New loan program for large corporations open to more abuse than CERB, experts say
The federal government’s Large Employer Emergency Financing Facility (LEEFF) is now open for applications. The program will allow large corporations, those making over $300 million in annual revenues, to apply for loans of, at least, $60 million.
The program, which was announced last week, worried critics who viewed the loans as no-strings-attached bailouts for large corporations. Additional details about the LEEFF, released today, show that there are indeed some strings attached.
The terms and conditions of these loans require borrowing companies to publish an “annual climate-related financial disclosure report,” highlighting their plans to address the climate crisis. Borrowers will also be subject to certain restrictions on dividend issuance, share buybacks, and executive compensation.
The most notable provision, however, was one involving repayment of loans. Borrowing corporations, if they are publicly traded, will be required to give the government the option to take an ownership stake equal to 15 percent of the loan’s principal. Alternatively, the government can demand to be paid the equivalent in cash.
The motive behind this idea is to “make sure that if the firm does well that Canadians, and Canadian taxpayers, share in that upside” says Finance Minister Bill Morneau.
Despite these conditions, there are still concerns that the LEEFF program will be susceptible to abuse by large corporations. As Toby Sanger of Canadians for Tax Fairness points out the program does “nothing on maintaining jobs, paying taxes, or greater transparency.” This leaves the potential for abuse that is “much larger” says Sanger, than the potential abuse of the CERB program.
Last week, allegations of CERB fraud made news headlines, with right-wing politicians and groups seizing on the opportunity to attack the unemployment benefit.
One of the biggest objections to the LEEFF was that tax-avoiding companies would be able to access public funds. Critics had urged the government to refuse any aid to companies that use tax havens. While the government did eventually agree to refuse aid to companies convicted of tax evasion, large corporations are rarely found guilty of, or even charged with, these crimes.
Experts say that the government could have used these loans as an opportunity to demand transparency when it comes to large corporation’s finances. Such a move would allow tax agencies to crack down on tax-evading companies, especially those that are abusing aid programs when they have funds hidden offshore.
On the other hand, there are those that argue these loans should have had no strings attached whatsoever. Economist Jim Stanford took issue with this claim in an appearance on The Evan Solomon Show.
“There’s a bit of a double standard here,” says Stanford, “Conservatives are railing on about supposedly people collecting CERB when they’re not entitled to it (…) but when it comes to big business getting 60 million dollars, suddenly we are told that the requirements and due diligence are too onerous.”