TORONTO, May 27, 2026 /CNW/ - With a growing entrepreneurial drought across Canada, the Canadian Federation of Independent Business (CFIB) is calling on the federal government to follow the lead of provinces by making changes to the small business corporate tax rate.
This spring three provinces (Ontario, Quebec and Newfoundland and Labrador) announced plans to significantly reduce their small business rates. Two other provinces (PEI and Nova Scotia) also reduced their rates and increased the threshold under which the rate applies in recent years.
"Since the last federal small business rate reduction, five provinces have made progress in reducing their corporate tax rates on small businesses," said Dan Kelly, CFIB president. "And while the federal rate has been stuck at 9% since 2019, provincial rates now range from 1% to 2.5% in all provinces, other than Manitoba's country-leading rate of 0%."
In addition, while the federal government caps the amount of income under the small business threshold at $500,000, three provinces now have higher thresholds (Saskatchewan and PEI at $600,000 and Nova Scotia at $700,000).
"Over the past decade, the federal government has been sending the wrong message to entrepreneurs. Small businesses had to push back against a gutting of the small business tax structures in 2017 after being referred to as tax cheats by the Prime Minister. It is no small wonder that 55% of business owners would not recommend starting a business today," Kelly said.
As provinces are delivering real tax relief to small businesses, Ottawa has no excuse not to do the same. CFIB is calling on the federal government to lower its rate from 9% to 6%. In addition, the $500,000 small business threshold should have been raised to over $700,000 by now just to keep pace with inflation. Parliament's Industry Committee recently recommended it be raised to $1 million in order to enhance Canada's productivity.
CFIB is also pushing back against several myths around the Small Business Deduction (SBD), including claims that it discourages business growth, misallocates capital, or primarily benefits rich shareholders.
CFIB's new analysis shows the most common criticism – that the SBD disincentivizes firms to grow – is wildly overstated. In fact, the vast majority of firms claiming the SBD operate far below the threshold. Only about 5,900 businesses have corporate income near the threshold. After adjustments, only 3,900 firms--or 0.4% of SBD claimants--are above the expected data trend. This means at least 99.6% of SBD claimants are not limiting their growth because of the deduction.
"The small businesses tax advantage is a strength, not a flaw, of Canada's corporate tax system. It helps small firms reinvest, create jobs, and cope with the higher costs of being small," said Simon Gaudreault, chief economist and vice-president of research at CFIB. "Investment is weak, costs are rising, and fewer Canadians are starting businesses. That's a clear signal it's time to take a hard look at how competitive Canada's tax system is for entrepreneurs. Instead of picking winners and losers with giant subsidy cheques from Ottawa, government need to look at real data and cut taxes so small firms can succeed."
About CFIB
The Canadian Federation of Independent Business (CFIB) is Canada's largest association of small and medium-sized businesses with 103,000 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.
SOURCE Canadian Federation of Independent Business (Toronto)
For media enquiries or interviews, please contact: Dariya Baiguzhiyeva, CFIB, 647-464-2814, [email protected]
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