One of the eyes in a $10 Canadian is in focus, the rest of the face is blurred

Canada’s emergency wage subsidy served as ‘blank cheque’ for companies: Canadians for Tax Fairness

By Natasha Bulowski, Canada’s National Observer, Local Journalism Initiative Reporter

Some of Canada’s biggest corporations received a pandemic subsidy intended to keep their employees on the payroll, but a new report finds that in many cases, these large companies actually reduced employment while padding the pockets of shareholders.

These findings, from a report by Canadians for Tax Fairness, should make Canadians angry and point to a double standard, the federal NDP’s finance critic Daniel Blaikie told Canada’s National Observer in an interview. It is “egregious” for the federal government to have the Canada Revenue Agency (CRA) “hound” some individuals who applied for and received financial support through emergency programs like the Canada Emergency Response Benefit (CERB) to return the money, he added.

Now, the federal government is unwilling to provide any kind of amnesty for low-income folks who have CERB debt, Blaikie said.

“I think that that is a really stark difference in the way that people are being treated,” he said. “The richest and the wealthiest are being treated with kid gloves, while the people that are the most desperate and have the least amount to repay are being treated like criminals.”

In the first year of the COVID-19 pandemic, the federal government introduced a suite of support programs, some geared towards Canadians — including the CERB — and some designed for businesses, the largest of which was the Canada Emergency Wage Subsidy (CEWS). Last May, the CRA notified more than 250,000 Canadians that they were ineligible for the CERB or related benefits and must repay the money they received.

Despite having “wage subsidy” in the title, the conditions for companies to receive CEWS were broad, and it “was really a blank cheque to companies,” the report said.

Of 74 publicly traded companies that avoided paying at least $100 million in taxes, half received CEWS money, Canadians for Tax Fairness found. The vast majority of companies assessed in the report have at least one subsidiary in a tax haven, paid out dividends to shareholders and did share buybacks. More than half of the companies reduced total employment in 2020 despite the federal subsidy.

The study only looks at the largest tax-avoiding public corporations, so these findings may be “just the tip of the iceberg,” said the report’s author DT Cochrane, an economist with Canadians for Tax Fairness.

“Most of our criticism is aimed at the government for not putting in place the proper rules to ensure this wouldn’t be abused and not following up to identify how this money was actually used,” Cochrane told Canada’s National Observer. In the future, business support programs like CEWS should publicly disclose the amount and duration of support, prevent recipients from providing bonuses or increasing dividends to executives and shareholders, have a path to recover misused funds and only hand out support to large businesses on a case-by-case basis, the report said.

Of the 37 public corporations Cochrane analyzed, 11 are in oil and gas, including Imperial Oil, Enbridge, Suncor, TC Energy and Canadian Natural Resources Ltd.

Despite a dip in revenues at the beginning of the pandemic, these companies have been “hugely profitable,” said Cochrane. Suncor and Imperial Oil saw net earnings more than quadruple from the second quarter of 2021 to 2022, and Canadian Natural Resources Ltd. more than doubled net earnings over the same period.

“They have the means of supporting their employees without taking these government subsidies,” said Cochrane.

Blaikie wants the federal government to be transparent about which companies received how much money so there can be accountability.

The report recommends policies to recover corporate tax revenue for public good — including a windfall profits tax, which the NDP has long called for. The federal government proposed a one-time 15 per cent tax on profits over $1 billion for big banks and insurers for the 2021 tax year, but there is no indication a windfall tax across all sectors is in the cards.

A two per cent tax on corporate share buybacks was also proposed in the 2022 fall economic statement, which the federal government says would increase federal revenues by an estimated $2.1 billion over five years, starting in 2023-24.

Taxing a percentage of what corporations report to shareholders is another possible fix proposed by the Canadians for Tax Fairness report. Raising the corporate tax rate and closing tax loopholes also featured in the recommendations.

It’s no secret the federal government must invest in countless areas of the economy to meet Canada’s climate goals; a massive transformation of industries and energy systems is required to reduce climate-warming pollution.

A national just transition to a low-carbon economy will be “incredibly costly,” Cochrane said. “When you put money into the economy, it just inevitably finds its way into corporate coffers for all kinds of reasons.

“We need to have a fairer tax system to make sure that the government can invest where investment needs to happen.”

Top image credit: Keeping an eye on where the money went – Photo by KMR Photography via Flickr (CC BY SA, 2.0 License)

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