CFIB members save on Amex
Attract more customers with a lower rate
By Dan Kelly
Published in the Financial Post March 24, 2017
One of the biggest days of the year for any head of an advocacy organization is federal budget day (a colleague of mine calls it the lobbyist’s Christmas). While most lobby groups are anxious to learn how much the government will spend on them or their cause, my group – the Canadian Federation of Independent Business (CFIB) – is primarily focused on how much of their own income Ottawa will let our members keep.
Last Wednesday’s budget was a dramatic improvement over last year’s inaugural effort for the new government. In fact, my primary emotion while reading the 2017 budget was one of relief. In the leadup to budget day, there were persistent rumours the government would raise taxes on capital gains or even cut the Lifetime Capital Gains Exemption, or as I call it, the retirement fund for most small business owners. These things did not happen, and that is good news.
The more troubling part is that many of these key small business tax measures are now up for review later this year. The budget flags concerns that some of the tax provisions available to private corporations can “inappropriately reduce personal taxes of high-income earners. It lists worries around the ability of small business to “sprinkle” income to family members with lower personal tax rates, the ability to hold “passive” investment income in the corporation and convert business income to capital gains. While I have no problem with government ensuring Canadians are not setting up fake businesses or bending rules to take unfair advantage, several of these provisions are important measures that make the endless hard work associated with being an entrepreneur worth it.
The budget does have several big positives for small business. Several of the new training investments look promising, including an additional $1.8 billion to expand the Labour Market Development Agreement and an additional $900 million on Workforce Development Agreements. Training – particularly informal, on-the-job training — is incredibly important and expensive for entrepreneurs to take on. There is also a new procurement initiative to support innovative entrepreneurs, and measures to make it faster and easier to employ foreign workers. In fact, the current government is taking a far more reasoned and business-friendly approach to the Temporary Foreign Worker program than its predecessor.
I also love the decision to allow firms of all sizes to use fully electronic T4s for workers, replacing the paper-based process. This, combined with a renewed effort on an inter-provincial Canada Free Trade Agreement, are signs that the government is serious about taking scissors to the tangled web of red tape stifling growth and innovation.
And while the review of key small business tax measures is worrisome on many levels, I’m pleased the government has expressed an openness to consider the tax impediments for family businesses to pass on a firm from one generation to the next. This builds on terrific private members’ bills from NDP MP (and leadership candidate) Guy Caron and Liberal MP Emmanuel Dubourg, both of whom have fought to ensure it is not more expensive to sell a business within your family than it is to a stranger.
The government’s projection for an increase in the Employment Insurance rate by three per cent in 2018 is another negative development to come out of the budget for small business owners. The payroll budgets of every business are now slated to increase for six straight years (taking into account that the 2018 EI hike will be followed by five years of CPP premium hikes starting in 2019). Not only does this mean a smaller paycheque for Canadian workers on Jan. 1 each year, it hampers small businesses' ability to raise salaries and wages for employees.
And while there were no new massive spending initiatives in the 2017 budget, the legacy of the 2016 version appears to have locked in deficits going forward. Concerns among entrepreneurs over government debt and deficits has risen to become the No. 2 issue for our members, just behind the total tax burden. Unfortunately, this budget provides no plan to get back to balance over the next five years – in fact, there isn’t even a plan to get down to the $10 billion deficit promise of the last election. I urge the government to introduce a plan to get back to a balanced budget before today’s deficits become tomorrow’s tax hikes.
So while the budget was a relief for what it didn’t do, there were also some important positive signals for small business owners. It appears the government is watching carefully what is going on south of the border, and adjusting plans accordingly. This is important. I believe the government is doing an excellent job on Canada’s trade and international relationships, particularly in Europe and in the U.S., under very challenging circumstances.
But there are certainly challenging circumstances for Canada’s entrepreneurs too. In the months ahead, I’ll be strongly defending the interests of CFIB’s 109,000 members during the review of private business tax rules. And, as we’ve done for 45 years, I’ll be the first to slam government when they take actions to harm Canada’s middle-class small business owners and commend them when they move the ball forward.
Thi story was originally published in the Financial Post.