The cost of doing business today and innovating for tomorrow are in focus
Canada’s federal finance minister will deliver the budget in the House of Commons next Tuesday, but what do businesses want Chrystia Freeland to say?
For small businesses the carbon tax is a critical issue according to the Canadian Federation of Independent Businesses, while KPMG in Canada has found business leaders are calling for larger tax breaks to support innovation.
Carbon tax hikes introduced at the start of April are adding additional costs to small businesses already struggling with overall costs of doing business in Canada today. The CFIB says that 79% of respondents to its new survey of SME owners said the extra tax is making it harder to meet other operational costs.
Additionally, 92% of respondents want the government to immediately repay $2.5 billion in carbon tax revenues that SMEs have been owned since 2019.
“The government has promised to return $623 million for 2024/25, raising the total to over $3.1 billion in money owed to SMEs,” said Dan Kelly, CFIB president.
The organization also wants Ottawa to cut the small business tax rate to 8% from 9% for at least two years, increase the small business deduction threshold and index it to inflation, lower Employment Insurance (EI) premiums for smaller employers, introduce a timeline to balance the budget, and reduce red tape.
“The upcoming budget needs to return confidence to small businesses about their future,” said Corinne Pohlmann, EVP of Advocacy at CFIB. “These remain challenging times for Canada’s small businesses. They’re still struggling to recover and grow, especially after Ottawa’s decision not to extend the forgivable Canada Emergency Business Account deadline and forging ahead with increases in carbon taxes, employment insurance premiums, CPP premiums and alcohol taxes so far this year.”
R&D support
Meanwhile, a separate survey from KPMG in Canada asked business owners and C-suite leaders from more than 500 Canadian firms ranging from those with revenues up to $1 billion to those with less than $9 million, including 42% that are family owned.
It found strong support for the budget to support innovation through increased tax credits for research and development. Almost eight in ten say they would conduct their own R&D if the investment tax credit rate was higher than 35% and a similar share would like to see a simplified application process and more generous incentives for the Scientific Research and Experimental Development program.
Almost nine in ten respondents said they would prefer better business tax advantages for innovation, growth, and productivity, over personal tax credits.
"Canada's lack of domestic research and development is a key factor in the country's lagging productivity, relative to other industrialized countries," says David Durst, Partner-in-Charge, Tax Incentive Practice, KPMG in Canada. "Canadian businesses have faced challenges transforming ideas and innovations into viable, profitable ventures that spur economic growth and lead to a higher standard of living for Canadians. Currently, there are tax incentives for early-stage R&D; however, widely available support to transition the resulting knowledge into commercialized patents is missing in Canada's approach."
