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Tax Minute – Happy New Year!
A lot of firsts in 2020
2020 was a truly unusual year in a variety of ways, including from a tax perspective. The year came with many new acronyms, such as TWS (Temporary Wage Subsidy), CEBA (Canada Emergency Business Account), CECR (Canada Emergency Commercial Rent Assistance) and CEWS (Canada Emergency Wage Subsidy), just to name a few. Some of these (TWS, CECR and CEWS) have become mainstream and are now officially in the Income Tax Act, while others, such as the CEBA, will have future tax implications.
Unprecedented spending
Looking at the Department of Finance’s Fiscal Monitor for October 2020, program expenditures related to COVID-19 amounted to $171 billion. In a news release on December 18, 2020, the Department of Finance announced that CEWS is being reinstated at 75%. While this provides needed relief for many industries, it will also extend the ongoing costs of COVID-19 related program expenditures well into 2021. The Government has further committed to invest “three to four percent of GDP, between up to $70 and $100 billion, over three years, to jumpstart our recovery.”1
Few new tax measures
Surprisingly, the Fall Economic Statement 2020 included relatively few new proposed tax measures. The tax measures that were proposed were changes to the taxation of Employee Stock Options (which have been in the works for a few years now), and some GST measures, including GST on the supply of cross border digital products and services, Airbnb (platform-based short term accommodations), and goods supplied through fulfillment warehouses. All of these measures have been long overdue but will not provide any significant revenue to offset the substantial COVID-19 related program expenditures.
Opportunities
As we make our way into 2021 with a new sense of hope and a resilient attitude, it will be important to make sure we utilize the programs our Government has provided as tools for recovery and, as always, make sure we have a solid tax plan to make the most out of 2021.
References:
1 November 30, 2020, Department of Finance Fall Economic Statement 2020