CFIB’s top tax changes and simplifications recommendations

With the new parliamentary session underway, policymakers have an opportunity to strengthen entrepreneurship and small business growth. Weak consumer spending, rising operating costs, labour shortages, and persistent economic uncertainty continue to strain small firms. The escalating Canada-U.S. trade dispute is adding pressure, as new tariffs, retaliatory measures, and supply chain disruptions drive costs even higher. Budget 2026 can help restore confidence through policies that create the conditions for entrepreneurs to succeed.

Small business tax rate

1. Reduce the small business tax rate from 9% to 6%.

Thresholds

2. Increase the small business tax deduction (SBD) threshold (unchanged since 2009) from $500,000 to at least $700,000 and index it to inflation moving forward. (House of Commons’ INDU committee recommended increasing the SBD to $1 million in their most recent report on productivity).

3. Increase the passive income limit from $50,000 to at least $250,000.

4. Increase the GST/HST threshold (unchanged since 1991) from $30,000 to at least $60,000 and index it to inflation moving forward.

5. Increase the GST/HST Quick Method of Accounting (unchanged since 2002) from $400,000 to at least $700,000 and index it to inflation moving forward.
   

6. Increase the CPP Basic Exemption (unchanged since 1998) from $3,500 to $7,000 and index it to inflation moving forward.
   

7. The GST/HST remittance thresholds (unchanged since 2007) and the source deductions remittance thresholds (unchanged since 2014) should be indexed to inflation. This would bring the annual GST remittance thresholds from $1.5 million to $2.2 million and the monthly source deduction remittance threshold from $25,000 to $35,000.
   

Capital Gains Tax

8. Introduce a lower capital gains inclusion rate for all small firms of 33% on the next $2 million of gains beyond the LCGE.
   

9. Include gains from the sale of assets, not just shares, under the LCGE for all sectors, not just farm and fishing property.
   

10. Exempt taxes from gains following the sale of a business (shares and assets) when the proceeds are reinvested in a Canadian CCPC within the next three years (rollover policy).
    

11. Expand Immediate Expensing to the remaining types of capital investment currently excluded.

Other measures

12. Lower Employment Insurance (EI) premium for smaller employers by allowing them to pay the employee amount for total wages under $600,000 (similar to the EI Small Business Job Credit of 2015/2016).
    

13. Provide the self-employed with some type of standard business deduction or refundable tax credit of up to $20,000 similar to the Qualified Business Income (QBI) Deduction recently made permanent in the USA.

For more information, please contact:

Jasmin Guénette

Vice-President, National Affairs

jasmin.guenette@cfib.ca

CFIB's Top Tax Changes and Simplifications Recommendations

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