The federal government’s first budget contained a number of broken commitments to small- to-medium-sized business owners.
Although the new government had promised to reduce the small business corporate tax rate to 9% by 2019, this promise was broken in today’s budget, as the rate will remain at 10.5% beyond 2016. This is expected to cost small firms over $900 million more per year by 2019.
The government also retreated from a promise to introduce an Employment Insurance holiday for employers hiring youth between ages 18 and 24 in 2016, 2017 and 2018.
In a further blow to small business, the government announced it still plans to proceed with an expansion to the CPP/QPP program by the end of the year, a job-killing payroll tax for small employers.
CFIB President Dan Kelly speaks to reporters after budget is released.
Other budget items of concern to independent businesses
- Deficit: a $29 billion deficit is projected for the current year with no concrete plan to return to balance.
- Passive vs. active income rules: the government has stopped the review of active/passive income rules, which will deny lower tax rates to legitimate small business employers such as self-storage facilities and campgrounds, among others.
- Employment Insurance: the Small Business Job Credit will end in 2017 and small businesses will see no net reduction in EI tax rates (as was previously announced in 2015); the EI waiting period for benefits will also be reduced from 2 weeks to 1.
- Work sharing: the government will expand the EI work sharing program, which is popular with some small employers during economic downturns.