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NDP would make companies that paid dividends, bonuses during pandemic reimburse their wage subsidy cash

'We call that retrospective taxation, and it's very hard to do': economics professor

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The NDP would force companies that received pandemic wage subsidies at the same time as they paid dividends to shareholders or gave bonuses to executives to return that money, leader Jagmeet Singh pledged at a campaign stop in Toronto.

The party would make sure “companies that took public money and abused that, are reimbursing that, are paying back that money that they took,” Singh said Monday, the second day of the federal election campaign.

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In its platform, the party promises to “go after large corporations that took publicly funded COVID-19 wage subsidies and turned around and paid out executive bonuses, executed stock buy-backs or paid shareholder dividends.” The document doesn’t cost out how much money an NDP government would claw back, but Singh said many companies would be affected.

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The Trudeau government has so far approved paying out $89.24 billion to companies through the Canada emergency wage subsidy (CEWS).

“First off, we know that there are hundreds of companies,” Singh said.

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A December 2020 investigation by the National Post found 68 publicly traded companies received at least $1.03 billion in CEWS and at the same time paid out more than $5 billion in dividends. Imperial Oil Ltd., Finning International Inc., Aecon Group Inc., Extendicare Inc. and Exchange Income Corp. all received more than $50 million each.

One sector that could be affected — and whose services the NDP is also promising to make more affordable — is telecom. Canada’s Big Three wireless companies — Rogers, Bell and Telus — received nearly a quarter of a billion dollars in wage subsidies, numbers first reported by the independent website the downUP, while they continued to pay regular dividends.

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Singh said information about dividends and executive pay for publicly traded companies is openly available, enabling the government to chase that money.

NDP Member of Parliament Peter Julian: “The first step is the government coming clean with how much has gone to companies engaged in executive bonuses and dividends.”
NDP Member of Parliament Peter Julian: “The first step is the government coming clean with how much has gone to companies engaged in executive bonuses and dividends.” Photo by Sean Kilpatrick/The Canadian Press/File

NDP MP Peter Julian said there needs to be a rigorous analysis to determine how many companies would be targeted by the measure. “The first step is the government coming clean with how much has gone to companies engaged in executive bonuses and dividends,” he said. “We need to start by full disclosure.”

Julian said that a “company that’s received hundreds of millions of dollars or millions of dollars in the wage subsidy at the same time as they paid out millions of dollars in dividends for executive bonuses, I think that’s a clear indication of abusing a system.”

The NDP didn’t answer questions about how much money it estimates it could collect from the measure. A party source speaking for background said  the NDP isn’t looking to claw back all the money that was received by a corporation, only the portion that was used for purposes such as CEO bonuses.

Michael Smart, an economics professor at the University of Toronto and co-director of the Finances of the Nation project, said that would only amount to a small portion of the $100 billion CEWS program. He said estimates indicate publicly traded companies received about $3 or $4 billion.

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Since the NDP’s plan is to claw back only a portion of that, “that’s going to be a small fraction of the total amount those companies received.”

“It won’t be billions of dollars. It would be hundreds of millions at most,” Smart said.

It's going to be a small fraction of the total amount those companies received

Michael Smart

It would also be an uphill effort, he predicted. “Governments are very reluctant, in general, to change the rules of the game after the fact. So we call that retrospective taxation, and it’s very hard to do,” he said. “It might well not even be legal for the government to try to claw back these payments by changing the rules of the game.”

The proposal to return the CEWS money is only one of a suite of pitches the NDP has brought forward under a plan to tax the wealthy in order to pay for services such as pharmacare and dental care.

The party plan includes a one-per-cent tax on wealth over $10 million, increasing by two points the tax rate for those earning over $210,000, and introducing a temporary COVID-19 “excess profit tax that puts an additional 15 per cent tax on large corporate windfall profits during the pandemic.”

The party hasn’t yet released costing for how much revenue its proposals could generate, but least one of those measures stands to bring in more than Smart’s estimate of hundreds of millions for the CEWS clawback.

An earlier report from the Parliamentary Budget Officer looking at the NDP’s proposed 15 per cent tax on corporate pandemic revenue said such a tax would generate $7.9 billion for the 2020 year.

— With additional reporting by Ryan Tumilty

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