The provinces of Ontario and Quebec are locomotives for Canada. Their combined economies represent the fourth largest economic area in North America, after California, Texas and New York State.
When we dissect these two economies, we quickly notice the fundamental presence of small businesses. In Ontario, 87% of businesses have fewer than 20 employees, while in Quebec the proportion is 85%. For both provinces, more than two-thirds of all jobs are in SMEs. Thus, by encouraging the growth of small and medium-sized enterprises, provincial governments are ensuring a positive future for their economy and their citizens.
Knowing how important SMEs are to provincial economies, what about the state of trade between them?
The Canadian Federation of Independent Business (CFIB) has taken a closer look and reveals the results in a new study1. This reveals that 215,000 SMEs trade in both provinces, i.e. 107,000 Quebec SMEs and 108,000 Ontario SMEs. This represents 39% of SMEs in Quebec and 22% in Ontario. The main sectors are the same for both provinces: wholesale and retail trade, and manufacturing.
For Ontario SMEs, the main barriers to doing business in Quebec are the language barrier (47%), high shipping costs (24%) and the complexity of provincial regulations (19%). In Quebec, the number one response from SME owners is that they have no barriers (29%) to their business activities. They then note shipping costs (27%), the complexity of provincial regulations (19%) and the language barrier (17%).
Let us first touch on the question of language. First observation: knowing several languages opens as many commercial doors, as shown by the large proportion of Quebec SMEs that are invested in the Ontario market. With the accompanying services offered by governments, we have real economic opportunities right at our fingertips! In addition, Ontario’s Francophone business community could play a key role.
Second, there is an opportunity to improve labor mobility and internal trade by reducing the administrative burden on SMEs, for example by having more measures for the mutual recognition of professional accreditations. This would meet the needs of many SMEs looking for qualified employees.
Indeed, 9 out of 10 SMEs in Quebec and Ontario want governments to reduce the overall tax burden, and rightly so, since both are at the top of the list of provinces with the highest small business income tax .
It’s even worse in Quebec, where smaller companies in the construction and service sectors are at a much greater tax disadvantage. Those in the service and construction sectors that have an annual payroll of 5,500 hours or less must pay the multinational tax rate. This gap places an inequitable burden on these businesses and undermines their growth and competitiveness. There is an urgent need to address this problem and put in place a fair and equitable tax regime for all SMEs in Quebec, similar to what Ontario is doing. In an economy where small businesses play a major role, taxing them more is not synonymous with economic growth.
Both economies have much to gain by facilitating better market access between the two provinces. Moreover, these are directions that are favored by a large majority of SME owners in both provinces, because they believe that closer collaboration between Quebec and Ontario will benefit Canada’s economy, their industry and their business. So here is a project to be prioritized by the Legault and Ford governments! Encouraging and increasing the network between Quebec and Ontario SMEs will stimulate the economy of both provinces, as well as that of the rest of the country.
