Clients, Colleagues, and Friends:
The partners of Stern Cohen LLP are greatly concerned about the survival of small businesses in our community forced to close their doors due to COVID-19. We believe the Canadian government needs to act urgently to provide additional and critical support.
To this end, we are again reaching out to our respective MPs. Below is the letter sent by Stern Cohen Tax Partner Adam Morke to his MP. In his letter, you’ll find the urgent solutions we are recommending.
If you can, we ask each of you reading this to send an email to your MP to express your concerns and to ask for additional immediate relief for small businesses. You can find your MPs name and email by entering your personal postal code on this link. Note that your full personal mailing address is also required in any communication to your MP.
The Partners of Stern Cohen LLP
April 16, 2020
Sent on April 16, 2020
Hon. Carolyn Bennett
40 Holly Street, Suite 103
Dear Ms. Bennett:
RE: Urgent solutions for small businesses to help pay rent and to make wage subsidy effective for them
I’m writing to you to request and recommend additional and necessary support to save small businesses that have been forced to close their doors due to COVID-19. My comments and suggestions are from the perspective of a partner at a mid-size accounting firm whose clients are private owner-managed businesses. I have outlined the problems I am seeing and my recommendations below.
Many businesses that are closed are faced with the prospect of being unable to pay their rent and other fixed costs. When a business is faced with the prospect of being evicted, they are unwilling to pay their employees even with a 75% wage subsidy. Retail stores, restaurants, cafes, salons, gyms, healthcare professionals and many more have been hit hard by this requirement to close their doors.
Proposed Solution: Provide immediate support by utilizing chartered banks and credit unions to provide a government backed interest-free loan that will be repaid once the rent subsidy is received. I would suggest a $50,000 interest-free loan for any business that reported annual revenue of less than $10,000,000 on their most recent income tax filing.
The rent subsidy could be calculated by considering the rent expense reported on the taxpayer’s most recent income tax filing (2018 or 2019). This rent expense reported could be converted to a monthly expense and this would continue to be paid to the business on a monthly basis as a rent subsidy until it is permitted to reopen. The intent of the initial loan is only to ensure businesses receive funds urgently while the government has time to develop a system to deliver the rent subsidy.
Many businesses that are closed will not utilize the CEWS as they can’t afford to pay their employees (or fixed costs) and wait 6 weeks to be reimbursed for 75% of wages paid. This defeats the purpose of the CEWS as it’s intended to keep employee and employers connected to facilitate a quick re-start to the economy.
Proposed Solution: Provide immediate funding by having chartered banks and credit unions provide government backed interest-free short-term loans to businesses that have been forced to close due to COVID-19. The loan will allow businesses with funds to pay their employees now and to repay the short-term loan once the CEWS is paid by the government. Make the program available for any business with annual revenue of less than $10,000,000 in its most recent tax filing (2018 or 2019) and that can show the bank it paid employees at anytime in 2020.
The above issues and suggested recommendations are, in my opinion and that of my partners, a strong, crucial step in the right direction to save these businesses. Although COVID-19 has forced these businesses to shut down we also need to plan and focus our efforts on the post-crisis world since many of these businesses will NOT be able to reopen their doors at the current economic pace things are moving at. Therefore, we have and feel both a professional and moral obligation to ensure business continuity in the post-crisis world since not acting in time can cause both a health and economic calamity that could mimic what we are already experiencing in the midst of this crisis.
Wishing you, your family, and your staff the very best during this challenging time.
Adam Morke, CPA, CA, TEP
Partner, Tax Specialist
Stern Cohen LLP
Note – This post has been edited from the original email to my MP to remove personal details and for formatting. AM
Thanks to Scott Webb from Pexels for the photo.