Canada’s 2021 Budget: The CLA’s Response

We are disappointed that the world-class innovation and experience of the Canadian fintech lending sector is not harnessed in Canada’s economic recovery plans as it has been successfully in the UK, US and Australia. We are pleased, however, that the government recognizes that the digital economy is critical to growing a more prosperous economy. Fintech innovation is an essential pillar in supporting the health and resilience of the economy and our sector will continue to play a prominent role.

We plan on continuing to work harmoniously with the government to ensure that all Canadian consumers and small businesses have access to safe and open credit.

Sections of Interest in the Canadian 2021 Federal Budget

General Highlights: 

  • $101.4 billion in new spending, aimed at both supporting the country through the third COVID-19 wave, and stimulating the economic recovery post-pandemic.
  • Deficit will remain at $354.2 billion in 2020-21 and expected to gradually decline to $30.7 billion in 2025-26 (1% of GDP).
  • Projection of 1 million new jobs created by the end of the year.

Primary Sections that Impact the Fintech Sector: 

Extending the Canada Emergency Business Account (pp. 85) 

  • In further recognition of the ongoing pandemic, the government recently extended the application deadline for CEBA to June 30, 2021.
  • Budget 2021 proposes to extend the application deadline for similar support under the Regional Relief and Recovery Fund and the Indigenous Business Initiative until June 30, 2021. 
  • Budget 2021 proposes to provide up to $80 million in 2021-22, on a cash basis, for the Community Futures Network of Canada and regional development agencies, and to shift remaining funds under the Indigenous Business Initiative into 2021-22, to support an extended application deadline for the Regional Relief and Recovery Fund and Indigenous Business Initiative until June 30, 2021. This would support small businesses in rural communities so they can continue to serve local populations.

Taking Action to Address Predatory Lending (pp. 123 & 485)

  • To help fight predatory lending, the Government of Canada will launch a consultation on lowering the criminal rate of interest in the Criminal Code of Canada applicable to, among other things, installment loans offered by payday lenders.
  • This consultation has the potential to benefit all Canadians and enhance consumer protection, particularly for lower and modest income Canadians, who may rely on high interest short-term credit to meet everyday living expenses, or unanticipated emergencies.

Better Labour Protections for Gig Workers (pp. 121)

  • Budget 2021 reiterates the government’s commitment to making legislative changes to improve labour protection for gig workers, including those who work through digital platforms. Following the conclusion of consultations recently launched on this topic by the Minister of Labour, the government will bring forward amendments to the Canada Labour Code to make these new, modernized protections a reality.

New Digital Services Tax (pp. 304) – more relevant to multinational companies. 

  • Budget 2021 proposes to implement a Digital Services Tax at a rate of 3 percent on revenue from digital services that rely on data and content contributions from Canadian users. The tax would apply to large businesses with gross revenue of 750 million euros or more. It would apply as of January 1, 2022, until an acceptable multilateral approach comes into effect. This would help ensure that Canada’s tax rules capture new ways in which businesses carry out value-creating activities

Enhancing the Canada Small Business Financing Program (pp. 134-135) 

  • Proposes to improve the Canada Small Business Financing Program through amendments to the Canada Small Business Financing Act and its regulations. 
  • These proposed amendments include: – Expanding loan class eligibility to include lending against intellectual property and start-up assets and expenses. – Increasing the maximum loan amount from $350,000 to $500,000 and extending the loan coverage period from 10 to 15 years for equipment and leasehold improvements. – Expanding borrower eligibility to include non-profit and charitable social enterprises. – Introducing a new line of credit product to help with liquidity and cover short-term working capital needs. 

Other Sections to Consider:

4.2: Helping SMBs recover and grow (government offering microloans for small businesses to go digital). 

4.3, pp. 139: Investing in Canadian Innovators Through a Renewed Venture Capital Catalyst Initiative. 

4.4: Making it Easier to do Business in Canada (Reducing Credit Card Transaction Fees). 

4.7: Supporting a Digital Economy.

Dean Velentzas
Head of Policy 
Canadian Lenders Association