Op-ed published in iPolitics on Nov. 2, 2026.
Small businesses must be at the centre of Prime Minister Carney’s next federal budget
If Canada is serious about boosting productivity, attracting investments and creating sustainable economic growth, the next federal budget must put small businesses at the centre of its economic agenda.
For Canada's small business owners, the past few years have felt like a crisis without an end date.
First came the pandemic, which pushed many entrepreneurs to the brink of closure. As businesses began to recover, rising inflation, supply chain disruptions, higher fuel and input costs, and ongoing labour shortages created new challenges. Today, trade uncertainty paired with weak consumer demand continue to put intense pressure on small firms, leaving many owners wondering whether they can make payroll, pay suppliers or keep their doors open.
These challenges have contributed to a growing trend of more businesses closing than opening in Canada for the past several quarters, a phenomenon CFIB has termed the “entrepreneurial drought”. At the same time, half of entrepreneurs have told us they would not recommend opening a business today. If the pipeline of new owners dries up, so does the investment, the jobs and the productivity gains the government is counting on.
The economic environment has become even more difficult since the United States began imposing tariffs on Canadian products. Many small firms are now caught in the middle of the trade dispute. Some face both U.S. tariffs on their exports and Canadian retaliatory tariffs on the materials they import. Many businesses are absorbing tariff costs in order to preserve long-standing relationships with American customers.
While government support programs were intended to help affected business, these programs were designed with restrictive eligibility criteria that excluded many small businesses from even applying due to required revenue thresholds.
Moreover, the federal tariff remission process, designed to waive, reduce or refund tariffs, has become increasingly difficult to navigate. This process requires a review by the Department of Finance, consultations with other departments and potentially domestic producers, followed by a recommendation to the Minister and approval through an Order in Council. This is a multi-step process that can be lengthy and create more challenges for smaller firms.
Small businesses don't need complicated subsidy programs or loans programs that leave them with more debt. Instead, the federal government should prioritize direct tariff relief for impacted small business and putting in place long term, structural measures that improve overall business conditions. In fact, 80 per cent of small businesses want the federal government to focus on ensuring a competitive business environment that benefits all businesses and industries across the economy.
As the federal government finalizes its 2026 budget, it must put a focus on the smallest businesses in Canada. These businesses have long been waiting for the government to show a clear, ambitious, and transformational fiscal plan that prioritizes their long-term success.
To achieve that, the federal government should start by lowering its small business tax rate from 9% to 6%. This would provide immediate relief and create stronger incentives for investment and growth. This change would save small businesses $2.1 billion which, according to CFIB’s research, would go to increasing employee salaries, paying down debt, and investing back into the businesses. Some provinces have recently reduced their own small business tax rate, like Ontario and Quebec. The federal government should follow suit.
The federal government should also modernize outdated tax thresholds that have failed to keep pace with inflation for decades. The Small Business Deduction threshold has been frozen at $500,000 since 2009. This should be increased to at least $700,000 and be indexed to inflation moving forward. The CPP Basic Exemption has been stuck at $3,500 since 1998. The GST/HST registration threshold has remained unchanged at $30,000 since 1991. In other words, what was meaningful breathing room for small businesses 20 plus years ago has become a source of financial concern and administrative burden.
Prime Minister Carney has made "catalyzing new investments" a priority of his government, with initiatives such as the Canada Investment Summit, and measures such as the Productivity Mega-deduction. While such actions clearly recognize the need for increased investments into the Canadian economy, more can be done to incentivize entrepreneurs to open new businesses or buy existing ones. This can be achieved through lower capital gains inclusion rate where the next $2 million after the Lifetime Capital Gains Exception (LCGE) would be taxed at 33% instead of 50%, and a rollover policy that would exempt taxes from all gains following the sale of a business if the proceeds are reinvested in a Canadian-controlled private corporation.
This is how we control what we can control. Not through multiple and inadequate programs, but through a fair, modernized, and investment-friendly policies that foster a more productive and competitive economy.
Amine El Idrissi is a bilingual policy analyst and Ons Dhaoui is senior policyanalyst at the Canadian Federation of Independent Business (CFIB).