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Justin Trudeau

Ottawa pledges billions in COVID-19 economic relief; ‘non-essential’ travel to and from U.S. to be barred

Wednesday, March 18, 2020 @ 5:44 PM | By Cristin Schmitz

Last Updated: Wednesday, March 18, 2020 @ 6:34 PM


Prime Minister Justin Trudeau announced billions in proposed measures to be rolled out soon as part of the first phase of the government of Canada’s “COVID-19 Economic Response Plan.”

The economic measures the prime minister announced March 18 include up to $27.4 billion in direct support to Canadian workers and businesses. This is in addition to $55 billion in tax deferral until September 2020 for individual and corporate taxpayers. The government is also providing $10 billion-plus via a business credit availability program through the Business Development Bank of Canada (BDC) and Economic Development Canada (EDC), along with what the government said is approximately $500 billion in credit and liquidity support through financial Crown corporations, the Bank of Canada, the Office of the Superintendent of Financial Institutions, Canada Mortgage and Housing Corporation (CMHC) and commercial lenders.

Prime Minister Justin Trudeau

The prime minister also announced March 18 that Canada and the United States have agreed to temporarily bar “non-essential” travel over their 8,891-kilometre shared border — news that was pre-empted by U.S. President Donald Trump in an early morning tweet.

At press time, however, the trading partners were still working out when their indefinite non-essential travel bans will kick in at the border, with Deputy Prime Minister Chrystia Freeland forecasting “hours or days” in answer to reporters, while Public Safety and Emergency Preparedness Minister Bill Blair predicted in “very short order.”

Both Freeland and Trudeau said that while cross-border tourism and recreational shopping will temporarily cease, “essential” travel will continue unabated. Neither defined the term. “Our governments recognize that it is critical that we preserve supply chains between both countries,” Trudeau stressed. “These supply chains ensure that food, fuel and life-saving medicines reach people on both sides of the border. Supply chains, including trucking will not be affected by this new measure. Canadians and Americans cross the border every day to do essential work or for urgent reasons. That will not be impacted,” he vowed.

The package of economic supports to individuals and businesses generally won praise from major business advocacy groups. However, many of the measures require approval by Parliament, which the government proposes to recall next week.

Trudeau told reporters he was “confident” that all parties in the Commons and the Senate will collaborate to pass the necessary legislation. “There is broad collaboration,” the prime minister explained. “There is broad openness to moving these measures quickly that will help Canadians who need it.”

The new package announced March 18 builds on initiatives the government announced March 13 which aim at increasing the availability of credit to businesses of all sizes; sustaining liquidity in key financial markets; and providing flexibility to businesses experiencing hardship as a result of the COVID-19 crisis.

Bill Morneau, Minister of Finance

One newly announced measure is changing the Canada Account so that the Minister of Finance, Bill Morneau, will be able to determine its limit in order to deal with exceptional circumstances. The account administered by the EDC is used by the government to support exporters when it is deemed to be in the national interest. The change will allow the government to provide additional support to Canadian companies through loans, guarantees or insurance policies.

To support the myriad businesses who are losing revenue, and to help prevent layoffs, the government proposes to provide eligible small employers a temporary wage subsidy for three months. The subsidy will be equal to 10 per cent of the 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,” a government backgrounder explains. Eligible employers will include companies eligible for the small business deduction, as well as non-profit organizations and charities.

The Canada Revenue Agency (CRA) will also allow all businesses to defer, until after Aug. 31, 2020, the payment of any income tax amounts that become owing on or after March 18, 2020, and before September 2020. This tax relief would apply to balances due, as well as instalments, under Part I of the Income Tax Act (ITA). No interest or penalties will accumulate on these amounts during this period.

The CRA also will not contact any small- or medium-sized businesses to initiate any post-assessment GST/HST, or income tax, audits for the next four weeks, the government announced. “For the vast majority of businesses, the CRA will temporarily suspend audit interaction with taxpayers and representatives.”

The CRA liaison officer service, which assists owners of small businesses to understand their tax obligations, will now be available by phone — rather than in person. The CRA will also be ensuring that small businesses are aware of any COVID-19-related changes such as filing and payment deadlines, proactive relief measures, etc.

The government said it is ensuring that businesses have access to credit. To that end, the business credit availability programwill allow the BDC and EDC to provide more than $10 billion of additional support, largely targeted to small- and medium-sized businesses. “BDC and EDC are co-operating with private-sector lenders to co-ordinate on credit solutions for individual businesses, including in sectors such as oil and gas, air transportation and tourism,” the government said. “The near-term credit available to farmers and the agri-food sector will also be increased through Farm Credit Canada.”

For individuals and families, the government is proposing to provide a one-time special payment by early May 2020, through the goods and services tax credit (GSTC), to more than 12 million low- and modest-income households, which may require additional help with their finances due to the fallout from COVID-19.

The government said this move will inject $5.5 billion into the economy and double the maximum annual GSTC payment amounts for the 2019-20 benefit year. It noted that the average boost to income for those receiving the benefit will be close to $400 for single people and close to $600 for couples.

The government said that for 3.5 million families with children, who may also require more support, it is proposing to increase the maximum annual Canada Child Benefit (CCB) payment amounts, only for the 2019-20 benefit year, by $300 per child — delivering almost $2 billion in extra support. It projects that the overall increase for families receiving the child benefit will be approximately $550 on average; they will receive an extra $300 per child as part of their May payment. The government said the proposed increases to the GSTC and CCB would give a single parent with two children, and a low-to-modest income, almost $1,500 in additional short-term support.

The government will also introduce an“emergency care benefit”of up to $900 bi-weekly for up to 15 weeksto provide income support to workers who must stay home and do not have access to paid sick leave. The government said this measure could provide up to $10 billion to Canadians, and includes:
  • workers, including the self-employed, who are sick, quarantined, or who have been directed to self-isolate but do not qualify for employment insurance (EI) sickness benefits;
  • workers, including the self-employed, who are taking care of a family member sick with COVID-19, such as an elderly parent or other dependents who are sick, but do not qualify for EI sickness benefits; and
  • EI-eligible and non EI-eligible working parents who must stay home without pay because of children who are sick or who need additional care because of school closures.

The government will introduce as well an “emergency support benefit,” delivered via the CRA, to provide up to $5 billion in support to workers who are not eligible for EI and who are facing unemployment.

The government proposes to waive, for a minimum of six months, the mandatory one-week waiting period for EI sickness benefits for workers in imposed quarantine or who have been directed to self-isolate (as announced on March 11). It is also waiving the requirement for a medical certificate to access EI sickness benefits.

According to the government’s backgrounder, it is proposing other targeted help including by:
  • Providing $305 million for a new “distinctions-based” Indigenous Community Support Fund to address immediate needs in First Nations, Inuit and Métis Nation communities.
  • Placing a six-month interest-free moratorium on the repayment of Canada student loans for all individuals now in the process of repaying these loans.
  • Reducing the required minimum withdrawals from registered retirement income funds (RRIFs) by 25 per cent for 2020, in recognition of the volatile market conditions and their negative impact on many seniors’ retirement savings. “This will provide flexibility to seniors that are concerned that they may be required to liquidate their RRIF assets to meet minimum withdrawal requirements,” the government said. “Similar rules would apply to individuals receiving variable benefit payments under a defined-contribution registered pension plan.”
  • Providing the Reaching Home initiative with $157.5 million to continue to support people experiencing homelessness during the COVID-19 outbreak. The government said the money could be used for a range of needs, such as purchasing beds and physical barriers for “social distancing” and securing accommodation to reduce overcrowding in shelters.
  • Supporting women and children fleeing violence — including facilities in Indigenous communities — by providing up to $50 million to women’s shelters and sexual assault centres to improve their capacity to manage or prevent a COVID-19 outbreak in their facilities.

In order to provide greater flexibility to individual taxpayers experiencing hardships during the COVID-19 outbreak, the CRA will defer the filing due date for the 2019 tax returns of individuals, including certain trusts.

For individuals (other than trusts), the tax return filing due date will be deferred until June 1, 2020. For trusts having a taxation year ending on Dec. 31, 2019, the return filing due date will be deferred until May 1, 2020.

The CRA will allow all taxpayers to defer, until after Aug. 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 ITA. No interest or penalties will accumulate on these amounts during this period.

The government said that in order to reduce the necessity for taxpayers and tax preparers to meet in person, and to reduce the administrative burden, “effective immediately” the CRA will recognize electronic signatures as having met the signature requirements of the ITA, as a temporary administrative measure. This applies to authorization forms T183 or T183CORP — the forms signed in person by millions of Canadians each year to authorize tax preparers to file taxes.

The CRA has also adapted the in-person Outreach Program that helps individuals better understand their tax obligations, and to obtain the benefits and credits to which they are entitled, so that the service is now provided by phone, and through webinar “where possible.”

Morneau said he has been encouraging the heads of Canada’s large banks to show flexibility in helping their customers whose personal or business finances are affected by COVID-19. The Superintendent of Financial Institutions has also “made clear his expectation” that banks will use the additional lending capacity provided by recent government actions to support Canadian businesses and households, the government said.

“In response, banks in Canada have affirmed their commitment to working with customers to provide flexible solutions, on a case-by-case basis, for managing through hardships caused by recent developments,” the government said. “This may include situations such as pay disruption, childcare disruption, or illness. Canada’s large banks have confirmed that this support will include up to a six-month payment deferral for mortgages and the opportunity for relief on other credit products.”

Through CMHC, Ottawa said it is also 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.”

If you have any information, story ideas or news tips for The Lawyer’s Daily please contact Cristin Schmitz at Cristin.Schmitz@lexisnexis.ca or at 613-820-2794.