Canada Revenue Agency: Picking Up a $5 billion Tab for the CRB Extension

The CRA has been quite generous to Canadians ever since the pandemic hit, and even though benefit payments are a massive resource drain, the CRA seems committed.

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The financial repercussions of the pandemic and the hardships it has caused individuals and businesses will leave a permanent scar on our societies and economies. And while most governments are committed to sheltering their people from the worst of it, they are paying a hefty price for that protection.

The initial pandemic response funding that included the generous Canadian Emergency Response Benefit (CERB) program cost the government about $74 billion. And even though its partial successor, the CRB, was supposed to be more discerning about payment disbursements (to encourage recipients to rejoin the marketplace as soon as possible), it still costs the government a lot.

Now, a CRB extension has been announced, and it’s expected to increase the total cost of CRB by at least $5 billion.

CRB extension

The CRB has now been extended till September 2021. The additional 12 weeks in the CRB program pays $500 a week (before deductions) to people who haven’t found jobs or paid work yet and don’t qualify for the EI. This extension is expected to cost the government an additional $5 billion, push the total tab to about $50 billion.

Even though it’s imperative for the sustenance of workers suffering from the financial impact of the COVID and a still-struggling economy, it’s still a massive resource drain for the government.

The importance of saving and investing

The government will (hopefully) keep providing enough funds for sustenance to people who can’t find paid work despite exhausting every effort. But the pandemic should have helped everyone realize how significant savings are. If more people had savings and nest eggs to rely upon during these harsh economic times, there would have been a lesser financial strain on the government coffers.

But saving alone isn’t enough. You need to grow your savings as well, so they might be enough to sustain you for a while, even if you don’t have a primary income source. Naturally, these emergency savings need to go to a  Tax-Free Savings Account (TFSA) so they’re at your disposal whenever you need them.

If you are starting now, one investment that might help you create a decent-sized cash nest-egg in your TFSA is very generous dividend stock, Canoe EIT Income Fund (TSX:EIT.UN). The fund is offering a mouthwatering yield of 10.6%. If it doesn’t slash its dividends, it will earn you more than the capital investment you make in this fund in about a decade.

The fund is composed of some of the largest, most reputable companies from both Canada and the US. The equity-selection approach of this fund is to maximize monthly distributions. While it doesn’t offer much in the way of capital gain, it can be a powerful dividend addition to your portfolio. If you can invest a decent sum in this fund and leave it in your TFSA, it can keep producing cash for you to use in the future.

If you invest $30,000 in the company and lock in the 10.6% yield, the company might help you accumulate enough cash in five years to sustain you for about eight months in place of $2,000 a month benefit payments. And the best part is that it would be tax-free.

Foolish takeaway

The CRA and the government might extend the CRB till the end of this year, but the chances of it carrying over to the next year are slim. Even if there is still a considerable number of people who are unemployed by the end of this year, the chances are that the government might try to bring them under the EI umbrella (after making some changes to the program).

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned.

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