Federal Tax Changes Show a Profound Misunderstanding of Independent Business. 

Recent musings about the federal tax changes by Finance Minister Bill Morneau are causing significant anxiety for small business owners. In talking with business owners from all levels, there is worry, frustration, and in some cases anger.
In Atlantic Canada, we feel it more than most other areas of the country. The cumulative tax burden is one of our biggest challenges. With new changes proposed by the federal government, it’s going to get worse.
The lower small business tax rate on the first $500,000 in corporate income remains vital to the success of many small firms. Now, big business groups, academics, and government officials are lobbying the government to limit access to it or eliminate it.
When running for office, the Liberals pledged to cut the rate from 10.5% to 9%. That hasn’t happened. These proposed changes will make things more difficult, especially for owners of smaller firms.
The idea is to make sure the wealthiest pay their fair share of taxes. Fair ball, but let’s not throw smaller businesses under the bus in the process. Unfortunately, the government appears to forget that the vast majority of independent business owners aren’t the 1%; they’re the middle class. Two-thirds of small business owners earn less than $73,000, half of whom earn under $33,000.
The Feds plan is to eliminate or restrict how some business owners save on taxes, including:
  • Sharing income with family members;
  • Saving passive investment income in a corporation; and
  • Converting a corporation’s income into capital gains.
These measures are currently legal and are often used by independent businesses to reinvest, ensure the stability or save for the retirement.
Most worrisome is the proposal to make it difficult for small business owners to share income with family members working for them. The support of family members in formal and informal roles is often key to the success of a firm and any limitations could have significant unintended consequences.
On passive income, we know it is much more difficult to borrow money as a small business owner. A business’ passive income acts as insurance against emergencies and unforeseen costs. Business owners need to be able to rely on their investments – in their own business – to protect them against the risks of owning a business.
Also, as business owners don’t have the generous pensions available to public servants or giant salaries creating RRSP room. They need to depend on the value of their business, including any of its investments, for their retirement years.
These changes would come into effect in 2018.
If you are concerned, you can share your views at fin.consultation.fin@canada.ca.

Province’s tire policy flip-flop is a slap at small business

Tires have historically been environmentally problematic sources of waste. Recently, however, technological advancements have led to much more efficient recycling by manufacturing construction materials, developing tire-derived fuels (TDF) and repurposing.

When the province decided the direction for tire recycling, they chose the manufacture of Tire Derived Aggregate or TDA. It has a number of uses, such as foundation material for highway and railway beds, backfill, and other civil engineering applications. At the time, a tender was issued and a local small business, Halifax C&D Recycling, was given the contract.

They invested in the neighbourhood of $5 million in equipment to properly process used tires and for the last eight years have run a successful program. According to the folks at Halifax C&D, there have been no fires, no stockpiles of tires or TDA and no environmental issues.

To pay for all of this, as a consumer, you pony up a fee of $4.50 per tire at the point of sale. This goes to Divert Nova Scotia who in turn pay $2.00 per tire to Halifax C&D Recycling Ltd. to deal with it at end of life. Ostensibly, the other $2.50 is used for transportation, administration and other costs associated with its disposal or funneled off to pay for recycling of other products.

Ten years ago Rodney MacDonald’s PC government proposed using tire derived fuel. In response, Liberal opposition MLA Keith Colwell brought forward a bill to ban the use of tires as fuel. He was adamant in pointing out potential health risks and outlining what he saw as a sweetheart deal for multi-national concrete manufacturer Lafarge because they would be paid to burn the tires. The idea was shelved.

This month, in a stunning reversal, Nova Scotia’s newly minted Environment Minister Iain Rankin gave a green light to a one-year pilot for Lafarge to start burning TDF in its plant in Brookfield. So what changed in nine years? Not much. Lafarge will get $1.05 from Divert Nova Scotia for every tire it burns. It’s a great deal for Lafarge, which is getting a fuel subsidy, and for Divert NS, which gets a lower disposal cost. For Halifax C&D, not so much.

Remember, for eight years, Halifax C&D believed the Nova Scotia government would never permit burning and would focus exclusively on recycling tires. They built their business developing markets based on what they saw as a consistent policy direction of government and a reasonably predictable stream of used tires.

The science of burning TDF, some of which was developed at Dalhousie University, indicates health and environmental risks are almost non-existent. We could argue the relative merits of using TDF versus natural gas in the cement kiln, but it would miss the point. What is more troubling, with this reversal, the government of Nova Scotia has put at risk the future of a local family firm, which has grown and developed in alignment with environmental goals, in favour of mandating citizens to directly subsidize a large multinational’s fuel costs.

Meanwhile, the experience Halifax C&D developed as a tire recycler has allowed them to bid on and win a pilot project in Newfoundland and Labrador. While this is a good new business opportunity to export Nova Scotian knowledge, experience and business to another province, and to create more jobs, it will not replace what C&D are losing here at home.

The government, by reversing direction on tire recycling in favour of burning, has thrown a small business into chaos in favour of subsidizing the fuel costs of a large multi-national. For a government that purports to support small business in Nova Scotia, this is not the way to show it.

Jordi Morgan is Vice President Atlantic of the Canadian Federation of Independent Business.

This commentary originally appear in the Halifax Chronicle Herald, July 26, 2017

Winter is Coming

Game of Thrones

Nova Scotia’s electoral Game of Thrones is in full swing and while it may lack the dramatic flair of the HBO series, it has one thing in common, winter is coming. Unfortunately, the parties are either unaware of it or are seemingly oblivious to a stark reality.

All of the parties have launched their offensives by flinging open the doors to the treasury, each with new and creative ways to spend our tax dollars with the greatest political efficiency.

The number one priority for CFIB’s 5,200 members in Nova Scotia, consistently, is a reduction of the overall tax burden and the clearest path to this is through alignment of public sector wages and benefits to private sector norms and an overall reduction of the size of the public service. In other words, reduce the cost and the size of government.

For those who argue we have already been dealing with austerity budgets, here’s the reality. Since 2007 Nova Scotia government spending has risen from $7.3 billion to $10.5 billion, an increase of 43 per cent. Additionally, we’ve seen a whopping 22.5 per cent increase in our debt from $12.4 to $15.2 billion over the same time period. All this with an increase of only 16 per cent in the CPI (inflation) and our population flat-lining at 1.5 percent. This is not restraint and certainly not “austerity” by anyone’s definition.

Spending restraint is becoming more important than ever before. Perhaps because the weather is warming our politicians are floating sunny prognostications but there is an inevitable, relentless sociological cold front headed our way. Stretching our Game of Thrones metaphor, let’s call it “The Wall”.

According to Statistics Canada, that “wall” can be found in baseline population predictions. In 20 years, those over 65 years of age will make up fully 30 per cent of our population. A great majority of those will be out of the workforce and needing higher levels of healthcare. Keep in mind, in 2013, that same cohort made up only 17 per cent of Nova Scotia’s population.

By 2038, the forecasts indicate our median age will be nearly 50 and our overall population is expected to decline to under 934,000.

So who will carry additional tax load? If you’re a voter in your 20’s and 30’s, have a look in the mirror.

While efforts are being made to increase immigration, and claims are being made about having the largest population “ever”, the fact remains, unless we make some fundamental and dramatic changes to the way our government spends, we will be faced with some very, very difficult decisions indeed.

Absent in all of the spending promises in this election is a discussion of any long-term fiscal planning to deal with this issue. By long term, we don’t mean 4 years out, we mean 25 years out. Intergenerational forecasts which will set sustainable spending patterns.

Where are the real plans to deal with the inevitable decline in revenues from a shrinking and aging workforce? While some creative gains are being made through immigration, they are incidental and the problem is not getting people to Nova Scotia, it’s keeping them here. More than half of those who arrive leave within five years.

It’s not much wonder as we’ve been struggling with economic growth and carry the some of the highest tax burdens in the country. Our public service is nearly 5 points larger than the national average and their salaries and benefits are completely out of whack with private sector norms. Is anybody connecting the dots?

Meanwhile, the front pages are littered with political spending sprees.

Small business owners want politicians to have the courage to not just stop the bleeding, but begin to fix the problem through an actual reduction in the size of government, lowering the costs of doing business and a putting laser-like focus on better regulation and more efficient service delivery.

If not, we are sentencing our next generation to a cold, bleak future, on the other side of the wall.

This originally appeared in the Chronicle Herald, May 13, 2017

We have all the evidence we need. It’s time for action to support small business

reports1

How many more studies until government finally takes the necessary steps to fix the drag on our regional economy?

There have been many reports generated to reinforce that which we already know. We know this because we’ve written many of them.

From CFIB’s work on inter-provincial trade barriers to multiple pre-budget submissions, red tape report cards, and other position statements, our members have consistently identified regulatory burden and taxation levels as the primary constraints on their business growth.

The latest, compelling piece of proof, comes from the government’s own joint office of regulatory affairs via Atlantic Provinces Economic Council (APEC). The new APEC project, Trade Barriers in Atlantic Canada: Opportunities for Regulatory Reform, reinforces what CFIB has been repeating for years; red tape and trade barriers are destructive to our economy.

The author, economist David Chaundy, says it’s some of the most significant work he’s ever done. In a career that has seen plenty of economic analysis of our region, that’s saying something. We were pleased here at CFIB to see APEC provide clear quantification of the problem. We believe this report, along with the other work we and other groups have presented, provides plenty of evidence to put regulatory reform (red tape) and interprovincial trade barriers squarely on the front burner in Atlantic Canada.

If governments in our region are serious about doing something meaningful to assist economic growth (as they should if we want to avoid plummeting head-first into a demographic abyss), it’s time everybody gets with the program.

Chaundy’s work identifies how the Atlantic provinces, more than any other region in the country, suffer economically under the weight of unnecessary regulation and inter-provincial trade barriers. It points to recent research which estimates the gains from removing all trade barriers in Canada could be as high as 3.3 per cent of GDP ($65 billion). This translates proportionately to even greater gains in the Atlantic region of 7.6 per cent of GDP or $8.5 billion.

trade-liberalization
From Trade Barriers in Atlantic Canada – APEC 2016

To put it in more relatable terms, this kind of cost reduction is the equivalent of an after-tax income increase of $2,000 for every person in Atlantic Canada.

Lowering interprovincial trade costs for Atlantic businesses will also improve their international competitiveness. With the signing of the Canada and European Union Comprehensive Economic and Trade Agreement (CETA), eliminating regional trade barriers have now become increasingly more urgent and more important.

Freeing up trade restrictions must become a central ingredient in the economic growth model being prioritized by each of the Atlantic provinces. It’s time for politicians to discard Donald Trump style parochial protectionism in favour of unfettered interprovincial free trade.

We have enough reports now all pointing in the same direction. As we noted at the time of its inception, the joint office of regulatory affairs can play a pivotal role in dismantling these trade barriers, removing red tape and setting our region on a path toward greater economic growth and prosperity.

There have been some good first steps, but each of the provinces now must re-double its efforts to tackle these important issues. With the body of evidence in front of them, the premiers must unify behind and forcefully advance this agenda.

Is Halifax “the new Seattle”? We have some work to do…

nova centreIt’s been 25 years since someone at Melody Maker declared Halifax “the new Seattle.” The reference was to the early 90’s burgeoning alternative music scene and what seemed to be a genuine surge in hip music, culture and attitude in the city.

Halifax is still a pretty cool place to live, all things considered, but it isn’t Seattle. However, there are signs we may be taking steps toward acting a bit more like the home of the Seahawks.

This week, Halifax Regional Council voted to do something to help businesses being pummelled because they are located next to large scale development projects. CFIB has been working for a couple of years to assist the city with the development of plans to mitigate the severe damage being done to businesses suffering in the shadow of construction disruption.

The construction site management technical guidelines approved this week are designed to help folks contending with future projects. The speed of the action taken indicates the mayor and councillors understand the severity of the problem.

A lack of appropriate guidelines, oversight and management capacity on the part of the city has wreaked predictable economic havoc.

What is puzzling is the city’s reluctance to publicly accept responsibility for any of the damage. CFIB acknowledges and supports the new guidelines as a positive step forward. Still, as Economy Shoe Shop owner Victor Syperek noted to the CBC this week, for many of the businesses adjacent the Nova Centre, it’s closing the barn door.

argyle-street-downtown-business-878x494

Recently, some of these businesses have launched legal action to seek redress. In response, the city immediately distanced itself, saying the suit, which is rooted in a statutory claim of “injurious affection,” fell outside the interpretation of the law. Certainly the city is well within its rights to defend itself against a lawsuit, but there seem to be contradictory messages here.

On one hand, the rapid development of a construction management guideline recognizes the city did a lousy job protecting small businesses against a development it approved. On the other, the city claims it legally bears no responsibility for the impact. Hmmm.

So, back to Seattle. In contrast to the Halifax approach, in advance of recent major work along an important avenue populated by many small and micro-business, Seattle set up the 23rd Avenue Stabilization Fund with the intent of providing support to businesses which would inevitably be affected by major road reconstruction.

Businesses were invited to apply under clear criteria for support, ranging from deferrals of taxes, licensing and utility payments, to direct financial assistance. Direct and individualized support was provided by the city to assist business owners in gathering the necessary documentation. Communication from the city was clear, precise and issued well in advance of any activity. Consideration was given to access and promotion of business in the region.

Seattle also did a similar and wider scale project in the early 2000s called the Rainer Valley Development Fund during their light rail transit line construction, so it’s not the first time they’ve thought outside of the box and looked beyond state laws to find ways to compensate small business.

With this in mind, Halifax now has to look at not just construction regulation, but the complete picture; a more empathetic approach with creative solutions to let small business know it’s actually valued in this city.

It may not be Nirvana, but it’s certainly better than what we’ve seen.

This post originally published in the Chronicle Herald

Economic barbed wire

Barbed Wire

Steps are being taken by Atlantic Canadian political leaders to dismantle a virtual wall erected between provinces over more than a century.

In perhaps one of the most memorable moments of his presidency, in 1987 Ronald Reagan stood before the Brandenburg Gates in Berlin and implored Soviet Union leader Mikhail Gorbachev to “Tear down this wall!” The purpose of the speech was to compel the Soviets to submit their economy to accountability, transparency, and greater freedom. While there may be lingering questions about the impact of Reagan’s rhetorical flourish, there’s no doubt the subsequent destruction of the Berlin Wall was transformative for the European economy.
While not the magnitude of Reagan’s oratorical overture, steps are being taken by political leaders in Atlantic Canada to dismantle a virtual wall erected between provinces over more than a century by creating a new office to begin pulling apart the red tape that often acts like economic barbed wire between provinces. Mention of internal trade barriers is frequently met with confused stares. After all, there are no border guards on the Confederation Bridge or economic sanctions against the province of Nova Scotia. Our members tell us that these barriers take the more insidious form of unnecessary and burdensome regulation.
Whether due to political interference, parochial interests, or simply grown from the nature of our different bureaucratic cultures, red tape inhibits businesses that aim to work in other jurisdictions by creating a prohibitive and expensive maze of differing rules, requirements, regulations, and practices.

From a business perspective, why do New Brunswick and Nova Scotia have different requirements in fall arrest requirements when gravity appears to act with remarkable similarity in both provinces? Why would first-aid kits in each province require different contents or trucks require different wide-load signage? Some of the examples border on the ridiculous, but either by default, or in some cases by design, all of these differences add cost, drag productivity, and ultimately make things more expensive for consumers.

The recent signing of the Comprehensive Economic and Trade Agreement (CETA) with Europe further highlights the need to move on freer trade within Canada. In some cases, the new agreement means that European companies will have access to opportunities across Canada that companies in a neighbouring province or territory may not. With a more global business environment and greater opportunities for free trade, we can’t continue to ignore the impact that our own provincial differences have on our economic competitiveness.

In fact, a recent poll conducted for the Canadian Federation of Independent Business (CFIB) by Ipsos-Reid shows that the majority of working Canadians agree it’s time for premiers to work together to remove impediments to the flow of goods, services, and workers across provincial and territorial boundaries.

With that in mind, CFIB has been cheering some of the recent work being conducted by both the Council of Atlantic Premiers and the Council of the Federation to help tear down those walls. Earlier this year, Premiers Gallant and McNeil took the significant step of creating the Joint Office of Regulatory and Service Effectiveness between New Brunswick and Nova Scotia. More recently, Prince Edward Island’s Premier Wade MacLauchlan and Newfoundland and Labrador’s government are showing interest in the process.

All of the Atlantic provinces stated in January that they would create an Atlantic Red Tape Reduction Partnership that would help streamline business requirements to create a more competitive economic environment within the region. Our neighbours are important trading partners, and we encourage these bodies to set meaningful regulation reduction targets, reach them, and report publicly on their achievements.

Further to regional work, the Council of the Federation (Premiers) has also been the scene of some encouraging progress. While we’ll have to wait until next spring to see what progress is made with reforms to our main national trade agreement, the Agreement on Internal Trade, we did see a positive step with the premiers signing the Provincial–Territorial Apprentice Mobility Protocol at their recent meeting in St. John’s.

Most notable about this new mobility protocol is that it follows the principle of mutual recognition. Rather than a lengthy bureaucratic process of trying to harmonize each and every regulation across each jurisdiction, the premiers simply said, “If it’s good enough in Province A, it’s good enough for Province B.” This is the gold standard for modern trade agreements and is precisely the direction we want our governments to go when removing barriers.

While the stakes may not seem as high in Atlantic Canada as for the Soviets in 1987, reality shows that we’re facing many daunting economic challenges and unfavourable demographics. With the world of trade changing around us, it’s becoming increasingly important that we work together to break down barriers between our provinces to make the best use of our economic and human resources. If we don’t, we risk isolating ourselves behind our walls of red tape.

Jordi Morgan is the vice-president, Atlantic Canada, and Erin McGrath-Gaudet is the director, P.E.I. and intergovernmental affairs, for the Canadian Federation of Independent Business. CFIB represents the voices of 11,000 small and medium-size firms in Atlantic Canada, with 109,000 members across Canada.

This piece originally appeared in Progress 101 issue online, by subscription and on newstands across Canada

Nova Scotia business needs clarity from Minister on any new recycling fees

PPP
25 years ago, Swedish academic and environmental economist Thomas Lindhqvist coined the term “Extended Producer Responsibility” (EPR). The concept is fairly simple; shift the responsibility and cost for disposal and recycling of products from the general tax base onto producers. Initially, the concept was applied to automobiles, large appliances and electronics. In the simplest of terms, the thinking is, producers will change the design of their products to ensure they are more effectively recycled, creating less waste destined for landfills or other environmentally degrading destinations.

Under the EPR law, brand owners must take responsibility for the complete life cycle of their product from inception to disposal. Driven by the polluter-pays principle, EPR has provided the foundation for new administrative, informative or economic policy instruments being developed or already implemented in other countries and by provincial and municipal governments across Canada.

Nova Scotia was drawn into the EPR discussion after the signing of a memorandum of agreement in 2010 by provincial environment ministers. The plan was to have EPR in place in all 10 provinces by the fall of 2015. Quebec, British Columbia, Manitoba, Ontario and Saskatchewan have already implemented EPR but none of the Atlantic Provinces have rolled out their programs … yet.

Over the past couple of years, the Environment Department has been gathering information on how to adopt such a scheme in Nova Scotia. To date, no clear plan has emerged, however the Minister of the Environment, Andrew Younger has taken pains to say it’s coming, but not before better consultation and some form of economic impact analysis has been completed. None has yet been done.

The results of the previous EPR consultations were of concern, as CFIB felt they didn’t adequately represent the views of small business. So, this July, CFIB surveyed its members on the issue, based upon “the British Columbia model” that was deemed “best practice” by the department. The results stated 82 per cent of small business owners were not aware of a new EPR program, 99 per cent said they had not been consulted and 70 per cent said that they were not supportive of the ideas we presented from the BC Model. Interestingly, on October 23rd, at a meeting of the Union of Nova Scotia Municipalities, Minister Younger told municipal representatives when and if they move ahead with EPR, Nova Scotia’s program will look like the BC’s, which is not particularly comforting.

He also floated a couple of trial balloons about exemptions including a “one or two million” dollar “de minimus” (the revenue line under which business would not be captured by regulation), the single retail point exemption and the 1 tonne of paper or packaging threshold. None of these ideas had been brought up before the UNSM meeting. Prior to the Minister running these up the flagpole, the Department’s regulatory framework was working on the premise that everything and everybody would have been captured.

When these exemptions were applied in BC, it reduced the number of affected businesses under their EPR system from upwards of 80,000 to just about 3,000. If the Nova Scotia government is going to apply the same standards, it too will have to look at what is the acceptable casualty rate among small businesses.

So, why are we making such a fuss? In a portion of the EPR policy that deals with printed paper and packaging, producers or first importers are expected to weigh, measure, record and forecast all of the packaging they sell in their business. If a small business receives goods from outside Nova Scotia, it could be deemed the first importer of goods in Nova Scotia. Let’s take for example a small independent pharmacy, perhaps part of a small group of small town pharmacies operated by one owner. With annual revenue above 1 million dollars, 3 locations and “producing” more than 1 tonne of paper and packaging, this business would not be exempt from the EPR law as Minister Younger has envisioned it.

Next time you drop in for a prescription, have a look at the shelves and imagine categorizing all the packaging, measuring it, reporting it and paying a fee to have it recycled. When that’s done, wait for an end of year compliance report and hope that your forecast was accurate so you won’t be fined. Oh, and all of this will be handled by a third party “stewardship” body which is unaccountable to government. It’s not hard to start seeing how the regulatory burden, compliance and cost might become worrisome.

If a small town in rural Atlantic Canada wants a pharmacy under EPR, it might just end up looking like the bulk barn.

Bulk Barn

This new scheme would be piled on top of taxes businesses already pay for the disposal and recycling of materials now being handled through municipal waste management programs. Retailers and franchisees are being hardest hit with EPR, as many of these smaller firms have little or no control over the materials generated. Market forces or franchise agreements don’t allow for arbitrary price increases to offset these additional costs.

Nova Scotia is already dealing with some of the highest cumulative business and personal tax rates in the country. Adding more fees and red tape is certain to harm employment and economic growth and put inflationary pressure on consumer goods. The question must be asked, what problem is government trying to solve?

Currently, Nova Scotia leads the country in waste diversion and recycling. Attitudes are mixed on what EPR is even meant to achieve. Is it to increase the recyclability of products? Promote recycling? Reduce toxic substances? Or is it to simply shift the financial burden of recycling from municipalities to “producers”? It is worth noting the Minister is pleased with the recycling progress in Nova Scotia, but he adds, it’s very expensive. Nova Scotia pays an average of $657 per tonne to recycle, more than double what New Brunswick pays. (New Brunswick is watching Nova Scotia carefully to see how their program unfolds and there are those who speculate a similar scheme is probably not far behind in that province.)

Even if we accept the solution is to shift the burden of recycling over to industry, one also has to understand that small- and medium-size businesses downstream from manufacturers caught in this regulatory maze will be punished for something they have little or no control over. For that matter, at this point, it isn’t even particularly clear who qualifies as a producer. Is it the importer, the manufacturer or the retailer?

From the perspective of some municipalities, this is could be a gift from above. With accumulating fiscal pressure, having the responsibility of waste management paid for by business is a release valve. For others, having recycling taken away from them may remove an important source of revenue. One thing is certain, if the government is foolish enough to force further costs of recycling onto small businesses, consideration absolutely must be given on the taxation side of the ledger. Surely municipalities could not expect small business to simply pick up the tab for waste management and not provide commensurate tax relief.

Until the provincial government can provide more clarity on the direction it wishes to take on EPR, CFIB will continue to be wary of plans the Environment Minister is pushing. We look forward to assisting small- and medium-size business stay out of the way of the EPR trawler by providing input to government through their next consultation phase.

As we are also working with other partners in the Atlantic Red Tape Reduction Partnership we remain adamant Atlantic Canada cannot afford to be walking blindly into a new set of punitive regulations and costs for small business, especially in the current economic environment.

Break Down the Trade Barriers in Atlantic Canada

Photo: Atlantic Provinces Trucking Association
Photo: Atlantic Provinces Trucking Association

Erin McGrath-Gaudet and Jordi Morgan

230 years ago Benjamin Franklin said “No nation was ever ruined by trade.” He added “Even seemingly the most disadvantageous.” As the Atlantic Provinces struggle to kick start sputtering economic growth numbers, it’s critical our leaders apply a laser focus on our own regional interprovincial trade barriers.

While the federal government is making overtures on a national scale, the Atlantic region must begin to show the same common sense attitude we see in the West where premiers are calling for the creation of a domestic free trade zone. While the average Canadian is likely unaware of the barriers to the movement of goods, services and people that exist between provinces and territories, for small businesses looking at markets outside their provincial boundaries, nonsensical trade barriers represent unnecessary cost and lost opportunities.

There are many good reasons for us to be having this conversation now. Canada’s current Agreement on Internal Trade (AIT) is not keeping pace with the changing economic environment. There have been some attempts to create provincial agreements with varying degrees of success – the New West Partnership Agreement between British Columbia, Alberta and Saskatchewan being the most significant- but even its scope is limited.

The recent Comprehensive Economic and Trade Agreement (CETA) with Europe will further highlight the shortcoming of not having free trade within Canada as European companies will now have access to opportunities across Canada that companies in a neighboring province or territory won’t.

So what are some of these barriers?

In many cases, barriers arise from provinces and territories not recognizing each other’s regulations. This often means having to register with the appropriate authorities in each separate jurisdiction, ensuring you are complying correctly with regulations that are slightly different, and paying fees or charging taxes appropriately in different circumstances.

In some cases, governments can outright prohibit the movement of goods. A notable example of this is the prohibition of transporting alcoholic beverages across provincial or territorial borders. The federal government changed this in the case of wine but provinces have been slow to change their own legislation and regulations to permit “cross-border” shipping of wine for personal use.

Many of these barriers will be highlighted in a CFIB report to be released later this fall.

These barriers extend beyond “business” to impact workers directly. A CFIB report released last year highlighted barriers in the area of skilled trades. Of all the trades certified in Atlantic Canada, there is not a single example of apprenticeship requirements being the same in all four provinces. When a Red Seal is obtained, workers are recognized across the country but until a worker achieves that designation, their options for movement, even within the region, are quite limited. While some progress is being made, much more can be done.

Atlantic Canada is facing many significant economic challenges and given our unfavourable demographics, it’s becoming increasingly important that we work together to break down barriers between our provinces to make the best possible use of our economic and human resources.

It’s more important now than ever before to create an environment where Atlantic Canadian businesses have some competitive advantage to counter the environment of high taxes and overly complicated regulation and red tape. Making these moves will require much more effort on behalf of the Atlantic premiers on regional co-operation. As Benjamin Franklin also said, “If we do not hang together, we shall surely hang separately.”

Erin McGrath-Gaudet is Director of Intergovernmental Policy for the Canadian Federation of Independent Business. CFIB represents 11,000 small and medium size businesses in Atlantic Canada.

Minister Kenney solving Temporary Foreign Worker problems in Alberta by making things worse in Atlantic Canada

The Charlottetown Guardian theguardian.pe.ca
The Charlottetown Guardian theguardian.pe.ca

Last Friday the federal government announced massive changes to the Temporary Foreign Worker program. These changes were unnecessary and largely driven by a cynical union-led media campaign. CFIB has worked in cooperation with the federal government on many files but we regard this as a gross over-reaction to a few negative stories, many of which have been exaggerated heavily by big labour, seeking to organize small and medium-sized businesses, particularly quick service restaurants.

CFIB members strongly support stiff penalties for those caught abusing the program or mistreating any employee, Canadians or TFWs. These changes, however, convict all employers and prevent those who have followed all of the rules from even attempting to use what has become a valuable tool to solve urgent and serious labour shortages.

Employment Minister Jason Kenney has singled out the restaurant, hotel and retail sectors, effectively barring them from even applying to use the program for most positions in most parts of Canada. For both high and low wage positions, employers will now be facing a $1,000 fee for each TFW position. Oh, and if your application is rejected, don’t expect a refund. Massive amounts of red tape are being piled on including the requirement to report every interaction with every applicant, including why they weren’t hired.

What’s more, Minister Kenney made these changes while seemingly oblivious to the reality of the labour market in Atlantic Canada. During his media conference, the Minister noted his inability to comprehend why employers can’t find Canadian workers in areas of high unemployment in places “like Cape Breton.”
For starters, our population is aging and declining and young people are moving to his home province of Alberta in droves.

He says employers should use “market mechanisms” such as higher wages to attract new workers. Well, the employers he is referring to are already operating on razor thin margins because of those same market mechanisms and simply paying people higher wages is not an option. Maybe they can pony up $25 an hour in Fort McMurray to serve coffee, in Glace Bay…not so much. The solution he offered on CTV’s Question Period was if you can’t find enough Canadian workers, don’t start the business. The logical extension of this, if you are struggling to find employees, shut down. As an economic growth strategy, this seems a little counter-intuitive.

In the same interview Mr. Kenney noted he wants to return the TFWP to its original objective to be the “last, limited and temporary resort for employers who absolutely cannot find qualified Canadians to take jobs at the Canadian wage rate.” So now, in order to assist those who are at the end of their rope finding workers, he has made the program impossibly bureaucratic, financially out of reach and/or absolutely inaccessible to those who need it most, again, a little counter-intuitive.

Perhaps the Minister of Employment should take a week or two and walk in the shoes of those entrepreneurs who want to contribute to their communities, create employment and build a business in Atlantic Canada while competing with the oil patch and the federal EI system for workers. He might just get a clearer comprehension of those “market mechanisms”. Atlantic Canada is in need of sound immigration and employment policy, not punitive measures designed to solve problems in tight labour markets in Alberta.

Jordi Morgan is Vice President Atlantic of the Canadian Federation of Independent Business which represents 11,000 members in Atlantic Canada and 109,000 members across Canada. You can reach him at Jordi.morgan@cfib.ca, @CFIBAtlantic and find out more about CFIB at http://www.cfib.ca

The moratorium on temporary foreign workers is not “a good first step”, it’s wrong.

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An ugly underpinning of the Canadian psyche is exposed as the result of the CBC’s story about a woman losing her job in Saskatchewan. Volumes of opinions, letters to editors, commentaries, status updates and tweets spewed forth, slamming the government for blindly allowing, or even encouraging, greedy employers to give all our jobs away to foreigners.

It’s been troubling to watch this explosion of dialogue over Canada’s Temporary Foreign Workers Program (TFWP). Since the exposure of a handful of alleged abuses in the west, rhetoric from union bosses and a fundamental misunderstanding of the program, and the problems it is designed to address, has played into some of the worst of our collective national attitudes.

Yes, there are situations where rules get broken and employers may abuse the program. Canadians should always have the first crack at jobs and any abuse must be dealt with severely but slamming the door indefinitely on an entire sector will have dire consequences for many small business owners, most of whom have done absolutely nothing wrong.

The Minister placing a moratorium on the food services sector is unfair and potentially devastating to hundreds of small enterprises. Had Minister Kenney shut down Employment Insurance for an entire sector because of the rumored abuse of a few, imagine the cataclysm. Arguably there is more evidence to suggest that such a move would be a reasonable course of action, but because in this instance the targets are small businesses owners, too bad, so sad.

The TFWP ballooned over the past several years because employers are finding it increasingly difficult to hire workers with either appropriate skills or a willingness to take on specialized shift work. Simply put, many Canadians either can’t do or don’t want those jobs. The TFWP isn’t the real problem. It’s a symptom of a deeper issue: the Canadian labour market is not meeting the needs of small businesses desperate for workers.

Last weekend in Cape Breton three small business owners told me they’ve literally been driven to find foreign workers because they have run out of options. Why? Even in Cape Breton, an area with an unemployment rate of 15.6%, businesses can’t find people willing to work some jobs. If they do manage to find a Canadian worker, often they’ll quit after being trained, are unproductive (or worse), or simply won’t show up.

Businesses in Goose Bay, Labrador are struggling to find employees for entry-level jobs because the Muskrat Falls project is scooping up both skilled and unskilled workers. Under this new moratorium small businesses like family owned restaurants that depend on the TFWP are at risk of shutting their doors because they can’t find staff. It’s a story being repeated everywhere in Atlantic Canada.

The myth of “cheap” labour

Big unions have been torquing this story to their advantage. The labour movement is being frustrated in their efforts to organize the hospitality sector. This manufactured outrage over the TFWP has provided them with the opportunity to sell this as a program that drives down wages and keeps young Canadians out of work.

There are many reasons to criticize this program, saying it provides cheap labour is not among them, nor does it keep young Canadians from working.

Using the TFWP is bureaucratic and expensive. Employers must first prove they can’t find a Canadian to do the job. They must also pay the industry average wage and often the TFW is paid more than a Canadian worker (something which CFIB views as unfair), they must not pay the TFW less than they pay their other workers nor is it possible to pay less than the minimum wage. The employer must pay return airfare for the worker to their home country, a $275 non-refundable application fee to government and, often, fees to a recruiting agency to help find the foreign worker which can range from $5,000 to $10,000. The entire process requires about a 2 inch thick binder of evidence and can take 5 months just to get approvals.

Believe it, if there was an alternative, employers would gladly use it. The hospitality industry, currently being punished with this moratorium, already hires Canadians 98% of the time, this firestorm of outrage is over 2% of workers.

Unfortunately, most of the employees perceived to be TFWs are actually new Canadian citizens or permanent residents. As a result of the skewing of this narrative, landed immigrants, permanent residents and others “from away” are being unfairly characterized and mistreated by people who see their presence as an economic threat.

The TFWP is not perfect but this does not mean the vast majority, those playing by the rules, should be punished so severely for the misbehavior of a few. What is even more worrisome is many new Canadians are being made to feel unwelcome and unsafe because of an organized campaign of half-truths.

To the federal government, do not shut down this program, fix it…and soon.

CFIB has many recommendation including using this program as a point of entry for permanent residency and rethinking the bias in the immigration system against people coming to Canada to fill entry level jobs. Undermining the efforts of small businesses and creating friction between Canadians and new or potential citizens is not helping.

For the record, CBC’s program Power and Politics straw poll on Monday, April 28th showed 98% of its viewers participating in its poll believed Temporary Foreign Workers were taking jobs from Canadians…all 2% of them. The spin cycle is in overdrive.