Good morning, Mr. Chairman and committee members. Thank you for taking the time to hear my remarks.
My name is Olivier Guerrero; I am a Canadian citizen, and president and shareholder in my own IT consulting company called Conseils GO & See Inc., which was created in March 2000.
I am here today to tell you about the unfair legal action being taken against me by the MRQ and the CRA, namely, because the MRQ decided to consider me a PSB. I created my federally chartered corporation myself, using all of the information I could obtain from the government and by consulting documents and Internet sites. At the time, and today, it was not indicated anywhere that I could set up as a PSB. To obtain more details on the status of PSBs, I had to do specific research using highly technical terms on government websites in order to know what a PSB was.
For 10 years, I did as all businessmen do and prepared my annual federal and provincial tax returns, paying my GST and QST instalments. My corporate tax returns, both federal and provincial, never contained any irregularities.
One fine day in February 2008, I received a call from an MRQ auditor who told me that according to his analysis of my file, my company was a PSB. His argument was that I had been with the same firm for several years and that, consequently, I was considered an employee. He also announced that a new assessment for previous years would be produced, because as such, the only eligible expenses for a PSB are salaries paid and the taxation rate must be adjusted upwards since I am not the owner of a real business. After several months of contact with the auditor, I finally received a notice of assessment for several tens of thousands of dollars, for which the cumulative interest represented almost 20%. Five weeks later, I received a notice of assessment from the CRA, which was based on the MRQ decision. The bill doubled. I immediately paid the notice and the two from the government, because I am an honest citizen and I do not want something like that hanging over my head. However, I had to borrow money from the bank to do so. I challenged both levels of government. The MRQ rejected my appeal, and at present, I am taking steps to file a complaint in court so that I can continue to follow up on my file. That is a brief overview of my situation and how I got there. I would now like to explain just how absurd the notion of PSB, as it stands, is.
Very simply put, PSB status can be determined in two different ways, based on criteria that are completely subjective and discriminatory, in my view. The first is punitive. You are told that you must go back three years and pay interest because you did not do things properly. The second is on a voluntary basis. To my mind, this leads to a highly unusual paradox. I am being criticized for having offered my services to a consulting firm for several years.
The first year, I have no reason to think I might have PSB status, as I am working as a consultant with the company. The client is satisfied with my services, and offers to renew my contract for another project. I declare my income the following year the same way. Did I have any reason to question my status? I don't think so. However, I'm really unlucky, because the client feels that my services are very good and decides to offer me another contract. In the end, I should tell myself that since I have been with the firm for three years I should consider myself a PSB. How do I do that? Is there a form to declare that I am a PSB? How do I indicate that to the government? If I do so voluntarily, will I face a punitive process? They will tell me that I have been doing that for three years and that I will have to pay interest. I don't know how to position myself.
According to arguments put forth by the government, a company must take risks. In reality, isn't the aim to create a loyal clientele, as the fewer the risks, the better the company will fare? Why, in my case, would that become a means of discrimination?
Must we punish the good people who offer good service? Or should I be bad and change contracts every three months? How can I plan how to carry out self-assessment? What are the criteria, beyond all reasonable doubt, that I can take into consideration?
I will continue describing the paradox looking at another aspect, that is the situation I find myself in and because of which I have had to borrow money. I was labelled as a PSB because they wish to see me as the employee of a company I do not own. As a company, what benefits do I have compared to a permanent employee of the company to which I offer my services? Overall, I do indeed earn a bigger salary, but compared to the list of advantages that a permanent employee has, my advantages are quite slim. Moreover, as is the case for my friend Mr. Robitaille, I have to pay the management costs of the business, whether they be fees to register with the government, accounting fees, professional association dues, the cost of equipment, software, and training.
As far as employment insurance is concerned, I do not have the right to contribute and even less to benefit from it. An employee working 35 hours per week, for example a permanent employee, simply goes home once his day is done. I however must provide approximately five hours of work per week throughout the year in order to ensure the survival of my business and do the administrative work. This is unpaid time.
The employee enjoys training programs. When I am in training, however, I cannot bill for the cost of it nor am I paid. It is therefore a loss. On the other hand, my freedom as an entrepreneur is something I consider an advantage, for which a price must be paid. I made this choice to have that freedom. I want to be able to make my own decisions, but the government is denying me that.
Finally, the ultimate irony in this story is that I am being accused of acting as an employee. By declaring me a PSB, I am obliged to remain a business, but I am not granted the right to be one. I do not have the right to deduct my expenses. As a PSB, my tax rate is approximately 50 percent, whereas with the deduction granted to a small business, the rate is 19 percent. It is 38 percent for large businesses.
Do you believe that such tax rates allow me to remain competitive with my competition? Am I being discriminated against in the end? Do we want to snuff out independent entrepreneurs to the benefit of companies that, by the way, take advantage of subsidies? These same companies are also quick to decamp and invest in foreign markets such as in China or in India. I lose all around. I ask you the following question: is a PSB an employee or a business?
I hope that my presentation has convinced you that the law must be changed and objective criteria defined to limit these kinds of excesses. Canadian micro-businesses will not be able to remain competitive and develop if they have to bear this kind of a burden. We want to create wealth in Canada and not in other countries.
I am sent you a document entitled EPSP = employee or enterprise? which in contains some of the arguments that I have just made before you. In conclusion, I would like once again to thank you, ladies and gentlemen members of Parliament, for having listened to me.