Juno News - December 14, 2022Another tax hike for Canadians (ft. Dan Kelly)
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Summary
The Canadian Federation of Independent Business is calling on the federal government to pause the planned increase of EI and CPP premiums, which will take about $305 away from the average Canadian worker next year. Dan Kelly, president of the CFIB, joins me to talk about the issue.
Transcript
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I want to turn to some cost of living issues, which are very much affecting Canadians.
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We spoke about inflation a fair bit last week, and I know we'll have a bit of a more in-depth
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look at this in a couple of weeks with Franco Terrazzano of the Canadian Taxpayers Federation.
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But I think one of the big things that it's important to identify here is that for most
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Canadians who are grappling with inflation, there isn't just one instant snap-of-the-finger
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There's general inflation, supply chain issues, there are the increases to the carbon tax.
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And one that doesn't often get discussed, but I think it's important here, is the increases
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to payroll taxes, which if you're talking about thousands of dollars a year that Canadians
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A few hundred a year in payroll taxes is quite significant.
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The Canadian Federation of Independent Business is calling on the federal government to pause
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the planned increase of EI and CPP premiums, which will take about $305 away from the average
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Dan Kelly, president of the CFIB, joins me now.
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Sorry, we had a little bit of a technical issue there.
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These premiums go up every year, but we're also talking about a year that isn't exactly
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business as usual economically for Canadian families.
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No, I mean, typically there is an increase in the maximum amount that we can pay CPP and
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In fact, for two years, the federal government froze the employment insurance rates because
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they recognized the economy was in rough shape.
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Canadians were struggling through the pandemic, and so they kept those rates frozen.
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Now they've removed that cap on EI, and they're in the process of raising CPP rates significantly
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Those two things combined are going to raise employees' payroll taxes by over 6% this year.
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As you said, about a $305 increase, up to a $305 increase for the employee, $325 increase
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So your payroll on January 1 for most working Canadians will drop.
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That's in the face of an environment where we're all dealing with the inflationary pressures
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We're seeing EICPP premiums rise, and then, as you noted, later in the spring, in most provinces,
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an increase in the carbon tax as well as an increase in liquor taxes.
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Do you recall in the last couple of years when the government put this freeze in, when that
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What I mean by that, basically, is are we past that point where the government could easily
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Look, the government could, even now, announce a freeze or retroactively take out the increase.
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In fact, in 2015 and 2016, the Liberals, just as they took power, put a two-year freeze on,
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a two-year reduction plan for small businesses on their share of the EI bill.
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But, you know, we're a couple of weeks away from January 1, and rates are expected to rise.
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The Liberals did increase EI, sorry, did increase Canada Pension Plan premiums in both COVID years,
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in 2021 and 2022, they're doing it again this year, despite the fact we're all dealing with
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You know, when you take 300 bucks out of somebody's take-home income, that's, you know, that's
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a round or two of groceries for many Canadian families at a time when Canadians are really
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The benefits for CPP, the future benefits, they're going to be, that increase is going
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So putting a one-year pause in place, we don't think is too tall in order.
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Unfortunately, the government has ignored these calls and is moving ahead.
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Now, if you're self-employed, you're getting hit on both ends of this, aren't you?
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You don't have to face EI premiums, but on Canada Pension Plan, you pay both the share
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as the employee and you pay the share as the employer on self-employment income.
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So you could have hundreds and hundreds of dollars of increased Canada Pension Plan
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premiums, and the self-employed really were huge losers out of COVID.
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For the business, of course, this is adding additional pressure.
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I mean, we talk about the inflationary pressures on average Canadians.
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For business owners, they're seeing that pressure on every line of their budget.
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And, of course, with rising taxes, these payroll taxes, that obviously saps their ability
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to provide raises for their employees to deal with the inflationary pressure that they're
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I know that there's this vision that, I don't even know if it's an intentional one,
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but this approach of the business owner as being the miserly one that doesn't want to
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And, you know, any small business owner I've ever spoken to would love to pay their employees
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But sometimes they look at their balance sheet and that money just isn't there.
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So when you're talking about, you know, a few hundred dollars per employee, if you've
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got 10 employees, that $3,000 is not insignificant on some small businesses, is it?
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And look, I mean, we have to also put the context of what's happening right now.
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But if you can believe it, only half of small businesses say that they are back to 2019 levels
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For many, they're not seeing customers return in the volume that they did pre-pandemic.
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On top of that, just to get through the restrictions of the last two years, the average small firm
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That's how much they now owe, exposed to higher interest rates that they're having to make
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So lower sales, more debt at higher interest rates, and huge cost increases.
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This is not the boom times that people were predicting coming out of COVID that many of
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Sadly, for many small businesses, these remain pretty bleak times.
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Small business optimism, if you can believe it, is actually fairly close to the low levels
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And yet, the federal government feels like this is a great time to jack up taxes.
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I mean, there's always been that divide that people have seen between the financial economy
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Between the picture of the economy that you might see looking at the stock market, although
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And again, a lot of people have made billions in the pandemic, but for a lot of small business
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They haven't seen that incredible financial success story that Amazon has.
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Well, look, restrictions really hit independent businesses particularly hard, especially in
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retail, hospitality, the service sector, arts and entertainment, travel and tourism.
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These were the sectors that were most directly affected by COVID restrictions.
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They took it on the chin to try to get through.
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Yes, there were government support programs in place, but our data shows that only about
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one-third of the cost to business was covered by COVID subsidies.
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And business owners are saying, look, give us a bit of a breather here before you start
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You add to that the carbon tax increase that we're expecting in April.
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And for small businesses, that's especially deadly.
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Small firms don't qualify for any of the rebates that supposedly are there for consumers.
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They basically are just payers of the carbon tax itself.
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Liquor tax increases affect hospitality and some in the retail sector.
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We need to make sure that Canadians have dollars to spend in businesses.
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I know that you have obviously called first and foremost for a freeze on these increases.
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Another idea is putting forward a refundable tax credit.
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The freeze would be, in your view, the ideal response, correct?
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Look, our first choice is to put the brakes on the increase that is expected for January 1.
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I'm not optimistic that that's going to happen, only two weeks away from the new year.
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But, you know, that would be the best course of action for the federal government to take.
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But there are ways, even after that, to try to offset these costs.
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Even if they're not going to offset them for average Canadians,
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trying to remove some of the payroll burden on Canadian employers would be helpful.
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And there are ways, through a mix of credits, tax reductions, and other ways,
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that the federal government can come to the aid of small and medium-sized firms.
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You know, we've got all sorts of pressures right now,
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and we need to get a few of them taken off our list.
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Have you found that Christopher Freeland, the finance minister,
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actually hears you out when you've brought these concerns historically?
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Or do you find that the government is just completely detached
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from the reality of what small business owners are facing?
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there was no secret that the finance minister, Bill Borneau,
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did not listen one bit to the concerns of small business owners.
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And that's when the CPP increase plan was first hatched.
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criticism of the federal government alone does not set CPP rates.
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Many provincial governments, including conservative provincial governments,
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supported the increase in the Canada Pension Plan.
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We're trying to convince some of those same governments to put pause, to press pause.
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When the deputy prime minister, when Christy Freeland took the reins in finance,
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she did listen to many of our requests over the course of the pandemic,
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some of the work that we did to try to make sure that there were effective subsidy programs in place for small business.
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And right now, what businesses need is a little bit of relief.
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There was, in the fall economic statement, a plan to reduce credit card processing fees.
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I'm hoping to be speaking to her before the holidays in the next couple of days.
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And we'll be putting this request to her once again to see if small firms can get at least some relief
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from the massive pressures that Otto is imposing right now.
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I wasn't going to go there, but since you mentioned credit card processing fees,
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I don't know if a lot of consumers realize how disruptive those are to businesses.
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You know, the average consumer, of course, thinks that the credit card industry is funded
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through the annual fee that they might pay to get a premium card
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or is funded by the interest that they might pay if they carry a balance on their credit card.
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What they don't know, for the most part, is that every time that card is swiped or chipped,
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the merchant pays a fee somewhere in the range of 1.5% to 2.5% of the sale
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for the courtesy of making that transaction happen.
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That's somewhere in the range of $5 to $10 billion a year that Canadians pay
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that is embedded in the prices of everything that we buy.
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And those fees, sadly, in Canada are among the highest in the world.
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So it is good that the government has talked about finding ways to lower the pressure of these fees
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We're working to make sure that that actually happens,
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putting some ideas forward to government, to Visa, to MasterCard.
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The rewards that, you know, your free trip to Florida that you may never get,
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that's funded by consumers that are paying with cash, paying with debit.
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So it's actually, in many ways, a wealth transfer from low-income Canadians
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that pay with cash and debit to wealthier Canadians that have one of these premium credit cards.
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That's something that I think very few understand.
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Yeah, and I'm guilty of it as well, because don't get me wrong,
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I've got credit cards that, you know, give me AeroPlan points, and I use those things.
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But it's not coming out, like, you know it's not being conjured out of thin air.
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And then that gets passed back to the consumer.
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So we think that a fairer system would be to keep these fees low,
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as is the case in many other countries in the world.
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But it's unfair that the merchant has to pay for the reward schemes,
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the customer loyalty schemes that really do reward the banks
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That's not the way that this is supposed to work.
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So here's, I guess, where we get down to the action item here.
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We're looking at this increase going in January 1st,
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and I think you mentioned earlier that technically there are options after January 1st,
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but this is really the crunch time if there's going to be a freeze,
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most likely, on these increases in premiums, correct?
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And we have a petition on our website right now,
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directed at the federal government and provinces,
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to press pause on the EI and CPP premium increases that are expected,
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Again, I think, you know, one of my observations about Canadians
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between the policies that the government's putting in place
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I get a lot of emails from people who are self-employed.
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You'll certainly see both ends of that as well.
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President of the Canadian Federation of Independent Business.
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Thanks for listening to The Andrew Lawton Show.