EXCLUSIVE CHAT WITH MARVIN CRUZ
Senior Research Analyst at CFIB and author of the report, Taxing Payroll: A Barrier to Business Growth and Competitiveness.
You recently released your landmark payroll tax report, Taxing Payroll: A Barrier to Business Growth and Competitiveness. Tell us about payroll taxes. Why are they a concern for small businesses?
Payroll taxes, such as Employment Insurance and the CPP/QPP, take a big bite out of the resources available to employers. The chunk being taken will get even bigger with the CPP/QPP’s ongoing expansion, which will see premiums rise by at least 20% by 2025. As our report cites, the burden associated with such payroll taxes is so severe that 77% of business owners point to payroll taxes as the most harmful tax for business growth.
What would you say is the biggest impact that payroll taxes have on the success of a small business?
Payroll taxes play an important role in the growth and competitiveness of small businesses. In large part, not only does the burden associated with payroll taxes limit the resources available to grow a business (i.e. innovation, increasing wages, or hiring new staff) but in effect, as these taxes are based on employees’ wages, businesses are ultimately punished for trying to grow and create jobs.
Why are payroll taxes such a big challenge for SME owners when it comes to growing their business?
Payroll taxes are damaging to business growth because they impose a heavy administrative burden and are not scaled up or down depending on how profitable a business is. For a small business owner, every dollar taken away hurts, especially if you are not turning a profit.
What are some of the strategies or initiatives that the government can put in place to reduce the impact that payroll taxes have on SMEs?
To avoid suffocating small businesses, governments need to move away from payroll taxes. Instead, steps need to be taken to provide businesses the opportunity to re-invest and increase the pay, benefits and training opportunities for their employees. For instance, the federal government can: halt or slow down additional CPP increases; implement an EI credit which effectively lowers the rate for small businesses; introduce an EI holiday for hiring youth aged 15 to 24.