Business
CEWS 2.0 – Why I see it as another attack on the small business owner
July 18, 2017 – The Minister of Finance announces draft legislation of the Tax on Split Income (TOSI) rule changes that would have far reaching impact into the small business community and although some changes were made, the rules have negatively impacted small businesses ever since and will continue for years to come.
Three years later, July 17, 2020 – The same Minister of Finance tables legislation of the changes to the Canada Emergency Wage Subsidy (CEWS), what I like to call CEWS 2.0 which will also continue for years to come.
Before you try to correct me and say that the subsidy is only for 2020, please read on.
While many media and politician soundbites like to give the impression of how CEWS 2.0 will help small business, I cannot help but see this as an opposite approach.
Do not get me wrong, money is money, and businesses will take all the help they can get, and if my business qualifies, I will take full advantage of it, but I personally don’t have to pay a tax specialist to figure it out.
There are two new calculations to CEWS 2.0.
- a baseline amount based on the percentage of revenue decline in the month compared to either the same month in 2019, or the January-February 2020 average revenue amount.
- a top-up amount based on the three-previous month revenue decline where it exceeds 50%.
Instead of an all or nothing at a 30% decline, even a 1% decline will get you a pro-rated payout, although the costs of figuring out your eligible amount might outweigh the benefit.
In fact, you could have an increase in revenue compared to this time last year and still get a payout. Make sense?
If the previous three months were greater than a 50% decline you qualify for the top-up amount regardless of the result for the current month.
The complexity of the CEWS design will reward those that have experts in their corner compared to those that do not.
Consider the following scenario:
A large public corporation that has employees making more than $1,129 a week will be able to not only have a simple calculation, they will not have anyone “related” to the corporation that they have to do extra baseline remuneration calculations for. Just like CEWS 1.0, in CEWS 2.0 every employee including the CEO will be subsidized in a public corporation, with no clawback mechanism (as recommended in my earlier article, the Keep it Simple S…ubsidy).
In the large public corporation, the bookkeeping, payroll, and accounting function will be up to date and (I would hope) accurate because of internal controls. They also frequently have large accounting and I.T. departments to easily calculate the eligibility and amounts for such a subsidy.
But let us compare this to a small owner-managed business like a restaurant for example. The profit margins in restaurants are already sliced thinner than the meat on a charcuterie board. Add to this the extra costs of social distancing and safety precautions, as well as the inconsistency of regulations for being closed, re-opened, and closed again as we navigate the pandemic and restaurants seem like a lost cause for a business owner.
Assuming they are able to still successfully navigate the minefield that COVID19 has placed on their livelihoods, many restaurants have dozens of part-time staff, including family members.
So right away we have a glaring difference: relatives.
The rules in CEWS 2.0 has not reduced any of the requirements for calculations to be made with respect to relatives working in the business. Relatives must have been being paid as a wage employee during one of a few optional calculation periods prior to March 15, 2020 to be eligible for any of the CEWS.
Do you remember TOSI?
TOSI basically was designed so you could only income split dividends with related persons under a complex set of strict rules. Even though restaurants are considered “food services”, the Canada Revenue Agency (CRA) and Finance have in Example 4B of their TOSI explanatory notes an example of a restaurant which would not be considered a service. In doing so, they sent the message to continue to pay yourselves in dividends if you run a family owned restaurant.
As a result, family owned restaurants continued to do just that.
Fast forward to 2020 and you now have family members working in a low margin business, with no support for their dividend remuneration under CEWS 1.0 or CEWS 2.0.
Even if the small business owner was one of the lucky fortune tellers that decided to pay themselves wages, they still have to do a baseline calculation (two different ways – weekly or bi-weekly – for each claim period) just to figure out how much they might be able to get.
Keep in mind the bi-weekly periods are the periods that were set by finance, not the period you may already be using for your payroll cutoff.
Now we have the part-time restaurant staff in my example. The family business now must calculate the average weekly earnings of each individual staff member during the claim period to figure out what the maximum amount of benefit is.
To make it better, the bookkeeping records better be pristine and accurate on a month to month basis, rather than on an annual basis like many, if not most, small businesses do.
Enter in that sale on the 1st of this month instead of the 31st of last month, and you could be looked at as “gaming the system”.
If you are a late-night pub restaurant, make sure that you are closing out the tills at 11:59pm on the 31st of the month – or your numbers would be inaccurate and you could be called a “tax cheat.”
I can’t wait for the Halloween pub crawls this year, when the weekly earnings of those late-night pub staff will have to also be cut off at midnight Saturday, October 31st. At least there will be plenty of mask wearing that night.
So, we now have increased the compliance costs for the small restaurants for monthly reporting, weekly payroll calculations, overnight cutoffs on month-ends, and special treatment for relatives of the business.
It doesn’t take a tax specialist, a cost-accounting CPA, or a PhD in mathematics to figure out that this is going to cost more per employee in overhead costs to the small family business in comparison to the large public corporation.
While I am more than happy to receive money from my clients for doing the immense research and calculations that will be required, the fact remains for the small business owner, is all of this extra work and compliance cost worth it in the end?
Sadly, you will not know if it is worth it, until after you have put in the work to calculate it.
If you happen to be one of the lucky ones that qualifies, you will then have to track the amount of CEWS you received for each employee separately.
This is because the CRA in question 29 of their Frequently Asked Questions on CEWS said that there will be a new box at the bottom of the T4 required to be filled in for the amount of CEWS received for that employee.
But what about my earlier statement that CEWS will impact businesses for years to come? With your calculation and compliance is going on until the end of February 2021 with the addition of the T4 box, does it end there?
February 2021 will just be the beginning. This will begin the audits of the CEWS claims (if they have not already started).
Since the CEWS is required to be reported on the 2020 T4 slips filed by the business in February 2021, would it be fair to say that the three-year tax compliance clock only begins at that time?
This means from now until February of 2024 you can expect to have a call from (likely the payroll audit division of) the CRA to take a look at:
- your weekly employee wage calculations;
- the monthly revenue calculations;
- the monthly cut-offs;
- the timing of your invoices;
- the CEWS amounts allocated to individual staff members; and
- the scrutiny of amounts paid to relatives;
All while you have the joy of having an internal debate with yourself on whether to pay your tax specialist to deal with them, or to try and go at it alone and confused.
July 2017 – TOSI
July 2020 – CEWS 2.0
I wonder what July 2023 will bring.
This article was originally published on July 23, 2020.
—
Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the founder of CGL Strategic Business & Tax Advisors (CGLtax.ca). Cory is an advocate for small business in his role as Alberta Governor for the Canadian Federation of Independent Business (CFIB); converts legislation into layman terms for fun; and provides Canadian tax advisory services to other CPA firms across Canada; opinions are his own.
Biography of Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr can be found here.
From the Fraser Institute
By Nadeem Esmail and Mackenzie Moir
It’s an exciting time in Canadian health-care policy. But even the slew of new reforms in Alberta only go part of the way to using all the policy tools employed by high performing universal health-care systems.
For 2026, for the sake of Canadian patients, let’s hope Alberta stays the path on changes to how hospitals are paid and allowing some private purchases of health care, and that other provinces start to catch up.
While Alberta’s new reforms were welcome news this year, it’s clear Canada’s health-care system continued to struggle. Canadians were reminded by our annual comparison of health care systems that they pay for one of the developed world’s most expensive universal health-care systems, yet have some of the fewest physicians and hospital beds, while waiting in some of the longest queues.
And speaking of queues, wait times across Canada for non-emergency care reached the second-highest level ever measured at 28.6 weeks from general practitioner referral to actual treatment. That’s more than triple the wait of the early 1990s despite decades of government promises and spending commitments. Other work found that at least 23,746 patients died while waiting for care, and nearly 1.3 million Canadians left our overcrowded emergency rooms without being treated.
At least one province has shown a genuine willingness to do something about these problems.
The Smith government in Alberta announced early in the year that it would move towards paying hospitals per-patient treated as opposed to a fixed annual budget, a policy approach that Quebec has been working on for years. Albertans will also soon be able purchase, at least in a limited way, some diagnostic and surgical services for themselves, which is again already possible in Quebec. Alberta has also gone a step further by allowing physicians to work in both public and private settings.
While controversial in Canada, these approaches simply mirror what is being done in all of the developed world’s top-performing universal health-care systems. Australia, the Netherlands, Germany and Switzerland all pay their hospitals per patient treated, and allow patients the opportunity to purchase care privately if they wish. They all also have better and faster universally accessible health care than Canada’s provinces provide, while spending a little more (Switzerland) or less (Australia, Germany, the Netherlands) than we do.
While these reforms are clearly a step in the right direction, there’s more to be done.
Even if we include Alberta’s reforms, these countries still do some very important things differently.
Critically, all of these countries expect patients to pay a small amount for their universally accessible services. The reasoning is straightforward: we all spend our own money more carefully than we spend someone else’s, and patients will make more informed decisions about when and where it’s best to access the health-care system when they have to pay a little out of pocket.
The evidence around this policy is clear—with appropriate safeguards to protect the very ill and exemptions for lower-income and other vulnerable populations, the demand for outpatient healthcare services falls, reducing delays and freeing up resources for others.
Charging patients even small amounts for care would of course violate the Canada Health Act, but it would also emulate the approach of 100 per cent of the developed world’s top-performing health-care systems. In this case, violating outdated federal policy means better universal health care for Canadians.
These top-performing countries also see the private sector and innovative entrepreneurs as partners in delivering universal health care. A relationship that is far different from the limited individual contracts some provinces have with private clinics and surgical centres to provide care in Canada. In these other countries, even full-service hospitals are operated by private providers. Importantly, partnering with innovative private providers, even hospitals, to deliver universal health care does not violate the Canada Health Act.
So, while Alberta has made strides this past year moving towards the well-established higher performance policy approach followed elsewhere, the Smith government remains at least a couple steps short of truly adopting a more Australian or European approach for health care. And other provinces have yet to even get to where Alberta will soon be.
Let’s hope in 2026 that Alberta keeps moving towards a truly world class universal health-care experience for patients, and that the other provinces catch up.
If you think the CCP will treat foreigners better than its own people, when it extends its power over you, please think again: Dimon Liu’s warning to Canadian Parliament.
Editor’s Note: The Bureau is publishing the following testimony to Canada’s House of Commons committee on International Human Rights from Dimon Liu, a China-born, Washington, D.C.-based democracy advocate who testified in Parliament on December 8, 2025, about the human cost of China’s economic rise. Submitted to The Bureau as an op-ed, Liu’s testimony argues that the Canadian government should tighten scrutiny of high-risk trade and investment, and ensure Canada’s foreign policy does not inadvertently reward coercion. Liu also warns that the Chinese Communist Party could gain leverage over Canadians and treat them as it has done to its own subjugated population—an implied message to Prime Minister Mark Carney, who has pledged to engage China as a strategic partner without making that position clear to Canadians during his election campaign.
OTTAWA — It is an honor to speak before you at the Canadian Parliament.
My testimony will attempt to explain why China’s economic success is built on the backs of the largest number of displaced persons in human history.
It is estimated that these displaced individuals range between 300 to 400 million — it is equivalent to the total population of the United States being uprooted and forced to relocate. These displaced persons are invisible to the world, their sufferings unnoticed, their plights ignored.
In 1978, when economic reform began, China’s GDP was $150 billion USD.
In 2000, when China joined the WTO, it was approximately $1.2 trillion USD.
China’s current GDP is approximately $18 trillion USD.
In 2000 China’s manufacturing output was smaller than Italy’s.
Today it’s larger than America, Europe, Japan, and South Korea combined.
If you have ever wondered how China managed to grow so fast in such a short time, Charles Li, former CEO of the Hong Kong Stock Exchange, has the answers for you.
He listed 4 reasons: 1) cheapest land, 2) cheapest labor, 3) cheapest capital, and 4) disregard of environmental costs.
“The cheapest land” because the CCP government took the land from the farmers at little to no compensation.
“The cheapest labor,” because these farmers, without land to farm, were forced to find work in urban areas at very low wages.
The communist household registration system (hukou 戶口) ties them perpetually to the rural areas. This means they are not legal residents, and cannot receive social benefits that legal urban residents are entitled. They could be evicted at any time.
One well known incident of eviction occurred in November 2017. Cai Qi, now the second most powerful man in China after Xi Jinping, was a municipal official in Beijing. He evicted tens of thousands into Beijing’s harsh winter, with only days, or just moments of notice. Cai Qi made famous a term, “low-end population” (低端人口), and exposed CCP’s contempt of rural migrants it treats as second class citizens.
These displaced migrant workers have one tradition they hold dear — it is to reunite with their families during the Chinese Lunar New Year holiday, making this seasonal migration of 100 to 150 million people a spectacular event. In China’s economic winter of 2025 with waves of bankruptcies and factory closures, the tide of unemployed migrant workers returning home to where there is also no work, and no land to farm, has become a worrisome event.
Historically in the last 2,000 years, social instability has caused the collapse of many ruling regimes in China.
“The cheapest capital” is acquired through predatory banking practices, and through the stock markets, first to rake in the savings of the Chinese people; and later international investments by listing opaque, and state owned enterprises in leading stock markets around the world.
“A disregard of environmental costs” is a hallmark of China’s industrialization. The land is poisoned, so is the water; and China produces one-third of all global greenhouse gases.
Chinese Communist officials often laud their system as superior. The essayist Qin Hui has written that the Chinese communist government enjoys a human rights abuse advantage. This is true. By abusing its own people so brutally, the CCP regime has created an image of success, which will prove to be a mirage.
If you think the CCP will treat foreigners better than its own people, when it extends its power over you, please think again.
The Bureau is a reader-supported publication.
To receive new posts and support my work, consider becoming a free or paid subscriber.
Residential school burials controversy continues to fuel wave of church arsons, new data suggests
Brown University shooter dead of apparent self-inflicted gunshot wound
Paris Climate Deal Now Decade-Old Disaster
Canada Hits the Brakes on Population
Alberta’s new diagnostic policy appears to meet standard for Canada Health Act compliance
RFK Jr reversing Biden-era policies on gender transition care for minors
Why is Canada paying for dairy ‘losses’ during a boom?
-
Uncategorized2 days agoMortgaging Canada’s energy future — the hidden costs of the Carney-Smith pipeline deal
-
International2 days agoAustralian PM booed at Bondi vigil as crowd screams “shame!”
-
Automotive1 day agoCanada’s EV gamble is starting to backfire
-
Agriculture1 day agoEnd Supply Management—For the Sake of Canadian Consumers
-
Alberta1 day agoAlberta Next Panel calls to reform how Canada works
-
International5 hours agoGeorgia county admits illegally certifying 315k ballots in 2020 presidential election
-
Agriculture10 hours agoThe Climate Argument Against Livestock Doesn’t Add Up
-
International5 hours agoCommunist China arrests hundreds of Christians just days before Christmas