The situation around the COVID-19 pandemic leads to uncertainty for all Canadians and Canadian companies. The government urge everybody to self-isolate and stay at home. Most of the business switching to work from home model to protect their employees and continue to provide services and complete work, but not all companies can do it. The bars, restaurants, movie theatres, and all other public entertainment centers are closed. People are losing work hours and afraid to lose a job.
What’s the government doing to support Canadian business?
In this situation, the Government of Canada taking the necessary steps to help Canadian businesses stay alive and project jobs for employees. The total cost of an economic response plan is $27.4 billion, which includes credits, subsidy, and loans, and planned to start in April – May 2020. That is in addition to $65 billion tax payments deferral for individuals and businesses and Business Credit Availability Program (BCAP), which is available immediately.
Availability of credit to the business of all size
On March 13, 2020, the government outlined a coordinated package of measures to support the functioning of markets, which will significantly increase the availability of credit to businesses of all sizes, sustain liquidity in critical financial markets, and provide flexibility to companies experiencing hardship.
The Business Credit Availability Program (BCAP) will allow the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) to provide more than $10 billion of additional support, primarily targeted to small and medium-sized businesses. It will be a useful tool for helping viable Canadian businesses remain resilient during these very uncertain times.
The Office of the Superintendent of Financial Institutions (OSFI) announced it is lowering the Domestic Stability Buffer by 1.25%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 also took a series of actions to support the Canadian economy by cutting the interest rate to 0.75% as a proactive measure in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices.
Helping Businesses Keep their Workers
To prevent lay-offs and support businesses that are facing revenue losses, the government is proposing to provide eligible small employers a temporary wage subsidy for three months. The subsidy will be equal to 10% of the remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. 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 today and before September 2020. This relief would apply to tax balances due, as well as installments. 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.
Supporting Financial Market Liquidity
As a further proactive and coordinated measure to bolster the financial system and the Canadian economy, the government announced on March 16 that it is launching an Insured Mortgage Purchase Program (IMPP).
Under this program, the government will purchase up to $50 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC). This action will provide long-term stable funding to banks and mortgage lenders, help facilitate continued lending to Canadian consumers and businesses, and add liquidity to Canada’s mortgage market.
Further, the Bank of Canada has announced that it will adjust its market liquidity operations to maintain market functioning and credit availability during the current period of uncertainty in which conditions are evolving rapidly.
Anna Grigoryan is a public accountant specializing in providing accounting, bookkeeping and tax services to Small Business owners and individuals. She has more than ten years of professional experience in public accounting and a bachelor’s degree in Business Accounting. Anna is the founder and CEO of Taxory, an accounting firm located in Ontario, Canada.