From: AlanBaggett@volcanomail.com   
      
   Canada Revenue Agency is Losing $25 Philip Cross: The Canada Revenue Agency, a   
   black hole that swallows up small-business dreams   
   :CRA SOTW   
      
   If you run an independent firm, get ready for bureaucratic hassles every step   
   of the way, especially when it comes to dealing with the CRA   
      
   The importance of small business is undeniable. As Michael Novak wrote in   
   Business as a Calling, small business creation is a “good index of the   
   general health of society — not only its economic health but also its   
   morale, hopefulness, and spirit of    
   generosity for others.” Canada’s political class unanimously subscribes to   
   the mantra that small businesses are the bedrock of our economy, with more   
   than two million small firms employing nearly half the workforce. So why is it   
   so difficult to set    
   up and run a small business in this country?   
      
   To start, there is no easy-to-follow road map for establishing a small   
   business. When I left the government six years ago, my first attempt to set up   
   my own business was based on the counsel of a financial adviser. A year later,   
   a lawyer told me I had    
   missed two other critical steps. I sent in the necessary paperwork, but the   
   bureaucracy returned the forms saying they were incomplete. My lawyer’s   
   secretary said such unfounded rejections are routine (“they’re idiots”   
   she sniffed dismissively),    
   and resubmitted the forms — without any changes. Sure enough, this time they   
   were approved.   
      
   But that was nothing compared to dealing with the Canada Revenue Agency, a   
   black hole that swallows up small-business dreams. In one attempt to pay   
   business income tax, my bank sent the taxes to the wrong location. Two weeks   
   later I received an official    
   notification from CRA that my taxes were overdue. Instead of asking what might   
   have gone wrong, the CRA went nuclear, threatening to close my business unless   
   payment was received immediately.   
       
   This is the everyday reality of bureaucratic attitudes to small business, not   
   the fawning platitudes offered by politicians.   
      
   That threat induced the state of panic the CRA intended, and I repeatedly   
   tried to contact the agency by phone and fax to find out what had happened to   
   my payment. The Minister at the time bragged about CRA’s responsiveness, a   
   boast echoed by Mel Cappe,   
    the former head of the civil service, who claimed that CRA’s practices were   
   a model for businesses because of how “they answer the phone.”   
      
   While this may be how government perceives its service delivery, my experience   
   confirmed the Auditor General’s recent report that a majority of calls to   
   CRA are never answered. Eventually, after much effort and undue stress,   
   everyone agreed that the    
   payment was made but had not reached the CRA. Nevertheless, I had to pay for   
   late payment. By then, I was grateful that at least my business was not shut   
   down.   
      
   As a small business, I was eventually allowed to remit my taxes on a quarterly   
   rather than a monthly basis, saving me time filling in forms. However,   
   according to the CRA my ability to remit quarterly is conditional on having a   
   “perfect compliance    
   history” of filing within 15 days of the end of a quarter. While governments   
   with dispiriting regularity make mistakes with their paperwork, I have to be   
   letter perfect. No excuses; no trips abroad, no illnesses, no simple   
   forgetfulness. Any    
   transgression will be my last.   
      
   Speaking of remittances, whoever in the federal government designed the GST   
   never ran a small business. While large businesses have the resources to   
   process their GST at relatively little cost, for a small business the GST   
   involves meticulously recording    
   every expenditure and revenue on a monthly or quarterly basis and only   
   original receipts are accepted.   
      
   Every firm earning a paltry $30,000 or more must file the GST, and once   
   registered to the GST system you cannot leave (making it the Hotel California   
   of the tax system) even if your income falls below this threshold — a   
   significant incentive for firms    
   to stay very small. GST submissions are so burdensome and complex, in fact,   
   that specialized firms have sprung up to handle the paperwork (at a cost, of   
   course).   
      
   No wonder a 2014 survey by the Canadian Federation of Independent Businesses   
   found that the number two complaint held by 72 percent of its members is about   
   government regulation and the burden of paperwork (the number one complaint   
   cited by 78 percent of    
   firms was high taxes).   
      
   As an economic researcher, intellectual property is the lifeblood of my   
   business, but it took over a year just to get a copyright for the name of my   
   business. As for getting a trademark on my work, after years of effort I   
   simply gave up.   
      
   While complicating my life and enriching my accountant, starting a business   
   has increased my understanding of the dynamic between firms and government. It   
   is far easier now to understand the frustration and hostility small businesses   
   feel given the    
   mixture of indifference and outright antagonism that the bureaucracy holds for   
   them. The outrage to the proposed tax changes by the federal government in   
   mid-2017, so surprising to the Trudeau government and its academic advisers,   
   was also completely    
   predictable to anyone who knows and understands small business.   
      
   So why do most small business owners persevere? Freedom and control of one’s   
   work environment tops the list, which is reflected in why people increasingly   
   turn to self-employment as they grow older; they will stay in the labour   
   force, but only on their    
   own terms. Maybe some day we will even have the freedom to keep over half of   
   the pay we earn. I even grant myself the freedom to be less than perfect —   
   except of course when dealing with CRA. Then I better be the very image of   
   perfection.   
      
   Philip Cross is a Munk senior fellow at the Macdonald-Laurier Institute.   
      
      
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