Tax-re­lief fan­fare

The Guardian (Charlottetown) - - BUSINESS - Blake Doyle Blake Doyle is The Guardian’s small busi­ness colum­nist. He can be reached at blake@is­landrecruit­ing.com.

With the ex­u­ber­ance of an ex­hal­ing bal­loon, the gov­ern­ment made a quiet but im­por­tant an­nounce­ment this week that ap­peared both hastily re­leased and ab­sent the com­mu­ni­ca­tion mus­cle nor­mally as­so­ci­ated with good news sto­ries.

Gov­ern­ments are easy to crit­i­cize when an­nounce­ments are made, even pos­i­tive an­nounce­ments. An ex­pected re­frain is of­ten, “More could be done.” Crit­i­cism is both ex­pected and weight­less. In an in­fla­tion­ary en­vi­ron­ment where wage growth lags ex­pen­di­tures, in­vest­ment op­tions are end­less.

With­out dis­sect­ing pri­or­i­ties, this is a busi­ness col­umn and any an­nounced re­duc­tion of busi­ness tax is warmly re­ceived.

Busi­ness tax rev­enue has ex­pe­ri­enced un­ex­pected growth in the prov­ince. Cor­po­rate in­come tax was $38 mil­lion greater than fore­cast and the econ­omy has been strong thanks to many fac­tors in­clud­ing in­creas­ing pop­u­la­tion, a func­tion which is now un­der ad­just­ment.

So, like a found $20 bill in a for­got­ten pocket, the min­is­ter of fi­nance had to de­cide what to do with the sur­prise ben­e­fit. Spread­ing it be­tween busi­ness and per­sonal tax­pay­ers seems a bul­let­proof con­sid­er­a­tion. For a mere seven per cent im­pact to a $75 mil­lion bud­get sur­plus, it’s mod­est.

A multi-phase re­duc­tion in the tax rate was an­nounced in this year’s 2018 bud­get, so a re­duc­tion needed to be im­ple­mented be­fore the next bud­get. This was both planned and ex­pected. But the tax re­duc­tion should never have been a ques­tion. The fed­eral gov­ern­ment has been pro­gres­sively re­duc­ing the fed­eral cor­po­rate tax rate for the last dozen years. P.E.I has main­tained the high­est small busi­ness tax rate in the coun­try and it re­mains one of the high­est; tax re­lief re­mains a com­pet­i­tive ne­ces­sity.

Re­ac­tion has been muted, not be­cause a re­duc­tion is not wel­come, but be­cause it is over­due. We must move from a com­pet­i­tively dis­ad­van­taged po­si­tion to a uniquely strate­gic po­si­tion. Bal­anced and ap­pro­pri­ate tax rates are part of this, but busi­ness is look­ing for strate­gic po­si­tion­ing be­yond just a level tax en­vi­ron­ment. Ac­cess to skilled, ef­fec­tive labour, reach­ing new mar­kets, in­vest­ing in tech­nol­ogy and in­no­vat­ing pro­cesses, or sim­ply turn­ing a vi­able profit to sup­port busi­ness own­ers and their fam­i­lies.

Tax­a­tion is a cru­cial pil­lar of this equa­tion, to be sure. But, be­yond tax­a­tion busi­ness re­quires an ef­fec­tive en­vi­ron­ment on which to flour­ish. Many busi­ness own­ers can at­test that the en­vi­ron­ment has never been bet­ter, and data sup­ports this. Data also in­di­cates that the econ­omy is un­der­go­ing a sub­tle shift — one that is part of an ex­pected and nat­u­ral cy­cle. Busi­ness needs to be cog­nizant of this oc­cur­rence whether nat­u­ral or, in this case, in­duced and re­spond ac­cord­ingly.

The planned tax re­duc­tion need not be ap­plauded at this time — it was ap­plauded and ac­knowl­edged when it was an­nounced. This ex­pected tax re­lief should be fol­lowed with, “Where is the next?” and, “Make us at least com­pet­i­tive with other re­gions.”

If we are not com­pet­i­tively po­si­tioned, tax rates can be an equal­izer to trans­porta­tion and other dis­pro­por­tion­ate in­put costs.

I’ll hold my ap­plause for the next round of eco­nomic in­duc­ers.

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