Tough times for small biz in NB

I have been researching lately a few trends among SMEs in Canada and actually was quite shocked to uncover a few facts which will undoubtedly not make in into the public discourse during the election in New Brunswick but which probably should.

First, as the chart below shows (sorry for the small size), New Brunswick’s small business segment has taken a thumping since 2000. The number of businesses with 1-9 employees is down 8%, the same decline for businesses with 10-19 employees and a 3% decline in businesses with 20-49 employees. Only PEI has faired worse.

This is an important statistic for three reasons:

1) The NB government cut off a variety of support programs for small business when the Tories came into power and made some cuts to the small business tax rate. The Mike Harrisian theory says that if you want small business to grow, cut their tax and reduce red tape.

Nope. Not in New Brunswick. Note to Tories: If you want the small biz vote, you had better tweak your approach.

2. Another point I have made on numerous occassions. Small businesses don’t pay any real corporate tax and never have. The entire tax cuts to small business were estimated to only take out a few million dollars from the tax coffers of the province. I think at the time it worked out to about the cost of a cup of coffee per day per small business. Therefore, cutting their corporate tax rate was another PR effort.

3) Thirdly, I have a theory that small business growth is tied to overall economic growth. I base this on the fact that the small business retention and growth rate in Ontario has always been far above New Brunswick’s even though they have had much fewer economic supports for small business. My logic here is simple, 95% of all small businesses exist to service their local market (restaurants, hair dressers, consultants, corner stores, franchises, etc., etc, etc.) and their growth is dependent on the overall growth of the community rather than tweaking a tax rate. For example, bringing 7,000 call centre jobs into Moncton (like it or not) brought it something like $350 million in new payroll spending – which is enough business for hundreds of small businesses.

However, my logic here is strained as the government of New Brunswick spends $2 billion more per year in New Brunswick now than in 1999 and the small business sector still shrunk.

I’ll leave it to economists to work this one out.

But I can’t leave you without another interesting small biz stat that I came across this week. I have been looking at Statistics Canada’s income data which comes from income tax forms.

In 1999, there were 44,140 people that claimed ‘self-employment’ income on their tax forms.

In 2003, that number had dropped to 42,180 – a drop of 4.5%. In Canada as a whole the number of people reporting self-employment income increased by 1%.

Average self-employment income reported by NBers increased by 7% from 1999-2003 – one third the increase from regular employment income. Across Canada, the average self-employment income increased by over double the NB rate.

What the decline in small businesses and the tepid growth in average self-employment income (below inflation) tell us is that it’s becoming a lot harder to be a small business in New Brunswick in the past five years.

But, the election messaging on this will be simple.

Lowest small busines tax rate in Canada! Red tape reduction! Wow!

Things are always the same as what you read in the papers, folks.

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0 Responses to Tough times for small biz in NB

  1. Anonymous says:

    Sorry, there’s really nothing that needs to be added here, I just wanted to know if somebody can get me a picture of Al Hogan’s hummer. That would be great on another persons blog.

  2. MonctonLandlord says:

    On the topic of small business…

    95% of all small businesses exist to service their local market … and their growth is dependent on the overall growth of the community

    Why is there only 3 or 4 corner stores in Dieppe?

    I think the government should cut the Provincial Property Tax on Commercial properties, municipal taxes are already and justifiably an annual operating expense. Us landlords, are not tempted to renovate, or build new buildings. (And of course my theory, is that someone who would like to build a new corner store in Dieppe, say a $250k building, would pay extra taxes (above the regular municipal property tax) since it is commercial (this does not exists in any other province…)

    So the “new” potential corner store in Dieppe, must remit an extra 0.0152% annually so on a $250k building this would be $3800 extra… paid to GNB coffers.

    Again this is not the case in other provinces, and maybe there are more corner stores per capita elsewhere.

    (or in DC’s lingo, a reduction in Small Buisnesses in NB of 8%).

    You must have heard the news today, that B. Lord has annonced a new programme to reward the building owners wishing to renovate their buildings, why not just cut the tax he collects from the building owners? Much simpler, more fair, and at the end of the day, the owners would have more cash flow to make their own call on when to renovate or when to build a new corner store.

    The political scene in the province is so far behind, we need help, can we find it from within? Doesn’t matter. But since this blog likes stats, you may remember last election, when it took a long time to reveal the cabinet, sources say that there were very weak (speaking of résumé – education and experience) of the elected, that it was very difficult to determine Ministers.

    Well, for fun, at the time, I remember browsing through the bios on the new cabinet, and could help but notice that less then half had listed any post-secondary education in their bios. So let me get this straight, to have a basic job at GNB, say a Project Executive, you need a post-secondary degree, yet the Minister might not even have qualified for a basic officers’ job. Someone help, we need candidates with a good mix of experience and education. From within? hopefully…

  3. Anonymous says:

    That’s really interesting, not to be unkind, but I remember seeing a photo and feeling guilty because my first thought was “boy, they look like a bunch of idiots”.

    The other side of that is when the minister isn’t educated, they are more likely to simply kowtow to the bureaucrats underneath. Typically bureaucrats are similarly ‘educated’, namely, getting their jobs right out of university and never having worked in the private sector.

    I should admit that I recall similar experiences with university professors. I worked for several who had spent their lives in business then took a few courses at UNB and commented on what idiots the profs were.

    I can still vividly remember this group of MBA’s who had bought the clock making and selling company in Maugerville. THey were the last clock assembly plant in Canada, family run for generations. These guys had a whole big marketing presentation, and lo and behold, they were out of business in two years.

  4. Anonymous says:

    My dad was a landlord of a duplex, the only way it made any money was because he was working and the investment saved him taxes. If you don’t live in the building taxes are twice as high, talk about that when you mention the cheaper taxes than Nova Scotia.

    The only way it is viable is to live in one half, and rent out the other. That’s hardly building for investment. As usual, there is one set of rules for millionaires building buildings, and one set for those who are just trying to save fo r a nest egg or build up some equity.

    It was McKenna who actually changed those taxes around, he wasn’t as ‘business friendly’ as people think.