March 23, 2020
Canada announces Economic Response Plan
On 18 March 2020, the Canadian Government announced its CA$82 billion1 Economic Response Plan: Support for Canadians and Businesses. The plan outlines a new set of economic measures, including $55 billion in tax flexibility measures and $27 billion in direct support to Canadian workers and businesses affected by the current situation. The measures include:
A summary of the key measures to support workers and businesses, as well as tax measures outlined in the Economic Response Plan, is outlined below.
Helping businesses keep their workers
Temporary wage subsidy
A new temporary wage subsidy has been created to help prevent layoffs. This subsidy is available immediately to companies eligible for the small business deduction as well as charities and non-profit organizations for a period of three months. The subsidy equates to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. This will benefit companies by reducing their remittances of income tax withheld on their employees’ remuneration.
Canada Work-Sharing Program
The Work-Sharing Program has been in place to help employers and employees avoid layoffs when there is a temporary reduction in business activity that is beyond the employer’s control. The measure provides income support to employees eligible for EI benefits who are required to reduce their work week.
Temporary changes to the Work-Sharing Program were put in place and are generally effective from 15 March 2020 to 14 March 2021. These measures apply to employers affected by the current situation (as well as those employers affected by the downturn in the forestry, steel and aluminum sectors) and include the extension of the duration of work-sharing agreements. Previously, these agreements could span 38 weeks, but that limit has now been extended to 76 weeks. The waiting period between agreements has also been waived.
Help for affected workers
EI sickness benefits
Changes to the EI sickness benefits were made earlier in March. Notably, the one-week waiting period has been waived for Canadians who have been sickened as a result of the current circumstances or placed in quarantine, and no medical certificate will be required.
Temporary income support for workers
The Government announced a new Emergency Care Benefit to assist workers who, due to the current situation, are unable to work as a result of illness or closures. The program will become available in April and will provide up to $900 biweekly for up to 15 weeks. This program is available to the following individuals:
Longer-term assistance named the Emergency Support Benefit was also introduced, aimed at supporting workers who are not eligible for EI and who are facing unemployment. This program will also become available in April and will be administered through the Canada Revenue Agency (CRA).
No new information was released relating to other non-quarantined individuals who have been laid off as a result of the sudden closure of the business due to current circumstances who qualify for EI and do not require care for children. Therefore, it is assumed that the EI application process for those individuals remains unchanged.
Improved access to credit
Measures have been implemented to provide businesses with increased access to credit.
The Business Credit Availability Program is now available to allow the Business Development Bank of Canada and Export Development Canada (EDC) to provide more than $10 billion of additional support aimed at small and medium-sized businesses. Farm Credit Canada is also increasing the near-term credit available to farmers and other businesses in the agri-food sector.
Canada’s large banks will also have access to an additional $300 billion in funds as a result of the lowering of the Domestic Stability Buffer by 1.25% of risk-weighted assets, effective immediately. This action, in addition to last week’s dropping of the Bank of Canada’s emergency interest rate cut to 0.75% may help to increase companies’ ability to access credit during the financial hardship resulting from the current situation.
In addition, changes have been made to the Canada Account that is administered by EDC, which supports exporters. The changes will now allow the Minister of Finance to determine the limit of the Canada Account in order to deal with exceptional circumstances, thereby providing additional support to Canadian companies through loans, guarantees or insurance policies.
Other support from lending institutions
Canada’s banks have committed to working with customers to provide flexible solutions, on a case-by-case basis, for those affected by recent developments. This support will include up to a six-month payment deferral for mortgages and the opportunity for relief on other credit products. The Canadian Mortgage and Housing Corporation (CMHC) is also providing increased flexibility for homeowners facing financial difficulties. These flexibility measures include the ability to defer mortgage payments on homeowner CMHC-insured mortgage loans.
Extended tax filing and payment deadlines
We will publish additional Tax Alerts on provincial measures as information becomes available.
Other tax measures to support individuals
Other administrative tax measures
1. Currency references in this Alert are to the CA$.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (Canada), Toronto
Ernst & Young LLP (Canada), Montréal
Ernst & Young LLP (Canada), Vancouver