House Call with Carol Hughes

There’s a lot we can do to help small business thrive

Jobs created in small- and medium-sized enterprises (SMEs) go a long way to making our communities, provinces and country prosperous, but it isn’t always clear if the support these ventures need to thrive is in the immediate thoughts of the government. While we tend to hear a lot about SMEs during elections, even governments with majorities seem to have a hard time delivering much during their mandates. This is unfortunate since these businesses really are the heartbeat of a vital economy.

The proof for that is in the numbers. In Canada, small businesses create a whopping 78 percent of our new jobs. They account for about 27 percent of Canada’s Gross Domestic Product too. Those are big contributions so it should be no surprise that 98 percent of all Canadian businesses are small businesses with fewer than 100 employees. With that in mind it becomes easier to see why improving the fortunes of SMEs is a perennial election promise grab-bag.

One way to help would be to rein in banks on credit card interchange and merchant fees. Canadians pay among the highest credit card merchant fees in the world with processing costing these businesses between 1.5 percent and four percent of the purchase price. In 2012, that cost retailers $832 million. Combine that with the fact that almost two-thirds of their customers use cards for purchases and it’s clear the banks are really eating into SME profits. In 2013, the Competition Tribunal of Canada found that conditions imposed by VISA and Mastercard were anti-competitive and called on government to regulate the industry. Other countries have successfully regulated credit card merchant fees at a level far lower than Canada’s. Australia at 0.5 percent, the United Kingdom at 0.8 percent, and the European Union at 0.3 percent are three appropriate examples.

Another way to help SMEs is to make it easier to transfer businesses among family members. People might be shocked to learn that it is more beneficial for owners to sell their business to a complete stranger than to a family member. That’s because the difference between the sale price and the original price at time of purchase is considered a dividend. I have spoken to farmers who tell me this is among the biggest reasons farms no  longer stay in the family. New Democrats proposed a solution with a bill that would have ensured a level playing field under which family transfers of small businesses are treated in a similar manner as those to a third party. The idea was supported by the Canadian Federation of Independent Business, but not government who voted it down.

Finally, we can support SMEs with payroll taxation relief. The government promised a youth hiring credit for employers to forego EI premiums for 12 months when they hire a young person (ages 18-24) into a full-time position, but have not implemented this policy. The idea is that this measure would counter the high unemployment rate among young workers and is also timely as business adjusts to minimum wage increases in some provinces. This is a measure that could be implemented quickly that would give employers an incentive to hire more young people.

It is clear that SMEs are driving a good portion of our economy and with a little help they could be contributing even more. These are just a few ways the government could go about providing that assistance. All that is required is the political will to give the concerns of these businesses a place of prominence on the parliamentary agenda.