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 firstname.lastname@example.org.
Coronavirus vaccine could help economy recover faster than expected
Canada’s economy could rebound faster than expected if consumer spending jumps in the wake of a successful coronavirus vaccination effort, Bank of Canada Governor Tiff Macklem said on Thursday.
On the other hand, if the economy weakens amid a second wave of infections, Macklem indicated the central bank could if necessary cut already record low interest rates.
In late October, the bank said it assumed a vaccine would not be widely available until mid-2022. Since then, several manufacturers have announced potential vaccines that could be distributed starting early next year.
“It is possible, especially when there is a vaccine, that households will decide to spend more than we have forecast and if that happens the economy will rebound more quickly,” Macklem said in response to questions from the House of Commons finance committee. He described the news about vaccines as promising.
In late October, the bank forecast the economy would not fully recover until some time in 2023, a forecast Macklem repeated in his opening remarks.
The path to recovery still faced risks, he said. Earlier this year the bank slashed its key interest rate to 0.25 per cent.
“We could potentially lower the effective lower bound, even without going negative. It’s at 25 basis points, it could be a little bit lower,” Macklem said, repeating that negative interest rates would not be helpful.
The U.S. Federal Reserve has a target for its key rate of 0 to 0.25 per cent. The Reserve Bank of Australia this month cut its policy rate to 0.1 per cent.
Some other central banks also have benchmark rate that are less than 0.25 per cent, such as the European Central Bank and the Bank of England.
“We want to be very clear – Canadians can be confident that borrowing costs are going to remain very low for a long time,” Macklem said.
Source: – Global News
As economy struggles, Fed weighs boosting bond purchases – Investment Executive
The Fed since June has been buying $120 billion in bonds each month to keep downward pressure on long-term interest rates as a way of giving the economy a boost as it struggles to emerge from a deep recession.
The purchases have included $80 billion a month in Treasury bonds and $40 billion in mortgage-backed securities.
With the economy showing signs of slowing in the face a resurgence in coronavirus cases and a return to shutdowns in some areas, there has been market speculation that the Fed could decide to boost the size of its monthly purchases.
The minutes show that while no decision was taken on what to do or when, Fed officials were keeping their options open. Some analysts believe the Fed will make an announcement on boosting the bond purchase program at its next meeting on Dec. 15-16, especially if there has been no movement by Congress to provide more economic relief to individuals and businesses.
The minutes said that many Fed officials “judged that asset purchases helped provide insurance against risks that might reemerge in financial markets in an environment of high uncertainty.”
Concern has been growing among economists that the economy is slowing after an initial rebound this summer and could even topple into a double-dip recession in the early part of 2021 if Congress does not replenish expiring support programs.
At the White House Wednesday, Peter Navarro, one of President Donald Trump’s economic advisers, told reporters that a “sober” reading of the economic recovery shows “we are facing … a chasm ahead for millions of Americans unless there can be a bipartisan” deal to provide further economic relief.
The minutes released Wednesday covered the Fed’s Nov. 4-5 meeting, held just after the November elections, and were released with the customary lag of three weeks.
At the meeting, the central bank kept its benchmark interest rate at a record low near zero and signalled that it was prepared to do more if needed to support the economy.
A multitrillion-dollar stimulus effort enacted in the spring has helped support millions of Americans who have been thrown out of work and provided further assistance to struggling individuals and businesses.
But many of those programs have expired and jobless benefits are due to run out for millions of Americans by the end of this year.
Federal Reserve Chairman Jerome Powell had said at a news conference following the two-day meeting that Fed officials had discussed whether and how a bond buying program might be altered to provide more economic support.
In addition to increasing the size of the program, the Fed could decide to alter the composition of the bonds purchases to focus on buying long-term securities as a way of putting added downward pressure on long-term rates.
Mexico Economy Grows at Record Pace With Long Recovery Ahead – Yahoo Canada Finance
Chicco Black Friday & Cyber Monday Deals (2020): Best Nextfit Car Seat, Bravo Travel System & More Deals Reviewed by Saver Trends
Review of the latest Chicco deals for Black Friday & Cyber Monday, featuring offers on Keyfit 30 car seat, Bravo Travel System & more Here’s a comparison of the latest Chicco deals for Black Friday & Cyber Monday, including the best sales on convertible car seats, car seat and bases and more. Links to the top deals are listed below.Best Chicco Deals: * Save up to 43% on Chicco travel systems, carriers, sterilizers, and more at Walmart – see the latest discounts on a wide variety of Chicco infant car seats, strollers, food warmers, and modular sterilizers * Save on Chicco travel systems, portable bassinets, hook-on chairs, and more at Amazon – click the link to see live prices on top-rated baby safety car seats, travel gear, and more * Save on top-rated Chicco baby safety car seats, travel systems at buybuyBABY.com – check live prices on Chicco KeyFit 30 Infant Car Seat, Chicco Fit 4-in-1 Convertible Car Seat, and more * Save up to 32% on top-rated Chicco travel systems at Walmart – check the latest deals on travel system models, including Chicco Mini Bravo, Chicco Activ3 Jogging, Chicco Bravo Trio, and more * Save on best-selling Chicco KeyFit series car seats at Walmart – click the link for the latest deals on Chicco KeyFit series car seats, including the Onyx, Regatta, Q Collection, and more * Save up to $90 on car seats from the Chicco NextFit series at Walmart – check the latest savings on top-rated Chicco NextFit convertible car seats Best Baby Deals: * Save up to 40% off on a wide selection of baby gear at Walmart – find the latest deals on car seats, strollers, bassinets, activity centers, bouncers & rockers, carriers, playmats, and more * Save up to 40% on Graco baby strollers, car seats & more baby gear at GracoBaby.com – click the link to see updated prices on best Pack ‘n Play® playards and other top-rated Graco cribs, strollers, and car seats * Save up to 49% on baby gear including car seats, strollers, clothing & essentials at Amazon – check live prices on clothing, bedding, baby care items and accessories * Save up to $105 on baby strollers, car seats, cribs & more at buybuyBABY.com – including deals on Fisher Price, Carter’s and Disney * Save on a wide range of Burt’s Bees baby items at BurtsBees.com – click the link for latest deals on baby ointment, lotion, creams, and bath bundles from Burt’s Bees * Shop baby swings, bassinets, playards & more at 4moms.com – click the link to see the latest prices on baby stuff like the mamaRoo4, rockaRoo, mamaRoo sleep bassinet, and more Searching for more deals? We recommend checking Walmart’s Black Friday & Cyber Monday sale and Amazon’s Black Friday & Cyber Monday deals for thousands more live discounts. Saver Trends earns commissions from purchases made using the links provided.About Saver Trends: Saver Trends research and share online sales news. As an Amazon Associate and affiliate Saver Trends earns from qualifying purchases.Contact: Andy Mathews (email@example.com)
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