Budget needs to work for our smallest businesses
January 20th, 2017 - 12:12pm
There is a small army of civil servants and political staffers working on this year’s federal budget. They are planning tax measures and initiatives that could steward the economy by promoting fiscal growth and stability. If all goes well, it will result in the creation and maintenance of jobs. Before that happens, the Minister of Finance will receive submissions and specific requests for the budget. As you may well imagine, the bigger the group - for instance the banking sector - the more sway their requests will carry. At the other end of the spectrum, there are those whose request can’t cut through the din in the lead up to a budget. This is problematic in general and more so for the kinds of businesses we depend on in rural and northern Canada.
While there are a number of items of great importance to Northern Ontario that should be addressed in this year’s budget, I submit that it is paramount for the document to leave no stone unturned in support of our smallest businesses. These are family -run enterprises that may hire a few employees a year. Seasonal businesses make up a large number of these Ma and Pa outfits and some of them have been thrown a curve ball from Revenue Canada that the government simply must reconsider.
The problem is exemplified by small campgrounds which are having their status as small businesses revoked if they hire fewer than five employees. This has sent shock-waves through the campground community and hardly a week goes by that MPs aren’t submitting petitions signed by campers asking the government to stand down from this cash grab. The petitioners point out that the bottom line for these businesses can be razor thin and without small business status, tax bills will balloon and so will the cost of camping. In many cases they won’t be able to compete or carry on.
The Canada Revenue Agency (CRA) measures that affect family run campgrounds also apply to family run storage businesses. Reclassifying these businesses after the fact means that entire business models can suddenly be invalidated with the stroke of a pen. While there are ways these ventures can build themselves up to re-establish small businesses credentials with CRA, the issue at hand is how the whole problem was imposed in an arbitrary manner.
It is well proven that people respond to incentives, but we should also consider that people respond to disincentives as well. Over-taxing Ma and Pa ventures can drive them out of business. In a big city, this might seem like a paper cut, but in a smaller community it’s more like a gash. If the CRA was adamant that businesses like these should not be eligible for small business status, it would have made sense to grandfather existing businesses through a period of adjustment while reserving the reclassified option for new ventures.
Nothing good can come from measures that force family businesses to close. When compared to the lax treatment CRA affords wealthy individuals caught in offshore tax avoidance schemes it appears as if there are two solitudes in the tax-man’s Canada. The little guy gets the stick, while the well-to-do get the kid glove treatment. There is a budget coming up which represents an opportunity to do something about the very bad optics that surrounds the family-run campground saga. Here’s hoping that message is being heard and the interests or rural and northern Canada will get the respect they deserve.