Yes, there’s a new Sheriff in Alberta, Buford T. Notley

Smokey-and-the-Bandit-II-DI (1)

Q: “What’s the difference between Canada’s inter-provincial liquor regulations and Smokey and the Bandit?

A: One is a farce based on the antics of local authorities chasing around entrepreneurs to enforce prohibition era liquor regulations…and the other is a Burt Reynolds movie. (Ba-dum)

The sad reality though is trade regulations governing alcoholic beverages have evolved into a rather unfunny joke in most provinces. Any long-forgotten public policy benefits these regulations may have once had (if any) lay long buried under shovels full of parochialism and politics.

It’s timely to note that Canada’s plunge into restrictive inter-provincial trade policies was initiated with the movement of liquor across provincial borders. It was during the height of the prohibition era the Supreme Court of Canada (SCOC) jumped in and gelded section 121 of the Constitution Act, the part which clearly states the framers intent of unfettered free trade between provinces.

As I’ve outlined on this blog before, the Canada Temperance Act (CTA) governing the sale of liquor came into force in Alberta in January of 1921. In February of that year, Gold Seal, a liquor retailer in Alberta, asked Dominion Express to deliver liquor to some folks outside of Alberta. Dominion Express refused because it felt that to do so would violate the federal CTA. So began Gold Seal Ltd. v. Alberta (Attorney General) which eventually made its way to the high court.

With the Gold Seal decision, the SCOC’s interpretation of section 121 limited its application to prohibiting only inter-provincial “customs duties” and, for what some have advanced were political reasons, the SCOC poured section 121 and the free-trade intentions of the Fathers of Confederation into the gutter.

Since that decision, successive politicians, courts, government officials, special interests and other political constituencies have used the Court’s interpretation of section 121 to successfully create trade schemes and regulation on virtually everything but especially…liquor.

Until recently, CFIB thought provincial governments were getting the message. At least we were until the Notley government in Alberta delivered its recent budget and changes to the Alcohol and Gaming Regulations. Without consultation and without warning, the government changed the regulations around the importation of beer from outside the New West Partnership (NWP) provinces, B.C., Alberta and Saskatchewan. Before the budget, breweries outside the NWP were charged 20 cents a litre to sell their product in Alberta. Today, they’re paying $1.25 a litre.

A six-pack of “imported” beer is going up $3, a case will increase by $11 and a keg by $30. Importers say the 525 per cent increase in tax means small importers’ products will not be able to compete with the large internationals, effectively killing a piece of Canada’s burgeoning craft and artisanal beer sector.

When the Calgary Herald asked about the changes, a Finance ministry spokesperson sent an email back saying the budget changes support Alberta businesses. “Alberta craft brewers create jobs that help grow our economy,” the email read. “Our government will use the tools we have to help this and other industries grow.” Sure.

In fact, as a result of the changes, some small craft brewers based outside the NWP region have announced they are pulling out of the Alberta market.  Ontario-based Muskoka Brewery said the tax increase has created “unacceptable conditions” and it is winding down operations in Alberta, B.C. and Saskatchewan. More recently, Justice Earl Wilson of the Court of Queen’s Bench granted an injunction to Steam Whistle, another Ontario brewery, temporarily preventing the government of Alberta from collecting what they claim is a discriminatory tax on its beer.

Craft breweries from coast to coast to coast should be the poster children for how business will be conducted in the 21st century. While they compete, they also collaborate to build their industry in the face of some of the worst regulatory impediments government could devise.

It borders on the bizarre that the Alberta government feels it’s a good time for what amounts to a ham-fisted, unconstitutional, interventionist approach to an industry that up until now, without these “tools”, has been growing across the country in leaps and bounds.

With the NWP, B.C., Alberta and Saskatchewan were a model for the reduction of inter-provincial trade barriers. With this latest protectionist move the Alberta government has reverted to the same 1921 prohibition era thinking that got us into this trade mess in the first place.

Of Torches, Pitchforks and the Small Business Business Tax Rate

torches

As the story goes CFIB founder John Bulloch was sitting in his tub reading a federal government white paper on tax reform in 1969. When he saw the government planned to “realign” the economy by raising taxes on small businesses in Canada, he took action. He exposed the scheme in the Toronto Telegram and the ensuing protest was the closest thing Canada had seen to the villagers storming the castle with torches and pitchforks. Thousands of independent business operators came together to protest the idea and out of this movement, CFIB was created.

Since that time, CFIB has argued for a lower small business tax rate to recognize, among other things, the disadvantage small firms face when trying to access credit and raise capital to reinvest in their businesses. When it comes to tax policy, the Small Business Tax Rate (SBTR) is our DNA.

That being said, as governments prepare their spring budgets, the recommendations are now beginning to flow from vested interests to guide the decisions being made by Ministers of Finance and their departments. Right on cue, the Atlantic Provinces Economic Council (APEC) has released its Atlantic Report titled Exploring Opportunities for Tax Reform, providing fiscal policy recommendation for each of the four Atlantic Provinces.

Three key recommendations were put forward for Nova Scotia. Interestingly, the first two have been long standing positions articulated by CFIB in its pre-budget submissions over the past decade. The first recommendation is to “focus on expenditure restraint in balancing its budget beginning and laying the groundwork for growth-oriented tax reform”. CFIB members would agree wholeheartedly. Government must begin its budgeting exercise not by searching for new and exciting ways to tax us, but to apply a very sharp pencil on the spending side of the ledger.

The second recommendation is to begin annual indexation of its personal tax brackets. CFIB has been fighting what is otherwise known as “bracket creep” since the Hamm government de-indexed the personal tax brackets some 15 years ago. If you’re wondering why, my CFIB colleague Nick Langley summed it up pretty well when he said “If you are earning minimum wage in Nova Scotia, the amount of personal income tax collected by the provincial government has increased by 275 per cent in the last 15 years.”

It should also be noted bracket creep was highlighted in Laurel Broten’s Nova Scotia Tax and Regulatory Review ‘Charting a Path for Growth,’ released in 2014. Her recommendation is a built-in cost-of-living adjustment for personal income taxes. It’s a sensible approach CFIB put forward when we met with Ms. Broten during her stakeholder consultations. So far, so good.

However, it’s the third recommendation from APEC where we part ways. It should also be very alarming to all small business owners. APEC recommends more than doubling the provincial Small Business Tax Rate, beginning January 2017, from 3% to 7% and a reduction of its general corporate tax rate from 16% to 12% by 2021. This recommendation echoes Ms. Broten’s original notion the taxes on larger corporations in Nova Scotia should be reduced and the reduction should be paid for by smaller business.

Nova Scotia currently has a competitive SBTR, but it continues to have the lowest small business tax threshold, the amount below which a business is eligible for the rate, at $350,000. Every other province in the country has a $500,000 threshold. This already puts small business in Nova Scotia at a competitive disadvantage with the rest of the country, raising the SBTR would only add insult to injury.

At risk of attributing motivation to these recommendations, it should be noted that APEC board is comprised of representatives of some of the biggest corporate entities in Atlantic Canada, so it’s not hard to see where this is coming from. To be fair, CFIB agrees with APEC the general corporate tax rate should indeed be lowered. It will create a more competitive environment to attract larger firms and offers greater opportunity for job creation and investment. That’s fine, just don’t make small businesses pay for it.

It’s hard to imagine the Premier would be prepared to head out on the election trail in 2017 selling the idea to small business operators that the reason they’re paying higher taxes is so the province could provide a break for Irving, Fortis, Emera and Sobeys. Really?

If the past two budgets are any indication, this government doesn’t seem to have much appetite for going to war with small business over the SBTR. Both of the previous Finance Minister’s budgets wisely ignored Ms. Broten’s suggestion and there are few indications Premier McNeil, a former small business operator, would embrace the suggestion from APEC.

In fact, CFIB has been very supportive this government’s efforts to help small business by laying the groundwork to reduce regulatory burden in Nova Scotia. However, any move to add additional financial burden on small business through an increase in the SBTR is, from CFIB’s perspective, a non-starter.

Should the government actually decide to heed the advice of large corporate interests and raise taxes on small business to pay for a break for larger corporations, it won’t be just the film industry circling province house, every small business owner in the province will have reason to pick up the torches and pitchforks.

Halifax fiddles, small business burns

I bleed dartmouth

The Darkside

Here is an another example of how a regulation does not fit any meaningful or useful policy objective.

I would suggest the city official, council, the mayor and any other interested person sit down and have a good look at the Premiers’ Charter of Governing Principles for Regulation.

This Darkside case exemplifies the worst kind on ridiculous, invasive regulatory interference and red tape facing small business in Halifax.
Someone enlighten me, exactly what problem are city officials trying to solve? Is their some rampant proliferation of too many pastries and not enough gallery space?

Has there been one…single…complaint?

Will taking these people to court or enforcing administrative penalties adding up to $47,000 accomplish anything beyond putting them out of business?
Are they trying to ensure these maleficent scoff laws are made an example of? Does too much counter-space to serve coffee and samosa really deserve the death penalty?

While I agree, businesses should strive to be compliant with existing regulations, (God knows there are enough of them to comply with) but regulation must also serve the public…not just justify the existence of those enforcing them.

This is just another example why Halifax received CFIB’s paperweight award for it’s subjectively interpreted patio rules and the interdepartmental approval process.

Council says it’s going to tackle red tape…not a really good start folks. Halifax fiddles…small business burns