Feature: Experts Call for Policy Reform to Inspire Recovery, Growth

By Jeff Buckstein

Visionary business leaders seek opportunity through adversity, and despite the damage to businesses and livelihoods in Canada caused by the COVID-19 global pandemic, new pathways to build back even stronger have been identified.

“I think there’s a tremendous opportunity here to look at a lot of existing policy and regulation and see how the pandemic has identified structural weaknesses within,” says Ashley Challinor, vice-president of policy for the Ontario Chamber of Commerce in Toronto.

The question is “How can we rejig things that we’d already been doing to not only be more aligned towards recovery, but more aligned towards growth and business resilience as well?” she elaborates.

Trevin Stratton, chief economist and vice-president of the Canadian Chamber of Commerce in Ottawa, says a key area of policy reform needs to centre on Canada’s Income Tax Act. Comprehensive structural tax reform, which hasn’t been undertaken in Canada since the late 1960s, is long overdue because the country’s tax code is not just outdated but also complicated, especially for small businesses, he explains.

“We’re also interested in reforming the way that businesses interact with the CRA and with governments, so it is easier for them to understand their obligations,” adds Challinor.

Another long-standing issue that business leaders say must be tackled is internal trade barriers within Canada. The pandemic brings renewed opportunity because there has been a groundswell of support for Canadians who want to buy Canadian and support local and small businesses.

“It’s outrageous the number of trade barriers within Canada. Each province and territory tends to have their own set of regulations, and very few of those are recognized or harmonized across the country. These are needless administrative and financial barriers that prevent businesses from operating easily and smoothly across the country,” Challinor says.

“We are calling on the federal, provincial, and territorial governments to get together and figure it out because this is something that would have a huge benefit for all Canadians, for the Canadian economy, and for Canadian businesses,” stresses Stratton.

Stratton is also calling for policy changes designed to increase productivity to stimulate the Canadian economy, to rectify a situation where, over the last decade, Canadian productivity has flatlined while the productivity of many of our competitors, especially our largest trading partner in the United States, has significantly increased.

“The reason for that is there have been a lot of incentives put in place for American businesses to invest in the types of skills and technologies that increase productivity and that increase output per unit of input, that don’t necessarily exist at the same level in Canada. And so what we really need to do is to create a very attractive environment for investment here,” he says.

Policy reforms with respect to taxation, regulation, and removal of inter-provincial trade barriers will go a long way towards reducing the cost of doing business, and stimulating business investment, including foreign investment, he elaborates.

Rebuilding from the COVID pandemic might also be the time to implement new green measures that will stimulate the economy and keep it competitive with other countries that are investing in new technologies.

“We know climate change is real, and that all of us, including business, have a role to play in finding a solution. Businesses are already driving the innovation that is helping to reduce emissions and develop new, cleaner technologies and energy sources. Meeting our emissions targets and transitioning to a cleaner world will require a strong, vibrant business community,” says Stratton.

Challinor stresses that if Canada is going to focus on a green recovery, that needs to include everybody, especially those businesses and individuals for whom the pandemic has had the most destructive economic impact. “We need to ensure that those groups are getting the training or retraining they need in order to participate in that green recovery,” she elaborates.

Economic recovery and growth requires planning and positioning now for the future. “Certainly there are risks involved. But there are also opportunities and a silver lining if we do it right,” Stratton stresses.

COVID Government Programs

David J. Mason, FCPA, FCA Deloitte LLP

Since March both Federal and Provincial governments have offered a number of programs to support businesses during the Pandemic. More recently both the Federal and Ontario Governments have announced new programs or extensions to existing programs. For these new programs or extensions to existing programs, we are waiting for more details on the program offerings going forward. Beside the programs offered below there are programs tailored for specific industry sectors or specific groups such as indigenous support programs.

The information below is meant for general information and is not intended to offer specific advice on available subsidies and grants for any particular business.

The most popular program that applies to the most businesses is the Canada Emergency Wage Subsidy. Initially, to qualify a company had to be able to demonstrate at least a 15% decrease in revenues in March compared to the same month in the prior year or the average of the revenue in January and February. The percentage decrease required to qualify increased to 30% for April, May and June. For July and onwards, any decline in revenues from the same period last year or compared to select other periods will qualify for a portion of the subsidy.

While this program has proven popular, the number of employers claiming, and the amount claimed have been less than the Department of Finance anticipated. As of October 18, 2020, there have been 1,372,950 approved applications and the program has paid out $43.96 billion. This program has been extended to June 2021 however, the details of the program beyond the end of the year have not yet been released.

Another program which has been somewhat contentious is the Canada Emergency Commercial Rent Assistance (CECRA) program. The original design of the program required the Landlord to claim the relief based on their tenant having at least a 70% drop in revenue in 2020 compared to 2019. The Landlord also had to reduce the rent by 25% for the period of the support under CECRA. Many landlords were not willing to forgive the 25% and so could not qualify for the program. Landlords were willing in many cases to work with their tenant to help them through the crisis but expected to receive the full value of rent over time. This program was originally offered for April, May and June but was extended for landlords who qualified for the first 3 months for an additional 3 months.

The Department of Finance has announced a new Canada Emergency Rent Subsidy program which will provide businesses with revenue loss with rent or mortgage support directly of up to 65% for businesses with revenue loss and an additional 25% for businesses facing lockdown restrictions.

The Canada Emergency Business Account is available to both incorporated and unincorporated small businesses as well as certain NPOs and charities. This program provides an interest free loan of $40,000 which is repayable by December 31, 2022. If the loan is repaid by that date, only $30,000 needs to be repaid. In order to qualify, the business has to be able to demonstrate that it has operating expenses of at least $40,000 during the balance of 2020. Support is available until December 31, 2020 and is available through the business’ bank. This program is also expanding so that impacted businesses can access another $20,000.

Other lesser known programs include the Regional Relief and Recovery Fund and the Strategic Innovation Fund. The latter is available to companies who are innovating in areas related to COVID-19 prevention and treatment. We understand there have not been many applications at this point in time. There has been up to now, 69 announced projects.

Another program which was introduced in the spring and is continuing is the Business Credit Availability Program. This is a co-lending program offered by BDC and EDC through the banks. It will provide up to $12.5M for operational cash flow requirements; available until June 2021. We have a number of clients who have accessed this program. The banks have been quite accommodating in working with companies to obtain this financing. Because of the guarantee provided by EDC, the program encourages the banks to offer more credit to businesses that had stable operations prior to March 2020.

Stimulus Spending Priorities:

Infrastructure

Ashley Challinor, vice-president of policy for the Ontario Chamber of Commerce, says lack of high-speed Internet access is not just a problem in rural and northern areas, but that broad swaths of urban and suburban areas in Canada also lack access to high-speed Internet.

Therefore, broadband and high-speed Internet access tops the list of infrastructure improvements required and need to be urgently prioritized. It is at the heart of competitiveness in a global economy.

“It’s absolutely mandatory to have now, to do any sort of business or any sort of engagement with the outside world, including schooling and training,” stresses Challinor.

Trade-enabling infrastructure is also important, says Trevin Stratton, chief economist and vice-president of the Canadian Chamber of Commerce. He cites, for example, the Chamber’s request to accelerate the twinning of Quebec’s Highway 185 all the way to the New Brunswick border as a four-lane highway. “That would be something very useful that the business community would appreciate,” he says.

Training and retraining

A long-standing problem with the Canadian economy has been a skills mismatch between unemployed workers and skilled jobs that companies are begging to fill. The pandemic provides a new opportunity for government to look at those individuals who are unemployed or underemployed and target retraining programs to get them into those areas of the economy where there is known demand for skilled labour.

“That includes not just those industries that are doing well during the pandemic, but also industries that could be growing if they had access to the right kind of labour,” says Challinor.

Childcare

Childcare is so important because there is a self-defeating cycle where if there is no access to childcare, the spouse with the lower paying job must generally leave that job and stay home, Often because of the gender pay gap women must leave the workforce, as has been seen during this pandemic. So investing in childcare is a critical component of getting women back to work.

Many small business owners also need assistance with child care. “We spend a lot of time thinking about employers and employees, and how to get women back to work,” says Stratton.

“We’re interested in looking at creative solutions that get employers on board – especially larger employers that may have a capacity and the resources to create child care options at their locations, both to support their employees and surrounding communities,” says Challinor.