Minister of Finance Highlights Plan to Double Down on Progress for Middle Class
November 1, 2017 – Ottawa, Ontario – Department of Finance Canada
When you have an economy that works for the middle class and those working hard to join it, you have a country that works for everyone. The investments the Government of Canada has made in Canadians and their families, in our communities and in our economy are working. Canada now has the fastest growing economy in the G7 and among the best job growth in a decade, giving our Government the ability to reinvest the benefits of that growth back into the people who contributed most to that success.
The Government knows that middle class families and small businesses are the cornerstone of the Canadian economy, and that tax fairness is essential to build sustainable growth. Since coming into office, the Government has focused on transforming Canada's economy by investing in our people and putting more money in the pockets of those who need it most, giving them confidence in our economy and in their future, while creating more opportunities and good, well-paying jobs.
Finance Minister Bill Morneau appeared today at the Standing Senate Committee on National Finance where he highlighted the next steps to help the middle class by lowering taxes on small business, while ensuring the system is not used to reduce personal income tax obligations for high-income earners.
Minister Morneau spoke about the proposed measures to address tax planning by owners of Canadian-controlled private corporations (CCPCs), as well as the Government's plan to reduce the federal small business tax rate to 9 per cent by 2019, all of which were included in the Fall Economic Statement.
The Fall Economic Statement proposes to:
- Strengthen the Canada Child Benefit (CCB) by making annual cost of living increases to the CCB starting in July 2018—two years ahead of schedule. For a single mother of two children making $35,000, a strengthened CCB will contribute $560 in the 2019–20 benefit year towards the cost of raising them. That means more money, tax-free, for books, skating lessons or warm clothes for winter. The added confidence the CCB brings to families has proven to have an immediate positive impact on economic growth.
- Put more money in the pockets of low-income workers—including young single workers just getting a foothold in the workforce—by further enhancing the Working Income Tax Benefit by an additional $500 million per year, starting in 2019.
- Help small businesses invest, grow and create jobs by lowering the small business tax rate to 10 per cent, effective January 1, 2018, and to 9 per cent, effective January 1, 2019. This will provide a small business with up to $7,500 in federal corporate tax savings per year to reinvest in and grow their business, and $1,600 per year for the average small business.
- Make important changes to the tax system that will ensure Canada's low corporate tax rates go towards supporting businesses, not to providing unfair tax advantages to high-income and wealthy Canadians.
"Our plan is working. Canada's economy is outpacing all G7 countries, growing faster than it has in a decade. So we are doing more to help those who create growth and drive our economy, with lower taxes on small business, more support for parents, and more money in the pockets of low-income workers. Canadians sent us here to grow the economy in a way that benefits the middle class and that is exactly what we are doing."
- Bill Morneau, Minister of Finance
- All corporations, including CCPCs, benefit from a combined general corporate tax rate that is 12 percentage points lower than Canada's largest trading partner, the United States.
- The Government intends to provide support to small businesses in Canada through a further reduction of the federal small business tax rate to 9 per cent.
- As a result, the combined federal-provincial-territorial average tax rate for small business would be lowered to 12.9 per cent from 14.4 per cent, by far the lowest in the G7 and fourth lowest among Organisation for Economic Co-operation and Development countries. Small businesses can retain more of their earnings to reinvest, supporting the growth of their business and job creation.
- CCPCs with taxable passive income above the $50,000 threshold in 2015 represented 3 per cent of the CCPC population, but earned more than 88 per cent of total taxable passive income. The threshold is equivalent to $1 million in savings, based on a nominal 5-per-cent rate of return. The vast majority of businesses will not be affected by the Government's tax changes.
- In Canada, 80 per cent of passive investment income is earned by 2 per cent of all CCPCs.
- More than 80 per cent of passive investment income is earned by CCPC owners making more than $250,000 per year.
- An increasing number of Canadians—often high-income individuals—are using private corporations in ways that allow them to reduce their personal taxes. In some cases, someone earning $300,000 with a spouse and two adult children can use a private corporation to get tax savings that amount to roughly what the average Canadian earns in a year.
- Only an estimated 50,000 family-owned private businesses are sprinkling income. This represents only a small fraction—around 3 per cent—of CCPCs.
- Doubling Down on Progress for the Middle Class
- Fall Economic Statement
- Targeted Tax Fairness Measures Will Protect Canada's Next Generation of Innovators and Entrepreneurs
- Targeted Tax Fairness Measures Will Protect Small Business Owners Including Farmers and Fishers
- Targeted Tax Fairness Measures Will Protect Middle Class Small Business Owners
- Government Moves to Reduce Small Business Tax Rate and Support Fairness for the Middle Class
Media may contact:
Office of the Minister of Finance
Department of Finance Canada