The 2022 federal budget, announced on Thursday, was a missed opportunity to help small businesses recover from COVID, says the President and CEO of the Canadian Federation of Independent Business.
Dan Kelly said the budget ends all COVID supports, including the Hiring Program which was meant to help small firms rebuild their workforce in the recovery phase. The national organization said it is disappointed the budget doesn’t include measures to help small businesses’ post-pandemic recovery. Small businesses continue to struggle after an extremely difficult two years and now face a host of higher costs and a mountain of COVID-related debt.
“The federal budget ends all COVID support programs, including the Canada Recovery Hiring Program, which was meant to help small firms rebuild their workforce in the post-COVID recovery phase. The budget was a missed opportunity to help small firms now facing massive cost increases on virtually every line of their own budgets, including payroll and carbon taxes. It also doesn’t help the two thirds of businesses (67 per cent) that were forced to take on COVID-related debt, at an average of $158,000 per business,” said Kelly. “CFIB will continue to advocate for a small business hiring incentive and 50 per cent forgiveness of Canada Emergency Business Account (CEBA) loans.”
The CFIB said the budget includes billions in new spending and deficits as far as the eye can see. Small businesses know that today’s deficits mean more taxes for them down the road. A plan to move more quickly to balance the budget remains a priority for small business owners, it said.
“April 1 saw an increase in carbon taxes, adding further unfairness to a tax regime that collects hundreds of millions from small businesses while returning next to nothing to them in rebates. Fuel and energy costs were viewed as the single biggest cost challenge facing small business and a process to return these desperately needed dollars to small businesses has yet to be created,” said the national organization.
“At a time when many small firms are struggling to make payroll, the budget confirms workers and employers will see another significant increase in both Employment Insurance (EI) and CPP/QPP premiums. And with potentially costly changes planned for the EI system, small firms are rightly worried about many years of payroll tax hikes ahead,” added Kelly.
On a positive note, the CFIB said it was pleased the budget allows more firms access to the nine per cent small business tax rate on the first $500,000 in corporate income. Instead of losing access at $15 million in taxable capital, firms with up to $50 million will be able to benefit.
“We congratulate the government for accepting CFIB’s long-standing recommendation to raise this threshold to $50 million, encouraging more small firms to grow to medium-sized. We are also encouraged by the planned review of rollover provisions for small business investments,” said Kelly.
Michelle Wasylyshen, National Spokeswoman for the Retail Council of Canada, said the federal government’s 2022 budget contained some good news measures for retailers, most notably the adjustments to the Temporary Foreign Workers Program (TFWP), announced earlier in the week, to help businesses address labour shortage issues.
“Retail is Canada’s largest private-sector employer and our members have had to cope with a significant loss of experienced staff throughout the pandemic as employees needed to find work in other industries when stores and malls remained closed or operated at a limited capacity for prolonged periods of time,” she said.
“We are seeing signs of economic recovery in our sector, but things remain fragile, with inflation rates the highest they’ve been in over 30 years, the recurring threat of new COVID variants, leading to changes in work and spending patterns, and the recent instability arising from blockades and occupations of border points and urban centres. As such, we are disappointed to see limited movement on the many ideas we put forward during the past two years, as they would have helped ensure the recovery of Canada’s retail industry, boost Canada’s economic growth and make life more affordable for Canadian families.
“Of these, RCC was most hopeful that the government would take action on credit card swipe fees for our small businesses which, we estimate, are costing merchants $10 billion a year. These costs will only be further multiplied with rising inflation rates coupled with the declining use of cash and rise in online shopping. We also called for the elimination of tariffs on essential items Canadians use every day, such as clothing, shoes, and baby items which translates into around $5 billion in hidden taxes for Canadians each year, unnecessarily adding to their cost of living.”
Perrin Beatty, President and CEO of the Canadian Chamber of Commerce, said Canadian businesses have faced an unprecedented two years, characterized by a multi-wave pandemic, inflation that has reached a 30-year high, supply chain disruptions, extreme weather events, and geopolitical turmoil. Given these conditions, it has never been more important for the federal government to focus on economic growth.
“This economic growth must be private sector-led. While our public finances have benefitted from higher inflation rates and energy prices and low interest rates, we cannot borrow or inflate our way to prosperity. Federal spending needs to be both fiscally responsible and targeted at where it can generate genuine economic returns. Generating economic growth requires carefully using all the tools available, including tax, regulatory, labour, and infrastructure policy, to attract private sector investment,” he said.
“The government has set out an ambitious agenda in Budget 2022. It now will be essential to work collaboratively with businesses to ensure measures announced are implemented in a manner that will support economic growth.”
The Chamber outlined the following measures it welcomed from the budget for Canadian businesses:
- The gradual phase out of the small business tax rate when taxable capital reaches $50 million instead of $15 million;
- Investments in the critical minerals industry to support the full development of supply chains, from extraction through to processing and recycling;
- Various measures to support the net zero transition, including the introduction of a tax credit for carbon capture, utilization, and storage, incentives for Zero Emissions Vehicles, and investment tax credits for net zero technologies;
- Funding towards a trusted employer program for Temporary Foreign Workers that will address labour shortages; and
- Support for exploiting the opportunities from the legal cannabis sector.
But the Chamber also noted the following that will “undermine” much-needed economic investment and growth:
- The absence of debt relief for businesses that used government support programs such as the Canada Emergency Business Account;
- A lack of focus on cybersecurity supports directly for the private sector; and
- Only a partial review of the tax system rather than a comprehensive review, particularly given the implementation of additional measures on a sector basis for financial institutions and digital services.
“The gap between Canada’s potential and our performance continues to grow. It has never been more important for the government to view Canadian businesses as a partner, and not as a problem. Our competitors are squarely focused on how to attract investment and growth. That needs to be our top priority, too,” said Beatty.
The Canadian Taxpayers Federation criticized the budget announced by Finance Minister Chrystia Freeland for failing to provide a plan to balance the budget and rein in spending.
“Freeland is giving taxpayers another credit card budget with no plan to pay the bills on time and chip away at the $1-trillion debt,” said Franco Terrazzano, Federal Director of the CTF. “Freeland is taking the wait-and-see approach to the government’s credit card bills and hoping the economy can grow faster than its borrowing, but that’s not a good bet with its track record of runaway spending.”
The CTF said the federal deficit is expected to be $52.8 billion this year and Budget 2022 does not include a plan to balance the books.
“The debt is projected at $1.2 trillion by the end of the fiscal year. Budget 2022 is adding another $148 billion to the debt by 2027. At 45.1 per cent, the 2022 debt to GDP ratio remains higher than pre-pandemic levels, which were close to 30 per cent,” explained the Federation.
“The federal government’s spending is projected to be $452.3 billion this year, which is $89.4 billion above pre-pandemic spending in 2019. The federal government’s spending was at all-time highs before the pandemic. Interest on the debt is projected to cost taxpayers $26.9 billion this year.”
