Gary Sands is chair of the Small Business Matters Coalition and senior vice-president, Canadian Federation of Independent Grocers
Over the past few weeks, there has been opposition conveyed through social and print media from certain quarters over Ottawa's proposal to eliminate tax loopholes for individuals purportedly using small-business corporate tax structures to avoid paying their fair share.
Let's be clear – not all small-business groups are opposed to these proposals, nor the need to ensure that all small-business tax benefits are indeed going to genuine "bricks and mortar" small businesses. As chair of the Small Business Matters Coalition, representing slightly more than 200,000 small and medium-size businesses (SMEs) in Canada – and as such the largest voice for small business in Canada – I know that we need to be consistent when the government proposes more transparency in the tax-payment system.
For example, the small-business community has been unanimous in calling for more fairness and transparency in the deliberately opaque credit-card payments system, along with calling for changes in the fees paid by small-business retailers as opposed to corporate giants such as Wal-Mart and Costco. That is why the entire merchant business community welcomed the review of the Canadian payments system by Finance Minister Bill Morneau.
How, then, can this same small-business community be opposed to the same minister bringing forward proposals to provide more transparency and fairness in the tax system? There is a profound difference between tax loopholes and tax incentives. It is the latter that our coalition supports, and we see no reason why eliminating loopholes to provide the basis for more incentives to genuine small businesses should not be welcomed.
The current government campaigned on providing more tax relief for middle-class Canadians and small business. However, in the previous budget, Mr. Morneau indicated a desire to first ensure that current tax strategies are benefiting those for whom they are intended. Our coalition supported that position. Income sprinkling, as it is called, is a critically important measure utilized by many small businesses to compensate family members making a real and meaningful contribution to the family business. But it should not be used as a means by self-employed high-income professionals to avoid tax by sprinkling income among family members with no such connection.
While Canada has the lowest small-business tax rate among the G7 countries, let's not forget that at the same time the small-business sector in our country has unique and significant challenges. The aforementioned credit-card interchange fees, invisible to consumers, amount to an estimated $5-billion siphoned out of the pockets of businesses.
As well, while investing in the bricks and mortar of physical store locations, buying local, hiring local and supporting local communities, the small businesses in our communities must cope with the emerging competition of online e-commerce giants who provide shopping options at all hours and on all days.
Conversely, small businesses must cope with myriad laws, skyrocketing energy costs, a plethora of regulations, fees, zoning restrictions, employer taxes and premiums, whopping double-digit minimum-wage hikes and outdated, contradictory and confusing holiday-closing laws.
So with SME's employing about 90 per cent of the private-sector work force and accounting for 40 per cent of Canada's GDP, we need to be cognizant of these cost challenges that threaten small business and not view current tax rates in a silo, however favourable they compare with other G7 countries. That is why small business should support eliminating loopholes that provide the government with the ability to further reduce the small-business tax rate.
All three levels of government need to better support and co-ordinate their efforts for helping small business manage the changes taking place in today's economy, as opposed to those changes managing the future for small business. In turn, the small-business community must be consistent on the principles of transparency and fairness.
We must ensure that the tax system is also one that continues to support small businesses' ability to invest, hire more people, source local Canadian products and to expand. If the review of the current tax system initiated by Mr. Morneau allows Canada to build on that edifice, that helps not just the small-business sector, but all Canadians in communities across the country.