Business
CEWS 2.0 – Why I see it as another attack on the small business owner
July 18, 2017 – The Minister of Finance announces draft legislation of the Tax on Split Income (TOSI) rule changes that would have far reaching impact into the small business community and although some changes were made, the rules have negatively impacted small businesses ever since and will continue for years to come.
Three years later, July 17, 2020 – The same Minister of Finance tables legislation of the changes to the Canada Emergency Wage Subsidy (CEWS), what I like to call CEWS 2.0 which will also continue for years to come.
Before you try to correct me and say that the subsidy is only for 2020, please read on.
While many media and politician soundbites like to give the impression of how CEWS 2.0 will help small business, I cannot help but see this as an opposite approach.
Do not get me wrong, money is money, and businesses will take all the help they can get, and if my business qualifies, I will take full advantage of it, but I personally don’t have to pay a tax specialist to figure it out.
There are two new calculations to CEWS 2.0.
- a baseline amount based on the percentage of revenue decline in the month compared to either the same month in 2019, or the January-February 2020 average revenue amount.
- a top-up amount based on the three-previous month revenue decline where it exceeds 50%.
Instead of an all or nothing at a 30% decline, even a 1% decline will get you a pro-rated payout, although the costs of figuring out your eligible amount might outweigh the benefit.
In fact, you could have an increase in revenue compared to this time last year and still get a payout. Make sense?
If the previous three months were greater than a 50% decline you qualify for the top-up amount regardless of the result for the current month.
The complexity of the CEWS design will reward those that have experts in their corner compared to those that do not.
Consider the following scenario:
A large public corporation that has employees making more than $1,129 a week will be able to not only have a simple calculation, they will not have anyone “related” to the corporation that they have to do extra baseline remuneration calculations for. Just like CEWS 1.0, in CEWS 2.0 every employee including the CEO will be subsidized in a public corporation, with no clawback mechanism (as recommended in my earlier article, the Keep it Simple S…ubsidy).
In the large public corporation, the bookkeeping, payroll, and accounting function will be up to date and (I would hope) accurate because of internal controls. They also frequently have large accounting and I.T. departments to easily calculate the eligibility and amounts for such a subsidy.
But let us compare this to a small owner-managed business like a restaurant for example. The profit margins in restaurants are already sliced thinner than the meat on a charcuterie board. Add to this the extra costs of social distancing and safety precautions, as well as the inconsistency of regulations for being closed, re-opened, and closed again as we navigate the pandemic and restaurants seem like a lost cause for a business owner.
Assuming they are able to still successfully navigate the minefield that COVID19 has placed on their livelihoods, many restaurants have dozens of part-time staff, including family members.
So right away we have a glaring difference: relatives.
The rules in CEWS 2.0 has not reduced any of the requirements for calculations to be made with respect to relatives working in the business. Relatives must have been being paid as a wage employee during one of a few optional calculation periods prior to March 15, 2020 to be eligible for any of the CEWS.
Do you remember TOSI?
TOSI basically was designed so you could only income split dividends with related persons under a complex set of strict rules. Even though restaurants are considered “food services”, the Canada Revenue Agency (CRA) and Finance have in Example 4B of their TOSI explanatory notes an example of a restaurant which would not be considered a service. In doing so, they sent the message to continue to pay yourselves in dividends if you run a family owned restaurant.
As a result, family owned restaurants continued to do just that.
Fast forward to 2020 and you now have family members working in a low margin business, with no support for their dividend remuneration under CEWS 1.0 or CEWS 2.0.
Even if the small business owner was one of the lucky fortune tellers that decided to pay themselves wages, they still have to do a baseline calculation (two different ways – weekly or bi-weekly – for each claim period) just to figure out how much they might be able to get.
Keep in mind the bi-weekly periods are the periods that were set by finance, not the period you may already be using for your payroll cutoff.
Now we have the part-time restaurant staff in my example. The family business now must calculate the average weekly earnings of each individual staff member during the claim period to figure out what the maximum amount of benefit is.
To make it better, the bookkeeping records better be pristine and accurate on a month to month basis, rather than on an annual basis like many, if not most, small businesses do.
Enter in that sale on the 1st of this month instead of the 31st of last month, and you could be looked at as “gaming the system”.
If you are a late-night pub restaurant, make sure that you are closing out the tills at 11:59pm on the 31st of the month – or your numbers would be inaccurate and you could be called a “tax cheat.”
I can’t wait for the Halloween pub crawls this year, when the weekly earnings of those late-night pub staff will have to also be cut off at midnight Saturday, October 31st. At least there will be plenty of mask wearing that night.
So, we now have increased the compliance costs for the small restaurants for monthly reporting, weekly payroll calculations, overnight cutoffs on month-ends, and special treatment for relatives of the business.
It doesn’t take a tax specialist, a cost-accounting CPA, or a PhD in mathematics to figure out that this is going to cost more per employee in overhead costs to the small family business in comparison to the large public corporation.
While I am more than happy to receive money from my clients for doing the immense research and calculations that will be required, the fact remains for the small business owner, is all of this extra work and compliance cost worth it in the end?
Sadly, you will not know if it is worth it, until after you have put in the work to calculate it.
If you happen to be one of the lucky ones that qualifies, you will then have to track the amount of CEWS you received for each employee separately.
This is because the CRA in question 29 of their Frequently Asked Questions on CEWS said that there will be a new box at the bottom of the T4 required to be filled in for the amount of CEWS received for that employee.
But what about my earlier statement that CEWS will impact businesses for years to come? With your calculation and compliance is going on until the end of February 2021 with the addition of the T4 box, does it end there?
February 2021 will just be the beginning. This will begin the audits of the CEWS claims (if they have not already started).
Since the CEWS is required to be reported on the 2020 T4 slips filed by the business in February 2021, would it be fair to say that the three-year tax compliance clock only begins at that time?
This means from now until February of 2024 you can expect to have a call from (likely the payroll audit division of) the CRA to take a look at:
- your weekly employee wage calculations;
- the monthly revenue calculations;
- the monthly cut-offs;
- the timing of your invoices;
- the CEWS amounts allocated to individual staff members; and
- the scrutiny of amounts paid to relatives;
All while you have the joy of having an internal debate with yourself on whether to pay your tax specialist to deal with them, or to try and go at it alone and confused.
July 2017 – TOSI
July 2020 – CEWS 2.0
I wonder what July 2023 will bring.
This article was originally published on July 23, 2020.
—
Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the founder of CGL Strategic Business & Tax Advisors (CGLtax.ca). Cory is an advocate for small business in his role as Alberta Governor for the Canadian Federation of Independent Business (CFIB); converts legislation into layman terms for fun; and provides Canadian tax advisory services to other CPA firms across Canada; opinions are his own.
Biography of Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr can be found here.
Business
P.E.I. Moves to Open IRAC Files, Forcing Land Regulator to Publish Reports After The Bureau’s Investigation
Following an exclusive report from The Bureau detailing transparency concerns at Prince Edward Island’s land regulator — and a migration of lawyers from firms that represented the Buddhist land-owning entities the regulator had already probed — the P.E.I. Legislature has passed a new law forcing the Island Regulatory and Appeals Commission (IRAC) to make its land-investigation reports public.
The bill — introduced by Green Party Leader Matt MacFarlane — passed unanimously on Wednesday, CTV News reported. It amends the Lands Protection Act to require IRAC to table final investigation reports and supporting documents in the Legislature within 15 days of completion.
MacFarlane told CTV the reform was necessary because “public trust … is at an all-time low in the system,” adding that “if Islanders can see that work is getting done, that the (LPA) is being properly administered and enforced, that will get some trust rebuilt in this body.”
The Bureau’s report last week underscored that concern, showing how lawyers from Cox & Palmer — the firm representing the Buddhist landholders — steadily moved into senior IRAC positions after the regulator quietly shut down its mandated probe into those same entities. The issue exploded this fall when a Legislative Committee subpoena confirmed that IRAC’s oft-cited 2016–2018 investigation had never produced a final report at all.
There have been reports, including from CBC, that the Buddhist landholders have ties to a Chinese Communist Party entity, which leaders from the group deny.
In the years following IRAC’s cancelled probe into the Buddhist landholders, The Bureau reported, Cox & Palmer’s general counsel and director of land joined IRAC, and the migration of senior former lawyers culminated this spring, with former premier Dennis King appointing his own chief of staff, longtime Cox & Palmer partner Pam Williams, as IRAC chair shortly after the province’s land minister ordered the regulator to reopen a probe into Buddhist landholdings.
The law firm did not respond to questions, while IRAC said it has strong measures in place to guard against any conflicted decision-making.
Reporting on the overall matter, The Bureau wrote that:
“The integrity of the institution has, in effect, become a test of public confidence — or increasingly, of public disbelief. When Minister of Housing, Land and Communities Steven Myers ordered IRAC in February 2025 to release the 2016–2018 report and reopen the investigation, the commission did not comply … Myers later resigned in October 2025. Days afterward, the Legislative Committee on Natural Resources subpoenaed IRAC to produce the report. The commission replied that no formal report had ever been prepared.”
The Bureau’s investigation also showed that the Buddhist entities under review control assets exceeding $480 million, and there is also a planned $185-million campus development in the Town of Three Rivers, citing concerns that such financial power, combined with a revolving door between key law firms, political offices and the regulator, risks undermining confidence in P.E.I.’s land-oversight regime.
Wednesday’s new law converts the expectation for transparency at IRAC, voiced loudly by numerous citizens in this small province of about 170,000, into a statutory obligation.
Housing, Land and Communities Minister Cory Deagle told CTV the government supported the bill: “We do have concerns about some aspects of it, but the main principles of what you’re trying to achieve are a good thing.”
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After scathing warnings from interim budget officer Jason Jacques, Liberals move to silence dissent and install a compliant insider with “tact and discretion.”
It’s remarkable, isn’t it? After a decade of gaslighting Canadians about their so-called “fiscally responsible” governance, the Liberal Party, now under the direction of Mark Carney, finally runs into a problem they can’t spin: someone told the truth. Jason Jacques, the interim Parliamentary Budget Officer, was appointed for six months, six months. And within weeks, he did something this government considers a fireable offense: he read the books, looked at the numbers, and spoke plainly. That’s it. His crime? Honesty.
Here’s what he found. First, the deficit. Remember when Trudeau said “the budget will balance itself”? That myth has now mutated into a projected $68.5 billion deficit for 2025–26, up from $51.7 billion the year before. Jacques didn’t just disagree with it. He called it “stupefying,” “shocking,” and, this is the one they hate the most, “unsustainable.” Because if there’s one thing Ottawa elites can’t handle, it’s accountability from someone who doesn’t need a job after this.
But Jacques didn’t stop there. He pointed out that this government has no fiscal anchor. None. Not even a fake one. A fiscal anchor is a target, like a deficit limit or a falling debt-to-GDP ratio—basic stuff for any country pretending to manage its money. Jacques said the Liberals have abandoned even that pretense. In his words, there’s no clear framework. Just blind spending. No roadmap. No compass. No brakes.
And speaking of GDP, here’s the kicker: the debt-to-GDP ratio, which Trudeau once swore would always go down, is now heading up. Jacques projects it rising from 41.7% in 2024–25 to over 43% by 2030–31. And what happens when debt rises and growth slows? You pay more just to service the interest. That’s exactly what Jacques warned. He said the cost of carrying the debt is eating into core government operations. That means fewer services. Higher taxes. Slower growth. The burden gets passed to your children while Mark Carney gives another speech in Zurich about “inclusive capitalism.”
And let’s talk about definitions. Jacques flagged that the Liberals are now muddying the waters on what counts as operating spending versus capital spending. Why does that matter? Because if you redefine the terms, you can claim to be balancing the “operating budget” while secretly racking up long-term debt. It’s accounting gimmickry, a shell game with your tax dollars.
He also pointed to unaccounted spending, about $20 billion a year in campaign promises that haven’t even been formally costed yet. Add that to their multi-decade defense commitments, green subsidies, and inflated federal payroll, and you’re looking at an avalanche of unmodeled liabilities.
And just to make this circus complete, Jacques even criticized the way his own office was filled. The Prime Minister can handpick an interim PBO with zero parliamentary input. No transparency. No debate. Just a quiet appointment, until the appointee grows a spine and tells the public what’s really going on.
Now the Liberals are racing to replace Jacques. Why? Because he said all of this publicly. Because he didn’t play ball. Because his office dared to function as it was intended: independently. They’re looking for someone with “tact and discretion.” That’s what the job listing says. Not independence. Not integrity. Tact. Discretion. In other words: someone who’ll sit down, shut up, and nod politely while Carney and Champagne burn through another $100 billion pretending it’s “investment.”
Let’s be clear: this isn’t just about replacing a bureaucrat. It’s about neutering the last shred of fiscal oversight left in Ottawa. The Parliamentary Budget Officer is supposed to be a firewall between reckless political ambition and your wallet. But in Carney’s Canada, independence is an inconvenience. So now, instead of extending Jacques’ term, something that would preserve continuity and show respect for accountability, the Liberals are shopping for a compliant technocrat. Someone who won’t call a $68.5 billion deficit “stupefying.” Someone who’ll massage the numbers just enough to keep the illusion intact.
They don’t want an economist. They want a courtier. Someone with just enough credentials to fake credibility, and just enough cowardice to keep their mouth shut when the spending blows past every so-called “anchor” they once pretended to respect. That’s the game. Keep the optics clean. Keep the watchdog muzzled. And keep Canadians in the dark while this government drives the country off a fiscal cliff.
But let me say it plainly, thank god someone in this country still believes in accountability. Thank God Jason Jacques stepped into that office and had the guts to tell the truth, not just to Parliament, but to the Canadian people. And thank God Pierre Poilievre has the common sense, the spine, and the clarity to back him. While Mark Carney and his Laurentian elite pals are busy gutting oversight, rewriting the rules, and flooding the economy with borrowed billions, it’s men like Jacques who refuse to play along. He looked at the books and didn’t see “investment”—he saw a ticking fiscal time bomb. And instead of ducking, he sounded the alarm.
Poilievre, to his credit, is standing firmly behind the man. He understands that without a real watchdog, Parliament becomes a stage play, just actors and scripts, no substance. Backing Jacques isn’t just good politics. It’s basic sanity. It’s the minimum standard for anyone who still thinks this country should live within its means, tell the truth about its finances, and respect the people footing the bill.
So while the Liberals scramble to muzzle dissent and hire another smiling yes-man with a resume full of buzzwords and a Rolodex full of Davos invites, at least one opposition leader is saying: No. We need a watchdog, not a lapdog. And in a city full of spineless bureaucrats, that’s not just refreshing—it’s absolutely essential.
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