Third Reading - Bill C-20, An Act respecting further COVID-19 measures
Honourable senators, I rise to speak to Bill C-20, An Act respecting further COVID-19 measures.
Honourable senators, Bill C-20 is comprised of three parts. Part one revises the eligibility criteria for the Canada Emergency Wage Subsidy program. Part two provides for a payment to persons with disabilities for reasons related to COVID-19. Part three provides for legislative changes for flexibility in certain time limits or periods that are difficult or impossible to meet as a result of COVID-19.
My comments are directed to part one of the bill, which addresses the Canada Emergency Wage Subsidy program. This bill makes three changes to that program. First, it amends the Income Tax Act to revise the eligibility criteria for the Canada Emergency Wage Subsidy program. Second, it extends the Wage Subsidy program to November 21, 2020, with the ability to extend the program by regulation to December 31, 2020. Third, it provides a revised calculation of the wage subsidy for the fifth and subsequent qualifying periods of the program.
Honourable senators, as you know, the Finance Committee conducted hearings in spring and early summer on the government’s response to the COVID-19 pandemic and its economic consequences. Our report was released earlier this month.
During our hearings, many witnesses indicated appreciation for the government’s support, but also indicated that many businesses and individuals in need are not eligible for assistance under the current COVID-19 programs. The Canada Emergency Subsidy program, which is the subject of this bill, is one of these programs, however, there are other COVID-19 programs that should be adjusted and I would like to briefly comment on those before I discuss the wage subsidy program.
As I mentioned before, in this chamber, when we review bills in the Finance Committee, we look at what is included, but we also think about what is not included. I expected to see some changes to the Canada Emergency Commercial Rent Assistance program. This program was announced in April with the objective of lowering rent for small businesses by 75% for April, May and June. The program was subsequently extended to July.
Forgivable loans by CMHC would cover 50% of the rental payments, the landlord would cover 25% and business would pay the remaining 25%. The government initially estimated that the program would cost $3 billion. But as of July 17, 42,000 businesses supporting 304,000 employees had been assisted to the amount of $367 million, far short of the $3 billion set aside for the program.
The Canadian Federation of Independent Business had this to say about the rent assistance program, and this is the quote from them, “That program, while well-intentioned, is a real mess. That program is not delivering money and relief to the business owners that need it.”
The Federation indicated that landlords were confused by the amount of financial information required, the complexity of the forms, and the technical difficulties with the application portal. The Federation also wanted the 70% lost revenue criteria to be reduced. They felt it was too high.
In summary, they said that the program is too complicated, too reliant on landlords to administer, and the all-or-nothing threshold of a 70% revenue reduction leaves many hard-hit businesses without assistance.
The Finance Committee, in its COVID-19 report, which was issued earlier this month, heard testimony expressing similar concerns, and recommended that the government consider modifying the program to make it more accessible to businesses facing financial hardship. So I see Bill C-20 as a missed opportunity. The Canada Emergency Rent Assistance program should also have been amended in this bill.
While Bill C-20 amends the Canada Emergency Wage Subsidy program, many people are also calling for adjustments to the Canada Emergency Response Benefit. The Canada Emergency Response Benefit, or CERB, provides recipients with a flat amount of $2000 a month or $500 weekly, with the effective period being March 15 to October 3. The program allows recipients to earn up to $1,000 per month while collecting CERB.
The ninth report on Canada’s COVID-19 emergency response was released last week by the Department of Finance. That report indicated that as of July 16, there has been $60 billion in payments to just over 8 million applicants for the CERB program. During the hearings of the Finance Committee in May and June, we heard from witnesses who suggested that changes to the CERB program be considered. Many people are saying that CERB should be adjusted and the government should provide information to Canadians on the future of the program. Will it terminate on October 3 or will it be extended? If it is to be extended, will the criteria be changed? Many people have said that the monthly limit of $1,000 in other earnings should be changed so that CERB benefits are scaled back rather than terminated when an individual’s other earnings exceed $1,000 a month.
In addition, some provinces are warning that the Canada Emergency Response Benefit could hamper economic recovery by providing a disincentive to work. A recent survey earlier this month by the Canadian Federation of Independent Business found that 27% of respondents had encountered workers who had refused to return to work when recalled. Of those, 62% cited a preference to stay on the CERB program.
A frequently asked question at our Finance Committee hearings revolved around the transitioning of employees from CERB to the wage subsidy program. In my opinion, Bill C-20 was also a missed opportunity to adjust the CERB program and provide some information to Canadians on the future of the program.
I’d like to now speak about the wage subsidy program, which is reflected in Part 1 of Bill C-20. The wage subsidy program was initially put in place for a 12-week period from March 12 to June 6 and provided a 75% subsidy to businesses that qualified. To administer the program and calculate the subsidy, each set of four weeks is designated as a period, hence the first 12 weeks represented periods one, two and three. On May 15, the government announced the program would be extended for another 12 weeks, from June 7 to August 29. These additional 12 weeks were also broken down into four-week periods and were designated as periods four, five and six. The same eligibility criteria applied to periods one, two, three and four, which ended on July 4. Businesses that demonstrated a 15% drop in revenue for period one and a 30% drop in revenue for periods two, three and four were provided with a subsidy of 75% of employee wages up to $847 per employee per week. In calculating how much the government was going to subsidize for each employee, they use a base salary of $1,129 a week. That’s an important number to remember when you are working through the calculations.
However, businesses told the government that the wage subsidy program could better support businesses if the criteria were changed. They said that the 30% revenue decrease was like a cliff. If you had a 30% drop in revenues, you were entitled to the subsidy; you were in. If your revenues decreased 29%, you weren’t entitled to the subsidy; you were out. They said it was an all-or-nothing program. Many businesses suggested a graduated subsidy. As revenues increase, the wage subsidy would be gradually decreased. This was consistent with what the Finance Committee heard during its hearings on the COVID-19 programs. When the government first implemented the wage subsidy program, it initially estimated that the program would cost $71 billion. However, as of June 29, the Canada Revenue Agency had paid out only $18 billion of the $71 billion allocated. The estimated cost of the program is now $83.6 billion as announced on July 17 by the Minister of Finance. I suspect that was intended to reflect the new criteria that are reflected in this bill.
Bill C-20 lays out the revised formulae — and I say formulae plural because there are a number of formulae in the bill for the wage subsidy program. When I first looked at the bill and saw all the formulae reflected in the bill, I had to lay it aside. When Senator Gold sent out the background information on Bill C-20, he provided us with a link to the Department of Finance website, which provided some more detailed information on calculations in the program and it was a help in trying to work through the numbers.
Effective July 5, period five and onward, all employers with a revenue decline of less than 30% will now be eligible for the wage subsidy program. The new formula applies to the five four-week periods beginning July 5. These are periods, five, six, seven, eight and nine, beginning July 5 with period five and ending November 21 with period nine. In effect, there is a different formula for each of the five four-week periods, and the formula decreased the amount of subsidy over a period of time. For example, the maximum weekly benefits per employee, when there is a revenue drop of 50% or more, is $677 for periods five and six; $565 is the maximum subsidy for period seven; $452 is the maximum subsidy for period eight; and a maximum subsidy for period nine is $226. If the subsidy drop is under 50%, the subsidy is calculated differently. For periods five and six, it’s 1.2 times the revenue drop times the base salary of $1,129. For period 7, it’s one times the revenue drop times the base salary of $1,129. For period eight, it’s now 0.8 times the revenue drop times the base salary of $1,129. For period nine, it’s 0.4 times the revenue drop times the base salary of $1,129.
These formulae are for the base subsidy, and there are additional formulae for the calculating a top-up rate for the most affected employers if the business revenue drops 55%, 60%, 65%, 70% and over. Also, there is a safe harbour rule whereby, in periods five and six, employers who would have been better off with the formula used in periods one to four would be eligible for the 75% wage subsidy if they have a revenue decline of 30% or more.
I provide all of this information on the calculation of the base subsidy, and reference the top-up subsidy and the safe harbour rule to indicate the complexities of the program.
Dan Kelly, president of the Canadian Federation of Independent Business said during a recent Bloomberg interview that the program is positive in that it will support more employers and more businesses, but he said, “It is a confusing, confusing program.” He didn’t say it once. He said, “confusing, confusing.” It takes a while to work through the numbers. He went on to say, “It is not for the faint-hearted.” I discovered that over the last four days.
In our COVID-19 report issued earlier this month, the Senate Finance Committee recommended that the government consider the adoption of a progressive or scalable eligibility threshold for the Canada Emergency Wage Subsidy and that the duration of the subsidy be extended for particularly hard-hit sectors. This bill attempts to do that, but it is complex. I think it’s going to help businesses because it expands, and it’s going to provide access to financial assistance to more employers. However, I can tell you, if the accounting industry is suffering because of the pandemic, this program is going to be a big help to them because it won’t just be the calculation of the subsidy, but they will also have to help business owners gather all of the information that they are going to need in order to calculate the subsidy.
Having said that, I expect further changes to this program, and I also expect further changes to some of the other programs, such as CERB and the rent assistance program.
Honourable senators, thank you very much. These conclude my remarks.