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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 to halt planned federal payroll tax increases

Regina, 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.

“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 Marilyn Braun-Pollon, CFIB’s Vice-President, Prairie & Agri-business. “With CPP and QPP set to increase by at least 20 per cent over the next seven years, payroll taxes will be taking an even bigger chunk out of salaries and profit margins, putting small firms’ ability to grow, hire new staff and compete at risk.”

Depending on where their business is located, an employer faces between three and seven different payroll taxes, including CPP/QPP, EI and Workers’ Compensation. Quebec and BC have the highest cumulative payroll tax burdens in the country, with Alberta and Saskatchewan the lowest. For example, in Quebec, which has the highest number of payroll taxes, an employer has to pay $56,488 for a $50,000 salary, but the employee only takes home $46,531 (before income taxes), after their $3,469 share of payroll taxes is deducted.

Presently, there are three payroll taxes levied on employers in Saskatchewan – Employment Insurance (EI), Canada Pension Plan (CPP) and Workers’ Compensation. EI and CPP are levied by the federal government and they are standard throughout the country. “While Saskatchewan fares better than most provinces in terms of payroll tax burden, we believe one solution to further reduce this burden is to have the Saskatchewan WCB change its funding ratio from 105-120% to 100-110%,” added Braun-Pollon. “The Board should also offer surplus distributions to employers, if its funding radio exceeds 110%.”

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, this form of taxation is simply not sustainable.”

To arrange an interview with Marilyn Braun-Pollon, Vice-President Prairie & Agri-business, please call (306) 757-0000 or email [email protected]. You may follow CFIB Saskatchewan on Twitter @cfibsk.

About CFIB
The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small and medium-sized businesses with 110,000 members (5.250 in Saskatchewan) 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. Learn more at cfib.ca.