Finance Minister: Ottawa Didn’t Study $550 Million Tax Credit For Small Businesses

According to local Canadian newspapers, Finance Minister Joe Oliver revealed the government approved a $550-million tax credit for small businesses without an internal analysis of how much employment the measure would create.

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Oliver told the House of Commons finance that such a study was deemed unnecessary because it was already done by the small-business lobby group ‘Canadian Federation of Independent Business.’

The particular comment raised accusations that the government is surrendering its policy development control to lobbyists from the private sector.

When the hiring credit was first announced in September, Oliver raised eyebrows and pointed towards a CFIB estimate that claimed the creation of 25,000 ‘person years’ of employment. However, the announcement didn’t include any job-creation estimates from the government.

Those numbers were rejected by the Parliamentary budget officer next month, concluding the measure would lead to only about 800 jobs over the next few years.

Liberal MPs and NDP asked the minister to explain the discrepancy between the numbers from the watchdog and the lobby group during an appearance before the House of Commons finance committee, and also asked whether the Department of Finance conducted its own study regarding the credit.

Mr. Oliver said they didn’t conduct an analysis on every expenditure because they didn’t think it was required as they had already received one and knew that it was good news for small businesses. SMBs have been asking for this break since a long time.

Opposition MPs have been scrutinizing whether Finance Canada had conducted an internal study of the credit. The comment from the minister confirmed it had not. The two-year credit will provide an average payment of $350 to eligible small businesses to offset the expense of employment-insurance premiums.

The credit was announced rather than an across-the-board reduction in EI premiums, which has been slated for 2017 by the government. And just a day after the announcement, a report was released by the Office of the Chief Actuary stating that Ottawa will collect $4.6 billion more in EI premiums in 2015 than it will likely to pay out benefits, which will result in a $3.5-billion surplus after covering the $1.1-billion deficit on the account.

The PBO analysis pointed out that by keeping premiums higher than necessary to break even, the economy is going to lose more than 9,000 jobs in the next two years – after taking into account the 800 jobs created by the credit. Deficits or surpluses in the EI reflect in Ottawa’s bottom line.

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