New Investments to Help Canada's Small Businesses Grow and Create Jobs

The Government is investing in people and their communities, and working to build an economy that works for everyone: one with good, well-paying jobs for Canadians, in which businesses of all sizes can confidently invest in their own growth.

Every day, in communities all across the country, Canada's small business owners and entrepreneurs work hard to grow their businesses and create the jobs that middle class families rely on. Collectively, small businesses now account for about seven out of 10 jobs in the private sector.

To support Canada's entrepreneurs, the Government cut the small business tax rate to 10 per cent effective January 2018, with a further reduction to 9 per cent set for January 2019.  With this further tax cut, the combined federal-provincial-territorial average income tax rate for small business will be 12.2 per cent—the lowest in the Group of Seven (G7) and the fourth lowest among members of the Organisation for Economic Co-operation and Development.

For small businesses, this will mean up to $7,500 in federal tax savings per year to reinvest – in new equipment, new products, and new jobs.

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

New 2018 Fall Economic Statement Support for Investment in Small Businesses

The Government's 2018 Fall Economic Statement proposes three immediate changes to Canada's tax system that will further support investment, jobs and growth in small businesses, creating opportunities in communities across the country. These include:

  • Allowing businesses to immediately write off the full cost of machinery and equipment used for the manufacturing and processing of goods.
  • Allowing businesses to immediately write off the full cost of specified clean energy equipment.
  • Introducing the Accelerated Investment Incentive, which will allow businesses of all sizes in all sectors of the economy to write off a larger share of the cost of newly acquired assets in the year the investment is made.

Faster write-offs will make it more attractive for businesses of all sizes, including small businesses, to invest in advanced technologies and processes that help drive business growth in all sectors of the economy. It will also spur the adoption of advanced clean technologies that lower energy costs and pollution emissions.

How Faster Write-Offs Will Help Small Businesses

Immediate Expensing for Manufacturers and Processors

Alex owns a small winery, Sommelier Inc. She has been hoping to expand her business by increasing her capacity for fermentation and storage. The equipment Alex needs will cost $200,000. Prior to the introduction of immediate expensing for machinery and equipment used in manufacturing and processing, Alex would have been able to deduct $50,000 from her $250,000 business income in the year, leaving her with $200,000 in taxable income. Under the new investment incentive, she will be able to write off the full cost of the new equipment, leaving her with taxable income of just $50,000. In addition, all of Sommelier Inc.'s income will benefit from the small business tax rate reduction from 10.5 per cent to 9 per cent, as of January 1, 2019. Overall, these measures will provide Alex with federal tax savings of $16,500 in the year her investment is made.

Immediate Expensing for Clean Energy Investments

Celso owns a small greenhouse, Local Greenhouse Corporation. He would like to improve his environmental footprint by investing in solar panels to offset a portion of his greenhouse's electricity requirements. Buying and installing the solar panels will cost $80,000. Prior to the introduction of immediate expensing for clean technologies, Celso would have been able to deduct $20,000 from his $295,000 business income in the year he bought the equipment, leaving him with $275,000 in taxable income. With the new investment incentive introduced in the Fall Economic Statement, Celso will be able to write off the full cost of the new equipment, leaving him with taxable income of just $215,000. In addition, all of Local Greenhouse Corporation's income will benefit from the upcoming cut to the small business tax rate—from 10.5 per cent to 9 per cent—as of January 1, 2019. Overall, these measures will provide Celso with federal tax savings of more than $9,500 in the year he makes the investment.

Accelerated Investment Incentive

Claire owns a small company in the truck transportation sector, On the Road Inc. She would like to expand her business and update some of her old equipment. Claire decides to invest $600,000 in two new trucks, $13,000 in office equipment and furniture, and $10,000 in new computers. She sells one of her old trucks for $50,000. Prior to the introduction of the Accelerated Investment Incentive, Claire would have been able to deduct $114,000 from her $614,000 business income in the year, leaving her with taxable income of $500,000. With the Accelerated Investment Incentive, Claire will be able to deduct $342,000, leaving her with taxable income of $272,000. In addition, all of On the Road Inc.'s income will benefit from the reduction in the small business tax rate—from 10.5 per cent to 9 per cent—as of January 1, 2019. Overall, these measures will provide Claire with federal tax savings of over $28,000 in the year the investment is made.

Connecting Canadian Small Businesses with the World

Canada's small businesses are also benefitting from the Government's commitment to make Canada the most globally connected economy in the world.

Canadian small businesses are well-positioned to benefit from the increased certainty and expanded market access that come along with the newly renegotiated North American Free Trade Agreement (NAFTA), as well as the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Canada now has comprehensive free trade agreements with countries representing two-thirds of the world's total gross domestic product, and is the only country in the G7 that has trade agreements with all other G7 countries.

To build on this success, the 2018 Fall Economic Statement proposes an Export Diversification Strategy aimed at increasing Canada's overseas exports by 50 per cent by 2025, with a focus on three key components: investing in infrastructure to support trade; investing to help Canadian businesses export and grow; and enhancing trade services for Canadian exporters. These measures will deepen the presence of Canadian small businesses in new markets—and help them take advantage of the new opportunities that exist because of the trade agreements the Government has secured in the past three years—so that they are positioned to succeed and grow, creating good jobs and supporting communities at home.

Investing to Help Canadian Businesses Export and Grow

The Government is working to ensure that small businesses can take full advantage of these trade opportunities by opening up new export opportunities so that they can succeed and grow.

Canadian small and medium-sized enterprises (SMEs)—which represent 99 per cent of all businesses and employ more than 10 million Canadians—are an economic powerhouse with tremendous untapped potential. At present, only a small fraction of these businesses—around 11 per cent—are currently engaged in exporting. To help Canadian businesses develop export plans, build global partnerships, and gain the skills needed to successfully export to markets around the world, the Government of Canada is proposing $198 million in investments over six years to:

  • Help Canadian SMEs explore new export opportunities. The Government proposes to provide additional funding to CanExport and related funding programs to support businesses wishing to reach new overseas markets, including providing them with funding to support participation in trade shows and trade missions, market research, legal fees and adaptation of marketing tools.
  • Provide Canadian technology firms with support, connections, and in-market guidance. To accomplish this, the Government proposes to expand the Canadian Trade Commissioner Service's Canadian Technology Accelerator program globally, including the expansion of this successful program to global technology hubs such as Delhi, Hong Kong, and Tokyo.
  • Give SMEs the assistance they need to prepare for—and succeed in—exporting. To help SMEs get ready to export to new markets, the Government proposes to provide targeted support to help businesses improve their export readiness through export capacity building initiatives. This will enable businesses to take advantage of exporting products and services to markets where Canada has recently implemented free trade agreements (e.g. CETA and CPTPP).

The Government also proposes additional investments to support the Canadian Trade Commissioner Service and other federal partners that provide trade services for Canadian exporters. This new investment of $184 million over the next five years will allow for the addition of more trade commissioners to help businesses at home and abroad, and new support in traditional and emerging sectors such as agriculture, e-commerce, digital products and intellectual property.

In addition, the Fall Economic Statement announced measures to boost Canada's ability to trade overseas by accelerating infrastructure spending. Investments in marine ports and along the busiest rail and highway corridors will help get products to international markets more quickly and efficiently, giving Canadian producers more opportunities to obtain a fair price for their products and helping to secure jobs for middle class Canadians.

To boost Canada's ability to trade overseas, the Government will accelerate investments in our ports and trade transportation corridors leading to Asia and Europe, including key ports on the east and west coasts. 

Helping Small Business by Removing Barriers to Trade Within Canada

Overcoming trade barriers—not just internationally, but right here at home—is fundamental to the growth and success of Canadian small businesses, and the jobs and communities that depend on them.

The Government of Canada is working with our provincial and territorial partners to remove barriers to trade between provinces and territories, and the recent Canadian Free Trade Agreement, which entered into force in July 2017, is an important step in this direction.

To help small businesses more easily sell their products and services across Canada, the Government is working with provincial and territorial partners to remove regulatory and other barriers in four key areas that can have a positive impact on small businesses:

  • The transport of goods between provinces and territories.
  • Food regulations and inspection rules across the country.
  • The construction sector, including the harmonization of building codes across Canada.
  • The facilitation of greater trade in alcohol between provinces and territories.

Making it Easier for Small Businesses to Grow

Regulations ensure that businesses can compete on a fair and level playing field, while protecting the health and safety of Canadians, and safeguarding our natural environment. Over time, however, regulations can accumulate, become outdated, and result in unnecessary barriers to business innovation and growth—which can represent an even more significant challenge to SMEs.

To remove these barriers to business growth and job creation, the 2018 Fall Economic Statement announces the Government's plan to:

  • Create an External Advisory Committee on Regulatory Competitiveness to help Ministers and regulators identify and introduce regulatory changes to promote innovation and economic growth that works for everyone.
  • Introduce an Annual Modernization Bill, starting in 2019, to remove outdated or redundant regulatory requirements, and to allow for the updating of regulations.
  • Enact policy changes and introduce regulatory measures that respond to recommendations from the business community for a simpler, clearer and modernized regulatory system that will support the development of innovative approaches and products.
  • Launch a Centre for Regulatory Innovation to speed up the integration, adoption and commercialization of new approaches and emerging technologies.
  • Review legislation to assess whether opportunities exist to integrate regulatory efficiency and economic growth more fully in the mandates of regulatory departments.
  • Provide funding for federal departments and agencies to strengthen their capacity to consider economic and competitiveness needs when designing and implementing regulations.