2016 federal budget breaks election promises to small businesses

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.

Federal budget 2016

Budget Recap from CFIB President and CEO Dan Kelly

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 businesses 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.

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