Photo: Finance Minister Bill Morneau speaks to reporters in March about the mounting toll of COVID-19. The government announced a series of measures this week to support Canadians and workplaces amid the worsening global pandemic.
Additional economic and income bridging measures announced by the federal government this week will go a long way to quickly help workers and employers deal with the economic fall-out from the COVID-19 crisis. They include:
- An Emergency Care Benefit of up to $450/week for up to 15 weeks for those who don’t qualify for EI sickness benefits and who are sick, quarantined, taking care of ill family members or children who have to stay home due to school closures.
- An Emergency Support Benefit to be delivered through the CRA for those not eligible for EI and who are facing unemployment—with more details to be announced later.
- A special one-time payment in early May of the Goods and Services Tax Credit to low and modest-income families.
- An increase in the Canada Child Benefit with a May payment of an extra $300 per child.
- Deferral of filing due dates for 2019 tax returns until June 1, 2020.
- Allow all taxpayers, including all businesses, to defer tax balances and installments owed from now until after August 31, with no interest or penalties accumulating.
- Six-month interest-free moratorium on repayment of Canada Student Loans
- Reduction in minimum withdrawals from Registered Retirement Income Funds by 25% for 2020 for seniors, in recognition of the decline in stock markets.
- A wage subsidy of 10% for three months of up to a maximum of $1,375 per employee and $25,000 per employer for eligible small employers, including small business, non-profits and charities.
- Additional support for Indigenous communities, homeless, and women’s shelters.
- Up to a six-month deferral on mortgage payments and possible relief for other loans through banks and the CMHC.
- Additional liquidity support for businesses.
The cost of the direct support measures is estimated at $27 billion with an additional $55 billion in tax deferrals. The support is more than what was provided in response to the 2008-099 financial crisis, which is appropriate as the immediate economic impact and downturn could be larger.
This isn’t as much as some other countries have announced, but there will be more coming from both the federal government and provinces, including for directly affected sectors. The federal government’s package of measures is more targeted to lower incomes and vulnerable workers using existing programs that can get the funds out quickly, together with new program support for contract, gig and self-employed workers who aren’t eligible for EI.
This package uses existing programs and staff, including the CRA, to deliver money quickly while reducing the immediate workload of collecting taxes— an important approach when capacity will be an issue for government.
However, most individual Canadians receive income tax refunds instead of having to pay balances.
It would be better to have an automatic tax-filing and return system so Canadians could receive their refunds and benefits automatically without having to prepare tax returns themselves, as Canadians for Tax Fairness—and others—have advocated for.
While there is immediate relief for business and individuals with mortgages and loans, the federal and provincial governments could also lean on major lenders, credit card companies, utility companies and landlords to be lenient with household bills coming due. Borrowing rates for banks and major companies have been reduced to close to zero and they could pass that onto households too.
These short-term emergency measures highlight the gaps we have in our social safety net, with many workers not eligible for EI, emergency leave or other workplace sick benefits. Canada should introduce permanent reforms so all workers have access to paid sick leave and take further steps to ensure more workers are covered by employment insurance.
The government’s important economic and income “bridging” programs should receive all-party support. It looks like the bridge required will be longer than many expected—months, not weeks, with a deeper economic chasm, and we don’t know where the bridge will lead. What will the new normal be?
The Alternative Federal Budget, released earlier this week, provides many excellent proposals for where this bridge could lead and hopefully the federal budget, which had been expected at the end of March, will provide some of those answers.
While now clearly isn’t the time for significant tax increases, we will soon question how the government is going to pay for it all. The Platform for Tax Fairness we published last year shows that there are tens of billions the federal government could generate annually by making our tax system fairer: enough to pay for this bridge and the new investments needed for a stronger, more equitable and sustainable economy on the other side.