Some think that taxing business could be the solution to raising government revenue. They believe that taxing business can bring in significant revenue without a significant effect on people, and without causing harm to the economy.
But this theory is flawed and will have many consequences, for businesses, for people, and for the economy.
Many people tend to regard businesses only in terms of gigantic multinational corporations. We know this isn’t the case, but we often forget about the huge number of small or medium businesses that contribute to the Canadian economy.
According to Industry Canada’s Key Small Business Statistics, as of 2012, small businesses made up 98 per cent of businesses in Canada, and were responsible for 48 per cent of employment.
A more glaring figure is that less than one in 10 small businesses earn enough money to be viable. Out of 100,000 new small businesses created in a year, only around 9,000 survive.
So when we decide to tax business, or “get tough on greedy business”, we need to remember the small businesses as well, and the huge number of Canadians who have spent so much time and effort to build their business.
Business tax rates will affect their employment levels, their ability to grow, and make it harder for new businesses to start. Before levying any taxes on business, we need to remember which businesses are hit hardest — the small ones.
Consumers are also hurt by this policy. Businesses will respond by increased taxes by increasing prices, especially smaller businesses with low profit margins. Sometimes, they must increase prices further than consumers are willing to pay, leading to the end of their business. Consumers are then left with even less options when choosing who to buy from and what to buy. When we tax business, the consumer also pays.
Finally, how does taxing business effect the economy as a whole? It’ll reduce the growth of business, with more unemployment and slower economic growth as a result.
I don’t believe in a “holy grail” tax policy because there’ll always be some negative effects no matter the tax. But, a tax on business can have one of the most direct negative consequences on our economy. It’ll also have hidden, indirect consequences on all of us. I believe we must carefully consider the effects of the business tax before expanding it. Instead, I’d go as far as to say that reducing business tax, when practical, would be a preferred course of action. This would benefit everyone, from businesses big and small, to the average Canadian, and by extension, our whole economy.