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New CFIB report: Small business is getting crushed under the weight of payroll taxes

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It’s time for Manitoba’s party leaders to commit to ending the job killing HE Levy

Winnipeg, August 28, 2019 – Payroll taxes are taking a big bite out of employers’ and employees’ earnings and it is about to get even bigger, says the Canadian Federation of Independent Business (CFIB). CFIB’s new ground-breaking report, Taxing Payroll: A Barrier to Business Growth and Competitiveness, finds payroll taxes place a disproportionate burden of taxation on smaller businesses. The report reveals 77 per cent of entrepreneurs agree payroll taxes are the most harmful tax for their business. 

In Manitoba, the Health and Post Secondary Education Tax Levy (HE Levy) is one of most punitive payroll taxes in the country for many small businesses. 

“Payroll taxes are one of the most detrimental forms of taxation for small firms, because they impose a heavy administrative burden and are not scaled up or down depending on how profitable a business is,” said Jonathan Alward, CFIB’s director of provincial affairs in Manitoba. “Unfortunately, Manitoba has the fourth highest payroll tax burden in the country, largely due to the HE Levy.”

Depending on where their business is located, an employer faces between three and seven different payroll taxes, including CPP/QPP, EI and Workers’ Compensation. CFIB is asking all provincial governments to eliminate provincial health and/or education payroll taxes within the next 10 years. In the meantime, governments should introduce an exemption threshold or raise the existing one to at least $2.5 million in total annual payroll and index it to inflation in order to help small firms stay profitable.

Recommendations for the 2019 Manitoba election
Leading up to the September 10th provincial election, CFIB sent a survey to all political party leaders and is challenging them to address Manitoba’s high payroll tax burden by committing to:

  • Raise Manitoba’s Health and Post Secondary Education Tax Levy exemption to $2.5 million and index the exemption to inflation
  • Implement a longer-term plan to phase out the Health and Post Secondary Education Tax Levy

“It’s time for all Manitoba party leaders to stand up for small businesses by ending the job killing HE Levy,” added Alward. “I’ve heard from businesses with just 16 employees who can’t afford to grow or pay their employees more because of this punishing 4.3% tax, and because it isn’t even indexed to inflation.” 

Federal payroll taxes                                                                                                                 Canada Pension Plan (CPP) premiums and Quebec Pension Plan (QPP) premiums are set to increase by at least 20 per cent over the next seven years, so payroll taxes will be taking an even larger piece out of salaries and profit margins, putting small firms’ ability to grow, hire new staff and compete at risk.

Recommendations for the 2019 federal election
As policy makers gear up for the upcoming federal election, CFIB is asking all parties to address the payroll tax burden by committing to:

  • Halting or slowing down additional CPP increases after 2019
  • Implementing an EI credit which effectively lowers the rate for small businesses
  • Introducing an EI holiday for hiring youth aged 15 to 24

“Governments need to move away from payroll taxes if they want to avoid suffocating small businesses and the labour market,” added Marvin Cruz, Senior Research Analyst at CFIB. “In the short-term, employers usually try to offset their payroll tax costs by raising prices or cutting back on hiring. In the long run, however, payroll taxes lead to lower wages for employees. Betting heavily on this form of taxation is clearly not sustainable.”

To arrange an interview with Jonathan Alward, Director of Provincial Affairs for Manitoba, please call 204-982-0817 or email [email protected]. You can also follow CFIB Manitoba on Twitter @cfibMB.

You can also learn more about CFIB’s recommendations to Manitoba’s party leaders for the upcoming provincial election by reading the Manitoba Election 2019: Small Business Platform.

About CFIB
The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small and medium-sized businesses with 110,000 members (4,800 in Manitoba) across every industry and region. CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings.