Pedestrians in Yonge St. in Toronto on March 3, 2021.Fred Lum/The Globe and Mail
Allan Lanthier is a retired partner of an international accounting firm and has been an advisor to both the Finance Department and the Canada Revenue Agency.
Donald Trump has begun a global trade war aimed at friends and enemies, with a special approach in Canada: Canadian businesses will have to react.
In addition to finding new markets, Canadian companies must now compete even more fiercely against US companies for investment and jobs. Clearly, the largest companies will do most of the heavy work. What raises the question of why small businesses, not large, are pointed out for so many tax exemptions in Canada.
Carbon price reimbursement is only the most recent example. In its 2024 budget, the federal government announced that it would send fuel load reimbursements of more than $ 2.5 billion to small and medium enterprises, but nothing for the largest. Now, the government has said it would go even further and make tax -free reimbursements.
Refund taxes will be resolved once the Parliament returns to work. However, the broader questions are why small businesses receive so many fiscal exemptions and if many of these preferences must more their existence to political convenience than solid fiscal policy.
The most expensive preference is the tax rate of small businesses, which has an annual federal-professional cost of approximately $ 15 billion, a cost assumed by other taxpayers, including largest companies. Our federal federal federal corporate rate is approximately 26.5 percent and the rate of small businesses only 11.6 percent, a saving of almost 15 percentage points.
The lowest rate generally applies to the first $ 500,000 of annual commercial income. Politicians do not seem to be able to resist the attractiveness of lower rates. In its last budget in 2015, the Government of Stephen Harper proposed a reduction of two percent points in the federal rate of small businesses, and the new liberal government followed that promise. And last week, New Scotland announced that its rate, which was already 2.5 percent, would be further reduced by a percentage point and its annual threshold increased to $ 700,000 of commercial income.
There is little or no evidence that these lower rates contribute to job creation or economic growth in a significant way. In addition, preferential rates are available for incorporated professionals, such as doctors, lawyers and counters.
The small businesses of many other tax preferences benefit. A 35 percent loan for research and development is applied. Shareholders can receive tax -free capital profits of approximately $ 1 million when they sell their small businesses, a limit that the 2024 budget proposes to increase to $ 1.25 million, adjusted to inflation in the future. The list continues.
While politicians love to say that small business is the backbone of our economy, that is not really true. There is no doubt that small businesses, those with up to 20 employees, are critical for the Canadian economy: however, they represent less than 20 percent of Canadian works. The largest companies use many more Canadians, pay higher wages and have greater productivity.
Canadian companies are in a new battle against US companies. While the Federal Corporate Rate of the United States is 21 percent, the president of the United States Donald Trump Make a campaign to reduce it to 15 percent for corporations that manufacture their products in the US. This would mean a combined US federal state tax of approximately 20 percent, a significantly lower rate than ours.
In threatening tariffs, Mr. Trump has not only thrown a curved ball: it is a high and internal rapid ball directed directly to our collective bosses, and our government must respond. In addition to retaliation rates, we must reduce our general corporate tax rate for all companies and provide accelerated tax cancellations to level the playing field with the United States. And to compensate for the loss of corporate taxes, many of the preferences of small businesses that accumulate our fiscal code must be reduced or repealed.