Would reducing the small business tax rate from 9% to 6% help?
Entrepreneurs and small businesses are facing challenges from weak consumer spending, labour shortages, rising operating costs, and economic uncertainty - and agri-buisnesses are no exception. Ongoing trade tensions and supply chain disruptions have added further pressure, making it more difficult for businesses to grow and invest.
The Canadian Federation of Independent Business (CFIB) is calling for a series of tax changes that could support entrepreneurs and encourage business expansion across the country. The recommendations are aimed at providing relief for small firms while helping them remain competitive in a changing economic environment.
One of the key proposals is to reduce the small business tax rate from 9% to 6%. Lowering the tax burden would allow business owners to keep more of their earnings and reinvest in operations, equipment, employees, and long-term growth.
CFIB is also recommending that the Small Business Deduction threshold be increased from $500,000 to at least $700,000 and be indexed to inflation in future years. The organization believes this change would better reflect today's economic conditions and provide additional support to growing businesses.
Another recommendation focuses on passive investment income. CFIB suggests increasing the passive income limit from $50,000 to at least $250,000. This change could provide business owners with greater flexibility in managing earnings and planning future investments.
Several proposals target the Goods and Services Tax and Harmonized Sales Tax system. CFIB recommends raising the GST/HST registration threshold from $30,000 to at least $60,000 and indexing it to inflation. It also proposes increasing the Quick Method of Accounting threshold from $400,000 to at least $700,000. These measures could reduce administrative burdens and make compliance easier for many smaller businesses.
The organization is also calling for an increase to the Canada Pension Plan Basic Exemption from $3,500 to $7,000, with future adjustments tied to inflation. According to CFIB, this move could help lower payroll costs while improving financial flexibility for employers.
Additional recommendations include indexing GST/HST remittance thresholds and payroll source deduction thresholds to inflation. By updating these limits, businesses could benefit from reduced administrative requirements and greater efficiency in managing tax obligations.
CFIB believes capital gains tax reforms could further encourage entrepreneurship and investment. Among its recommendations is a lower capital gains inclusion rate of 33% on the next $2 million in gains beyond the Lifetime Capital Gains Exemption. The organization also supports expanding eligibility under the exemption to include gains from the sale of business assets as well as shares.
Another proposal would allow entrepreneurs to defer taxes when proceeds from the sale of a business are reinvested into another Canadian-controlled private corporation within three years. This rollover approach is designed to encourage continued investment in Canadian businesses.
CFIB is also urging the government to expand immediate expensing rules, so more types of capital investments qualify. Business owners often need to invest in equipment, technology, and infrastructure, and faster access to tax deductions could encourage those investments.
To help smaller employers manage workforce costs, CFIB recommends lowering Employment Insurance premiums by allowing eligible businesses to pay a reduced rate on wages up to a specified threshold. The organization also proposes a business deduction or refundable tax credit for self-employed Canadians, like a program available in the United States.
Supporters of these measures argue that reducing taxes, updating outdated thresholds, and encouraging investment could help small businesses remain resilient and contribute to Canada's long-term economic growth. As policymakers consider future budget decisions, these proposals may help shape discussions on how to strengthen entrepreneurship and support business success across the country.
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