The Canada Income Company has acquired almost 1,200 complaints about firms allegedly misusing federal assist cash designed to guard jobs in the course of the pandemic, CBC Information has realized.
Regardless of repeated threats from the federal finance minister’s workplace to return down laborious on firms with massive fines and even imprisonment of executives for misusing the Canada emergency wage subsidy (CEWS), the CRA hasn’t penalized a single firm.
Critics say that is partially as a result of the CEWS program does not expressly prohibit how firms handle the earnings that may consequence from receiving federal assist for wages, as long as the federal government cash was used for that goal.
There’s nothing that claims an organization receiving CEWS cash cannot additionally pay or enhance dividends to shareholders or hike government pay.
“The federal government dropped the ball,” stated Richard Leblanc, a professor of governance, legislation and ethics at York College.
It is not troublesome to seek out examples of firms that seem to have fared effectively after receiving pandemic assist cash from Ottawa.
Yellow Pages, for example, the telephone e book turned digital advertising firm, collected $7.3 million in CEWS funds in 2020.
It additionally paid out $8.8 million in dividends, the primary such cost to its shareholders in a number of years. Between August and December, the corporate additionally purchased again $3.3 million price of its personal inventory.
“The standards to qualify for the subsidy had been clear, and Yellow Pages adopted and met these standards,” the corporate stated in an e mail to CBC Information.
“With the help of the subsidy, Yellow Pages didn’t scale back worker wages, impose mass layoffs, or furlough its staff.”
Cash in, cash out
However some critics say the actual fact firms had been in a position to increase dividends or purchase again shares after receiving CEWS funds is proof this system is flawed.
“CEWS was supposed to make firms entire, to not make firms extra worthwhile,” stated Leblanc.
The CRA wouldn’t say which firms had been the topic of complaints or present any additional particulars in regards to the nature of the complaints.
At a complete price of greater than $74 billion, CEWS has now grow to be the federal government’s most costly COVID-19 reduction program, surpassing the Canada emergency response profit (CERB).
This system was launched a yr in the past this month to assist Canadian firms preserve employees on their payroll as strict COVID-19 restrictions had been imposed.
The fundamentals had been easy: the federal government would pay as much as 75 per cent of staff’ wages with a view to encourage firms to keep away from layoffs and rehire staff.
To qualify, firms merely needed to present a drop in income associated to the pandemic, both yearly or over specific durations.
‘Bettering free money circulate’
CBC Information has discovered six examples of enormous, publicly listed firms that certified for and acquired CEWS and both initiated or elevated funds to buyers within the type of dividends.
They embrace TFI Worldwide, a Montreal-based delivery and logistics firm with greater than 16,000 staff throughout North America.
TFI hiked its dividend twice in 2020, paying out greater than $67 million to shareholders whereas additionally receiving $52.3 million in CEWS.
In an e mail to CBC Information, TFI declined to touch upon the topic.
Excessive Liner Meals acquired $3.4 million in CEWS and elevated its dividend by 40 per cent citing “bettering free money circulate.” Excessive Liner Meals paid out a complete of $5,518,000 in dividends in 2020. The corporate didn’t reply to repeated requests for remark
Tourmaline Oil, an oil and pure gasoline producer primarily based in Calgary, and Alamos Gold, a multinational gold producer primarily based in Toronto, additionally raised their dividends and acquired CEWS, though neither firm printed the amount of cash it acquired from the federal government wage subsidy program.
Tourmaline elevated its dividend by 17 per cent, and Alamos by 33 per cent, noting that “the rise is supported by the file free money circulate within the quarter and robust outlook.”
Neither firm responded to requests for remark.
“The typical individual will see that there was unjust enrichment on account of a authorities program, and that cash went to shareholders and went to executives,” stated Leblanc.
He argues firms ought to have been required to limit dividend will increase, share buybacks and hikes to government compensation as a situation for receiving CEWS.
“It may have been really easy to limit that originally,” he stated.
Others imposed restrictions
These varieties of restrictions wouldn’t have been unprecedented in Canada.
Firstly of the pandemic, the Workplace of the Superintendent of Monetary Establishments (OSFI), Canada’s banking regulator, barred banks and insurers from dividend will increase, share buybacks and will increase to government compensation to make sure Canada’s monetary establishments had been economically steady and had sufficient capital and liquidity.
Some pandemic-related stimulus funding within the U.S. was additionally conditional on proscribing dividend will increase, government pay and share buybacks.
Ari Pandes, affiliate professor of finance on the College of Calgary, says usually these varieties of restrictions are pushed by politics.
“I can see the optics are unhealthy,” Pandes stated of firms that obtain authorities subsidies after which enhance payouts to shareholders or increase government compensation.
“However the intent of the wage subsidies was to make the businesses as if the pandemic did not occur, going as they had been. And if that was the intent, effectively, that is good. Corporations are wholesome.
“An organization would by no means enhance a dividend except they felt they might maintain that for the very long run.”
Falling by way of the cracks
As of this month, CEWS has been distributed to greater than 440,000 companies. However some companies that say they desperately wanted the subsidy discovered they did not qualify.
555 Brewing Co. in Prince Edward County, Ont., laid off most of its staff in March 2020, when the pandemic hit. The enterprise certified for just a few CEWS funds and was in a position to rehire a few of its staff. However the seasonal nature of the enterprise meant it was not in a position to faucet into the wage subsidy over a subsequent variety of qualifying durations.
“Sadly, just a few of the durations we did not qualify, we solely simply missed it, however we’re nonetheless down,” stated co-owner Drew Wollenberg.
“[Especially] while you take into accounts all the additional bills that we have had, we’re working with virtually twice the overhead to attempt to preserve everybody protected and to pivot the enterprise to swimsuit the present local weather.”
Natalie Wollenberg, Drew’s spouse and co-owner of 555 Brewing, says listening to about firms growing payouts to shareholders whereas her enterprise is struggling to remain afloat is hard to swallow.
“It is actually heartbreaking, when a whole lot of small companies house owners … are stressing to hell about, ‘How am I going to make it to the top of the week?'”