Thank you.
Chairperson Easter, committee members, fellow witnesses, good morning.
Thank you for the opportunity to appear before this committee to discuss what the Saint John Region Chamber of Commerce, the chamber, feels are considerations that should be included in the next federal budget.
During the recent provincial election, the New Brunswick boards of trade, chambers of commerce and other associations created a platform called We Choose Growth, which has five pillars that lay out what our members, the province and the country need to be successful. These five are private-sector driven economy, responsible resource development, responsible financial management, improved export performance, and labour force development. I will try to focus on most of these this morning.
First I'll talk about private-sector driven economy.
New Brunswick is the best place to live in Canada. However, a competitive tax and regulatory environment is needed to attract new businesses, as well as allow current businesses to grow in this current global competition for capital and talent, regardless of the size of the organization. Our federal small business tax rates are competitive when you look only at the corporate level of taxation. However, with the additional consideration of personal tax rates and a top marginal rate in excess of 50%, there is a disincentive for business owners to achieve their full potential when more than 50% of what they earn will be paid in tax. This disincentive is worsened when a business is subject to the general tax rate of 29% in New Brunswick.
The recent changes in the small business deduction rules related to the amount of passive income one earns can double the income tax burden on many successful small businesses and remove growth capital from that business. As well, the wide-ranging changes that have occurred over the last several years have increased every business owner's accounting and legal fees just to remain compliant. Therefore, we recommend all recent tax changes be put on pause and a robust and complete review of the tax system, including tax rates, be undertaken to ensure that it is fair and equitable to all. Any review will, and should, take time.
However, New Brunswick and Canada need immediate action now to encourage investment, to stop the capital drain and to encourage growth. We suggest an immediate writeoff of capital expenditures as a start. This can be enhanced with a super deduction of 125% of the expenditure to allow a further incentive for investment and growth. For everyone, a reduction in the top marginal rate to below 50% would be positive. Further, a positive amendment to the recent changes to the tax on split income rules would be to provide for a spousal exemption, or raise the age it applies to for those under 25, and revert back to the rules that had worked effectively since the early 1990s. This would eliminate complexity and reduce risk for the business owner who wants to do things right, but has no idea how to apply the new, overly complex rules.
As New Brunswick is an aging society, current business owners are faced with succession issues. Many would love to transfer their business to family members, but the current rules make it nearly impossible, as most business owners cannot efficiently transfer their business to the next generation without significant tax costs. We suggest that a mechanism be introduced to allow the rollover of a family business to the next generation that would allow the current owner to enjoy the same benefits as if they sold to an arm's-length person.
Next is responsible resource development.
New Brunswick was built on the riches that the land and sea have provided to us, and the hard work of those who took risks with no guarantee of success. The current regulatory framework appears to be in constant flux and causes significant issues for anyone trying to start or grow a business utilizing these natural resources. The creation of any major piece of infrastructure, such as a pipeline, would draw in more business opportunities and give local businesses the opportunity to gain valuable experience that they can then take and use elsewhere. It would grow New Brunswick's tax base.
With this uncertainty, it is not surprising that we have no new private projects that bring new enterprises to New Brunswick that not only create immediate jobs but the lasting infrastructure that attracts additional new investment. Rules should be established that are reasonable and realistic, in collaboration with industry and stakeholders, and that don't pit opposing parties against each other but look at the national good. These rules should then be consistently applied to any project review in its development so that we can get something built in Canada.
To confront climate change by offering beneficial tax treatments, immediate writeoffs, super deductions or better refundable tax credits for modernization of pollution control equipment, upgrading to new efficient equipment or the installation of renewable energy sources, as opposed to charging carbon taxes, would create better results. Everyone in Canada is taxed out and can't afford any new taxes. Incentivize behaviour. Don't punish when there is no alternative.
Next is responsible financial management.
A fiscally strong, stable federal government helps Canada sell itself as a good place to invest. Running extreme deficits and accumulating debt with no clear plan to return to a balanced budget is not sustainable. Neither is trying to balance a budget through tax increases as we have passed the point where more taxes generate more income.
Therefore, we recommend that the government work to live with less, focus on the expenditure side of the income statement and don't balance the budget through tax increases. Every year that goes by that we are not dealing with this makes it harder to correct and puts Canada at risk of not being able to ride out the next inevitable downturn.
As for improved export performance, we are an export-focused economy, primarily through the U.S. We must expand to other markets. The federal government should provide better financial backstops for businesses wishing to enter new export markets.
However, it will take years to develop any new markets. The trade issues between Canada and the U.S. must be stabilized to maintain the free flow of goods to the U.S. Many New Brunswick companies that employ thousands currently depend on the U.S. market for their survival. Any disruption to cross-border trade would be devastating.
In the five minutes we've had, I have only touched on four of the five pillars of growth. There is much more to discuss.
Thank you for this opportunity to appear before you. I welcome any questions you may have.