Tag Archives: Premier Stephen McNeil

Cutting Red Tape: An old problem finding new solutions

scissor-red-tape

I was having coffee with an old political warhorse recently and we were talking about red tape. He told me a story about how after John Buchanan won the 1981 election, his government promised to cut red tape. The classic line from Digby Liberal Joe Casey in the legislature was, “He sure is cutting, but lengthwise.”

This is to say, there’s nothing really new about politicians promising to cut red tape. The idea has been kicked around for years because red tape is a horrible drag on the economy. What’s new, however, is after years of hounding federal and provincial governments, the Canadian Federation of Independent Business (CFIB) is beginning to see some results.

To give credit where it is due, during John Hamm’s government, there was some movement on red tape, but it was no secret the bureaucracy regarded the project as bothersome. The “Better Regulation” initiative was largely ignored, then quietly shelved during Rodney MacDonald’s years and completely jettisoned during the Darrell Dexter years.

However, under Stephen McNeil regulatory reform has been revived and Nova Scotia’s grade on CFIB’s annual Red Tape Report Card has climbed from the “D” he inherited in 2013. As it is Red Tape Awareness Week, CFIB is announcing Nova Scotia is receiving a mark of “B” for 2016 putting the province back in the top half of Canadian jurisdictions.

The improvement in the mark is not because we’ve seen significant regulatory burden reduced for business, it’s because of the political leadership and excellent groundwork completed by a small group of dedicated individuals led by Chief Regulatory Officer, Fred Crooks.

We were very pleased to see Regulatory Accountability and Reporting Act passed, the creation of the Joint Office of Regulatory Affairs and Service Effectiveness, the Premiers’ Charter of Governing Principles for Regulation adopted, the creation and implementation of the ground-breaking business economic impact analysis tool and the initiation of a “Business Navigation” project to help new businesses get off the ground.

In particular, the Premiers’ Charter is a beacon of hope for small businesses in Nova Scotia. The commitment to enact fewer and better regulations, as well as the cost-for-cost rule, should keep the current regulatory burden in check. It’s now also been adopted by the three other Atlantic Provinces with mirror legislation as part of their participation in the Joint Office.

While this is all good, to see improved satisfaction levels from business owners, the government must begin producing results in time and/or money saved. With new technologies designed to make secure, online transaction readily available, there are tremendous opportunities for government to find creative solutions to cut costs, fix the government customer service experience, measure improvement and deliver real results.

To advance this, CFIB is recommending the province establish a baseline measurement of the existing red tape burden faced by Nova Scotia’s small businesses, set clear targets for its reduction, and publicly report on how it’s going. We believe only accountability will force this innovation.

If the Premier really wants to make Nova Scotia “the best regulatory environment in Canada”, we need to get at it, and now. The groundwork is done, it’s time to take action. Let’s navigate away from bureaucracies that are simply held accountable for process and move to a service oriented public sector that is held accountable for results.

This article was originally published in the Chronicle Herald on Thursday, January 26, 2017 
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Of Trade and Liquor and Lawyers.

http://www.cbc.ca/news/canada/new-brunswick/gerard-comeau-border-alcohol-ruling-1.3554908
Gerard Comeau after a judge dismissed a charge of bringing too much alcohol into New Brunswick because it violated free trade provisions in the Constitution. (CBC NB)

A few years ago, Gerard Comeau, a retired steelworker from Tracadie, New Brunswick, went on a 185 kilometre booze run to Pointe-à-la-Croix, Quebec. Like countless other folks in New Brunswick, Gerard opted to make the two-hour drive to cross over the Restigouche River into the neighbouring province to pick up cheap booze which often sells at half the price of the same product in the New Brunswick Liquor Corporation (NB Liquor) outlet.

When Gerard brought his 14 cases of beer and three bottles of liquor back home that day, little did he know he was triggering a series of events which would place him in the company of our Fathers of Confederation. Sir John A. MacDonald and George Brown’s healthy taste for tipple notwithstanding, Gerard had something more in common with the framers of the Constitution: the desire to promote free trade. Gerard’s free trade efforts, however, led to him being charged with illegal importation of alcohol.

Three years later Mr. Comeau showed up for court. With the help of some constitutional experts and lawyers, Gerard argued that Section 134 of the New Brunswick Liquor Control Act is unconstitutional.

New Brunswick’s regulations, like Nova Scotia’s complex assortment of liquor laws, are empowered by a 1928 federal statute, the Importation of Intoxicating Liquors Act. It demands alcohol only move in or out of provinces with permission from its liquor control board. It was designed primarily to stop bootlegging as Prohibition was lifted at different times in different jurisdictions. It’s also a pretty handy law should a province want to enable a monopoly and jack up its prices without having to consider all that messy stuff like supply, demand and other market forces.

When they got together in Charlottetown, this isn’t quite how the founding fathers envisioned our free trading Dominion.

In his decision, Provincial Court Judge Ronald LeBlanc dusted off our history and ruled that New Brunswick’s restrictions on bringing alcohol into the province violate the Constitution’s free-trade provisions. LeBlanc cited Section 121 of the Constitution Act; “All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.”

Judge LeBlanc correctly recognized and emphasized free trade between the provinces was the intention of the signatories and a founding principle of Canada.

To find the turning point between the signing of the Constitution and when our free-trader Gerard was charged, we need to go back to the 1920s. During the height of the Prohibition era, the Supreme Court of Canada (SCOC) was asked to rule on an interprovincial trade dispute and, in the process, essentially gelded the free trade provisions in Section 121.

As the story goes, the Canada Temperance Act (CTA) governing the sale of liquor finally came into force in Alberta in 1921. In February of that year Gold Seal, a liquor retailer in Alberta, asked Dominion Express to deliver some liquor to customers 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.

In the Gold Seal decision, the SCOC’s interpretation of Section 121 limited its application to prohibiting only interprovincial “customs duties.” For what some have advanced were purely political reasons the SCOC kicked Section 121, and with it the free trade intention of the Fathers of Confederation, to the curb.

Since then, successive politicians, courts, government officials, special interests and political constituencies in every province have used the Supreme Court’s ruling to successfully impose a myriad of trade schemes and regulations on everything from eggs, wheat and coffee creamers to truck parts and, of course, liquor.

However, the LeBlanc decision in the Comeau case has drawn back the curtain on a very important and equally inconvenient truth. Provincial liquor control regulations, which provide the foundation for our provincial liquor monopolies, including the NSLC, may not pass muster according to intention of the constitution.

Last Friday, the New Brunswick government announced it is seeking leave to appeal the Comeau ruling directly to the New Brunswick Court of Appeal. The federal Conservatives are also calling on the federal government to act as an intervener if the Court of Appeal agrees to hear it and are also asking the Trudeau government to refer the case to the Supreme Court to clarify Section 121.

So what does this all mean for entrepreneurs and small business in Nova Scotia? It could mean a great deal.

As a backdrop to all of this, the Premiers are embroiled in retooling the Agreement on Internal Trade (AIT). A deadline for an agreement passed March 31, 2016, but hope remains something will eventually get hammered out. There is some urgency as international trade agreements, such the Comprehensive Economic and Trade Agreement (CETA) with Europe and the Trans-Pacific Partnership (TPP) are coming into play. Why the urgency? Without change, under these new agreements, we may end up with foreign companies having greater access to opportunities in Canada than firms located in a neighbouring province or territory.

We’ve seen some regional progress on this front with the New West Partnership between B.C., Alberta, Saskatchewan and Manitoba and last year the Atlantic Premiers signed the Council of Atlantic Premiers’ (CAP) Red Tape Reduction Partnership and opened the Joint Office of Regulatory Affairs. All moves aimed at streamlining the flow of business between provinces.

In fact, just last month at a CAP meeting in Annapolis Royal, in an under-reported but nonetheless significant development, Premiers McNeil, Gallant, MacLauchlan and Ball agreed to advance three specific recommendations to reduce trade barriers brought forward by business groups led by the Canadian Federation of Independent Business, the Atlantic Chambers of Commerce and Canadian Manufacturers and Exporters.

So while the Premiers seem to collectively understand internal free trade is an urgent priority, the Comeau case could force the issue. If the case is referred to the SCOC and should that ruling be upheld, it will have profound implications for not only liquor regulations, but it might well call into question the constitutional validity of the tens of thousands of other interprovincial trade restrictions, prohibitions and conditions on business now in place; restrictions which are estimated to cost our national economy upwards of $14 billion every year.

It’s also encouraging the Atlantic Premiers are asking business for concrete recommendations to address regional trade problems. CFIB believes this is another step in the right direction. We encourage business owners to bring forward red tape and trade issues which require attention and we will be monitoring to ensure governments respond with solutions. If you do business in more than one province and you’re running into red tape between jurisdictions, CFIB wants to know about it.

With liquor regulations under the microscope, perhaps now is the best opportunity to assist our burgeoning local wine, craft beer and boutique distilleries. These small businesses are providing important economic growth opportunities, especially in rural areas. Eliminating archaic, Prohibition-era liquor regulations is something the Atlantic Premiers should get out in front of now.

This could have enormously positive impacts downstream in the accommodation, food and beverage and tourism industries. More and more entrepreneurs in Nova Scotia are risking their own capital and creating ventures in these sectors which are showing tremendous possibilities. Government needs to create the right environment for business and then get out of the way.

Eliminating cross-border restrictions on trade of alcohol products being manufactured throughout our region is a good place to start looking for solutions. It is one example of a broader need to remove barriers to business. Allowing more competition and freeing up the flow of commerce by eliminating restrictions on internal trade is an idea whose time has arrived.

Originally published in the Chronicle Herald, June 7, 2016

 

The $15 Minimum Wage. Good politics, bad policy

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The latest salvo in the Nova Scotia NDP’s battle back from electoral oblivion has been fired. Newly minted leader Gary Burrill is launching the Nova Scotia franchise of the “fight for 15” minimum wage war. Good politics perhaps but this is bad economic policy. This massive minimum wage hike is modelled on the Alberta government’s last election platform and has become somewhat of a Cause Célèbre for organized labour across Canada and the U.S.

The “Fight for 15” walks hand-in-hand with the discussion of the Living Wage, a somewhat arbitrary economic line-in-the-sand being drawn by anti-poverty and social activists.

In a study commissioned last year by the United Way the Living Wage for Halifax was identified by the Canadian Centre for Policy Alternatives at $20.10 per hour. This benchmark describes what the CCPA believes each money earner in a family of two parents and two school age children must earn to provide what they saw as a “reasonable quality of life”, free of the stress of financial hardship.

However the 20 dollar plus Living Wage is more a Trojan horse. Behind this is what its supporters feel is the much more “reasonable” 15 dollar minimum wage. While the Living Wage is promoted as a voluntary measure, it’s not hard to draw a line directly to the minimum wage policy discussion. The headline in the Herald last year read, Study: Minimum wage only half of what it needs to be.

The Living Wage has been officially adopted by New Westminster, British Columbia and several cities in the United States. The Mayor of Vancouver is now mulling over the idea. The outcome for city employees is nominal as the vast majority of municipal government jobs pay near or above that mark anyway. Where it is really felt is in the private sector.  As a Living Wage community, it is a requirement for private contractors also to also meet that benchmark in order to be eligible to contract with the municipality.

Unions like this policy because it drives up wages and reduces the ability of private sector contractors to compete for union jobs. It effectively increases the government employee wage floor, makes collective bargaining easier and freezes out small private contractors, a perfect union trifecta.

While this Living Wage conversation goes on, discussions around the minimum wage are ramping up in Canada with the help of Alberta`s new government. It was in the NDP platform. When the NDP swept into power, Alberta was left with a minimum wage policy that remains nothing short of horrifying for small business.

Since that time the Alberta government’s own advisors say: “it’s reasonable to assume significant job loss is one realistic possibility” and the NDP government has not produced a single economic impact analysis demonstrating otherwise. Premier Rachael Notley even admitted Alberta’s fragile economy cannot handle this shock.

Nova Scotia’s economy is certainly no more equipped to handle this kind hike and the NDP here are proposing they can meet that goal by 2018. There is no economic impact analysis. They say small business will be exempt, but no criteria is identified. How will they determine how one business must pay a $15 minimum wage and another does not? The prospect of implementing this kind of discriminatory economic policy is nightmarish.

Punishing jumps in the minimum wage mean targeted business owners will need to hike prices, lay off staff, reduce employee work hours and reduce training. Profitability will decline, reinvestments and growth in business will diminish, and jobs which may otherwise have been created will simply not appear. In other words, nothing good.

On the other hand, government will reap benefits through higher personal income and payroll tax revenues. For the low-income employee, the benefit will be marginal at best.

In fact, minimum wage earners lost more in 2015 due to higher government deductions (e.g. CPP/QPP, EI, federal and provincial taxes) compared to 2010 in all provinces and territories except Newfoundland and Labrador. For example, Alberta minimum wage earners could see their payroll deductions increase from $1,965.60 in 2010 to $5,576.22 in 2018 with the minimum wage rate increase to $15 per hour.

Minimum wage hikes are harmful to youth employment.  According to a recent report from the Fraser Institute, for every ten per cent increase in minimum wage there is a resulting decrease of youth employment by three to six per cent.  The NDP proposal of a 29 per cent to the minimum wage would mean a reduction of 9 to 18 per cent in youth employment in Nova Scotia.

The report also notes that nearly 59 per cent of people earning minimum wage are people aged 15-24 who typically are entering the workforce.  Only 2 per cent are people who are single parents who have at least one dependent living at home.

Basic Personal Exemptions 2016

BPE

If government is looking for a policy change to help low income workers, they need look no further than the Basic Personal Exemption (BPE). This is the annual income at which a worker begins to pay taxes. Nova Scotia has the second lowest BPE is Canada at $8,481. We urge the Nova Scotia government to address this shameful statistic first before looking at reckless minimum wage hikes.

We were very pleased to see this week the Premier suggesting this is his preferred option. If so, CFIB will be looking for it in the next budget. Nova Scotians face some of the heaviest tax burden in the country. By allowing low income earners to keep more of what they earn, rather than enrich the treasury through minimum wage hikes, the government can actually do something meaningful to benefit those who need it most.

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

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.

An Opportunity for Nova Scotia to do the Right Thing

Budget

It’s not often the Canadian Federation of Independent Business (CFIB) offers up a mark of A to a federal budget, but small business owners across the country should be thrilled to see several small business friendly measures. The 2015 budget includes an 18 per cent reduction in the small business corporate tax rate (SBTR) over the next four years.

Reducing the SBTR from 11 to 9 per cent over the next four years comes after years of steady CFIB lobbying and will save small firms $2.7 billion over four years ($1.2 billion per year when fully implemented). This announcement comes on the heels of Employment Insurance premium relief, new measures to address credit card fees and balanced budget legislation.

CFIB is applauds the government for lowering the tax burden on Canada’s small businesses now that the budget has been balanced. Reducing the overall tax burden is consistently viewed by CFIB members as the most effective measure the federal government could take to strengthen the performance of small firms. We’re especially pleased that government intends to legislate the full small business tax cut plan before the election.

There’s other good news for small business in two sectors important to the Nova Scotia economy. Farmers and fishers will benefit from the increase of the Lifetime Capital Gains Exemption for these businesses to $1 million as of today. CFIB’s agri-business members have called for such a measure for many years. We will now continue to lobby the government to extend this to all our members.

The provincial finance minister Diana Whalen must now take all of this into consideration when looking at tax reforms in Nova Scotia. In the 2015 provincial budget, the McNeil government kicked any significant tax policy changes (the NS Film Tax Credit notwithstanding) down the road for further consultation. This was in spite of a thorough Tax and Regulatory Review (The Broten Report) and many public consultations this past spring.

CFIB’s concern is the provincial finance department may swing it’s revenue hungry eye to the room now being made available by the feds in the SBTR. You may recall, one of the recommendations in the Broten Report called for an increase in the SBTR to pay for a big business tax reduction, something CFIB vigorously opposes.

 To what extent do you support or oppose increasing the small business corporate income tax rate to 8% from 3% over the next five years?  CFIB Small Business Tax Survey – March 2015 n=258
To what extent do you support or oppose increasing the small business corporate income tax rate to 8% from 3% over the next five years?
CFIB Small Business Tax Survey – March 2015 n=258

Nova Scotia taxpayers will remember what happened the last time the federal government provided tax room by reducing the federal portion of the HST by two percentage points. No sooner had the feds provided this tax relief than finance minister Graham Steele took the opportunity in the 2010 provincial budget to hike the HST by the same two points, extracting an additional $215 million from the economy.

To assuage the business community, the Dexter government announced they would reduce the SBTR by .5 percent. In a clever sleight-of-hand it then promptly reduced the threshold of eligibility to $350,000, effectively eliminating any meaningful benefit to the small business community as a whole. So we know how that played out politically.

Since that time, CFIB has continually asked the provincial government to lower the SBTR and raise the small business tax threshold to the national average of $500,000. With the approach in the latest federal budget, we believe Nova Scotia small businesses should be able to benefit equally from this new rate drop.

Unfortunately, there are those in the Department of Finance who are doing a good job convincing the finance Minister that the small business tax rate applies to businesses that use the rate either unfairly as a tax haven or to “stay small”. It’s an odd proposition.

The argument they make would suppose business owners would opt against making another $100,000 dollars to avoid paying $15k in taxes. If it isn’t clear, business owners focus on after-tax earnings, not the tax itself. Yes, there may be some finagling on the fringes, but the vast majority of small business owners are in business to succeed and grow.

It should also be pointed out that the vast majority of all those big companies which are the darling job creators of the economists, didn’t start out with 1000 employees. K.C. Irving started with a retail gas operation in Bouctouche.

It’s also difficult to accept the logic that somehow smaller businesses would be better off with a higher tax rate. Limiting the already limited access to capital available to small enterprise would not serve as an advantage. In fact, quite the opposite.

Another rationale often floated is a lower SBTR would place larger firms at a competitive disadvantage. These are the same companies who have enjoyed the general tax rate that has been almost cut in half since the 1990s.

The McNeil government has made some very positive moves with its reorganization of the Department of Business, its focus on putting structures in place to reduce red tape and its efforts to reign in growth of the public sector.

We would encourage the Premier and the Minister of Finance to recognize the importance of the SBTR and our unfailry low small business tax threshold of $350,000. Raising the threshold to national norms and not raising the SBTR will allow small business in Nova Scotia to reinvest and the provide them with the opportunity to grow.

Want to help entrepreneurs? Make Nova Scotia a leader in regulation again, and make it the law.

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Regulation is necessary. Some regulation is quite positive, supporting efficiency, business and consumer protection and ensuring the health and security of citizens. Business owners understand this and have no objection to needed rules being administered fairly. Unfortunately, small and medium size businesses are feeling the brutal impact of unnecessary regulation and red tape and it’s killing the entrepreneurial spirit in Nova Scotia.

The Canadian Federation of Independent Business (CFIB) has released its 2015 Red Tape Report Card, comparing the relative merits of efforts to reduce red tape across the country. Nova Scotia’s mark? A dismal D-. This mark may deserve an asterisk but that depends on what action will be taken by the government over the next few months.

Last week, an announcement from the office of Minister of Municipal Relations and Service Nova Scotia, Mark Furey, showed some signs the importance of doing something about measuring red tape and being held accountable for the damage it causes to small business is taking hold in the public service.

Service Nova Scotia will now have two branches, one focused on service excellence and the other focused on program modernization and red tape reduction. A Deputy Minister has been assigned and it looks like an administrative framework is being created to start tackling the problem.

In fact, a great deal of work has already been done with Service Nova Scotia’s Access to Business (A2B) initiative over the past couple of years, unfortunately there’s no way the public can measure either its impact or effectiveness. While these moves are very encouraging, tinkering with the bureaucracy is simply not enough. Regulatory reform must be politically championed and enshrined in legislation.

In both last year’s pre-budget submission and our Tax and Regulatory Review submission, CFIB provided the provincial government with clear criteria in five specific categories used to grade regulatory accountability. It includes political leadership, public measurement, putting constraints on regulators, legislating the commitment and demonstrating momentum in red tape reduction.

When Laurel Broten presented her Tax and Regulatory Review in December, almost every suggestion brought forward last spring by CFIB on red tape was adopted as a recommendation. The government is now holding another round of public consultations on the report. On the regulation piece, CFIB is asking the government for prompt adoption of these sensible improvements and make it law.

We’re asking the Premier and the Minister of Finance to step up and state clearly this is a priority for government and bind any action with the discipline of legislation. Not only would this be a low-cost political win, it would be a meaningful improvement in conditions for small and medium size business in Nova Scotia.

Of all the issues of concern to Canadian small business owners, government regulation and paper burden is second only to the overall tax burden. We are very pleased to see Minister Furey working on the mechanics inside Service Nova Scotia, but when the next budget is delivered, both the Premier and the Minister of Finance must also step forward and plant the flag for regulatory excellence in this province.

Additionally, as cabinet prepares for the spring budget, every Minister around the table should be arguing to do what is necessary to show the Nova Scotia government takes red tape as seriously as it is taken by our entrepreneurs.

Let Our Fathers of Confederation Guide the Premiers on Trade

conventionphoto2

This year, Charlottetown is celebrating the moment when our country was conceived. In 1864, the first of the Charlottetown conferences was convened to hammer out some of the philosophical and legal structure of our nation. It was the birth of a constitution that has served to create arguably the most successful experiment in democracy ever conducted, The Dominion of Canada.

Theirs was a project was to create a nation loved by its citizens because of its constitutional commitment to the protection of minority rights and personal freedoms, the “Canadian” rights and freedoms. “Freedom”, as Sir Wilfred Laurier stated during a campaign stop some 30 years later, “freedom in every sense of the term, freedom of speech, freedom of action, freedom in religious life and civil life and last but not least, freedom in commercial life.” Hover for a moment on the end of that statement.

Entrenched in section 121 of the Canadian Constitution is perhaps one of the most important bits of economic glue holding this fragile, tentative union together, the provision of free trade between the provinces. It could be argued without the creation of a Canadian free trade zone, comprised at the time of 4 million mismatched souls, the notion of Canada as a nation itself might never have even got off the ground. Certainly the cancellation of the Canadian-American Reciprocity Treaty in 1865 necessitated the creation of a more robust domestic market.

The founding fathers vehemently opposed Inter-Provincial Trade Barriers (IPTBs as we affectionately refer to them now). They believed if Canadians were to prosper it was essential that all Canadians could freely access markets within the country. Section 121 of the Constitution is explicit. In the final version from March 1867, section 121 reads: All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.

In spite of its seemingly obvious constitutional intent the forces of parochialism and protectionism have prevailed over the wisdom of our founders. Through a variety of decisions throughout the 20th century, subsequent interpretations of section 121 served to open the door to closing more doors. While customs duties and similar charges remain prohibited between provinces, successive governments have successfully closed or restricted their provincial borders through mazes of indirect taxation and absurd regulations stifling the free flow of goods and services.

Midway through the second decade of the 21st century and as we prepare to celebrate the 150th anniversary of Confederation, if our founders could be raised from the dead and made aware of what we are doing with their precious document, they would surely be puzzled.

You may ask, “How can this be? Surely our elected officials would not knowingly have undermined the most sacred foundation of our national architecture.” Actually, yes…they did, generally for short-sighted reasons based on either protectionist or isolationist principles.

Many of the barriers in question are at the same time serious and foolish. Have you ever wondered why regulation would be imposed to determine the size of the containers for milk and cream? Do we need protection from the amount of milk we put in our coffee? Another example, from province to province the regulations governing truck tires are not consistent. In fact, there are situations where depending on the load, trucks must stop and change tires when they cross the provincial border to be in compliance. This is one of a myriad of mysterious regulatory anomalies that business must decipher and comply with.

Perhaps the most ridiculous example, the infamous Quebec ban on pale yellow margarine, has been removed but it still serves to illustrate the deceptive thinking behind these barriers. Consumers didn’t need to be protected by the colour of the product inside so they didn’t mistake butter with something with “margarine” on the label, but it was designed to impose an extra cost on non-Quebec margarine producers, to benefit Quebec dairy producers, all at the expense of Quebec consumers. By the way, the rule that is still in place says butter sold in Quebec must be wrapped in foil. Why has never been explained.

Recently the federal government moved to eliminate restrictions on shipping wine from one province to another. In response several provinces promptly establish new regulations again restrict that trade. The inevitable result will be court challenges to the validity of these regulations which will again test the interpretation of section 121 to create great expense, delay and confusion. By the way, don’t be buying a case of wine in Nova Scotia and driving it to New Brunswick. The maximum amount of liquor that can be imported into New Brunswick from another province is one bottle of wine or hard liquor or 24 bottles of beer. There’s an immediate 292.50 fine and your crisp L’Acadie Blanc souvenir from the vineyard can be seized and destroyed.

As our clever student intern working on CFIB’s Atlantic IPTB report said at our summer meeting…”What’s the difference between Smokey and the Bandit and Atlantic Canada’s Alcohol policies? One is a foolish story about regular folks of coming to terms with 1970’s era prohibition style trade restrictions and the other is a Burt Reynolds movie. Ba-dum.

There are volumes of petty, preposterous, punitive rules and regulations so immense it is difficult to measure the economic impact on the economy. However anyone familiar with any industry can easily come up with their own examples. Measuring the overall impact is considerably more difficult. In 2010 Brian Lee Crowley, Robert Knox and John Robson wrote Citizen of One, Citizen of the Whole for the MacDonald-Laurier Institute publication True North. Three reasons are given why it is so difficult to measure the cost of ITPBs;

“First, IPTBs are so numerous and varied that no one has managed even to list them all. Second, they have such complicated effects that it is impossible to measure even their short-run costs with any certainty. Third, the harm they do accumulates dramatically over time in ways that are even harder to measure, especially their depressing impact on people’s enthusiasm for trying new things, which, after all, is the elusive “innovation” that is the Holy Grail of so much government economic policy.”

Regulations restricting inter-provincial trade clearly are in defiance of the spirit in which the constitution of this country was written. What is puzzling is the resistance of political leadership to addressing such a fundamental flaw in the application of policy and why it’s repeated. Surely, even the anecdotal evidence must be enough to raise sufficient concern for attention.

The federal government is finally beginning to show some sign it takes this issue seriously. James Moore, the federal Industry Minister, said his number one priority is a new internal trade deal that would replace the existing Agreement on Internal Trade (AIT), signed by the provinces 20 years ago. It left behind a patchwork of cumbersome barriers. Moore says, “The Agreement on Internal Trade … is out of date and it doesn’t make sense anymore.” In fact, it’s become practically useless. Ironically, since the AIT was signed 20 years ago, Canada has finalized trade agreements with over 40 countries, including the European Union and South Korea. Some companies now are noting it’s harder to do business inside Canada than internationally.

Later this summer the Council of the Federation (The Premiers) are meeting in, of all places, Charlottetown, and IPTBs will be on the agenda. PEI Premier Robert Ghiz has said he doesn’t have much to say about it right now, but he’s open for discussion. NS Premier Stephen McNeil is making the right noises and one might expect New Brunswick’s David Alward would support such measures.

Let’s hope the echoes of the ghosts of the Fathers of Confederation influence the Premiers while they are in Charlottetown. Eliminating these ludicrous trade barriers between the provinces is something they must advance now.

Ray Ivany and the Cold Hard Truth About Our Culture of… Whaaa?

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In March of 2002 Stephen Harper set off a firestorm of criticism after being quoted in the Saint John Telegraph Journal. When asked about the economic performance of the region, he responded by saying, “I think in Atlantic Canada, because of what happened in the decades following Confederation, there is a culture of defeat that we have to overcome. …Atlantic Canada’s culture of defeat will be hard to overcome as long as Atlantic Canada is actually physically trailing the rest of the country.”

The headline writer didn’t have to dig to deep to find gold. His political opponents of the day didn’t have to work to hard to extrapolate all the verbal batons with which to beat him over the head. I still believe had Mr. Harper not framed it just so, the federal political landscape might look a lot less Liberal and NDP is this neck of the woods. I knew as soon as I read that he said it there would be a significant personal political price he would pay in Atlantic Canada. There was.

Fortunately, Ray Ivany and his panel on Nova Scotia’s economic recovery aren’t worried about getting elected. If any politician had stood up and spoke as frankly as Ivany did yesterday, political opponents would be falling over themselves to discount the formidable truth of what was said. It was true 12 years ago. It’s still true today.

The panel’s findings are nothing new. Collectively we all realized or at least suspected the key points. People who are paying attention have known it for a long time. The Herald editorial call it a “unvarnished, awkward and often unflattering truth— about our collective selves.”

Essentially, the report says we have developed a culture of “No”. Call it what you will but Harper’s 2002 interpretations ain’t far off. We can argue about policies going back to Confederation that have entrenched this attitude but there is no denying it exists…in Now or Never, An Urgent Call to Action for Nova Scotians,  Ivany’s panel affirmed this in spades.

Among other points, it’s made clear we depend too heavily on government interventionism. Ivany takes pains to point out some new program or policy tweak is not going to turn this around.

Evidence of this may no clearer than our response to the shipbuilding procurement strategy. There is no denying that injecting 30 billion dollars into a local economy will have an impact…but let’s see it for what it is. It’s primarily federal public money backed up by provincial public money going into DND, another publicly funded entity. It’s redistribution not wealth creation.

Is this simply going to become another government teat on which we will become dependent or do we actually believe it will transmogrify into private sector wealth creation and development? To do that we had better understand that it’s through the private sector we will make that happen through export development and market expansion of defense technology. I can already hear the naysayers.

Government also has to look at its relationship to business and figure out how to get the hell out of the way. Our tax and regulatory load in this province is debilitating. All the payroll tax credits and government “incentives” in the world won’t alleviate the outright punitive measures that are in place to set up shop and run a business in Nova Scotia. Can you say the highest Workman’s Comp rates, convoluted apprenticeship regulations, the First Contract Arbitration legislation…? I could go on for days. While we’ve seen some nominal reduction of regulatory burden recently, it’s not nearly enough.

On my radio program I tried on many occasions to talk about immigration. From most of the calls I received, we don’t much like folks “from away”. This is bad. Very bad.

Ivany’s report talks about our demographic decline. We have a rapidly aging workforce and shocking levels of out-migration. These alarm bells have been ringing for a dozen years.

It’s not good enough to just tolerate higher levels of immigration, as a culture we must be embracing the benefits of immigration and promoting Nova Scotia as a place that wants and welcomes immigrants. The provincial government may not be able to solve this problems on its own, but having the highest personal, business and consumption taxes in the country doesn’t exactly say “céad míle fáilte”.

Perhaps the most refreshing component of yesterday’s illuminations was Ivany’s insistence that this was a message for the people of the province, not simply a message for government. While I accept his point, government however is how we collectively make decisions and it is, or ideally should be, a reflection of our collective will. Let’s hope government listens and embraces these ideas.

Ivany usefully called for long-term targets be legislated and that the legislation be enforced. I would take this a step further and demand short, medium and long-term targets be legislated and rigorous metrics be transparently applied to ensure governments are meeting those goals and reporting back to the public.

It’s true we may not be capable of running government like business but we can sure as hell take a few cues from successful enterprise and apply it to public policy.

Ivany’s comment about Nova Scotia taking a long hard collective look in the mirror is a great one. Often when criticism comes from outside, as Maritimers, we are too quick to become defensive. Ivany has said we need to take an honest look at ourselves, reset our attitudes and get on with the work of turning our beloved province around.

I guess it just must be said by someone who isn’t “from away.”

The Bluenose marathon

The Bluenose marathon has the potential to leave Nova Scotians breathless, weak and struggling across the finish line…and then there’s the race.

Ba-dum.

The saga to restore Nova Scotia’s most familiar icon, Bluenose II, is beginning to supersede the racing legend of the original Grand Banks Schooner. This tale however is not one rich in Canadian accomplishment, pride and celebration. This latest yarn is steeped more in bureaucracy, greed, bungling and ineptitude. It’s unlikely any catchy shanties will be written.

The old salts of Lunenburg are rightly concerned, skeptical and angry about what is being done to the pride of their shipyard. There are a group of folks who have been carefully watching what is going on with the restoration of Bluenose II. They don’t watch on webcams or read provincial media releases, they are much closer to the boat than that. Former crew, wooden ship builders…those who know their way around a waterfront. Word is, they don’t like what they are seeing and hearing.

Add to this, today, Kevin Lacey of the Canadian Taxpayers Federation is releasing a number of documents outlining some of the goings on around the rebuild. The documents obtained through the Freedom of Information and Protection of Privacy Act show some of the reasons behind the budget ballooning from $14,000,000 to over $17,000,000 and counting.

The project is managed by MHPM of Ottawa, a company that curiously doesn’t normally work in the shipbuilding sector. The CTF noted in December the project management contract was three times over budget and the meter was still ticking as Nova Scotians continue to fork over a $25,000 per month retainer in spite of the project being months overdue and millions over budget.

Interestingly, rebuilding a Canadian icon doesn’t warrant a spot on the front page of the MHPM website. Sea trials still won’t get underway until this spring.

So, we don’t have Percy Paris and Darrell Dexter to kick around on this file anymore but it must be clear to the Liberals they have a mess on their hands. The new Communities, Culture and Heritage Minister is Tony (Be Careful what You Wish For) Ince. I’m sure Tony is a nice fellow, but his background as a Community Services Counselor, sales rep and actor may not have prepared him to sort out this political, cultural and financial quagmire.

My guess is, this file may have had at least something to do with Kellianne Dean being asked to come back from the Public Service Commission and back into Communities, Culture and Heritage as Deputy Minister. She held this position for six years and is widely regarded as one of the brighter lights in the bureaucracy. Tony may need some help.

None the less, she and her rookie Minister may have some ‘splainin’ to do.

I don’t know much about buying big sailing ships, but is it really a yachting industry standard for boat builders to charge 43% markups on materials purchased that are changes from the original contract? Any chance the the Minister responsible could have negotiated some better terms?

They say you can get the same feeling of owning a sailboat by standing in a cold shower tearing up hundred-dollar bills, but there is no real reason taxpayers in this province should have this same sensation foisted up them. Mr. Lacey’s FOIPOP documents will make those of us who shop for bargains to make ends meet…just a little queasy. That familiar seasick feeling will come from reading the contract signed by Minister Paris and Peter Kinley, President and CEO of the Lunenburg Shipyard Alliance.

If I’m Seattle Seahawk’s owner Paul Allen, I suppose a 43% markup on these sorts of things going into my yacht wouldn’t feel out of line. However, the taxpayers of Nova Scotia are not Paul Allen and this unquestionably poor oversight of public money.So what does this “markup” mean in real terms. Here are a couple of examples Lacey noted.

  • A couple of years ago the delivery man dropped off a couple of washers and dryers. Cost to the builder, about $5,400. Cost to you and me, $7,722.
  • Some portholes were ordered in November of 2012. Cost to the builder about $12,950…cost to you and me? Just under $17,440.

Not exactly rollback day at Walmart.

So, who cares. Somebody is making a boatload of money from a government contract. What else is new?

Well, some questions have to be asked why this is happening and there are many other questions swirling around valuable materials taken from the original vessel. Who owns these and what happens to the proceeds from their sale?

What should be a proud moment for all Nova Scotians is awash in questions and problems. An internal review was ordered by Minister Ince and he says the results will be made public. Nice gesture but this might, as Lacey is rightly suggesting, be a job better suited for the incoming Auditor General.

Even as retiring AG Jacques LaPointe sails over the horizon, there are rumours afloat that this new iteration of the Bluenose II may not even be able to perform properly under canvass. According to some sources, the new rudder has required significantly more ballast to be added near the keel, limiting the vessel’s ability to sail per the original design specs.

Well, it might not win any races, but we still love Bluenose II and its legacy certainly deserves better than what we have seen delivered so far. As a point of pride, most Nova Scotians would agree that rebuilding Bluenose II as an ambassador is a good idea. It’s enormous value representing our province is hard to measure. But that is not a reason to ignore the potential for unnecessary profiteering by those doing the work.

My 50 cents worth.

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