Finance projects a $343.2 billion deficit for 2020-21, but CEWS is extended to December 2020
The federal government discussed the effect of COVID-19 on tax revenues and emergency response measures in an "economic snapshot" presented on July 8, 2020. "Economic and Fiscal Snapshot 2020" is a 168-page update on the economic outlook only for the year ended March 31, 2021 and projects a $343.2 billion deficit for 2020-21. Although the government does not specifically introduce any new tax changes in the snapshot, it subsequently announced that it will extend the Canada Emergency Wage Subsidy (CEWS) until December 2020. The snapshot estimates the cost of the CEWS as $82.3 billion (significantly higher than the Parliamentary Budget Officer's recent estimate of $56 billion on June 18, 2020).
Prime Minister Trudeau confirmed on July 13, 2020 that the CEWS would be extended to December 2020, but did not provide further details at that time. Changes to the CEWS, including possible revisions to the revenue drop threshold starting July 5, 2020 to August 1, 2020 (i.e., Period 5), are expected to be revealed soon.
Previously, the government announced that it would approve regulations to maintain the existing CEWS rules, including the 30% revenue drop threshold, for June 7, 2020 to July 4, 2020 (i.e., Period 4). An advance version of the regulations for Period 4 of the CEWS is now available, and will be posted in the Canada Gazette, Part II on July 22, 2020.
In response to COVID-19, Canada introduced the CEWS, a temporary 12-week subsidy that generally provides an amount to employers equal to 75% of employees' remuneration paid, up to a maximum of $847 per week per employee. The government subsequently proposed to extend the CEWS for three more four-week periods (i.e., an additional twelve weeks) from June 7, 2020 to July 4, 2020 (i.e., Period 4), from July 5, 2020 to August 1, 2020 (i.e., Period 5) and from August 2, 2020 to August 29, 2020 (i.e., Period 6). For details, see TaxNewsFlash-Canada, 2020-47, "Canada Extends 75% Wage Subsidy and Refines Eligibility").
The CRA later confirmed that for the period from June 7, 2020 to July 4, 2020, the subsidy will maintain the 30% revenue drop threshold from the previous period. For details, see TaxNewsFlash-Canada, 2020-55, "Extended 75% Wage Subsidy — 30% Revenue Decline for June".
Estimated costs of selected COVID-19 tax measures
The snapshot states that the estimated deficit of $343.2 billion includes the following costs of selected COVID-19 tax measures:
The snapshot also confirms that the government is prepared to make necessary changes to the CERB this summer if required.
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Information is current to July 14, 2020. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500.
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