Nearly eight in 10 (77 per cent) Canadian small business owners believe payroll tax is the levy that most impedes growth, according to a new report by the Canadian Federation of Independent Business (CFIB).
Depending on location, employers face between three and seven different payroll taxes, including pension plans (CPP/QPP), employment insurance (EI) and workers’ compensation, according to the report, Taxing Payroll: A Barrier to Business Growth and Competitiveness.
In Ontario, an employer pays $5,114 in payroll taxes on a $50,000 salary, while the employee pays $3,182 in payroll taxes, leaving them with a net income of $46,818.
Payroll taxes are even higher in Quebec, according to CFIB.
“Payroll taxes are one of the most detrimental forms of taxation for small firms, because they impose a heavy administrative burden and are not scaled up or down depending on how profitable a business is,” said Simon Gaudreault, senior director of national research for CFIB.
“With CPP and QPP set to increase by at least 20 per cent over the next seven years, payroll taxes will be taking an even bigger chunk out of salaries and profit margins, putting small firms’ ability to grow, hire new staff and compete, at risk.”
The report urges provincial governments to eliminate provincial health and/or education payroll taxes within the next 10 years.
Until then, it urges governments to introduce an exemption threshold to at least $2.5 million in total annual payroll and index it to inflation, as well as exempt senior employees (over 65) and young workers (under 18) from payroll taxes.