Thank you, Mr. Chair.
CFIB is a not-for-profit, non-partisan organization representing more than 109,000 small and medium-sized businesses across Canada that collectively employ more than 1.25 million Canadians and account for $75 billion, or nearly half of Canada's GDP. Our members represent all sectors of the economy and are found in every region of the country. Addressing issues of importance to them can have a widespread impact on job creation and the economy.
You should have a slide presentation in front of you that I'd like to walk you through over the next few minutes.
CFIB's October business barometer on slide 2 shows that after a rough spring, small business optimism has trended into more positive territory so far this fall. The barometer has shown a gain of half a point, up to 65 from September's reading, but it generally remains in line with the average value from the past four months. Full-time hiring plans are basically unchanged this month and are typical for this time of year. We see this as a sign that business owners remain cautious. Only 41% of owners report a generally good state of business.
The barometer has shown us that the economy remains sluggish. To help us get through the sluggish economy we believe governments need to address the issues of greatest concern to small business so that business owners can focus on their own business, that is, hiring staff and growing their business, thereby growing the economy.
So, what are these concerns? As you can see on slide 3, the top issue of concern to small business is the total tax burden, and this includes all levels of government, which I will address in more detail shortly.
Second is government regulation and paper burden. We are pleased to see movement through the government's response to the Red Tape Reduction Commission. Now the hard work begins of implementing these changes, and CFIB plans to monitor closely how this is implemented.
The third high-priority issue is government debt and deficit. Small business owners understand the importance of paying down debt, and we have seen this issue grow in importance to them as the deficit has grown over the years.
The top issue of concern to small business owners is their total tax burden. There is only one taxpayer, but they pay taxes to all levels of government. With so many taxes it's important to understand which ones have the biggest impact on the growth of their business.
As you can see on slide 4, payroll taxes have by far the greatest impact on growth. Why? Because they're a tax on jobs. They must be paid, regardless of whether the business has any profit that month. One of the most costly payroll taxes is CPP/QPP. CFIB continues to advocate strongly against any increases in CPP or QPP premiums as they have a direct impact on job creation among smaller firms.
While the goal of enhancing retirement savings is a laudable one, CFIB and its members strongly oppose any plan that would involve mandatory increases to the payroll tax burden, as you see on slide 5. It is important to note that while CPP appears to be well managed at the moment, several years ago the fund was in terrible shape. Putting more of our retirement eggs in one basket is not a good option. CFIB encourages the federal government to take a leadership role in urging its provincial counterparts to examine other alternatives to help Canadians save for retirement, including PRPPs.
On slide 6 you'll see that small businesses are also concerned about the corporate taxes they pay, and reducing the small business corporate tax rate is an important step that can help businesses maintain or strengthen their performance. This is not surprising, as there has been a gradual erosion of the value of the small business rate relative to the corporate rate over the last several years as the general rate has come down. While CFIB supports reducing all corporate tax rates to stimulate job investment and growth, there are solid reasons why the small business rate was originally significantly lower than the general rate. For example, small businesses have a higher tax and regulatory burden per capita and they do not have access to all the market information that larger businesses do. Once the deficit is eliminated, CFIB suggests that government commit to reducing the tax rate by several percentage points to 9%.
As you will recall from slide 3, government spending is an important issue to business owners. One important way to reduce government spending is to start bringing federal public sector wages and benefits more in line with the private sector, as outlined on slide 7. Small business owners are particularly concerned with the sustainability of the federal pension plan, as it has an unfunded liability estimated to be between $140 billion and $220 billion. Public sector pensions were created under different demographic conditions from those today and are now unsustainable, given current lifespans and expected payouts. The government has important work to be done in this area, including converting all MP pensions and new hires in the public sector to defined contribution plans, as was done at EDC, a federal government agency; increasing the normal age of retirement to 65 for all in the federal public service, as was done for the OAS changes; and eliminating the bridge benefit, as has already been done at the Bank of Canada.
These are but some ideas we have to help support small businesses and grow the economy. To recap: we recommend first that you reject calls to increase CPP or QPP premiums or any provincial variation on this; second, we'd like the federal government to start addressing the erosion of the value of the small business tax rate; and third, we encourage the government to reduce spending by bringing public sector wages and benefits more in line with the private sector.
Small businesses truly are the backbone of Canada's economy and the heartbeat of our communities. They employ millions of Canadians and take risks every day. Government's role is to foster the spirit and create the conditions for small businesses to grow into medium and large businesses, and to encourage more Canadians to take a leap into becoming entrepreneurs.
The recommendations presented here are just some of the ways this can be done.
Thank you.