On March 18, 2020 the Canadian government announced its economic response plan for COVID-19. Support is offered for both individuals and business. Details of the plan will be summarized here. For more detailed information, please visit the Government of Canada COVID-19 Economic Response page.
Temporary Income Support for Workers and Parents
The Emergency Care Benefit was introduced and provides up to $900 bi-weekly for up to 15 weeks for workers who are sick, quarantined, or forced to stay home to care for children or sick family members. Canadians can apply for this program irrespective if they qualify for EI. Application will be available in April 2020 and can be made using the CRA MyAccount secure portal, the My Service Canada Account, or calling a toll-free number equipped with an automated application process (number not yet available).
Longer-Term Income Support for Workers
An Emergency Support Benefit delivered through the CRA to provide up to $5.0 billion in support to workers who are not eligible for EI and who are facing unemployment. The benefit will be for up to 14 weeks at EI rates.
The EI Work Sharing Program extended eligibility agreements to 76 weeks, will ease eligibility requirements, and streamline the application process. This program provides EI benefits to workers who agree to reduce their normal working hour as a result of developments beyond the control of their employers.
Income Support for Individuals Who Need It Most
The Government is proposing to provide a one-time special payment by early May 2020 through the Goods and Services Tax credit (GSTC). This will double the maximum annual GSTC payment amounts for the 2019-20 benefit year. The average boost to income for those benefitting from this measure will be close to $400 for single individuals and close to $600 for couples.
The Government is proposing to increase the maximum annual Canada Child Benefit (CCB) payment amounts, only for the 2019-20 benefit year, by $300 per child. Families will receive an extra $300 per child as part of their May payment.
$305 million will be provided for a new distinctions-based Indigenous Community Support Fund.
A six-month interest-free moratorium will be placed on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.
Required minimum withdrawals from Registered Retirement Income Funds (RRIFs) will be reduced by 25% for 2020. Similar rules would apply to individuals receiving variable benefit payments under a defined contribution Registered Pension Plan.
The Reaching Home initiative will be provided with $157.5 million to continue to support people experiencing homelessness during the COVID-19 outbreak.
Up to $50 million will be provided to women’s shelters and sexual assault centres to help with their capacity to manage or prevent an outbreak in their facilities.
Support for Businesses
The government is changing the Canada Account so that the Minister of Finance would now be able to determine the limit of the Canada Account in order to deal with exceptional circumstances. This will allow the government to provide additional support to Canadian companies through loans, guarantees or insurance policies during these challenging times.
The government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities.
The Business Credit Availability Program (BCAP) will allow the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) to provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses including in sectors such as oil and gas, air transportation and tourism. The near term credit available to farmers and the agri-food sector will also be increased through Farm Credit Canada.
The Office of the Superintendent of Financial Institutions will allow Canada’s large banks to inject $300 billion of additional lending in to the economy.
The Bank of Canada cut the interest rate to 0.75% as a proactive measure in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices.
The government announced on March 16 that it is launching an Insured Mortgage Purchase Program (IMPP). Under this program, the government will purchase up to $50 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC). Details of the terms of the purchase operations will be provided to lenders by CMHC later this week.
The Bank of Canada also announced that it will broaden eligible collateral for its term repo. This expansion of eligible collateral will provide support to funding conditions for financial institutions by providing a backstop to regular private funding.
The Bank also announced that it stands ready, as a proactive measure, to provide support to the Canada Mortgage Bond (CMB) market so that this important funding market continues to function well. This would include, as required, purchases of CMBs in the secondary market.
Role of Financial Institutions
Banks in Canada have affirmed their commitment to working with customers to provide flexible solutions, on a case-by-case basis, for managing through hardships caused by recent developments. This may include situations such as pay disruption, childcare disruption, or illness. This support will include up to a 6-month payment deferral for mortgages, and the opportunity for relief on other credit products.
Mortgage Default Management Tools
The Canada Mortgage and Housing Corporation (CMHC) and other mortgage insurers offer tools to lenders that can assist homeowners who may be experiencing financial difficulty. These include payment deferral, loan re-amortization, capitalization of outstanding interest arrears and other eligible expenses, and special payment arrangements.
The Government, through CMHC, is providing increased flexibility for homeowners facing financial difficulties to defer mortgage payments on homeowner CMHC-insured mortgage loans. CMHC will permit lenders to allow payment deferral beginning immediately.
Flexibility to Taxpayers
The government has offered extended filing deadlines and has deferred payments on tax amounts owing. Please see our previous post for more info on this.