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Over 31,000 small businesses in Saskatchewan will see their taxes go up after the province raised them by one per cent on Canada Day.

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Now, organizations are calling on the provincial government to freeze the tax at zero per cent to help businesses stay afloat at a time when inflation, interest rates and the cost of living continue to catapult.

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“Given all the challenges that small business owners are currently facing like heavy debt loads, skyrocketing inflation, increased input costs and rising interest rates, cost relief is becoming increasingly urgent,” said Brianna Solberg, director of the Canadian Federation of Independent Businesses (CFIB) ) for the prairies and Northern Canada.

While a one or two per cent tax rate might not seem very significant, Solberg said that a business that brings in $500,000 annually could end up paying up to $10,000 a year more in taxes. “This money could make or break some businesses right now,” said Solberg.

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Thousands of Saskatchewan’s small business risk closure by end of 2023: CFIB

“These extra taxes are a drop in the bucket for the government, but the extra cost could break a small business,” said Canadian Taxpayers Federation (CTF) prairie director Gage Haubrich. “The provincial government decided to get greedy instead of continuing to give small business owners a break.”

In 2020, the province lowered the tax to zero per cent to help small businesses stay afloat during the COVID-19 pandemic. On Canada Day of this year, the tax was raised by one per cent and is expected to go up to two per cent in 2024.

“The reduction of Saskatchewan’s small business tax rate from two per cent to zero per cent was originally introduced in 2020 as a temporary economic relief measure to support small businesses negatively impacted by the COVID-19 pandemic,” said the province in a statement.

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The Saskatchewan government extended the temporary zero per cent small business tax rate from July 1, 2022, through June 30, 2023.

“It has served its purpose within the time frame it has been created for.”

Solberg said that CFIB has been calling on the government to freeze the tax rate at zero per cent until at least 2024 to give more businesses a chance to recover.

“I think with the projected $1 billion surplus in this year’s provincial budget, we would have hoped to see some affordability measures announced for small businesses, such as holding this tax at zero per cent,” said Solberg.

Solberg said that the increased cost will force businesses to make tough decisions.

“They’re either going to have to increase their prices to accommodate, or they may have to lay off some staff,” said Solberg, adding that business owners are already working upwards of 59 hours a week to make up for a lack of staff .

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“I think that some may feel that this is the straw that breaks the camel’s back.”

President and CEO of the Business Development Bank of Canada (BDC) Isabelle Hudon, who visited Regina and Saskatoon this week to meet with their clients, said that opportunities for growth are still salient in Saskatchewan.

“It was very clear here that (our clients) do recognize the situation, but the growth is still happening,” said Hudon. “The anxiety is not yet around interest rates. Labor shortages are probably the biggest challenge they deal with.”

Last month, CFIB estimated that more than 8,000 small businesses were at risk of closing their doors by the end of the year if the federal government didn’t change the repayment date for the Canada Emergency Business Account (CEBA) loans.

Solberg said that the CFIB’s latest survey results indicate that the average Saskatchewan small business owner is still carrying the average of $63,000 in COVID-related debt.

“Many worry whether they’ll ever be able to pay this back or if they should simply close their doors, especially with the (CEBA) loan repayment deadline coming in December of this year,” said Solberg, adding that the CEBA loans could pack on an additional $20,000 to that debt.

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