Creating an economic environment to ensure businesses can succeed was the key part of the agenda at the Ontario Chamber of Commerce’s 2023 Annual General Meeting and Convention in Niagara Falls.

In attendance at the recent event, hosted by the South Niagara Chambers of Commerce and Greater Niagara Chamber of Commerce, were 160 delegates representing nearly 80 Chambers provincewide, including Cambridge Chamber of Commerce President and CEO Greg Durocher, and Board Chair Kristen Danson.

“The OCC’s AGM is an important avenue to share new ideas and connect with other Chamber leaders to find ways to ensure businesses have the legislative support they need to succeed,” he said. “The policies the Chamber network approves create a roadmap when it comes to making important legislative changes.”

In total, 43 policies were approved by the delegates covering a wide variety of issues that can directly affect businesses including labour, energy, education, healthcare, transportation and transit. 

The theme for this year’s AGM was Growing Together, which exemplifies the Chamber network’s focus on driving economic growth in the province. 

This year's event featured a range of keynote speakers, panel discussions, and breakout sessions on topics that are critical to the success of Ontario's businesses.

Attendees had the opportunity to hear from experts in areas such as innovation, trade, workforce development, and government relations.

Fireside chats were held featuring a variety of provincial political leaders, including Ontario’s Minister of Red Tape Reduction Parm Gill, who talked about the importance of creating a path for businesses to succeed. 

“I think we can all agree that for the province to be competitive we’ve got to make sure we are creating a business environment for businesses to come and make investments, and create well-paying jobs,” he told the delegates. “That’s what we (PC Party of Ontario) have been doing for the last five years. We’ve made tremendous progress.”

However, there is more room for improvement according to Ontario NDP Finance & Treasury Board Critic Catherine Fife. The Waterloo MPP, along with Ontario Green Party Leader Mike Schreiner, were among those who discussed a variety of issues that needed to be addressed such as housing and healthcare.

“When you have a strong healthcare system that can actually draw people into the province, that social infrastructure investment is seen as a plus by companies that are thinking of coming into Ontario,” she said. “And it also serves employees well and is certainly worth fighting for.”

Her concerns about Ontario’s healthcare system were reiterated by Ontario Liberal Party Interim Leader John Fraser, who talked about the importance of creating a stronger workforce.

“We do not have enough people to care for the people who need it,” he said. “We need a skilled workforce, but enough training is not always that accessible to all people.”

The Hon. Perrin Beatty, Canadian Chamber of Commerce President, also identified the need to boost our innovation capacity for Canada to compete internationally.

“We’ve been calling on the government to focus on the fundamentals of growth. We need to build a 21st Century workforce,” he said. “It’s time for governments at all levels to treat business as partners not a problem.”

Cambridge Chamber policies approved by Ontario delegates

The AGM is a pivotal event for Ontario’s business community, providing an opportunity for industry leaders to come together to discuss and debate key policies that shape the Ontario Chamber of Commerce’s (OCC) advocacy agenda for the coming year.

The Cambridge Chamber presented three policies, all of which received overwhelming support from delegates:

• The first policy is aimed at opening Ontario’s job market for employers and employees and urged the Government of Ontario to develop all potential partnerships within local municipalities and community organizations to ensure that language training is made available to new immigrants to help expediate entrance into the workforce. Also, the policy called on the Province to provide an opportunity for those on ODSP (Ontario Disability Support Program) who want to work to do so without risk of losing their provincially funded benefits if their employer does not provide those services. And finally, the policy recommended providing employers with a form of renumeration (i.e., tax credit) when it comes to providing provincially regulated training, such as WHMIS and their associate costs.
• The second policy was ‘reaffirmed’ by the Chamber network after first being introduced in 2019 calling for more to be done by the Province to encourage more women and girls to consider a career in the skilled trades. 
• The Chamber also presented and co-sponsored a policy with the Greater Kitchener-Waterloo Chamber of Commerce to attract and retain highly skilled talent by urging the Province to double the size of the Ontario Immigrant Nominee Program and to work with post-secondary institutions to reduce regulatory barriers hindering the construction of new on and off-campus housing. As well, it urged the Province to match investments in post-secondary infrastructure and increase funding for Facilities Renewal Program-elgible projects. 

The collective power of the Chamber movement to assist businesses succeed was front and centre at the Ontario Chamber of Commerce’s recent AGM and Convention.

Approximately 150 delegates, the majority representing Chambers and Board of Trades from across the province, gathered at the Pearson Convention Centre April 28-May 1 in Brampton to network, hear from Ontario political leaders, and debate policy issues to assist them in their advocacy work with government on behalf of businesses.

“Ensuring businesses have the legislative backing and supports they need to succeed and prosper plays an important role for all Chambers and Boards of Trade,” says Cambridge Chamber of Commerce President & CEO Greg Durocher, who led a strategy session on delivering Chamber services across a diverse membership base and was joined at the event by in-coming Chamber Board Chair Kristen Danson. “The conference is a great place to share new ideas and connect with other Chamber leaders from around the province.”

This was the first in-person AGM the OCC has held since the pandemic and featured appearances by the Ontario leaders of the Liberals (Steven Del Duca), NDP (Andrea Horwath) and Green (Mike Schreiner), as well as the Hon. Prabmeet Sarkaria, President of the Treasury Board of Ontario. All four spoke about the strength and importance of the business community and what their parties can do to help our economy.

Also, Canadian Chamber of Commerce President and CEO Perrin Beatty was on hand to offer an update on the Chamber network from a national perspective.

“It’s great for the Chamber network to hear from all sides of the political spectrum,” says Greg, noting potential policy resolutions are formulated from a wide range of issues and concerns.

This year, 34 resolutions were up for debate on a variety of topics ranging from improving supports to employers, to the creation of a construction strategy for tiny homes.

The Cambridge Chamber’s policy calling for the creation of a ‘backstop’ for the implementation of mandated workplace vaccination policies was among 32 that received approval from delegates. The approved policy calls for the Ministry of Labour to include elements within the articles of the Occupational Health & Safety Act to provide protection against discriminatory legal actions aimed at businesses that wish to implement such a policy.

“It’s important that businesses have the protections they need in order to operate in the manner which they feel works best for them,” says Greg.

The approved policies now become part of the OCC policy ‘playbook’ in its efforts to advocate for change with provincial and federal levels of government.

Besides adopting policies, the conference wrapped up with an awards ceremony to recognize the achievements of Chambers and Boards of Trades.

The Cambridge Chamber, in partnership with the Greater Kitchener Waterloo Chamber of Commerce, was presented with the Chair’s Award for Innovative Program or Service to recognize the success of their rapid screening kits program which has been adopted by Chambers provincewide. Since April of 2021, the program has resulted in the distribution of more than one million kits to more than 7,500 businesses throughout Waterloo Region.

“This program has made a huge difference to thousands of businesses in our region, and we couldn’t be more pleased,” says Greg.

For more information about the kits, visit https://chambercheck.ca.

Canada is facing a competitiveness problem. Inflation, supply chain constraints, and labour shortages risk undermining a swift and robust economic recovery. Meanwhile, recent domestic and international events have renewed the spotlight on energy security and affordability.  

The Cambridge Chamber of Commerce and the Ontario Chamber of Commerce (OCC) has released the 2022 Federal Budget Submission focused on public policies that increase Canada’s economic resilience to ongoing and future threats. 

“Businesses across Waterloo Region are continuing to feel the effect of the pandemic,” said Cambridge Chamber of Commerce President & CEO Greg Durocher.  “Budget 2022 must lay the groundwork for a strong, inclusive recovery with policies that support the sectors and demographics hardest hit by the pandemic, building the infrastructure and workforce of the future, and modernizing regulation to ensure Canada can attract investment and nurture entrepreneurship.” 

Some key highlights from the budget submission include recommendations for the Government of Canada to: 

• Promote Canada’s energy sector on the global stage and recognize nuclear power as a clean and necessary energy resource in the fight against climate change. 
• Expand immigration and express entry of skilled workers to address labour shortages.  
• Increase the Canada Health Transfer Payment to meet the current and future pressures facing Ontario’s health-care system.
• Modernize transportation infrastructure to address bottlenecks along supply chains and facilitate the decarbonization of the transportation sector.
• Reform the federal tax system to attract foreign direct investment, drive domestic business growth and innovation. 
• Develop a sustainable path to reduce the federal debt-to-GDP ratio and wind down other pandemic-related supports to ensure long-term fiscal balance and the capacity to address future economic shocks. 

The OCC’s 2022 Ontario Economic Report found that a staggering 62% of sectors face labour shortages in Ontario and expect to continue facing them over the next year. Together with supply chain disruptions, these shortages impact the cost of living, service delivery, and product availability. 

“As the indispensable partner of business, we call on the government to resolve long-standing structural issues, including barriers to interprovincial trade and skilled labour shortages, to drive entrepreneurship, investment and long-term economic growth,” added Rocco Rossi, President and CEO of the OCC. 

The recommendations outlined in the budget submission were developed together with businesses, associations, post-secondary institutions, chambers of commerce, and boards of trade from across the province.  

See budget recommendations: http://bit.ly/3uRp9Bl

The next Ontario election maybe three months away, but it’s more than clear political leaders have already begun to jockey for position as COVID-19 restrictions continue to lift and numerous announcements pertaining to proposed legislative changes surface.

Whether it is promising more money for transit projects or getting rid of licence plate sticker fees, these types of political announcements says Darrell Kennedy, a political science instructor at Conestoga College’s School of Interdisciplinary Studies, are part of our democratic process.

“They (politicians) are vying for our votes,” he says, adding this type of tactic is often framed in a negative way. “I tell my students we should be more concerned about holding them to their promises as opposed to why they are making promises.”

When it comes to the politics leading up to the June 2 election, Darrell says the key issues surrounding the campaign may hold a few surprises.

“I think there is a lot of noise surrounding this election and I think much of that noise involves COVID-19,” he says. “However, we underestimate how forward-thinking people are. They are tired of talking about COVID-19, and they want a way out.”

Darrell says despite varying opinions regarding how Ontario Premier Doug Ford’s Progressive Conservatives approached the pandemic, the electorate – as well as those in businesses impacted by it – have already made up their minds over the course of the last two years regarding this issue.

“I don’t think this election is going to be swayed either way on what your opinion is of how Doug Ford handled COVID-19,” he says, noting he expects it will still be used as a ‘weapon’ by the other parties. “I think it is going to be a war of attrition and as we approach June, we are going to see the Ford government use Ontario’s opening up as a way to take away votes from the other parties.”

Darrell says the opposition parties could almost be classified as ‘victims’ of their government position during the last two years because they have an obligation to oppose the government and have done just that – referring to COVID-19 as a political ‘hot potato’. 

“I think the stars of have kind of aligned for the PCs in that when this election occurs in the next three months, they are going to be able to offer things to voters,” he says. “I think the other parties right now only have a few tools in their toolbox they can use to attack Doug Ford and a lot of it is in the past.”

Darrell says there are many issues political contenders could be focusing on, noting that housing is a key concern for his students – most aged 18 to 25 - as opposed to COVID-19 or even the environment.

“They grew up with it,” he says, referring to concerns surrounding climate change. “A lot of the younger generation have a fear about not being able to own a house or even having adequate shelter.”

The Ontario Housing Affordability Task Force, which recently outlined more than 50 recommendations in a report, says housing prices have nearly tripled in the last decade in Ontario. According to the report, the average house price in this province at the end of 2021 was $923,000 compared to $329,000 10 years ago. The task force has called for the construction of 1.5 million homes in the next 10 years.

“I hope housing is the issue people latch on to because it affects business as well,” says Darrell. “If you can’t afford the house you are living in you can’t afford to spend money in the community you are living in.”

To be successful in the election, he recommends Ontario’s political leaders focus on housing and childcare and other ‘regular’ issues that may have been brushed aside during the pandemic but are very important to young families.

But just as important, Darrell says the party that does not spend the campaign ‘demonizing’ the others in the media could be very successful.

“I think people are starting to get a little bit more wary of how the media portrays different groups and we all have a sense of which parties they may lean towards,” he says. “I think we kind of underestimate the electorates’ knowledge of the difference between the parties.”

Darrell says forward thinking is the best tactic for a successful political leader to use.

“Ontario has a lot of things it needs to do better and solve,” he says. “But I think the party that focuses more on those sorts of things as opposed to how COVID-19 was handled is going to turn out to be the winner.”

I am a small business owner based in Cambridge, Ontario.  Along with my partners, we operate two manufacturing operations employing a total of about 25 people.

I am proud of all of the response of our political leaders to this crisis on all levels – local, provincial and federal.  They have taken a sober and analytical approach to the immediate needs of the citizens of this country.

Their willingness to commit funds, resources and support to our front line workers, small businesses and all in need will get Canada through this ordeal.

As a business owner, my top priority is always looking ahead to determine how I can not only succeed; but avoid unexpected disruption to my team; and minimize our potential for risk of any kind.

This is where I think the business community needs more support from our leaders.

The question of when we should re-open for business is open for debate.  The leaders in Canada, USA and abroad have differing opinions on this matter. 

There is only one question on my mind – what is required for me to do business in a way that will be safe for my team, clients and supply chain?  This is the question that must be answered prior to our return to regular business.

There is no doubt in my mind that the scientists of the world will determine when it should happen; using the tools and expertise available to them.  It brings me comfort to know that our Canadian politicians are being guided by science in their decision making process on these issues.  

However, there is another component to this decision that I think we are neglecting.  Whenever we return to work, it will be to a new business landscape.  There are new risks, new considerations and a higher expectation from the community for business owners to provide a safe working environment.  As a community, we need to determine what will be required to have in place prior to a return to “regular” business. Until we have a vaccine / “herd immunity”, do workers require masks to be safe?  Do we need to require hand sanitizer at entry points to work areas and require all team members to use?  In Taiwan, there are some common practise expectations for citizens that have allowed them to maintain a very low infection level of COVID without restriction on children being at school, or businesses operating normally.  What can we learn from their example that can help us to prepare to resume our work?

If Toyota, Honda, or even my business or a local hair salon re-opened in two or four weeks without making any adaptations to how the risk of COVID transmission is controlled; how will we have made progress against this disease?

The saying “time heals all wounds” has never resonated with me.  Time doesn’t heal all wounds; but time does offer us the opportunity to prepare for what is coming at  us next.  We know that the economy will have to resume prior to COVID being completely eradicated.  The question is – what will we as a community do to mitigate the risk of another peak of infection as we make that return to the new normal?

There is no question that children will have to return to school; I am less concerned about when that happens than I am about what the plan is to keep them safe and healthy once they are there.  We have the example of how Taiwan has made this work; kids wearing masks and having plastic cubicle style dividers between desks during meals.  Will we use this time to learn from their example and adapt our own action plan for what is required to be in place prior to resuming their in class education?  My hope is that we do. 

The Cambridge Chamber of Commerce is starting to gather experts and business owners to start this discussion.  I am proud to be a part of this discussion; I look forward to learning and planning together with others to determine how we as a business community can plan to get back to business.  This is new territory for everyone – consumers, business owners, employees, politicians, government, youth and seniors.  If we can agree on the supports that are needed to re-open in a safe manner, the time spent until that happens can be spent planning and making the required changes to how we do business to accommodate the new reality we live in.  If as a community we neglect this opportunity to plan and adapt, we are destined to repeat this cycle of the pandemic again in the not so distant future.

This is work that our Chambers of Commerce, professional associations, industry associations, regulatory bodies or governing standard registrars, perhaps the labour unions and school boards are well poised to do.  They have connections to business in their sector, a communication channel with a broad range of companies in a vertical market, and the support of their members.  If we all pressure these organizations in our own industries to get to work on our behalf, we can start planning for the future.

It’s time to change the question from “when can we re-open” to “what is required for a safe and healthy re-opening in my workplace to get through this crisis”?

Let’s get to work.

Kristen Danson

Managing Partner

MitoGraphics Inc. / Swift Components Corp

519 240-4205 Direct

Leading tax practitioners say that business owners with income as low as $50K will be affected

Ottawa, September 27, 2017 – The Coalition for Small Business Tax Fairness, a unified voice of more than 70 organizations representing hundreds of thousands of business owners across the country, has written a new letter to Finance Minister Bill Morneau with professional analysis confirming that Ottawa’s tax proposals will affect middle-class business owners, resulting in higher tax rates than other Canadians with similar income levels.  

“We are alarmed by the huge gap between the government’s statements about the impact of their proposals and the detailed analysis by Canada’s tax professionals,” said Dan Kelly, President of the Canadian Federation of Independent Business (CFIB) and member of the Coalition. “Tax practitioners are united in the view that these changes have the potential to affect all small business taxpayers, no matter their income.”

"It is the farmers, mom and pop shops, and entrepreneurs, who invested everything into their businesses, that will be most affected by these changes, instead of targeting the real problem. The government needs to go back to the drawing board, hold a real consultation and listen to what tax professionals, provincial governments and the business owners who fuel the growth of our communities are saying," added Perrin Beatty, President and CEO of the Canadian Chamber of Commerce.

The government has claimed that these proposals would not affect business owners with incomes under $150,000. Tax practitioners disagree.

One of the new rules introduced by the government would restrict small business owners from sharing income with family members. Tax practitioners say that this can affect business owners with incomes as modest as $50,000. Also, as two-thirds of Canadian incorporated businesses are majority owned by men, the restrictions on sharing income with a spouse are likely to remove a disproportionately higher number of women from benefiting from their family’s business.

The government is also proposing changes that would discourage small business owners from holding certain types of investments in the incorporated company. According to tax practitioners, business owners retain business earnings in the corporation to safeguard against economic downturns, secure bank financing and invest in other start-up companies.

Tax practitioners have confirmed that the proposed tax changes would result in higher combined corporate and personal taxes for business owners across the board and in many cases, small business owners would incur tax rates far greater than what an employee with a similar level of income would pay. 

The Coalition, which has doubled in size since August 31, is asking the federal government to review carefully the analyses of tax professionals across the country, take these proposals off of the table, and launch meaningful consultations with the business community to address any shortcomings in tax policy.

The Coalition for Small Business Tax Fairness is encouraging business owners and other concerned Canadians to contact their Members of Parliament and use the hashtags #unfairtaxchanges #taxesinéquitables on social media. For the full list of Coalition members, please visit smallbiztaxfairness.ca.  

For media enquiries or interviews, please contact:

Andy Radia
Media Relations Specialist
647-464-2814

What some are saying:

“The agriculture equipment manufacturing sector represents 12,000 Canadians and their families predominantly in rural areas; as entrepreneurs who have put their lives on the line to invest in and grow their family business, the sector consistently exports more than $1.8 billion of farm equipment to over 150 countries. The scope and complexity of the proposed tax changes puts a lot of this at stake, and we must fight to ensure that fairness prevails for our members.” — Leah Olson, President, Agricultural Manufacturers of Canada

“Franchisees are the backbone of the communities they serve, by employing people of all backgrounds, supporting local initiatives, and helping grow the economy. As business owners, they assume significant risk, but have been able to achieve success through hard work and support from family members. Simply stated, CFA believes the changes being proposed by the Minister will hurt Canadian franchisees.” — Ryan J. Eickmeier, Vice President, Government Relations & Public Policy, Canadian Franchise Association

“The residential construction and renovation industry has always largely consisted of family-run businesses that help build the communities they operate and live in, many over several generations. These are hard-working Canadians trying to earn a middle-class living, hire local workers, and create a future for their families. The government’s proposed tax changes threaten the very existence of these businesses, posing a threat to small local companies in every community and the jobs they create.” —Kevin Lee, CEO, Canadian Home Builders’ Association

“We look forward to working with the Minister of Finance to ensure that any changes help secure the future of agriculture and not hinder it.” — Mark Wales, Chair of the Canadian Horticultural Council’s Business Risk Management Committee

“We are fully supportive of the government’s pledge to advance evidence-based policy-making. Our members are concerned that the government’s proposed changes to small business taxes are not sufficiently informed by the level of research, analysis and consultation required to ensure a full appreciation of the impacts this will have on Canadians - not just entrepreneurs and small business owners but also on the overall health of the Canadian economy and competitiveness in the short and long term.” — Leigh Harris, Vice Chair (Interim) National Board of Directors, CMC-Canada

“Canadian business families are scared, confused, and demoralized. Years of planning for business succession will potentially go up in smoke! And we’re being called tax cheats along the way. Canada can do better, we must do better—our economy depends on it.”— Allen S. Taylor, Chair, Family Enterprise Xchange

“These egregious proposed tax changes would negatively impact the family farm in ways that are both profound and complex. The federal government needs to reverse course on their ill-advised tax hike attack on our middle-class family farms. — Levi Wood, President of the Western Canadian Wheat Growers Association, grain farmer

Letter Sent to the Cambridge Chamber of Commerce Membership

The federal government's recent small business tax proposal is punitive and will have damaging effects on business communities in Ontario and across the country.Over the summer, the federal Finance Department has made it clear that it intends to make the most sweeping changes to business taxes in 50 years.These proposed changes will negatively impact tens of thousands of businesses by raising taxes, reducing incentive for private investment, increasing administrative burdens, and making it even more difficult for a business to be transferred from one generation to the next.

Family businesses and family farms are being touted as tax cheats by the Federal Government. Although, they have walked that back - the fact is they have described legitimate and legal use of the tax laws are wrong and most commonly referred to as a loophole. This is not only ignorance of what it takes to build a successful business, but makes Canada the only country in the world to impose such punitive tax measures on small business. It is clear, this government has no respect for business, especially the locally owned family business.

The immediate reaction from our members and businesses across Canada was negative. We are particularly worried about the effects of the proposed tax changes for small and medium sized businesses - who are essential to our thriving local business community. We encourage local businesses to contact our  MP to provide feedback on the possible changes.

Bryan May, M.P., Cambridge & North Dumfries
534 Hespeler Road (Main Office)
Suite A4
Cambridge, Ontario N1R 6J7
Telephone: 519-624-7440 Fax: 519-624-3517 

[email protected]

Marwan Tabbara, M.P. Kitchener South - Hespeler
153 Country Hill Drive (Main Office)
Suite 2A
Kitchener, Ontario N2E 2G7
Telephone: 519-571-5509 Fax: 519-571-5515 

 [email protected]

 As an organization, we support reasonable attempts to reduce tax evasion or loopholes. However, these changes are insulting to businesses that have worked within the rules in good faith to build their businesses, to save for retirement, and sometimes just to keep their doors open.

Small Business is Too Big To Ignore and we need to demonstrate this with one voice.  

If you're not a small business owner but work for one, ask Mr. May and Mr. Tabbara to protect YOUR job by supporting small business entrepreneurs in Cambridge.

SIncerely,

Greg Durocher

Cambridge Chamber of Commerce

President/CEO 

If your business is incorporated, you could be facing a larger tax bill and big compliance costs from the government’s new proposals to change the way corporations are taxed. Here are three things you need to know about the tax changes proposed by the federal government:

• Do you employ family members? The government wants to scrutinize their compensation to apply a much higher tax rate on income they consider “unreasonable.”

• Do you invest the profits from your business? The federal government is proposing to tax that income at an effective rate of 70%. 

• Do you want to pass your business on to your children? Tough new rules make it difficult for younger kids to get the capital gains exemption. They could be double-taxed.

Small and medium-sized businesses (SMEs) are the engine of the Canadian economy – estimates range from 85 to 90% of all businesses in Canada are SMEs.

The chamber network across Canada is using its collective voice on this issue; your voice as a business person needs to be heard as part of this initiative. Send a message to your MP today. Government needs to know that this tax reform will harm businesses of all sizes.

Don’t know where to send the message to your Member of Parliament? Look up their address using your postal code.

Thirty-five business groups, including the Canadian Chamber—on behalf of the hundreds of thousands of members they represent—have presented a letter to Finance Minister Bill Morneau asking the government to take these proposals off the table and instead meet with the business community to address any shortcomings in tax policy affecting private corporations.

These are not tweaks! The government has just proposed the most radical tax overhaul in 50 years. We’re particularly worried about the impact on business from (1) a new tax on investment income in a corporation and (2) tough new rules for compensation in family businesses. Why is the government doing this?

The Minister says it’s all about “fairness,” and his consultation document compares the tax treatment of a business owner with that of an employee to point out corporations have “unfair” advantages. But, the comparison makes no sense—there are good public policy reasons for why owners are taxed differently.

Because unlike an employee, a business owner doesn’t get a pension or health benefits or vacation pay. She invested her own money to get the business started. Or, she pledged her personal assets (house, car) as collateral for a loan. She has employees who depend on her. And, if nobody wants her goods or services next month, she does not earn a penny.

That’s why in every advanced economy in the world, businesses can accumulate and invest after-tax retained earnings so they have money to get them through an economic downturn or to make big capital investments. One owner told us, “I keep most of the earnings in the company because we’re trying to grow and because in construction, we go through tough cycles when business dries up.”

The government wants to tax “passive” (invested) income. It says it’s a crackdown on “high income individuals,” but the rules would apply to all incorporated businesses in Canada, most of whom are restaurants, retailers, farmers and consultants—to punish them for saving and investing. It gets worse!

Finance Canada also expects to raise $250 million by cracking down on “unreasonable” salaries paid to family members, which it says diverts corporate income into lower tax brackets. But, to pull in $250 million, CRA will have to tax over $1 billion in salaries and audit hundreds of thousands of businesses. Imagine the litigation! You’re paying your spouse $80K, but the CRA believes he or she should only be earning $50K. Do you go to Tax Court? An owner told us, “if my son had not worked 12 hours a day, my business might not have succeeded. Painting us all as cheaters is unfair and discriminatory.”

Incredibly, Finance Canada has managed to design a set of tax measures that would hit the maximum number of businesses in the most complicated way for a small amount of revenue. The expected $250 million is less than 1% of the federal deficit.

Nobody supports tax evasion or loopholes. But these changes will punish legitimate businesses. And, they come after the government cancelled reductions in the small business tax rate, tightened rules on partnerships and started taxing work in progress. That’s on top of new carbon taxes, raised CPP premiums and an increase in the EI rate. Our members are asking why this government keeps raising taxes on business.

We’re not sure what to tell them, but there is an important test ahead. Finance Canada has launched a consultation even though it is clearly determined to move forward—the legislation is already drafted. So email or call your local MP to tell him/her the government is proposing to hammer business with tax changes that will hurt families and punish
entrepreneurs. Only MPs have the power to slam the brakes on Finance Canada’s runaway train.

For more information, please contact :
Hendrik Brakel
Senior Director, Economic, Financial & Tax Policy
613.238.4000 (284) | [email protected]

Big increases to minimum wage are becoming fashionable in Canada: first Alberta (from $12.20 currently to $15 in October 2018), then B.C. (from $10.35 to $11.35 in September 2017) and now Ontario (from $11.40 to $15.00 in January 2019, a 30% hike in 18 months). Are workers better off or does it mean fewer jobs?

The debate has been ferocious because economists don’t agree, but let’s look at the fundamentals. The government accepts that carbon taxes are effective at reducing emissions because if you make something more expensive, people will use less of it. We agree, but the same logic must apply to wages. And, actually, a business owner faced with the rising cost of an input (labour) has three options:

• Absorb the added cost out of her profit margin
• Raise prices
• Reduce use of labour by substituting in morecapital or simply making do with less work

Let’s take these in order. Some businesses are so spectacularly profitable that owners can just absorb rising labour costs. But Apple and Microsoft don’t use minimum wage labour. If we look at profit margin by industry, the biggest users of minimum wage labour are in retail and food service, with razor thin (below 3%) margins. There is very little room to absorb these costs, and if a business is not profitable, there is not much point in keeping it going.

What about raising prices? The critical ingredient in business success is getting the right price point for your market. One restauranteur told us that the lunch menu in her neighborhood has to be $5-$8, any higher means flirting with disaster. In retail, the competition is with online giants, like Amazon. Often, there is no room to raise prices without driving away customers.

The third option to cope with rising wages is making do with less staff. This is controversial because many studies show that minimum wage can be increased without a corresponding rise in unemployment.

That’s why the recent Seattle study produced such a bombshell. Washington state collects detailed data on hours worked and it showed how part time workers with irregular schedules are cut back. Seattle’s minimum wage hike reduced the total hours worked by the low-wage workforce by about 9% while raising their wages by only about 3%. The net loss to workers was an average of $125 a month. This is a big, immediate hit to the most vulnerable workers.

In the long-term, minimum wage hikes can also drive labour-saving capital investment. The former CEO of McDonald’s told Forbes, “demands for a much higher minimum wage would force businesses with small profit margins to replace full-service employees with costly investments in self-service alternatives.” At the time, labour groups accused business owners of crying wolf. McDonald’s is now rolling out touchscreen selfservice kiosks across Canada and the U.S.

There is some evidence that modest increases in minimum wage can be done without disrupting labour markets, but governments have to be cautious about hurting competiveness. Previously, I had said there are three options to deal with rising costs, but there is actually a fourth and a fifth option: shut down or move to a different jurisdiction. Let’s provide input to the Government of Ontario to prevent this from happening. The Ontario Chamber of Commerce has
done some great work on this issue and has a report that can be viewed here.

For more information, please contact:

Hendrik Brakel

Senior Director, Economic, Financial & Tax Policy

613.238.4000 (284) | [email protected]