Tag Archives: Small Business

Nova Scotia’s pre election budget: anger and gratitude

delorey mcneil
Nova Scotia Finance Minister Randy DeLorey looks on as Premier Stephen McNeil speaks in Nova Scotia Legislature 

Premier Stephen McNeil must be listening to Tony Robbins. One of the tenets of the motivational speaker’s philosophy is it’s impossible to be angry and grateful at the same time. McNeil’s recent budget leverages the idea in spades.

CFIB members have been lobbying for tax relief over the last four years. Finance Minister Randy DeLorey delivered one of our key asks, to raise the small business tax threshold from $350,000 to $500,000, giving small business owners the capacity to retain more money in their business to innovate and create employment. Check that box.

Additionally, we’ve been adamant about providing some relief on personal income taxes, especially so lower-income earners can keep more of their earnings.

By raising the basic personal exemption by up to $3,000 for those earning less than $75,000, many low-and-middle-income earners in the province will see more of their paycheck, a much preferable mechanism than raising the minimum wage.

As we’ve argued for years, as a poverty-reduction measure, minimum wage is ineffective because government becomes the principal beneficiary through higher taxes. With this adjustment to the basic personal exemption, thousands more lower-income Nova Scotians will pay no provincial tax at all.

Another positive benefit of the budget for small business owners is the provincial government’s measurable commitment to reduce red tape. This is a principal file for CFIB. We have been supportive of the efforts of this government to put in place the structures to begin reducing unnecessary regulatory burden. Nailing down a target of $25 million in cost to business is the right thing to do.

CFIB members will be grateful for these improvements, which may temper taxpayer anger heading into the predicted provincial election. While these measures are sensible, and should be commended, there is still much work to be done on tax reform to put Nova Scotia in a competitive position.

We remain concerned, however, about the propensity of government to create boutique programs to benefit specific sectors. While there are programs geared toward small business growth in areas such as export and innovation, historically the programs go largely unnoticed or unused.

Leaving more money in the hands of small business owners to reinvest, without forcing them through the rigours of bureaucratic process to access benefits is a far more efficient and desirable approach.

Preparing for an election, it’s not hard to see why this government has chosen the former option. It provides more control over who will be the principal beneficiaries and constituencies. That is a simple political calculation.

Many small business owners remain frustrated by high taxes and governments that seem out of touch or ambivalent to their needs. This is a good start, but it’s only a start.

It has been a very long time since the people in Nova Scotia have seen any meaningful tax relief at all. A morsel can seem like a feast for the starving. Now that the math is done in the Department of Finance, it will, presumably, be put to the people of Nova Scotia to determine if they are indeed grateful or angry.

This post originally appeared in the Chronicle Herald, April 29, 2017 on day prior to the call of the 2017 provincial election.

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Cap and Trade for Nova Scotia Still Fuzzy for Small Business

cap-and-trade

The Nova Scotia government’s decision to go it alone with cap-and-trade to put a price on carbon raises more questions than answers.

This spring, government released a discussion paper, looking for feedback. They gave less than a month for responses and you needed a degree in environmental science to make any sense of what was being asked.

At an information session, executive director Jason Hollett of the climate change unit tried valiantly to outline a coherent picture, but he was working within an unreasonably tight timeline and without all the tools. In spite of a commendable effort, many left the session scratching their heads. Under questioning, somewhat ominously, he referred to the scheme as “a big regulatory beast.”

Without much heavy industry, Nova Scotia has few large greenhouse gas (GHG) emitters. Our coal-burning generating stations are pumping out the lion’s share (44 per cent). The transportation industry creates 27 per cent, followed by commercial and residential heat (combined 13 per cent) and the oil and gas industry (five per cent). The remainder comes from waste, agriculture and other industry.

For years, Nova Scotians have been paying through the nose to achieve GHG reductions through transition to renewable electricity generation and efficiency. We can pat ourselves on the back. After coughing up the highest power rates in the country over the last 10 years, our renewable portfolio has grown from seven to 27 per cent, exceeding our reduction targets.

Apparently unsatisfied with this progress, the Trudeau government, riding its mandate to legislate away climatic catastrophe, told Nova Scotia to put a price on carbon by 2018 or we’ll do it for you. The McNeil government initially balked, then came up with what it felt was the best option, a go-it-alone cap-and trade-system.

Using cap and trade, the premier successfully avoided the “carbon tax” narrative, opting instead for what appears to be a more saleable version.

The proposed Nova Scotia cap-and-trade model is fairly simple, but its administration is expected to be complex and therefore, presumably, costly.

Government will cap the amount of GHGs emitted into the atmosphere, hand out free credits for that tonnage to this handful of larger polluters and they can trade among themselves. When someone needs more, they can buy in this tiny market of emitters. How that will affect price is unclear.

A central tenet of carbon pricing is revenue neutrality. But with this plan, at least for now, there is no clarity in respect to dollars changing hands or how it will affect the price of electricity or fuel. Other questions: Will the incentive to be greener simply be higher energy and transportation costs? What would be the offset?

Moving ahead without the required evidence in respect to cost and competitiveness will frustrate business owners. In spite of a stated intention by government to measure and cost all regulation prior to application, none of these calculations are yet available.

While public servants are trying to align regulations between provinces to break down trade barriers, Nova Scotia’s approach (in spite of the premier’s openness to having the other Atlantic provinces jump on board) could result in two, three or four carbon pricing schemes in the region.

cap and trade chart

CFIB members support environmental initiatives. Seventy-nine per cent believe it is possible to grow the economy and protect the environment at the same time. But 80 per cent say government must consider the cost to small business before implementing a mechanism to price carbon. That means measuring and communicating real economic costs and environmental benefits and establishing a reasonable window for consultation and implementation.

In light of the work by this government to improve the regulatory environment, introduction of a “regulatory beast” feels counter-intuitive and environmental and economic impacts are still fuzzy. For something of this size and importance to be a cost of doing business in Nova Scotia, we need clarity.

This originally appeared in the Chronicle Herald, April 26, 2017

What Will a Liberal Majority Mean for Small Business?

justin-trudeau-sept-21-2

October 18th to 24th is Small Business Week in Canada. Every year, organizations across the country mark the importance of entrepreneurship to our economy. This year Small Business Week was kicked off with a wholesale change of government and there was lots of talk about small business during the campaign.

The health of the small business sector is critical to the economic success of the country. The Canadian Federation of Independent Business (CFIB) is proud to provide a strong voice for our 109,000 members to ensure their opinions are heard when politicians are making decisions.

So what does this Liberal majority mean for small business? There is both good news and some cause for concern. During the campaign, the Liberals committed to reducing the small business tax rate to 9% by 2019 and to reducing employer Employment Insurance (EI) premiums from $2.63 to approximately $2.31 in 2017. We also like Justin Trudeau’s plan to waive EI premiums for new jobs for young people for the next three years. This will certainly encourage hiring in a segment of the population that can use a leg up.

The Liberals have also promised to maintain the Canada Job Grant while reinstating the federal-provincial Labour Market Development Agreements. According to their platform this will provide the provinces and territories with half a billion dollars per year in skills training. CFIB also supported two recent Liberal MP Private Members Bills including Emmaneul Dubourg’s bill to allow small business owners to pass their business to their children free of capital gains and Ted Hsu’s bill to bring back the long-form census.

These are all good measures.

On the other hand, there were a couple of red flags. The comment made by Mr. Trudeau suggesting a large percentage of small firms are used as tax-shelters requires clarification. The vast majority of small firms are legitimately using the small business deduction. If Mr. Trudeau was talking about ensuring that the deduction is not being abused, we can support that position. If there is a move to limit access to the small business deduction, as is taking place in Quebec, CFIB will raise strong opposition.

CFIB is also concerned about the Liberal plans to increase CPP premiums. We will be asking the new government to put this idea on hold until the economy is in better shape. Because CPP premiums act as a tax on every dollar a business pays to its employees, it is a big disincentive to hiring at a time when the economy needs just the opposite. CPP expansion is currently our members’ number one area of concern and we will be reaching out to learn more about the Liberals’ plans.

We are hopeful this new government will take note of our members concerns. Most have a direct impact on the bottom line of small firms and in turn the success of the Canadians who run them and are employed by them.

Now, with the election behind us, this week we want to focus attention on the importance of small business to our communities. On October 24th, CFIB is sponsoring Small Business Saturday to encourage the community to recognize the contribution of our local entrepreneurs by making a conscious choice to support local business.

We are asking you to take some time this Saturday to cast a vote for small business in your neighbourhood. Drop in for a meal, listen to some music, purchase a gift, get some groceries, have your hair done, drop off the dog for grooming or pick up that item you need for your home.

By supporting small business in your area, you are supporting your family, friends and neighbours. These are the same folks who often sponsor your kid’s sports teams, local cultural events and community projects.

At CFIB we believe small business makes Canada a better place. We hope this Saturday you’ll make your part of Canada a better place for small business.

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

Stephen McNeil

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

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

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

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

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

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

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

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