Last week, city council approved the 2018 budget, albeit with some heated debate, including a motion to raise the municipal business tax by $10 million, or 15 per cent. While the motion was defeated, it underscores an all-too-familiar refrain from a small minority on council: small business is a cash cow that can be endlessly milked.
It takes major sacrifices to start a business. The vast majority of startup owners don’t draw a paycheque in their first few years. Over 80 per cent of startups are personally financed to get up and running. That typically involves putting not only retirement savings, but often family savings into the business. It can even include re-mortgaging the family home. In the early years, credit cards are sometimes maxed in order to meet the next payroll, or to just keep the lights on.
Once it’s started, running a business is extremely difficult. Across Canada, 30 per cent of all business owners are forced to shut their doors in their first two years of operation. In the first five years, almost half of all businesses fail. Other research has shown only a third of all businesses last a decade.
Those aren’t easy kitchen-table conversations to have. Could you ask your loved ones to put the family savings into a venture which, statistically, has an almost 50 per cent chance of failing within five years?
Despite these risks, small business owners power our economy. There are over 23,000 businesses with employees in Winnipeg; nearly 70 per cent have fewer than 10 employees, while 94 per cent of our businesses have fewer than 50. Across Manitoba, over 70 per cent of all private-sector employment comes from small business. From 2005 to 2015, small business accounted for almost 90 per cent of the 1.2 million private-sector jobs created across Canada.
Without these entrepreneurs and risk-takers, we wouldn’t have a functioning economy. We couldn’t support our communities, our families and our quality of life.
Despite this, some elected officials seem intent on exploring new ways to stymie and penalize small business. The federal government’s proposed business- tax changes are a case in point.
Business owners pay more than their fair share of municipal taxes toward roads, parks, police and fire, transit, water and waste, and more. Businesses aren’t freeloaders; on top of the jobs they create, they are often among the first to help out local charity campaigns and causes.
A recent C.D. Howe report indicates Winnipeg has the highest municipal business tax burden of any large city west of Montreal. A recent Altus Group report shows our commercial property owners pay twice as much in property taxes as residents do. The same report shows Winnipeg was the only city outside of Alberta to see commercial property taxes increase year over year.
We are the only major city in Canada with a municipal business tax, a tax that does not consider one’s ability to pay. That tax raises about $60 million a year for Winnipeg. This was the same tax four councillors were looking to increase by almost 15 per cent. Imagine if your property taxes rose 15 per cent.
Perhaps this is why more Canadians are choosing to forego starting their own businesses. In 1984, the entry rate of new firms as compared to existing firms was at 24 per cent across Canada. Since then, that rate has declined by more than half. In Manitoba alone, the number of annual business starts has declined by almost 12 per cent from 2008 to 2015. Fewer small businesses means fewer jobs, less income and a shrinking tax base to pay for the services we all enjoy.
In the words of the World Bank, "Innovation and entrepreneurship are recognized as key building blocks of competitive and dynamic economies. Countries and regions with vibrant innovation and entrepreneurship ecosystems tend to witness higher productivity rates, leading to increased economic growth and more robust job creation, the main pathways through which the poor can escape poverty." As we all rush to get our holiday shopping done, the Winnipeg Chamber of Commerce encourages you to shop local, and to take the time to thank our local entrepreneurs. Do not, like some indifferent to the plight of small business, take it for granted that these shops will always be there. Nothing is guaranteed in their world, and they could be gone tomorrow, at the cost of our community and the prosperity of hundreds of thousands of Winnipeggers.