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Canadian gov’t promotes small business tax cut

Canadian gov’t promotes small business tax cut

OTTAWA: The upcoming 0.5 percent cut to the Canadian small business tax rate will save SMEs up to CAD7,500 (USD5,699) in federal taxes a year, the Finance Department has said.

The Government has proposed reducing the small business corporate tax rate from 10.5 percent to 10 percent, effective January 1, 2018. This is intended as a first step toward lowering the rate to nine percent in 2019.

According to the Finance Department, as a result of these cuts, Canada’s combined federal-provincial-territorial average tax rate for small business will be the lowest in the G7 and fourth lowest among OECD countries.

The Government hopes that, as a result of the rate cut, entrepreneurs will be able to retain more of their earnings to reinvest, grow their businesses, and support job creation.

Finance Minister Bill Morneau said: “Over the last two years Canada’s economy has created nearly 600,000 jobs and today we lead the G7 in growth. Our ambitious plan to help strengthen the middle class is having a real and positive impact for families and the job creators who support communities from coast to coast to coast.”

“In 2018, we are doubling down on that plan, by cutting taxes for small businesses and keeping them low for middle-class families.”

The Liberal Government announced its intention to lower the rate in October, in the wake of a controversial consultation on proposed changes to tax planning rules used by private corporations. The Government was accused of unfairly targeting small businesses.

The small business tax rate was last cut by the Conservative government in its 2015 Budget. Effective January 2016, the rate reduced from 11 percent to 10.5 percent. The Conservatives had planned to reduce the rate by 0.5 percent each year, until it reached nine percent in 2019.

The Liberals pledged at the 2015 election to reduce the rate to nine percent, but their 2016 Budget deferred any further reductions.