A young Canadian entrepreneur's perspective on the proposed tax reforms
Canada's youth unemployment rate is still almost twice our national average, and while the rate declined in April, this is due to the fact young Canadians are leaving the workforce.
Where are they going? Frustrated with the lack of opportunity, many are turning to entrepreneurship to take their future into their own hands and find new ways to solve community challenges.
As one of these driven young Canadians, I have invested everything I have since the age of 19 years-old into building my business; and, through my youth innovation work, I have connected with young entrepreneurs in more than 59 countries.
In comparison to other parts of the world, Canada offers many innovation resources and support programs for businesses. For instance, I can register a business name overnight, file trademarks online without large lawyer fees, and access a variety of business planning, and mentorship supports through federal and provincial centres. Grateful for the ecosystem Canada has provided me to start my business, I have been proud to be a young Canadian entrepreneur.
Initial conversations on proposed tax reforms however, caused some concerns.
Over the past year I have participated in key international leadership forums, including the United Nations High Level Political Forum, the G20 Young Entrepreneurs' Alliance summit (G20 YEA), and several W20 leadership consultations, to build policy recommendations that foster youth-led innovation, job creation and women's entrepreneurship.
Even before the proposed tax reforms were revealed, one of the core recommendations in the G20 YEA communiqué - presented at the G20 meeting to Prime Minister Trudeau, and other G20 Heads of State and policy makers - was the need for Smart Taxation Schemas with more progressive measures that alleviate tax burdens that curb the growth of startups and small-medium sized enterprises (SMEs).
It has been widely acknowledged now that entrepreneurs or SMEs are not the target of the tax reforms, and changes will only affect high-net-worth individuals and doctors with private corporations. While many questioned this in the initial proposal, the strong response from Canadian businesses and community leaders have helped to advocate for better consideration and protection measures to be put in place.
In trying to raise investment for my startup during this process, I witnessed the cascade effect these initial concerns provoked from both the perspective of a Canadian business owner and also the high-net-worth individuals that serve as our economy's investors.
While Canada is home to many talented and bright entrepreneurs, most of them find their initial success - or more specifically their investment money - outside of our country. This is not a new problem, however, the investor response from the proposed reforms will inevitably amplify this, and in some cases could inhibit the growth of innovation and business prosperity in our country.
To understand the effect of the tax reforms (particularly the initially proposed), the role of capital in our economy must first be considered. The situation can be likened to the bee crisis with high-net-worth individuals as our bee hives and their capital as the pollen to our field of flowers (the working class, SMEs and entrepreneurs).
Just as bees serve as a critical role in our food production by distributing pollen to flowers, corporations turn capital into jobs, salaries, services and investment for our economy. While some bees will sting, cause you pain and havoc, the reality is we need them to survive.
If Canada proceeds with tax reforms that discourage success and make it harder for investors to access their capital - which is the fuel to our economy - it will directly affect their businesses and the people they serve. The consequences will mean less investment for entrepreneurs, fewer jobs and higher unemployment, and potentially reduce services for the low-income individuals that the reforms seek to uplift. This is particularly true when considering the repercussions on the reforms with doctors. Despite your opinion on the wealth advantages of doctors or our health care system, the reality is the change will prompt many doctors to leave and set up their practice elsewhere; or at the very least, make it harder to attract top medical talent to come to Canada. Less doctors will mean longer waiting times and fewer critical care services. Such a consequence could possibly cost people their well-being due to the lack of medical expertise available or delayed treatment.
If Canada wants to truly become a Nation of Innovation as set out by our Innovation Agenda, our country needs to attract, not deter, businesses, investors, and high-net-worth individuals to invest in our economy. You will always attract more bees with honey than vinegar. Rather than build reforms that discourage the flow of capital, it is more advisable to provide incentives that encourage better choices. There is no doubt we have some very neglected flowers in our fields that need more support and attention from the bees. The notion to distribute pollen more evenly in a field so more flowers have a chance to grow is worthy, but we still need the bees to carry out the task. Limiting the amount of pollen a bee can carry to one flower won't necessarily benefit the other flowers in the field. Instead, the bee could choose to find another field - as will the investors and businesses that are powering the Canadian economy. Rather than capping business success, we should instead build policies that encourage a flow of capital.
Tax reforms that encourage high-net-worth individuals to invest their wealth into their communities, supporting better quality jobs, and funding innovation projects that strengthen our economy could provide more value than the currently proposed.
To build a healthy economy Canada needs a flow of capital between all stakeholders. There is nothing wrong with Canadians achieving their ambitions and building a quality future themselves; the key is building an ecosystem whereby these individuals pay it forward and invest back into growing the Canadian economy.