As Liberals pile on the taxes, small businesses can’t catch a break

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By Brianna Solberg

“It’s a tough time to be a small business owner” may be the understatement of the year just ending. Speak to any business owner in your community and they will tell you that over the past 12 months, nearly every line item in their budget has gone up: food, fuel, rent, insurance, utilities, not to mention the challenges created by labour shortages, supply chain issues and lingering pandemic debt.

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To make matters even worse, only about half of small businesses are back to pre-pandemic sales levels. Many owners say customers have been slow to return and are spending less on average when they do. Data from the latest Canadian Federation of Independent Business (CFIB) monthly business barometer indicates both that insufficient domestic demand is limiting business’ ability to grow and that business owners are not optimistic things will get better anytime soon.

The new year will bring new challenges as Ottawa piles on four major tax hikes.

As of Jan. 1, changes to both the Canada Pension Plan (CPP) and Employment Insurance (EI) premiums will increase payroll taxes by up to $348 for workers and $366 per employee for employers. As a result of these increases, an employer paying the maximum CPP/EI contributions will pay up to $5,524 per employee. To say nothing of the other payroll taxes, such as workers’ compensation premiums, that business owners must pay, or the payroll levies for education or health care that they face in several provinces.

Then on April 1, the carbon tax rises from $65 per tonne to $80, while the alcohol excise tax is automatically adjusted for inflation. Assuming Ottawa doesn’t legislate a freeze or cap, the increase will be about 3.5 per cent.

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A higher federal carbon tax will be hard for many small business owners to swallow. CFIB estimates that Canadian small businesses pay around 40 per cent of the funds the tax collects, yet Ottawa plans to rebate only 10 per cent of what it collects to small businesses. It’s no surprise this obvious unfairness coincides with a recent increase in opposition to the carbon tax among Canadian small businesses, with the majority in all provinces now opposed.

These four tax increases will cut workers’ take-home income and further drive up the cost of doing business at a time when business owners can least afford it — especially as they struggle to pay back their pandemic-related debt.

Right now, many are desperately trying to find funds to repay their Canada Emergency Business Account (CEBA) loans. CEBA loans are due on Jan. 18 if businesses want to keep the $20,000 forgivable portion and avoid paying interest on the principal. Yet CFIB data indicate only 34 per cent of business owners have repaid their loans while another 23 per cent don’t think they can repay in time to keep the forgivable portion. CFIB has been urging the federal government to extend the deadline until at least the end of 2024.

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Pandemic-related debt and rising costs have created near-constant stress for small businesses under for the past few years, so it’s not surprising over half of them plan to maintain their current level of operations rather than grow or expand.

Unfortunately, without the ability to grow and reinvest in their businesses, many small operators are fearful they will continue to lose sales and contracts to big businesses, especially online giants, and in the resulting competition they feel the odds are stacked against them. According to recent CFIB survey data, fully 90 per cent of small firms believe they’re treated unfairly compared to big businesses in Canada. In recent months, governments have handed out tens of billions of dollars in subsidies to the likes of Stellantis-LG Energy Solution, Volkswagen and Northvolt. Small firms don’t expect increased sales or new contracts as a result. The double standard is stark: big businesses get billions while small firms’ pleas for tax relief and an extension of a repayment deadline continue to be ignored.

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Small businesses clearly need help. We’ve already seen more business bankruptcies this year than last, while CFIB data suggest an alarming 13 per cent of small businesses are planning on scaling down or closing altogether. The damage that would do to the Canadian economy underscores the need for governments to recognize and address the needs of small firms before many more of them are lost.

Brianna Solberg is legislative affairs director for the Prairies and Northern Canada at the Canadian Federation of Independent Business. 

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