Published On: Tuesday, 10 October 2017

How Business Reacts to Government Attacks

How Business Reacts to Government Attacks
Faced with the option of collecting taxes for governments – which businesses do – or feeding their families, what do you think they’ll do?

- Mark MacDonald is the Publisher of the Business Examiner News Group, and President of Invest Northwest Publishing.

CANADA - It’s become vogue in political circles to harvest seeds sown to the masses about greedy business owners, to provoke and promote class warfare into votes.

By doing so, it appears that governments perform as if it is their duty to vilify and demonize business owners and entrepreneurs, making it appear that it’s “just the right thing to do” to bring them to heel and tax them to death.

After all, these people are “sprinkling” revenues to family members to escape the taxman, and creating endless loopholes to avoid contributing even more to government coffers. Right?

Except they willfully overlook one important fact: There are no loopholes. The tax laws that exist are there because government wrote them, and they are perfectly legal. They’re incentives to encourage growth and reward hard work. The truth is, when business owners pay less tax, they aren’t ripping off the government. The wise ones have enlisted accountants and lawyers to make sure their rights are protected.

Justin Trudeau’s much publicized tax attacks are bold and crass. The Liberal government has apparently concluded that business voters represent only a sliver of those who actually cast ballots, so they can be re-elected by ignoring them.

These taxes not only take aim at business people now, but in the future, at retirement. By targeting corporations, family trusts and Capital Gains, they’re directly attacking their retirement plans. They don’t have gold-plated government or union pension plans. Their businesses, buildings and assets are their retirement.

If these risk-takers choose to retreat, then the number of jobs they create will slowly shrink, making voters realize that government attacks on business are really an attack on everyone else – only in slow motion. It seems only then will they experience the effect of such draconian, punitive measures.

If businesses don’t – or can’t – grow, they’ll shrink to survive, if necessary.

Faced with the option of collecting taxes for governments – which businesses do – or feeding their families, what do you think they’ll do?

A vivid example of what has happened is in Greece, where not paying taxes is the norm, with some estimates indicating over one-third of business owners won’t collect or pay tax, and the underground economy is about 25 per cent of GDP.

Could they revolt in placid Canada? That’s highly unlikely, given our unofficial “tax me, I’m Canadian” mindset. But businesses could go further underground. The underground economy is already substantial.

Or they cut back. Faced with increased overhead like minimum wage hikes, if they can’t foresee the marketplace accepting price increases, they adjust. They reduce hours.

Studies show that in Washington State, where government has mandated a $15 per hour minimum wage, the average lower-wage-scale worker has had their weekly schedule cut from 6-10 hours each.

Politicians and bureaucrats need to open their eyes to what is already here, and what is inevitably coming.

Walmart, Save-On-Foods and other large retail outlets have had self-serve aisles for years. While it was introduced under the guise of convenience, allowing customers to pay and exit the store quicker, there is little doubt it was at least a test flight for eventually cutting staff, if necessary.

McDonald’s Restaurants has maintained its strong position in the fast food industry due to its innovation and consistency. Golden Arches' customers are now greeted by a large screen, self-serve menu where they can fill out their own order, pay, and wait a few minutes to pick it up.

Convenient? Of course. But doesn’t that make it one-step closer to removing some entry-level order taking positions altogether?

And how will restaurant owners respond to government-mandated payroll increases? Besides working harder, there are a few ways they could possibly adjust. Could they view tips for service as house money? Perhaps they eliminate servers and make their restaurants buffet-style. Maybe patrons will have to give their own orders and pick up their own food.

Or maybe companies reduce, or stop paying benefits to staff. In the U.S., where Obamacare’s clumsy introduction was excessively costly to small business, some owners have capped their health benefits to employees at a fixed dollar amount. Since they can’t afford to pay the whole bill, they contribute a flat amount of money each month, and let employees look after the rest themselves.

And perhaps worst of all, businesses do other things outside of business, under the table, to earn unmarked – read untaxable – cash. Black markets have always been out there, but there’s no doubt they increase when governments over tax. When people who would normally want to be law-abiding citizens see no other choice, they can choose to go to the dark side to stay in business and provide for their own.

Or they’ll give up. If profitability is a faint hope here, business owners may just look for greener pastures.

As these punitive tax measures and regulations are introduced, watch the money flow out of Canada. Why? Because it can.

What business bashers fail to recognize is, that in today’s global economy, money is more fluid than ever. Investment advisors can move their clients’ cash to other countries with a tap of the keyboard, moving to areas of the world that are more tax and investment friendly. If Canada and BC continues its current tact to be antagonistic to business, then investors will simply move on.

They will, and they are, because in this global economy, they can.