Canada’s small and medium-sized businesses (SMEs) have a slightly different view from government about the recently-announced proposed changes to the Canada Pension Plan (CPP).
A survey by the Canadian Federation of Independent Business (CFIB) has found that the majority of SMEs across Canada believe the increases in CPP, which provincial finance ministers characterized as modest, are not modest and will make it more difficult for them to grow their businesses and cope with other increases in taxes and costs.
“Try growing a business and creating jobs in a tough economy with the constant threat of carbon taxes, minimum wage hikes and other new costs, then add seven straight years of CPP increases,” says Dan Kelly, CFIB president. “A full 80 per cent of small business owners say that increases in CPP contributions will make it much more difficult for them to cope with other tax increases and increased costs.”
The CFIB believes the CPP expansion will be doubly damaging for many employers and their employees because it not only increases the rate of contributions but it also raises the threshold on income that was previously exempted from contributions.
Starting in 2019, employer and employee premiums will increase from the current 4.95 per cent of earnings to 5.95 per cent in 2023.
Under the new plan CPP contributions will be deducted on income up to a threshold of $82,700. Previously the threshold was a maximum of $54,900 of a person’s income that was subject to mandatory CPP contributions.
The new plan aims to replace 33 per cent of workers’ income up to the higher ceiling, up from 25 per cent of earnings under the current plan.
SMEs play a vital role in the Canadian economy. Roughly 15 per cent of Canadians, for example, are self-employed and one in three people in the country own or work in a small business. Mid-size and large private enterprises account for almost half of total employment in the country.
The CFIB survey showed overwhelming support by entrepreneurs for pubic consultations on the CPP changes and the opportunity to have their views heard on the matter.
“We commend the British Columbia government for joining Quebec in consulting with the public prior to finalizing any plan to raise CPP premiums,” Kelly says. “After all, the 2016 federal budget promised to launch consultations to give Canadians an opportunity to share their views on enhancing the CPP.”
The CFIB says a recent public opinion poll and its member survey found that expansion of the CPP is not the favoured choice of Canadians for retirement savings. If given a choice, small business owners and employees would prefer Registered Retirement Savings Plans (RRSPs), Tax Free Savings Accounts (TFSAs) and personal investments for their retirement over mandated CPP increases.
Over one third of employed Canadians believe the increases will reduce their ability to spend on essential goods and services and two thirds of small business owners say they will face increased pressure to freeze or cut workers’ salaries.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
Copyright 2016 Talbot Boggs