Good morning. In today’s newsletter, we’re looking at how growing complexity in Canada’s income tax code is weighing on small businesses.

Utilities: Halifax-based Emera is bidding to build a national champion in the utility sector by merging with Calgary’s Canadian Utilities and parent ATCO in $35-billion union.

Defence: Ottawa is turning the new Defence Investment Agency into a Crown corporation, a move giving it more decision-making power.

Entrepreneurship: Business leaders are asking Ottawa to expand a tax incentive to reinvest startup proceeds.

Family meetings: Eleanor McCain is ramping up her campaign for a lucrative exit from McCain Foods by calling a family meeting to discuss an initial public offering.

How complexity creates a tax of its own

Serena Thompson founded Lighthouse Learning and Development Centre in Markham, Ont., nearly 12 years ago after deciding her autistic son was not getting the support he needed in the public school system. What began with six employees has grown to nearly 20. Lighthouse is now a registered private school, autism therapy centre, not-for-profit and registered charity.

For a story on how Canada’s income-tax code has expanded to more than twice the length of War and Peace, I spoke with Thompson about the cost of navigating complexity.

You were a police dispatcher before becoming an entrepreneur. What was it like getting started?

There was a lot, because not only was I setting up a business, I was setting up an education centre. There were permits you had to think about and registrations and taxes, and all of these different things that you have to teach yourself if you’re going to be successful.

Never mind employing people. That was its own separate beast – how to navigate employing people and being a good team leader while at the same time being an HR person.

You need money to start a business. Where are you getting that from? If you’re funding the business yourself, there have to be loan documents associated with that. There are all these things that you don’t know when you’re starting up, and your really good idea turns into something very challenging before it comes to fruition.

Was the tax side particularly complicated because of the kind of services you provide?

It was much more challenging, especially when you’re working with neurodivergent individuals because there are certain things you’re tax-exempt from. Do we charge tax? It’s a service, so how does that work? Some of our families are funded under the Ontario Autism Program. Where do taxes come into there?

We learned very early on that, as much as you’d like to save money for your organization, you have to outsource a lot of those things.

I know what I’m really good at, but I also know what I cannot do. Something like taxes, your HST, your yearly financials – while it’s going to cost money to have somebody do that, you’re going to spend more of your time and money in the long run trying to muddle through it.

Was hiring that outside expertise a difficult expense to justify?

It was a very challenging decision because our revenue was coming from families of children with autism. We were trying to keep costs down for them, but we wanted to offer an exemplary program, and that costs money.

So it was a difficult decision. Do we spend some of this money outsourcing these requirements because they’re needed? You have to do taxes. There isn’t really a book you can read to help you muddle through it.

We could spend the money and have someone keep our books clean and do our financials and all of our HST, or keep our fingers crossed and do it ourselves and potentially owe more than we would have paid to subcontract it.

There are so many things you can do wrong where you could be penalized later on.

If you’re not an accountant, you’re not an accountant.

You’ve talked about the problem of not knowing what you don’t know. Can you elaborate a little?

You need either experience or specific training to find out how to capitalize on what is out there.

You’re filling out a tax form and just filling in the boxes. It doesn’t necessarily tell you if you did this, then you can claim it, or if you did that, then you can claim it.

If you don’t know, then you don’t know where to look. When we brought in an accountant and they started listing all these different things, we were like, “What? We had no idea.”

It makes you sit back and think these big organizations really do know something that small businesses don’t.

With outside help, what is tax time like now?