Smaller businesses pay between 20-23% more in taxes in Canada than in the U.S.

The Big Beautiful Bill makes the gap permanent

TORONTO, Sept. 11, 2025 /CNW/ - A microbusiness (four employees) in Canada pays on average a whopping 20% more in taxes than a similar firm in the United States, finds a new report from the Canadian Federation of Independent Business (CFIB) that compares tax loads in all 10 Canadian provinces and 20 U.S. states. A small business (25 employees) pays 23% more in taxes than its U.S. counterpart.

If Canada wants to boost its productivity and attract investment, it needs to control its tax burden. Bradlee Whidden, senior policy analyst for Western Canada at the Canadian Federation of Independent Business (CFIB), breaks down the fiscal environment in Canada and the U.S. and explains why it’s important for Canada to prioritize small business tax competitiveness.

"U.S. tariffs are not the only competitive issue facing Canadian small businesses," said Bradlee Whidden, senior policy analyst and report co-author. "When you look at the numbers, it's crystal clear: smaller businesses in Canada are already at a serious tax disadvantage, which was just made permanent by recent pro-small business changes in the United States through the Big Beautiful Bill. If Canada wants to compete and raise our standard of living, we need to cut taxes. Payroll taxes are heavy on both sides of the border, but the real gap is in corporate and property taxes. Here in Canada, that gap means less money going back into wages, business operations, and growth." 

On a province-by-province level, Quebec and Atlantic Canada performed poorly, while Western Canadian provinces ranked a bit higher, but still significantly below the average of U.S. states analyzed in the report. Even the most competitive provinces (B.C. for micro businesses, Saskatchewan for small firms) have an average tax burden higher than the vast majority of U.S. states.

Among microbusinesses, the five best (1 – 5) and worst (26 – 30) jurisdictions are: 

1.    South Dakota (USA)	26.  Newfoundland and Labrador (CAN)
2.    North Dakota (USA	27.  Prince Edward Island (CAN)
3.    Wyoming (USA)	28.  Nova Scotia (CAN)
4.    Florida (USA)	29.  New Brunswick (CAN)
5.    Texas (USA)	30.  Quebec (CAN)

Among small businesses, the five best (1 – 5) and worst (26 – 30) jurisdictions are:

1.    South Dakota (USA)	26.  Nova Scotia (CAN)
2.    Wyoming (USA)	27.  Prince Edward Island (CAN)
3.    North Dakota (USA)	28.  Newfoundland and Labrador (CAN)
4.    Florida (USA)	29.  New Brunswick (CAN)
5.    Texas (USA)	30.  Quebec (CAN)

To improve Canada's tax competitiveness and boost economic productivity, CFIB is calling on the federal and provincial governments to lower corporate income tax rates for small firms, and to increase the small business deduction threshold while indexing it to inflation moving forward. Additionally, municipal and provincial governments should reduce property taxes and close the property tax gap between commercial and residential properties.  

"Trade disruptions have put the spotlight on Canada's uphill battle to remain competitive with the United States. While we can't control what other countries do, we can't ignore the widening gap between Canadian small firms and their U.S. competitors," said Juliette Nicolaÿ, CFIB's policy analyst for national affairs and report co-author. "It's time for governments to step up with policies that lower the cost of doing business in Canada." 

Read the full report.

About CFIB 
The Canadian Federation of Independent Business (CFIB) is Canada's largest association of small and medium-sized businesses with 100,000 members across every industry and region. CFIB is dedicated to increasing business owners' chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings. Learn more at cfib.ca. 

Methodology
This analysis presents figures in each country's local currency. Variables were selected for each business type based on what was reasonable for their size. For small businesses and microbusinesses, these include pre-tax net income ($1 million and $150 thousand), number of employees (25 and four), and business property value ($3 million and $450 thousand). Taxes that are treated as business expenses, such as payroll and property taxes, reduce taxable income before the remainder is subject to income taxes. Local taxes (e.g. municipal property taxes) assume the business is located in the largest municipality in each province/state. Five of the most populous U.S. states were selected for the comparisons, with the remaining fifteen chosen based on their trade exposure and geographic proximity to Canada.

SOURCE Canadian Federation of Independent Business

For media enquiries or interviews, please contact: Dariya Baiguzhiyeva, CFIB, 647-464-2814, [email protected]