CERB creates tax concerns and businesses have been trying to compete with government benefit, observers say

Recipients of the Canada Emergency Response Benefit (CERB) will see the financial assistance program end on Sept. 26 and local observers say there are limited resources for employees as the Northern economy chugs along only partially open.

Andy Wong, tax consultant and accountant, said people who have been receiving the financial assistance are likely after the CERB deadline passes. He said there are two options available for people to collect income for another six months – one being the enhanced Employment Insurance program that is likely to serve those on CERB.

It's only available to those who have at least 120 hours of work in the past 12 months.

"You are eligible for minimum of $400 per week for a minimum of 26 weeks, which is significant," said Wong.  "The rules are slightly different in that you have to apply every two weeks and, as an employment insurance (EI) program, you have to show eligibility that you are actively and willing to receive work."

Wong said the other option is the Canada Recovery Benefit – a "mirror image of enhanced EI, but for the self-employed who are not eligible for the employment insurance program.

"If you are a massage therapist or gym instructor, you will likely still need support and your income would likely be quite reduced, but you can't access EI," Wong said.  "Regardless of if you have worked over 120 hours, you can't access EI because you are self-employed..."

Looking ahead to next year's tax season, Wong said he expects there will be hurdles to overcome for tax professionals.

"The challenge will not so much be the taxes as the T4 preparation season," he said. "The reason why that is going to be new for payroll administrators is because they will be required to break down the payroll during the first three months of CERB, which is going to require a lot of work."

CERB recipients should be ready to pay taxes next year, Wong said.

"People should be prepared for a sticker shock, especially if they received all seven payments, which would be mean $14,000," Wong said. "That would taxable  and something you might not expect."

Michael McLeod, MP for the Northwest Territories, said his government has not indicated that it will be raising taxes next year, except for targetting high-income earners during the Tuesday's Throne speech. For the most part, he said CERB has served as an emergency measure to help people as businesses and schools were closing due to Covid-19.

"CERB is something that, as the name states, has served as an emergency measure," he said.  "I have not heard a lot on this issue but the ones who have contacted me are usually asking about eligibility requirements and that was early at the start of the benefit."

McLeod said he has been in contact with Indigenous leaders, including in his home community of Fort Providence, and there needs to be more restrictions on who gets the money as it has led to "anecdotal reports" of people spending the funds on alcohol or drugs.

"So that is one side of it," McLeod said. "But CERB has had many benefits and has helped saved millions from financial ruin. During the pandemic, it was the right tool at the right time to help the vulnerable. The reality is we have no cases and I'm optimistic it stays that way."

Criticisms of CERB 

David Bob, president of the Northern Territories Federation of Labour (NTFL), said he expects the program's end is going to have negative impacts on the Northern economy.

"Definitely with CERB coming to an end, it is going to hurt the economy with everything still partially closed and nothing fully open," Bob said. "It will hurt the territories in a big way without having that same consumer power to buy things and keep businesses open.

"I think we will see a downturn of the economy and higher under-employment rates."

Bob said he knows that there are some EI extensions available, however it doesn't reflect a long-term plan, in his view.

"Basically, they made EI a bit easier to access. But due to high unemployment in NWT in the previous year, for accessing income assistance if you have not been working, there is no real fall back," he said.

Bob said NTFL continues to work on getting CERB extended while also enhancing EI and ensuring there are greater benefits for workers.

"I think CERB, to date, has kept people from falling into a system where they have no food and have to pay rent still, but once that is gone how many will have to choose between paying rent and utilities?" he asked.

With CERB transitioning into a new EI program, effective Sept. 27, McLeod said it will help people whose incomes are still affected by the pandemic.

He added that the government is likely to make further announcements regarding taxable income assistance in the future.

Rene Comeau, executive director of the Northwest Territories Chamber of Commerce, said her organization has not taken a position on whether CERB has been largely positive or negative. She agrees that there should be more clarity on a long-term plan for Covid-related income assistance and that it must be made clear that collecting the funds will lead to higher tax bills next year.

Nevertheless, she said remains worried about how the financial assistance has hurt chamber member businesses who now need workers because they are competing against the generous incentives of collecting the benefit.

"A lot of our membership have seen a dwindled employee pool because people collecting CERB get more than going back to work, especially if they are in lower positions and specifically retail and hospitality and those types of sectors," she said.

"I know specifically in the hospitality sector they are begging for employees," adding that the benefit provides a 'living wage' which drives up the cost of products by a significant amount.

"Private independent business can't compete with those kinds of salaries."

NNSL Media reached out to the GNWT Department of Finance on Tuesday but was still awaiting a response at press time.