More local business failures loom without additional aid

Companies clinging to government support life rafts in B.C. send out an early warning S.O.S.

It’s estimated 8,000 businesses closed between February and April in the Metro Vancouver region | Rob Kruyt

About 8,000 Greater Vancouver businesses and 149,000 jobs were lost between February and April due to the COVID-19 pandemic, according to Statistics Canada numbers cited by the Greater Vancouver Board of Trade (GVBOT).

Many more layoffs and permanent businesses closures can be expected, when temporary government support programs wind down and taxes that had been deferred come due at the end of this month, unless the B.C. government extends those programs, say various business associations.

About two-thirds of businesses in B.C. are receiving some form of government support, according to the GVBOT. They expect a “second wave” of layoffs and businesses closures, if those programs end too quickly. A federal wage subsidy, for example, expires at the end of this year.

About 32% of businesses surveyed expect they will have to reduce employee hours once programs end, and 27% expect they will have to lay off employees. One in 10 expect they will have to shut down, either temporarily or permanently.

As part of its $5 billion plan to deal with the pandemic, the provincial government set aside $1.5 billion for a longer-term economic recovery plan. That plan hasn’t been revealed yet, but there is no shortage of ideas for how the money should be spent.

The GVBOT, the BC Chamber of Commerce (BCCC) and the Canadian Federation of Independent Business (CFIB) have all recently published surveys and economic recovery recommendations that urge provincial government action to prevent more business closures and permanent job losses.

The most immediate lifeline would be further deferrals of provincial taxes, according to the CFIB. Forty per cent of small and medium-sized businesses in B.C. say they haven’t paid their provincial tax bills yet, according to a CFIB survey released last week, and one in 10 say they won’t be able to pay by the September 30 deadline.

The new Employer Health Tax, which replaced MSP premiums and shifted the tax burden from employee to employer in many instances, was deferred until the end of September. A carbon tax increase, scheduled to go into effect April 1, was also deferred.

While half of B.C. small businesses have already paid the taxes they owe, the CFIB says one in 10 say they will not have enough cash to cover their bill.

“Many small businesses cannot take the financial hit of paying their tax bill in full because revenues have not returned to normal or their business has not returned to full operation,” said Muriel Protzer, CFIB senior policy analyst for B.C. “A successful economic recovery depends on small businesses having financial flexibility. Partial forgiveness of provincial taxes or an extended deferral due date would help satisfy this.”

The CFIB is asking the province to forgive provincial taxes that were initially deferred, extend the provincial tax due date past September 30 or delay the carbon tax increase beyond September 30.

The B.C. government has agreed to some of the requested deferrals. It announced September 2 that the carbon tax increase will be deferred until April 2021. The government is also extending the quarterly payment dates for the Employer Health Tax. The next quarterly instalment, due this month, has been deferred to January 31, 2021.

But further tax deferrals may be just more triage. According to the GVBOT, longer-lasting tax cuts or reforms are needed to aid in B.C.’s financial recovery.

It recommends a temporary reduction in the provincial sales tax (PST), for example, but stops short of saying what the rate should be or how long it should be reduced.

The PST is 7% on most goods and services, but for hotels – one of the hardest-hit sectors – it’s 8%, which is on top of 3% municipal or regional taxes.

Both the GVBOT and the BCCC are also urging the provincial government to replace the PST with a value-added sales tax.

Among the GVBOT’s recommendations are for the government to lower the PST temporarily, implement a payroll tax holiday and provide a working-capital grant and employee retraining. In the medium and long term, the GVBOT also wants the province to address the housing affordability crisis for the “missing middle.”

“Sixty per cent of the people that we surveyed said they have trouble recruiting and retaining talent due to the high cost of living,” said GVBOT CEO Bridgitte Anderson.

The BCCC, meanwhile, has compiled 54 recommendations for economic recovery. Like the GVBOT, it recommends deferrals or changes to the new Employer Health Tax. It also wants municipal property tax reform to eliminate the “highest and best use” designation for property.

The designation sets property assessment values not on what the property is used for – and therefore what its current market value is – but for what it potentially could be used for, under existing zoning and official community plan bylaws.

Dan Baxter, the BCCC’s director of policy and government relations, cites a single-storey bakery or clothing store as an example. If the zoning and official community plan says a 40-storey tower could be built there, that’s how the property gets assessed.

“That basically takes their tax bill and could double it to triple, depending on how much land lift is there,” Baxter said.

The BCCC also wants the PST on machinery and equipment eliminated, and regulatory fast-tracking of shovel-ready and “shovel-worthy” infrastructure projects.

Anderson said that cutting regulatory red tape could go a long way to stimulating the economy by speeding up infrastructure and other projects.

“In Quebec and Ontario and Alberta, they’ve all made regulatory or legislative changes to quicken the pace of the regulatory process for infrastructure investments,” she said. “We are saying, in our plan, that B.C. should be following their lead so that it’s an expedited process for both public and private projects, while maintaining environmental and safety standards.” 

 =Greater Vancouver Board of Trade 

To help businesses hard-hit by the COVID-19 pandemic, the board of trade is asking for tax and regulatory relief, including:

•lowering the PST temporarily;

•implementing a payroll tax holiday;

•providing a working-capital grant and employee retraining program for small business;

•deferring Workers’ Compensation premium payments;

•encouraging travel in B.C. and Canada by waiving the PST on flights and hotels;

•reviewing existing regulations, deferring new ones and cutting red tape where possible; and

•continuing funding and expand child-care services.

 Canadian Federation of Independent Business 

The CFIB is asking the province for at least one of the following measures:

•forgive provincial taxes that were initially deferred;

•extend the provincial tax due date past September 30; or

•delay the carbon tax increase beyond September 30.

BC Chamber of Commerce 

The BCCC has put forward 54 recommendations for economic recovery, among them:

•defer or change the new Employer Health Tax;

•reform property tax to eliminate the “highest and best use” designation for property;

•eliminate the PST on machinery and equipment eliminated;

•fast-track shovel-ready and “shovel-worthy” infrastructure projects

nbennett@biv.com

@nbennett_biv