The Standing Senate Committee on National Finance met by videoconference this day at 11 a.m. [ET] to examine the subject matter of Bill C-9, An Act to amend the Income Tax Act (Canada Emergency Rent Subsidy and Canada Emergency Wage Subsidy).
Senator Percy Mockler (Chair) in the chair.
The Chair: Honourable senators, before we begin, I would like to remind you and our witnesses to please keep your microphones muted at all times, unless recognized by name by the chair.
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We will now proceed to the official portion of our meeting.
My name is Percy Mockler, senator from New Brunswick and I am chair of the committee. I would like to introduce the members of the National Finance Committee who are participating in this meeting: Senator Boehm, Senator Dagenais, Senator Deacon, Senator Duncan, Senator Forest, Senator Galvez, Senator Klyne, Senator Loffreda, Senator Marshall, Senator Richards, Senator Smith, Senator Gagné and Senator Martin. We also have other senators attending the meeting.
I wish to welcome all of you and viewers across the country who may be watching these proceedings.
However, before hearing from our witnesses, I must address one housekeeping item. It seems that there was an agreement to give one deputy chair seat on our National Finance Committee to the Progressive Senators Group. This is not what we did at our last organization meeting. I’ll take full responsibility. We will therefore immediately rectify the situation.
I believe that Senator Richards wishes to address the committee.
Senator Richards: Thank you very much, Senator Mockler. I am resigning as deputy chair and nominating Senator Klyne for the position. I will remain on the steering committee as a fourth member. Thank you very much.
The Chair: Thank you, Senator Richards.
On this, honourable senators, do we have an agreement that Senator Richards will resign the deputy chair position and that it will be linked directly to the Progressive Senators Group under Senator Klyne? Do I have unanimous agreement, honourable senators? Thank you. Therefore, it is the will of our National Finance Committee.
For the fourth person on the steering committee, Senator Richards will be that fourth person. Is there an agreement, honourable senators? Agreed? Thank you.
Honourable senators, let’s get down to our scheduled business today. We are beginning our study of the subject matter of Bill C-9, An Act to amend the Income Tax Act (Canada Emergency Rent Subsidy and Canada Emergency Wage Subsidy), which was referred to the Finance Committee on November 5, 2020, by the Senate of Canada.
Honourable senators, for our first panel today, we welcome the representatives of three organizations. First, from the Canadian Federation of Independent Business, we welcome Dan Kelly, President and Chief Executive Officer. Second, from Restaurants Canada, we welcome Lauren van den Berg, Executive Vice-President, Government Relations. She is accompanied by David Lefebvre, Vice-President, Federal & Quebec Affairs. Finally, from the accounting tax and business consulting firm MNP LLP, we welcome Am Lidder, Senior Vice-President, Taxation Services. She is accompanied by Kim Drever, Partner and Regional Tax Leader.
Welcome to all of you, and thank you for accepting our invitation to look at the subject matter of Bill C-9.
We will start with presentation remarks of not more than five minutes by Mr. Kelly, to be followed by Ms. van den Berg and Ms. Lidder. Mr. Kelly, the floor is yours.
Dan Kelly, President and Chief Executive Officer, Canadian Federation of Independent Business: Senator Mockler, thank you so much for giving me the floor. Senators, it’s great to be with you today, virtually. I’m looking forward to the day when we can do this again in person.
My organization, the Canadian Federation of Independent Business, has really been hit incredibly hard by small businesses across Canada asking for help and support during this critical period. I’m delighted that you’re studying this bill. It is an important one. I urge your swift passage of this legislation.
Last night, through Maxime Fortin, the clerk, I sent around a slide deck that has a bit of data from small business owners across Canada. We have been collecting data on a regular basis from our 110,000 small- and medium-sized business members across Canada. It gives you a representative flavour of just how bad the damage is from COVID-19 to the independent business community across Canada.
Of course, as we speak, there are more lockdown measures being applied to small businesses across Canada. I’m in Toronto now, but my home province of Manitoba is being hit hardest with an across-the-board shutdown very much similar to what we saw in most provinces in March. This is a massive crisis for small businesses, and it requires immediate action.
Right now, across Canada, we have been collecting data almost every week from small business owners, and you should know that right now only 66% of small businesses across the country are fully open. A third of small businesses are closed or partially closed, even now, eight months into the pandemic. That has been stuck at about 70% through the majority of the eight-month COVID emergency.
Only 42% of small businesses have brought back their full staffing. That means that almost 60% are at lower levels of staffing than they were pre-pandemic. Most worrisome of all, of course, for small business owners is that only 29% of small businesses are at normal levels of sales. So 70% of small businesses are making less than their normal level of sales for this time of the year, and many of them, over a third, were down by 50% or more, still, at this stage of the pandemic. It’s getting worse, not better. Since the second wave, 51% of small business owners have seen a further decline in sales, and concern about the second wave has started. That’s deeply worrisome to us.
Right now across Canada, 37% of small businesses are telling us that they are losing money every single day that they are open. Over a third of small businesses are losing money every single day, many of them asking the question, “How many more days do I have before my business needs to permanently close its doors?”
We did some research to understand how many small business owners are actively considering bankruptcy or winding down their business; 14% of small business owners are currently looking at shutting their businesses forever. That’s one in seven small firms across Canada that may end up permanently closing their doors as a result of COVID-19. It varies deeply sector to sector in business. Obviously, those in the hospitality industry are hardest hit, as well as those in the arts and recreation and the service sectors.
Government has put in place some positive programs for small business owners, and the changes that are contemplated in Bill C-9 are, for the most part, very positive changes, things that we have been asking the government to consider as the pandemic has wound on.
Right now, 70% of small business owners — our members — have used the CEBA loan program and 63% have used the Canada Emergency Wage Subsidy (CEWS) at some point over the last number of months. Of the previous rent approach, the CECRA program, which we believe to have been a giant failure, only 22% of small business owners had used the CECRA program successfully. One of the biggest gaps in that program was it required their landlord to agree to participate in order to get any kind of relief, and most landlords took a giant pass on this program.
When we asked about our members’ plans, we shared with them the good news based on the government’s intentions in Bill C-9, and over half of business owners said they intended to use the revised wage subsidy to help their firms over the next number of months. Half said they would apply for the new CEBA loan program and the expansion of $20,000 per loan, another welcome move that the government has proposed. Only a third have suggested that they will look at the rent subsidy. I don’t take that as a measure of the lack of need for a rent subsidy, but I believe that the numbers are lower on that front because so many business owners have been of the view that the rent subsidy is unworkable, and so we have a major communications challenge in making sure that business owners know that there are significant revisions made to the proposed program that is before you today.
We like a lot of the tenets of these programs. I want to share with you that, right now, when we asked our members whether or not the changes to CEWS, CERS and CEBA, the three main government support programs, will help businesses survive and provide the lifeline that they need, the good news is that 25% of small business owners said they strongly agree this will help them survive, and a further 39% said they somewhat agree this will help them survive the pandemic.
These are not perfect programs, senators. There are giant gaps that exist in each of the government support programs. New business owners can access almost nothing.
I see I’m almost out of time. The programs are not, in most cases, set to fit what is coming up as a result of additional business closures.
The Chair: Thank you, Mr. Kelly. I’ll have to cut you off. Thank you. You have provided us with documents. I appreciate that. I will ask then, Ms. van den Berg, please, to make your comments.
Lauren van den Berg, National Vice-President, Government Relations, Restaurants Canada: Thank you so much for having us this morning. By way of brief background for those who may be unfamiliar with us, Restaurants Canada is a national industry association representing the voice of food service. I’m Lauren van den Berg, the executive vice-president of government relations.
As this committee begins its review and deliberation of Bill C-9, which includes critical support mechanisms for so many struggling businesses across the country, I would like to share some of our concerns regarding the unintended consequences of the wage and rent subsidies in particular, as well as solutions that will help the hardest-hit businesses to survive.
First and foremost, CEWS has been instrumental in the ability of restaurants to reopen and to continue to operate. Our industry would have collapsed without this critical support mechanism. While the rent program and emergency small business loans were crucial, it is because our industry is fundamentally so labour-intensive that we were able to make every dollar through the wage subsidy program go further than it would have through CERB or EI, because that’s one of the critical assumptions here. We’re job creators. The Prime Minister has highlighted on numerous occasions that the goal was to create 1 million jobs. Frankly, we’re the only sector that has the capacity to create those jobs [Technical difficulties] so many at the outset of this apocalypse. In fact, the food service sector lost more jobs in the first six weeks of the pandemic than the entire Canadian economy lost during the 2008-09 recession. No other industry comes close to this level of shortfall.
That brings us to a second important assumption. When the government proposed the extension of the wage subsidy back in June and July, we were more optimistic as a country. The sun was shining, the weather was warm, patios could be enjoyed again and the economic outlook was optimistic. The reality is that we are now in the middle of a second wave. Winter is literally coming, and indoor dining rooms are being shut down across the country. Those assumptions that were made back in June no longer reflect the operating environment and the economic landscape of businesses across the country — but especially of restaurants.
Because despite the lost revenue from closures and operating restrictions, we have taken the time to invest considerable resources — up to $750 million so far in staff training, PPE, safety equipment — all to ensure that we’re keeping staff and Canadians safe.
This speaks to our innovative nature as an industry. Many small operators have been able to pivot to takeout and delivery to survive, but I want to be clear here; it’s just barely surviving. The third-party delivery platforms that we’re all now very familiar with — the Uber Eats, SkipTheDishes — charge exorbitant fees for the privilege of delivering these restaurant meals to Canadians. We are being charged rates of 30 to 35% for that privilege. No restaurant is making a profit using these platforms.
And then there are the additional costs of keeping customers safe when they do order takeout or delivery. The single-use items that our industry relies on are now required at much higher numbers than previously. The packaging costs alone are astronomical for small operators. Add to this the cumulative escalation of the excise tax on beer, wine and spirits, and the economic recovery of Canadian restaurants begins to feel like a losing battle.
All of these costs, combined with a more depressing economic reality than was assumed back in the summer months, have meant that the proposed formula for the CEWS program won’t work for us going forward. What we are proposing instead — and we are happy to share our formula and related documents with this committee — is a model that will help sustain as many small business owners across the country as possible. When the Canada Emergency Wage Subsidy was first introduced, it provided struggling businesses with a 75% wage subsidy. That amount has declined significantly at a time when restaurants are still struggling, in many cases more than ever.
Restaurants Canada is proposing that the wage subsidy equal 1.6 times the decline [Technical difficulties] in sales up to a maximum of 75%. CEWS is fundamental to our industry. I know it sounds drastic to double it, but that’s because the assumptions made in June have been cut in half. While this model would also help offset the losses incurred since the start of this crisis, it doesn’t take into account the additional operating expenses I highlighted earlier that restaurants have incurred since 2020, such as third-party delivery, staff training, PPE, et cetera. What we are proposing will help ensure our industry can survive. CEWS is fundamental to the existence of the restaurant and food service sector.
We make up a critical, load-bearing pillar of Canada’s culture and economy. We are essential to a resilient and inclusive COVID-19 recovery, which is why we need a formula that will help sustain as many small business owners across the country as possible.
I thank the committee for its time and consideration. I am happy to answer any questions you might have.
Am Lidder, Senior Vice-President, Taxation Services, MNP LLP: Thank you, honourable members of the Senate. Just over 240 days ago, our lives changed forever as Canadians from coast to coast to coast have experienced a level of stress and uncertainty that has been unknown in our country for generations. We thank the Government of Canada and all governments across the country for their tireless work to keep Canadians safe and healthy throughout the pandemic.
Our presentation today is focused on ensuring that the changes to Bill C-9 deliver simpler, more accessible programs to help businesses get through the pandemic. This is important for immediate emergency relief and the long-term health of our economy. As the largest accounting, consulting and tax advisory firm headquartered in Canada, MNP has had a unique vantage point through which we have experienced this pandemic and the related economic fallout. As a trusted adviser to over 180,000 clients, we have stood alongside them as they faced the challenges of COVID-19. With over 80 offices across Canada, we have been deeply engaged in the communities we call home and know first-hand the complexities of operating a business in a world with more questions than answers.
Broadly, the legislative changes put forward in Bill C-9 are to be commended, as they provide businesses with much-needed emergency financial support in a time of sustained crisis. At the same time, these amendments demonstrate how complex our tax system and government programs are. Easing the administrative and financial burden put on businesses to access and comply with the programs may allow more businesses to access support.
We are tabling with the committee some specific technical amendments to Bill C-9 that we feel could improve the legislation, and ultimately the outcomes for the small- and medium-sized businesses that represent an integral part of our Canadian economy, the Canadians employed by these businesses and the communities that they support. Simplicity and accessibility are key to delivering successful emergency relief programs. Our hope is that through the Bill C-9 process, and any future deliberations on support measures, businesses are not unduly burdened by excess administration. We believe that making the Canada Emergency Rent Subsidy a tenant program is the right focus, and we believe that this will improve accessibility for those who need it.
To address specific concerns related to the Canada Emergency Rent Subsidy, there are a number of businesses that will be excluded from the program by virtue of how the legislation is drafted. I’ll just share a few examples.
Businesses that change the terms of their lease, for whatever reason, would be excluded. Businesses that are moving into different premises could also impede the tenant’s ability to access the subsidy. There is also some uncertainty for those businesses that own their own building but are receiving income through leasing excess space like, for example, a local bookstore that shares space with a coffee shop. If the bookstore’s revenue declines to below the rental income due to the pandemic, would that bookstore still qualify? Last, the eligibility criteria require that cash-strapped tenants find the cash to pay the rent in order to access the program.
Regarding CEWS, the program is working and the extension of the program is welcomed by Canadians. This is a lifeline for Canadian businesses. Bill C-9 contains amendments related to asset sales that could have a negative impact on succession planning of small and medium-sized businesses. Given the significance of the CEWS program, vital business decisions may be delayed.
Take for example a family-owned flower shop with two locations. It would be unable to transition one of the locations to their daughter. She would be disqualified from CEWS, whereas if the family had opted instead to sell the location to a competitor, the new owner would qualify. This leads to the long-term sustainability of the business being compromised. While program tweaks and changes compound, it is critical that policy-makers are mindful that the CEWS program is administratively challenging for businesses. We caution that any further changes do not add further complexity.
Ultimately, we believe that the core objectives of any recovery measures ought to result in a more robust and competitive economy so that all Canadians and Canadian businesses can prosper in our evolving economic reality. An ideal recovery is one where our country is well positioned to respond to any future challenges. Canadians and the businesses with which they work or invest are continuing to face a crisis of confidence. The need for the protections and stability afforded to them by amended programs like CEWS and CERS are not to be understated.
The Chair: Ms. Lidder, thank you very much. Well done; great presentations. Thank you for your statements and your comments. We will now proceed to questions. I would like to inform you and all senators that, as in the spring, there will be a pre-established list of questioners and there will be a rotation between each panel. Honourable senators, for this panel you will have a maximum of five minutes each; therefore, please ask your questions directly to the witnesses and please respond concisely and succinctly. The clerk will make a hand signal to show that the time is over and I will then proceed to the next senator.
Senator Marshall: Thank you to our witnesses for being here today.
I was very disappointed when I read the bill because there was no information on the programs after December 19. I would like your comments on what difficulty this poses for your clients or your members. Since December 19 is only five weeks away, when would you like to see the information?
Mr. Kelly: Senator, thank you for the question. It is a very good one. We are concerned because businesses do need the ability to plan and better understand what kind of subsidies are available to determine how far they may be able to go during the pandemic. What I like about the formula that has been established through both the CEWS changes and the new CERS program is that it puts the rails of two good programs in place that can be ratcheted up or down depending on the circumstances that the economy finds itself in.
I don’t think the government needs to present a plan all the way out to June at this stage. Doing it a few months ahead of the schedule is good, but your point is a very valid one: We are only five weeks away from the end of the subsidy period in late December. We do need to have more advanced warning than that. If we kept two or three months ahead, I think we would find that comfortable balance to allow government to plan and also allow businesses to know what the subsidies might look like as they go forward.
Senator Marshall: Thank you. Could I hear from the other witnesses?
David Lefebvre, Vice-President, Federal & Quebec Affairs, Restaurants Canada: Thank you for your question. Of course, we see the situation and the predictability of that from a small-business perspective and, in our case, from a food service and restaurants perspective. But also, in terms of the overall labour market, we like to see this predictability because we know that our workers and workers in our sector are looking forward to coming back to the business. The wage subsidy makes it possible to do that, so any kind of reassurance in terms of more medium– and long-term extensions of the program is good, because at the same time you have a lot of people in food service that are thinking that maybe they should try to work in another line of work or other businesses. It is critical for us that our workers have the confidence that they will be taken care of moving forward.
Ms. van den Berg: Just to build on the excellent points made by Dan and my colleague, David, one of the unique challenges facing restaurant owners is trying to keep pace with the evolving public health guidance and the realities of being given 24 or maybe 48 hours’ notice to shut down entirely. This has been extremely devastating for an industry that, even at the best of times, was making perhaps 3.8% pre-tax profit. This is not a rich industry, and being able to access and plan for the access of these support programs will be absolutely crucial to our survival, let alone the road to recovery.
I certainly take your point. I would like to echo that five weeks is not a lot of time. Looking ahead to 2021, we’re hopeful that the expert testimony heard here and the consideration of this committee will help to address some of the gaps that we’ve identified in the legislation as it currently stands.
Senator Forest: I want to thank the witnesses. Are you ready to answer a question in French? My question is primarily for Mr. Kelly from the Canadian Federation of Independent Business. The Canada Emergency Wage Subsidy and the Canada Emergency Rent Subsidy are quite complicated to administer. The programs have been renewed several times and the rules have changed from one period to the next. According to media reports, a number of entrepreneurs who acted in good faith are afraid that the Canada Revenue Agency will find them at fault.
Based on your expertise and the information from your members, I want to know what key recommendations we should provide to simplify these programs. The programs should be much more easily available to small businesses that may not always have the staff needed to manage very complicated programs. Mr. Kelly, if the other two speakers could build on your response, I would appreciate it.
Mr. Kelly: Thanks so much for the question, Senator Forest. You’re absolutely right: there are a million rules that businesses have to comply with and it is very confusing. I’m pleased to say that my organization has been working closely with the Canada Revenue Agency behind the scenes to ensure that the templates they put in place and the calculators are as easy as is possible. However, there are a few changes that would be helpful to these programs.
I say that while still urging you to pass the legislation as fast as humanly possible. But, in terms of the changes that are needed, one of the big ones for the rent subsidy is the fact that you are actually required to pre-pay your rent — at the moment, with the way the legislation is written — prior to applying for the rent subsidy. This creates a giant chicken-and-egg problem for small businesses. The reason they need the subsidy is that they don’t have the money to pay their rent, yet the requirements are that you have to pay it and then get it retroactively. We’re urging government and the government has been receptive to making a change to allow that to happen. I know that was introduced in Parliament just last week. It failed, but that was something that I know is under active consideration.
Second, on the rent subsidy, there are simplifications needed. One of the biggest ones that has prevented many firms from accessing this is the requirement that you have a business number in advance and that you have a track record in 2018 and 2019. Newer firms that perhaps have not needed a business number — say a school that is GST- or HST-exempt — are not able to apply for the program and they become unusable to them.
We have a four-page list of exemptions and problems with the legislation and are urging governments to consider making changes to these programs. They have been receptive to that but there’s a lot more needed before the programs are usable by all.
Ms. van den Berg: Just to build on the points raised, one of the difficult aspects of applying for the rent subsidy in its first iteration has been addressed: the barrier to entry has been lowered and we are appreciative of that. However, what we struggle with is what was already identified: having to pre-pay rent when you need to apply for a program because you need rent, especially in a restaurant when even, again, during the best of times they have perhaps between four and six weeks’ worth of liquidity on hand.
This apocalypse — and I don’t mean to be glib but that’s certainly what it feels like — has dragged on for six, seven, eight and nine months. We’re in the middle of a second wave and restaurants don’t have the cash on hand. They aren’t able to pay rent. That’s why they are paying for the rent subsidy.
Additionally, one of our long-standing concerns has been the unintended consequence of punishing those under the franchisee model, those multi-unit operators who happen to own a restaurant in the downtown core of a city. Rent there is just prohibitively more expensive by definition and the cap causes a lot of problems for those who operate as a franchisee.
The Chair: Thank you.
Kim Drever, Partner and Regional Tax Leader, MNP LLP: I would also add to that, Senator Forest. There is complexity in the program. We understand the complexity is there to create a fairness program so that one size does not fit all. But that being said, with respect to the payment of rent, we would agree that it will cause financial hardship for a lot of businesses in Canada to have to pay the rent to the landlord prior to having to claim for the subsidy.
We do understand there is a conundrum, however, because the rent must be paid. So government does have a need to ensure that any rent subsidies that are received in advance of payment of rent are actually paid to the landlords. They are also running a business and need to achieve their own cash flows with that.
The Chair: Thank you.
Ms. Drever: With respect to the CEWS program, some of the calculators that the CRA has issued have been very helpful. The program is very complex. We discourage any further changes; do not add more complexity.
I didn’t have the opportunity to respond to Senator Marshall. Going back to the timeline, we do think sooner rather than later is best to give people access to information so they can make decisions and have certainty. Uncertainty is one of the biggest problems that we are facing with business right now and we do have to be nimble to get the right values at the right numbers but we do want to make sure that businesses can make decisions and that involves finding out what the subsidy amounts are.
The Chair: Thank you, Ms. Drever.
Senator Klyne: These were very good presentations; they answered a lot of presumed questions, I’m sure. We know that the hospitality and tourism industry has been hit hard by the decline in long-haul, non-essential travel, plus the guidelines and restrictions established to protect both employees and customers.
The rent assistance and the wage subsidy are both intended to address that sector, but can you share with the committee what other sectors may be falling through the cracks simply because the nature of their business does not align with the structure or nature of the programs or subsidies?
As well, is there a seasonality factor that could be a concern here? Businesses might be in the trough or shoulder of their season and it would be typical that in that same trough, when you compare prior periods, they already were experiencing low sales, so it’s kind of a non-event because their season might be picked up in the ensuing months.
As far as other sectors that might be missed, perhaps CFIB could answer that, and if anybody else wants to jump in, I’d appreciate it. Thank you.
Mr. Kelly: Thank you, Senator Klyne. Yes, your instincts are absolutely right. We are soon going to send each senator a four-page list of the problems, the challenges and the gaps with all the major government support programs. That includes the wage subsidy, the new rent subsidy and the CEBA loan program.
A few of the groups you mentioned, Senator Klyne, are absolutely in that category of major gaps. Seasonal businesses find these programs incredibly difficult to access because their volumes are often not easily compared from one year to the next. And while the government did add a second comparator — they allow you to compare against January and February of this year, not just for the same month last year — that too provides some limitations for certain businesses that are not able to use it.
Another one, as I mentioned, is new businesses. Those that didn’t have a track record in 2018-19 can use almost none of the programs. Firms that don’t have a business number can’t use those programs.
The self-employed struggle to use most of the programs. They often don’t meet some of the requirements, and I urge the government to consider some support for people who are self-employed. They are slipping through the cracks of this program left, right and centre.
Music schools come to mind. We’ve seen lots of different academies, those that are GST-exempt, that the programs are not working for. I’m sympathetic to governments. When COVID first happened, these programs were not even contemplated, so they had to rush to get the rails of the programs up and running. I don’t want to make perfect the enemy of the good, however, if you fall into one of these categories where there is no support whatsoever and you see somebody else receiving government support to help them get through, it feels really unfair and potentially punishes and irreparably harms that business.
We need to keep correcting them as we go, and we’re working with government every single day to make that happen. I will say, Minister Freeland has been very receptive and had an open ear and has fixed many of the problems as she’s taken the reins in the Ministry of Finance.
Mr. Lefebvre: I think it’s a good question, especially as some provinces are moving into the red zone with new closures of restaurants and food services, and with the Christmas season coming, Christmas parties are going to be hard to do in a lot of provinces. Typically, late December and January are harder periods in our industry, so I would say there’s a concern there.
There is another concern that is more about geography than seasonality. There’s a special problematic subsector of the food service that is in the downtown core, whether it’s Vancouver, Calgary, Toronto, Montreal, Halifax or other places, where there’s collateral damage for other businesses when their workers remain home and work remotely.
There’s a specific problem there, especially in light of the rent support, because usually those rents will be higher in the downtown core than they would be in other parts of their respective provinces. That’s something that we’ve also worked with government on: some sort of program for the downtown cores. We’re still waiting for that. Just make sure that, in terms of the cap and those kinds of things in the rent and cost support, these items are considered. Thank you.
Ms. Lidder: We also provided a list of where we think there are gaps and where different businesses have fallen through the cracks. One I would mention is the top-up for the rent subsidy, and the public health restriction.
That’s where some or all of the activities are required to cease in order to be able to access the top-up. It excludes situations where the restrictions are due to limitations on the number of people that can come into the restaurant, or the reduction of hours. Both businesses would have a reduction in revenue, but one would be able to get the top-up and the other wouldn’t. Thank you.
Senator Richards: In part, my question was answered. I think you’re right. It’s mind-boggling to have to pay the rent before you get money to pay the rent.
Mr. Kelly, on the graph you stated that about 29% of businesses are operating close to optimum or are in pretty good shape. What businesses are they? Are they across the spectrum or within certain sectors?
Second, what are those businesses that are in really dire straits?
Mr. Kelly: Thank you, Senator Richards. My presentation does have data on which businesses are the most or least hardest hit by this. Those that tend to be faring a bit better include the construction sector, finance and insurance companies, professional services, and agriculture, with exceptions in all of those categories. And those that are faring the worst include hospitality, arts and recreation, personal and miscellaneous services, social services, and transportation. They tend to be the hardest hit sectors of the economy.
For retail it is a mixed bag. We are deeply worried about the new, almost universal lockdown in Manitoba. There’s also been a big shift from small to large because, of course, big-box stores and online retailers have seen huge benefits from some of the lockdown measures. The small guy is really getting hit hard.
Ms. van den Berg: Certainly, restaurants, and the food service industry writ large, have been some of the hardest hit by this pandemic. As I mentioned in my opening remarks, we lost more jobs in the first six weeks of the pandemic than the entire Canadian economy did in the 2008-09 recession. The hard truth for our industry is that this summer’s bustling patio season was just an illusion of success. Even with the full patios, where “full” is now at half capacity, most restaurants were barely breaking even. That was at best, because they were still operating well below normal capacity, but saddled with the same costs.
Our recent data forecast suggests that hospitality sales will not rebound to pre-pandemic levels until at least 2022. According to our estimates, more than 10,000 restaurants have already shut down as of August. That number is likely to be much higher today, and will be even higher tomorrow.
Senator Richards: Thank you for that.
Ms. Drever: Thank you for that question. We would agree with Dan Kelly that there are certain businesses that have been thriving, like the big-box stores and businesses like that, like grocery stores. But there are a lot that have very much been impacted. Even if we look at real estate, we see a lot of declines there. We see declines in the hospitality industry and in gyms. We are also noticing quite a few declines in places like medical and dental offices, and anything that’s been subject to any kind of public health restriction.
Retail is impacted, hospitality is impacted and hotels have been impacted in a big way. In our brief, we had said maybe we should implement something as part of the recovery where we actually create a stay-at-home and travel-local tax credit to get people spending money back within their own jurisdictions.
The Chair: Thank you.
Senator Smith: Listening to the witnesses, the following thoughts are on my mind. Many small businesses and owners are worried that relief programs will only delay the inevitability of bankruptcy if they’re not allowed to open due to public health orders. The same businesses have spent thousands retrofitting their businesses with plexiglass barriers, personal protective equipment, sanitizing products and other health-related measures. In your view, what steps can the federal government take in working with provincial and local governments to ensure businesses can remain open in a safe manner?
Ms. van den Berg: If I may, I will jump on that particular grenade first.
I think what’s been particularly frustrating for the restaurant industry, which I alluded to when we were being asked to shut down with relatively no notice, is that — I’ll be blunt — we’re not getting the data. We are investing over $750 million in 2020 alone — and that’s just since March — in a wide variety of PPE equipment and staff training. We’re paying double for storage costs because we’re moving furniture into storage while only serving half of our capacity. The list goes on.
Restaurants are the safe alternate to the private gatherings that are the source of this community spread. Where data has been made public regarding transmission rates — not case numbers and not hospital beds, but transmission rates as spreader events — it’s those private gatherings. When you can’t go to a restaurant to enjoy a meal in a safe location, you go to your friend’s house. You go to your neighbour’s house and hang out on a balcony in a condo. This is where you’re seeing the majority of the spread. What we’ve been asking for is that governments at the provincial level meet us at the table. We’ve made these enormous investments literally at a cost.
We just want to know: If you’re going to shut us down, how do we do better? If we’re somehow the source, share the data so we can figure out together what we need to do to improve. Because punishing us but then not telling us what we did wrong makes it a little bit difficult for anything to change in the future. We’re seeing that in the rise in case numbers in certain parts of Ontario where restaurants have been closed for 28 days — in some cases that’s been extended to mid-December — and case numbers are still going up.
The logical conclusion to that is that restaurants are not the source of the spread. So where does that leave us?
Mr. Kelly: Your instincts are right. Public policy-makers have a very challenging job ahead of them, but more and more of the business community is starting to feel like they are the scapegoat or essentially being shut down in order to send a message to the public that they need to take COVID seriously, not because the spread of COVID is coming from the businesses themselves that are the subject of the business closures. It is essentially them as a message to the public: “Hey, guys, wake up. You have to take this seriously.”
Businesses did an enormous amount during the first rounds of shutdowns, and I was impressed with what they did at their own peril to try to protect society, but that patience is beginning to wear fairly thin. The message from the Prime Minister to the premiers the other day was, “Don’t worry about closing down these businesses, because we’ve got you. The federal government will take care of the business losses right now so that you should feel unencumbered to shut them down.”
I know the Prime Minister wants to support small businesses. That’s not my point. The unfortunate reality is, as we’re discussing right now, these programs are not ready. The rent support program has not existed for months and months, and even when it did, it was a disaster.
We need to get these programs. I implore you, senators, to get this legislation passed and in place as quickly as humanly possible because businesses are failing every day without it.
Ms. Lidder: I’ll go back to the example that I shared about the public health restriction. You take a restaurant in Winnipeg where the jurisdiction has closed all in-restaurant dining. That restaurant would be able to access the top-up of the rental subsidy, whereas in Surrey, B.C., my hometown, we don’t have such a restriction in place at the moment, but the restaurants are only able to be open until a certain time and there are certain social distancing requirements. So both restaurants are impacted, yet the restaurant in Winnipeg is able to claim the top-up and the restaurant in Surrey is not, and yet they can have the same revenue decline.
Just keep that in mind when looking at the legislation and differentiating that.
Senator Dagenais: My question is for Mr. Kelly. Mr. Kelly, I’m not sure whether you had time to finish your presentation on the lack of assistance for new entrepreneurs. Are any people ready to start a business right now? Of course, we’re facing a very unique economic situation. How could this affect employment in the country? If there are no new players, the employment situation won’t improve.
Mr. Kelly: Your question has a lot of wisdom, Senator Dagenais. The fact is that businesses do fail all the time. In good economic times, small businesses and entrepreneurs fail. That usually is met with replacements by new businesses that come and take the place and fill the location or hire more people in the absence of the business that has failed.
We are not seeing that. We are seeing a greater number of business failures. It hasn’t been recorded. We’re only at the tip of the iceberg because actual bankruptcies have also been slowed by COVID-19. In my view, there are hundreds of thousands of zombie businesses right now, businesses that are essentially dead but they haven’t finalized the closure process altogether. They have a paper sign saying, “Temporarily closed.” We are going to see those businesses now formally fail and more boarded-up signs. Our research shows that one in seven small businesses will fail before the end of the pandemic.
Business start-ups are slowed. What worries me the most, though, is the businesses that started in 2020. I have a list of hundreds of businesses that have reached out to tell me that because there are requirements to show your tax returns from 2018 and 2019, businesses that started in 2020 are not eligible for the wage subsidy, the rent subsidy and the CEBA loan program. They have to have a business number before this started. That has been corrected to a degree in the new rent subsidy proposal, but I would urge the government — and you, senators — to look for ways to allow new businesses that have started and have shown investments that they’ve made to access the program, and even for those that are now starting a business to have access some of this support as well.
Senator Dagenais: My next question is for Ms. van den Berg. Restaurants include chains and banner groups owned by large companies that are listed on the stock exchange. However, there are also small local restaurants. Is the situation for the large chains different from the situation for local restaurant owners? Do you think that the current government response is too late for a number of restaurants?
Ms. van den Berg: That’s an excellent question. What’s important here is that while the brands may be large, like the unnamed ones I won’t mention here, they are fundamentally run at the local level by small business owners. It’s that franchisee model. At the end of the day, at the heart of the communities, it’s small business owners who are opening your favourite diner, your favourite local watering hole, your favourite sit-down restaurant. For us, the biggest challenge has been the discrepancy between those with indoor dining and the quick-service model where you can go in and leave. To be clear, those have also been devastated by the pandemic, but because of their business model, they’ve been able to pivot much more quickly toward delivery and takeout models. Again, then you have the third-party delivery platforms that are charging several arms and at least a leg for that privilege.
The big problem for us has been those rolling restrictions, based on no publicly shared data, to shut down dining rooms. It’s November, we live in Canada and winter is coming. No one is going to want to sit on a patio in -10 or -15 degree weather for more than 30 seconds. Those restaurants are going to be absolutely devastated in the coming months, not to mention the fact that winter generally is a slower period for our industry. Once the Christmas parties wrap up, no one really goes out again until March. This is the time when restaurants traditionally hunker down and save. Now they’re hemorrhaging from both sides, and the subsidies that have been promised feel dangerously close to too little, too late for many.
Senator Galvez: After hearing all of you, I somehow feel that we have heard this before in the previous bills. I have three questions: one for Mr. Kelly, one for Ms. van den Berg, and the last one for Ms. Lidder.
At this point, what I am thinking is that maybe we can add an observation to the bill to express our worry and concerns. Concerning what Mr. Kelly told us, there are very important gaps in specific sectors of new businesses, seasonal businesses, professional services and independent professionals. Could we put an observation as to how the government should include these people in the bill?
What I’m hearing is that the government doesn’t have enough confidence in some sectors, such as restaurants, for example. We don’t trust that these types of businesses can be at the level of the sanitary requirements and exigence so people can feel safe being there.
This brings me to the question of tax fairness. She says maybe we can give tax incentives and tax exceptions so the business can do a retrofit, for example, to increase the capacity to do ventilation or capacity of change in the layout of the business so that the people can be safely practising their yoga or gymnastics or music classes.
At this point, you need to see us as people who can convey your message to the government — maybe not as an amendment, but at least as an observation.
Ms. van den Berg: Thank you, Senator Galvez. I certainly appreciate that.
Just a point of clarification: I certainly don’t want to give the impression that we don’t think governments have confidence in the ability of restaurants to keep the public safe. In fact, it’s quite the opposite. We have invested $750 million exactly in that. We have additional staff on hand who are entirely responsible for sanitizing everything that is ever touched in the establishment. There has been everything from masks to face shields and new stations. It is the safe alternative to any other private gathering or public gathering in a park because we take safety so seriously, full stop. We have had to pivot from being food safety experts to food safety and sanitation experts very quickly.
What I would like to reassure this committee of is that restaurants are a safe place to go and celebrate with your friends and family because we have been making those investments and we have been training our staff. We have been keeping pace with the evolving public health guidelines to make sure that Canadians and our staff are safe and healthy and can contribute to the economy going forward.
Mr. Kelly: Senator, I really like the spirit of what you’re suggesting, which is to have you senators highlight some of the gaps in the legislation while speeding this through as quickly as possible.
Ideally, in normal times, I would be urging you to make sure there are proper amendments, and I would give you a lengthy list of those amendments. My plea to you today is we need to get the legislation passed and in place. With the additional lockdowns in Manitoba, Quebec, Ontario and British Columbia now, we need to ensure that for those businesses that are shut down a second time, they are not going to make it unless they have rent support delivered quickly. Even with the optimistic view of the passage of this bill, we are looking likely at December at the earliest before any money gets into the hands of business owners to pay their October rent. We needed to have this legislation there yesterday.
I will add one quick piece of advice on the wage subsidy. The government has said there is now a 25% top-up of the rent subsidy for businesses shut down a second time. I think that should be contemplated for the wage subsidy as well. Right now, the wage subsidy maxes out at 65% if you have a 70% reduction in your revenues. In the spring, you could have a 30% reduction in your revenues and you would get 75% as a wage subsidy.
For those businesses shut down a second time, I would urge senators to recommend to the government that they add a 25% top-up to the wage subsidy for those businesses. That would raise the level of the wage subsidy to 90%.
The Chair: Ms. Drever or Ms. Lidder, any comments on that question?
Ms. Lidder: In the spirit of different ideas on how to jump-start things, we have attached our pre-budget consultation along with this. In it, we talk about a commercial retrofit refundable tax credit that would just help create safer workplaces for employees. You have greater well-being for the employees, productivity and confidence.
We also talk about a supercharged home renovation tax credit. We realize that during the pandemic a lot of us have had our parents living with us just for health reasons, so we would like to try to support those types of measures.
The Chair: Thank you.
Senator M. Deacon: Thank you all for being here this morning. We know this is time-sensitive, but we appreciate being able to dig into a lot of important issues.
I’m going to start with two questions. In the first question, of course, I’m going to focus a little bit on Mr. Kelly, if you don’t mind. This is around independent businesses. I have listened to what you said in different ways a couple of times this morning. I want to be really clear on something, and it’s the qualifying period for the Canada Emergency Wage Subsidy.
I read in the briefing notes that you provided — thank you for that — that businesses that started up in January and February of this year were unable to qualify for the emergency benefits based on the structure of the average revenue decline test. It’s my understanding that Bill C-9 at this moment changes some of these qualification tests, including replacing the three-month average revenue decline test with a year-over-year test that compares revenues on a monthly basis to revenues from the 12 months prior or to those of the average revenue earned in the months of January and February 2020.
Do this and other changes in Bill C-9 address your concerns in terms of whether businesses that began in January or February of this year can now qualify for these emergency funds?
Mr. Kelly: Thank you, Senator Deacon. I don’t think it does. There are two things that are in the bill. One is the period that you have to compare your revenues against and the other is the top-up. The change that they have made to the top-up allowed you to look at, for the wage subsidy, the three-month rolling average — the average of the past three months — to see if you would get extra money for the wage subsidy and top it up to the maximum of 65%, or you can compare against the one month immediately prior. You had those two options available to you.
For the subsidy itself, you can compare against the same month last year to determine your revenue loss or against January and February of 2020. What we’re finding, though, is that there were businesses that started up in June and were making investments. Franchise restaurants opened and put $470,000 worth of investments forward to get their restaurant up and running. They opened their doors in June, shut down again now and are completely ineligible to use the subsidy. That is not fixed in this legislation. Those are some of the examples that I am raising.
It does address, to your point, some of the problems, but there are requirements to present your tax returns from 2018 or 2019 for some of the subsidy programs, and many of them are causing problems. I will say the new rent subsidy does fix a few of the problems.
Senator M. Deacon: Okay. Thank you. I’ll keep thinking about that. I appreciate that.
I’m going to move over to Restaurants Canada, and I want to ask you specifically about this lockdown measure that will allow businesses to apply for extra emergency funds if they have been affected by a public health lockdown, whether they had to shut down entirely or, as the legislation says, were “significantly restricted.” It’s the second term that I’m thinking about, wherein a business can apply for supplementary funds if it ceases some or all of its activities and if it’s reasonable to conclude that the ceased activities were responsible for at least 25% of the revenues of the entity of that location and business.
I think the provision has promise. I like it. But I worry a little bit about vagueness. Will this lead to confusion and weaken its application? Is your understanding that a restaurant could apply for this if, for instance, they had live entertainment three or four nights a week pre-pandemic that they have had to stop? Even a games night that draws folks comes to mind; any extras that brought people to the bar or restaurant that they had to stop. I’m interested in your take on that part of this.
Ms. van den Berg: Thank you, senator. That’s a great question. To your point, I absolutely think there is a tremendous opportunity for confusion. Again, I’ll highlight that the government had the best of intentions with this. We haven’t lived through this kind of pandemic; there isn’t really a playbook for this.
On the other hand, we have had six, seven and eight months to plan for this second wave, so we were hoping for a bit more specificity and clarity around what does and doesn’t work. And if it doesn’t work, why not? I think, in our case, pointing exactly to the examples that you have laid out, it’s unclear whether having live entertainment that was forced to shut down would allow you to qualify for the extra exemption.
On its surface, again, it’s great intentions. I think it allows the doors to be opened for a lot more of the heavily hurt businesses than it did previously. But again, the devil is in the details. For us, we still have a lot of outstanding questions around who qualifies, what the barriers to entry are and how we can help support the members who don’t necessarily have the time to wait for the CRA, for example, to get back to them for clarification. I’m happy to let David answer if he has anything to add.
Ms. Drever: Senator, I just wanted to add a little bit to that. I know that it says certain activities are required to cease, but that’s where I think we have some problems with the drafting of this “public health order” definition. Depending on your jurisdiction, you might not be required to cease, but you may have the same consequence. That’s because, as a result of the public health order, you weren’t absolutely required to shut down your in-room dining. You could still access in-room dining, but you had such restrictions on capacity, and it specifically indicates that, for purposes of this, restrictions on time or restrictions on capacity would not be considered ceasing. That’s where we think there are some problems with that piece of the legislation.
The Chair: Thank you for that.
Senator Boehm: I would like to thank our witnesses for their expertise and their willingness to answer all the questions. Usually, at this point, when the turn comes to me, I’m in awe of my fellow senators, who, of course, have asked all the most penetrating and interesting questions, but I will try to pick up on a few threads.
Mr. Kelly, thank you very much for the statistics you sent. They are very instructive. For me, they really underscore the crisis in our hospitality sector.
My questions are sort of on those lines. It’s all fine and good to have a dialogue with the CRA on what the template looks like, but are you in the sector having broader dialogues at the political level with the government in terms of potential downstream impact?
For instance, as we get into winter, there is a shortage of propane heaters; we hear about that. Also, propane isn’t exactly that cheap, so that’s an extra cost restaurants would have in terms of trying to keep patios going.
Are there incentives that could be put out there in terms of a public campaign? If you look at what Prime Minister Boris Johnson did in the U.K. — providing a subsidy for clients going to restaurants — I don’t know if that was tokenism or if it actually worked, but it raised the spirits of a lot of people — again, depending upon the public health advice that is forthcoming.
I’m wondering whether you’ve had a look, as an association, at other jurisdictions and how this is being handled in terms of getting some fresh ideas out there, under the assumption the pandemic could be protracted and that we could even be looking at a sustained second or maybe even a third wave as we come into the spring.
Mr. Kelly: Thank you, senator. There is a lot to unpack in that.
We absolutely are looking at what is happening in other jurisdictions as to what has worked and what has not. The message from entrepreneurs in hospitality — really, in any sector — is that the main thing they want longer term is to replace subsidies with sales. The only way that we’re going to get through that is to ensure that businesses can safely reopen and serve the public once again. Those are the short-, medium- and long-term goals of virtually every business in the country.
To help them along the way, given the effect of the public health measures that are currently in place, we absolutely need to help guide businesses through the COVID emergency and support them.
My organization rejects business subsidies. We feel like they are horrible ideas, because they end up creating all sorts of unintended consequences. Small firms tend to never benefit from them in any great way. We are supporting and advocating for business subsidies in this rare instance because business owners are asked to close, shut down or serve fewer customers in order to protect society. It’s deeply unfair to ask them to eat the whole cost of that.
Reducing their costs and taking away some of their expenses are two main things that governments need to do, other than finding ways to allow them to safely reopen. In part, that means, in addition to the subsidy measures contemplated in this bill, doing things like putting CPP expansion on hold for one year. Right now, on January 1, Canada Pension Plan premiums are to rise for every single employer and taken off every single employee’s paycheque going forward. Cancelling tax hikes and getting these subsidy programs working to insulate the business community would be the best measures.
Stimulative measures to try to encourage more consumer spending will probably not be as effective as they are in normal times, because the public can’t visit the businesses that are most severely affected, like those in the restaurant sector. They can’t go.
Ms. van den Berg: Thank you so much for the question. We have absolutely been keeping a close eye on the U.K. model. For us, we have been attempting a Canadianized version of it.
But for our operating environment, quite literally, it comes down to indoor dining. What they did in the U.K. — Eat Out to Help Out — is predicated on nice weather and not being the middle of February in Canada.
Our struggle continues to be that when data is made publicly available, the transmission data shows that restaurants make up less than 0.1% of all cases. With that kind of information available, we are safe to reopen, full stop. And we are one of the few businesses that can do it safely and responsibly, because it’s what we have been trained to do. Because we’re those job creators, we can make every dollar from the wage subsidy go that much further than it would through CERB or EI, for example.
To be clear, these subsidy programs will help us survive. The road to recovery is absolutely about getting Canadian butts back in the seats of Canadian restaurants.
The Chair: Thank you.
Senator Duncan: At the outset, I would like to identify for my colleagues and for our panellists that I am sponsoring Bill C-9 in the Senate. I have heard very clearly the need to pass this legislation while providing substantive sober second thought, including, perhaps, as some of the senators have suggested, observations on this particular bill.
If you could have just one observation — just attach one — what is the most important?
Mr. Kelly: The most important would be to get the rent subsidy right insofar as you do not have to prepay your rent prior to use of the subsidy. If I could pick one change, that would be it.
Ms. van den Berg: If Dan is going to cover the rent, I’m happy to cover the wage side. Restaurants Canada would strongly recommend that the proposed wage subsidy equal 1.6 times the decline in sales, up to that maximum of 75%.
Ms. Drever: If we were to pick just one thing with respect to Bill C-9, it would be with respect to the rent subsidy. The rent subsidy currently has restrictions that if you have renegotiated your lease in a manner that is substantially different, or it’s not substantially the same as it was prior to October 9, then you would no longer be eligible. So if you had to make the difficult decision of reducing your footprint, or you had to move locations, you are no longer eligible for the rent subsidy. We think those businesses still greatly need the rent subsidy.
The Chair: Senator Duncan, you still have a minute.
Senator Duncan: I will pass, thank you.
Senator Loffreda: I’m always happy to conclude. Thank you to our panellists for being here. My question is for our guests from MNP LLP. I will also invite Mr. Kelly to chime in if he wishes and if time permits.
My question revolves around investment tax credits, and scientific research and experimental development investment tax credits, and the correlation between these credits and the wage and rent subsidies in Bill C-9. I have read that the wage and rent subsidies might have unintended consequences for certain businesses, like R&D firms that are eligible for other tax credits like the scientific research and experimental development investment tax credit. To avoid double-dipping, I understand the eligible expense base is reduced for these various federal tax credits by the wage and rent subsidies received, which is totally fine.
I know similar investment tax credits exist in the film industry or for scientific industries, health industries and high-tech companies. For example, I hear from the industry and the Canadian tech and R&D companies of their disadvantage to non-tech companies if they receive the wage subsidy and/or rent subsidy.
My question is this: Could you address that issue in general terms, and might there be a financial shortfall or disadvantage for certain sectors, or these industries, by claiming the wage or rent subsidies? We do want to promote R&D, especially in these times, and our research and development industries do need additional support, especially now, the health industry in particular.
Ms. Lidder: I can take this one. We have been looking into that, senator. I think there is one position where you take any employees that you have, where you have claimed the CEWS or the rent subsidy, that all of those expenses would have to be excluded out of the SR&ED claim.
Another position where I think it is more reasonable is to say how much of that time these employees spent around the different SR&ED work versus other work, and try to carve out a piece so that different industries are on an even footing. So getting some certainty around that would be very helpful.
Mr. Kelly: The details of that question are very good ones. I have not investigated, but I will.
Senator Loffreda: Yes. And Kim, I would like to hear your perspective on it.
Ms. Drever: There is one other thing that we would like to see with respect to SR&ED and certain other tax credits —
Senator Loffreda: Just to clarify, as a CPA I know what a SR&ED is but not everybody does, and we don’t want to lose all the senators. I try to keep it basic and simple.
Ms. Drever: The SR&ED is the Scientific Research and Experimental Development Tax Incentive that is available where businesses have created new technology or advanced innovation. It’s really for scientific innovation and scientific research. So these businesses can get a credit that for certain small businesses is a refundable credit and for others it reduces their income taxes.
One of the things that we are suggesting is that, for all businesses for this period of time, it should become a refundable credit because the SR&ED credit — it’s in our briefing notes with respect to the pre-budget, but we think it would be very helpful if all businesses that do SR&ED could have it refundable at this point in time. I would echo my colleague Am’s comment that we do think the tax credits with respect to CEWS should be consistent across all industries.
Senator Loffreda: Thank you for that answer. Like I said, it is very important, and if we can adjust it — maybe not now. I do support Bill C-9, but maybe going forward in the budget we could make an adjustment there and communicate it to our Minister of Finance.
The Chair: You still have time for another question, Senator Loffreda.
Senator Loffreda: Thank you for the presentations, and thank you for all the questions that all the senators have asked. I think they are all great questions.
One concern I do have is that — and going to what Senator Smith has often said, I look at these subsidies as an investment. How many of these businesses will actually survive? I think it would be a sin if we put all these subsidies and money out there knowing in advance that all it is doing is prolonging their bankruptcy. Maybe Mr. Kelly or anybody else on the panel could chime in. I would like to hear as a conclusion that this investment is well worthwhile and that we’re not throwing it after businesses that will go bankrupt anyway in a few months.
Mr. Kelly: Sure — a note of optimism and a reality check. This will help. These subsidies will help and have helped stave off bankruptcy, decline, layoffs or irreparable harm to hundreds of thousands of businesses already, and I believe, if properly constituted, will do the same for many more.
But many businesses who are helped will still go bankrupt. Many firms that are receiving this aid will still be irreparably harmed. What we are trying to do is limit the amount of economic damage to the independent business community to ensure that Canadians have jobs to go back to. I can assure you that, when we are investigating this later and there is an Auditor General’s ruling on this, they will find that some of the subsidy dollars went to firms that essentially wound down and went bankrupt through this process. And yet, I still urge you to do that, to pass it. The consequence of not doing it is far greater than the waste of tax dollars on businesses that may still end up bankrupt.
Senator Loffreda: What percentage? Ten?
Mr. Kelly: It would be almost impossible for me to calculate right now. We’ve heard from 14% of businesses that they are already planning their winding down at this moment. That’s one in seven small firms. We’ve put out a range between 55,000 and 225,000 business bankruptcies. In our view, the difference is what happens during wave two as well as how well the programs deliver. So we could save probably close to 200,000 businesses if we ensure that these subsidy programs are working well.
Senator Loffreda: Thank you.
The Chair: Thank you, Mr. Kelly.
Ms. van den Berg: Just to sort of square the circle on the previous question, our members have told us that over 82% found the wage subsidy extremely helpful and, in fact, integral to their survival during the first wave of this pandemic. With the amendments being proposed about the wages and rents, we will be able to help many restaurants across the country survive.
To date, we have seen 10% of the 98,000 restaurants from coast to coast to coast close. I couldn’t tell you what the future holds, but I can tell you that with the winter months coming, it’s going to get worse. I believe that the wage subsidy model that we have proposed will help make sure that the restaurants which are most able to survive will. It’s that 1.6% and the top-up at 75 rather than 65; all of these minute changes and tweaks are really, at the end of the day, absolutely critical to the bottom line of so many small business owners across the country.
For the restaurant industry, again, just to reiterate, we are a critical building block of the economy and local communities in which we operate. Our sector alone is a reflection of Canada’s diversity; 58% of our industry is made up of women, and 31% of the food service workforce belongs to a visible minority. We support a wide variety of supply chain businesses, so when dollars go into a restaurant, they have indirect impacts on over 290,000 jobs through different supply and manufacturing companies. We spend more than $30 billion per year on food and beverages, and we play a critical role for Canadian farmers and the agri-food sector.
Again, I would encourage you to consider restaurants to be the backbone of local communities and safe places to go celebrate.
The Chair: Thank you.
Ms. Drever: Thank you. I would like to echo that the subsidies have been integral to the success of businesses or for businesses to continue to deal with two of the biggest line items on their income statement — wages and rent — so they have been very well received.
However, to ensure success in the long run, we have to create certainty and predictability and ensure that businesses continue to know what is on the other side of the pandemic — even things like certainty in tax policy, keeping a lot of what we currently have and that we’re working on or that we have as tenets of our system. Keeping that consistent will bring back a lot of confidence. There has been a lot of chatter out there about different potential options. I think we have to make sure that people have certainty on what’s in the future.
The Chair: Thank you very much to our witnesses. I would like to share with you that the Finance Committee’s motto is certainly about transparency, accountability, predictability and reliability. Thank you very much for sharing your information and expertise. It has been very informative.
Welcome, everyone, to the second portion of this meeting of the Standing Senate Committee on National Finance. We are continuing our study of the subject matter of Bill C-9.
For our second panel, we welcome the Honourable Chrystia Freeland, Deputy Prime Minister of Canada and Minister of Finance. She’s joined by Department of Finance officials Andrew Marsland, Senior Assistant Deputy Minister, Tax Policy Branch; and Maude Lavoie, Director General, Business Income Tax Division. Welcome everyone and thank you for being here.
And to Minister Freeland, thank you for your availability to come before the National Finance Committee of the Senate of Canada.
Madam Minister, I would invite to you now make your opening remarks, followed by a period of questions from the senators. You have the floor.
The Honourable Chrystia Freeland, P.C., M.P., Minister of Finance, Department of Finance Canada: Thank you, Chair, and good afternoon, honourable senators. Thank you very much for the opportunity to speak to you about Bill C-9.
Thank you very much for agreeing to have this meeting this week and for working with such alacrity on this important legislation. I appreciate it very much. I am really grateful.
As you already heard, I am accompanied here today — virtually, of course — by Andrew Marsland, Senior Assistant Deputy Minister of Tax Policy, and by Maude Lavoie, DG of the Business Income Tax Division.
In responding to the COVID-19 pandemic, our government has kept two objectives foremost in our minds. The first is to protect the lives and health of Canadians. The second is to preserve and protect the jobs and livelihoods of Canadians. Throughout, we have been guided by the knowledge that the best economic policy is a strong health response. That is the purpose of this bill and the reason for the urgency.
The second wave of the coronavirus is here. Winter is coming, and December rent will soon be due, so all of us need to act quickly. We know that stopping the spread of the coronavirus has an immediate economic cost to people, to businesses, to charities and non-profits. That is why the federal government has acted and will continue to act energetically to provide financial support to people and businesses, so that all Canadians can do the right thing when it comes to public health.
From an economic standpoint, Canada is well positioned to do so. At the beginning of the year, our fiscal position was the best in the G7. Today, even after taking unprecedented measures over the past few months, we still have the strongest fiscal position in the G7.
Bill C-9 proposes to help employers that need support, with new targeted measures to ensure that they can weather the crisis and continue paying their workers.
Let me tell you a little bit about the measures we are proposing. First of all, Bill C-9 introduces the Canada Emergency Rent Subsidy. This provides rent and mortgage support through to June 2021 for businesses and other qualifying organizations that have lost revenue because of COVID-19. It would cover up to 65% of rent or mortgage interest payments for the hardest-hit businesses and, crucially, this support would be payable directly to tenants.
Second, Bill C-9 proposes a new lockdown support program of 25%, over and above the 65% rent subsidy, for entities whose operations are significantly restricted by a public health order. This means that some qualifying organizations could have up to 90% of their rent covered.
As I say that, honourable senators, I am thinking particularly of businesses in Manitoba; in the city I represent, Toronto; and in a large part of Quebec today.
Third, Bill C-9 extends the Canada Emergency Wage Subsidy to June 2021, as promised in the Speech from the Throne.
I know that senators are concerned about the amendment that the government put forward to address the eligibility of rent payable under the new rent subsidy program.
We have an interim solution to ensure that rent payable is an eligible expense from day one. After Bill C-9 is passed — if indeed it is passed, as I hope it will be — we will publish and swiftly introduce legislation to formalize rent payable as an eligible expense.
Given that this is our clear and publicly stated intention, we are confident that the Canada Revenue Agency will consider rent payable as an eligible expense from the moment the new rent program is launched. There will be no delay.
We have already indicated to the CRA that this is our government’s intent and we will formally communicate this to the CRA if and when Bill C-9 becomes law.
We know that the crisis will leave its mark. However, we must do everything in our power to limit job losses and business closures. These measures show both our compassion and our pragmatism.
Senators, we collectively have it within our power to help Canadians and Canadian businesses get through to the other side of this global pandemic.
This is what we need to do, and we need to do it without delay.
I hope we can act now, and I hope that all of the honourable senators who are here will support Bill C-9. I’m happy to answer your questions.
The Chair: Thank you, Minister Freeland, for your comments and statement.
We will now proceed to questions from the senators. I would like to inform senators that we will have a maximum of four minutes per senator. Therefore, I ask you for your total cooperation to ask your questions directly and succinctly. To the witnesses, please respond concisely. The clerk will make a hand signal to the chair at the time the four minutes are up. Then I will need to proceed to the next senator.
Senator Marshall: Welcome, minister, and Mr. Marsland and Ms. Lavoie.
When I read Bill C-9, the thing that stood out to me was that there’s no requirement to publicly provide any financial or program information on the two programs that are the subject of Bill C-9.
I know that the government does release a dashboard on the wage subsidy, but that’s voluntary and could be stopped any time. I did find some information on the previous rent subsidy program in a news release, but the program information and financial information are very much lacking.
You did provide the biweekly COVID-19 report until August. We don’t get that anymore. Bill C-9 is being put to us before we get the fiscal update. It’s a big issue. The lack of financial and program information is one of the biggest issues I have.
Why is there no reporting requirement in the bill for these two programs? Why is government refusing to provide program and financial information to parliamentarians?
Ms. Freeland: First of all, senator, thank you for that question and for your hard work and detailed study of the legislation. Let me offer you a little bit of financial information. Our program costings are as follows; I’m going to share some estimates from the Department of Finance.
The costings for the Canada Emergency Wage Subsidy at the rates that we are proposing until December 2020 in total would be $65.5 billion. As for the costing for the new program — and what I’ve given you is the cost of the program thus far — again, the estimate from the Department of Finance for the Canada Emergency Rent Subsidy and the lockdown support is $2.2 billion for the periods discussed until December 2020.
Then CECRA, which was an ancestor program of the rent subsidy, has reached around 139,000 businesses with assistance of over $2 billion.
Those numbers are to give you some costings in this space that we’re talking about. As you mentioned, senator, we committed in the Speech from the Throne to providing a fall fiscal update, and we will, of course, be doing that.
Senator Marshall: Thank you. Why can’t we get the financial information on a monthly basis? That’s the issue. We don’t get it on a routine, regular basis.
Ms. Freeland: Thank you for the question. I understand and appreciate the desire for financial information. That’s why I have given you some information now. We will be offering considerable detail in the fall fiscal update. I know that senators will be going over that carefully, and I’m glad that you will be.
Senator Marshall: The question still remains: Why doesn’t government just provide it on a monthly basis to senators and to parliamentarians? Right now, we have to go through various sources to try to construct and put the financial information together ourselves. We go to the Bank of Canada and we go to the Parliamentary Budget Officer, but the government should be providing this information on a monthly basis.
Ms. Freeland: I understand you, senator. That’s a very clear point that you’ve made.
We are seeking to provide financial information. We absolutely understand that that is something that senators and MPs have the right to and need to do their jobs, as do all Canadians.
I will point out that this is a very fast-moving, fast-changing situation, especially with the second wave now upon us, and the government has been putting in new programs at a pace that I would say is unprecedented in the history of the Government of Canada. But I accept the core point that it’s important for us to be accessible and available to senators and MPs.
Senator Forest: Thank you for joining us, Minister Freeland. In the interest of fairness, I’ll give my speaking time to my colleague Senator Loffreda.
Senator Loffreda: Minister Freeland, thank you for being with us, and thank you to Mr. Marsland and Ms. Lavoie for being here.
I do support Bill C-9, but we just had an interesting panel with the MNP tax experts. An important area, especially today, is scientific research and experimental development tax credits. That industry is extremely important, especially in the times we’re living in today.
My concern was some leaders in those industries have told me that the non-tech companies have an advantage over the tech companies when it comes to Bill C-9 because the wage subsidy and the rent subsidy get reduced or deducted from the tax credits and from the expenses that are eligible for the tax credits.
We don’t have ample time here to get into that discussion and, like I said, I appreciate Bill C-9 and I support it. It has helped many in the industry. However, I would like to make a footnote for the budget coming up. They will make a proper recommendation for that, so I want it to be on the record if you have anything you’d like to share with me with respect to that. Was there any discussion? If not, I do have another question.
Ms. Freeland: Thank you very much for making that really important point. As I said at the beginning, the extremely experienced officials from the Department of Finance are with us virtually, and let me ask them now, as I’m sure they have done already, to make a note of that very important footnote, as you put it, senator.
I do agree that one of the important challenges in designing policy for supporting the economy in the COVID period is how to be sure that the tech sector, start-ups, R&D and those companies so essential to our economy are not at a disadvantage because of the policies that we are putting together. That’s something we think about a lot.
What I would say, as I think you have already understood, is in the first instance our effort is to create broad-based programs that are as simple as possible that will support the lion’s share of individual Canadians and Canadian businesses, and that is what we are seeking to do with Bill C-9. However, I do want to be clear with you that I think you’ve raised an important point. It’s one we’re very mindful of and you’ve caused us to underscore and highlight that particularly challenging issue.
Senator Loffreda: Thank you very much. As I said, I do support the bill and thank you for all the great work. I do understand that we are building the tracks as the train is speeding along, so I do appreciate and support that.
There was a question with the amendment that was attempted in the House of Commons. Speaking of investment tax credits, I do understand at one point why the rent must be paid before you put the subsidy in motion. That’s the way the investment tax credit works. In investment tax credits, you have to pay your tax credit, you make your claim and the government refunds you the tax credit.
I do understand that concept and I don’t think it’s a foreign concept. We are living in a time where many don’t have the resources to do that but, as a banker, allow to me to say there are many different ways for Canadians to finance. Maybe landlords should finance. Maybe the banks should look into it and say there’s an investment coming in finance. I don’t see that as such a negative and I wanted to put that on the record.
And last but not least, in Canada, and for employees outside of Canada, I want you to share a sentence or two because there have been many in the industry saying —
The Chair: Senator Loffreda, can you please ask your question?
Senator Loffreda: — outside of Canada the wage subsidy doesn’t cover. What is your impression of that?
Ms. Freeland: To the first point, thank you very much for sharing that. With the legislation, we are always seeking to strike a balance between ensuring that the programs have real integrity and ensuring that businesses are getting the urgent support they need in an unprecedented global pandemic.
To your second question, senator, our objective, first, is to support Canadians and Canadian businesses — people working and living in Canada.
Senator Loffreda: Thank you.
Senator Klyne: Welcome to our panel. It’s especially good to see the minister here. Thank you for that.
I’ll talk about the seasonality of businesses. There are a number of businesses that, as we go into winter, are going into the shoulder season of the downturn of their business, hence, this is the cycle of reduced revenue until the spring start-up. I understand that the government has provided several different options for comparing month-to-month revenues in 2020 to the prior period as a means to identify a business’s eligibility. However, for the aforementioned seasonal businesses, while the prior period comparison may show a marginal decline, if any, it is quite likely they burned through cash reserves in March to June of this year and would have a truncated or shortened season complicated by a slow restart in July through October this year.
How is the government recognizing the COVID-19 impact upon a business that burned through its cash reserves in the first half of what would have otherwise been a productive season in March to June and then lost much of the other half of its productive season due to a slow restart going into July through October? Again, this is all due to the COVID-related best practices. Yet, in November to March, for many, the revenue comparison year over year does not represent a negative impact within the definition of eligibility.
Ms. Freeland: Thank you very much, senator, for the question.
You raise an important issue, specifically the particular impact of the crisis on seasonal businesses. We can describe them as seasonal. We could also be speaking about the tourism and hospitality sector. I do think, much as the answer to the question about R&D and tech businesses, there are some specific cases that we need to think about and be sure that the measures we have in place are providing support for those specific types of businesses.
In designing Bill C-9, we have first sought to create a simple, robust and broad-based program that would support the greatest number of Canadian businesses right away. I do very much agree with you that seasonality is something that we need to be thinking hard about. In thinking about what comparable period businesses could use to calculate what their level of decline is and therefore what level of support they’re eligible for, our objective has been to support the businesses that need the support rather than to seek to disqualify businesses. However, as I say, I do agree that seasonal businesses are a particular case.
I would also say, senator, that if there are specific businesses in your province that you’re concerned about, particularly, for example, in the tourism and hospitality sector, the RDAs have been given significant resources to partly provide a solution for some of those businesses that, because of specific ways that they operate, are not fully served by broad-based programs.
Let me just conclude by saying that once we get these measures passed, a business could get as much as 65% of wages covered, and if it is subject to specific lockdown provisions, 90% of rent or mortgage interest. That is really significant support and I think that is appropriate.
Senator Klyne: Thank you, minister.
Senator Richards: Thank you, minister, for taking the time to be with us today.
I agree with Senator Marshall. I wish there were updates on spending and that they would come quicker and be more relevant and more timely.
My question is about the hospitality sector and the banquet halls that have been forced to shut down all across the Maritimes and in Ontario. Event banquet halls that usually hold hundreds or thousands have been reduced to holding 50 or 60 people.
Is there any way to compensate for what they are going through, the rent and the overhead they are suffering through at the moment, with Bill C-9?
Ms. Freeland: Thank you very much, senator, for the question. This is where, again, it will depend on the specific details of the business and where it is specifically because of the interaction between this legislation and local public health orders. But one of the measures that we’re discussing today is the specific lockdown support. That support, which provides a 25% top-up on the rent subsidy for businesses subject to a specific lockdown order, could help the types of businesses you are talking about.
The idea behind it is we know that there are some businesses that, absolutely through no fault of their own but in order to protect public health, have been subject to particularly stringent restrictions. That’s why, for those businesses, we hope, with your support, to put in place this 25% top-up. That would mean that businesses subject to specific public health order lockdowns could get up to 90% of their rent covered. That’s significant support, especially if you add to it that they could get 65% of wages covered with the wage subsidy.
Senator Richards: Thank you very much.
Senator Smith: Thank you, minister, for being with us today. I have to go back to something Senator Marshall brought up earlier. I need you to walk us through your thought process. We all recognize that what the government has done to assist businesses is the right thing. That is not in question. The Prime Minister, of course, in his recent address to the Canadian Chamber of Commerce made it clear there is not going to be a fiscal anchor in the government fiscal update. Then in the same week, when you addressed the Toronto Global Forum, you said:
Our fiscally expansive approach to fighting the coronavirus cannot and will not be infinite. It is limited and temporary. A smart and careful government . . . will impose those limits upon itself . . .
Those are two different opinions. I recognize this is a fast-moving situation. I support that, but having said that, how will you move forward in terms of providing the type of information so that not only parliamentarians but Canadians as a whole will be able to really follow leadership and direction and the execution of what you’re trying to accomplish?
Ms. Freeland: Well, thank you very much, senator. You have managed in a short question to pack in a lot of different elements, so I’m going to try to address them.
Let me start by saying something very important, which is there is no difference of opinion on this matter or, actually, on any other matter I can think of right now between me and the Prime Minister. We are very much like-minded and working very closely together. He, of course, is the Prime Minister and therefore my boss. When it comes to our fiscal approach, thank you for quoting what I said in my speech. Those words were very intentional.
We believe that right now, with this unprecedented global pandemic, we as the Government of Canada, and I would even say as all Canadians, senators and MPs, we really need to provide unprecedented support for individual Canadians and for Canadian businesses. As the second wave of the virus rages, I feel confirmed in the approach our government has taken to provide that support. It’s so important because it allows public health authorities to do the right thing, and do what they need to do to fight the virus.
Also, a very important objective that I hope we all have in mind is to work hard to avoid unnecessary scarring of the economy, to avoid unnecessarily cutting into our country’s economic muscle, so that when we get a vaccine, we’re really in a position for the economy to come roaring back.
What I also said, and what I believe — and I know the Prime Minister shares this conviction — is we have to differentiate very clearly between this exceptional, one-off, temporary situation, where we’re doing extraordinary things that I think none of us could have imagined a year ago to fight the coronavirus, and ordinary times when a different approach is called for. And I think our government has demonstrated in the time that we have spent in government, that Canada has a very proud tradition of fiscal prudence and well-managed public finances. Our government has continued that tradition, and it is thanks to that tradition, actually, that we were in such good shape going into this crisis.
I see you nodding, senator, so I hope you agree with me. I think we all need to differentiate really clearly between the extraordinary circumstances we are now in and the extraordinary fiscal action we need to take, and between the situation we will be in once our country, our society and our health have recovered from the coronavirus.
The Chair: Thank you, minister.
Senator Dagenais: Minister Freeland, this morning we heard that the Canadian Federation of Independent Business suggested several ways for you to make the program more easily available and less restrictive, especially for start-ups. You’ll undoubtedly say that you’ve heard from the members of this organization, which is normal. The government’s rhetoric is to respond in this way.
However, for the sake of practicality and efficiency, if we were to propose amendments in our report, would you be prepared to debate them in the other place in order to improve the bill? Do you think that these are the last assistance programs that you’ll be presenting for this issue, or should we expect to see you again soon with more changes?
Ms. Freeland: Thank you, Senator Dagenais, for these two questions. With respect to the Canadian Federation of Independent Business, I want to assure you that my team and I have a very open dialogue with the organization. This helps us a great deal with the creation of our programs. Of course, we may not agree on everything. However, I really want to thank the organization for its openness during our discussions. This is very helpful to us. Regarding the amendments, the senators must make the decision. At the same time, I want to point out that our businesses across Canada need help now. The second wave is hitting very hard. As I said in my opening remarks, lockdown restrictions are being reintroduced in many cities and provinces throughout the country. In my view, we must do everything possible to help our economy and our businesses right now. When I speak with business people and with leaders of business organizations across Canada, they tell me that they need this assistance now.
Regarding your second question, you’re asking whether this is the end. I’ll respond as follows. This bill will give Canada the most comprehensive support in the world, especially as a result of the emergency subsidies that provide direct assistance to Canadians.
With the Canada Emergency Wage Subsidy, the Canada Emergency Commercial Rent Assistance and the additional subsidies granted as a result of the lockdown, we’ll have a comprehensive set of interacting measures that will remain in effect until summer or fall 2021. This is a good thing. This set of measures is also flexible. We’ll pay more if the crisis gets worse and we’ll pay less if we manage to flatten the curve.
Lastly, we all understand that the coronavirus is a new virus. We can’t predict exactly what will happen with the virus and the global economy in the future. I think that we all need to be aware of this.
The Chair: Thank you, Minister Freeland.
Senator M. Deacon: Thank you, minister, for being here today. This is so important.
My question concerns the lockdown support for locations significantly affected by the public health restrictions, a support, of course, that I applaud your government for including in this important legislation. It’s made clear that if your business is shut down through a public health order, like a gymnasium, for example, you would qualify for the extra lockdown support. That’s pretty clear and pretty cut and dried, but there’s also room for businesses that have been forced to cease some or all activities where it’s reasonable to conclude that these ceased activities were responsible for — and I quote from the legislation — at least 25% of the qualifying revenues. There are a lot of grey areas here as I see it at the moment. Businesses will no doubt be anxious to show they qualify for this extra emergency funding.
Is the public service, which has done a sensational job, prepared to adjudicate on who qualifies for this lockdown funding based on these somewhat inexact qualifications? Will there be an appeals mechanism? Do you have any insight you can share on that today? Thank you.
Ms. Freeland: Senator Deacon, that is, if I may, an absolutely excellent question. It is something that we spent a great deal of time thinking about.
This lockdown support provision, as far as I am aware, is a brand new measure created here in Canada. It was designed because we could see public health officials across the country really agonizing over the decisions they had to make. They’re doing such a great job. You can see the pain in their faces when they talk to us, because they live in their communities and they don’t want to hurt their businesses, but they know that some restrictions are going to be what gets us through and actually leads to a better health outcome and also a better economic outcome. We very much believe these businesses need support, and that the people making the decisions about these local lockdowns would find they could make better decisions if they knew the support would be there.
Then, as we were thinking about this, we came to the point that you touch on, which is the reality that some of these local lockdowns are absolute, that the particular businesses simply must shut down. Those are easy, cut-and-dried cases, but as we thought about it some more, we believed that what would happen, and what we’ve seen happen already in some places, is very significant restrictions on businesses but not complete ones. For example, with restaurants, there is no indoor dining but takeout is still possible, and with gyms, some form of activity is permitted, but not all.
The intent of these measures has been to include as many as possible. Our desire is not to exclude. Our desire is to find a way to cover businesses that are significantly affected — that’s why we have the 25% — by lockdowns, but also not to create some kind of perverse incentive for them to shut down entirely.
We have worked hard with the public service to put forward measures which we believe we can deliver on. You do give me a good opportunity to thank the CRA, which has been doing so much of the work to get the support out to Canadians. So we have worked closely with the CRA on this.
Senator Boehm: Minister, it’s good to see you again. Thank you for all your hard work.
I have two questions. My first question is whether you are in any position at all to measure or evaluate the success rate of the wage subsidy. In particular, I’m thinking of large enterprises in Canada, such as Air Canada, WestJet, and Indigo Books, that initially let many people go, hired them back with the wage subsidy and then, in turn, because of their own bottom line concerns regarding pension and other benefits, and, indeed, the nature of the market, had to let them go again. I’m wondering whether you have any way of measuring that and what the indicators might be.
Second — and this won’t surprise you coming from me — as Minister of Finance, you, of course, have an obligation to be in touch with your counterparts around the world. This is a global pandemic. I’m wondering whether you’re in a position to share your experience in terms of Canadian governmental initiatives as compared to some of what other countries might be doing, particularly those who are federations like Canada.
Ms. Freeland: Thank you, Senator Boehm, for those two really useful questions.
First of all, on the wage subsidy, let me offer a few things. We know that the program has so far supported more than 3.8 million people in their jobs. That is a very good thing.
As you know, senator, we’ve created programs to support Canadians if they’ve lost their job because of COVID, but it’s far better for individual Canadians and for the economy if people can keep their jobs and keep that connection to work. That’s why I am such a big fan of the wage subsidy program. That’s why I’m so pleased that we’re extending it — I hope, with your support — until the summer.
The other metric that I would offer, senator, is we are seeing a pretty robust jobs recovery in Canada, particularly when compared with the G7 economy with which we are the most closely connected, and that is the United States. In fact, I think that TD recently published a report pointing out how much stronger our jobs recovery has been than the U.S. recovery, and they were so struck by the difference that TD pointed out that we used to say, “. . . when the U.S. sneezes, Canada catches a cold.” Instead, we should say, “. . . ‘When the U.S. sneezes, Canada builds antibodies’.”
When it comes to other countries, it’s a great question and one I would expect from you, Senator Boehm, for obvious reasons. It’s something that I pay a lot of attention to because I think we might as well learn from smart things that other countries are doing.
I would say something that you will be very familiar with. I think the German Kurzarbeit program is something that Canada should be paying a lot of attention to and something I’ve been looking at quite a bit.
I think that in Canada right now, as I said in answer to an earlier question, what we’ve tried to do is create a set of measures that will see us through to the summer. We’re in the second wave now. We don’t know what’s going to happen in the winter. We have some measures that are flexible.
I see the chair is asking me to stop talking, so I will. I’m sorry.
The Chair: Thank you, minister.
Senator Duncan: Thank you, Mr. Chair, for acknowledging that I’m sponsoring this bill in the Senate. Thank you, minister and your officials, for attending today. It’s much appreciated.
My question has to do with the CEWS. The Canada Emergency Wage Subsidy has been very much appreciated here in the North and throughout the country with the smaller airlines. We’ve seen the larger airlines reduce their services in Eastern Canada and continue their competition with those smaller airlines.
We learned this morning, as we were aware, that in the restaurant industry we have a degree of competition or non-support for the efforts of SkipTheDishes and the 30%, issues such as that kind of a lack of cooperation amongst industry. Yet in this bill we’ve seen the recognition of the exchange of information between provinces and territories and the federal government. We’ve seen it clearly outlined in the bill that there will be cooperation and that exchange of information.
Is there an intention in the future, or is it ongoing with this bill, to work with the provinces and territories and introduce measures to encourage all parts of the economy to recognize that we are all in this together and we’re all working together to rebuild the economy?
Thank you again for your appearance and for the opportunity to ask my question.
Ms. Freeland: Thank you, Senator Duncan. Thank you very much for the hard work you’ve taken on in sponsoring this legislation in the Senate.
I think you get at a couple of really important points. First of all, to the point of cooperation with provinces and territories, this legislation has really benefited from that. I have regular calls with the finance ministers of the provinces and territories. In your territory, the finance minister and the premier are one and the same, and he is doing a great job and is a great partner. Particularly when it comes to rent support, input from the provinces and territories was absolutely consequential in how we designed this program, particularly that it should go directly to tenants.
In your question you’re also getting at a very important tendency when it comes to the coronavirus that I think we together need to seek to counteract, which is it’s hitting the most vulnerable the hardest, whether that is the most vulnerable individual Canadians or the most vulnerable businesses. So if you’re a small business, it is hitting you harder than if you’re a big one with lots of liquidity, lots of reserves and lots of access to bank credit. I do think, as a government at the federal level — and I believe provinces and territories too — we need to lean against that because small businesses are the lifeblood of our communities and employment. One of the things this bill and CEBA are seeking to do is ensure that small businesses have the support they need to get through this crisis.
Senator Pate: Thank you to the minister and officials for joining us. My question follows up nicely to Senator Duncan’s question.
Minister, you have long been an advocate of social, economic and political change that is ambitious and doesn’t just benefit the wealthiest. As you will know, since the March 2020 COVID pandemic hit and the lockdowns, the total wealth of the 20 richest Canadians has increased by some $37 billion.
Minister Freeland, I have two questions for you. What are you doing to ensure that bills like Bill C-9 are not unduly benefiting rich property owners while leaving the most vulnerable in society to not be able to pay their rent?
Second, given the information and the work that’s being done in territories like Yukon and Nunavut and provinces like P.E.I., Newfoundland and Labrador, and B.C., what steps are being taken to implement a negative income tax model in order to implement a basic or guaranteed liveable income to ensure that people don’t fall below a floor that will make it very difficult for them to be able to rebound?
Ms. Freeland: Thank you very much, Senator Pate, for the questions.
You’re quite right, I do share your concern about the pernicious impact of rising income inequality. I think it is really important to support our small businesses, to support Canadians and to support the middle class. That’s the key not only to having a healthy economy but to having a healthy society.
When it comes to these support measures, as I said in answer to Senator Duncan’s question, we really have in mind, first and foremost, to provide support to small businesses. We think they are the ones who are in the greatest distress. I would also remind people that CEBA and the RDAs are there to provide additional support to those businesses.
What I would also say is right now we are in the jaws of a global pandemic. We’re in a second wave that’s worse than the first wave. My overriding concern today is to get Canada and Canadians through it, to put measures in place that facilitate the adoption of strong and effective health measures.
That’s why the lockdown support is so important to make it possible for all Canadians to do the right thing when it comes to health and, critically, to limit, insofar as we can, scarring to our economy, to limit the number of people who lose their jobs permanently and to limit the number of businesses that close their doors, because this is going to end. Winter is coming now, but spring will come too. Then we are really all going to want to focus on the economy coming roaring back — yes, senator, building back better — and we will be in the best possible position to do that if we have Canadian households and Canadian businesses still viable and solvent.
Senator Forest: Thank you, Minister Freeland, for joining us today. It’s very important. I have two quick questions. First, in this environment, the entire Canadian economy is being hit hard. I’m thinking in particular of three sectors: tourism, culture and the entire airline industry. In addition to the valuable programs that you quickly put in place, couldn’t you consider creating a sector assistance program for these three sectors?
Second, you introduced a wage subsidy program. Today, we can see that some publicly traded companies, which have benefited or are still benefiting from this program, are paying dividends to their shareholders. This seems a bit indecent. For example, I’m thinking of a company like TFI International, which even had the audacity to increase its dividends. As of September 30, the company has received almost $63 million in wage subsidies. In the same period, it paid out almost $46 million in dividends.
In the current environment, you’re talking about survival. In my opinion, these types of examples aren’t the way to proceed. Thank you in advance for your responses.
Ms. Freeland: Thank you, Senator Forest, for this very important question.
I have a few responses to the questions regarding the more heavily affected sectors. You mentioned tourism, culture and the airline industry. First, we started by introducing very general and very simple measures to help as many Canadian businesses as possible. I think that Bill C-9 will provide a comprehensive set of measures to help our economy survive until the end of the pandemic. I hope that everyone will agree that this definitely needed to be done first. I’d add that these general measures are also helping the more heavily affected sectors. For example, the airline industry has already received over $1 billion through the wage subsidy. However, you’re right that some sectors are being hit particularly hard. In general, the tourism and airline industries are more heavily affected because of border restrictions and quarantine measures. We’re currently trying to determine how to help these industries. I’ll add just one other thing. The regional development agencies have already helped these industries a great deal. This is good and necessary. In terms of the cultural sector, I believe that the specific measures to assist the businesses harder hit by the guidelines issued by public health agencies for the reinstatement of the lockdown will also help many cultural businesses. I could elaborate, but the chair is telling me that I must wrap up my comments.
The Chair: Thank you, Minister Freeland.
As we conclude the session, we want to thank you and your staff, minister, for your availability to National Finance. As you have seen across Canada, from the East Coast to the West Coast, and the South and the North, the majority of people continue to wear our masks, wash our hands and use social distancing. The objective of our committee has always been and will continue to be transparency, accountability, predictability and reliability for legislation that comes to the Senate for Canadians.
On that, I will ask you, minister, if you want to take one more minute to conclude your remarks before we adjourn.
Ms. Freeland: Thank you, Mr. Chair. I would like to conclude by thanking all senators for your very clear, highly informed questions; how engaged you are with this legislation; how close you are to the concerns of Canadians; and to conclude with a plea: The second wave is here, I think, with more viciousness than anyone could have anticipated. Canadian businesses need this help now, so I hope I can count on all of you to get this legislation passed with alacrity so we can keep the Canadian businesses we all love so much going through this crisis. Thank you.