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By Dan Kelly
Published in the Financial Post October 6, 2017
Getting SMBs' trust back will be tough, but here's what we recommend to move forward
You wouldn’t know it this year, but October is supposed to be the month when we recognize the importance of small business in Canada. Small Business Week (Oct. 15) and Small Business Saturday (Oct. 21) are just days away and are typically times when politicians line up to celebrate the contributions of smaller firms. But this October, rather than lining up to celebrate small business, the federal government has chosen to kick entrepreneurs in the teeth.
This week, the government closed a 75-day consultation process on the biggest reforms to small business taxation that this country has seen in more than 40 years. The process was entirely inadequate to fully assess the implications of changes to the ways small firms share income among family members, save in their businesses and claim capital gains when passing a business onto the next generation.
On top of the incredibly harmful proposals, the government spent the past two-and-a-half months going out of its way to malign the independent business community, trying to achieve political gain by promoting the view that small business people are wealthy fat cats trying to cheat on their taxes.
But a remarkable thing happened. As a result of the deep unfairness in both the substance and the tone of the government’s proposals, we witnessed something very rare — a spontaneous, genuine response from small business owners, a group typically way too busy to mount protests and campaigns over government policy.
Business owners from coast to coast have been taking direct action, including reaching out to their MPs, setting up special websites and packing local meeting halls. The depth of this unhappiness appears to have genuinely surprised our political leaders. Fingers can get burned when one plays with class warfare.
What politicians may have also missed is that there is a growing sense on the part of entrepreneurs that governments don’t understand them, appreciate their contributions or care about their future. On top of planned hikes in Canada Pension Plan premiums, Employment Insurance, carbon taxes or pricing and provincial minimum wages, these changes appear, to many, to be the straw that may break the camel’s back.
CFIB’s submission to government and the work of the Coalition for Small Business Tax Fairness (of which CFIB is a member) have provided strong evidence from tax professionals that the proposals will: (a) affect middle income business owners who have as little as $50,000 in income; (b) raise effective tax rates on business owners to levels higher than that of personal taxpayers; and (c) create scenarios for retroactive taxation – particularly on capital gains.
It appears government is finally beginning to get the message. In outlining where this will go from here, Finance Minister Morneau has suggested five principles, including supporting small firms, keeping their taxes low, avoiding red tape, protecting family farms and business succession and testing proposals through a gender-based analysis. This is a good place to start. In fact, had he asked, CFIB might have recommended some of these principles months ago.
But details and trust are in short supply these days.
CFIB is recommending that the current proposals be dropped and replaced with a process to work with the business community to ensure there are no abuses of income tax rules.
In the meantime, CFIB will continue its campaign to inform MPs and the public about the concerns of small business owners. We will also continue our work to educate Canadians that running a small business is not an easy endeavour and is certainly not the road to riches for every individual who chooses to hang up a shingle.
For members of the public who want to support small businesses more directly, I encourage you to participate in Small Business Saturday. On Sat., Oct. 21, I invite you to visit your favourite neighbourhood spot – the local business that helps you feel at home in your community. It’s also the perfect opportunity to discover the unexpected by learning more about the variety of independent businesses in your area. Also check out shopsmallbiz.ca – an online directory of small business.
For governments too, it really isn’t too late to take a new approach to dealing with the independent business community. Yes, trust will need to be rebuilt, but small business owners are used to building things.
This story was originally published in the Financial Post.