Monty Python and the Royal Bank of Canada

Monty Python and the Royal Bank of Canada

August 11, 2020

I’ve got a good one for you.

Two of Canada’s largest and most profitable companies are set to receive COVID relief money from the government even though they are already highly profitable and have so much cash on hand they’re sending it back to shareholders.

Sounds absurd, right? Like something Monty Python would dream up, right?

johncleese

John Cleese – cofounder of Monty Python’s Flying Circus

No – this is, unfortunately, not fiction by John Cleese. It’s Liberal government policy cooked up by Bill Morneau and Justin Trudeau.  

The details of it were highlighted by Alan Lanthier, one of Canada’s leading accountants and a former advisor to the Department of Finance and the Canada Revenue Agency in this recent Globe and Mail column.

Here’s the scoop: the Canada Emergency Wage Subsidy (CEWS) was rolled out last March and saw the federal government (translation: you and me) pick up the tab for 75% for employees’ wages – both active and laid off – in any company that suffered a 30% decline or more in revenue in any four week period.

OK so far. Fair enough.

Here’s where things change: last month the government extended the program to December. But, in doing so, instead of receiving a wage subsidy if a company suffered a 30% decline, the new rules have it so that an employer suffering ANY revenue decline at all would be deemed eligible.

As Lanthier points out, the 75% rate for active employees has been replaced by lower rates, but with any revenue decline giving rise to the subsidy, tens of millions of dollars will be given to corporations that don’t need the cash.

  • Rogers Communications had a revenue decline of 17% in the quarter ending June as compared to 2019. But it still had net income (profit) of $279 million and paid most of that ($252 million) in dividends. Despite that, under the new rules, Rogers will qualify for a nice government (translation: from you and me) subsidy cheque of $25 million for the month of July alone.
  • Here’s another example: Royal Bank of Canada, one of Canada’s largest corporations and by far our biggest bank. Lanthier did the same calculations here. RBC had a quarterly revenue decline of 10 per cent to the end of April, 2020. If that decline persists into July, RBC will receive $40 million from the government (translation: from you and me) even though it made $1.5 billion and paid it all out in dividends.

Wait. It gets worse.

Rogers and RBC work in two very protected sectors of the economy. They are sheltered from foreign competition in cable/wireless and in banking services. Unlike most Canadians, these big companies don’t have to compete with huge American, European or Asian rivals.

Which is why Canadians’ cell phone bills and bank fees are the highest in the world.

So, if we get this right, what we have is a Liberal government giving away money to companies who not only don’t need it, but who are also protected from global competition and raking in exorbitant fees from the very taxpayers that are sending cheques to them.

Unbelievable.

Sounds like a Monte Python sketch. But, no, it’s our Liberal government in action.

 

- Rick Peterson


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