion in fiscal stimulus and $55 billion in additional liquidity.
What we were looking for
What we got
Direct cash transfers or reduced cash outflows of individuals
An Emergency Care Benefit of up to $900 bi-weekly for up to 15 weeks to provide income support to workers who must stay home and do not have access to paid sick leave. This would include workers who have been directed to self-isolate or are sick but do not have access to EI benefits. It also includes workers that have to take care of elderly family members or children.
Emergency support benefit for workers who are facing unemployment and who are not eligible for EI. This will be delivered through the Canada Revenue Agency.
The intent of both of these programs appears to be a clear safety net for folks who don’t qualify for EI benefits.
Planned enhancements to the Canada Child Benefit of $300 per child, for those who qualify.
Six-month interest holiday on Canada Student loans.
Payroll tax reductions or holidays
10% wage subsidy that will be available to businesses to keep employees on the payroll, for a period of up to three months from today.
This is capped at $1,375 per employee and $25,000 per employer. This applies to any company eligible for the small business deduction, as well as not-for-profit corporations and charities.
Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration.
Extension of tax deadlines
Federal tax deadlines have been changed as follows:
For individuals – June 1, 2020 (from April 30)
Deferral of requirements for tax payment for all taxpayers (individual and corporate) to August 31, 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act.
No interest or penalties will accumulate on these amounts during this period.
Other tax changes that were not at the forefront of the announcement include:
Calendar year trust filing deadline extended from March 30/20 to May 1/20
CRA will allow electronic signatures – temporary measure
Temporary suspension of income tax and GST/HST audits of SMEs for four weeks.
It appears that corporate filing deadlines remain in place. We will continue to monitor this for clarity.
$55 billion in tax deferrals will come from this decision – this represents the value of tax payments that were anticipated, but will be pushed out. It is not a tax reduction. This will provide much needed short-term liquidity in the system, but is not fiscal stimulus in and of itself.
Targeted industry support or intervention
No announcement, but a reference was made to possible use of the Canada Account which foreshadows possible moves down the road. This was likely not an accidental mention. This vehicle is and has been used by the federal government to perform extraordinary actions in the commercial space – for example, it was used to help finance the General Motors and Chrysler bailout. We are watching closely for corporate bailouts in key industries.
Regional economic support
No announcement in terms of regions.
Support for provincial health care
No announcement from a provincial perspective. Although this will undoubtedly be needed, more money does not get us more doctors or nurses. Provinces will continue to fund these systems and this issue will be looked at on a regular basis. That said, an Indigenous Community Support Fund was put in place.
Income tax and other incentives
Targeted assistance in the coming months, possibly to be announced in a federal budget.
Enhanced GST credit – averaging close to $400 for individuals and $600 for couples
Reduced minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25 per cent for 2020 in recognition of volatile market conditions and their impact on many seniors’ retirement savings.
Is $82 billion enough? Recognizing that only $27 billion appears to be an actual fiscal stimulus, there may be a need for more. The $55 billion deferral is just that – a deferral. It’s not forgiveness.
But inside the government, decision makers are planning for a long haul. The powder needs to be kept dry in case the situation worsens (or improves) in a manner that was not anticipated. More aid may need to be rolled out, or some may need to be reined in. So, it’s enough for now.
Since our communication on Monday, there have been several developments of note.
Canadian Banks have come together to offer up to six months relief on residential mortgage payments. We highlighted changes in the domestic stability buffer for Chartered Banks that appears to have facilitated this type of decision making.
The Bank of Canada and CMHC also continue their efforts to keep credit markets at ease. Previous facilities announced remain in place.
The situation is fluid, the stakes are unprecedented in many ways. The public-servants supporting the political decision makers are among the best and brightest in the world. Our financial institutions are among the strongest in the world.
One concern is that these programs sound like there will be some bureaucratic barriers to access. It remains to be seen how quickly this cash will actually roll out. That said, the Minister of Finance announced today that the Emergency Care Benefit will be available online with only personal attestations required.
In 2020, many expect services to be available in real terms at the click of a mouse. Many of these incentives will take time to roll out, and rules will clarify over time. Patience is a virtue during this period.
As the situation evolves, rules could clarify further. Your Welch LLP representatives will continue to understand these new programs as they evolve and help you access them.