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Keep It Simple S…ubsidy

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You want my idea for the wage subsidy… well here it is.

WARNING: It is so simple to implement, there is no way a government would do it.

(Originally posted on LinkedIn (no joke) April 1, 2020)

 

 

People have said “you are quick to pick apart the wage subsidy, so what is your solution?”

So… you asked for it… here it is:

I’ve said it from the very beginning that it should resemble EI support. All they should be doing is simple.

(No this is not an April Fool’s joke… but I am hoping the Press Conference on April 1, 2020 by the Minister of Finance was)

I was fine with EI amounts… but since we have the Canadian Emergency Response Benefit (CERB)… let’s use that amount to keep it more simple.

The amount is this:

(just like the CERB). $2,000 per worker per month, taxable, and no withholdings up front

Put a ‘clawback’ amount on those that are getting it like the clawback on Old Age Security or regular EI benefits for when they file income tax next year.

The 3-prong approach to the subsidy

 

Prong 1 – CERB from Service Canada

Everyone should get it. Yes, everyone.

However, anyone that makes more than the EI maximum in 2020 must pay back 30 cents of the CERB on every dollar over the $54,200 EI maximum threshold when they file their 2020 taxes.

So when you file your personal 2020 income tax, if you ended up making more than $80,667 in income, you will have had to pay back the full $8,000 of CERB received on a T4E.

This results in helping everyone today, help jump start the economy when we need to and have those that get back on their feet quicker, paying some or all of it back.

If you received both the CERB from Service Canada, and the CERB through your employer, you have to pay back the amount greater than the $8,000 received, and then any other amount based on the formula above.

This will prevent or reduce the double dip.

 

Prong 2 – CERB through the Small Business employer

The small business (less than $15M in assets of all associated corporations) employer would also get the CERB on a per-employee basis. They already have to fill out the number of employees when they file their remittance forms, so what’s the difference?

This $2,000 flows through to subsidize the wages, and must be paid to the employees. You create a different box number to track it on the T4 slips next year for audit purposes and to make sure the employee got the money.

I know this isn’t 75%, but the 75% was a capped amount anyways. That’s why I said keep it simple.

In order to incentivize the small business employer so they don’t lay them off, treat it as a flow through, and non-taxable to the employer.

So if there are five employees at the small business, the employer will get $10,000 of CERB to flow through to the employees.

The employee’s wages will be subsidized by the $2,000 amount, and they will put the $2,000 in a different box on each T4 slip for tracking purposes.

In order to incentivize the employer to act as the flow-through for Service Canada, this $2,000 will not be subject to EI or CPP by the employer and will not be included in the taxable income of the employer.

This allows the employer to claim the full wage deduction, have subsidized payroll costs, and save the income tax amount by deducting the full payroll.

By not counting it as income, this tax and remittance savings can be viewed liked an “admin fee” for acting on Service Canada’s behalf.

On $10,000 (5 employees) this would save up to $252 in Employer EI, $525 in Employer CPP, and $900 in federal income tax.

Cost to government for employer being the administrator instead of Service Canada: $1,167.

Incentive for employer to NOT lay off the staff, $10,000 in wage costs… and $1,167 in tax savings.

 

Prong 3 – CERB through Large Corporations

If the employer is getting the CERB on a per-employee basis and they are a large (greater than $15M in assets) corporation or associated group, allow them to not pay employer EI or CPP on the CERB.

100 employees = $200,000 = up to $5,040 in reduced EI, and $10,500 in reduced CPP remittances as the incentive.

So the employer gets $2,000 per employee as a subsidy to cover wage costs, and does not have to do payroll withholdings on the amount, saving them a total of $200,000 + 5,040 + 10,500 = $215,540.

Or put another way, they can save $15,540 by not laying them off.

If that’s not enough incentive, then perhaps look at it being only 50% taxable, which in the example above, would reduce Federal income tax by $15,000 (using 15% general rate x 50% x $200,000)

 

 

Audit Tracing

By simplifying the process, there is less ability for abuse.

Service Canada will issue everyone a T4E with the CERB they personally received from them (no application necessary).

T4 box numbers can be reconciled by CRA on slip filing to amounts of CERB received by the employer through the PIER system.

Those same boxes can be reconciled to specific individuals on tax filings to see if there were any that should repay.

Amounts greater than $8,000 received by anyone will need to be repaid.

Those with income over the EI Maximum amount, will have to repay some or all of the CERB back when they file.

If you don’t agree… well… the specific repayment formula can be figured out later… we have a year for that. We need the money in the public’s hands now though.

 

In Conclusion

These incentives and recapture mechanisms will reduce the likelihood of layoffs in low-margin industries like hospitality since $2,000 a month goes a long way to covering those wages; it will “Flatten the EI Curve” (trademark pending – not really… but I like saying it)

It would get everyone back working quicker after this is done by maintaining the connection to employers, and get the economy kick-started with cash injections at the front of this thing, rather than the end.

In the end… you have employers flowing the $2,000 through to the employee on Service Canada’s behalf as a no-withholding amount and a nominal cost to the employer to administer it, rather than Service Canada processing hundreds of thousands (if not millions) of individual applications.

If they are a small business, they actually get a tax savings by being the administrator and helping Service Canada in the process.

If they are a large business, they can have a good chunk of payroll costs reduced by not having to pay EI and CPP on the amount, and perhaps tax savings.

In the end, every worker gets $8,000 over 4 months just to buy everyone time and we have Flattened the EI Curve.™

Biography of Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr can be found here.

#RedDeerStrong – If you’re struggling and you need to consolidate debt through a mortgage refinance, Kristen is here for you.

CEO | Director, Canadian Tax Advisory CGL Strategic Business & Tax Advisors 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://www.CGLtax.ca/Litzenberger-Cory.html

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‘Freedom Convoy’ organizer Tamara Lich expected to have bail hearing today

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OTTAWA — Tamara Lich, an organizer of the “Freedom Convoy,” is set to appear in an Ottawa court today for a bail hearing after being arrested last week for allegedly breaching one of her bail conditions.

She was arrested in Medicine Hat, Alta., where she lives, on a Canada-wide arrest warrant sought by the Ottawa police.

Police transported her to the capital and she briefly appeared before an Ottawa judge on Thursday before remaining in custody over the weekend.

Lich was a key figurehead of the massive protest that overtook the capital’s downtown streets for more than three weeks in February.

She and fellow protest organizer Chris Barber are jointly accused of mischief, obstructing police, counselling others to commit mischief and intimidation.

She was released with a long list of conditions, including a ban from all social media and an order not to support anything related to the “Freedom Convoy.”

Police have not said which condition she’s accused of breaching.

This report by The Canadian Press was first published July 5, 2022.

This story was produced with the financial assistance of the Meta and Canadian Press News Fellowship.

The Canadian Press

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Poilievre among those marching with soldier charged for criticizing vaccine mandates

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By Lee Berthiaume in Ottawa

Conservative leadership candidate Pierre Poilievre joined the final leg of a march led by a Canadian soldier charged for speaking out against COVID-19 vaccine requirements that has sparked promises⁠ — and fears — of a new wave of protests in the capital.

James Topp was charged in February with two counts of conduct to the prejudice of good order and discipline for comments made while wearing his uniform, and has since been leading a four-month march to the capital from Vancouver.

His march has been supported by many of the same figures involved in the “Freedom Convoy” that snarled downtown Ottawa for weeks until police used force to end what they and the government described as an illegal occupation.

His arrival in the capital and promises of a new round of protests starting Canada Day have set residents on edge. Ottawa Mayor Jim Watson and the city’s interim police chief, Steve Bell, have promised to crack down on any illegal activity.

Poilievre walked alongside Topp for about half an hour after the two met in the parking lot of a strip mall west of downtown Ottawa shortly before noon, where hundreds of people had gathered to see the army reservist.

Video of the meeting shows Poilievre citing to Topp a famous quote by then-prime minister John Diefenbaker about being a “free Canadian” when the latter signed the Canadian Bill of Rights in 1960, before expressing his opposition to vaccine mandates.

When Topp says he wants the reinstatement and reparations for anyone who lost their job because of vaccine mandates, Poilievre said: “Everybody who lost their job simply because of a COVID mandate should be restored to their job, no question about it.”

The two also spoke about the divisions within Canada, with Poilievre saying: “People are desperate for hope … I think it’s time to put this country back together, and heal the wounds and reunite our country.”

The two were then followed by about 200 supporters, many of them carrying Canadian flags and some sporting camouflaged backpacks and other gear, as they walked down the sidewalk of a major street for about half an hour before Poilievre left.

Poilievre’s appearance with Topp comes as the presumed Conservative leadership front-runner has been accused of unabashedly cozying up to anti-vaccine protesters and other groups associated with the “Freedom Convoy.”

Topp has said he has no plans to lead an occupation of the capital, and invited Ottawa police to work with him to facilitate his march through the city to the National War Memorial.

However, an organizer for a group calling itself Veterans 4 Freedom said in a recent video posted to YouTube that it plans to set up a semi-permanent camp east of Ottawa called “Camp Eagle” and hold events in the city all summer.

While police have since managed to prevent similar protests from taking over the city, stopping planned demonstrations from getting out of hand during Canada Day is likely to be complicated by the presence of thousands of people celebrating the holiday.

The charges against Topp relate to two videos posted online in the winter in which the army reservist appears in uniform criticizing vaccine requirements for military personnel and other federal employees.

Canadian Armed Forces members are severely restricted in the comments they can make while in uniform, particularly when it comes to criticizing government policies, in large part to protect the military from any perception of politicization.

His lawyer has argued such restrictions should not apply to policies that affect Armed Forces members personally.

Prime Minister Justin Trudeau on Thursday said police are taking their responsibility to keep people safe during Canada Day celebrations “very seriously,” while Ontario Premier Doug Ford called on those intending to protest in Ottawa to respect the law.

“Folks, be considerate this weekend, you’re going to Ottawa, be considerate. It’s Canada Day, we’re Canadians, just everyone have a good time, a safe time, stay healthy and safe and spend time with your families,” Ford said.

Ford said he is disappointed to see such protests return to the capital.

“I’m all for peaceful protests and you can demonstrate, but no shenanigans this weekend, just be peaceful and let the people of Ottawa enjoy their weekend,” he said.

“Honestly, we shouldn’t even be going through this. It’s disappointing, but it is what it is.”

More than two dozen Conservative MPs hosted Topp and other leading figures in the Freedom Convoy on Parliament Hill last week, posing for pictures, promising their support and listening to a lecture on the purported dangers of COVID-19 vaccines.

Health Canada says only vaccines that meet strict safety, efficacy and quality standards are approved for use in the country, and the benefits of COVID-19 vaccines continue to outweigh the risks of the disease. About 85 per cent of Canadians have received at least one dose.

Topp told the MPs that he was marching in part to get all vaccine mandates repealed, as well as to demand the reinstatement of anyone who lost their job because of such a requirement and compensation for wages lost.

At the same time, he and the others raised the spectre of civil war in describing the state of the country.

“We won’t be intimidated by any group that plans to disrupt the celebrations,” Mayor Jim Watson said during a briefing earlier this week. “We’re prepared and we will not tolerate any illegal activity by anyone.”

Bell said police are prepared for a number of different scenarios, and will respond quickly to any illegal activity, including efforts to set up structures such as stages.

In late April, the Ottawa Police Services Board approved a request from Bell to appoint up to 831 RCMP officers to help with the Rolling Thunder motorcycle events, and made those appointments valid until July 4.

The city is warning that vehicles will be ticketed and towed if they’re found violating no-stopping zones, although the full extent of the areas that will be off limits has not been determined.

Many Ottawa residents remain angry at how the city and police handled the “Freedom Convoy” protests, with several community groups banding together to launch a citizens’ inquiry into how that protest was handled.

This report by The Canadian Press was first published June 30, 2022.

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