Businesses across the country have been facing unprecedented financial strain since the World Health Organization declared COVID-19 to be a global pandemic on March 11th. The resulting measures put into place to slow the spread of the virus have had a dramatic impact on every individual and industry in the country, with most companies facing reductions in business or even closures. Several companies have already begun to take action, asking employees to reduce their hours or turning to layoffs, as cash on hand becomes a major concern.
In an effort to help businesses maintain payroll expenses and keep people employed throughout the health crisis, the federal government announced last week that it would be enacting several initiatives to provide businesses with assistance and tax deferrals to increase spending on pressing matters, like payroll and other operating costs. Today, the Prime Minister announced a major increase in assistance.
Federal Wage Subsidies
When the plan was originally announced last week, the proposed subsidy was set at 10%, to a maximum of $1,375 per employee and $25,000 per employer. Eligible small and medium-sized businesses could take advantage of the subsidy from March 18th through to June 20th, in an effort to avoid layoffs where possible.
However, as of today, March 27, Prime Minister Trudeau has announced a dramatic increase to the wage subsidy plan, as 10% was evidently deemed insufficient to keep many businesses going until the threat of the pandemic begins to wain in Canada. The Prime Minister announced this morning that the subsidy is going to be increased from 10% of payroll to 75%, a significant jump that will hopefully mean good things for many employees across the country who would otherwise be facing unemployment.
Eligible small and medium businesses can take advantage of the subsidy retroactive to March 15, meaning employees will be paid even if their workplace has been forced to slow down or close completely. As these changes were just announced, more details will follow, likely early next week. For example, there was no mention of per employee or per business caps, so this remains to be seen.
Canada Emergency Business Account
In this morning’s press conference, Prime Minister Trudeau also announced the Canada Emergency Business Account, which will be used to provide loans of up to $40,000 for eligible small and medium-sized businesses. The loans will be guaranteed by the federal government and will be interest-free for the first year. Certain qualifying businesses will also be granted loan forgiveness of 10% of the total amount.
In addition, businesses will be able to defer GST/HST payments as well as taxes on imports until June of this year. This will allow businesses to keep more cash on hand to assist with immediate expenses.
Provincial Aid for Businesses
In addition to the federal aid, the Ontario government will also be working to provide businesses with needed assistance throughout the next few months.
The province will be providing $6 billion in provincial business tax interest and penalty relief to corporations over a five months period. For smaller companies that pay less than $1 million in payroll, the province will temporarily increase in the Employer Health Tax exemption. The province will also allow a deferral of WSIB premiums for up to six months. Municipalities throughout Ontario are also being encouraged to extend deferrals of property tax as well.
While these are significant steps towards helping businesses face this unprecedented time, it remains to be seen what the long-term effects the pandemic will have on the Canadian economy overall. Cases of COVID-19 continue to rise in Ontario and across the country, but with any luck we will begin to see evidence of a reduction soon, owing to the extensive protocols put in place to slow down the spread.
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