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Mad as hell: business taxes and red tape can frazzle you.


The list of problems he's faced while trying to set up his company during the past year would fill many pages, but his most pressing concern is that he is selling his product without collecting any provincial tax.

In May 1991, Reid dropped out of his Ph.D. studies to become an entrepreneur. Enviro-oil looked like a sure bet and it fit perfectly into a market niche. The company recycles oil from cars, trucks and locomotives using technology developed in Canada. The system takes the used and dirty liquid and turns it into top quality No. 2 type diesel fuel which can be used in trucks, commercial boilers and as a heating fuel. The by-product of the refining process is a black ash which is mixed with concrete as a binding agent -- just the type of business our environmentally correct society is looking for.

Before Enviro-oil came along, used oil was sprayed on dirt roads to keep down the dust or it was burned, releasing toxins into the air.

Enviro-oil's problems began in July 1991, when the company started producing and selling home heating fuel, which carries no provincial tax. After the winter that market died out and it was time to start selling diesel fuel. It was now April 1992, and Reid had been waiting for several weeks for a ruling from the Finance Department as to what tax he should charge on his product.

By May there was still no word from the bureaucrats. Soon Reid had plenty of product to sell and customers were anxious to buy. When he called the Tax Department he was told to be patient. The pressure mounted. Reid shut down the plant for five days since it made no sense to go on refining but not selling. The shut-down cost $2,000 per day. After one week of thumb-twiddling, explanations to angry clients and a loss of $10,000, Reid could wait no longer. He started selling the fuel and did not collect any tax. By the time this article went to press, Enviro-oil had been operating for five weeks, tax-free, and still no word from the Finance Department. If the company had waited for the government, it would now be $50,000 in the hole.

The strain shows on Reid's face and he is blunt. "After five days I said 'to hell with it' and if they come after me now for the taxes, I might as well shut the doors."

Manitoba Finance Minister, Clayton Manness, refused to return phone calls on Enviro-oil's problems. However, Reid claimed that after being interviewed by Manitoba Business, he received a call from a man who identified himself as Garry Gibson, from the Minister's office. Reid said Gibson told him not to speak to the media on the matter. Furthermore, Reid said that Gibson said that the minister would be "very upset" if the matter became public.

Case Two

On March 24, 1992, Fiona Webster Mourant, president of Manrex Limited, a Winnipeg-based pharmaceutical consulting firm, sent an angry letter to David Brown, Deputy Mayor of Winnipeg. She came to the point in the second sentence. "As a small business owner I have begun to question why we would want to continue operating in Canada, and in particular, Winnipeg." Webster Mourant's questions started shortly after her company relocated on Waverley Street. She wanted to put a sign in front of the building -- on the same site where the previous business had set up its sign -- and she ordered one from a local company. Price tag -- $2,500.

In the letter Webster Mourant said, "To my disgust I learned (from the sign company) that I would have to pay $150 to obtain a city permit and from $700 to $1,000 for an application for zoning approval."

"This does not guarantee that we will even get approval and represents close to HALF the cost of the sign. Can you tell me what justification the city has to charge such an exorbitant fee?" Brown wasn't the only one to get Webster Mourant's letter. She was so steamed she sent a carbon copy to 87 suppliers across Manitoba as well as Steve Childerhouse, then president of the Winnipeg Chamber of Commerce. In addition, she cancelled her order for the sign.

Nine days later Brown wrote back. He said, "I have asked the Commissioner of Planning and Community Services to review the issue specifically with regards to your sign situation as well as the current fee schedule." Two months later, Webster Mourant had had no further word from the city government.

Overall, the young executive says she is concerned about the use of tax dollars. "I don't understand what half the taxes are for or what their benefit is," she said, pointing out the window of her office to the spot where the sign was supposed to go. "This sign issue is the straw that broke the camel's back. The government is like a leech; it doesn't create anything and it's becoming a weight around the neck of business." Manrex, which makes and markets medication handling systems for hospitals and nursing homes, and pharmaceutical delivery systems, was started two decades ago by John Webster, Webster Mourant's father. She said if it wasn't for that history, the company would move. "I don't see how somebody could begin to think about setting up a business in this province."

When contacted about the letter, Deputy Mayor Brown said he had asked for more information about the matter from several municipal and provincial government departments. He added he had just received the final piece of the puzzle "yesterday" and planned to contact Webster Mourant by telephone "very shortly." However, two weeks later she hadn't received any correspondence. Webster Mourant did receive a letter from Industry Minister Eric Stefanson explaining the benefits of staying in Manitoba rather than moving to the States. Enclosed was a copy of the provincial budget. Says Webster Mourant, "Instead of dealing with the issue at hand -- the sign -- I received information on the provincial budget and a letter detailing why I should stay in Manitoba." Webster Mourant says the sign is a small issue but symptomatic of her feelings about government taxation and spending. She feels government doesn't spend our tax money wisely and that in itself is something she feels can't be fixed.

Seeing Orange

Robb Miles wishes people in the city planning department were a little colorblind. Miles is the president of Park Rite Ltd. which owns and operates parking lots all over the city. Several of those lots are in the Exchange District, close to the company head office. A standard feature of all Park Rite lots is the color orange. It is painted on posts, fences and curb stones to make sure drivers don't hit them. More than a year ago Miles was served several violation notices by the city zoning department. They didn't like the orange, and in particular they said it didn't belong in a heritage area. Miles was ordered to pick another hue and repaint. Instead he took a camera, walked around the area, and took shots of everything he saw which was orange including the hydro tower in Stephen Juba Park, the fence around the water intake station on James Street and structures at The Forks. He put them together along with a written protest and, after lobbying several counsellors, took the document to an appeal meeting with support from the Winnipeg Chamber of Commerce and representative of the Exchange District Biz Association. According to Miles, he won the appeal but it took a week of activity -- time he said would be better spent running his business.

Barry Yanchyshyn, the city's historic projects coordinator, sees the color issue through different eyes. "Orange, at most, is an accent color," he said. "It's not an appropriate color and that's the end of the's so ugly." Yanchyshyn explains that the Exchange District is subject to a "design review" which means all outdoor colors must be kept within the guidelines of a historic theme. "We're trying to accomplish something here in terms of appearance and tourism, and what Miles is doing is detracting from that attempt. He's gone ahead and done it without approvals." When asked why Park Rite cannot paint property it owns any color it wants, Yanchyshyn replied, "for the same reason you can't turn your house into an industrial's against the law." He also stated that Park Rite had "won" nothing at the appeal and the issue is still considered to be "unresolved."

Color isn't Miles' only complaint. He has a dozen examples of what he calls "harassment." "If you've got the time," he said, "I've got all morning to tell you stuff." In the seven years he has been in business he has learned some rules about dealing with city hall but he has been pushed to the point of breaking them. "You have to be extremely careful with bureaucrats," he said. "They're capricious and you get no support from their managers but I've finally taken enough of this, I don't care anymore. I've gone through hell and I won't take this."

Steve Childerhouse understands the anger and frustration of the business community. "Government is like a Goliath you cannot kill," says Childerhouse, who recently stepped down after a year as president of the Winnipeg Chamber of Commerce and has now returned to his job as a partner with Price Waterhouse. Childerhouse is still involved with a group called CAP-IT -- The Coalition Against Perpetually Increasing Taxes. The group has several members including the Consumers Association, the Manitoba Society of Seniors, the Canadian Federation of Independent Business, the Trucking Association and the Winnipeg Chamber of Commerce.

Childerhouse agrees that people tend to get the government they deserve and in Winnipeg that is particularly so because "we've let it get out of hand and done nothing about it." As a result, CAP-IT plans to become a real force in the upcoming municipal elections in Winnipeg and try to install a business friendly set of leaders. Through advertising, the group plans to make expenditure control and tax review "the election issue," said Childerhouse. "We want to get something done so business can move ahead. We don't want to destroy the environment, or set up sweatshops, but we do want the attitude toward business to change; it's terrible right now. All I get is phone call after phone call, letter after letter saying 'go get them'. But the city thinks its relationship to business is good."

Gordon Johnstone, president and CEO of Winnipeg 2000, the city's business development agency, says much of the current outcry comes from a general disillusionment with government by everyone, not just business.

Johnstone's recommendation for businesses? "Getting things done depends on the sophistication of business," he said. "Business that tends to learn the ropes and plays the ropes almost uses government to its advantage at times." Johnstone defined "sophistication" as knowing the rules and procedures for getting access to decision makers -- who to call and who to deal with. He did not like equating sophistication with knowing which cocktail party to attend, and having the "right" people on the Christmas card mailing list although he did agree that for new companies, which need the most help and whose owners have the least free time, "learning the ropes is a long process, I agree the ropes are sometimes complex."

But for Manrex, Park Rite and Enviro-oil those ropes have simply become a messy and solid ball of knots.
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Author:Ryan, Bramwell
Publication:Manitoba Business
Date:Jul 1, 1992
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