WINNIPEG - Canada’s provincial and territorial Finance Ministers must break away from the federal government’s example in order to support small business, urges the Canadian Federation of Independent Business (CFIB). The new passive investment tax rules implemented at the federal level unfairly punish small business owners and create an environment that discourages growth.
Federal budget 2018 included new rules that will shut out some small businesses from accessing the small business tax rate if they have more than a certain amount of pre-existing passive investments, taxing them like big businesses. If provinces choose to implement similar rules, small businesses will pay thousands of dollars more in provincial taxes next year on top of higher federal taxes. Many small business owners rely on their investment income to stay afloat during economic uncertainty without resorting to cost cutting measures like layoffs, downsizing or closures.
“Today’s Finance Ministers meeting is an important opportunity for the provincial and territorial Ministers to show leadership on this issue and create an environment where small business can thrive,” said Dan Kelly, CFIB’s president and CEO. “CFIB has confirmed that provinces are not obligated to follow the federal lead.”
Only Ontario and Prince Edward Island have already indicated they would follow the federal government’s lead on passive investment rules. CFIB is calling on the newly elected Ontario government to revisit that decision before it goes into effect in 2019.
In addition to keeping the small business tax rate open to businesses with existing passive investment income, CFIB encourages the Ministers to consider the following measures:
· Freeze or reduce taxes for businesses grappling with Canada Pension Plan premium increases that start in 2019
· Reallocate provincial Workers’ Compensation Board surpluses to employers
· Allow a business to deduct up to $100,000 of new capital investments in the year of purchase
· Implement tax credits for small businesses to hire and train youth
· Commit to balancing budgets in those jurisdictions running deficits over the next five years
· 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. We are asking Finance Ministers to listen to their concerns and act now,” concluded Kelly.