Canada Limits New Wage Subsidy for Firms Keeping Employee Taxes

Canada will reduce the amount of cash companies receive under a new multi-billion dollar wage subsidy program if they’re already enjoying another tax benefit to battle the economic effects of the new coronavirus.

The federal government is allowing small businesses over the next three months to keep a portion of their employees’ income tax that’s taken off their paychecks and normally sent to public coffers. Finance Minister Bill Morneau and department officials unveiled details of another program Wednesday that will send direct deposits to companies and non-profits of any size, costing C$71 billion ($50 billion). Both programs aim to help companies retain workers during the Covid-19 outbreak.

But if a company is already keeping income tax under the first program, those amounts will be deducted from any application made under the second, senior Finance Department officials said during a technical briefing with reporters.

The aim is to prevent any company from double-dipping, according to the officials, who spoke on background.

The first program, called the Temporary Wage Subsidy for Employers, allows firms to keep tax payments equal to 10% of a worker’s wage from March 18 to June 19. The second program, named the Canada Emergency Wage Subsidy, will send companies money equal to 75% of an employee’s wage.