COVID-19 Government Aid
Canadian governments at all levels responded to COVID-19 by telling people to stay home and shuttering large parts of the economy resulting in massive job losses along with creating massive liabilities for business owners and threatening the survival of businesses ranging from theatres, to restaurants and airlines.
Federal COVID-19 relief as of April 24, 2020 was $145.6 billion according to news media. In the first month COVID-19 emergency funding was already 3.5 times of Canadians’ old tax debt and it has continued to rise rapidly. As of May 26, 2020 news media reported that the $2,000 Canada Emergency Response Benefit had paid $40 billion dollars to 8 million Canadians. 8 million people represents a staggering 42% of Canada’s workforce, including sole proprietors, and self-employed Canadians.
The Government of Canada also immediately extended tax filing and payment deadlines from April 30 to September 1, 2020, ostensibly to reduce Canadians’ stress and anxiety of being unable to pay their outstanding 2019 taxes due to COVID-19 decimating their financial capacity to pay their regular bills for shelter, food and communications, let alone any outstanding taxes.
Canadians’ Tax Debts
In 2018, Canada Revenue Agency (CRA) reported that uncollected taxes had risen to $44 billion and “…unpaid tax owed is set to hit more than $47 billion by 2020. The steady increase in the tax debt — up by about $2 billion annually [since 2015] — comes despite a major investment in the 2016 federal budget to wrestle down fast-rising levels of uncollected tax debt.”
Importantly, “close to half of the unpaid tax debt is owed by individual Canadians. Corporations and businesses account for the remainder, which includes unpaid GST and payroll deductions not turned over to Ottawa.”
To be clear, tax debt includes neither tax revenue lost to the underground economy (the black market) nor tax evasion, for instance through offshore tax havens. Tax debt means tax owed by Canadians who actually have filed their individual and business tax returns, i.e. people who rather than cheating are dealing with capacity to pay issues.
Universal Tax Debt Relief
Universal Tax Debt Relief is an efficient way to give affected Canadians a chance at recovery and rebuilding their lives, or at least some peace-of-mind. Meaningful tax debt amnesty has to extend to 2019 and perhaps include COVID-19 Year 1, ie the current year.
It would give affected Canadians a chance to wind down their businesses responsibly, perhaps even avoid personal and business bankruptcies, and stop having the millstone of CRA debt around their necks, potentially until the end of their lives. An utterly hopeless situation.
Eliminating their CRA debt would give affected Canadians a chance to begin the long but hopeful process of rebuilding their lives, their credit and start with a fresh slate in terms of their relationship with CRA. They could work to avoid poverty becoming a burden to Canada’s social safety system.
Unprecendented? Not really.
CRA has not collected from tax evaders despite having access to the Panama Papers and the Paradise Papers, for instance.
CRA has hired more tax collectors since 2015 to deal with the tax debt backlog, and they have assigned a few staff to tax evasion as well. But CRA simply does not have sufficient enforcement capacity and uncollected tax debt keeps growing – and no one seems to track what the other group, tax evaders, are doing overseas to avoid or evade taxes in Canada..
In 2012, the federal government simply wiped out about 280,000 skilled immigrant applications because they were backlogged and doing so gave the government a clean slate rather than have a years-old millstone around its ability to act in the present time.
But what about fairness?
COVID-19 isn’t fair. Falling into debt because of following ones passion
isn’t fair. Missing a single tax payment and learning the hard way how big a stick the government carries isn’t fair. Life isn’t fair.
My proposals isn’t suggesting anyone should not be paying their taxes – I pay mine and I expect all tax payers to pay theirs. This is simply a
recognition that there are groups of people who have ended up in dire financial situations, while they have been building businesses, communities and making all manner of contributions. With COVID-19 all bets are off. The fall out will include business and individual failures. This is a chance to give back hope for a better day.
COVID-19 relief has been fast and effective at saving the lives of millions of Canadians. It is time to save the lives of those Canadians who have been living under the unyielding choke-hold of tax debt and CRA tax collections.
Some added notes
Tax Debt and CRA’s punitive penalty and compound interest regime
CRA uses a punitive daily compound interest regime coupled with severe penalties for late filing or not being able to pay all taxes by the due date. This is applied in the harshest ways related to payroll taxes. GST debt and income tax is treated with somewhat less punishment in comparison. The penalties and compound interest exceed the average profit margin of many businesses by a wide margin, making catching up exceedingly difficult, if not impossible.
“The penalty for late filing payroll remittances is:
- 3% if the amount is one to three days late
- 5% if it is four or five days late
- 7% if it is six or seven days late
- 10% if it is more than seven days late, or if no amount is remitted
- 20% if this is the second or subsequent time you are assessed this penalty in a calendar year, if the failures were made knowingly or under circumstances of gross negligence”
Amongst other penalties there is a “penalty for failure to file information returns over the Internet.” And for some tax remitting organizations, “payments made on the due date but not at a financial institution can be charged a penalty of 3% of the amount due.”
Importantly, any monies owned to CRA including penalties and interest CANNOT be used as a tax write off. Normally, interest on a loan is a tax write off, but interest on CRA debt has to be paid out of after-tax income, making paying old debts dauntingly difficult.
Getting a loan to pay off CRA debt?
Banks will not make loans to people carrying CRA debt. Loan sharks on the other hand charge more than 30% on loans they give – again, most businesses do not achieve such high profit margins. This spiral of despair is a set up for failure.
Does bankruptcy wipe out CRA debt?
Important to understand is that debt to CRA is unlike any other debt – even in bankruptcy CRA debt is not automatically wiped out and can persist to the end of a person’s life. In effect CRA can keep a bankrupt person from ever emerging from bankruptcy. CRA can and does claw back Canada Pension Plan payments, which average around $650 a month, leaving seniors with tax debt in a despairing situation.
A sector analysis series #1
Creative Commons Licence CC BY-SA (i.e. use in any way you want with attribution of source: “Inga Petri, Strategic Moves, May 17, 2020”)
Public health officials in Canada ordered dine-in restaurants closed everywhere during March 2020. Now in mid-May, they are musing about reopening restaurants with new obligations, centred on 2 metre distancing, disinfecting surfaces and perhaps more.
That potential “permission” to “open” cannot result in thinking restaurants and their owners wouldn’t require continued financial support.
The reality check
2018 financial data from Statistics Canada available at http://www.ic.gc.ca/eic/site/pp-pp.nsf/eng/home shows that for the 35,514 full-service restaurants with sales between $30,000 to $5 million (data for those earning above $5 million is suppressed):
- 35% did not generate any profit at all, i.e. they were operating at a loss.
- The other 65% turned a profit of 7.6% on average, representing $24,400 for the year.
That means a profitable restaurant in Canada makes money only 4 weeks out of 52 on average. It also means a restaurant owner’s average annual profit is less than minimum wage. And no, many sole proprietors do not pay themselves a regular wage; instead keeping everything working in their business. Anyone can see the high risk restaurateurs take and how tenuous their existence is.
In the Yukon, where I live, the numbers are a little better: only 22% do not report any profit and of the 78% that do, the average profit is 9.3% representing $66,000 on average in 2018. Nonetheless these figures show how little slack there is and how all the money for the years comes from the now cancelled summer tourist season.
This data makes clear: the average restaurant, closed down already for two months due to the public health orders, is already bankrupt. Re-opening obligations are shaping up to be costly and won’t result in lower staffing complements despite serving far fewer customers due to new labour intensive cleaning regimes. There is simply no economic case to reopen for the great majority of dine-in restaurants.
Significant direct contributions to Canadians
Through the risk borne by them, restaurateurs have been contributing far-reaching benefits to Canada’s economy: according to Government of Canada data, the average dine-in restaurant had $765,600 in sales. Of that $250,300 went to labour costs and wages. Purchases and materials that are part of the cost of goods sold totalled $273,900. Rent accounted for $65,300 and so on.
And there are many more indirect, restaurant owners have been building communities, contributed to quality of life, played a large part in attracting and retaining a skilled workforce, growing tourism through the culinary arts and memorable dining experiences, supporting charities, paying staff, helping put young people through school, feeding people, all while breaking their backs and bank accounts.
In short, the direct and related economic activity generated by the restaurant sector is worth billions to Canadians and the Canadian economy.
A broken model – Restaurateurs need help
COVID-19 is showing for the world to see what has been true for some time: The business model independent full-service restaurants have been forced into, largely by price competition from other food sector players, is broken and the owners are broke.
The numbers also make clear why restaurants can fall into GST and Payroll remittance tax debt, when basic break-even is so difficult to achieve. Non-remittance incurs extraordinary penalties and interest charges that can take up any monthly surplus and more. And then they are exposed to the CRA’s relentless collections and being treated as less than valuable community builders and hard-working, creative, innovative business leaders.
They need a chance at a life beyond COVID-19 and beyond a broken business model.
How can Canada help restaurants and their owners now?
A few ideas that could pull restaurants and restaurateurs back from the brink:
- Consumers have to learn to pay much more for the pleasures of eating out, especially when they don’t wish to tip 20% for servers and rather see living wages for restaurant workers, rather than below minimum wage as is the case in some jurisdictions. In the Yukon where I live it appears as though most, if not all, workers in the restaurant industry earn well above minimum wage plus tips.
- Landlords should permanently slash rents to restaurant tenants to enable restaurant owners earning a living wage and being able to invest in innovations in their business or business model.
- In addition to short-term COVID-19 Transition Grants to pay for additional public health mandated expenses and staff training, Government has to consider providing meaningful tax debt relief to allow a fresh start or at least some peace for owners.
- Sole proprietors must be considered as a special group requiring assistance. If sole proprietors are considered as “making a profit” when they barely break even before paying themselves anything, their work translates into not being able to cover their personal expenses and falling into debt.
- Local governments should revisit their zoning requirements to enable new, innovative ways of providing food services to the public. They can range from quickly enabling sidewalk patios and taking over unused parking spaces (no tourists means ample parking spaces are unused); a new breed of home-based businesses offering nano-scale/single-table/prepared-food eating experiences without the massively expensive requirements for home-based commercial kitchens; significantly reducing restaurant and liquor licensing costs.
- Canada’s provincial and territorial government-owned and run Liquor Control Boards should look at offering higher discounts or find a way to return most of their profits to their customers, i.e. bars and restaurants that must purchase alcohol at government controlled prices; allowing off-sales within every restaurant liquor license during the COVID shutdown period and 3 months beyond.
COVID-19 relief has been fast and effective at saving the financial lives of millions of Canadians. It is time to save the lives of those Canadians who have been living under the unyielding pressures of low price competition while the market demands quality food and high quality, unique dining experiences.
I am grateful to the Banff Centre for Arts and Creativity for inviting me to participate in this digital transformation summit in November 2019. Following is a responsive personal reflection on:
What do you think are the most promising ideas and activities for moving forward in a digital transformation in the arts?
Two ideas stood out to me: first, worldviews matter to how we regard and evolve our digital presence; second, the Canadian arts world is a latecomer to the digital realm—especially not-for-profit arts and arts service organizations—but it is working hard to catch up.
Indigenous Worldviews in the Digital World
These ideas kept coming back to me in several presentations, panels and hallway conversations. Bringing Indigenous worldviews and worldviews from outside western European traditions to bear on the way we conceive of the digital realm and its uses offers tremendous hope for our collective future well-being. The winners and losers paradigm that has driven digital innovation appears to reinforce—rather than improve —the real world dynamics between advantaged and disadvantaged groups; the colonizer and the colonized; the recent immigrant of colour and the predominantly white settler of European descent. By bringing the values, ways of connectedness and accountability of Indigenous peoples in Canada as well as people of colour to the forefront, we could draw on values-based frameworks of belief, thought and action that largely have eluded digital advances.
Catalytic digital investments bring art and technology together
The arts in Canada are working hard to catch up on understanding and making use of the digital realm for good. The Canada Council for the Arts said that only 39% of core applications to the Digital Strategy Fund have been funded during the first half of the fund’s life. This suggests a low understanding of the types of digital intelligence and digital transformations this fund envisioned among a majority of applicants. On the other hand, for many funded projects it is this catalytic investment that has been bringing digital technologists, strategists, consultants and not-for-profit arts organizations in closer contact. This contact appears to have begun to shift the conversation toward a greater understanding of the opportunities and challenges of the digital realm.
As new digital technologies and methods combine with massive increases in data speeds during the next decade, every sector of the arts and every stage in the creative production process will see new kinds of disruptions that challenge their traditional bricks and mortar models. By bringing technologists, digital visionaries, artists and arts organizations together to define mission-critical sector-wide issues and develop effective, scalable digital solutions, the Canadian arts sector can exert, at last, some influence in the digital world.
Today, we’ve launched digitalartsnation.ca, the website for Making Tomorrow Better: Taking Digital Action in the Performing Arts. This initiative received significant funding from the Canada Council for the Arts’ Digital Strategy Fund in spring of 2019. The nation-wide partnership led by the Atlantic Presenters Association includes the Manitoba Arts Network, BC Touring Council, Island Mountain Arts/Northern Exposure, Yukon Arts Centre / N3 and the Yellowknife Arts & Cultural Centre.
Of note: most of the participants in the face-to-face workshops live on the edges of the country. therefore we tailor content to suit the realities, including slower internet connectivity, of rural and remote communities across Canada. Because what works there, will work in urban centres, too.
These workshops are designed to help participants speak digital with confidence – that is, we will demystify and discuss the digital realm in plain English – and quickly become competent participants in arts sector conversations about leading digital tools, emerging digital innovations, and new digital business models.
Watch our upcoming workshops page and see where we are headed next!
I recently attended a workshop by Arts Impact AI, which is undertaking conversations on AI across Canada. I discovered quickly that my expectation of what Artificial Intelligence (AI) is, wasn’t quite in the right place for the conversation at hand. I expected the discussion to centre around intelligent machines thinking and working similar to humans. Where attributes like self-learning or the ability to intelligently change its programming based on new input would be explored.
We spent the morning considering algorithms capable of rapidly analyzing vast amounts of data. An intuitive example came in the form of a group exercise where group 1 developed an algorithm (five characteristics based on a set of 12 images of convicted criminals) to identify the most likely criminal in a crowd, group 2 – the computer – applied the algorithm and group 3 – the humans – were tasked to simply identify the criminal without an algorithm. My colleagues in group 1 – which was made up of people from diverse backgrounds and ethnicities who live on the traditional territories of self-governing First Nations in the Yukon (and yes, that might have mattered to our decision-making) – opted to select criteria that did not include racial stereotypes. Needless to say, we broke the machine.
Each group had serious struggles with the ethical implications of their group’s role. This was the point, of course: do the designers of algorithms simply reinforce the stereotypes based on a highly biased judicial system that disproportionately affects Indigenous people and people of colour, and often men that are visibly part of these groups; or do they write an algorithm that does not fall into those stereotypes but focuses on other aspects.
Big Data Analysis
In my way of thinking this kind of AI application lives in the realm of big data analysis. While I imagined AI to feel unfamiliar and new, this felt extremely familiar to me: As a market researcher, I have followed for years work on “big data” analysis and how with the aid of faster computers our ability to analyze truly vast data sets has increased many fold. The biggest advantage, indeed, being speed that cannot be matched by a single human brain.
The AI application this group exercise mirrored is based on the analysis of a vast amount of data, e.g. 10,000+ photographs of convicted criminals, using computer facial recognition. This analysis identifies statistical probabilities for the parameters that were set. Those probabilities are then used by humans to program an algorithm. That algorithm seeks to identify people in large crowds that match the analysis. By definition, this kind of analysis is looking to the past to inform the future; or in this case, to become the future.
The humans who build such algorithms – which itself is void of AI self-learning or the acquisition and application of new information and capacity – determine their outcome.
When these humans do not apply a greater understanding, or an ethical lens (related to systemic impacts of oppression of certain groups in society, for instance) to the parameters analyzed in the first place, or to the resulting statistical probabilities, they are bound to create algorithms that reinforce the systemic biases evident in society.
In short, they may miss a lot of criminals and identify a lot of non-criminals. In so doing, they may also ensure that more of the same groups of people are pursued with the government’s righteous rigour, resulting in higher incarceration rates for these groups. Rather than discover what is real, it perpetuates a seriously biased reality that increasingly would disadvantage specific groups. The past literally becomes the future.
AI governance as data governance
This discussion of what algorithms are today centred on big data and what we can and should do with it was fascinating. Alas, it didn’t paint a picture for me of artificial intelligence in the sci-fi sense.
In any case, as a result of this data focus, the AI governance discussion was heavy on data governance, i.e. the collection, storage and use of personal data. Personal Information Privacy and Electronic Documents Act and provincial laws govern information that is identifiable to an individual already. Canadian Anti Spam Legislation tries to combat spam and other electronic threats. There is a Do Not Call List to regulate how landlines can be used. These legislative tools tend to deal with a specific technology. This approach leaves much grey and blank space as companies explore and create more advanced technological innovations. Simply put, technology changes more rapidly than laws.
In the end I feel it is this conundrum that AI governance should address – to move away from regulating one specific technology at a time to contemplate the notion of privacy and social licence we wish to adopt in our society.
Definitions of Artificial Intelligence
Artificial intelligence (AI) is an area of computer science that emphasizes the creation of intelligent machines that work and react like humans.
Some of the activities computers with artificial intelligence are designed for include:
- – Speech recognition
- – Learning
- – Planning
- – Problem solving
4 Types of AI
- Reactive machines – e.g. Deep Blue chess playing machine
- Reactive machines have no concept of the world and therefore cannot function beyond the simple tasks for which they are programmed.
- Limited memory – e.g. autonomous vehicles
- Limited memory builds on observational data in conjunction with pre-programmed data the machines already contain
- Theory of mind – e.g. current voice assistants are an incomplete early version
- decision-making ability equal to the extent of a human mind, but by machines
- Self-awareness -so far only exists in the movies
- Self-aware AI involves machines that have human-level consciousness.
Canada Council for the Arts announced its unique Digital Strategy Fund (DSF) in March 2017 with a sense of urgency: “The fund is part of a catch-up movement for the vast majority of the arts sector, which is at risk of being less and less visible and less supported by citizens (…)” As a strategic fund, it is time-limited and was to operate from 2017 to 2021. The Digital Strategy Fund is worth $88.5 million.
UPDATE August 12, 2019
Canada Council for the Arts’ Strategy and Public Affairs supplied to me new tables on August 9, 2019. My initial analysis was based on Canada Council’s grants database information. That public information does not include the amounts committed by Council to multi-phase projects as those funds will be released based on interim project report. The different between the Grants data base as of August 9, 2019 and the actual allocated pending reports is just over $7 million, i.e. $36 million as opposed to close to 29 million. Another difference was in the year to which projects were allocated, i.e. many of the projects marked 2019 actually belong to the 2018-2019 fiscal year and are now marked 2018.The basic point of the analysis remains: less than half the available fund have been allocated so far leaving significant opportunity space for new applications to the fund.
Tables below are updated using the new data supplied by Council.
I hope it will illuminate where funding has gone and help see where the digital opportunities spaces might lie for the upcoming September 18, 2019 deadline for the next full round of funding.
In total, the DSF has spent $36 million for 352 projects for an average of $102,961 per project. (*IMPORTANT NOTE: The total number of projects funded is 352 over this period, however, multi-year projects are counted in each of the fiscal years in which funding is awarded.) 2018 saw nearly seven times as many projects funded, resulting in a quadrupling of funding allocated. The average funding in 2018 is substantially lower because it includes a round of funding for core funding recipients that maxed out at $50,000.
$36 million represents only 40% of the total ear-marked funding. It is clear: there is tremendous opportunity to obtain funds for bold digital experimentation in and a great deal of learning about the digital realm with the remaining $52 million over the next two years.
During these first two years, Digital Literacy projects have 25% of all funding allocated. Public Access and Citizen Engagement stream received 29% of funds – representing 16% of projects, while the Transformation of Organizational Models received about 26% of all funding for close to 10% of all projects. This assumes all multi-phase projects will proceed beyond their initial phases and the allocated funds will be disbursed. The Special digital projects for core grant recipients makes up about one fifth of the funds spent, but half of the projects. The multi-phase projects while few in number represent a very significant investment of the life of the projects in particular when they meet their go/no go metrics positively.
In a sector that by and large is lagging in the adoption of contemporary and leading digital tools and methods, these figures paint an encouraging picture: Not only are arts organizations embarking on becoming well versed in the use of digital tools but a considerable number are working toward producing, marketing and distributing participatory and receptive arts experiences by experimenting with and leveraging the tools and methods of the digital realm; and 34 projects representing $9.5 million ($5.7 ,million of funds have been released pending multi-phase project go decisions for later phases) are looking at what digital transformation might look like for their organizations and sectors.
These projects are predicated on partnerships and generating significant benefit for more than the lead applicant. As such seeing a segment of the arts and culture sector embracing this opportunity to obtain risk capital for strategic organizational model and business model experimentation in the digital world is encouraging.
Canada has become highly urbanized, with about 17 million Canadians living in the six largest urban centres, and more than 80% living in urban and sub-urban areas of Canada. This begged the question about the geographic distribution of funds so far.
The six largest urban centres across Canada have received 68% of all funding even though their general population comprises about about 47%. This suggests that there is a greater concentration of organizations and activities in the digital realm in the largest cities. Nonetheless, $11.5 million have gone to cities under 1 million as well as smaller jurisdictions including a few in rural and remote places. The average level of funding per project is on par when we exclude the special projects at about $103,000. Still, one of the promises (opportunities, challenges) of the digital realm is that it might create a more level playing field for geographically disadvantaged and systematically excluded places and people. There is a need to explore how smaller communities can build the capacity needed to access more of this funding.
Further analysis shows that every region in the country has benefited from the Digital Strategy Fund; and it matches quite well to the size of population, with only the three Prairie provinces under-performing significantly by the measure of general population.
Perhaps not surprising given their population base or remoteness, the Northern Territories and PEI have received funding for only 1 to 2 projects each so far. While on a population basis this would be deemed adequate, it does not reflect the depth and breadth of the arts and cultural communities.
In my work with arts and cultural organizations in every province and territory in Canada over this decade, I have seen exceptional arts communities in unlikely places and without exception they have an interest in staking a claim in the digital realm. I expect and hope to see more winning proposals from strong local arts and culture sectors in Nunavut and Yukon as well as Vancouver and Gulf Islands, BC Interior, NWT, Newfoundland, rural Maritimes as well as cottage country in Ontario.
Bottom line: with 60% of the ear-marked funding envelope not yet spent, the time is ripe for a plethora of proposals for the September 18, 2019 deadline. Plus there is money available for Digital Literacy projects under $50,000 to succeed any time you need them – indeed, you can apply as often as you need under this component!
Let’s get on it! Let’s talk!
Notes: I collated this spreadsheet DSF_2017to2020_Aug2019 from the data points on Canada Council for the Arts’ proactive disclosure website. It represents 337 projects and is based on a data pull on August 2, 2019.
The funding database for DSF does not specify the artistic disciplines or whether it belongs to an equity-seeking group.
The three funding streams allocate either up $250,000 for single phase or $500,000 for multi-phase projects, and up to 85% of total eligible costs for a new project or 50% to refine or optimize an existing one. By any measure this is a significant and unique investment in the arts and culture sector in Canada. New in 2018 was that Digital Literacy projects of up to $50,000 can be submitted any time to be approved internally at Canada Council within a few weeks, ie without convening an expert jury. Also new was that the expectations around having a partnership lead these projects has been loosened to specify that it must benefit a wider group.
Three rounds of funding have taken place: the first closed in fall 2017 with funded projects announced in April 2018, the second one closed in fall 2018 with projects announced in April 2019, and the third one targeting organizations that receive core funding from Council was published in summer 2019.