www.cfib.ca

Budget 2008Empowering Entrepreneurs

Canadian Federation of Independent Business

January 2008

www.cfib.ca

About CFIB

Result of a tax protest 36 years ago

106,000 members nationally; 1,100 in PEI

Policy stance decided by members; one-member, one-vote

100% member funded

www.cfib.ca

The Power of Entrepreneurs: About more than business

Economic Contributions:

• SMEs employ 2/3 of working Islanders

• SMEs create 60% of new jobs in PEI

• SMEs responsible for 45% of PEI’s GDPSource: Statistics Canada• SMEs contribute time and money to amateur sports, arts and culture, youth activities

• Many roles: volunteers, trainers, parents, activities, leaders Sources: CFIB Building Better Communities Survey, 2005

Social Contributions:

www.cfib.ca

The Power of Entrepreneurs:

Who Canadians respect7.4

7.0

6.4

6.1

5.2

5.2

5.0

4.5

4.5

Farmers

Small businesses

Educ. system/Schools

Healthcare system

Legal system/Courts

Banks

Large companies

Government

Unions

Source: CFIB Small Business, Big Value, 2007

www.cfib.ca

The Power of Entrepreneurs: Who Atlantic Canadians trust to create jobs

59

25

14

4

0 20 40 60 80 100

SMEs

Government

Multi-nationals

Don't know

Source: Leger Marketing, Confidence in Canadians on Job Creation and Social Responsibilities, May 2005 N=1,502

www.cfib.ca

Empowering Entrepreneurs: Budget 07/08What SMEs liked from 07/08 budget Increase in basic personal exemption & personal income

tax brackets Decrease in the small business corporate tax rate

Concerns from 07/08 budget Deficit Increase in spending No commitment to reducing red tape Freeze in residential property tax assessments until 2010

www.cfib.ca

Empowering Entrepreneurs: What SMEs are looking for in 08/09

Balanced budget Spending restraint Balanced budget legislation

Tax reductions Personal income taxes (BPE, Indexation) Small Business corporate rate

Red tape Measurement Commitment to reduce

www.cfib.ca

Empowering Entrepreneurs:Fiscal responsibility 73% say that balancing the budget is

important to their business

79% support balanced budget legislation

Measures to balance the budget: Reduce the size of government- 85%

Reduce program spending- 22%

Reduce capital spending- 13%

www.cfib.ca

Government spending increased by 64% in last 10 years

Inflation increased by 27% over that same time

Empowering Entrepreneurs: Spending restraint?

1997 1999 2001 2003 2005 2007Year

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Spending (64%)

Inflation (27%)

Population Growth (2%)

www.cfib.ca

Empowering Entrepreneurs:Fiscal responsibilityMember Comments:

“Stop government waste”

“Improve efficiency”

“Reduce government loans to large corporations and companies that are high risk”

“Stop direct competition with private sector”

www.cfib.ca

Empowering Entrepreneurs:Tax reduction priorities Reduce personal income taxes

Increase basic personal exemption

Index BPE & PIT brackets with inflation

Reduce small business corporate tax rates & increase threshold

Reduce fees for permits and licenses

Reduce fuel taxes Diesel fuel

www.cfib.ca

Basic Personal Exemption by Province, 2007

Source: Federal and Provincial Government websites

$14,523

$9,600

$9,330

$8,676

$8,553

$8,404

$8,239

$7,634

$7,560

$7,484

$7,481

$0$2,000

$4,000$6,000

$8,000$10,000

$12,000$14,000

$16,000

Alberta

FEDERAL

Quebec

BC

Ontario

Saskatchewan

New Brunswick

Manitoba

PEI

Nfld/Lab

Nova Scotia

www.cfib.ca

Empowering Entrepreneurs:Business Tax Load

NB NS NL PEI0

20

40

60

80

100

120

Provincial Average = 100%

49%

61% 63%

104%

Comparison of Provincial Business Tax Load(Atlantic Canada, Indexed to National Provincial Average at 100%)

Source: Saskatchewan Business Tax Review Committee, Nov. 2005

www.cfib.ca

Empowering Entrepreneurs:How tax savings would be spent

Invest in new equipment

Increase employee wages

Pay down debt

Source: CFIB Mandate 227 Survey on Tax Competitiveness

6861 57

0

10

20

30

40

50

60

70

Per

cen

t

Invest in newequipment

Increase wages Pay down debt

www.cfib.ca

Empowering Entrepreneurs:Harmonizing sales taxes 52% say harmonizing sales taxes is important;

38% not important & 10% don’t know

80% say full input credits are important 11% not important & 10% don’t know

66% say PST is the most harmful provincial regulation

75% say sales taxes are affecting their growth

www.cfib.ca

Empowering Entrepreneurs: Reducing Red Tape

Cost of complying with regulations in PEI totals $102.3 million each year

Compliance costs are highest for the smallest businesses Regulations cost a typical Island firm (fewer

than 4 employees) $5,360 annually

www.cfib.ca

Empowering Entrepreneurs: Reducing Red Tape

73% are calling on government to publicly report regulatory burden on businesses

70% support setting targets for red tape reductions

59% support legislation that would restrict the introduction of new rules & regulations

www.cfib.ca

Empowering Entrepreneurs:Reducing Red Tape Keys to successful reform:

Measurement

Public Reporting

Targets for reductions

Improve communication & customer service

www.cfib.ca

Empowering Entrepreneurs:Reducing Red Tape PST is the most harmful regulation for

Island Businesses

Difficulties with PST system 2 systems (GST & PST) vs. 1 system (HST)

Clarity of regulations

Burden of regulations

Administration costs

www.cfib.ca

Crib- PST

Mattress-

Exempt

Blanket- ExemptSheet

s- Exem

pt

Lotion-

PST

Powder-

Exempt

Oil- Exempt

Cloth diape

rs- Exem

pt

Disposable

diapers- PST

Wipes-

PST

Wash cloths-

PSTChange Pad- PST

Bumper Pad- PST

PST Complexity

www.cfib.ca

1. Fiscal responsibility / spending controls Introduce balanced budget legislation

Adopt a debt-reduction strategy

2. Multi-year tax plan: Introduce indexation of BPE and PIT brackets

Reduce small business rate; increase threshold

Reduce provincial portion of fuel tax

3. Introduce taxpayer protection legislation

Empowering Entrepreneurs: Budget Recommendations

www.cfib.ca

4. Greater accountability on user fee increases

5. Commit to measure and reduce regulatory burden

6. Introduce legislation that would restrict the introduction of new rules and regulation

7. Improve budget day process Lock- up for stakeholders

Access to budget documents and finance officials

Empowering Entrepreneurs: Budget Recommendations