High corporate taxes is a well-known gripe of businesses across Canada, but the biggest surprise for Dan Kelly was the proportion of small businesses keen to see the scrapping of higher tax on selling their business to family members as opposed to a third party.
“It is a crazy policy that exists for a number of reasons,” said Kelly, chief executive officer of the Canadian Federation of Independent Businesses, which represents 110,000 small business owners. “(It) discourages owners from passing on their business within the family.”
On Wednesday, the non-profit organization released its Federal Business Platform — a wish list of issues it wants the political parties to commit to as part of their electoral platform. CFIB members are spread across a variety of industries, with 24,800 members from the retail sector alone. The report was aggregated from its internal surveys.
With the federal election looming, the biggest concern facing small business owners is — not surprisingly — high tax rates.
Other CFIB recommendations to ease small business stresses include halting or slowing Canadian Pension Plan increases, allowing income-splitting with spouses, scrapping new passive investment rules, introducing an employment insurance reduction or training tax credit, and closing the gap between the credit card rates for small and big businesses, among others.
“Repeal the federal carbon backstop and work with the provinces on customized approaches to climate change that will minimize the negative impacts on small business,” was another recommendation.
According to Statistics Canada, small business owners were responsible for 52 per cent of the business-sector GDP in Canada in the past year, and as many as 85 per cent of net new jobs created between 2013 and 2017 were thanks to small and medium-size business owners.
“That’s huge for our economy. Unfortunately, governments haven’t always done a great job of understanding the reality of running a small business and how to support small business owners to create jobs and grow the economy,” Kelly said. “The upcoming election is an opportunity for all parties to approach the small business community with platforms that address their concerns.”
Kelly notes that many small businesses are still smarting from the 2017 small business federal tax hike to 10.5 per cent, although he was pleased to see it reduced to nine per cent as of Jan. 1 of this year.
There’s this outlook that business owners try to do as little as possible to pay their employees so that they can walk away with fat cat pockets.
Dan Kelly, CEO, Canadian Federation of Independent Business
Other CFIB ideas include creating a pathway to permanent residency for Temporary Foreign Workers and give them an “opportunity to work with an employer as a step towards permanent residency.”
The survey includes data from a 2018 CFIB Member Profile Survey of 3,151 recipients, in which one out of two said they had had to stop paying themselves or their family members in order to pay employees.
“There’s this outlook of many that business owners try to do as little as possible to pay their employees so that they can walk away with fat cat pockets,” said Kelly. “It works out that during the 2017 tax fight with the federal government, small firms were simply looking for loopholes to take on their taxes.”
Kelly says that he and CFIB are realistic in realizing that the parties will not be able to adopt all of these proposals into their mandates, but he is hopeful some ideas will see a breakthrough given that all parties agreed on cutting tax rates last year.
