Winnipeg, Manitoba
23 April 2015
The Government of Canada is committed to ensuring the continued success of Canadian businesses and promoting the creation of high-quality jobs. To this end, on April 23, 2015, Prime Minister Stephen Harper announced the proposed cut to the federal small business tax rate, which will help small businesses prosper from coast to coast to coast.
Canada’s federal income tax system supports small businesses through a preferential tax rate for Canadian-controlled private corporations with less than $15 million in taxable capital. The small business tax rate, which was reduced to 11 per cent in 2008, generally applies to the first $500,000 per year of qualifying active business income. This preferential rate allows small businesses to retain more earnings that can be used to reinvest and create jobs. Almost 700,000 small businesses benefit annually from this lower rate.
Economic Action Plan 2015 proposes to further reduce the federal small business tax rate to nine per cent by 2019. This reduction will be phased in as follows:
- 10.5 per cent effective January 1, 2016;
- 10 per cent effective January 1, 2017;
- 9.5 per cent effective January 1, 2018; and,
- Nine per cent effective January 1, 2019.
The Government of Canada will simultaneously adjust the Dividend Tax Credit to maintain the appropriate tax treatment of dividend income.
It is estimated that this measure will reduce federal taxes for small businesses and their owners by $2.7 billion over the 2015-2016 to 2019-2020 period.
The tax reductions for small businesses proposed in Economic Action Plan 2015 have been made possible by balancing the budget.
Economic Action Plan 2015 proposes to further support small businesses and their owners by:
- Improving access to financing for Canadian small businesses;
- Expanding services of the Business Development Bank of Canada and Export Development Canada to help small- and medium-sized enterprises;
- Increasing access to venture capital financing to help innovative, high-growth companies grow and create jobs;
- Providing $14 million over two years to Futurpreneur Canada in support of young entrepreneurs; and,
- Supporting the Action Plan for Women Entrepreneurs to help women business owners succeed.
Other major initiatives that the Government has initiated to help small businesses across Canada to prosper include:
Red Tape Reduction Action Plan
Description: Since it came into effect in 2012, the Red Tape Reduction Action Plan has provided a successful, system-wide control on the growth of regulatory red tape impacting business. To date, the plan has resulted in over $22 million less in net administrative burden annually and businesses spend 290,000 fewer hours annually dealing with regulatory red tape. By reducing red tape, our Government has helped businesses save an estimated $75 million annually in costs, including for over 5,000 small businesses.
The Government’s sustained approach to reducing the administrative burden associated with the tax system has made a significant contribution to the broader initiative to eliminate unnecessary red tape. The Government is continuing to reduce the tax compliance burden through new actions in Economic Action Plan 2015:
- Reducing the frequency of remittances for the smallest new employers;
- Launching the planning and preparation required for federal adoption of the Business Number as a Common Business Identifier; and,
- Enhancing Canada Revenue Agency administrative processes and service options for businesses.
Improved Access to Financing under the Canada Small Business Financing Program
Description: The upcoming changes to the program announced in January 2015 will make loans available to more firms by increasing the revenue threshold under which a small business can apply for the program, and will support business start-up and growth by increasing the maximum loan amount and the maximum term length for loans financing the purchase or improvement of land and buildings. Since 2006, the Canada Small Business Financing Program has provided over 50,000 loans to small businesses.
Small Business Job Credit
Description: The Small Business Job Credit is expected to save small businesses more than $550 million over the next two years by lowering small businesses’ Employment Insurance (EI) premiums from the current legislated rate of $1.88 to $1.60 per $100 of insurable earnings in 2015 and 2016. Any firm that pays employer EI premiums equal to or less than $15,000 in those years will be eligible for the credit. Almost 90 per cent of all EI premium-paying businesses in Canada will receive the credit, reducing their EI payroll taxes by nearly 15 per cent.
Venture Capital Action Plan
Description: The Venture Capital Action Plan is improving the access of high-growth companies to venture capital financing so that they have the capital they need to create jobs and growth. The plan makes available federal resources to help increase private sector investments in early-stage risk capital, and to support the creation of large-scale venture capital funds of funds led by the private sector.
Business Innovation Access Program
Description: The Business Innovation Access Program is a Government of Canada pilot program, announced in the 2013 Budget, that provides $20 million in funding to small- and medium-sized enterprises to help them access business services or technical assistance at Canada’s learning institutions and publicly-funded research organizations to bring bigger and better innovations to market faster.
Lifetime Capital Gains Exemption LCGE applicable to capital gains realized on the dispositions of qualified farm or fishing property to $1 million.
Other measures that the Government has taken that will benefit small businesses include:
- Creating the Canada Job Grant, which helps Canadians get the training they need for available jobs and puts skills training decisions in the hands of employers. The Canada Job Grant will provide up to $15,000 per person for training costs, such as tuition and training materials, which includes up to $10,000 in federal contributions. When fully implemented, a total of $300 million per year will be invested in the Canada Job Grant nationally;
- Concluding negotiations for the Canada-European Union Trade Agreement and concluding negotiations and implementing legislation for the entry into force of the Canada-Korea Free Trade Agreement, Canada’s first free trade agreement in the Asia-Pacific region (2014);
- Creating jobs, economic growth and productivity by launching the New Building Canada Plan, the largest and longest federal infrastructure plan in our country’s history, which will support the construction or renewal of provincial, territorial and municipal infrastructure (2014); and,
- Releasing an updated Code of Conduct for the Credit and Debit Card Industry in Canada to help make life more affordable for Canadians and entrepreneurs. Following consultations with stakeholders, these new changes mean more transparency, more flexibility and more choice for merchants and consumers, including new provisions that apply specifically to mobile payments (2015).
