There is no doubt that COVID-19 has changed the way businesses function in Cape Breton. The pandemic has forced many entrepreneurs to reshape operating strategies for financial survival.
Think of the new safety protocols for restaurants to protect staff and customers from virus transmission. Think sporting events playing out before near-empty stadiums and instead focused heavily on revenues generated from media broadcast of the event.
There are just too many changes to business practices to list here in this column including the growth of digitization in our economy but I wanted to single out a few examples to illustrate some telling impacts.
One major impact comes from folks not feeling safe to travel outside the province or eat out in restaurants due to the pandemic. Instead, they are using some of those cash savings to fund home improvement projects right here in the Cape Breton economy. That is a good thing for our community and our workers and it supports the “Shop Local-Buy Local” mantra being promoted by the local business community.
Demand in the home improvement sector has soared and is so strong that it has led to a shortage of building materials, a rapid rise in material costs and a shortage of skilled labour to take on those home improvement projects.
Many new contractors have entered the home improvement business in 2020 and many anxious homeowners are in hot pursuit of their services. Sometimes these contractors show up when expected to do a job and sometimes not. This has been a long-standing problem with small contractors in Cape Breton.
Some contractors present an official written quote including HST for the project leaving a paper trail to follow while other contractors are quite prepared to take cash from the customer thereby avoiding HST. Cash leaves little trail for CRA to follow when it comes to reporting taxable income.
This practice leads me to shed some light on the underground economy and its impact on our well-being as a province. Statistics Canada defines the underground economy as “consisting of market-based activities, whether legal or illegal, that escape measurement because of their hidden, illegal or informal nature.”
I use the construction industry as an easy-to-understand example but you can imagine other opportunities for tax avoidance including buying illegal cigarettes, street sold cannabis, cash tips, paying cash for services, Airbnb cash rentals, or offshore bank accounts not being reported to CRA.
In Nova Scotia, according to Statistics Canada, the underground economy was estimated to be $1.28 billion in 2018. That is near 3 per cent of provincial GDP. This is revenue that escapes government taxation. Nova Scotia’s underground economy as a share of GDP is higher than the national average which is troubling. Taxes on $1.28 billion would go a long way to offset the forecasted 2020 Nova Scotia budget deficit of $853 million due to the pandemic.
Some of the underground economy is driven by the fact Nova Scotia has the second-highest personal income tax rates in the country. It remains one of three remaining provinces in the country that still practices “bracket creep” on your personal income tax deduction by not adjusting it to CPI on your annual income tax return.
The higher the taxes the more incentive it provides for individuals and companies to embrace tax avoidance. Alberta has one of the lowest personal income tax rates in Canada and no provincial sales tax. It abandoned “bracket creep” on its residents decades ago. It also has one of the lowest underground economy as a share of GDP rates in the country running at 1.8 percent of provincial GDP.
British Columbia has the highest ratio at 3.7 percent of GDP. In Canada, the underground economy was valued at a whopping $61 billion in 2018 amounting to 2.7 per cent of national GDP.
I can only imagine with the increased demand for home improvement projects in Canada due to the pandemic that underground economic activity will likely increase 50 per cent rising close to $90 billion for 2020.
In Nova Scotia, residential construction accounts for over 25 percent of the estimated underground economy GDP. The next six largest contributors to the underground economy amount to about 50 per cent of Nova Scotia’s underground economy. They are retail trade, accommodation/food services, finance/insurance/real estate, manufacturing, professional/technical services and health care/social assistance.
If we want to grow the Nova Scotia economy and thereby increase tax revenues to pay for the services we all expect, we are going to have to rethink the tax burden on individuals and businesses to bring balance and fairness to the tax environment. It is one of the reasons we struggle to recruit doctors to Cape Breton. Above-average taxes in Nova Scotia hinder economic expansion. High taxes will continue to drive the underground economy and tax avoidance until we address them.
Adrian White is CEO of NNF Inc, Business Consultants. He resides Sydney & Baddeck and can be contacted at email@example.com.
‘No plan’ for economy will work without more access to COVID-19 tests, vaccines: O’Toole – Global News
O’Toole made the remarks during a press conference Sunday morning.
“There is no plan for the economy if we don’t have rapid testing and vaccines as swiftly as possible,” he told reporters.
O’Toole’s comments come as the federal Liberal government prepares to release a fall economic update on Monday.
The government has not tabled a budget for this fiscal year, but in July delivered what it called a “fiscal snapshot” that estimated the deficit was heading for a record of $343.2 billion.
Ottawa to deliver long-awaited economic update amid pandemic
O’Toole said there can’t be a “full economy, a growing economy, people working, people being productive without the tools to keep that happening in a pandemic.
“Those two tools are rapid tests and a vaccine,” he said.
O’Toole said Canada is “months behind our allies” when it comes to the large-scale rollout and use of rapid COVID-19 tests.
Health Canada has approved more than three dozen different tests for COVID-19, but only six of them are “point-of-care” versions more commonly referred to as rapid tests.
Millions of rapid tests have been delivered to the provinces, however, health officials have been slow to utilize them as questions about best use and reliability remain unanswered.
Coronavirus: LeBlanc says Canada is in top five to get COVID-19 vaccine
O’Toole also said it appears as though Canada will be “months behind our allies on vaccines.”
“These are critical tools,” he said. “The vaccine is the hope we’re all looking for.”
Canada has signed contracts to secure 400 million doses of COVID-19 vaccine, however, the federal government says only six million of those doses — enough to vaccinate three million people — will be in the country by early January for distribution once approved by Health Canada.
However, both the United States and Britain have said they expect to have millions of vaccine doses by next month and expect to have larger portions of their populations inoculated more quickly.
O’Toole said Canadians are going to be “rightly frustrated” when other countries are “rolling out millions of doses” of COVID-19 vaccines before Canada.
“I hate to see us trailing,” O’Toole said. “I don’t compare ourselves to the worst response, I want Canada’s response to be the best, that’s why I want to see a plan and I want to see a plan for the economy — we need to get people working.”
Canada ‘needs a more ambitious procurement program’: Saskatchewan premier on COVID-19 vaccine
O’Toole is not the only one who appears to be frustrated. In an interview with The West Block’s Mercedes Stephenson, Saskatchewan Premier Scott Moe said it is “troubling” that only a small segment of the Canadian population could be vaccinated immediately.
Moe said the federal government communicated to the country’s premiers how many doses they would receive, adding that the first round of doses will likely treat about 100,000 people in Saskatchewan.
“We need to receive more and we need to receive it in a much more timely fashion,” he said.
Moe said Canada needs a “more ambitious procurement program for sure.”
Prime Minister Justin Trudeau has said Canada’s lack of domestic manufacturing capabilities for the highly sought-after coronavirus vaccines — several of which use brand new mRNA technology — means it will be slightly further back in the queue than countries that produce the vaccines domestically.
Still, Intergovernmental Affairs Minister Dominic LeBlanc said on The West Block on Sunday that Canada is still positioned to be in the “top five” in the global queue for vaccines.
— With a file from the Canadian Press
© 2020 Global News, a division of Corus Entertainment Inc.
Turkish Economy Likely Outperformed Most Peers at Lira’s Expense – Yahoo Canada Finance
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Turkish Economy Likely Outperformed Most Peers at Lira’s Expense – Bloomberg
Cyber Monday Couch Deals: The Best Discounts To Get Right Now – Forbes
‘No plan’ for economy will work without more access to COVID-19 tests, vaccines: O’Toole – Global News
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