CFIB welcomes Canada Carbon Rebate for Small Businesses, but wants more details

CFIB Capital Gains changes a ‘mixed-bag’ for small business owners

The Canadian Federation of Independent Business (CFIB) welcomed the federal government’s plan to introduce a Canada Carbon Rebate for Small Businesses in the recent federal budget.

The rebate was one of several budget items the federal government says will help small businesses succeed. CFIB president Dan Kelly said the rebate is long overdue.

“Carbon tax rebates owed to small businesses have been a long time coming, but we’re glad to see the government making progress on it,” Kelly said in a press release. “Most importantly, it is good to see government broaden its eligibility rules to include most small and medium-sized firms.”

The rebate will see the government return more than $2.5 billion to roughly 600,000 small and medium-sized businesses with less than 500 workers. The rebate size will be based on the number of employees.

Kelly said many of the rebate details are still unclear. The CFIB has called on the government to return all $2.5 billion in 2024.

While the CFIB is happy to see the rebate, Kelly added that 82 per cent of small firms want the carbon tax eliminated.

The rebate returns proceeds from the price on pollution from 2019-20 to 2023-24.

The rebate is one of several budget items the federal government says will help boost small businesses. The budget also includes a five year $60-million investment for Futurpreneur Canada, a national not-for-profit that provides young entrepreneurs with access to financing, mentorship, and other business supports.

The budget also provided $350 million over five years to Indigenous Financial Institutions, plus $200 million over two years to invest in Canadian start-ups.

The federal government also increased the Lifetime Capital Gains Exemption from $1,016,836 in capital gains tax-free on the sale of small business shares and farming and fishing property to $1.25 million. The change will come into effect on June 25, and be indexed to inflation thereafter.

The federal government says Canadians with eligible capital gains below $2.25 million will be better off under these changes.

Kelly said it’s a “mixed-bag” for small business owners. Some will see a boost as a result of the changes, while others, like professional corporation owners, will be hit with more taxes if they sell their small business shares for more than $2.25 million.

“What worries me the most about the capital gains changes is the potential to demotivate Canadians from getting into business in the first place or working hard to grow a small business to a medium-sized business,” Kelly said. “CFIB will be pushing back against any increase in the capital gains inclusion rate for all small- and medium-sized business owners. It seems bizarre that government would single out some sectors of Canada’s SME community for higher taxes, including many of those hardest hit by pandemic restrictions like restaurants and arts and recreation firms.”