Ottawa tries to clarify business benefit
Calculator for CEWS program creates more confusion then ever, critics say
OTTAWA The federal government on Tuesday sought to clarify requirements under its $80-billion wage subsidy, amid criticism that the program is overly complicated for businesses to apply for.
Revenue Minister Diane Lebouthillier announced the creation of a new calculator aimed at helping small business owners determine their eligibility for the Canada Emergency Wage Subsidy (CEWS) program, which pays a portion of wage costs for businesses struck by the COVID-19 pandemic. A number of other private accounts have released their own calculators in recent days to assist business owners with the application process.
The announcement by Ottawa comes amid criticism that the updated wage subsidy is overly complicated to navigate for smaller companies that don’t have in-house accounting offices. The CEWS program, now estimated to cost $82 billion, will be the key program used by the Trudeau government as it seeks seek to transition Canadians back into the workforce.
Finance Minister Bill Morneau last month announced significant adjustments to the CEWS, which was initially structured as a flat subsidy that would cover 75 per cent of wages for businesses whose revenues had dropped by 30 per cent or more in the last year.
The updated subsidy then introduced a “scaling” system in which applications are open to firms with revenue losses of any size, providing subsidies that are more commensurate to those losses. Industry groups broadly supported the changes, but said they also introduced a thicket of administrative hurdles that were likely to scare away small business owners. Conservative finance critic Pierre Poilievre called the updated program a “cobweb of complexity.”
Several accounts reiterated similar criticisms after Lebouthillier released the calculator on Tuesday, saying business face much of the same hurdles as before.
Experts say small businesses are confused about which of their employees might be eligible for the subsidy, for example, based on whether they are considered “arms-length” or not. Companies with a mixture of furloughed, part-time, and work-from-home employees might not fit squarely within the structure of the updated program, they said.
Still others say the updates will require businesses to make a range of complicated calculations, and will have to estimate their revenue losses over several periods, then compare those losses under both the current and newer version of the CEWS in order to apply.
“It’s horrendously and needlessly complex,” said Allan Lanthier, an accountant and former adviser to the Department of Finance and
CRA. “It’s like there was no adult in the room when they were drafting this stuff up.”
He said owners will still have to determine these calculations before they can use the calculator, which simply shows them what their eligibility for the program will be.
“Figuring out what the numbers are is 99 per cent of the work,” Lanthier said. “This calculator doesn’t do any of that for you.”
The application process also includes different testing periods for the base subsidy and the separate “top-up” subsidy, which requires additional calculation, Lanthier said. Companies will also have to begin monitoring where their individual streams of revenues come from every month, in order to properly apply for the CEWS.
“The problem is the wide number of variables that businesses need to consider,” said Joe Devaney, director of accounting information website Video Tax News.
Devaney said much of the complications with the updated wage subsidy have ironically come out efforts by the government to make the program better for businesses, which has in turn deepened the administrative burden faced by owners.
Companies are given the option to apply for the subsidy using either typical accounting practices or working on a cash basis, for example, which can improve their eligibility for the subsidy, but also compels them to make a range of calculations before applying.
“I think the challenge is that there are so many options, it’s really hard to figure out which is the best one,” he said.
Video Tax News, together with Punchcard Systems, has developed a free calculator for the CEWS program separate from the new one developed by the Canada Revenue Agency, which Devaney says can help businesses navigate the application process.
As of Aug. 9, slightly more than 813,000 businesses have been approved for the CEWS program, for a total cost of $26 billion.
Applications for the program have remained far below initial government estimates, due in part to delays in getting the program off the ground. The older version of the CEWS was expected to cost $73 billion, but had paid out just $10 billion months after it was first established.
It’s horrendously and needlessly complex. It’s like there was no adult in the room when they were drafting this stuff up.