Small business gets broad support in 2015 federal election
All parties agree in writing to cut SMB tax rate to 9%
As a keen election observer for more than 30 years, I cannot remember a campaign where small business issues have been such a focal point. But I shouldn’t be surprised, considering how crucial small businesses are to the health and growth of the Canadian economy.
We’re in the thick of surveying our 109,000-strong membership to check their collective pulse on election issues, and reaching out to all parties to get specific answers to the top priorities for those business owners.
All four national party leaders have responded to CFIB’s election survey and we’ve published their responses in their entirety on CFIB’s website. This should be mandatory reading for any small business owner. We’ve even published a few videos of my interviews with the party leaders.
If you watched the economics debate between the Liberals, Conservatives and NDP, you know small business issues were at the top of the agenda, including Employment Insurance premiums, Canada Pension Plan, and the small business corporate tax rate, among others.
In a rare moment of political unity, all four national parties have committed in writing to cut the tax rate from 11 to 9 per cent. There are sizable differences on many issues, but it’s great to see such broad support for Canada’s entrepreneurs.
During the course of this campaign, commentary about whether some wealthy Canadians are using the lower rate as a tax dodge has been growing. This has given fuel to some academics and unions who challenge the idea of a lower rate of taxation on small business.
They argue that a lower rate for small businesses acts as a disincentive to growth and presents an unwarranted hit to the treasury in terms of lost tax revenue. It disappoints me to see Canada’s big business lobby group — the Canadian Council of Chief Executives — calling for higher taxes on small business as a way to help them grow.
First, every tax policy needs to stand on its own merits. If there is any evidence people are using the small business deduction to inappropriately or illegally reduce or defer taxes owing, they should have the book thrown at them.
We at CFIB have yet to see any evidence. When pressed to provide examples, those who feel there needs to be a crackdown suggest doctors, dentists and lawyers shouldn’t have access to the small business rate. I struggle to understand this argument. In the past 20 years, provinces have allowed most professionals to incorporate, recognizing they face the same risks and responsibilities as any other business.
The lower tax rate was put in place for two main reasons: to recognize that small businesses bear a much greater burden than larger corporations when it comes to tax and regulatory compliance; and to help balance their more limited access to financing by allowing them to pump money back into their businesses. While corporations are calling for an end to the lower small business tax rate, let’s remember that large firms have seen their taxes cut nearly in half, from 28 per cent to 15 per cent, since 2000, while the small business rate has barely moved, down from 12 per cent to 11 per cent.
Ted Mallett, CFIB’s chief economist, has dug deeper into this in an informed and well-supported analysis piece, dispelling some longstanding myths about the small business tax rate, in October’s issue of the Canadian Tax Journal.
Putting aside the rhetoric and overheated partisan talk, there are verifiable numbers:
For every employer earning more than $250,000 a year, there are five who earn less than $40,000.
Small businesses employ nearly 10 million Canadians, often two or three at a time.
They are the majority of employers (98.2 per cent) in Canada.
These numbers tell a compelling story: Small business owners are ordinary Canadians, making extraordinary contributions.
I take no issue with the suggestion all tax rules, including those for small business, be fairly applied and that anyone found abusing them be stopped. This includes every taxpayer, from employees working under the table to corporations that shift income outside of Canada to avoid taxation.
Sweeping generalizations, however, need to end. Small business owners work hard to compete in a big business world, and still manage to create half of all new jobs. They deserve recognition for their unique role in the economy, and they deserve incentives, not higher taxes, to help them grow.
Let’s hope the elected government, whichever party, continues to focus on the economy, and the vital role played by Canada’s entrepreneurs.