The civil servants’ strike will not only reduce GDP if it extends, but it may also make it harder to calculate interest on your tax refunds or balances due.
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Adding in the ripple effects on households and businesses, a month-long strike could cost a percentage point (1%) of GDP growth on an annualized basis, according to Scotiabank economist Derek Holt.
It’s rare for Canadian governments to “shut down” for a few weeks, as sometimes happens in the United States, but this strike, which he sees as a partial shutdown, “is probably the biggest, the longest, and the most disruptive,” he wrote in a notice to investors.
Impact on government spending
“For every day that one-third of the federal workforce remains unemployed, and assuming the impact on federal spending is proportionate, the drop in federal spending would be about $200 million,” he believes.
Between a third and a half of federal employees would be affected by the current strike.
Tax Disadvantages
Among them are employees of the Canada Revenue Agency (CRA).
Photo from the Scotiabank website
Derek Holt
Scotiabank economist
The latter announced in a press release that it did not intend to extend the deadlines for filing tax returns. However, the strike could not only delay customers’ tax refunds, but also raise the question of interest to be paid or received.
If you have an outstanding balance for 2022 and cannot pay it by April 30, IRS will charge you interest at 9% from May 1, 2023, compounded daily.
On the other hand, if the CRA owes you a refund, the agency will pay you the same—at 9% interest per day.
However, it is calculated from the later of the following three dates: May 30, 2023, the 30th day after filing your tax return, or the day you paid an overpaid tax.
In other words, the government pays no interest for 30 days after filing a statement, but pays interest thereafter if it misses that time. A situation that is very rare… except in the case of a strike.
Will the CRA pay?
When asked if the deadlines for both refunds and balances due could be adjusted, the Canada Revenue Agency was unable to provide us with a timely response.
A spokesperson, Jeffrey Lansing, was preparing a response as of press time.
Politically risky
But according to chartered accountant and auditor François Richer, it would come as a great surprise to Canada’s tax authority to impose interest on taxpayers who filed their tax returns on time but whose payment was delayed until after March 30 because of the strike.
“I don’t think getting people to pay interest because of the strike would stand the political test,” he said.
However, it will be interesting for those entitled to reimbursement to see whether the CRA will have to pay more interest than usual if the strike is extended.
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