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Canadian small businesses say operational costs, taxes and health care regulations need work

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Business Practices
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Nearly all Newfoundland and Labrador Province small businesses cite the cost of doing business as their top legislative priority this year followed by taxes (83%) and health care (78%), according to a recent survey by the Canadian Federation of Independent Business (CFIB).

“The reopening of the legislature is an opportunity for the government to show that they are listening and are prepared to meet the needs of small businesses,” said Beatrix Abdul Azeez, CFIB policy analyst, in a news release. “The cost of doing business is high and, unfortunately, small businesses in Newfoundland and Labrador are burdened by a 3% small business tax rate — the highest in Atlantic Canada — and a 15% retail sales tax on insurance — the highest across Canada.”

According to CFIB, the top cost constraints for small businesses are wage, insurance, and regulatory costs. Wage costs were cited by 75% of small business survey respondents.

Nearly half reported they are faced with a shortage of skilled labor, which is limiting their sales and production growth, CFIB said.

To alleviate some of these pressures, CFIB recommends that the provincial government:

    • “Eliminate the 15% Retail Sales Tax (RST) on all insurance premiums that impact businesses (property and casualty, environment, professional liability, director and officers, etc.);
    • “Reduce the small business tax rate to 2% and increase the income threshold from $500,000 to $700,000;
    • “Tie minimum wage increases to the rate of increase of the median wage in the province; and
    • “Adopt a “do no harm” approach to policies affecting small businesses, to avoid imposing new costs under the current economic strain.”

“Implementing CFIB’s policy recommendations would be steps in the right direction for small businesses who are striving to keep up with all the cost pressures and limitations they face,” Azeez said.

In December, The Automotive Industries Association of Canada (AIA Canada) released a new labor market research report that found 65% of mechanical and collision shop owners experienced an increase in technician turnover last year, and nearly half of the technicians who quit did so for higher-paying jobs.

Others abandoned the space due to poor perception of the industry, lack of career development opportunities, and better working conditions elsewhere, according to the report.

Among the talent that left the industry for better-paying alternatives, 13% moved into the construction space, AIA Canada said. It noted that the average $1,483 weekly income from construction is higher than the approximately $983 earned in auto repair and maintenance per week.

At the end of February, CFIB said it welcomed Alberta’s provincial budget that “further builds on the government’s plan of long-term fiscal stability and debt repayment.”

However, the federation said businesses hoped this year’s budget would include lowering the small business tax rate and increasing its threshold while also reducing insurance taxes.

“Small businesses are not fully out of the woods and are facing the same economic difficulties felt across the province,” said Andrew Sennyah, Alberta senior policy analyst, in a news release. “CFIB is pleased to see the Alberta government reaffirm its commitment to red tape reduction, outlining a path to eliminate the provincial debt, and continue to invest in the Alberta Heritage Savings Trust Fund. We look forward to working with the Alberta government to reduce the cost of doing business in the province.”

According to a recent CFIB survey, Alberta small business owners stated they would like to see the provincial government focus on the following areas in 2024:

    • “Addressing rising prices and the cost of doing business (95%);
    • “Reducing the overall tax burden (94%);
    • “Improving the quality and accessibility of health care (90%);
    • “Balancing the government budget/paying down debt (89%);
    • “Ensuring labour policies are reasonable for employers (89%); and
    • “Reducing red tape (88%).”

“CFIB appreciates that the budget reflects the priorities of small businesses at a time when many continue to struggle with challenging economic conditions,” said Bradlee Whidden, Western policy analyst, in the release. “That being said, Alberta needs an updated long-term plan to address issues that continue to affect these businesses like red tape reduction, crime and safety, and utility costs.”

The long-term small business confidence index for the next 12 months saw an increase of 6.1 points to 54.9 in February, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer®. This indicator has been steadily increasing since November 2023.

Earlier in February, CFIB said small businesses’ average price (2.8%) and wage (2.5%) plans for the next year continued their downward trend and were getting closer to their historical averages.

However, CFIB said the “very restrictive” monetary policy by the Bank of Canada continues to negatively impact small businesses.

Forty-eight percent of small businesses had reported challenges with borrowing costs at the time of the report, which was still significantly higher than the historical February average, CFIB said.

Forty-nine percent of survey respondents also reported struggling with insufficient demand, which CFIB found both were at or close to a historical high.

“This February, the CFIB Business Barometer is showing business owners are seeing some hope on the horizon for the next 12 months,” said Simon Gaudreault, CFIB’s chief economist and vice-president of research, in a news release. “However, they’re not out of the woods yet with a Canadian economy in clear deceleration mode, and it will still take a few more months, and probably a few interest rate cuts, before a lot of them are finally able to grow and fully recover.”


Featured image credit: PeopleImages/iStock

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