Reclassification of small resorts tax misguided

There is deep wisdom to be gleaned from the fables that were a staple for pre-MTV generations and when it comes to governments and taxation the one cautionary tale that springs most handily to mind is that of the Golden Goose.

For those not familiar with Aesop’s fable number 87, or the numerous variants to be found in the folktales of most cultures across the globe, the story of the Golden Goose revolves around a wondrous bird that regularly laid eggs of gold.

The golden eggs provide a solid income for the normally struggling farmer and his family, but convinced that a massive nugget must lie within the goose, they cut the hapless creature open only to discover that the magical creature’s inner workings were no different from those of normal geese and that in killing their feathered benefactor they had destroyed their sinecure.

In a puzzling move, the Canada Revenue Agency determined that small resorts, those with less than five year round employees, are really just rental agencies, and therefore not worthy of the tax breaks that small businesses enjoy. Everyone can make a mistake, however, and following a huge outcry the CRA decided to review their decision. It is even more puzzling that the agency has recently completed that review and decided to take the axe to hundreds of small resort owners across the nation. Somehow the bureaucrats in the Revenue department seem to believe that there is “gold in them thar’ innards” and thus CRA intends to claw three year’s worth of back taxes based on the reclassification of small resorts as rental agencies, resulting in a massive tax hit for many operators.

That decision will be the death knell of many small resort operators, particularly in regions such as Northern Ontario, where those resorts are more likely to be small mom and pop operations, eking out a living with less than five full-time employees, and which operate only during the short summer season.

This hit comes on the heels of another tax implication that was imposed by the Municipal Property Assessment Corporation a number of years ago when it chose to reassess trailer parks on the basis that some of the trailers in those parks are permanent dwellings, due to large attached decks and so-called Florida rooms, add-on structures attached to trailers. While this might seem fair to some municipalities who saw the assessments on those resorts rise, it was patently unfair to the resort owners who received the bill. Told they could simply pass the cost on to their customers, resort owners were left scratching their heads as to how much and to which trailers those increased assessments should be assigned.

Faced with escalating energy costs, the rising cost of employees and maintenance construction costs, an industry still reeling from a massive decrease in tourism linked to a high Canadian dollar and the decision to no longer market tourism products into the US, our largest market for tourism dollars, the challenges facing small resort owners from all levels of governments and their agencies have battered the tourism industry in the North with a death from a thousand cuts.

Be it the unreasonable timelines imposed by the Technical Standards and Safety Authority on small marina operators and Northern gas stations (where the result has too often been the closure of the only gas station in many small communities), then a kneejerk reaction imposition of draconian propane filling regulations due to a southern company not following the existing rules or arbitrary tax decisions on small resorts, the result has been a steady loss of employment in some of the most challenged regions of the country and a cascading erosion of the quality of life in the North.

When small businesses across the North are forced to shutter their operations when they are not able to pay the taxman, it does not take an advanced degree in economics or business to project the inevitable impact on the public purse, as it suffers the loss of the taxes paid by not only small resort owners, but also a loss of revenue from the thousands of seasonal employees (often more than five employees per resort, but rarely the full time equivalent due to the short seasons in the North) that will be thrown out of work.

It is long past due for governments to remove the urban-coloured glasses worn by bureaucracies and begin to govern for all Canadians because if the little geese prosper and grow, more golden eggs will inevitably flow—otherwise, the government will find itself with nothing to show for its efforts than one big goose egg.