Backgrounder: Support for Small and Medium-Sized Businesses

The Government of Canada has a plan to build a cleaner environment and a stronger economy for today and tomorrow. A key part of this plan, the Greenhouse Gas Pollution Pricing Act (GGPPA), which was enacted on June 21, 2018, establishes a federal Canada-wide standard for reducing carbon pollution. The federal standard gives provinces and territories the flexibility to choose a system that meets this standard and works best for them.

Provinces or territories that meet this standard with their own carbon pollution pricing systems will continue to reduce carbon pollution using their own systems.  For all other provinces and territories, starting in 2019, a federal "backstop" carbon pollution pricing system will apply to ensure that all jurisdictions in Canada meet the federal standard.

Small and medium-sized enterprises (SMEs) are a critically important part of the Canadian economy. The Government recognizes that SMEs can expect to incur additional costs as a result of carbon pollution pricing, and is committed to providing additional support to help them take climate action, and lower their energy costs while remaining competitive.

Estimates of support available to small and medium-sized businesses in provinces that do not meet the federal carbon pollution pricing standard in fiscal years 2019-20 to 2023-24 are presented in Table 1.

Table 1: Estimated Support to Small and Medium-Sized Businesses, 2019-20 to 2023-24
Province 2019-20 2020-21 2021-22 2022-23 2023-24 Total
Ontario $105 million $155 million $205 million $255 million $255 million $975 million
Saskatchewan $30 million $45 million $60 million $80 million $80 million $295 million
Manitoba $15 million $20 million $25 million $35 million $35 million $130 million
New Brunswick $5 million $10 million $10 million $15 million $15 million $55 million
Note: Numbers are rounded to the nearest $5 million. Estimates are illustrative and subject to adjustments as more information becomes available. Costs to administer the support are not included in the above figures and will be borne by the Government of Canada.

The Government is developing options on how best to deliver this direct support to eligible businesses. Further details on the program design will be outlined in early 2019.

In addition to this direct support, small and medium-sized firms will also benefit from proposed payments to individuals and families in the form of Climate Action Incentive payments. These payments will help to ensure that Canadian businesses continue to benefit from strong consumer demand and a growing economy.

The Government has also provided over $2.3 billion of support to Canada's clean technology companies since 2017. These companies are developing new technologies that other SMEs can integrate into their operations to be cleaner, more competitive, more efficient, and reduce their carbon pollution pricing costs.

In addition, SMEs are benefitting from the Low Carbon Economy Fund (LCEF). Under the LCEF Leadership Fund, the Government of Canada has so far contributed over $300 million to programs offered by provinces and territories for which SMEs are eligible, including for energy retrofits, energy efficient equipment upgrades and fuel switching. SMEs have also submitted project applications for the Low Carbon Economy Challenge, under the Champions Stream, for which funding decisions will be announced in early 2019. SMEs are also eligible to apply to the Partnerships Stream to be launched early in 2019.

Canadian small businesses are also benefiting from the Government's reduction of the small business tax rate, which was lowered to 10% in January 2018 and will be further reduced to 9% in January 2019. By this time next year, the combined average income tax rate for Canada's small businesses will be just 12.2%—the lowest in the G7 and the fourth-lowest among members of the Organisation for Economic Co-operation and Development.

Corporate Income Tax Rates for G7 Countries, 2019
Small Business Income
Corporate Income Tax Rates for G7 Countries, 2019 - For details, see the previous paragraphs
Source: Organisation for Economic Co-operation and Development tax database

Along with a low small business tax rate, SMEs benefit from direct program support for scaling up, including access to financing and foreign markets, support for innovation, and services to build entrepreneurial and management capacity. Of note are services and products offered by the Business Development Bank of Canada as well as the Canada Small Business Financing Program, which helps small businesses obtain loans to finance equipment and leasehold improvements.