Ottawa tightens access to COVID-19 salary support in new measure to replace SSUC – .

Ottawa tightens access to COVID-19 salary support in new measure to replace SSUC – .

A Globe and Mail investigation found that dozens of publicly traded companies received payments under the SSUC and then amassed earnings and profits gains.CHRISTINNE MUSCHI / Reuters

The latest version of the Liberal government’s COVID-19 wage subsidies will only be open to companies whose revenues have declined significantly in the first 12 months of the pandemic, closing a loophole that had allowed companies with healthy sales growth to claim funds on the basis of brief downturns in their operations.

Earlier this year, a Globe and Mail investigation found that dozens of publicly traded companies received Canada Emergency Wage Subsidy (CUS) payments, then amassed earnings and earnings gains. profits.

Unveiling a lean successor to CEWS on Thursday, Finance Minister Chrystia Freeland said candidates will now have to demonstrate a “deep and lasting loss”, in addition to a slowdown during a four-week grievance period. The final claims period for SSUC expires on October 23, and the government has stated that the replacement programs will remain in effect until May 7.

Canada’s COVID-19 benefits will expire on October 23. Here’s what you need to know

SSUC: a massive subsidy, shrouded in secrecy

As part of the new tourism and hospitality revival program, companies in these sectors are expected to show that their income has fallen on average by at least 40% during the first 12 months of the SSUC program, this average being calculated over 13 four-week periods. . Firms in other industries, applying under the separate worst-hit business recovery program, are expected to experience a revenue loss of at least 50 percent over the same period.

The original SSUC program, retroactive to March 2020, did not contain such provisions. It allowed companies to pocket grants even though their revenues and profits subsequently increased during the year. The Globe investigation found that 388 publicly traded companies, or their subsidiaries, had received payments from the SSUC, despite the fact that a significant number of them did not experience a prolonged decline in their income or of their profits.

Almost 25% saw higher revenues in the second quarter of 2020 compared to the same period in 2019. Only just over half of publicly traded companies receiving payments from SSUC at the time saw their profits fall. in the second quarter of 2020 compared to the same period. in 2019.

This does not mean that these companies broke the rules. All they did was take advantage of the government’s decision to base grant applications on how income had declined over a four week period. If a company’s fortunes subsequently rebounded, its claim against the SSUC was not affected.

Since claims could be made retroactively, even companies whose sales were already rebounding strongly could legally receive money from the SSUC.

Economists say disregard for the long-term outlook for business was just one example of how the SSUC’s original program was poorly targeted.

Miles Corak, a professor in the economics department at the City University of New York, is an expert who criticized the program for not focusing on companies that were at risk of laying off workers due to the pandemic. He said the decision to demand a long-term drop in income is a good one, as it avoids providing subsidies for transient fluctuations in income. But he added that there is a danger that the more targeted program will end up supporting some companies that have suffered a permanent slowdown.

If there had been a version of the 12-month rule in place for the original program, few of the publicly traded companies the Globe reviewed would have qualified. Of the full list of 388 companies, 295 had reported their annual results for 2020 when The Globe compiled the information. Of those 295, only 50 suffered income losses greater than 40% in 2020 compared to 2019. And only 27 – less than 10% – would have been eligible for a program that required a 50% drop in annual income.

The Globe’s initial investigation found that the 388 publicly traded companies and their subsidiaries together had received more than $ 3.6 billion in payments from SSUC as of the end of January 2021. The companies that did not see their income annual fall of at least 40 percent accounted for most of that total, $ 2.6 billion.

When asked if there should have been a rule in the original SSUC program requiring a prolonged drop in income, Prof Corak said he was reluctant to criticize policy decisions in hindsight. But he argued that the fact that many companies received subsidies on the basis of what turned out to be fleeting losses strengthens the case for a pandemic profit tax focused on this group.

“Now it’s time to ask for a refund,” he said.

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