The Costs and Timelines: The Debt and Deficit are Ballooning

Evelyn Jacks

The government released costing and timelines for its various pandemic response provisions on April 1 and this, co-mingled with reports from the Parliamentary Budget Officer indicates a steep climb back to fiscal health once the pandemic crisis is over. Tax and financial advisors will want to shore up their knowledge on managing individual and family balance sheets against a future back drop of slow economic growth and potentially much higher taxes.

On March 20, the Parliamentary Budget Officer warned Canada’s economy could suffer the weakest growth on record since 1962, projecting real GDP growth of -5.1% for 2020 and an unemployment rate of 15%. Nominal GDP (the number upon which tax revenues is based) is also expected to shrink by $218 billion compared to last fall’s forecasts, all while deficit spending has skyrocketed. The provisions announced so far are outlines in the chart below but include:

1. $52 billion in direct spending: The March 11, 18, 23 relief measures announced included enhancements to CCB, GST Credit Relief, RRIF withdrawal changes, and the $2000 per individual Canada Emergency Response Benefit

2. $85 billion – tax deferrals for individuals and businesses

3. $65 billion – loans and credit availability

4. $71 billion – the 75% wage subsidies when business revenues drop 30% or more. However, re-employment opportunities expected from this measure could reduce the costs of the CERB.

The budget deficit is expected to increase to $26.7 billion in 2019-2020 and $112.7 billion in 2020-21 amounting to 5.2% of GDP in 2020-21. The Federal debt, however, is expected to rise from $685.5 Billion in 2018-2019 to $825.0 Billion in 2020-21.

Tax and financial advisors are encouraged to learn the details behind all of these provisions with Knowledge Bureau with two new options: take the new Knowledge Gap Courses including a new one available April 9 on the topic of Pandemic Relief , or join uss for the new Virtual CE Summits. Details to be announced tomorrow, but for a sneak preview, see below.

Here’s an overview of the government’s economic response plan dates and costs for COVID-19.

Economic Response Plan – Cost and Implementation Dates

Measure

2020-2021 Cost/Impact

Implementation

Lower Registered Retirement Income Fund Minimum Withdrawal Amounts

$495 million

Immediately; Supporting legislation to follow

Temporary Business Wage Subsidy (10%)

$3.8 billion

Immediately; supporting legislation to follow

Canada Emergency Response Care Benefit

Up to $24 billion

Early April *

Emergency Support Benefit

Up to $5 billion

Early April *

Canada Student Loan Payments

$190 million

Early April *

Support for Indigenous Communities

$305 million

April *

Support for people experiencing homelessness (through Reaching Home)

$157.5 million

April *

Support for women’s shelters and sexual assault centres including on reserve

$50 million

April *

GST Credit

$5.5 billion

By Early May *

Enhanced Canada Child Benefit

$1.9 billion

May *

Subtotal

$41.4 billion

 

Other supports

 

 

Canada Emergency Wage Subsidy

$71 billion

Six weeks from April 1

Flexibility for individual, corporate taxpayers (tax payment deferral to September)

$55 billion

Immediately

Business Credit Availability Program (BCAP) through BDC and EDC

$10 billion

Immediately

Subtotal

$136 billion

 

Total support to individuals & business

$177.4 billion

 

Credit and liquidity support through financial Crown corporations, Bank of Canada, OSFI, CMHC and commercial lenders (e.g., Domestic Stability Buffer, Insured Mortgage Purchase Program, Banker’s Acceptance Purchase Facility)

In the range of $500 billion

Immediately

*requires Royal Assent

   

Learn more: The All New Virtual CE Summits will be introduced to you on April 22 and May 13. WE are so pleased to combine the power of a robust online learning course with an interactive Zoom Meeting platform with your instructors on May 13. Please mark your calendar now.

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