CHARLOTTETOWN, P.E.I. — P.E.I.’s finance minister has been asked to exempt federal benefits received by out-of-work Islanders from being taxed.
The Canada Emergency Response Benefit (CERB) benefit was introduced by the federal government as a core relief program for workers who lost their jobs due to the coronavirus pandemic. Thousands of Islanders have drawn from the program as a result of the economic downturn caused by COVID-19 related health measures.
During question period on Tuesday, Liberal MLA Heath MacDonald suggested the P.E.I. government is expecting a “tax windfall” from the thousands of Islanders collecting the benefit.
“Will the minister and her government commit to exempting Islanders from the provincial portion of the tax for CERB recipients – the people that need it most?” MacDonald asked Finance Minister Darlene Compton.
Compton did not commit to a tax exemption for CERB recipients.
“Taxes are considered part of that CERB. The federal government expects people to pay their income tax on that, as well as the province,” Compton said.
“The money is there to help Islanders get through, and we will be happy to work with any Islander that needs the help to get through COVID.”
In an interview with media, MacDonald raised the financial hardship faced by Islanders, many of whom have been forced to draw from the CERB program due to job losses. He said many will be deferring mortgage or property tax payments.
"I think you have to realize that right now we're going through a pandemic where the federal government has alleviated some pressure for some of Island society, the most vulnerable right now. And CERB did that," MacDonald said.
MacDonald did not suggest the federal government should exempt CERB benefits from federal income taxes.
Compton, in an interview, said the province is planning an increase in the basic personal exemption, which will mean an across-the-board tax cut.
But she said the income drawn from the CERB program is still income that is subject to provincial taxation.
"If you look across all of Canada, you will see that all provinces are charging. It is taxable income, and the federal government is also charging federal tax on this," Compton said.
Last week, the federal government announced that the CERB benefits will be extended for another two months.
Canada’s Parliamentary budget officer has suggested this extension will cost the federal government $17.9 billion. The PBO also warned that many CERB recipients are unaware that the benefits will be taxed and could face “unpleasant surprises” at tax time.
