Q & A With Experts: using Canada’s tax system to help the economy recover
On March 18, 2020 the federal government introduced the COVID-19 Economic Response Plan providing support to Canadians through this global health crisis.
Professor Andrew Bauer of the School of Accounting and Finance explains how this plan, largely delivered through our tax system, can be used to stimulate economic recovery... and IF it goes far enough.
Why use Canada’s tax system as a crisis recovery strategy?
Two reasons. One, because we always have. Look to past recessions – or the very first income tax in Canada, introduced in 1917 during World War I. We turned to taxes in those uncertain times for our economic needs, we're doing it here, and we'll do it again in future crises.
Second; the tax system is a window into society at large – our wants and needs, our behaviours, they are largely reflected somewhere in our tax system. So if Canadians need a strategy to recover from crisis, you can be sure that our tax system will incorporate elements of that strategy.
The federal government has already pushed back deadlines for individuals and businesses to pay their taxes, what other tax relief measures could support families during this crisis?
The COVID-19 Economic Response Plan (the plan) also includes other tax-related measures that provide relief. The Canada Emergency Response Benefit (CERB) is a transfer that mimics Employment Insurance (EI). After undergoing a number of updates since originally announced, CERB helps individuals (employed or self-employed) off work sick or in quarantine, caring for children, subject to layoffs, or working reduced hours. The plan also helps low- and moderate-income families with enhancements to the GST credit and the Canada Child Benefit.
Here are some other things the federal government could do for individual taxpayers:
Treat the CERB as non-taxable;
Temporarily and/or partially refund the basic personal tax credits for 2020;
Introduce a universal basic income.
Photo right Professor Andrew Bauer
Has the response from the federal government been adequate to prevent the economy from collapsing?
I think it’s fair to say the response is a start, and it came quickly, which is important. Market research (See link below) finds that half of Canadians barely cover their monthly bills. So it’s important to have something in place quickly.
I think we should look to see how government response evolves with the crisis. In some ways it has already – the federal government continues to make changes to individual cash support (what is now CERB) and to wage subsidies originally announced in its plan.
I expect we’ll see more changes as this pandemic and the governmental response carries on.
Professor Bauer On The Governments Initial Response
Three in 10 (29%) Canadians Already Insolvent; Cannot Pay All Their Monthly Bills. View associated research at below link: