By Dan Kelly
Published in Canadian SME on October 19, 2019
With only a few days left until the federal election, many small business owners are reviewing the party platforms to ensure they make the best choice for themselves and their business in the voting booth.They have been watching the debates, asking questions and engaging with their local candidates to learn how they intend to deal with their biggest concerns.
The good news is that all the major party platforms include proposals on how they can help small business owners succeed. While the platforms include some bad ideas too, it’s good to see some of CFIB’s longstanding policy recommendations adopted by the parties.
On October 22, Canada will wake up to a new government. Regardless of political stripe and whether we have a minority or a majority, a new government would be wise to pull the best ideas from all the party platforms. To that end, here are some great ideas from each of the party platforms that any incoming government should adopt.
Liberal Party of Canada: Ending credit card processing fees on HST/GST
Small merchants have a long history with credit card processing fees. About a decade ago, they were stuck paying exorbitant fees to accept credit card transactions, especially on premium cards, and unable to negotiate the same advantageous rates as large retailers. Since then, much has been done to right the balance with major changes adopted by both the current and previous governments. In fact, there is an additional reduction in all processing fees coming next year as part of an agreement between the federal government and Visa, Mastercard and American Express.
The Liberals recently promised to also eliminate the processing fees on HST and GST, which would save small businesses approximately $500 million per year. Sales taxes go directly to the government so it is unfair to make merchants pay fees to collect and remit them. CFIB has been asking for this measure for years and we are pleased to see the Liberal Party adopt it.
Conservative Party of Canada: Rolling back the 2017 small business tax changes
Small business owners are still deeply unhappy with the small business tax changes the government introduced in 2017. A business owner now must jump through hoops to prove the extent of their spouse’s involvement in the business in order to split dividend income. Entrepreneurs who earned passive investment income above a certain amount are now barred from accessing the small business tax rate, despite earlier promises that their investments would be grandfathered.
These new rules were nominally designed to target wealthy Canadians, but most small business owners who found themselves affected are firmly middle-class. It is good news that the Conservative Party has promised to exempt spouses from the income splitting rules and return to the pre-2017 rules for passive investments.
New Democratic Party: Ending the unfair tax treatment of family transfers of small businesses
A longstanding concern for small business owners is the tax rule that makes it more expensive to sell a business to a family member than a stranger. This issue is only becoming more pressing as Canada’s population – including small business owners – is ageing. Nearly three-quarters of small business owners plan to retire in the next 10 years and 47 percent within the next five. Many are counting on the sale of their business to fund their retirement.
Essentially, when one sells or transfers a business to a family member, the income is considered a dividend rather than a capital gain, therefore making it ineligible for the Lifetime Capital Gains Exemption (LGCE) that is available to those who sell their business to a third party. The NDP has committed to making it as easy to sell a business to a family member as to a stranger, which would put the worries of many small business families to rest.
Green Party of Canada: Ensuring foreign digital giants like Netflix are subject to Canadian taxes
It might be shocking to learn that major online service providers like Netflix, Google and Uber are not subject to Canadian taxes, but it’s true. While this may be attractive to consumers, who are in turn not paying higher prices to offset these taxes, it puts Canadian companies at a disadvantage. The Green Party has committed to taxing these services like we do Canadian companies, thereby evening the playing field for them.
Apart from being Election Day, October 21 is the start of Small Business Week. With these and other good ideas coming out of the party platforms, the incoming government would do well to make promoting entrepreneurship a major theme of its mandate. Regardless of who takes power in the days ahead, there is no monopoly on good ideas. I’m hoping a new government will act on these solid ideas to help Canadians to follow their entrepreneurial passion and help those who have already taken the plunge stay successful.