Sure.
This is because most smaller employers already understand the importance of being flexible for retaining employees, attracting new workers, and maintaining good work morale.
We believe this new legislation could pose several challenges for the small businesses, as listed on slide 6.
First would be the added administrative burden, such as reorganization of responsibilities to deal with employee requests and complying with regulations related to applications. Also, small businesses have limited resources to address any potential complaints or appeals processes that may result.
Second, in some businesses it is difficult for employers to offer certain types of arrangements, such as working from home, which may also require specialized equipment, which can be quite costly for smaller firms.
Third, there can be significant costs in terms of temporary reductions of productivity due to disruptions of regular schedules. Moreover, many small-business owners may have concerns regarding the fair treatment of other employees, who may end up taking on extra work, causing resentment among co-workers.
Finally, such legislation could lead to undue pressure on those small employers who are unable to accommodate the requests due to the nature of the work they do, such as those in the transportation sector.
Each business faces its own unique challenges. That's why it's really best left with employers and employees to work out the most suitable arrangement between them. In our feedback to the government, we recommended that they not proceed with this legislation, and if they did, that they potentially exempt smaller businesses. If they still planned to move forward, we had put forward a series of reasons that an employer should be allowed to refuse such a request, and we were pleased to see that many of those were incorporated into this legislation. However, we would like to see more than 30 days allotted to the employer to respond to a request. We had suggested three months, which is the period that's allowed in the U.K., and there were a few details about the enforcement of this bill and whether there will be an appeals process. These are areas that we remain concerned about at this time.
Next I want to talk about the multiplication of the small-business deduction.
In Bill C-63 changes were made to the treatment of farmers and fishers selling to co-operatives so they can remain eligible for the small business deduction. This was welcome clarification of the changes to this multiplication of the small business deduction that was introduced earlier this year, but, really, more needs to be done with it. In budget 2016, the government announced changes that would seem to be targeted at those who had created certain structures that enabled access to the small business deduction more than once, but this now seems to be affecting more businesses than we were first led to believe. Under these new rules, active business income is not eligible for the small business deduction if a corporation earns that income from providing services or products to a direct or indirect interest; however, no guidance detailing what exactly “indirect interest” is has been given.
What does this mean? Well, it seems these new rules are having a broader impact on some small businesses, especially in rural areas. For example, we have one member from a small town in Alberta who owns a restaurant and purchases fresh produce from her father's farm. Our member has a very limited number of suppliers, as there are few other businesses in her area that provide fresh produce, so she purchases it from her father. However, under these new rules, any active business income generated from their arm's-length relationship may no longer be eligible for the small business deduction, even though they both run completely separate businesses.
The rules have also created additional administrative costs, as it requires increased effort to determine whether these rules apply to one's corporate earnings, and to what extent. If a business is affected by the rules, it has been recommended to them that they keep two sets of accounting records: one for income not eligible for the small business deduction and one for the part that is eligible. We believe more needs to be done to fully understand and address the impacts of these changes.
Finally, I want to mention the importance of the Canadian free trade agreement and how pleased we are that this budget bill confirms the federal government's commitment to this important and historic agreement. It's clearly important to small businesses, but now the really hard work begins. We need the federal government to continue to play a key role in making sure that progress is made on the agreement, and this starts with making sure the regulatory reconciliation and co-operation table is active in addressing key issues for small business.
On slide 11 you can see the list of regulatory areas that require greater alignment across Canada and that should be tackled quickly by the RCT. They include corporate registration and reporting, agricultural and transportation regulations, professionals and trade licensing, and workers' compensation and health and safety rules. We would encourage the federal government to use its influence in keeping discussions going and finding solutions.
Thank you.