Good morning. Thank you for the opportunity to be here.
The CFIB represents 97,000 small and medium-sized, independently-owned Canadian companies. They come from every region of Canada, and they are found in every sector of the economy.
CFIB data shows that many small businesses continue to face persistent challenges, including high levels of pandemic-related debt, insufficient domestic demand, high interest rates, inflation and increased labour costs. Many are struggling to keep their heads above water, let alone make headway in reducing the debt that they incurred during the pandemic.
Late last month, Stats Canada revealed that more businesses have closed as a result of the COVID-induced economic downturn than during the 2008 financial crisis. Another report from the Office of the Superintendent of Bankruptcy found that business bankruptcies in September were up more than 40% compared to the same month last year. Clearly, a significant number of small businesses have closed down, with many simply having no choice but to walk away from their businesses.
The CFIB's latest monthly business barometer, which tracks business confidence over the next year, has sunk to lows not seen since the early days of COVID, with just 47% of small business owners feeling like their business will be doing better a year from now. We normally want to see that index sitting somewhere between 65% and 70% when the economy is growing at its potential.
As small and medium-sized businesses represent more than half of Canada's GDP and employ over 80% of Canadians in the private sector, these business losses can have a significant impact on Canada's economy, and governments need to pay attention.
In a recent survey, we asked small businesses what they want the federal government to focus on to help them address their business priorities. The top issue cited by two-thirds is to reduce the overall tax burden to help them address rising costs. Second was more flexibility around the repayment of CEBA loans to help them address their debts. Third was reducing red tape to help them be more productive, followed by helping them deal with labour shortages.
The CFIB's budget recommendations will focus on ways that may help address these concerns, with the exception of CEBA, as we understand that any decisions around CEBA, the Canada emergency business account loan, will have to be made sooner than the budget. Just so you know, we continue to press for an extension of the CEBA repayment deadline to maintain the forgivable portion to the end of 2024 to give small businesses more time to recover.
Over the last year, not only have businesses' costs gone up, but so have government taxes. While EI was frozen during COVID, it was increased in 2023 and will again increase in 2024. Every year for the last few years, there were increases in CPP premiums, carbon taxes and alcohol excise taxes.
To help address and offset some of these costs, the CFIB recommends, among other ideas, first, lowering EI premiums for smaller employers, which are more sensitive to payroll tax increases than larger firms. One way to do this would be to replicate a program from 2015-16 called the small business job credit. It provided rebates to businesses with less than $50,000 in EI premiums that were equivalent to what they would have paid if they had only paid 1.2 times what an employee pays—normally, they pay 1.4 times.
Second, you can increase the small business deduction threshold to $700,000 from $500,000 and index it to inflation so that more small firms can access the small business tax rate.
Third, you can freeze the carbon tax and fix the unfairness that results in small businesses paying about 40% of the carbon tax while less than 10% is set aside for them. Only a small fraction of that amount has ever been returned to them. We would ask that the $2.5 billion that has already been earmarked for small businesses and collected from them be immediately returned to all small businesses, not just a select few, and that the formula be reconfigured to make it more fair for small businesses. If this cannot be done, then the current carbon tax should really be scrapped.
Next, the CFIB found that the most effective methods to address labour shortages are immigration and automation. Knowing this, the CFIB recommends, among other things, that we allow temporary immigrants already in Canada to work or work more.
Second, we recommend that you help small businesses invest in automation by extending the accelerated investment incentive for a few more years. We would also encourage the government to extend or make permanent the immediate expensing provision that allows Canadian control of private corporations to expense up to $1.5 million in the year the asset is put into use, which is set to expire at the end of this year. This would give small businesses more time to capitalize on this tax measure, help make them more productive and keep them competitive with their U.S. counterparts that have a similar tax measure that has already been made permanent.
Third, we need to enhance incentives to work for older workers, so that they stay in the workforce longer without losing their benefits. I'm happy to elaborate on that and how that could be done.
Finally, putting together a greater emphasis on reducing regulatory burden could help address productivity, lower costs and free up time so that entrepreneurs can focus on building their businesses. You could try to identify examples of red tape and then fix them one by one. However, new ones will always emerge. To really address this issue, you also need to implement a process that requires regulators to not just create but also actively manage regulations.
In our experience, we have found that governments that are successful in reducing the regulatory burden do three things well.
First, they make red tape reduction a political priority. Without leadership from the top, nothing will get done.
Second, they measure and report on the total number of rules that exist, because once they're measured, you can more effectively start to reduce that burden.
Third, you place constraints on regulators. While there is already a constraint on regulators at the federal level called the one-for-one rule, it needs to be updated to include not only those rules found in the regulations but also those in legislation, guidelines and policies.
Those are just some of the many recommendations that could help small businesses grow and be more productive during a difficult time, which not only helps them and their communities but also helps grow and extend Canada's economy overall.
Thank you.