Decision to defer small business tax cut will cost nearly $1 billion per year
OTTAWA, March 22, 2016 /CNW/ - In reacting to the 2016 federal budget presented today, the Canadian Federation of Independent Business (CFIB) is deeply troubled that the federal government broke an election commitment to middle class small business owners across the country.
Broken Small Business Corporate Tax rate promise
"In its platform, in a written letter to CFIB members, and in campaign stops across the country, the new government promised to reduce the small business corporate tax rate to nine per cent by 2019. That promise was broken today as it announced the rate will remain at 10.5 per cent after 2016," said Dan Kelly, CFIB president. This decision will cost small firms over $900 million more per year as of 2019.
Giant deficits with no exit plan
"Small business owners across the country are deeply troubled by the ballooning deficit. What was proposed to Canadians as a short-term $10-billion deficit plan to invest in critical infrastructure is now $29 billion with no plan to get back to balance," Kelly said. Most of the deficit is to cover a massive 7.6 per cent increase in program spending, which will do next to nothing to grow the economy. "Small business owners know that today's deficits are tomorrow's taxes," added Kelly.
Commitment to expand CPP/QPP payroll taxes a job killer
CFIB is also alarmed that the Minister is personally committed to reaching an agreement to expand the Canada Pension Plan/Quebec Pension Plan before the end of the year. "If there was going to be one promise to defer in the budget given the state of the economy, it should have been the commitment to hike CPP/QPP payroll taxes. Two thirds of small firms say they will have to freeze or cut salaries and over a third say they will have to reduce hours or jobs in their business in response to a CPP/QPP hike," Kelly said. CFIB is actively lobbying provincial governments to reject the proposal expected to be discussed in a June meeting of finance ministers.
Youth Employment Hiring Credit cancelled
It appears the government has broken a promise to introduce an Employment Insurance holiday for employers hiring youth between ages 18 and 24 in 2016, 2017 and 2018. "CFIB applauded the Liberals when they announced this measure, and we are deeply disappointed that they have abandoned this commitment," Kelly said.
Other budget measures:
- Passive vs active business rules: Many small firms will be upset that the government has ended the review of passive/active income rules, denying access to lower tax rates to small businesses owners running self storage facilities and camp grounds, among others.
- Access to the small business rates for professionals: CFIB is very pleased the government has maintained access to the small business rate for professionals like dentists and accountants, but will need to review new measures directed at partnerships and associated companies to ensure there are no unintended consequences.
- Employment Insurance premiums: With the end of the Small Business Job Credit in 2017, small firms will see no reduction in net Employment Insurance (EI) tax rates as was announced in 2015. "There are many significant benefit enhancements in this budget that will drive up EI costs for the future," Kelly said.
- Work Sharing: CFIB is pleased government has expanded the EI Work Sharing program. This has been popular among small business owners to help them retain some staff during economic downturns.
"Other than some infrastructure spending, there is nothing in this budget that will help any small firm create even one job. CFIB's will be pressing the new government to reinstate the small business corporate tax rate cut and restore confidence among small business owners in the months ahead," Kelly concluded.
CFIB is Canada's largest association of small- and medium-sized businesses with 109,000 members across every sector and region.
SOURCE Canadian Federation of Independent Business
For further information: To arrange an interview with Dan Kelly, please contact Ryan Mallough at 647-464-2814 or email email@example.com.