Quickly designed and delivered COVID-19 support packages have downstream consequences.
The imprecision with which some of the key qualifications were communicated has led Canada’s federal government to make it easy for employee whistleblowers to report improper use of employer wage subsidies. The government also retreated on repayment requirements because of a lack of clarity at launch on whether Canada Emergency Response Benefit (CERB) eligibility was based on 2019 self-employed gross or net income of $5,000. And when year-end tax slips are delivered, some consumers will no doubt insist they were not aware that CERB benefits were taxable.
In the most recent example of quickly executed programs causing later confusion, Ottawa published a searchable registry of more than 340,000 groups and companies that received the Canada Emergency Wage Subsidy (CEWS), desiged to provide financial support for companies for continued employment of staff. The registry does not show how much CEWS was received by each organization out of the total $54 billion distributed so far in 2020.
Immediately adjacent to that registry is a heading “Information for Employees” that provides a link a reporting facility. “If you have any reason to believe a CEWS applicant is misusing the subsidy, you can report suspicious activity to the CRA.” The link facilitates reporting “suspected tax or benefit cheating in Canada.”
The implication is that some organizations may have collected the CEWS, but not fulfilled their obligation to continue to employ staff, and that employees would be in the best position to recognize this.
The CRA release announcing the registry notes that the wage subsidy can only be claimed for “employee renumeration”, that the criteria is built into the application program and that penalties can include repayment of the subsidy with 25 percent additional penalties, and potential imprisonment. Other public articles indicate that companies that use CEWS for purposes such as paying out dividends or making capital investments will be held accountable.
That disclosure came just days after Prime Minister Justin Trudeau told Canadians not to worry about recent CRA notices related to repayment of the CERB.
CERB payments were made directly to individuals who lost nearly all their income because of COVID-19 and those who earned at least $5,000 during the previous tax year. However, at the launch of the CERB, ambiguity existed about whether the $5,000 amount was gross income or net income. CRA sent notification to 440,000 Canadians who failed to meet the “net income” qualification standards, requesting the repayment of CERB before the end of 2020. Many of those recipients protested that the CRA web site and telephone hot line information was unclear at the time of the application, and they had no ability to repay the CERB amounts.
Trudeau told Canadians they wouldn’t have to repay during Christmas or by January 1 in a year-end interview with the CBC. “We’re going to work over the coming weeks and months to make sure that there’s a path forward that makes sense.”
Still to come, however, is some expected fallout when year end tax slips show that CERB payments are taxable to recipients. That information has been consistently delivered by the CRA since the program was introduced, but there are bound to be some taxpayers who will have overlooked that the plan’s payments – up to $500 a week for up to 28 weeks – came with a tax bill at the end of the year.
The federal basic personal amount – the amount you can earn before you are required to pay federal income tax – is $13,229 for 2020. But CERB recipients may have generated substantial taxable income before the outbreak or by resuming work resulting in tax payable on the CERB income.