NDP demands federal wage subsidy clawback, but critics question feasibility

Ottawa — The NDP is calling on the federal government to regain pandemic wage subsidies given to companies that used cash to raise executive compensation, but economists have more feasible alternatives to worker support. May show a good route.

In a May 13 letter to Treasury Minister Chrystia Freeland, New Democratic Peter Julian said that all listed companies that received the Canadian Emergency Wage Subsidy (CEWS) would raise salaries and bonuses for senior management. He said he needed to repay.

“Wage subsidies were clearly supposed to be used to protect workers and the jobs of Canadians. It’s not a bonus to the brass of top-tier companies,” the letter said.

“If there is a clear breach of what the program’s clearly stated goals were, it is absolutely appropriate to ask for the money to be returned,” Julian said in an interview.

Freeland has repeatedly stated that grants can only be used to pay employees, but nothing prevents stronger executive compensation as a condition of their support.

Julian also criticized Ottawa for not adding warnings to limit share buybacks and dividend increases.

Last year, hundreds of CEOs and senior executives enjoyed millions of dividends paid by listed companies. The CEWS program provides up to 75% subsidy for salary costs and is estimated to cost $ 110.6. a billion.

NDP financial critics have accused the government of “aggressive” moves to crack down on the abuse of Canada Emergency Response Benefits aimed at helping Canadians who lost their jobs during the COVID-19 pandemic.

“They have put pressure on those who received the CERB, even if they were victims of cheating by others. But they haven’t stepped up and what about wage subsidies. It shows no signs, and it’s just wrong, “he said.

Freeland spokeswoman Catherine Cuprinscus emphasized that the program aims to protect employment, with more than 5.3 million workers maintaining and rehiring salaries. Said it was useful.

CEWS, which said she received unanimous approval in the House of Representatives last July, “applies to companies of all sizes and sectors to prevent workers from cracking,” he said in an email.

In the last 14 months of lockdown, small retailers, entertainment, tourism and aviation sectors have retreated, but large stores, tech companies and transportation companies have been doing well, with more remote work and online distribution. did.

Many countries have introduced bans on dividend payments and other compensation within the first few months of the wave. Spain has demanded that the companies that paid the dividend repay the full employment maintenance funds. The Netherlands banned dividend payments, share buybacks and bonuses for executives of companies that used wage relief in the same year.

Last month’s federal budget extended wage subsidies until September, but with a new clawback system for jacking up executive compensation at listed companies, NDP now wants to apply retroactively.

David McDonald, senior economist at the Canadian Center for Policy Alternatives, says a tax system that effectively enforces refunds from companies that have declared profits while receiving subsidies may offer a simpler solution.

“The federal government can certainly change tax law, and if they want, they can go back and do it,” he said.

Ottawa can also step up new clawback measures by including dividend increases and share buybacks between repayment items. “We have $ 25 billion to be paid this year starting April 1st, so we still have time, the program isn’t over.”

Michael Smart, an economist at the University of Toronto, said future program reviews would make more sense than retroactive clawback, and the federal government would limit subsidies to small businesses and abused sectors. We propose to apply it only to high-risk jobs.

“Companies that issue shares on the Toronto Stock Exchange do not need government intervention,” he said. “We need to refocus on workers and Canadians who are experiencing loss of income.”

Smart called it a “mistake” that focused on clawback, highlighting potential loopholes.

“If the government passes the rule that CEWS will be reclaimed from a company that increases dividends this year, as CFO of the company, I know exactly what to do. Don’t pay special dividends this year. Next year. Will pay a special dividend. “

“It just takes away the heat of Ottawa.”

Canadians may be “surprised or shocked” by the landing of emergency funds in companies that are quickly in the pockets of executive staff, but “this is just the whole problem of the program. It’s part, “he added.

Starting in June, the revised CEWS program will raise the eligibility threshold to a 10% loss of revenue compared to the same four weeks in 2019. Part of the plan is that the subsidy rate will gradually decrease as September approaches.

“This money should be used by those who really need it, the companies that actually need it, to try to float, hopefully only in the last few months of the pandemic.” McDonald’s said.

Christopher Reynolds