Fredericton Chamber Presents to Standing Senate Committee on National Finance

FREDERICTON,​ ​NB​ ​​–​ ​Today​ ​at​ ​10:30​ ​am​ ​in​ ​Saint​ ​John,​ ​Fredericton​ ​Chamber​ ​of​ ​Commerce​ ​CEO​ ​Krista Ross​ ​presents​ ​to​ ​the​ ​Standing​ ​Senate​ ​Committee​ ​on​ ​National​ ​Finance​ ​regarding​ ​the​ ​federal government’s​ ​tax​ ​reforms​ ​proposed​ ​earlier​ ​this​ ​year.​ ​The​ ​committee​ ​is​ ​reaching​ ​the​ ​end​ ​of​ ​its cross-country​ ​tour​ ​and​ ​are​ ​expected​ ​to​ ​provide​ ​recommendations​ ​to​ ​the​ ​federal​ ​government​ ​by​ ​the​ ​end of​ ​2017.

“Our​ ​members​ ​are​ ​very​ ​appreciative​ ​that​ ​the​ ​senate​ ​has​ ​chosen​ ​to​ ​take​ ​on​ ​this​ ​issue​ ​and​ ​consult​ ​with the​ ​businesses​ ​that​ ​will​ ​be​ ​impacted​ ​by​ ​the​ ​proposals,”​ ​Ms​ ​Ross​ ​stated.​ ​“If​ ​Minister​ ​Morneau​ ​had engaged​ ​with​ ​a​ ​similar​ ​consultation,​ ​the​ ​government​ ​might​ ​have​ ​been​ ​able​ ​to​ ​avoid​ ​many​ ​of​ ​the​ ​issues with​ ​their​ ​original​ ​proposals.”

Ms​ ​Ross’​ ​comments​ ​will​ ​focus​ ​on​ ​the​ ​concerns​ ​expressed​ ​by​ ​chamber​ ​members,​ ​the​ ​broader​ ​economic impacts​ ​of​ ​the​ ​proposals​ ​and​ ​a​ ​recommendation​ ​that​ ​the​ ​government​ ​pull​ ​the​ ​proposals​ ​and​ ​call​ ​a​ ​Royal Commission​ ​to​ ​fully​ ​review​ ​Canada’s​ ​tax​ ​code.

“The​ ​business​ ​community​ ​has​ ​been​ ​calling​ ​for​ ​a​ ​comprehensive​ ​review​ ​of​ ​the​ ​country’s​ ​tax​ ​policy​ ​for many​ ​years​ ​to​ ​no​ ​avail.​ ​The​ ​tax​ ​code​ ​has​ ​just​ ​become​ ​more​ ​complex,​ ​increasing​ ​compliance​ ​and administrative​ ​costs​ ​-​ ​apparently​ ​leaving​ ​employees​ ​at​ ​the​ ​Canada​ ​Revenue​ ​Agency​ ​only​ ​able​ ​to​ ​hand one​ ​in​ ​three​ ​calls​ ​from​ ​taxpayers.”​ ​added​ ​Ross.​ ​“The​ ​silver​ ​lining​ ​with​ ​these​ ​proposals​ ​is​ ​that​ ​it​ ​is becoming​ ​more​ ​broadly​ ​understood​ ​that​ ​such​ ​a​ ​review​ ​is​ ​warranted​ ​and​ ​necessary.”

Ms​ ​Ross’​ ​full​ ​opening​ ​statement​ ​is​ ​reproduced​ ​below.

The​ ​Fredericton​ ​Chamber​ ​of​ ​Commerce,​ ​a​ ​nationally​ ​accredited​ ​organization​ ​with​ ​nearly​ ​1,000 members,​ ​is​ ​an​ ​active​ ​business​ ​organization​ ​engaged​ ​in​ ​policy​ ​development​ ​and​ ​advocacy​ ​that​ ​affects the​ ​competitiveness​ ​of​ ​our​ ​members​ ​and​ ​the​ ​Canadian​ ​business​ ​environment.​ ​The​ ​Chamber’s​ ​vision​ ​is ‘​Community​ Prosperity Through Business’. 
Contact:​ ​​Krista​ ​Ross,​ ​CEO​ ​–​ ​(506)​ ​458-8006

Senate​ ​Presentation​ ​-​ ​Federal​ ​Tax​ ​Changes​ ​-​ ​22​ ​November​ ​2017
Krista​ ​Ross,​ ​CEO
Fredericton​ ​Chamber​ ​of​ ​Commerce

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Good​ ​Morning,​ ​I’m​ ​Krista​ ​Ross,​ ​CEO​ ​of​ ​the​ ​Fredericton​ ​Chamber​ ​of​ ​Commerce. Thank​ ​you​ ​honourable​ ​senators​ ​for​ ​the​ ​opportunity​ ​to​ ​speak​ ​with​ ​you​ ​this​ ​morning​ ​about​ ​this​ ​issue​ ​that will​ ​directly​ ​or​ ​indirectly​ ​affect​ ​all​ ​960​ ​of​ ​our​ ​members.​ ​I​ ​can​ ​say​ ​without​ ​hesitation​ ​that​ ​this​ ​has​ ​been the​ ​matter​ ​that​ ​has​ ​concerned​ ​our​ ​members​ ​the​ ​most​ ​in​ ​my​ ​15​ ​years​ ​at​ ​the​ ​Fredericton​ ​chamber​ ​of commerce. 

We​ ​are​ ​concerned​ ​that​ ​the​ ​communications​ ​from​ ​government​ ​do​ ​not​ ​demonstrate​ ​a​ ​nuanced understanding​ ​of​ ​the​ ​fundamental​ ​differences​ ​between​ ​being​ ​self-employed​ ​and​ ​being​ ​an​ ​employee- the​ ​comparisons​ ​included​ ​in​ ​the​ ​original​ ​discussion​ ​document​ ​are​ ​not​ ​apples-to-apples.​ ​A​ ​person’s​ ​tax burden​ ​should​ ​be​ ​considered​ ​on​ ​an​ ​overall​ ​basis,​ ​considering​ ​both​ ​personal​ ​and​ ​corporate​ ​taxes​ ​where applicable.​ ​Tax​ ​professionals​ ​tell​ ​us​ ​that​ ​under​ ​the​ ​current​ ​system​ ​their​ ​clients​ ​will​ ​pay​ ​tax​ ​equal​ ​to​ ​an employee​ ​and​ ​any​ ​difference​ ​is​ ​simply​ ​about​ ​timing.​ ​Business​ ​owners​ ​that​ ​have​ ​incorporated​ ​do​ ​not have​ ​the​ ​same​ ​tax​ ​situation,​ ​or​ ​benefits,​ ​as​ ​an​ ​employee.​ ​Nor​ ​do​ ​they​ ​have​ ​the​ ​same​ ​income​ ​certainty. The​ ​current​ ​attempt​ ​by​ ​the​ ​government​ ​to​ ​make​ ​their​ ​situations​ ​‘fair’​ ​misses​ ​the​ ​point​ ​-​ ​what​ ​the original​ ​discussion​ ​document​ ​tries​ ​to​ ​do​ ​is​ ​make​ ​the​ ​situations​ ​exactly​ ​the​ ​same,​ ​when​ ​they​ ​clearly​ ​are not. 

As​ ​we​ ​all​ ​know,​ ​the​ ​government​ ​has​ ​tried​ ​several​ ​times​ ​to​ ​refine​ ​their​ ​proposals​ ​and​ ​their​ ​messaging.​ ​A good​ ​example​ ​is​ ​the​ ​$50,000​ ​cap​ ​on​ ​passive​ ​income​ ​earned.​ ​It​ ​is​ ​true​ ​that​ ​most​ ​small​ ​businesses​ ​won’t reach​ ​that​ ​figure,​ ​but​ ​the​ ​idea​ ​that​ ​small​ ​business​ ​would​ ​be​ ​happy​ ​that​ ​reforms​ ​would​ ​only​ ​affect​ ​the top​ ​3%​ ​of​ ​corporations​ ​is​ ​wrong​ ​headed.​ ​Small​ ​business​ ​relies​ ​on​ ​larger​ ​businesses​ ​as​ ​their​ ​customers through​ ​their​ ​supply​ ​chains.​ ​Small​ ​businesses​ ​also​ ​recognize​ ​the​ ​importance​ ​of​ ​large​ ​businesses​ ​as​ ​an economic​ ​driver.​ ​The​ ​economy​ ​works​ ​best​ ​when​ ​all​ ​sectors​ ​and​ ​strata​ ​of​ ​the​ ​business​ ​community​ ​are firing​ ​on​ ​all​ ​cylinders.​ ​The​ ​relationship​ ​between​ ​different​ ​industries​ ​and​ ​size​ ​of​ ​business​ ​is​ ​symbiotic​ ​and integrated.​ ​In​ ​Fredericton,​ ​we​ ​are​ ​known​ ​as​ ​the​ ​Startup​ ​Capital​ ​of​ ​Canada​ ​and​ ​many​ ​of​ ​these​ ​startups rely​ ​on​ ​mature​ ​businesses​ ​for​ ​their​ ​seed​ ​funding​ ​and​ ​as​ ​early​ ​adopters​ ​of​ ​innovative​ ​technologies.​ ​Do we​ ​want​ ​to​ ​stifle​ ​this​ ​germination​ ​of​ ​the​ ​ecosystem? 

One​ ​of​ ​our​ ​members,​ ​Germaine​ ​Pataki-Theriault​ ​owns​ ​Gallery​ ​78,​ ​a​ ​small​ ​private​ ​gallery​ ​and​ ​has​ ​stated that​ ​she​ ​doesn’t​ ​expect​ ​to​ ​be​ ​directly​ ​affected​ ​by​ ​the​ ​proposals,​ ​but​ ​realizes​ ​her​ ​customers​ ​will​ ​be​ ​and this​ ​type​ ​of​ ​discretionary​ ​spending​ ​is​ ​one​ ​of​ ​the​ ​first​ ​things​ ​to​ ​go.​ ​Non-profits​ ​and​ ​charities​ ​are​ ​similarly anxious​ ​and​ ​rightfully​ ​so​ ​-​ ​their​ ​funding​ ​relies​ ​on​ ​the​ ​business​ ​community​ ​being​ ​successful​ ​-​ ​it’s​ ​one​ ​of the​ ​reasons​ ​our​ ​organizational​ ​vision​ ​is​ ​​Community Prosperity Through Business. 

The​ ​proposals​ ​could​ ​also​ ​hurt​ ​the​ ​economy​ ​in​ ​undetectable,​ ​insidious​ ​ways.​ ​Imagine​ ​you​ ​own​ ​a​ ​very successful​ ​business​ ​and​ ​are​ ​ready​ ​to​ ​grow​ ​again,​ ​create​ ​more​ ​jobs,​ ​and​ ​support​ ​more​ ​small​ ​business through​ ​the​ ​supply​ ​chain.​ ​The​ ​uncertainty​ ​of​ ​the​ ​business​ ​and​ ​tax​ ​environment​ ​is​ ​currently​ ​so​ ​unsettled that​ ​people​ ​will​ ​delay​ ​investments​ ​perhaps​ ​indefinitely​ ​or​ ​look​ ​to​ ​other​ ​jurisdictions​ ​as​ ​a​ ​place​ ​to​ ​invest. And​ ​perhaps​ ​some​ ​will​ ​think​ ​twice​ ​about​ ​whether​ ​they​ ​wish​ ​to​ ​arrive​ ​at​ ​that​ ​threshold.​ ​Growing​ ​your business​ ​is​ ​not​ ​an​ ​easy​ ​task​ ​in​ ​the​ ​first​ ​place,​ ​maybe​ ​you​ ​decide​ ​it’s​ ​not​ ​worth​ ​the​ ​additional​ ​risk.​ ​What about​ ​outside​ ​investors?​ ​If​ ​Canadian​ ​businesses​ ​are​ ​nervous,​ ​you​ ​can​ ​bet​ ​that​ ​outside​ ​investors​ ​are thinking​ ​long​ ​and​ ​hard​ ​about​ ​whether​ ​this​ ​is​ ​the​ ​best​ ​environment​ ​to​ ​put​ ​their​ ​money.​ ​​ ​The​ ​World​ ​Bank Group​ ​just​ ​released​ ​their​ ​15th​ ​annual​ ​“Doing​ ​Business”​ ​report​ ​measuring​ ​business​ ​regulation​ ​and​ ​ease of​ ​doing​ ​business​ ​which​ ​ranked​ ​Canada​ ​18th….​ ​But​ ​in​ ​2009,​ ​we​ ​were​ ​8th….​ ​And​ ​the​ ​types​ ​of​ ​punitive taxes​ ​being​ ​proposed…​ ​will​ ​likely​ ​push​ ​us​ ​further​ ​down​ ​this​ ​ladder. 

Other​ ​big​ ​questions​ ​remain.​ ​Has​ ​an​ ​economic​ ​impact​ ​study​ ​been​ ​conducted​ ​on​ ​the​ ​proposed​ ​changes? Has​ ​government​ ​evaluated​ ​the​ ​increased​ ​compliance​ ​burden​ ​and​ ​financial​ ​cost​ ​to​ ​small​ ​businesses?​ ​Has government​ ​evaluated​ ​the​ ​increased​ ​cost​ ​and​ ​administration​ ​for​ ​CRA?​ ​How​ ​will​ ​the​ ​proposed​ ​changes be​ ​managed?

From​ ​the​ ​first​ ​day​ ​that​ ​the​ ​government’s​ ​original​ ​discussion​ ​paper​ ​and​ ​draft​ ​legislation​ ​was​ ​released, businesses​ ​across​ ​the​ ​country​ ​have​ ​felt​ ​attacked​ ​by​ ​their​ ​government.​ ​From​ ​the​ ​offensive​ ​language​ ​used in​ ​that​ ​document​ ​to​ ​government​ ​officials’​ ​dismissive​ ​attitude​ ​towards​ ​business’​ ​concerns,​ ​trust​ ​with​ ​the federal​ ​government​ ​has​ ​been​ ​badly​ ​eroded.​ ​Business​ ​owners​ ​were​ ​told​ ​that​ ​the​ ​very​ ​tools​ ​provided​ ​by the​ ​federal​ ​government​ ​to​ ​encourage​ ​entrepreneurship​ ​and​ ​growth​ ​were​ ​loopholes​ ​and​ ​needed​ ​to​ ​be closed.​ ​​ ​Business​ ​owners​ ​feel​ ​that​ ​the​ ​implication​ ​is​ ​that​ ​they​ ​are​ ​tax​ ​cheats.​ ​Meanwhile,​ ​people​ ​had organized​ ​their​ ​entire​ ​financial​ ​lives​ ​around​ ​these​ ​rules.​ ​I​ ​don’t​ ​see​ ​how​ ​any​ ​trust​ ​can​ ​be​ ​regained​ ​until the​ ​proposals​ ​are​ ​taken​ ​completely​ ​off​ ​the​ ​table​ ​and​ ​the​ ​government​ ​starts​ ​over​ ​with​ ​a​ ​proper​ ​process. 

We​ ​echo​ ​the​ ​Canadian​ ​Chamber​ ​of​ ​Commerce’s​ ​call​ ​for​ ​a​ ​Royal​ ​Commission.​ ​Rushing​ ​through​ ​reforms​ ​is the​ ​worst-case​ ​scenario​ ​for​ ​all​ ​parties.​ ​Just​ ​yesterday​ ​we​ ​learned​ ​from​ ​Auditor​ ​General​ ​Michael Ferguson​ ​(a​ ​Frederictonian​ ​like​ ​myself)​ ​that​ ​CRA​ ​is​ ​currently​ ​only​ ​able​ ​to​ ​field​ ​one-third​ ​of​ ​calls​ ​coming in​ ​from​ ​Canadians​ ​and​ ​are​ ​giving​ ​incorrect​ ​advice​ ​30%​ ​of​ ​the​ ​time​ ​-​ ​this​ ​is​ ​beyond​ ​alarming​ ​already.​ ​Now the​ ​government​ ​is​ ​proposing​ ​to​ ​increase​ ​the​ ​workload​ ​of​ ​CRA​ ​employees​ ​by​ ​making​ ​the​ ​tax​ ​code​ ​even more​ ​complicated​ ​and​ ​adding​ ​the​ ​responsibility​ ​of​ ​deciding​ ​what’s​ ​reasonable​ ​compensation​ ​for​ ​the spouse​ ​of​ ​a​ ​business​ ​owner.​ ​​ ​​ ​Business​ ​owners​ ​are​ ​already​ ​reluctant​ ​and​ ​apprehensive​ ​about​ ​working with​ ​CRA​ ​or​ ​asking​ ​questions….​ ​this​ ​fear​ ​will​ ​only​ ​become​ ​worse​ ​with​ ​the​ ​suggested​ ​changes​ ​(and currently​ ​the​ ​lack​ ​of​ ​detail).​ ​​ ​At​ ​what​ ​point,​ ​will​ ​businesses​ ​simply​ ​throw​ ​in​ ​the​ ​towel​ ​-​ ​deciding​ ​that​ ​it​ ​is not​ ​worth​ ​what​ ​they​ ​must​ ​give​ ​up…​ ​and​ ​/​ ​or​ ​invest​ ​to​ ​be​ ​self​ ​employed….​ ​And​ ​consequently,​ ​take​ ​jobs with​ ​them. 

In​ ​closing,​ ​it​ ​is​ ​evident​ ​from​ ​the​ ​ever-increasing​ ​complexity​ ​of​ ​the​ ​tax​ ​code​ ​that​ ​tax​ ​policy​ ​is​ ​a​ ​political tool​ ​and​ ​it​ ​really​ ​shouldn’t​ ​be.​ ​If​ ​the​ ​government’s​ ​concern​ ​is​ ​really​ ​fairness,​ ​then​ ​let’s​ ​have​ ​a​ ​full conversation​ ​and​ ​review​ ​through​ ​that​ ​lens.​ ​There​ ​is​ ​no​ ​chance​ ​that​ ​more​ ​tinkering​ ​and​ ​cherry-picking certain​ ​parts​ ​of​ ​tax​ ​policy​ ​will​ ​lead​ ​to​ ​the​ ​road​ ​to​ ​fairness​ ​-​ ​there​ ​are​ ​just​ ​too​ ​many​ ​moving​ ​parts​ ​to​ ​be able​ ​to​ ​do​ ​this​ ​on​ ​a​ ​piecemeal​ ​basis.​ ​So​ ​let’s​ ​hit​ ​the​ ​pause​ ​button​ ​on​ ​the​ ​proposals,​ ​engage​ ​in​ ​a​ ​full review​ ​and​ ​ensure​ ​that​ ​any​ ​new​ ​proposals​ ​should​ ​be​ ​straight-forward,​ ​simple​ ​and​ ​efficiently implemented​ ​by​ ​CRA​ ​and​ ​easily​ ​administered​ ​by​ ​small​ ​business.