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November 30, 2020 – Federal government update on the COVID-19 pandemic

Here is an update on recent decisions and actions by the Canadian government in connection with the COVID-19 pandemic.

Deficit and economic recovery

Deputy Prime Minister and Minister of Finance Chrystia Freeland presented the government’s economic update, announcing a record $381.6 billion deficit and a $1,107.4 billion debt, or 50.7% of gross domestic product (GDP).

“ Since the beginning of the pandemic, the federal government has been responsible for 8 out of every 10 dollars invested to support families and companies,” said Deputy Prime Minister Freeland.

Direct support measures will reach $227 billion this year, in the context of the most significant recession since the Second World War, caused by the global health crisis.

The deputy prime minister added that a $70 billion to $100 billion plan over three years is planned to relaunch the Canadian economy as soon as the pandemic is over.

Additional assistance for families

The minister of Finance warned that the winter will be difficult for Canadians, with the significant increase in the spread of COVID-19 across the country, and announced new financial assistance measures for families, workers and businesses to help them confront the second wave of the pandemic.

Families with a gross annual income of less than $120,000 will be eligible to receive temporary assistance of $1,200 per child under the age of six, while families with a higher income will be eligible to receive $600. This measure will cost $2.4 billion and some 1.6 million families will benefit from this assistance.

To help people doing telework because of the pandemic, a $400 deduction in expenses will be offered, without having to provide proof to their employer.

As of December 1, homeowners will qualify for $5,000 in assistance to make their homes more energy efficient. This measure is designed to support the economy.

Additional assistance for businesses

The minister of Finance announced that the maximum rate of the Canada Emergency Wage Subsidy offered to employers will increase from 65% to 75%, from December 20, 2020 to March 13, 2021. The measure will make it possible to support close to four million employees. The extended subsidy will cost $14.8 billion, bringing the total since the beginning of the pandemic to $83.5 billion.

The Canada Emergency Rent Subsidy, which covers up to 65% of eligible expenses, and the additional 25% support for businesses affected by lockdown measures, will also be extended to March 13. This represents an additional cost of $2.2 billion.

New taxation

As minister of Finance, Ms. Freeland announced that digital businesses that sell products and services to Canadian consumers will be required to charge sales tax (GST) as of July 1, 2021.

This tax targets companies that produce and disseminate digital content, in particular, Netflix, Apple, Disney, Amazon Prime, Facebook, as well as all products Canadians purchase online from foreign companies.

An additional 3% for the provinces

The federal government has not met the demands of the provinces, which formed a common front this fall to pressure the federal government to increase its health spending contribution to the provinces and territories from 22% to 35%.

The premiers are demanding this increase since health spending often represents more than half of their budgets and increases at two to three times the rate of inflation . The federal government has already assumed health spending in equal shares with the provinces.

Ms Freeland announced a 3% increase in federal health transfers.