Government of Canada's COVID-19 Economic Response Plan

The federal government has announced $27 billion in payments to Canadian workers and businesses. The Prime Minister has recalled Parliament, as most of these measures require Parliamentary approval and royal assent.

Other measures announced March 18 or earlier, include deferrals in paying taxes and direct support for the biggest financial institutions.

Below are extracts from the government's website. 

Temporary Income Support for Workers and Parents

For Canadians without paid sick leave (or similar workplace accommodation) who are sick, quarantined or forced to stay home to care for children, the Government will waive the one-week waiting period for those individuals in imposed quarantine that claim Employment Insurance (EI) sickness benefits.

Workers will no longer be required to provide a medical certificate to access EI sickness benefits.

Emergency Support Benefit

For Canadians who lose their jobs or face reduced hours as a result of COVID’s impact, the Government is introducing an Emergency Support Benefit delivered through the CRA to provide up to $5 billion in support to workers who are not eligible for EI and who are facing unemployment.

Emergency Care Benefit

The Canada Revenue Agency will provide up to $900 bi-weekly for up to 15 weeks. The payment will go to workers who do not qualify for EI sickness benefits, including those classified as self-employed.

The criteria to qualify:

- quarantined or sick with COVID-19;
- taking care of a family member who is sick with COVID-19, such as an elderly parent; and
- parents with children who require care or supervision due to school closures, and are unable to earn employment income.

Applications will become available in April 2020, and require Canadians to attest that they meet the eligibility requirements. They will need to re-attest every two weeks to reconfirm their eligibility.

Three channels to apply for the benefit:

- by accessing it on their Canada Revenue Agency MyAccount secure portal;
- by accessing it from their secure My Service Canada Account; and
- by calling a toll free number equipped with an automated application process not yet available.

Additional Measures

The government will extend to 76 weeks the EI Work Sharing Program, which provides EI benefits to workers who agree to reduce their normal working hours as a result of developments beyond the control of their employers. No further information is available at this time.

The government will pay, by early May 2020, an average of $400 for eligible individuals and $600 for couples through a one-time doubling of the Goods and Services Tax credit. Around 12 million families will receive the benefit based on their 2018 tax return.

For over 3.5 million eligible families with children, the Government will increase the maximum annual Canada Child Benefit by $300 per child to be paid in May and only for the 2019-20 benefit year.

The government will provide $305 million for a new distinctions-based Indigenous Community Support Fund to address immediate needs in First Nations, Inuit, and Métis Nation communities.

The government has placed a six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.

The government will reduce the required minimum withdrawals from Registered Retirement Income Funds by 25 per cent for 2020 for seniors who have reached pension age. Similar rules will apply to individuals receiving variable benefit payments under a defined contribution Registered Pension Plan.

The Reaching Home program dealing with homelessness will be given $157.5 million. These funds are earmarked for shelters to help them reduce overcrowding and allow for social distancing.

Women's shelters and sexual assault centres will receive up to $50 million to help prevent an outbreak of COVID-19 in their facilities.

Tax Payment and Filing Deferrals

The Canada Revenue Agency will defer the filing due date for the 2019 tax returns of individuals (other than trusts) until June 1, 2020. A later filing could delay payment under the Goods and Services Tax Credit or the Canada Child Benefit.

For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.

The Canada Revenue Agency will allow all taxpayers (individual and corporate) to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after [March 18] and before September 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.

Effective immediately the Canada Revenue Agency will recognize electronic signatures as having met the signature requirements of the Income Tax Act, as a temporary administrative measure. This provision applies to authorization forms T183 or T183CORP, which are forms that are signed in person by millions of Canadians every year to authorize tax preparers to file taxes.

Role of Financial Institutions

Canada's large banks have confirmed support for those having financial difficulties will include up to a six-month payment deferral for mortgages, and the opportunity for relief on other credit products. [The support is on a case-by-case basis, and conditional and vague -- TML Ed. Note.]

Mortgage Default Management Tools

The Government, through  the Canada Mortgage and Housing Corporation (CMHC), is providing increased flexibility for homeowners facing financial difficulties to defer mortgage payments on homeowner CMHC-insured mortgage loans. CMHC will permit lenders to allow payment deferral beginning immediately. [This measure is also vague and conditional -- TML Ed. Note.]

Support to Businesses

The government announced measures to support businesses that are in addition to those presented on March 13, by Minister of Finance Bill Morneau, Governor of the Bank of Canada Stephen Poloz, and Superintendent of Financial Institutions Jeremy Rudin.

Supporting Canadian Business through the Canada Account

The government is changing the Canada Account so that the Minister of Finance will be able to determine the limit of the Canada Account in order to deal with exceptional circumstances. The Canada Account is administered by Export Development Canada and is used by the government to support exporters when deemed to be in the national interest. This will allow the government to provide additional support to Canadian companies through loans, guarantees or insurance policies.

Helping Businesses Keep Their Workers

The government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10 per cent of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.

Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees' remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities.

Flexibility for Businesses Filing Taxes

The Canada Revenue Agency will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after [March 18] and before September 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.

The Canada Revenue Agency will not contact any small or medium businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks. For the vast majority of businesses, the Canada Revenue Agency will temporarily suspend audit interaction with taxpayers and representatives.

Ensuring Businesses Have Access to Credit

The Business Credit Availability Program will allow the Business Development Bank of Canada and Export Development Canada to provide more than $10 billion of additional support.

The Office of the Superintendent of Financial Institutions announced it is lowering the Domestic Stability Buffer by 1.25 per cent of risk-weighted assets, effective immediately. This action will allow Canada's large banks to inject $300 billion of additional lending into the economy.

The Bank of Canada has cut its interest rate to 0.75 per cent.

Supporting Financial Market Liquidity

The government has announced an Insured Mortgage Purchase Program. The government will purchase up to $50 billion of insured mortgage pools through the CMHC. This is intended to provide long-term stable funding to banks and mortgage lenders.

The Bank of Canada will broaden eligible collateral for its term repo facility to include the full range of collateral eligible under the Standing Liquidity Facility, with the exception of the non-mortgage loan portfolio. This expansion of eligible collateral will provide support to funding conditions for financial institutions by providing a backstop to regular private funding.

The Bank also announced that it stands ready, as a proactive measure, to provide support to the Canada Mortgage Bond (CMB) market. This would include, as required, purchases of CMBs in the secondary market. Similar to the increase in Government of Canada bond buybacks, this will support market liquidity and price discovery.

This article was published in

Volume 50 Number 9 - March 21, 2020

Article Link:
Government of Canada's COVID-19 Economic Response Plan

    

Website:  www.cpcml.ca   Email:  editor@cpcml.ca