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Small businesses on the ropes

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These federal Liberals have never been friends of SMEs. Photo Credit: iStock. 

Small- and medium-sized Canadian businesses (SMEs) have been having a pretty rough time of it lately, and we should all be concerned about that. The pandemic was hard on everyone and a full recovery from that terrible time has not yet taken place, but it was especially difficult for SMEs. It didn’t have to be that way, but for various inexplicable reasons many Canadian governments decided to punish smaller firms with rigid closures, costly regulatory requirements and other dictates that they did not impose on larger businesses. During the pandemic, many SMEs just closed their doors while too many of those which managed to stay in business are still struggling. 

The federal government’s refusal earlier this year to extend the deadline for the Canada Emergency Business Account (CEBA) pandemic-related loan program was the final nail in the coffin for many smaller firms. The extension that had been requested by the SME community was merely until the end of this year – about 10 months – which should not have been too much to ask. The Parliamentary Budget Officer estimated that this minor deadline extension would “cost” the federal treasury about $900 million to save thousands of small businesses and the jobs they provide. The fact the Trudeau government could not see their way to grant this extension when they seem delighted to hand out tens of billions of our tax dollars to profitable foreign auto companies is a sad indication of where the Liberals’ priorities lie. 

These federal Liberals have never been friends of SMEs, but prefer the large crony capitalist corporations that are constantly on the take from governments at all levels. Early in their tenure, the Trudeau Liberals made tax changes detrimental to smaller firms and in their last budget introduced a foolish and unnecessary change to capital gains taxation that will negatively impact many SMEs and other average Canadians. The claim in the budget that the capital gains tax increase would only affect the ultra-rich has since been shown to be just another colossal Liberal lie. 

The federal government is by no means the only culprit. Many provinces continue to pile on the red tape, onerous employment standards, labour laws and excessive regulations, frequently in the name of various so-called environmental and “woke” causes. In Ontario alone, SMEs are currently being hounded by provincial bureaucrats to conform to ridiculously complicated reporting requirements on emissions regulations where the bureaucrats themselves have difficulty understanding and explaining the so-called rules. Another ongoing absurdity in Ontario is imposing DEI-type (Diversity, Equity and Inclusion) reporting demands on businesses as to the make-up of their workforces. The current Ontario Progressive Conservative government claims to be “Open for Business,” yet its willingness to bow down to these activist-promoted unnecessary and expensive red tape nightmares indicates it is anything but. 

To cite another problematic three-letter acronym, ESG (Environment, Social and Governance) regimes are about to be imposed on mostly unsuspecting Canadian businesses if they want continued access to finance, insurance and other essentials of doing business. Although these rules are supposedly only to be inflicted on larger, publicly-listed corporations, the reality that many smaller firms have inter-relationships with larger corporations means that the SME sector will also be affected. Fortunately, the fairly limited experience businesses in Canada and other countries have had with ESG is turning many away from these absurd and harmful policies. But how much damage will be done before they are ultimately rejected as the disasters they were always destined to be? 

Among this doom and gloom, a recent Royal Bank conducted by Ipsos Canada showed some good news on the entrepreneurial front. This poll found that fully 51 per cent of Canadians are considering starting up a business. This is an increase of five percentage points from last year, which would suggest that potential entrepreneurs are emerging from their post-pandemic doldrums. However, more sad news comes from a survey conducted by my old stomping grounds, the Canadian Federation of Independent Business (CFIB), which found only 18 per cent of current business owners would advise someone else to start up a business at the moment. It’s great that Canadians who have not yet tried the business owner route want to take the plunge, but if experienced business owners are that pessimistic, there is much to be fixed in our system. 

Some folks say that governments need to do more to help SMEs, but in truth what is really needed is for governments to leave them alone. All governments like to proclaim that SMEs are the backbone of the economy, and that is true. But talk is cheap, and more action to reduce taxes, streamline regulation, get rid of unnecessary red tape and improve our competitiveness overall is badly needed. 

Much of the incremental regulatory burden in recent years has come from the lobbying of political activists who are funded by government and have zero concerns about the health of the SME sector or the economy overall. A good first step to fixing this problem would be to cut off all public funding to these groups so they actually have to compete in the marketplace and provide a useful service that people are willing to pay for – just like small businesses do – or cease operations. That might focus the mind and get rid of a lot of unnecessary regulatory overkill, improve the health of SMEs and devote our scarce tax dollars to more productive uses.

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