The Winnipeg Chamber: How does the fact your customers are owners change how you operate?
Nigel Mohammed: As a financial cooperative, ACU employees recognize that we are ultimately accountable to the 120,000 Manitobans who own our credit union together. Understanding that they are our member-owners serves to underscore the importance of providing trusted advice, access to adequate and appropriate credit, competitive financing and investment offerings, exceptional member service, and ensuring bottom line profitability of the credit union to better respond to member and community needs. Our credit union success is measured by our members’ success.
WC: Can you dive into your commitment to be “socially, environmentally, and ethically responsible” in your practices? How has that influenced your choices?
NM: It starts by making sure you have people in the organization (from board to management to employees) who are aligned with our vision of “a world where financial services in local communities contribute to a sustainable future for all.” Then you integrate this commitment into your policies, strategies, and targets and hold yourselves accountable for results on all measures – financial strength, social impact, members, employees, and environment.
For example, we’ve worked together as employees to reduce our GHG emissions by 56 per cent since 2012. We operate branches in communities that have been abandoned by all the banks, like Winnipeg’s North End. We provide over $85 million in financing towards affordable housing initiatives to create homes for over 3,100 of our most vulnerable neighbours. We provide ethical investment fund options so our members can put their money to work in a way that aligns with their values, and we focus our purchasing power as a credit union in a way that also aligns with our vision. And at the same time we were ranked one of the top financial institutions in Canada for member service, while also winning a 2018 Top Employer Award here in Manitoba.
It is about being financially strong so we can provide world-class service and advice to the local owners of our credit union, while making sure we are doing our part to have a positive impact on the environment we all share, and doing our part to reduce poverty and create social and economic inclusion for all in our community.
WC: Finance is one of the most rapidly changing sectors in the world. What are you doing to keep up with evolutions in fintech and cryptocurrency?
NM: As an organization we continuously review and assess new market entrants and changes in technology. Rapid technological change is impacting the way banking is being done, and we need and want to provide our members the most convenient ways to continue to do business with us.
This constant evolution means we need to be responsible and efficient with our technology investments. We view the fintech space as an opportunity to leverage those investments to ensure we are providing effective solutions for our members. With respect to cryptocurrencies, this is an area we are monitoring with a particular focus on research and pilots related to blockchain/distributed ledger technology. We work closely with our Credit Union peers and partners at a local and national level to leverage economies of scale while also looking internally as to how we can most effectively deliver services to our members.
We know technology will continue to evolve our business model and we have multiple ongoing strategic initiatives that - at their core - are focused on how we can use technology to better serve our members.
WC: As an organization that helps people manage their finances, what’s your view on the current debt load Canadians have? What tools do you provide to help people manage their finances better?
NM: The current debt load carried by Canadians is at an all-time high and is concerning for both individuals and businesses, questioning how long it can be sustained. At ACU, we provide our members with MoneyFit.
MoneyFit is a simple, convenient and easy-to-understand set of tools that supports and guides our advisors through the collection and analysis of their members’ personal financial information. MoneyFit also helps our advisors present their findings to our members in such a way that they:
WC: What should attendees expect at the Member MeetUp on April 25?
NM: Chamber members can expect to hear an overview of banking solutions available through ACU’s Business and Community Financial Centres that support the success of local businesses and non-profit organizations. We look forward to welcoming all in attendance and sharing what ACU has to offer.
Yesterday the federal Finance Minister released his much anticipated third budget. While there are many details to pore over, two things jump out: more deficits, and a lack of focus on our country’s competitiveness.
The federal budget deficit is scheduled to increase from $17.8 billion in 2016-2017 to $19.4 billion this fiscal year, a nine per cent increase. Budget forecasting documents only go out to the year 2022-2023, when the government projects an over $12 billion deficit. Over that time almost $100 billion will be added to the federal debt.
Those budget numbers also assume our economy will experience real GDP growth of 2.0 per cent a year from 2017 through 2022. Given the fact we are entering the tenth year of economic expansion, many (myself included) find those growth projections overly optimistic... and a recession would blow a huge hole in those deficit numbers...
Every 0.1 per cent decrease in annual GDP growth leads to an increase in the federal deficit of around $500 million. Given this is already one of the longest periods of economic expansion on record, continued straight-line GDP growth for five more years seems unlikely.
Irrespective of a recession, our economy is facing considerable uncertainty brought on by NAFTA renegotiations. The Bank of Canada has already said they are projecting this uncertainty will reduce investment and export growth. The longer those negotiations drag on, the greater the damage.
A rainy day will undoubtedly come at some point, and our government is choosing to not pack an umbrella.
On the taxation side, this federal budget left a lot to be desired. With the U.S recently increasing their competitiveness by reforming their tax system, our federal government instead chose to sit on their hands.
Nothing in the budget responds to the U.S tax moves; just a promise Finance Canada will analyze them. The government also doesn’t step back from their growth-inhibiting small business tax changes. More information on these measures were provided in this budget. They include a phasing out of the small business deduction on passive income earned above the $50,000 threshold. As companies earn above that threshold in a year from passive investments, a straight-line reduction of $5 for every $1 of income will take place. This means companies earning over $150,000 in passive income will lose out on access to the small business tax rate.
While at least the small business tax changes are clearer now, they still move our tax code in the wrong direction. What is urgently needed is a review of our entire taxation system so it best encourages growth and prosperity. We can no longer tweak on the edges - a comprehensive review is needed urgently.
On a positive note for business, the budget commits $11.5 million over the next three years to pursue targeted regulatory reforms with the goal of making our regulatory system “more agile, transparent and responsive.” These measures should help reduce regulations that inhibit business innovation.
Further to reducing red tape, the federal government is planning to reduce the current number of business innovation programs by up to two-thirds. The current 92 different business innovation programs buried across departments represent a virtual maze for entrepreneurs to navigate. Funding won’t decrease, so simplifying and streamlining programming is a positive step.
Locally, the budget includes a commitment to introduce legislation to enable Western Economic Diversification to collaborate more effectively with provinces. With our provincial government currently developing an economic development strategy, the timing couldn’t be better. The more both levels of government collaborate in this area, the more effective business programming we will see.
The budget also makes commitments to improve female entrepreneurship and workforce participation. If successful, those steps could also provide additional economic growth. Improving the Working Income Tax Benefit and making further investments to create a new Indigenous skills and training strategy are both positive steps forward.
On the whole, however, this federal budget doesn’t go far enough to address the competitiveness challenges we face. It continues to strain the government credit card with no end in sight.
Challenges are on the horizon. This federal budget doesn’t go far enough to address them.
If you’re like many small businesses these days, you might wonder how else you can save money after what may have already been a belt tightening year. According to Troy Vosseler, co-founder of Gener8tor, a concierge Startup accelerator in Wisconsin, getting your employees involved can be a big help in saving the company money. Here are a few tips he shares on engaging your team in the budgeting process:
Be transparent. Share the business plan and the financial picture so employees know what’s coming in, what’s going out and how it all comes together. Show employees they have role in the business’s success and update them regularly on the company’s progress.
Be a role model. Employees take their cues from the top, so model responsible spending behaviour, whether it’s spending on travel or buying new software.
Ask for ideas. Lead brainstorming sessions with your staff on how everyone can cut costs. Not only will you potentially hear some innovative ideas, but you’ll be creating buy-in, a great way to incent your staff to cut back on the expenses they incur.
If you’re wondering what your business can do to save money in the upcoming year, consider some of these cost-savings ideas:
Cutting costs may not be any business owner’s favourite activity, but it is one area in which you have some control. And chances are once you incorporate a few cost-savings measures in your office, you’ll be wondering why it took you this long to change your previous, less efficient ways.
The RFPQ is looking to short-list investment management organizations to then partner on a future request for proposals that would improve access to capital through the establishment of at least one fund. The RFI closes on March 8, and the RFQ closes on March 22. This venture capital work will support the development of the province’s new economic development strategy. Payworks CEO Barb Gamey and former Winnipeg Chamber President and CEO Dave Angus are co-chairing the development of the new provincial economic development strategy.
According to the Canadian Venture Capital and Private Equity Association, of the 431 venture capital deals made across Canada in the first three quarters of 2017, only 2 were in Manitoba. We did slightly better on the private equity side, but still only account for less than 2 per cent of all deals done in Canada. As recently as 2014, Manitoba tied PEI as the worst provincial performer in this area, with zero venture capital investment.
Capital is essential to business success. A lack of capital causes businesses to hit a growth wall. In a 2015 survey of the local business community, two-thirds of respondents cited “significant challenges with finding growth capital” as a barrier to growth. The recent announcement was the first concrete step by government to address this long-standing issue.
While this announcement was a step in the right direction, we can’t pretend the creation of one fund will fix the problem. A holistic access to capital strategy is needed that identifies all stages of capital financing, current capital availability, and local gaps along the entire capital continuum (idea, incubator, angels, and venture capital).
Without a proper strategy and framework in place, a fund can only fix part of the capital crunch Manitoba businesses face.
The Winnipeg Chamber: What's your elevator-pitch of a "pollinator" business?
Michael Shuman: A pollinator is a self-financing economic development program. Rather than ask City Council for $100,000 to launch a “buy local” campaign, a pollinator approach might seek to start a local loyalty card. Pollinators enable economic development to accomplish more for less money.
WC: Winnipeg and Manitoba are particularly dependent on cross-border trade. Does the economic shift you're suggesting lower the dependence on trade, particularly as we observe fraught NAFTA negotiations?
MS: Trade only makes sense when you cannot produce goods and services cost-effectively for yourself, and local economic development helps a community identify all the opportunities for cost-effective import substitution.
The goal is not disengaging from trade, however, but to improve the value-adding character of trade. As the late Jane Jacobs argued, an economic strategy promoting import-substituting businesses turns out to be the best way to develop exports.
Suppose North Dakota wished to replace imports of electricity with local wind-electricity generators. Once it built windmills, it would be self-reliant on electricity but dependent on outside supplies of windmills. If it set up its own windmill industry, it would then become dependent on outside supplies of machine parts and metal.
This process of substitution never ends, but it does leave North Dakota with several new industries – in electricity, windmills, machines parts, and metal fabrication – that are poised to meet not only local needs but also export markets. But instead of putting all of a community’s enterprise eggs in one export-oriented basket that leaves the local economy vulnerable to fluctuating global markets, import substitution develops myriad small businesses, grounded (initially at least) in diversified local markets, many of which then becoming exporters.
WC: There's a lot of rhetoric from the Trump administration on keeping jobs in America, particularly in manufacturing. Are they supportive (as much as a federal government can be) of the shift to local economies that you advocate for?
The Trump Administration’s policies are, frankly, a work in progress, filled with contradictions, and its trade policies are particularly immature. There’s also been no significant local economy piece of legislation or policy making that the Administration thus far has put forward or opposed.
But I’ve personally had conversations with many people in the government who see potential synergy with the local economy movement. Local First is just a more specific variant to America First. Entrepreneurship is favoured more by Republicans than Democrats. And there’s growing interest throughout government to apply recently legalized tools for grassroots investing to support local businesses.
WC: We often hear from our business members that lack of access to capital is a critical roadblock. Can you point to any examples of regions who made big strides in improving access? How did they do it?
MS: I would point to three Canadian provinces that have made significant strides: Alberta, through investment cooperatives; Nova Scotia, through Community Economic Development Investment Funds (CEDIFs), and New Brunswick (which now gives local investors a 50% provincial tax credit for investments over $1,000).
WC: What question do you wish audiences would ask you?
MS: What would it take to convince you to become a Canadian citizen?
Few issues matter more than the provincial budget in shaping the health, happiness and quality of life of Manitobans. It impacts every citizen, every business and every community in Manitoba.
It's our privilege to speak on behalf of our 2,100 member organizations on issues that shape community prosperity. When the government put out the call for input - and we applaud their track record of wide consultations - we provided the following key points (and our detailed submission) on how Manitoba can achieve its full potential.
1. Establish a tax commission to improve the tax system
Manitoba’s tax system has been without a comprehensive review for 18 years. A lot has changed in that time period, and our tax system doesn’t account for things such as the sharing economy. We recommend the development of a commission to establish a fairer, simpler and more competitive tax system.
2. Outline your plan to reduce the deficit
Manitoba can improve its credit rating and economic outlook by outlining a plan to get the deficit under control. A summary loss of $764 million this past year is an improvement, but Manitoba remains one of only two provinces that doesn’t have a firm timeline for getting back to balance.
3. Enable better access to capital and labour
To improve economic performance, we need to improve investment conditions, including access to a skilled and highly qualified workforce. A made-in-Manitoba access to capital strategy will encourage new investment into the Province. As recently as 2014, Manitoba tied PEI as the worst provincial performer in this area, with zero venture capital investment.
4. Improve value for money in government services
Manitobans consistently expect better value-for-money from our government while balancing demands for improved social outcomes and service delivery. The Chamber appreciates the value-for-money audit that has been undertaken and the initial steps toward developing social impact bonds in Manitoba, we also hope the government explores unique opportunities to innovate service delivery models.
5. Civic Partnership
The City of Winnipeg is also facing significant fiscal challenges, and unlike the Province of Manitoba, they have to balance their budget each year. Without revenue increases, the estimated gap between total expenditures and revenue could be as high as $400 million by 2027 for the City of Winnipeg, and that doesn’t account for the infrastructure deficit. With both governments facing fiscal challenges, a strong partnership is needed.
6. Carbon Price Revenue
The Winnipeg Chamber of Commerce applauds the Province for their Made-in-Manitoba Climate and Green Plan, as opposed to the federal one size fits all system. Regardless of pricing levels, any revenues raised must not go to debt or deficit reduction, or into general revenue. Carbon pricing revenues must go to help offset the increased costs on low-income Manitobans and towards initiatives that will lower our greenhouse gas emissions.
In late 2017 Finance Canada released their long term economic and fiscal updates for the country. The report forecasts how Canada’s economy will do up until 2055-2056, as well how the federal government’s finances will look.
The report forecasts deficits for the federal government until 2045-2046, or another 28 years. While that number is headline grabbing, it is important to recognize that assumes relatively modest growth scenarios. If the government based their projections on the four highest forecasts for GDP growth, the federal books will achieve a $3.9 billion surplus in 2023-2024. However if the lowest four forecasts are used, the federal governments books won’t be balanced until the mid-2050’s.
Higher debt levels make everyone, not just governments, more susceptible to economic downturns. We have been in a period of (albeit slow) economic expansion since 2008, one of the longest stretches on record. Inevitably this will change at some point, and typically governments borrow heavily during economic downturns to help stimulate the economy. This goes for governments of all colours. Coming out of the last recession in 2010 for example, the Canadian government posted a record deficit of over $55 billion.
All that debt has a carrying cost. Interest payments on the federal government’s debt total around $25 billion a year. That money can’t go to fixing roads, building schools or to enhancements in our healthcare system. It also can’t go to cutting taxes, as federal debt servicing costs are roughly equal to 80% of what the goods and service tax (GST) takes in!
As well with interest rates expected to rise further in 2018, the carrying cost of all that debt will most likely increase as well.
Compounding matters on the government side, is the rapid spending growth forecasted in the future to deal with an aging population. Seniors require more health care typically, as well we can expect Old Age Security (OAS) payments to balloon over the next several decades. Today’s report from Finance Canada forecasts federal spending to more than double in the two decades from 2026 to 2046, increases of around 5.25% a year on an annual basis.
This forecast extends decades into the future and will undoubtedly change over time. What we do know for certain is that more debt results in more tax dollars being spent to service it, and for that we should all be concerned. With pressures on the horizon, a stronger timeline is needed to get the federal government’s books back to balance.
In a recent survey of 1,000 Manitobans conducted by Probe Research, 75 per cent of respondents support conducting a comprehensive, system-wide review of Manitoba’s tax system.
The last time our tax system was reviewed in Manitoba was close to 20 years ago – a lot has changed since then, says Loren Remillard, President and CEO of The Winnipeg Chamber of Commerce, who commissioned the survey.
“These results clearly show Manitobans believe the time for tweaking is over and a deeper dive into the entire system is required,” notes Remillard. “Not only that, but the results are remarkably similar regardless of a respondent’s gender, age, education, income, place of residence and even their voting intentions.”
The survey accompanies The Winnipeg Chamber’s annual budget submission to the Province of Manitoba. Since 2016 The Chamber has advocated for a tax reform commission, and it is the primary recommendation for the 2018 Provincial Budget. The Chamber’s primary recommendation to the province is to form a commission that will make recommendations to reform our tax system. In addition, The Chamber calls on the Province to develop strategies to foster access to capital and skilled labour, as well as for the Province to clearly outline its plan to eliminate the deficit.
“With carbon taxes coming in 2018 and the promised PST cut on the horizon, now is the opportune time to look at our tax system,” added Remillard. “A fairer, simpler and more competitive tax system is in the best interests of all Manitobans. Our competitors are making changes to their tax system to improve competitiveness and we can’t sit by idly.”
With a sample of 1,000, one can say with 95 percent certainty that the results are (plus or minus) within 3.1 percentage points of what they would have been if the entire adult population of Manitoba had been surveyed.
With increased access to tax software and information, more Canadians are opting to prepare their own or their family’s personal tax returns. If you’re one of those individuals it’s important to update your knowledge of any annual changes in order to carry out the process correctly, as well, learn what opportunities may exist with each return’s unique set of circumstances.
Here is a brief checklist of questions to ask yourself before preparing a tax return this season:
How Talbot & Associates, Chartered Professional Accountants & Consulting Services can assist
Talbot & Associates has been serving clients for over 25 years with personal and business accounting services and professional consultation.
For those who’d like to learn the ins and outs of preparing a personal tax return, T&A is hosting its annual Personal Tax Preparation Workshop this Jan/Feb (6 classes Tues/Thurs Jan 23 – Feb 8) at the T&A Training Centre at 3553 Pembina Highway.
Participants will learn many tips on tax planning and how to prepare simple tax return or more complex ones with a business, rental or farm schedule.
Learn more here