The last federal budget before the election provided your business with very little relief from the barrage of new and higher taxes. Small firms are facing seven years of CPP premium hikes, higher taxes for many family businesses and those with passive investments and the new and rising federal carbon tax about to hit firms in four provinces.
Watch CFIB president Dan Kelly give CFIB's take on what the budget means for you:
Here are 5 things you need to know about the 2019 federal budget:
1. New investments in skills
Our members have told us that the shortage of skilled labour is one of their biggest challenges. The new Canada Training Benefit and the EI Training Support Benefit aim to help workers access the training they need. While these new benefits will be paid through the EI system, the EI rate is not expected to increase as unemployment rates remain low.
While it is good news that the government is looking at measures to help build the skills of Canadians, this approach raises concerns about the role of employers – both in ensuring the training is relevant to the world of work and in administering the time away from the workplace. We will be working with the government to make sure these new programs fully consider the needs of employers and we will keep you updated as more details become available.
2. Employment Insurance (EI) small business premium rebate
There may be some good news on the horizon for your business if you pay $20,000 or less per year in EI premiums. Starting in 2020, the government will be implementing a rebate that will aim to reduce your premiums. This reduction will be introduced to offset any potential increases in EI premiums resulting from the launch of the Employment Insurance Training Support Benefit.
However, we are still waiting for the full details of this new measure and how it will work. We are calling on the government to ensure that this rebate is significant and permanent. More details to follow.
3. Red tape
The government announced some efforts to continue working to help reduce red tape with an emphasis on certain sectors such as transportation, health and agri-foods. There will also be efforts to continue the work to reduce interprovincial trade barriers.
There will also be investments made to improve government services, including:
- The modernization of Service Canada’s phone lines
- CRA services such as:
- Expanding the Liaison Officer service to incorporated businesses, to help businesses comply with and understand their tax requirements
- Making the dedicated line for tax service providers permanent
- Improvements to the Immigration Refugees Citizenship Canada phone line, with an emphasis on improving the wait times for business inquiries
CFIB has been pushing the government to take concrete action to reduce red tape and improve services to your business over the past few years and we will watch them closely as they implement these changes.
The deficit is projected to clock in at $19.8 billion next year, with no plan to return to balance. In fact, the deficit will get worse before it gets better. It is only predicted to start going down in 2021-22. With economic uncertainties on the horizon, we are concerned that the government has not made any significant progress in getting their spending under control.
5. Other tax issues
While no action has been taken in the budget on intergenerational transfers, the government has acknowledged that this is an important area and will be making efforts to develop proposals to help address this issue. We will ensure that we continue to raise this important matter with government officials and policy-makers.
We were pleased to see some relief is being offered for farmers and fishers who can now access the Small Business Deduction for sales between businesses that are considered to be “arm’s length” companies (corporations that are not owned by family members). Previously, only sales to farm or fishing cooperative corporations were able to benefit from the Small Business Deduction. While this is a good first step, more needs to be done to ensure that other small businesses, such as businesses owned by members of a same family, are provided with the same relief.
Some missed opportunities
While the federal government has introduced some positive measures, there are still significant areas of concern that remain for small businesses. Here is what we are still asking them to do:
- Institute measures to offset the costs of the Canada Pension Plan increases nationally and the new federal carbon tax affecting small businesses in several provinces.
- Exempt previous passive investments from the small business tax changes so you can keep your access to the small business tax rate.
- Recognize the vital formal and informal roles spouses play to ensure the success of a family business by implementing a full spousal exemption from the new rules on income-splitting.
- Ensure that your business can feel the true impacts of red tape reduction by expanding the one-for-one rule to included policies, guidelines and legislation.
- Keep today’s debts from becoming tomorrow’s taxes by making a plan to balance the budget within the next three to five years.
As this is the last budget before the next federal election, we will continue to keep these issues top of mind for policy-makers and MPs. There is still much more to do in order to ensure your business can stay competitive!