The federal government plans to cut the small business tax rate from 10.5% to 10% by January 1, 2018, and to 9% by January 1, 2019, Finance Minister Bill Morneau announced October 16.
As well, the government will not be moving ahead with previously proposed changes to access to the lifetime capital gains exemption, which had been met with backlash from many small business owners, particularly farmers. Morneau also said the government intends to simplify proposed changes to limits to business owners splitting income with their family members.
Prime Minister Justin Trudeau had campaigned on the promise to reduce the rate to 9%, but in Budget 2016 it was announced that the rate would be frozen at 10.5%.
“We will be taking the next step towards greater tax fairness by addressing tax planning strategies that benefit the wealthiest, while fulfilling our commitment to lower the small business tax rate to 9%,” Morneau said. “We will make sure this small business rate is effective in encouraging businesses to grow, buy new equipment and hire more workers.”
The move comes as the Trudeau Liberals are still dealing with blowback from proposed tax changes announced in July. Some of these changes pertain to business owners’ ability to split income with their family members.
Richard Truscott, vice-president of the Canadian Federation of Independent Business in B.C. and Alberta, said he is pleased to see the government listening to small business owners’ concerns.
“Reinstating the promise to cut the small business tax rate is a great way to start small business week,” he told Business in Vancouver. “Hopefully this will be the first step to repairing the relationship with Canada’s entrepreneurs.”
Truscott said the rate cut would have been better presented as part of the initial tax reform package.
“We’re going to interpret these moves as hitting reset, and we will spend the next few weeks analyzing the entire package of changes, including the positive news about the reduction of the small business rate,” he said.
“We’re pleased the government appears to be open to hearing from the business community on the revised tax change package.”
@EmmaHampelBIV
