Business

CEWS 2.0 – Why I see it as another attack on the small business owner

Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr

Published

5 years ago

12 minute read

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.

Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr

CEO | Director CGL Tax Professional Corporation With the Income Tax Act always by his side on his smart-phone, Cory has taken tax-nerd to a whole other level. His background in strategic planning, tax-efficient corporate reorganizations, business management, and financial planning bring a well-rounded approach to assist private corporations and their owners increase their wealth through the strategies that work best for them. An entrepreneur himself, Cory started CGL with the idea that he wanted to help clients adapt to the ever-changing tax and economic environment and increase their wealth through optimizing the use of tax legislation coupled with strategic business planning and financial analysis. His relaxed blue-collar approach in a traditionally white-collar industry can raise a few eyebrows, but in his own words: “People don’t pay me for my looks. My modeling career ended at birth.” More info: https://CGLtax.ca/Litzenberger-Cory.html

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Trump: ‘Changes are coming’ to aggressive immigration policy after business complaints

Published on June 12, 2025

Todayville

From The Center Square

By Brett Rowland

“So we’re going to have an order on that pretty soon – we can’t do that to our farmers and leisure too, hotels, we’re going to have to use a lot of common sense on that.”

President Donald Trump said Thursday that changes are coming to his aggressive immigration policies after complaints from farmers and business owners.

“Our great Farmers and people in the Hotel and Leisure business have been stating that our very aggressive policy on immigration is taking very good, long time workers away from them, with those jobs being almost impossible to replace,” Trump wrote in a social media post Thursday morning. “In many cases the Criminals allowed into our Country by the VERY Stupid Biden Open Borders Policy are applying for those jobs. This is not good. We must protect our Farmers, but get the CRIMINALS OUT OF THE USA. Changes are coming!”

Later Thursday, Trump made it clear that businesses need workers.

“Our farmers are being hurt badly. They have very good workers – they’re not citizens, but they’ve turned out to be great. And we’re going to have to do something about that,” the president said.

He added: “We can’t take farmers and take all their people and send them back because they don’t have, maybe, what they’re supposed to have.”

Just how Trump may change his approach to immigration enforcement remains unclear, but he said he wants to help farmers and business owners.

“You go into a farm and you look and people, they’ve been there for 20 or 25 years and they work great and the owner of the farm loves them and you’re supposed to throw them out. You know what happens? They end up hiring the criminals that have come in, the murderers from prisons and everything else,” Trump said.

Trump said changes would be coming soon, but gave little detail on how policies could change.

“So we’re going to have an order on that pretty soon – we can’t do that to our farmers and leisure too, hotels, we’re going to have to use a lot of common sense on that.”

In a later post on Truth Social, Trump said illegal immigration had destroyed American institutions.

“Biden let 21 Million Unvetted, Illegal Aliens flood into the Country from some of the most dangerous and dysfunctional Nations on Earth — Many of them Rapists, Murderers, and Terrorists. This tsunami of Illegals has destroyed Americans’ Public Schools, Hospitals, Parks, Community Resources, and Living Conditions,” the president wrote. “They have stolen American Jobs, consumed BILLIONS OF DOLLARS in Free Welfare, and turned once idyllic Communities, like Springfield, Ohio, into Third World Nightmares.”

He added that deportations would continue: “I campaigned on, and received a Historic Mandate for, the largest Mass Deportation Program in American History. Polling shows overwhelming Public Support for getting the Illegals out, and that is exactly what we will do. As Commander-in-Chief, I will always protect and defend the Heroes of ICE and Border Patrol, whose work has already resulted in the Most Secure Border in American History. Anyone who assaults or attacks an ICE or Border Agent will do hard time in jail. Those who are here illegally should either self deport using the CBP Home App or, ICE will find you and remove you. Saving America is not negotiable!”

Brett Rowland

Investigative Reporter

Business

The carbon tax’s last stand – and what comes after

Published on June 12, 2025

Todayville

From Resource Works

By Stewart Muir

How a clever idea lost its shine

For years, Canada’s political class sold us on the idea that carbon taxes were clever policy. Not just a tool to cut emissions, but a fair one – tax the polluters, then cycle the money back to regular folks, especially those with thinner wallets.

It wasn’t a perfect system. The focus-group-tested line embraced for years by the Trudeau Liberals made no sense at all: we’re taxing you so we can put more money back in your pocketbooks. What the hell? If you care so much about my taxes being low, just cut them already. Somehow, it took years and years of this line being repeated for its internal contradiction to become evident to all.

Yet, even many strategic conservative minds could see the thinking had internal logic. You could sell it at a town hall. As an editorial team member at an influential news organization when B.C. got its carbon tax in 2008, I bought into the concept too.

And now? That whole model has been thrown overboard, by the very parties had long defended it with a straight face and an arch tone. In both Ottawa and Victoria in 2025, progressive governments facing political survival abandoned the idea of climate policy as a matter of fairness, opting instead for tactical concessions meant to blunt the momentum of their foes.

The result: lower-income Canadians who had grown accustomed to carbon tax rebates as a dependable backstop are waking up to find the support gone. And higher earners? They just got a tidy little gift from the state.

The betrayal is worse in B.C.

This new chart from economist Ken Peacock tells the story. He shared it last week at the B.C. Chamber of Commerce annual gathering in Nanaimo.

Ken-Peacock- B.C. Chamber of Commerce annual gathering in Nanaimo.

What is shows is that scrapping the carbon tax means the poor are poorer. The treasury is emptier.

What about the rich?

Yup, you guessed it: richer.

Scrubbing the B.C. consumer carbon tax leaves the lowest earning 20 percent of households $830 per year poorer, while the top one-fifth gain $959.

“Climate leader” British Columbia’s approach was supposed to be the gold standard: a revenue-neutral carbon tax, accepted by industry, supported by voters, and engineered to send the right price signal without growing the size of government.

That pact broke somewhere along the way.

Instead of returning the money, the provincial government slowly transformed the tax into a $2 billion annual cash cow. And when Mark Carney won the federal election, B.C. Premier David Eby, boxed in by his own pledge, scrapped the tax like a man dropping ballast from a sinking balloon. Gone. No replacement. No protections for those who need them most.

Filling the gas tank, on the other hand, is noticeably cheaper. Of course, if you can’t afford a car that might not be apparent.

Spare a thought for the climate activists who spent 15 years flogging this policy, only to watch it get tossed aside like a stack of briefing notes on a Friday afternoon.

Who could not conclude that the environmental left has been played. For a political movement that prides itself on idealism, it’s a brutal lesson in realpolitik: when power’s on the line, principles are negotiable.

But here’s the thing: maybe the carbon tax model deserved a rethink. Maybe it’s time for a grown-up look at what actually works

With B.C. now reviewing its CleanBC policies, here’s a basic question: what’s working, and what’s not?

A lot of emission reductions in this province didn’t come from government fiat. They were the result of business-led innovation: more efficient technology, cleaner fuels, and capital discipline.

That, plus a hefty dose of offshoring. We’ve pushed our industrial emissions onto other jurisdictions, then shipped the finished goods back without attaching any climate cost. This contradiction particularly helped to fuel the push to dump carbon pricing as a failed solution.

The progressives’ choice was made once the anti-tax arguments could no longer be refuted: to limit losses it would be necessary to deep six an unpopular strand of the overall carbon strategy. This, to save the rest. That’s why policies like the federal emissions cap haven’t also been abandoned.

To give another example, it’s also why British Columbia’s aviation sector is in a flap over the issue of sustainable aviation fuel. Despite years of aspirational policy, low emissions jet fuel blends remain more scarce than a long-haul cabin upgrade. The policy’s designers correctly anticipated that refiners would never be able to meet the imposed demand, and so as an alternative they provided a complex carbon credit trading scheme that will make the cost of flying more expensive. For those with a choice, nearby airport hubs in the United States where these policies do not apply will become an attractive alternative, while remote communities that have no choice in the matter will simply have to eat the cost. (Needless to say, if emissions reduction is your goal this policy isn’t needed anyways, since the decisions that matter in reducing global aviation emissions aren’t made in B.C. and never will be.)

I’m not showing up to bash those who have been genuinely trying to figure things out, and found themselves in a world of policy that is more complicated and unpredictable than they realized. Simply put, the chapter is closing on an era of energy policy naïveté.

The brutally honest action by Eby and Carney to eject carbon taxes for their own political survival could be read as a signal that it’s now okay to have an honest public conversation. Let’s insist on that. For years now, debate has been constrained in part by a particular form of linguistic tyranny, awash in terminology designed to cow the questioner into silence. “So you have an issue with clean policies, do you? What kind of dirty reprobate are you?” “Only a monster doesn’t want their aviation fuel to be sustainable.” Etc. Now is the moment to move on from that, and widen the field of discourse.

Ditching bad policy is also a signal that just maybe a better approach is to start by embracing a robust sense of the possibilities for energy to improve lives and empower all of the solutions needed for tomorrow’s problems. Because that’s the only way the conversation will ever get real.

Slogans, wildly aspirational goal setting and the habit of refusing to acknowledge how the world really works have been getting us nowhere. Petroleum products will continue to obey Yergin’s Law: oil always gets to market. China and India will grow their economies using reliable energy they can afford, having recently approved the construction of the most new coal power plants in a decade amid energy security concerns. Japan, which has practically worn itself out pleading for natural gas from Canada, isn’t waiting for the help of last-finishing nice guys to guarantee energy security: today, they are buying 8% of their LNG imports from the evil Putin regime.

Meanwhile, we’re in the worst of both worlds: our courageous carbon tax policy that was positioned as trailblazing not just for B.C. residents but for the world as a whole – climate leadership! – is gone, the poorest are puzzling over why things feel even more expensive, and nobody knows what comes next.