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Increased payroll taxes hurt Canadian business and their employees

Published by Marie Morden on June 21, 2016

Canadian Manufacturers & Exporters (CME) was surprised to hear of the sudden deal to expand the Canadian Pension Plan (CPP) after almost no consultation with business and limited research into the economic impact of the increased taxes.

Manufacturers in Canada have the largest collective employee base and salary levels of any sector in the country. Collectively the sector directly pays salaries of roughly $2 billion every week in sustaining the wellbeing of more than 1.7 million Canadians and their families.

"CME has long studied the direct relationship between taxes and investment and employment in Canada. Regardless of the type of tax - payroll, personal or corporate - the results consistently point out that higher levels of taxation results in lower investment in business activities, including research and development, new machinery and equipment, and their staff," said Jayson Myers, CME's President & CEO. "The reality is that each business only has so much money to invest. The more money that goes to governments, the less that is available to improve their operations to make them more competitive and grow."

While the details of the CPP expansion are limited at this time, CME has recently studied the impact of the proposed Ontario Retirement Pension Plan and found that companies cannot simply absorb additional costs or pass those costs along to their customers and remain globally competitive. Employees will end up paying through a reduction in wages and other benefits, including existing private sector retirement plans. In fact, based on CME's survey of Ontario industry, 68 per cent of companies will recover costs imposed by the ORPP by eliminating wage increases and bonuses, and 35 per cent of respondents will be forced to lay off staff or cut wages to compensate for increased costs due to the ORPP. We expect similar impacts with the CPP expansion.

With the very limited details of the CPP expansion available at this time, CME is calling on all governments to use the phase-in period between now and 2019 to study the potential economic impacts of this policy change and to make that information public. CME is working to ensure any new plan is reasonable and does not negatively affect Canadian manufacturers and exporters, and their employees.

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