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Don’t tax success by making large employers pay more

Opinion: ‘Big is bad’ policies that target large employers risk further undermining investment in Canada

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The role of government should not be to create jobs, but to establish the economic conditions in which companies can create a growing number of stable, secure well-paying jobs for Canadians. The more workers a Canadian company employs, the more they contribute to the Canadian economy as a whole.

Why, then, do some politicians claim to champion Canadian workers while condemning the Canadian companies that employ the greatest numbers of them? How can those elected officials, from across the political spectrum, reconcile venerating workers while vilifying the companies they work for?

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According to Statistics Canada, large businesses in Canada — which it defines as those with 500 workers or more — employed 4.4 million Canadians or 36 per cent of the private sector labour force in 2022. Yet these numbers fail to paint a full picture of our largest employers. Canada’s largest companies each employ tens of thousands of Canadian workers, with some employing more than 100,000 workers across the country.

Even this understates the true number of workers whose jobs are supported by Canada’s largest employers, as it fails to include the millions who work for the small to medium-sized companies that form part of their integrated value and supply chains.

And let’s not forget how many more people large companies continue to hire. Some of the country’s largest employers have plans to hire hundreds, if not thousands, of new workers here in Canada this year alone.

Among Canada’s largest employers are companies that operate in sectors as diverse as consumer retail, transportation, manufacturing, construction engineering, banking, financial services, telecommunications, natural resources and energy. Within each of these sectors are multiple large employers who actively compete against each other both at home and abroad.

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Are there enough of them? Let’s start by recognizing there is no global free market economic consensus which prescribes the exact number of banks, grocery chains, airlines, or telecom companies a country of 41 million people should have. In a capitalist economy, the number will be what the market can bear.

Here in Canada, there are no restrictions on the number of large companies, funded by Canadian investors, which can exist in most sectors. If there’s a business case, such as when a given market segment is underserved, entrepreneurs can launch new competitors and scale up or develop disruptive technologies to upend the status quo.

While not every small to medium-sized business aspires to become one of Canada’s largest employers, virtually all of Canada’s largest employers first started out as small businesses. We should be encouraging smaller enterprises to think big and grow into internationally competitive firms. Instead, political rhetoric is stifling ambition, innovation and competition by discriminating on size.

With the right economic conditions, which includes globally competitive tax and regulatory regimes, the Canadian market could grow to sustain an ever-greater number of large, homegrown enterprises that can compete, openly and fairly, against each other both across the country and around the world.

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Unfortunately, Canada’s current economic policies don’t adhere to these kinds of free market principles. Instead of growing the economy, federal government decisions are downsizing Canadian companies through a combination of higher taxes, burdensome regulatory red tape, and capricious changes to the country’s competition laws.

These “big is bad” policies deter more business investment than they attract. Private sector employers the world over won’t invest, or stay, in markets where the national government actively intervenes to cap profits or cut their market share.

Moreover, they won’t stay or invest in markets where governments invent and impose new taxes on top of existing taxes — including so-called “excess profits” surcharges. This is not free enterprise; it is the government dictating an arbitrary ceiling on success.

If the government caps profits by imposing an additional tax or surcharge on after-tax profits — meaning after those companies have already paid their employees and paid their corporate taxes — it would be another nail in the coffin for business investment in Canada.

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To be clear, the federal government has expressly ruled out limiting the market share of small to medium-sized companies or taxing their profits above a specified percentage. These quotas are reserved for Canada’s largest employers — those with the most workers.

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Any politician who claims to support workers should not single out Canada’s largest employers and the more than 4.4 million Canadians they employ. To prejudice those workers based on the size of the company they work for isn’t free enterprise, it’s futile intervention.

It defies common sense to suggest we can promote workers and protect their paycheques by having the government cut the market share and cap the profits of the employers who pay them. Lower performing, less profitable companies employ fewer Canadian workers.

Goldy Hyder is chief executive of the Business Council of Canada.

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