Skip to main content

In announcing the latest round of COVID-19 pandemic benefits, the Liberal government said in a news release it wants to ensure that “workers continue to have support.”

That will most certainly not be true. There will be a gap, in some cases weeks, between when existing benefit programs are scheduled to expire, and when the programs announced last Thursday start issuing payments.

The Liberals did say they wanted the successor to the Canada Recovery Benefit (CRB), the Canada Worker Lockdown Benefit, to take effect as of Oct. 24. Similarly, they intend to extend the Canada Recovery Caregiving Benefit and Canada Recovery Sickness Benefit through to early May.

The problem is that the government did not draft legislation earlier this year to enact those new and extended plans, so Parliament would need to debate and approve a bill before the proposed benefits could become a reality. And Parliament is not sitting yet.

Here’s the timeline: The CRB expired Saturday. The government had an option to extend that program until Nov. 20 under existing legislation, but chose not to do so. Parliament does not resume sitting until Nov. 22. Even a speedy drafting, debate and passage of benefits legislation would take days.

So workers whose income has been disrupted by lockdowns are likely going to have to wait until late November before they can submit a claim under the Canada Worker Lockdown Benefit. The government did say it intends to make such claims retroactive, meaning payments to workers would eventually be made. But eventually may be of cold comfort to workers with scant savings who could face the prospect of a month of lost earnings – just ahead of the holidays.

The gap is smaller when it comes to the caregiving and sickness benefits. Late Friday, the website for the programs was updated to say they had been extended through to Nov. 20, ahead of a proposed longer extension to May, 2022.

But there will still be a gap of days if not weeks before new legislation will give the government the authority to further extend those benefits.

Even if the government were to extend them to Nov. 20, there would still be a gap before new legislation would give it the power to issue benefits from Nov. 20 onward.

The Liberals have, at various points in the pandemic, waited until the 11th hour to extend or amend benefits. Last year, the legislation creating the CRB received royal assent on Oct. 5, more than halfway through the first two-week claim period. (However, individuals would need to wait until the end of the two weeks to make a claim, so that tardy legislation should not have been a barrier, other than by creating confusion.)

Why is this happening? One factor is the federal election, which meant politicians were campaigning in August and September rather than working in the House of Commons. Another is Prime Minister Justin Trudeau’s choice to wait to recall Parliament until the third week of November. By contrast, Parliament resumed sitting last fall on Sept. 23 – nearly a full two months earlier than this year.

Taxing questions

Responding to last week’s newsletter item on carbon pricing, one online reader asked how carbon charges affect inflation. Statistics Canada points out that the prices that are used in calculating its consumer price index are those “actually paid” by Canadians. Discounts, sales and, yes, consumption taxes are part of those prices. (Carbon pricing is not technically a tax, but the impact is the same when pricing changes.)

Statscan says the carbon levy affects three price indexes within the CPI: gasoline, natural gas, and fuel oil and other fuels. Generally speaking, in provinces where the federal carbon pricing backstop is in place, carbon charges rise each April 1. That makes carbon pricing different from increases in other taxes and levies, which tend to be more sporadic. Each year, there is a carbon bump.

That’s the direct impact of carbon pricing. But there’s also an indirect effect, since companies also pay carbon charges through carbon pricing and, for heavy emitters, through an output-based pricing system. Not all higher carbon charges will increase costs; companies could reduce their use of fossil fuel.

Competition could also restrain output price increases, since not all companies will face the same increase in costs. But to the degree that companies incur additional costs and are able to pass them through to their customers, prices will rise – and such an increase would be reflected in the CPI.

Line Item

No tax break on break fees: A recent Tax Court of Canada decision rejected the idea that fees paid as part of a merger proposal are not business income and as a result are not taxable. Glencore Canada Corp. had appealed a reassessment by the Canada Revenue Agency that said $101.5-million in fees related to the aborted 1996 merger of Falconbridge Ltd. (a corporate predecessor of Glencore) and Diamond Fields Resources Inc. were ordinary business income. There were two fees at issue: a $28.2-million commitment fee when the deal was inked and a $73.3-million break fee when it fell apart. Glencore contended the $101.5-million Falconbridge received was not taxable because the fees did not result from the mining activities that constituted the company’s business. If the fees were to be considered income, Glencore further argued, they should be deemed to be capital gains, which are taxed more favourably than ordinary income. For its part, the CRA argued the fees did indeed emerge from Falconbridge’s business activities: The merger’s purpose was to expand its mining operations. Justice Réal Favreau ruled in favour of the CRA, writing that Falconbridge was “carrying on its business” when it negotiated the merger offer. As a result, the fees it received were ancillary business income.

Follow me on Twitter, @PatrickBrethour or ask your Taxing Question here.

Sign up for the Tax and Spend newsletter here

Your Globe

Build your personal news feed

Follow the author of this article:

Follow topics related to this article:

Check Following for new articles

Interact with The Globe