By Daniel McHardie
As appeared on page B1
The Liberal government may be forcing the province’s entrepreneurs into closing their doors by slapping a major tax increase on small businesses, says an official with a business lobby group.
Andreea Bourgeois, the New Brunswick director of provincial affairs for the Canadian Federation of Independent Business, issued a stark assessment Tuesday after Finance Minister Victor Boudreau’s first budget, which raised corporate taxes for both small and large companies.
“Some of them will be very badly affected, they will probably downsize and have to let some people go, just because they will not be able to pay for salaries and also pay the taxes that they now have to pay (because of the budget),” Bourgeois said. “And in the end some of them may actually look at closing down the shop.”
The general corporate tax rate is being increased to 13 per cent from 12 per cent, a move intended to generate $17 million in new money for the province.
Small businesses would be hit with tax measures that cost $35 million. The small business tax rate would rise to five per cent from 1.5 per cent and the income threshold drop to $400,000 from $475,000. Bourgeois said many small business owners had budgeted for a previously announced drop of one per cent and will now have to rewrite their financial forecasts.
The CFIB director said the Liberal budget is turning its back on its own self-sufficiency agenda that is calling for higher wages and increased productivity and exports.
“How are you going to achieve this by increasing personal income taxes at all levels and increasing corporate taxes?” she asked. “Who is going to want to come to the province or stay in the province given the fact that we are paying more taxes on the personal front and businesses are taxed more so you fewer chances of being competitive outside of the province.”
The province’s business community was unanimous in its opposition to the proposed tax hikes. David Plante, the New Brunswick vice-president of Canadian Manufacturers and Exporters, said Boudreau’s budget is going in the wrong direction as it tries to portray the province as open for business.
“The increased business taxes is going to raise the question in the minds of investors as to whether we really do want business in New Brunswick,” Plante said.
Ian Munro, director of research for the Atlantic Institute for Market Studies, said the only silver lining in Tuesday’s finance proposals is that the Liberals did not let the books slip into deficit. Even with a $37 million projected surplus, Munro said it appears the tax hikes could have been avoided.
“I think if they had not gone through with this corporate income tax increase, as one example, we could still have posted a budget surplus of around $20 million,” he said. “I know the government wants to be a little bit conservative and build some cushion into these surpluses, but I think they could have scaled that back a bit and also dealt a little bit more on the expenditure side.”
Boudreau told reporters that the $37-million surplus isn’t a lot of money when the government is managing a $6.6-billion budget. The finance minister did offer the business community changes to the Small Business Investor Credit, which is designed to reward investors who put their money in New Brunswick companies.
The three proposed changes include raising the maximum investment for the 30 per cent credit to $80,000 from $50,000, which in turn increases the total credit available to an investor to $24,000 from $15,000.
The government also intends to broaden the type of shares covered in the program to include convertible and preferred shares.
Businesses that qualify for this assistance would be allowed assets worth $40 million, up from $25 million.