Recommendations to Support Small Business During the COVID-19 Pandemic

UPDATE: Good news! The government has listened and addressed all of the concerns we voiced (except the deferral on the remittance of payroll tax). To see the most recent information on Federal and Ontario response programs, please click here to read our article. 

Clients, Colleagues, and Friends:

The partners of Stern Cohen LLP are hearing your concerns and we are also concerned about the small businesses in our community affected by the impact of COVID-19. We believe the Canadian government needs to act urgently to provide additional support to small businesses to help them survive.

To this end, we have reached out to our MPs requesting they provide much needed support to small businesses. Below you’ll find our list of recommendations and the letter sent by Stern Cohen Tax Partner Adam Morke to his MP.

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.

Sincerely,

The Partners of Stern Cohen LLP
March 21, 2020

Our Recommendations to Support Small Businesses:

1. Increased Wage Subsidy:

The current 10% wage subsidy that is being offered isn’t enough to impact a business owners’ decision to keep their employees on payroll. We recommend immediately increasing the subsidy to provide additional relief for each employee that continues to be employed up to the amount the employee would otherwise receive on EI. This will help businesses keep employees on payroll and help those employees continue to receive more than their EI entitlement.

2. Expanded Wage Subsidy:

Currently the wage subsidy is offered to Canadian controlled private corporations (CCPCs), non-profit organizations, and charities. The subsidy is not currently available to businesses operating as a partnership or sole proprietorship. The wage subsidy should immediately be expanded to Canadian resident individuals operating their business as a sole proprietorship and to Canadian partnerships.

3. Keeping cash in the hands of small businesses – Deferral of GST/HST Remittance:

The Canadian government should be helping small businesses keep the cash they  currently have available in their bank accounts to help finance their operations. One way of immediately improving their cash-flow would be to extend the deferral provided for income tax instalments and payments to GST/HST.We are asking the government to provide deferrals on the remittance of GST/HST without penalty or interest. Many businesses are currently faced with the prospect of remitting GST/HST owed to them by their clients on invoices they don’t know when or if they’ll collect. This is putting business owners in the very difficult position of deciding whether or not to remit the GST/HST they technically are holding in trust for the government and whether to face the prospect of aggressive collection actions by the CRA.

Extension for All Tax Filings:

We have also asked our MPs to consider a more blanket extension to all tax filings due between March 13 and April 30 (and later as the COVID-19 situation continues). While we continue to work with our clients to complete their tax filings by the original due date,  we recognize that many taxpayers have closed their offices and/or individuals have placed themselves in self-isolation to “flatten the curve.” As a result, obtaining and sending required information has been difficult for certain taxpayers. We believe citizens have enough to worry about during this time and completing their tax filings on time shouldn’t be one of them.

Letter to Carolyn Bennett
(MP of Toronto – St. Paul’s)

Hon. Carolyn Bennett
40 Holly Street, Suite 103
Toronto, Ontario
M4S 3C3

Dear Ms. Bennett:

RE: Recommendations to Help Small Businesses with COVID-19

I’m contacting you regarding relief urgently needed for small businesses facing the COVID-19 crisis. My comments and suggestions are from the perspective of a tax partner at a mid-size accounting firm whose clients are primarily private owner-managed businesses. Our small business clients have already been greatly impacted by COVID-19. We are hearing about wide-scale layoffs and fears about the survival of their businesses.

I am urging the Canadian government to provide additional relief to these small businesses NOW to help them survive before it’s too late. I have provided my professional suggestions on additional steps that should be taken without delay.

1. Provide deferral of payment of GST/HST

Help small businesses keep the cash they have on hand by providing a deferral on the remittance of GST/HST. Part of the problem is business owners need to remit HST based on amounts they’ve invoiced to their clients, even if they don’t know when or if they’ll get paid by their clients. This problem is outlined well in this article [https://nationalpost.com/opinion/bill-robson-give-businesses-a-break-on-gst-hst-payments-during-covid-19-pandemic].

2. Deferral of payroll remittance

Similar to above, as a way of keeping cash in the hands of business owners, a deferral on the remittance of payroll tax could be provided.

3. Wage subsidy to keep people employed vs. forcing them to collect EI

The 10% wage subsidy being offered isn’t enough to change a business owner’s decision on whether to lay off someone. Either this needs to be bumped up ASAP or businesses’ will be forced to make wide-scale layoffs. It would be better to give employers relief (by increasing the wage subsidy) by an amount equal to what the employee would receive on EI and keep the employee working.

4. Wage subsidy application shouldn’t be limited to corporations

Currently it doesn’t apply to employers that operate as a sole proprietor or a partnership. Please extend its application to businesses that operate in this manner.

5. Further tax extensions

We need a blanket extension for all tax filing that would normally be due between say March 18 and April 30 (or longer). There are estates, partnerships, and other miscellaneous tax forms (e.g. T1134) that are still due during a period where it’s now very difficult to get documents to and from taxpayers. Some businesses are closed and/or individuals are self-isolating making it difficult to send and receive paper documents. We shouldn’t need to force people out of their self-isolation to get tax filings completed on time.

Wishing health and safety to you, your family, and staff during this challenging time.

Adam Morke, CPA, CA, TEP
Partner, Tax Specialist
Stern Cohen LLP

Note – This posting has been edited from the original email to my MP to remove personal details and for formatting. AM