Let’s not hobble entrepreneurs just when we need them most

Many people have a natural tendency to turn to government when a crisis strikes, and the COVID-19 pandemic has certainly been no exception. But while governments have had their role to play, entrepreneurs have also come through for us in many ways over the past year.

As the vaccine rollout picks up steam, we will need our entrepreneurs to be in top form once again to help make the post-pandemic economic recovery as speedy as possible. Doubling down on the selective deregulation that has occurred during the pandemic would be a good place to start. So would rejecting the siren call of those urging the adoption of a new wealth tax as a way to deflate our ballooning public deficits.

Entrepreneurs to the Rescue

In addition to wreaking havoc on lives and livelihoods, the pandemic has required businesses to adapt quickly. And with global supply chains and financial markets significantly disrupted, the government of Canada called on manufacturers to help in the battle against COVID-19. Aside from the obvious and tremendously important worldwide effort by pharmaceutical companies to rapidly develop a vaccine to fight the virus directly, many businesses mobilized quickly in more down-to-earth ways to provide help and comfort in these trying times.

For instance, when all this began, personal protective equipment (PPE) was in short supply, leaving frontline workers dangerously ill-equipped to care for COVID-19 patients. Harnessing its expertise in making helmet visors, hockey apparel company Bauer redirected operations in its Quebec facilities to make medical face shields for health care workers. Nike and New Balance similarly repurposed their facilities to produce PPE, and Canada Goose used manufacturing facilities in Toronto and Winnipeg to produce scrubs and patient gowns.

By mid-April 2020, sales of alcohol-based hand sanitizers were up 345% in Canada, with demand quickly outstripping supply. This led the federal government to call for assistance, and Health Canada to approve product licenses for non-traditional manufacturers, such as distilleries. Among others, Gelamain Québec, a group of collaborators and partners from the province’s spirits industry, answered the call and provided their expertise pro bono to produce and distribute hand sanitizer for the health network and select essential services. The group processed a generous donation of alcohol from the Diageo distillery and distributed 25,000 litres of hand sanitizer for free.

With many retailers closed and grocery store shelves being emptied by panic-buying, Amazon initially prioritized the sale of essential household items, including hand sanitizer, face masks, and disinfectants. And with e-commerce spending in general up 37% in the third quarter of 2020 over the same period in 2019, retailers and shipping companies prepared for the holiday crunch by hiring widely. UPS, FedEx, and Amazon together hired more than 300,000 employees, thereby helping to save Christmas!

Meanwhile, lockdowns reshaped the way many businesses operate, with nearly 40% of Canadians telecommuting by the last week of March 2020. Combined with the closure of schools and the use of virtual learning options, demand for communications technologies like Google Meet, Microsoft Teams, and Zoom skyrocketed. While helping mitigate the harmful psychological impacts of lockdowns, these videoconferencing platforms also accelerated the entry of telemedicine into the lives of Canadians in 2020, thus providing patients with better access to health professionals.

And while the pandemic has been devastating for the restaurant industry, it also ushered in an era of widespread food delivery. Winnipeg-based SkipTheDishes doubled its business in the third quarter of 2020 compared to the previous year. In May 2020, DoorDash sales were up 110% since the beginning of the year. And Quebec companies like UEat, Pizzli, and Restoloco helped expand the options available for restaurateurs by proposing more affordable alternatives. There was also unprecedented demand for online grocery orders, which resulted in a 241% rise in e-commerce sales for Sobeys compared to 2019, for instance.

A Wealth Tax: Hitting the Economy When It’s Down

As the above examples show, many businesses have pivoted quickly to adapt to the uncertain landscape, often helping to address critical resource voids, strengthening the ability of community actors to deal with adversity, and keeping their employees working or even hiring new ones. In some cases, bureaucratic barriers were lowered to give free rein to innovation, such as allowing telemedicine to flourish and non-traditional suppliers to make hand-sanitizer.

This kind of common-sense deregulation should be made permanent, and should inspire a similar relaxing of rules elsewhere in the economy. This will help entrepreneurs to fully exploit the agility and ingenuity that will be essential to the success of the post-pandemic economic recovery. But perhaps even more importantly, we need to refrain from throwing up any extra hurdles for entrepreneurs to leap over. A wealth tax would be just such a hurdle.

The New Democratic Party of Canada would have you believe otherwise. In anticipation of the 2021-2022 federal budget, the NDP proposed a tax on large fortunes, stating that this measure could bring the government $70 billion over ten years, and that many other countries have already implemented a similar tax.

What they failed to mention is that many countries have abandoned their wealth taxes. In 1990, eleven OECD countries collected some form of wealth tax, but by 2019, that number had fallen to five. The Austrian government abolished its tax because of its high administrative costs. Other countries, like Finland and Sweden, ended theirs because they were causing a significant exodus of capital and tax avoidance on the part of wealthier individuals and companies.

Moreover, in order to calculate the tax to be paid, a government must estimate and quantify the value of each asset held by each of its citizens, which is no small matter. And on top of this administrative difficulty, wealth taxes generate little revenue for governments—in Europe, just 0.2% of GDP, barely covering the costs of administering them.

As we come out of this major health crisis in the coming months, let’s give all our entrepreneurs as much freedom as possible to get their businesses revving again, and get people back to work to fulfil our needs on the market. And above all, let’s avoid placing any additional burdens on the shoulders of these unsung heroes of the pandemic.

The MEI is an independent public policy think tank based in Montreal. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship. For more information, please visit: www.iedm.org