The Liberal government’s decision to not cut small business taxes will boost government revenues and result in a small reduction in GDP and job creation, according to an analysis by the Parliamentary Budget Office (PBO).
The previous Conservative government had made several reductions in the small business tax rate, and in the 2015 election campaign, the Liberals had promised to continue reduce small business taxes from 10.5% to 9% by 2019. However, in their 2016 budget, the government kept the small business tax rate at 10.5%.
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The PBO said this decision will result in a $45 million decrease in federal revenues in 2016 because of the way tax information is recorded. In 2017 revenue from maintaining the rate at 10.5% will rise to $155 million, increasing to $815 million by 2020.
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The PBO also calculated the economic impact of not cutting the small business tax rate: by the decision will reduce GDP by $300 million, equal to 0.015% of total GDP. The office also estimated that failing to implement a tax cut will lead to job losses of 1,240 by 2020.
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