OTTAWA – The Liberal government revealed Tuesday that it’ll ‘t be fulfilling its election promise to reduce the small business tax rate, proposing the rate should remain unchanged at 10.5 percent for that foreseeable future.
The original platform called for the rate to become brought down in tranches to nine per cent by 2019. It had been already lowered from 11 per cent to 10.5 percent in January of the year.
Because the other three changes are already legislated for 2017, 2018 and 2019, the Liberals will have to introduce new legislation to keep the rate frozen.
“It’s a large broken promise from the federal government,” said Dan Kelly, head of the Canadian Federation of Independent Business, within an interview. “I must admit I did not see this coming.”
The CFIB estimated that Canadian businesses might have saved some $900 million a year as a result of the cuts. Kelly said that keeping the speed at 10.5 percent, plus a proposed extension of Employment Insurance benefits, means that costs will rise for that country’s small businesses in the coming years.
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He also voiced concern the insufficient relief comes at any given time once the country’s economy is constantly on the see damage from the crash in oil prices, that the Bank of Canada noted earlier this year has impacted spending confidence among energy and non-energy companies.
“It truly sends the content that small firms have dropped from the high priority to a non-issue,” Kelly said. “There’s practically nothing in this budget, save for some infrastructure spending, that will help a single small business create a single job anywhere in the nation.”
The Liberal government did proceed with an election promise to shut a loophole within the small business deduction, which wealthy individuals exploited as a tax shelter. A brand new proposal says that Canadian-controlled private corporations will no longer have the ability to claim another small company deduction of $500,000 high is a partnership of businesses not associated with each other.
But, the Liberals are earmarking money for any new “Innovation Agenda” the government says will help make Canada’s companies more innovative and competitive in the global economy.
“Our objective of growing the economy is fundamental to us and our innovation agenda is critical to that,” said Finance Minister Bill Morneau during a press conference Tuesday. “We’re setting ourselves up for any longer-term innovation strategy.”
This includes a Post-Secondary Institutions Strategic Investment Fund which will provide up to $2 billion over 3 years. The new fund will support a variety of investments, including expansion of incubators and accelerators at universites and colleges and converting under-utilized space into new information labs.
Also in the budget is $800 million earmarked to aid innovation networks and to promote the introduction of “clusters,” over four years. The federal government noted it desired to see the kind of knowledge sharing that gave rise to Silicon Valley and Canada’s high-tech cluster in Kitchener-Waterloo, Ont.
An additional $95 million per year will be given to analyze granting councils with an ongoing basis, using the Liberals highlighting it had been the “highest amount of new annual funding for discovery research in additional than a decade.”
The Liberals are also introducing a new High Impact Firm Initiative, that is set to supply consulting and advice to high-growth, innovative firms. Other organizations, such as the Business Development Bank of Canada, have identified so-called high-impact firms as firms that have a tendency to benefit the economy most.
“(The program is) made to help firms scale up and further their global competitiveness through co-ordinated services tailored to satisfy to their needs,” the government said in its budget.
The initiative aims to focus on 1,000 firms in first couple of many expand to more firms thereafter.
Financial Post
jshmuel@nationalpost.com
