Tax Cuts for Small Businesses Are Gaining Momentum

Small business tax rates by jurisdiction

Big wins Across the Provinces

Thanks to CFIB’s longstanding advocacy on reducing the small business tax rate, many provinces have been listening and have promised to deliver.

Momentum is building across Canada. This is good news for small businesses.

Recently, the Ontario, Quebec, Prince Edward Island, Nova Scotia and New Foundland and Labrador governments lowered their tax rate which can give momentum to our federal ask.

• Ontario led the charge in 2026
  In its March budget, the province announced that the Small Business Tax Rate (SBTR) will drop from 3.2% to 2.2%, effective July 1, 2026.
• Quebec quickly followed suit
  Following a meeting with QC’s VP, the new Premier matched Ontario’s move, announcing that the small business deduction (SBD) drops from 3.2% to 2.2%, effective April 29, 2026.
• Newfoundland and Labrador went a step a further
  In its 2026 Budget, the NFL government delivers key gains for small businesses, including a phased cut to the small business tax rate to 2 % as of January 1, 2026 (Retroactive), 1.5% on January 1, 2027, and 1 % on January 1, 2028
• Before that, Prince Edward Island and Nova Scotia laid the groundwork
  Following meetings with our Atlantic team’s directors, PEI and NS were the first to move in 2025. For PEI, the small business tax deduction threshold increased from $500,000 to $600,000. For NS, the small business tax rate dropped from 2.5% to 1.5% and is applicable to the first $700,000 of taxable income, up from $500,000.

How does this help small business?

With these tax savings, small businesses can:

• Offer better paycheques for their employees,
• Expand operations and invest in growth,
• Hire new staff.

Now imagine the impact if all provinces — and the federal government — followed suit in lowering the small business tax rate.

Ottawa: Rising Support for Raising the Small Business Deduction Threshold

On the federal level, there is some encouraging news as well which aligns with our key fiscal aks.

A recent report from the House of Commons Standing Committee on Industry and Technology (INDU) recommended government to increase the federal Small Business Deduction (SBD) threshold to $1 billion¹ which would help give our own request some momentum.

This aligns with CFIB’s advocacy. We are calling on governments at all levels to raise the SBD threshold to at least $700,000 and index it to inflation moving forward to maintain its value over time and improve the economic environment for businesses. It’s been at $500,000 since 2009. 

What CFIB is asking governments to do next

CFIB is continuing to push all levels of government to make small business tax relief a priority:

• Federally: Reduce the Small Business Corporate Tax Rate (SBCTR) from 9% to 6%
• Increase the SBDT to $700,000 and index it to inflation year after year

Lowering corporate taxes means stronger small businesses that will thrive today and beyond, and contribute to a stronger Canadian economy. When small business prosper, Canada prospers.

Be Part of the Momentum

Change like this doesn’t happen by coincidence. CFIB brings the voice of small business, driving the strength of our large membership to translate momentum into action.

Sign our petition to add your voice today.

If these wins show anything, it’s this: advocacy works. And when small businesses rally together, governments listen.

Curious about how CFIB builds on momentum to drive tangible results for businesses across Canada?

Join now and find out

For more information on the small business corporate tax rate, read our research blog post.

Recommendation 31 of the Improving Productivity Gaps and Capital Outflow report.