Independent business association warns of potentially heightened pain for entrepreneurs as well as employees
In the midst of ongoing economic pain from the COVID-19 pandemic, the Canadian Federation of Independent Business (CFIB) is reiterating its call for a delay to the planned January 1 hike in federal Canada Pension Plan (CPP) premiums.
“Payroll tax increases are bad news for small businesses in any year, but hiking them in 2021 will make the tough months ahead even harder,” CFIB President Dan Kelly said in a statement.
In order to allow for greater CPP benefits in future decades, the federal government has planned seven-year schedule to raise CPP premiums, which would raise workers’ CPP premium rates by 3.8%. The amount of income that would be subject to premiums would also increase by 5.3%, CFIB said, which for workers earning at least $60,000 would result in an over 9% increase in CPP premiums for both the employer and the employee.
“Let's not forget that the premium hike hits employees too, ensuring that every working Canadian will see a drop in their take-home income unless their employer is able to give them a larger raise on January 1,” Kelly said.
Aside from taking dollars-in-hand away from workers, CFIB said the planned CPP hike will crimp businesses’ ability to hire staff – a vital consideration as currently, just 42% of businesses are fully staffed.
CFIB added that the costs of administering payroll taxes, which tend to be more labour-intensive, are also disproportionately burdensome on small businesses. Firms that end 2020 in debt are especially vulnerable considering how payroll taxes must be paid regardless of how profitable – or unprofitable – a business is.
“Given the difficult situation many smaller firms are facing simply trying to hold on to their staff, now is not the time to raise taxes,” Kelly said. “Small firms are counting on the federal and provincial governments to put a temporary freeze on this harmful plan.”
In a letter addressed to the federal government, CFIB called for CPP/QPP premiums, as well as the federal carbon tax, to be held at current levels as small businesses strive to get back on their feet.