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Tax attack on small business


While many are enjoying the summer weather and taking much-needed vacation time with family, others are wading through the impact of proposed changes to the federal income tax legislation affecting small businesses that were announced on July 18. 

The federal government has characterized these changes as closing tax loopholes, raising taxes on the richest one per cent and ensuring they pay their fair share of taxes. Those who are reviewing the proposed changes anticipate there will be many more unintended victims than the targeted one per cent.

Small businesses are the backbone of the economy. According to Statistics Canada there are 1.17 million employer businesses in Canada and of these 98 per cent are small businesses.  Small businesses employ 70.5 per cent of working Canadians.   Who are these small businesses? They are plumbers, electricians, mechanics, family doctors, childcare providers, construction companies, beauty salons, restaurant owners, pharmacies, corner stores, and funeral home owners.

They are the drivers of our economy. They put a roof over your head and food in your refrigerator. They are your neighbours. They are hard-working individuals who have taken risks, worked long hours away from their family and have created employment opportunities for their employees.

The recent tax changes proposed by the federal government jeopardize the viability of small businesses. The changes attack an entrepreneur’s ability to save to protect their company against potential — and often inevitable — economic downturn and, in turn, protect their employees’ jobs. They inhibit how an entrepreneur chooses to compensate family members and to plan for succession of the family business to their next generation.  These wide-sweeping changes to the tax system for small business jeopardize the very fabric of our Canadian economy. They are creating double taxation situations for these business owners so that they can pay their “fair share.” They are targeting entrepreneurs who create employment and build our economy.

Winston Churchill once said, “Success is walking from failure to failure with no loss of enthusiasm.” The entrepreneurial spirit requires the fortitude to risk everything that you have. Running a small business is not without significant risk.  Despite how government would want to compare them, and while important to success of any business, employees do not have the same worries as their employer. Employees do not have the same burden of collecting from customers, paying employees, paying many provincial and federal government taxes and fees or ending your working life without a pension. Yet the new rules proposed by the federal government seem to forget that.

I am not saying the new measures will result in the collapse of all established small businesses, but what I am cautioning is that they will have the effect of causing the demise of many small businesses, discouraging others from entering into that forum and killing the entrepreneurial spirit of our youth.

It is estimated more than 60 per cent of business owners are baby boomers and it is expected that over the next 10 years these people will retire and businesses will change hands. If our entrepreneurs fade to non-existence, who will employ the 70.5 per cent middle-class workers? If your employer is overburdened with the new tax system how will they be able to pay competitive salaries and benefits to their employees?

It appears the federal government has not done sufficient homework on the effects of the proposed changes. They impact not only the wealthy one per cent. The unintended victims are employees of these businesses, the small-business owners and the Canadian economy at large, all of which suffer as a result of the changes.  While the government has invited consultation on the changes it has not given sufficient time to determine the impact of the taxation on small businesses. Many feel the recent proposals are akin to driving a nail with a sledgehammer.

If your household depends on earning an income from working for a small business or if you are a small business owner, make no mistake. If these proposals are legislated, you will be affected. Employers will be forced to cut costs as they take on this increased tax burden. The cost-cutting measures will likely come in the form of wage reductions, reduced health and other benefits and, worst of all, employee terminations. There are real but perhaps unintended consequences of what government is proposing.

The federal government states in its July 18th announcement “businesses big and small are the lifeblood of our economy.”  If it truly believes this statement, why is it attacking our entrepreneurs? Why has it released this very complex tax proposal in the quiet of the summer when individuals are busy with family vacations and have been given a very limited time to have their voices heard?  I believe that they do not understand the vital role that small businesses play in our economy. As you enjoy a summer evening sitting around the campfire with your small-business owner neighbour, ask him or her how they are sleeping at night with yet another attack on their livelihood.

 

Dorothy Keating is chair of the St. John’s Board of Trade

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