No timeline on tax cut for small businesses: minister
There is no timeline for instituting a promised tax cut for Canadian small businesses but it’s not off the table either, says Minister of Small Business and Tourism Bardish Chagger.
Chagger told CTV’s Question Period the government made the decision to give breaks to the country’s middle class as a means to grow the economy, despite repeated vows on the campaign trail to cut the corporate tax rate.
During the election campaign, the Liberals pledged to cut the tax rate from 10.5 per cent to 9 per cent for businesses earning less than $500,000 a year.
The move has angered small business groups, including the Canadian Federation of Independent Business. President Dan Kelly called the budget, which did not contain the promised tax cut, an “absolute kick to small business owners.”
Chagger said the corporate tax rate for small business was recently reduced to 10.5 per cent from 11 per cent. She said it was not reduced further in the government's first budget in favour of benefits to middle-class earners and infrastructure investments.
But she said businesses have not been forgotten.
“Business is implicit throughout the entire budget," she said.
The minister declined to offer a timeline on a small business tax cut, saying only that she will continue to consult with stakeholders.
“We are on Year 1 of a four-year mandate. We have a lot of work to do.”
Chagger also said the Liberals have invested $50 million in the Industrial Research Assistance Program, part of a total $800-million “innovation agenda” over four years that will benefit entrepreneurs and small businesses.
“It will be phenomenal because it takes us into the future and actually allows our small and medium businesses to be more innovative, to be more productive, and to be growth oriented and export oriented," she said.
Difficult for planning
Sherry Cooper, chief economist for Dominion Lending Centres, told Question Period she doesn’t understand why small business was left out of the government's free-spending budget.
“It does mean it is difficult for small businesses to plan for the future, because a promise that was made has, at least for the moment, not been fulfilled," Cooper said.
Kelly said there is a “pervasive” belief in Ottawa that most small business owners are rich people trying to cut their tax burden. He said there are more than 3.5 million entrepreneurs in Canada, and most of them earn middle-class incomes or less.
“In fact, there are more people under the low-income cut-off that are entrepreneurs than there are among the general population," he said.
"So it’s an absolute fallacy that small business owners are rich. Certainly, some do well, but that’s about eight per cent of entrepreneurs that earn, even with salaries, dividends and everything else, more than $200,000 a year.”
He said the CFIB’s most recent survey found optimism in the economy is at an all-time low among small business owners.
But Glen Hodgson, chief economist of the Conference Board of Canada, said the bigger issue is that successive governments have not done a comprehensive review of the overall tax system, which he said is complex, lacks transparency and doesn’t clearly tie incentives to results.
He said the previous Conservative government cut corporate taxes and boosted capital cost allowances, but there is no indication those moves improved business investment.