Earning too much could be next problem for Canadian small businesses due to government subsidy rules

OTTAWA – Of all the problems caused by the COVID-19 pandemic, Joseph Mireault now faces one he never thought possible.

He is making too much money.

With his wife, Mireault owns Tru-Valu optical, selling glasses and contact lenses in downtown Vancouver. Due to the virus, the doors were closed in April and May, with only a few sales for people in desperate need.

But the virus has waned in British Columbia and in June they reopened the doors. Business is far from normal, but it’s better and that could actually be a problem.

The federal government’s rent subsidy applies to tenants who have seen an average 70 per cent drop in their revenue for the months of April, May and June. Based on April and May, Mireault definitely qualifies, but when averaged out June will probably bring the average to a 65 per cent revenue drop, leaving him just short of the qualification.

He realized earlier this month that his next few sales could cost him immensely.

“If I make another $889 I disqualify myself from the entire commercial rent relief.”

The commercial rent program has been budgeted at nearly $3 billion. The federal and provincial governments cover 50 per cent of the rent, the tenants 25 per cent and the landlords lose out on the remaining 25 per cent.

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Mireault said he pays $9,000 a month in rent and without the rent relief program he will be liable for three months of that, a $27,000 bill. With the program he would pay 25 per cent of his rent bill or $6,750.

He said he doesn’t want to find himself losing out because he worked too hard to get his business back up and running.

“Don’t put me in a position that if I work hard, and I bust my butt, and we do everything we can to revive the business and get it going that I work against myself and put myself in a position where it’s gonna cost me,” he said.

He has hired back staff members and is concerned the wage subsidy program, which has a 30 per cent revenue drop requirement, will have the same issue. If business continues to improve he will be making just a little too much money to qualify for the program and suddenly have to cover the full cost of his employees’ wages, without help from the government’s subsidy program. That program covers 75 per cent of wages for business owners.

“Let’s make sure that through hard work and effort, you don’t disqualify yourself from getting a commercial rent relief from a landlord that is willing to go there.”

Mireault said he doesn’t know if his June bump will be temporary either, as customers came in to get eye appointments they had held off on for months.

Prime Minister Justin Trudeau said he was aware of the concerns about the program stifling growth and they are looking at changes, but didn’t provide specifics.

“We want all companies, all businesses, to do as best as they can, hire back as many people as possible to start getting as much profit, as much benefit, as they can.”

He said throughout the pandemic they have been open to changing programs and this could be another example where it’s no longer fit for purpose.

“It is obvious programs that worked and were designed to keep the economy shut down, so that everyone would stay safe, are not necessarily going to be exactly the right programs for an economy that is restarting.”

Laura Jones, executive vice-president of the Canadian Federation of Independent Businesses, said the subsidy not only has to be reformed, but it must also be extended.

“Pain isn’t over for many businesses. This is a substantial cost. So I think there’s no question that the rent subsidy needs to continue beyond June,” she said.

She said hitting July 1, without any more help on rent, could be the tipping point that closes businesses down.

“I can’t really express the urgency of this without swearing. It is so critical to the survival of so many businesses.”

She said the rent subsidy has gone through many changes and that has created some confusion among members. She said the government has to offer clarity and allow business to have confidence as they reopen.

Jones said a recent survey of CFIB members showed just 17 per cent had their full revenue back. She said businesses need this issue addressed and soon.

“A lot of small businesses are in big trouble and they need these supports to continue long enough so they can get back to normal sales.”

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