Ontario and Quebec have yet to match the federal government’s proposed tax relief for small businesses
Under the current rules, access to the small business rate is reduced proportionately when a business has taxable capital between $10 million and $15 million. According to the proposal, access to the tariff would be phased out between $10 million and $50 million.
The proposed change would allow more small to medium-sized businesses to access the small business deduction (SBD) and increase the amount of active business income that would be eligible for the SBD, said the federal government in the budget. The proposal would apply to taxation years beginning on or after federal budget date.
However, Ontario’s 2022 budget, tabled three weeks after the federal budget, contained no mention of the federal proposal or changes to the province’s small business tax regime. Quebec, which released its budget on March 22, has also made no announcement about its intention to match the proposed change since the federal government released its budget.
According to KPMG Canada, most provinces refer to the federal business limit for small business tax calculation purposes, meaning that provincial rules would automatically align with the federal change.
However, Ontario and Quebec would need to make legislative changes to match the proposed federal measure.
In an email to Investment Director, a spokesperson for the Ontario Ministry of Finance said that “given the timing of the release of the 2022 federal budget, the province has not had sufficient time to address the federal tax changes proposed in the budget. of Ontario by 2022”. The spokesperson said it would be “not appropriate to comment at this time” on whether Ontario would align with the proposed federal change. Ontarians vote in a provincial election on June 2.
A spokesperson for Quebec’s finance ministry said in an email that the federal government’s proposed change was “still under review.” The last scheduled sitting day of the National Assembly is June 10 before a provincial election due to take place by October 3.
If Ontario decided not to follow the federal government’s proposed change to small business taxation, it would not be the first time.
In November 2018, Ontario’s Progressive Conservative government announced that it would not follow federal changes to small business taxation that limited access to the SMD rate. At that time, Ontario’s ruling offered small businesses in the province tax relief, said Armando Minicucci, a tax partner with Grant Thornton LLP in Toronto.
However, if Ontario decides not to follow the federal government’s proposed small business tax changes this time around, small businesses in the province will be at a disadvantage, Minicucci said.