Don't follow Ottawa on small-business tax changes, CFIB asks provinces

The industry federation is hoping provinces won’t add salt to business owners’ federally inflicted wounds

Don't follow Ottawa on small-business tax changes, CFIB asks provinces

The Canadian Federation of Independent Business (CFIB) has urged Canada’s provincial and territorial ministers to break away from the federal government’s example of imposing new passive-investment tax rules on small-business owners.

In a statement, the CFIB contended that Ottawa’s changes announced in the 2018 Federal budget “unfairly punish small business owners and create an environment that discourages growth.” Should provinces choose to implement similar rules, they warned, small businesses would end up paying thousands of dollars more in taxes on top of higher federal taxes.

The group also argued that passive investments are essential for many business owners, who rely on the derived income to weather economic uncertainty without having to adopt cost-cutting measures like layoffs, downsizing, or closures.

“CFIB has confirmed that provinces are not obligated to follow the federal lead,” said CFIB president and CEO Dan Kelly.

At the time the statement was issued, only Ontario and Prince Edward Island had already signified their intention to follow Ottawa’s lead on passive investment taxation. The CFIB called on the newly elected government of Ontario to take a second look at the decision before it takes effect in 2019.

Aside from keeping the small-business tax rate open to businesses with existing passive investment income, the CFIB suggested a number of measures for provincial ministers to explore:

  • Freeze or lower taxes for businesses faced with Canada Pension Plan premium increases that start in 2019;
  • Reallocate provincial Workers' Compensation Board surpluses to employers;
  • Let a business deduct up to $100,000 of new capital investments in the year of purchase;
  • Create tax credits for small businesses to hire and train youth;
  • Commit to balancing budgets in those jurisdictions running deficits over the next five years; and
  • Measure the regulatory burden and take actions to reduce it.

“We're hearing from small business owners everywhere that they're frustrated with mounting taxes and regulations, especially as the reverse is true in the US,” Kelly said. “We are asking Finance Ministers to listen to their concerns and act now.”