How the Canadian government can use fiscal policies to mitigate the effects of covid-19 in the economy
INTRODUCTION
In the wake of the Covid 19 pandemic, many sectors of the global economy have been hard hit. It is expected that a significant adverse impact on the worldwide economy shall be realized. Governments globally, Canada, included having to put measures to curb the downturn with monetary and fiscal support. According to baseline envision a significant contraction in the global GDP of 2020 is highly expected. This data will help in mitigating the effects and provide relief for businesses and households. In an economy that is undergoing depression, the Canadian government can use the expansionary fiscal policy. These policies should be put in place to help rebuild in the long and short-term to strengthen health sector and specific stimulus measures to aid rejuvenate economies.
Measures should be put by the government of Canada to help in cushioning the economy from the regression and shifting aggregate demand as discussed;
Support measures for businesses:
Supporting measures is a measure to help small and medium enterprises maintain a consistent flow of cash. Since most companies are experiencing a sharp curve in liquidity decline, this has hindered their capacity to remit wages, service goods, debt interests and taxes, and debts. The government of Canada can generate all or part of the bank loans values granted to credible businesses. For small or those in affected sectors, the government may offer cash grants and interest-free loans. The government can also introduce deferrals for tax payments for corporate income tax; personal income tax payments added value tax and national social security contributions. The government should help companies keep their employees by putting in place or enhancing the voluntary and availability of short-term work programmes. This helps provide public income support to workers whose working hours have been reduced or laid off temporarily, but the contracts they signed with the companies or businesses they work in are still valid.
The government should introduce measures to allow carry-back of losses for the tax year 2020. This will help taxpayers carry back their 2020 losses against profits earned in previous fiscal years. For small businesses, the government should waiver property taxes and presumptive taxes. This may also include a reduction in vehicle taxes and water wage taxes. Tourism and airline companies have been profoundly affected, and the government should waiver specific levies on them.
Measures to support Households
To sustain the household circulation of cash, the Canadian government should extend households plans of payments for those families that strain in tax payments and extend tax filing deadlines or tax deferrals. These should apply to personal income tax and property taxes. These should target households with low income or assets below a particular worth. The government should put in place social protection systems to provide alternative incomes to families hit by sicknesses, loss of jobs, or a decline in revenue, thus offering automatic stabilization of the affected households. The government should consider direct transfers of income rather than through the tax systems for income redistribution since there is a necessity to offer financial help to the more vulnerable households during this pandemic.
Measures for supporting investment and consumption
The government should explore introducing systems to boost consumption and investment, which include short term positive adjustment for write-offs of assets of low value and also inclusive of depreciation acceleration. The government should waiver or exempt manufacturing companies from import tax for a specified duration. The provision of tax preference treatment to help boost investments and health-related expenditures should be given priority. This includes reduction of VAT input on items sponsored by institutions or increases Corporate Income Tax and Personal Income Tax deductions for purposes of donations by businesses and families to the health sector. To efficiently and cheaply acquire health devices and equipment, the government should introduce policies to enhance the importations of medical input to curb the virus. This includes the short term elimination of duties levied on imports of health devices equipment and medicines. Special Corporate Income Tax waiver for businesses engaged in the production of crucial supplies related to Corona Virus prevention, protection and control should be introduced. Budgeting for the equipment in totality to help in the expansion of production of devices should be considered. The medical personnel and immigration staff should have special allowances and payment to health officers that have contacted the deadly virus.
Changes in government Purchases
The Canadian government can increase its purchases and projects. Projects that enhance job creation like building more highway, railways, and government parastatals may increase job opportunities to the citizens, thus cushioning the households from the harsh economic time hence increasing the demand aggregate.
In conclusion, fiscal policy has been used in the recent pasts when economies faced depression and had helped in ensuring economies return to stability. Macroeconomies of the world are boring ideas from each other and helping in combating the pandemic as a family.