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Last updated: April 02 2020
The Costs and Timelines: The Debt and Deficit are Ballooning
Evelyn Jacks
The government released costing and timelines for its various pandemic response provisions on April 1 and this, co-mingled with reports from the Parliamentary Budget Officer indicates a steep climb back to fiscal health once the pandemic crisis is over. Tax and financial advisors will want to shore up their knowledge on managing individual and family balance sheets against a future back drop of slow economic growth and potentially much higher taxes.
On March 20, the Parliamentary Budget Officer warned Canada’s economy could suffer the weakest growth on record since 1962, projecting real GDP growth of -5.1% for 2020 and an unemployment rate of 15%. Nominal GDP (the number upon which tax revenues is based) is also expected to shrink by $218 billion compared to last fall’s forecasts, all while deficit spending has skyrocketed. The provisions announced so far are outlines in the chart below but include:
1. $52 billion in direct spending: The March 11, 18, 23 relief measures announced included enhancements to CCB, GST Credit Relief, RRIF withdrawal changes, and the $2000 per individual Canada Emergency Response Benefit
2. $85 billion – tax deferrals for individuals and businesses
3. $65 billion – loans and credit availability
4. $71 billion – the 75% wage subsidies when business revenues drop 30% or more. However, re-employment opportunities expected from this measure could reduce the costs of the CERB.
The budget deficit is expected to increase to $26.7 billion in 2019-2020 and $112.7 billion in 2020-21 amounting to 5.2% of GDP in 2020-21. The Federal debt, however, is expected to rise from $685.5 Billion in 2018-2019 to $825.0 Billion in 2020-21.
Tax and financial advisors are encouraged to learn the details behind all of these provisions with Knowledge Bureau with two new options: take the new Knowledge Gap Courses including a new one available April 9 on the topic of Pandemic Relief , or join uss for the new Virtual CE Summits. Details to be announced tomorrow, but for a sneak preview, see below.
Here’s an overview of the government’s economic response plan dates and costs for COVID-19.
|
Economic Response Plan – Cost and Implementation Dates |
||
|
Measure |
2020-2021 Cost/Impact |
Implementation |
|
Lower Registered Retirement Income Fund Minimum Withdrawal Amounts |
$495 million |
Immediately; Supporting legislation to follow |
|
Temporary Business Wage Subsidy (10%) |
$3.8 billion |
Immediately; supporting legislation to follow |
|
Canada Emergency Response Care Benefit |
Up to $24 billion |
Early April * |
|
Emergency Support Benefit |
Up to $5 billion |
Early April * |
|
Canada Student Loan Payments |
$190 million |
Early April * |
|
Support for Indigenous Communities |
$305 million |
April * |
|
Support for people experiencing homelessness (through Reaching Home) |
$157.5 million |
April * |
|
Support for women’s shelters and sexual assault centres including on reserve |
$50 million |
April * |
|
GST Credit |
$5.5 billion |
By Early May * |
|
Enhanced Canada Child Benefit |
$1.9 billion |
May * |
|
Subtotal |
$41.4 billion |
|
|
Other supports |
|
|
|
Canada Emergency Wage Subsidy |
$71 billion |
Six weeks from April 1 |
|
Flexibility for individual, corporate taxpayers (tax payment deferral to September) |
$55 billion |
Immediately |
|
Business Credit Availability Program (BCAP) through BDC and EDC |
$10 billion |
Immediately |
|
Subtotal |
$136 billion |
|
|
Total support to individuals & business |
$177.4 billion |
|
|
Credit and liquidity support through financial Crown corporations, Bank of Canada, OSFI, CMHC and commercial lenders (e.g., Domestic Stability Buffer, Insured Mortgage Purchase Program, Banker’s Acceptance Purchase Facility) |
In the range of $500 billion |
Immediately |
|
*requires Royal Assent |
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Learn more: The All New Virtual CE Summits will be introduced to you on April 22 and May 13. WE are so pleased to combine the power of a robust online learning course with an interactive Zoom Meeting platform with your instructors on May 13. Please mark your calendar now.
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