An entrepreneur-friendly wish list for the next federal government
As with any federal election, this one has come with its fair share of ups and downs, a few surprising twists and a great deal of time devoted by Canadians to deciding which party should lead our country into the 2020s—and which has the vision to help our entrepreneurs thrive.
Although Canada may be relatively business-friendly, we could be doing far more to lessen the burden on business owners. It starts with the Income Tax Act.
Put simply, Canada’s tax code has become overly complex. Worse, compliance has become far more onerous in recent years, and the Canada Revenue Agency’s increasingly aggressive behaviour could make one question Ottawa’s commitment to tax fairness. Federal tax changes to the treatment of inter-corporate dividends, the new passive investment income rules, and the new rules relating to income sprinkling for Canadian-controlled private corporations (CCPCs), are only a few examples of recent changes that have overburdened entrepreneurs.
In general, an overhaul of the tax code would help enhance business competitiveness, which is particularly vital at a time of increasing global competition. Perhaps something in line with a 21st-century version of the Carter Commission, which suggested widespread tax reform in the 1960s, is in order.
My business-friendly tax and policy reform wish list doesn’t end here.
Although the new federal carbon tax won’t have a significant impact on service-based businesses—the bulk of those costs will be borne by manufacturers, farmers and organizations operating in more energy-intensive sectors—there will be a trickle-down effect across the economy. The federal government should take decisive action to mitigate the damage.
Lastly, it’s time to address the looming fiscal time bomb that is the federal deficit, thanks largely to runaway spending. While interest rates are undeniably low, deficit spending is putting our national financial health in a precarious position. In fact, we were supposed to have a balanced budget by now, but the Liberal government increased deficits more than any other past government not faced with a major economic disruption. Was this really necessary? Interest rates won’t stay this low forever. Eventually, the cost of servicing the ever-increasing debt will take a much larger percentage of the government’s revenue, allowing less spending on more important fiscal matters.
With a recession potentially looming, global growth slowing—especially in important markets such as Germany—trade wars raging, bond yield curves inverted and macroeconomic challenges such as Brexit creating widespread uncertainty, the prospect that Ottawa may need to inject stimulus into the economy in the near future is very real.
That’s why the next federal government needs to make some hard decisions to get its fiscal house in order.
From an entrepreneurial perspective, it would be nice to see a government that spends responsibly. That means eschewing inefficient handouts, such as tempting tax credits, in favour of measures to enhance competitiveness, from lower tax rates to less burdensome tax policies.
Creating the conditions for SMEs to succeed requires the right kind of strategic governmental support. Will the next one be up to the task?
Armando Iannuzzi is a tax partner at KRP LLP, a Markham, Ont.-based accounting firm for entrepreneurs. Learn more at www.krp.ca