By Miles Clyne
It is well understood that small businesses are the backbone of any progressive country. If you doubt this, check out this Government of Canada link. In 2015, the Canadian private sector employed over 11.6 million people. 70.5% were employed by small business. Think also about the family run restaurant down the street, the doctor, farmer or the mechanic who has his own shop, or any other independent contractor or business person. They all make up that backbone.
We probably all know of people who had a crazy business idea and gambled their life savings on a wing and a prayer, or hopefully a more thought-out plan. Regardless of how thorough the research done, the type of person that would risk it all on an idea or a dream is not all that uncommon, but they are distinctly different from others. Many choose what would be considered the “safer” route in life, working for an established company or the government to get the stability and benefits they offer.
We should all expect a high degree of consistency with respect to many things in life such as; quality health care, education, equal rights and opportunity. But thankfully, we will not all follow the same road in life. The entrepreneurs among us are a breed unto themselves. They see life differently, they see opportunity where others may not, and will take risks others would shudder at the thought of.
Given the necessity of the entrepreneur to any economy, respecting them and ensuring their existence should be paramount to any government. If the Federal Liberal government enacts their proposed tax legislation, targeting privately held corporations under the disguise of equality, our world as we know it will change, and not for the better. In a short sighted, short-term money grab, our federal government is putting all of our futures at risk. Taking a card out of President Trump’s playbook, they are selling the logic of their proposed tax changes to those who do not benefit from the existing rules. The pitch tells the general public they will be better off as the government will have more money to share equally among everyone. Everyone wins, utopia at last. Oh, and the cruelest of the pitches, our government has labeled the small business owners as tax cheats, because they follow the tax legislation that recognized their contribution to our country.
There are two primary changes proposed for private business owners: Income splitting with spouses or family and sheltering money that is currently not needed for reinvesting back into their business’ would be eliminated. This current tax structure allows the business owner to either get more money out of their corporation at a lower tax rate or reinvest money within the corporation rather than withdrawing it, incurring a higher tax rate and therefore having less to invest for future needs.
What is the big deal you ask?
The reality is that many businesses are marginally successful or fail, in fact most new business’ do fail. They may fail quickly or take years. Every successful business owner I know has put their money, heart and soul, along with untold hours into their business. They assume all the risks with no guarantees.
An employee on the other hand has labor laws and are guaranteed certain standards to protect them, with no capital investment. I will assume that many business owners have invested in their post-secondary education as many employees will have also. Employees can climb the ladder or quit any time they like, all the while collecting a pay cheque and in many cases building a pension plan and qualifying for severance pay and EI if they lose their job.
The entrepreneur, not so. If they fail they don’t get EI or severance, and it is unlikely they had extra money to fund their RRSP so they are not building a pension. Then they get to deal with any debt incurred and their loss of capital on top of starting over again. The pro and con list for new business’s is already pretty lopsided against them.
Assuming the business becomes successful, there were likely years of just getting by that hopefully they can get caught up on, exceed, and justify the risks they took. But how do you make up for years of struggle and stress? And to top it off there is no guarantee that the good times will continue. They are on their own from beginning to end, living off their wits.
Now imagine that the tax incentives for starting a business are removed? Will new and existing business owners still take the same risks, knowing the pot of gold at the end of the rainbow is no greater than for the person incurring no risk from a tax perspective? Maybe you would, but the smart business person will consider locating where the after-tax benefit to them is the greatest. The family restaurant down the road isn’t likely moving to a more tax friendly jurisdiction, but the up and coming business that will ultimately pay a lot more in tax will be thinking about this.
Entrepreneurs are a wily lot. They understand opportunity and survival. And in this day and age where much of the growth is going to be coming from tech industries. Citizens and elected leaders need to understand that money, skill and technology are portable and can move very quickly. Our leaders should be providing incentives to attract, retain and encourage any individual with or considering a business in Canada. The US are now desperately trying to bring back businesses with huge tax driven incentives, they’ve figured out you can only squeeze something so hard before it breaks.
When a government can’t recognize the most important drivers in the economy, we need to step up and let them know our opinion. Canada has a young leader who needs to hear from his constituents. This is our country and it belongs to everyone, not the bureaucrats who can’t control their spending. We need to protect it for ourselves and for our children. Buying into a scheme that suggests we should all be treated equally when we don’t share equal risk is foolhardy at best.
A handful of people who were elected to serve us are at the controls and have a unique perspective. They believe it fair to make it harder than it already is on the people that actually build the businesses that drive the success of our country. Ironically, it is the most successful that pay the greatest amount of taxes already. An intelligent government would recognize the true value of these individuals rather than creating more hurdles for them to overcome.
Whether you lean right or left, whether you run a business or not, the government should strive to provide incentive for business minded people the opportunity to succeed.
The following links are articles or petitions asking the Prime Minister and Finance Minister of Canada to reconsider the proposed tax changes. Mark Warawa MP, recommended signing and dropping off to your MPs the attached petition. Signing all the electronic petitions below probably wouldn’t hurt either, if you disagree with the proposed tax changes.
- Petition to the Minister of Finance Federal: No Small Business Tax Hikes
- Pierre Poilievre MP Carleton Fight Back Against Liberals' Tax Hike on Small Businesses and Farmers