Thank you for the opportunity to be here today to share CFIB's perspective on these pre-budget consultations.
You should have a slide presentation in front of you, which I'd like to walk you through in the next few minutes.
CFIB is a not-for-profit, non-partisan organization, representing more than 109,000 small-business owners across Canada, who 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.
As you may be aware, CFIB takes its direction solely from our members through a variety of surveys. Today I'll be sharing with you some results from our pre-budget survey. I note that these are preliminary results as the survey is still in the field, but we'll be publishing our more detailed pre-budget submission once the survey is closed.
One of the surveys we do is called the business barometer. Every month we ask our members how they think their business is going to be doing in a year from now: better, worse or staying the same. The results of this survey give us an index. On slide 3, hot off the presses as of this morning, is our September business barometer, which shows small business optimism drifted slightly lower this month, to 59. The latest findings suggest economic conditions are stable, but weak. The index has been sitting between 58 and 60 for the last six months, but we'd like to see it between 65 and 70 when the economy is growing at its full potential.
We also survey our members to get a sense of what their high-priority issues are. They've identified the total tax burden, followed by government debt and deficit, and government regulation and paper burden, also known as red tape, as their top three priority issues.
So we have a sense of how confident business owners are about their own business and what their priorities are. We also asked our members how confident they are that the federal government has a vision to support them in this period of relative economic instability. Confidence levels are not that high, with 78% of business owners saying they're not confident the federal government has a vision that includes them. We have some ideas as to how the government can help build small business confidence by creating an environment where they can innovate, create jobs, and help grow the economy.
The first of these ideas to help SMEs strengthen their business performances is on slide 6. As you can see, for 86% of our members, the measure that would be the most effective would be to reduce the federal small business corporate income tax rate from 10.5% to 9%. This is our number one ask of your budget for 2017.
Our members know that today's deficits are often tomorrow's taxes, and two-thirds of our members feel that balancing the budget in the next few years would also be helpful.
On the same chart you'll see that 85% of our members feel strongly that a lower EI premium rate for small business would help their business performance. If you look at slide 7, you'll see why.
Payroll taxes are one of the biggest disincentives to hiring and growing a business because they are profit insensitive. You have to pay them whether you make any money that year or not. We were pleased to see that EI rates announced earlier this month are coming down, but unfortunately, due to the fact that the small business job credit, which many SMEs had access to, has not been renewed for 2017, many small-business owners' rates are actually going to go up by 4¢. This is why we suggest the government introduce a permanent lower EI rate for SMEs. There are good reasons for having a lower EI rate for small business: they are more labour-intensive than larger business and, as such, they feel labour changes that much more acutely.
Our members are also very supportive of having a form of rebate for hiring youth. In our recent EI report, 80% of our members were in favour of this credit. Small businesses are often the first employers of youth in this country and they spend a lot of time training them, both formally and informally. This explains the significant support for this credit.
We know the government is looking to increase CPP premiums in the coming months. In order to offset the biggest payroll tax that small businesses pay, we encourage you to consider other alternatives to ease the burden to the SME community.
We know that innovation is a priority for this government, and we'll be publishing in the coming weeks a report that challenges the notion that SMEs don't innovate. Our research shows good news: 80% of SMEs report they've been innovative in their business in the last five years. One of the key challenges they face when creating or improving their products, services, or processes is not accessing government grants, but rather it is the shortage of skilled labour. This was identified by nearly half of business owners as a barrier to innovation, followed by government red tape. We encourage the government to consider ways to increase access to skilled labour for business owners and, for those who need it, smooth out access to the temporary foreign worker program.
SMEs are often faced with the difficult choice of complying with government red tape or being able to have the time and money to undertake innovative work. We recommend that the government consider the creation of an innovation lens when implementing new regulations, policies, and taxes to ensure that they do not negatively impact a firm's ability to innovate. This lens would ensure that SMEs won't have to choose between being compliant and being innovative.
To sum up, on slide 9, you'll see our list of recommendations for budget 2017. We look forward to collaborating with the federal government to continue the good work that small businesses do to innovate, create jobs, and invest in the economy.
I look forward to answering your questions.
Please note that I can also answer your questions in French.