[As printed in the Lethbridge Herald, Dec. 31, 2008] http://www.lethbridgeherald.com/content/view/19875/57/

Lethbridge Business

The past few weeks’ letters have been highlighting Lethbridge City Hall’s cash grab from home based businesses. Not only is the home based business tax increase excessively high, it is also quite parasitic on the entrepreneurial spirit.

According to Industry Canada, 30% of small businesses fail in the first year and 50% fail after three years. These stats don’t apply to home based businesses (individual entrepreneurs) but the City’s business license renewal rate may be similar. As Mary Siever pointed out, Lethbridge City Hall will increase its home based business tax rate to $495. The biggest problem with a $495 license fee is that such an amount can be crippling during the first year or two of a new business. At a time (the first 3 years) when small businesses need all the support they can get, the City is milking those businesses.

Take this case as an example: In its first year, a home based business generates $10,000 in sales. After the cost of goods and federal and provincial taxes come off, that $10,000 turns in to $2,000 (net profit after tax). Now compare $2,000 in profit to the $495 license fee. In the first year of a Lethbridge home based business, the owner has to pay an equivalent of 25% in extra taxes to the city.

If the City has any capacity to understand the difficulties in starting a business then I think they would find their own policies to be extremely restrictive to commercial growth.