Deja vu: Federal budget seeks to cut red tape for small business

Small businesses will get some help cutting through red tape via government-funded Web tools, but will have to say goodbye to the recession-era 100 per cent capital cost allowances on IT investments, as the 2011 federal budget was tabled in the House of Commons this afternoon.

Parliament Hill watchers had to fight back the sense of déjà vu they must have felt as Finance Minister Jim Flaherty introduced a budget that is nearly a verbatim copy of one the Conservatives tabled just before Parliament was dissolved and an election was triggered March 26. The difference this time is the Conservatives hold a clear majority in the House with 166 of 308 seats, and a clear path to implement their financial plan. It’s a plan that is greeted with staid enthusiasm by several experts who watch Canada’s small business scene closely.

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Just having the predictability of a majority government will be a relief to businesses, says John Reid, CEO of the Canadian Advanced Technology Alliance (CATA). “Things can be implemented quickly and in a very supportive way, that’s a strong benefit.”

The Ottawa-based alliance supports the government’s first line items in the budget earmarked for its digital economy strategy, something that is still in the works. The Conservatives are pledging $80 million over three years to the Industrial Research Assistance Program (IRAP), which provides financial assistance to small and medium-sized businesses (SMBs) to help develop competitive technologies. There will also be $100 million over three years to the Canada Media Fund for investments in the creation of digital content, and $60 million over three years to boost student enrolment in digital economy-related fields.

“Content creation is an important part of our landscape,” Reid says. Even more investment would be good, but “we have to be realistic… it’s a fair and understandable budget given the situation that Canada finds itself in.”

Continued support for IRAP may help to offset some budget pain that businesses will feel as a result of the discontinuation of one economic stimulus measure. The 100 per cent capital cost allowance made on IT investments will not be renewed. After it expired in February, money spent on IT returned to the previous capital cost allowance rate.

Small businesses are looking to invest in technology in order to automate their processes, says Paul Edwards, the director of SMB research at Toronto-based analyst firm IDC Canada Corp. But without access to as much capital, they might not make those investments.

“There’s so many small businesses in Canada,” he says. “I think a lot of them would consider any kind of assistance from the federal government a bonus for their business.”

The budget also seeks to help business cut through red tape by putting money into online tools. BizPal, designed to be a one-stop shop for businesses to track what licences they need at each level of government, will become a permanent program with $3 million per year.

The Canadian Federation of Independent Businesses (CFIB) applauds that move and gives the federal budget a B+ grade overall, says Dan Kelly, senior vice-president of legislative affairs with CFIB.

“We’re big fans of BizPal, as are our members,” he says. “One of the constant worries when you’re setting up a business is you just don’t know what government departments you’re going to need licences from.”

Related Story: BizPal service is now available in a rural municipality in Manitoba

Still, BizPal is limited because it only tells businesses what forms they need to complete and doesn’t provide them online, Kelly adds. It could be improved by offering to complete the transaction and submit the licence request to authorities.

Another administrative step taken by government to reduce red tape is a new online function added to the Canada Revenue Agency’s (CRA) Web site. Businesses will now be able to submit a question about tax procedure to the CRA using the online My Business Account tools, and staff will be required to answer. That’s an improvement in transparency, Kelly says, because the CRA would only answer questions over the phone previously.

“Right now the only way to get that is by calling the CRA’s call centre, and often the advice you get is terrible,” he says. “The biggest area of irritation for small firms in respect to red tape happens to be the Canada Revenue Agency.”

In a CFIB study of about 100 calls made from across the country to the CRA’s call centre, 21 per cent of the questions asked either received incorrect information or no answer, Kelly says. The new online-based system will provide businesses with a written transcript of the questions they ask and the advice they receive, which could help if an audit occurs.

One of the government’s big-ticket items in the budget was an Employment Insurance Hiring Credit for Small Business. It gives small firms some relief as EI premiums are expected to rise over the next several years, Kelly says. The move will help businesses hire new workers.

“It will take the sting out of the EI increase for a lot of small businesses,” he says.

In a big picture view, the federal budget is forecasting a $32.3 billion deficit for 2011-2012. The Conservatives plan to eliminate the deficit and put their numbers in the black by 2014-2015.

Brian Jackson is Associate Editor at Follow him on Twitter, read his blog, and check out the IT Business Facebook Page.

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Brian Jackson
Brian Jackson
Editorial director of IT World Canada. Covering technology as it applies to business users. Multiple COPA award winner and now judge. Paddles a canoe as much as possible.

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