Premier McNeil, please don’t raise taxes on small business.

Stephen McNeil

John Bulloch founded the Canadian Federation of Independent Business as a result of the Canadian government’s White Paper on Taxation in 1969. The issue of the day was the federal government’s consideration of raising the small business tax to generate revenue. Thousands upon thousands of small business owners fought back. It was CFIB’s founding victory.

Forty-six years later in Nova Scotia, CFIB is leading the way on the same fight. When the Nova Scotia Tax and Regulatory Review was handed to the Finance Minister by its author Laurel Broten, CFIB was quick to applaud a broad array of sensible tax and regulatory recommendations. However, the proposal to raise the small business tax to pay for a tax cut for big business was one of the recommendations that stood out like a sore thumb.

In the report, Broten used theoretical arguments presented by Dr. Jack Mintz of the University of Calgary in a paper written in 2011. To its credit, the Mintz paper did note that small business tax policies were put in place to recognize small firms’ more limited access to capital financing and excessive compliance costs and cash flow issues. Unfortunately Mintz promptly went on to ignore these realities and theorize that small businesses choose to stay small because of a “wall” of taxation once they begin to grow.

While academic theories can be useful, they don’t always reflect what’s happening in the real world. Entrepreneurs start businesses to succeed, to be self sufficient and to contribute to the economy and their communities. With hard work, innovation and dedication, some eventually do grow into large businesses. The additional burden of unnecessary red tape, paperwork regulations as a firm grows is much more likely to force an entrepreneur to stay small compared to the fear of losing access to the lower rate of taxation.

Here in Nova Scotia, small business must contend with some of the most punishing taxes in the country. In our most recent survey, 85% of CFIB members identified the overall tax burden as the most important issue to their business. When asked what would help small business in Nova Scotia, 75% said reducing the overall tax burden. The message is pretty clear.

While CFIB members have called for and continue to support a reduction in the corporate tax rate to attract investment, tax cuts for big business cannot be funded on the backs of small business owners. It is CFIB’s view that should the government go ahead with this plan, it would essentially off-set any other sensible recommendations adopted from the Tax and Regulatory Review. An increase in the small business tax rate would make it harder for small business owners to make investments in their operations, increase employee wages, and compete with businesses from other, lower-tax jurisdictions. It’s simply a bad idea.

What gives me hope is that we have a Premier who was a small business owner well before he became a politician. He will know better than most of the joys and challenges of entrepreneurship, and the impact such a change would have on small business owners in Nova Scotia. Should the Premier want to examine the political calculus, he needs only to look next door to see an example of what not to do. The Graham government in New Brunswick bought into the theory of hiking the small business rate and, after that theory failed and he lost power, later governments reversed course and reduced it once again.

CFIB wants to ensure all Nova Scotia small businesses wanting to establish and grow in our province have every opportunity to become a medium or large-sized business. In fact, CFIB’s small business members do supported cuts in the general corporate income tax rates, however, we truly wish that big business advocates, such as Ms. Broten, now the head of Nova Scotia Business Inc., would stop calling for increasing taxes on small business as a way to offset those reductions. If the 2015 budget does include a hike in the small business corporate tax rate, it would serve as a declaration of war with small business owners. Let’s hope we don’t go there.

Scammers, cheats and thieves…alive and well with credit cards.

Credit card

Just prior to Christmas I dropped by my favorite horologist to buy a watch as a gift. After making my selection I asked the owner how business was going. If you ever want to get a sense of how times change, ask a watchmaker.

He’s upset with credit card companies and for good reason. There was a time in retail when business transactions were straightforward. Select a product, exchange for currency, deal done. In 2015 however, every credit card transaction can be a risk to the merchant. In fact, many small businesses run on razor thin margins and are anxious to do business in a poor economy. It’s fertile hunting ground for scammers ready and to looking to prey on an entrepreneur.

Our watchmaker was wound up over what is becoming a more and more common practice. A shopper/scammer buys an item with a credit card, shortly thereafter, the shopper/scammer calls the credit card company and claims dissatisfaction or claims the purchase was never made. The credit card company sides with shopper/scammer/cardholder (as is almost always the case) and the small business is left eating the cost.

If you are under the impression it’s all covered by some magnanimous banking insurance umbrella, well not so much. It’s the small business that takes the hit. It makes one wonder why small businesses accept credit cards at all, but they do, and it leaves them exposed to a litany of frauds and scams. CFIB encourages business to promote Interact debit, but today’s reality is many consumers depend on credit.

I was reminded of this when our Business Counselors caught wind of another credit card fraud scheme ticking away across Atlantic Canada. Small businesses called CFIB’s Business Counselors for help after thieves employed a common card-not-present scam. Individuals phone the retailer and offer to make a purchase on credit card. Once the transaction is complete, the thieves show up to collect the goods and only afterward does the merchant realize the card was stolen or invalid. Clean, simple and again, another small business is out of pocket.

There are lots of sad stories and many variations on this theme. So, CFIB Business Counselors are recommending small business owners first report the scam, then take a step back and examine your vulnerabilities.

Protect yourself by evaluating your procedures to authorize purchases. Refuse credit card payments over the phone by offering safer alternatives such as PayPal, Internet transfers or bank drafts. Always ask for photo id and be sure to photocopy the id when an item is picked up. If internet payments must be accepted, make sure to use secure tools recognized by reputable companies (Verified by Visa, Mastercard SecureCode).

These kinds of thefts can hit you and hit hard. According to the Canadian Bankers Association, credit card fraud hit 436.6 million dollars in 2011. Card-not-present schemes are the fastest growing credit card fraud in Canada, but the only reason we know that is because small businesses report these crimes. Reporting is one of the ways you can fight back. Understanding trends and creating awareness is an important tool in the federal Competition Bureau’s fight against innovative new scams.

The Competition Bureau is promoting Fraud Awareness in March. CFIB is supporting their efforts and asks that you to take some time to familiarize yourself with types of credit card fraud and scam techniques. And like our watchmaker, time is of the essence.