This past week Federal Finance Minister Joe Oliver unveiled his first major decision as finance minister with a targeted tax credit for small business to boost hiring without sacrificing Conservative plans to balance the books and cut taxes further before next year’s election.
The credit effectively reduces employment insurance premiums for small businesses, but falls short of a direct cut in premiums that would benefit all businesses and all workers. Ottawa confirmed on September 11, 2014 that a broader cut in payroll taxes wouldn’t happen until 2017 when premiums would drop sharply from the current $1.88 per $100 of insurable earnings to $1.47.
Small businesses will receive credits that effectively reduce the EI premium rate by 15 per cent over the next two years, with an average refund of about $350 per small employer that qualifies. Only businesses with roughly 20 full-time equivalent employees or fewer are likely to qualify for the new credit. Statistics Canada data show that businesses with fewer than 20 employees account for only 20 per cent of all employment in Canada.
The Canadian Federation of Independent Business praised Thursday’s announcement and estimated the credit would create 25,000 person years of employment over the next two to three years.
Although we applaud and welcome any and all types of tax relief to support the growth of Canadian business we are also keen to recognize that other government non-tax revenue policy change opportunities exist that, although may not provide as splashy a headline to lead the masses to recognize the overall kindness and generosity of government, may very well prove to provide a more sustainable path to the overall growth of our economy. We’ll take a cursory look at the granddaddy of them all, inter-provincial trade barriers in our next post.