Yahoo Finance 2018 budget has small businesses breathing a little easier: CFIB
Small business owners across Canada were breathing a bit easier on Tuesday as this year’s federal budget toned down some of last year’s dramatic changes that were proposed to the country’s tax laws.
The Canadian Federation of Independent Business (CFIB) says that while better than originally thought, the new budget still poses some significant setbacks for small business owners.
“The government did make some improvements, so we give them credit for that. It was clear that the heat that they felt over the course of the last eight months certainly caused them to rethink some of their plans,” CFIB president Dan Kelly told Yahoo Canada Finance. “It certainly is not a win in so far as the business environment is getting worse not better. It’s just getting less worse than what would have been the case if the original proposal went through.”
The original proposal in July was sharply criticized for being overly complex and unfairly targeting small business owners. After opening a dialogue on the proposed changes, the government made further amendments to the proposal in October.
The 2018 budget restates some previous announcements from October’s proposal, including cutting taxes for small businesses to nine per cent, down from 10.5 per cent. It also makes it clear that the government isn’t giving up on efforts to prevent the lower small business tax rate from being used “to gain a personal tax advantage for a very small number of wealthy individuals.”
The budget now includes a proposal for another “eligibility mechanism,” which slowly reduces access to the small business tax rate for businesses that have a significant amount of passive investment income. This is a change to a July proposal that called for cutting access to refundable taxes.
Kelly says what made it into this year’s budget is even better than what was announced last October but he had hoped passive income provisions would have been dropped altogether.
U.S. relationship still in question
The CFIB believes the budget also disappointed on keeping up with tax reforms seen south of the border.
“There’s virtually nothing in the budget to improve the competitiveness of Canadian businesses…and yet, we’ve seen the United States take some big strides forward,” he said.
“All we were hoping for in the budget was some signal that the federal government was taking it seriously and making a start in addressing the competitiveness gap that is starting to happen between Canada and the U.S.”
One provision the CFIB hoped the government would consider was one that would allow businesses to write off capital investments in the same year, which they say doesn’t exist in Canada at all.
Instead, they say in a time where NAFTA is uncertain, the country needs to improve its tax competitiveness, but the budget has made it worse.
“The tax changes they made on the small business side will still suck out another billion dollars a year out of the pockets of small business owners, and yet in the U.S., most business owners are seeing a giant cut in their taxes, and that’s not a good thing,” Kelly said.
Giving women a boost
Something the CFIB is looking forward to in the new budget is its focus on women entrepreneurs. The budget includes a new Women Entrepreneurship Strategy, which aims to reduce barriers and fuel funding for entrepreneurship, mentorship and skills training agencies aimed at women.
“In terms of the gender lens that was taken in the budget, I think it was entirely appropriate that the government look at ensuring that we can increase participation among women in small business ownership,” Kelly said. “We welcome those ideas and are prepared to work with the government into fleshing them out.”
While the budget was only released yesterday, the CFIB says it already has plans to lobby for further changes to tax rules, including for issues like income splitting. Kelly says they will continue to target members of parliament and lobby the senate aggressively.
“We’re not done. The budget isn’t in law yet. They still have to go through the budget implementation process,” Kelly said.
“We have not given up the battle.”
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