By Ryan Mallough
Published in the Toronto Sun on November 2, 2019
Now that Halloween is behind us, Ontario’s small business owners are hoping the government will get into the holiday spirit a little early this year with next week’s fall economic statement.
Balancing the budget was small business owners’ top priority for the incoming government during last year’s provincial election campaign. Finance Minister Rod Phillips’ comments at the Canadian Club in early October on the government’s progress on getting back to balance are encouraging, but as we get closer to balance, small business owners will be looking for tax relief.
Here are some of the things small business owners will be watching for when the government gives their financial update on Wednesday:
Reducing the small business tax rate
During the election campaign, Premier Doug Ford promised to reduce the small business tax rate by dropping it from 3.5% to 3.2%. This move would be a good one with entrepreneurs just as concerned about affordability as the general public.
While the government is making significant progress on reducing the province’s regulatory burden, small business owners still deal with disproportionately higher regulatory costs, not to mention added pressure from a tight labour market and increasing property taxes and rent payments.
Lowering the small business tax rate could help relieve some of that pressure, allowing businesses to stay competitive and continue to invest in their employees. It could also help ease the burden of the inflationary increases to electricity rates that kicked in on Nov. 1, and the annual inflationary minimum wage increases scheduled to return October of next year.
Increasing the EHT threshold
While not a campaign commitment, the government could also go a long way towards taking some of the pressure off small businesses by moving on the province’s payroll tax: The Employer Health Tax (EHT).
While the EHT threshold was increased from $450,000 to $490,000 in payroll last year, it has been increased by only about $90,000 since it was introduced in the 1990s – well behind the rate of inflation and last year’s 23% spike in the minimum wage that saw many business owners cross the threshold and forced to pay the tax for the first time.
Increasing the threshold to $1 million would protect smaller businesses, encourage more hiring, and provide payroll relief to employers of all sizes across the province. Introducing a plan and timeline now on how and when to get to the $1 million threshold would signal to businesses that government understands their pain.
Back in the spring budget, the government announced that it would look into Ontario’s property tax system with a focus on supporting a competitive business environment.
While the discrepancy between commercial and residential rates has long been a source of frustration for business owners across the province — as development in downtown Toronto and the GTA continues to boom — skyrocketing property assessments are crushing small business owners.
In some cases, businesses have seen their property tax bill more than quadruple in recent years, thanks to the “highest and best use” rule, which sees the property taxed at what it could be (like, a 50-story condo tower), instead of what it is (like a one-story restaurant).
While municipalities are responsible for property tax rates, it’s the province that has power on the assessments. It was heartening to see a property tax system review highlighted in the government’s recent red tape package. Business owners will be watching the Fall Economic Statement closely for an update and any indication on next steps.
Overall, the government’s first year has been a very good one for small business owners. As we enter the second, we’re looking to the provincial government to keep that momentum going, and to make sure Ontario remains open for business.
Mallough is director of provincial affairs, Ontario, for the Canadian Federation of Independent Business