There’s a lot to applaud, says Nick Langley of the Canadian Federation of Independent Business, starting with the reduction in the corporate tax rate from 11 percent to nine percent in 2019.
“To put it into perspective, for a small business with a taxable income of $500,000, they would see a savings of $25,000 over that four-year period,” says Langley, CFIB’s director of provincial affairs, Nova Scotia. “That’s money that can be reinvested into equipment, marketing and people.”
Nova Scotia business owners pay some of the highest taxes in the country, points out Kevin Lacey, Atlantic Canada director of the Canadian Taxpayers Federation, and this break is a big “hand up” for small business.
“We struggle in Nova Scotia under taxes, both personal and business, and what was delivered yesterday will go a long way to help alleviate some of the pressure.”
Farmers and fishermen in the province are also winners in this budget as the capital gains exemption on the sale of farms and fisheries has increased from $813,600 to $1 million. This move will go a long way to keeping those industries vibrant, says Langley.
“People in (farming and fishing) are getting older and there are barriers and impediments to passing on what they’ve built to a son or a daughter,” he says.
Proposed changes to the employment insurance program – a “break-even EI premium rate-setting mechanism” – are another welcome initiative. Starting in 2017, this initiative would return any surplus in the operating account through lower premiums for both employers and employees.
What does that mean in terms of real savings for business owners?
“This means that any business that have premiums equal or less than $15,000, they would be eligible for the credit,” says Langley. “In 2015 and 2016, small business will save $550 million in lower EI rates, and even more in 2017.”
Lacey agrees these types of initiatives will help make provincial businesses more profitable and benefit the local economy.
“The EI change was a big surprise, and something (the feds) have resisted this for many years even though we have seen an increase in premiums.”
Small business can also expect more straight talk from Canada Revenue Agency, something that has been a major “pain point” for organizations facing audits, for example. Yesterday, the government committed that CRA will honour all written advice and guidelines shared on its website.
“The ability to interface with CRA in a straightforward manner has been a major challenge for small business,” says Langley. “Often they receive mixed messages.”
The provincial government should take its lead on corporate taxes from the Feds, says Langley, and resist recommendations put forward in the Broten review to increase the provincial small business tax rate from the current three per cent to eight per cent.
“We fought vigorously against it leading up the (provincial) budget, but it’s not a dead issue,” he says. “The province said they would be examining it over the next year, so nothing’s been ruled out at this point.”
The McNeil government would be “foolish” to hike the small business tax rate in Nova Scotia and doing so will drive them out of the province, adds Lacey.
FACT BOX HEAD: Budget 2015 Breakdown of the Highlights
Proposals Affecting Farmers and Fishers
Capital Gains Exemption for Qualified Farm or Fishing Property – The Lifetime Capital Gains Exemption (LCGE) is available on the disposition of qualified small business corporation shares and qualified farm or fishing property. The exemption for 2015 is $813,600 and is indexed annually to inflation.
Proposals Impacting Business Owners
Small business tax rate and non-eligible dividend taxation – The small business tax rate applies to the first $500,000 of qualifying active business income of a Canadian-controlled private corporation (CCPC). The Budget proposes to reduce the current small business tax rate of 11 per cent by 0.5 per cent per year beginning Jan. 1, 2016 until it reaches 9 per cent effective Jan. 1, 2019. These reductions will be pro-rated for corporations with taxation years that do not coincide with the calendar year.
Proposals Impacting Charities and Charitable Donations
Donations of Private Corporation Shares or Real Estate – At present, gifts of private corporation shares or real estate to a charity can result in a taxable capital gain, whereas the capital gains applicable to gifts to a charity of publicly-traded securities, ecologically-sensitive lands, and certified cultural property are not subject to tax. The Budget proposes to provide an exemption from tax on capital gains with respect to certain dispositions of private corporation shares and real estate occurring after 2016. The exemption will be available where:
The private corporation shares or real estate are sold to a purchaser who deals at arm’s length with both the donor and the applicable qualified donee; and
The cash proceeds of the disposition of private corporation shares or real estate are donated to a qualified donee within 30 days after the disposition.
Source: Investors Group