Businesses are pushing for a broad freeze on payments to government and a ramp-up in wage subsidies as part of a more aggressive approach to safeguarding cash flow and avoiding cascading mass layoffs.
The federal government has delayed some corporate income-tax payments until September as part of an effort to blunt the economic toll resulting from the need to combat the novel coronavirus through physical distancing for weeks if not months. But most other levies, including payroll taxes and the GST, must still be remitted – with businesses having to pay as soon as Wednesday.
Some provinces are starting to roll out bigger-scale relief. On Monday, British Columbia announced a six-month payment holiday on most of the taxes and fees it collects, including the employer health tax, the provincial portion of the sales tax and its carbon tax. And the province said planned increases in the carbon tax and sales tax won’t kick in until at least the end of September.
Alberta said it is deferring payments of its portion of education property taxes that businesses pay, adding it could take additional steps.
Melmira Bra and Swimsuits laid off its 15 employees on March 13, ahead of official exhortations and restrictions limiting commercial activities. With no workers, the Toronto retailer cannot make use of the 10-per-cent wage subsidies that the federal government announced last week. To the contrary – Melmira will have to send Ottawa $25,000 on Wednesday for various remittances, including Canada Pension Plan and employment insurance deductions, at a time of year when it had already spent heavily to build up inventory.
“We’re trying to hold on to cash where we can,” said Amie Heenan, who runs the 30-year-old family business with her three sisters. “It’s a very big number.”
But Ms. Heenan said her business will remit the funds to avoid significant late-payment penalties.
Hotel and restaurant operators were already facing a severe cash crunch before Ontario and Quebec enacted measures on Monday to close all but essential businesses. Tony Elenis, president and chief executive officer of the Ontario Restaurant Hotel and Motel Association, said the association is requesting the Ontario government prevent evictions and lockouts for missed payments, and work with other levels of government to defer a range of payments, including hydro, gas and property and payroll taxes, among other measures.
“There’s no way of many businesses surviving without deferral,” Mr. Elenis said.
In Ottawa, Octopus Books laid off its three employees last Thursday, a day after the federal government announced its 10-per-cent wage subsidies. Owner Lisa Greaves said those subsidies were not enough to allow her to keep those workers on the payroll. “I don’t know how I could pay people if I couldn’t sell books,” she said.
But a more generous payment – on the level of Denmark’s 75-per-cent wage subsidy – would have “absolutely” made a difference, Ms. Greaves said. Denmark, Britain and New Zealand are among those offering significantly higher subsidies than Canada. In the United States, there are proposals for forgivable loans tied to maintaining employment, which amount to relatively generous subsidies.
Black Bellows Brewing Co. in Collingwood, Ont., shut its doors to patrons last week after just two months of operation, temporarily laying off its 45 employees, while ramping up an online delivery and curbside pick-up business that did not exist a week ago.
Bryn Davies and his two co-owners of the brew pub made that decision to reduce staff last week, when Ontario restaurants and bars were forced to shift exclusively to take-out and delivery. He said the federal wage subsidy for businesses like his does not come close to what is needed.
“It’s got to be a lot higher,” he said, adding that speed at which aid is delivered is key. “This is going to be a really difficult couple of months. … Any support that can be offered is a must at this point. And as quickly as possible.”
Mr. Davies said he has been in touch with the company’s loan providers – Royal Bank of Canada and Business Development Bank of Canada – about the possibility of deferring principal payments for six months, but the repayment holiday has not yet been confirmed. Black Bellows also has leases with equipment providers, but Mr. Davies does not expect flexibility from those companies, as they are in a similarly precarious position.
The Canadian Federation of Independent Business is among those pushing for a broader holiday in payments to government, as well as an increased wage subsidy. CFIB president and chief executive officer Dan Kelly said he is optimistic the federal government could increase subsidies since Prime Minister Justin Trudeau indicated that all options remain on the table.
Some small businesses are discovering that other promises of federal aid may be of limited assistance. The Prime Minister said Monday that an additional $5-billion in credit would be available to agri-food producers, through Farm Credit Canada.
That may not help Monforte Dairy in Stratford, Ont., which sells direct to consumers and restaurants. The artisanal cheese maker already has a loan with FCC, for which principal payments have been delayed for 12 months, but Monforte owner Ruth Klahsen was recently told by FCC that she couldn’t access new credit because her balance sheet isn’t strong enough.
Monforte has halted production and laid off 10 staff, and now must rely on selling inventory to ensure its long-term viability. “It wouldn’t take much to tip us into bankruptcy,” Ms. Klahsen said.
The B.C. Chamber of Commerce said it welcomes the province’s moves to delay remittances, particularly the deferrals of the employer’s health tax and the provincial portion of the sales tax. But Val Litwin, the chamber’s president and CEO, said it is critical that governments move quickly to deliver whatever assistance they are offering.
For some businesses, simply deferring payments will not be enough to survive. “I will need a government bailout to come out of this,” said Janet Zuccarini, owner and CEO of Gusto 54 Restaurant Group, which has restaurants in Toronto and Los Angeles.
Ms. Zuccarini is saddled with millions of dollars in construction costs for restaurants that were slated to open this year. At the same time, sales have been decimated because eight operations in Canada have been shut down, resulting in the furlough of roughly 800 employees.
“I’ve never asked the government for anything,” she said. “I’ve been an entrepreneur, paying my taxes. I’m hoping the government can do the right thing.”
With reports from Joe Castaldo, Matt Lundy and Josh O’Kane
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