Takeaways from our February 2024 omnibus survey: Current top challenge at Canadian firms and their preferred tax measures

In CFIB’s most recent Omnibus survey, Your Voice – February 2024, business owners were asked to reveal their single biggest challenge from a list of options. Among the myriad of issues presented, the financial situation of their business ─ manifested through issues like cash flow, debt management, and financing ─ emerged as the most acute challenge (20% of firms). Labour shortages (17%) and taxation (13%) are also frequently mentioned as the biggest challenge.

Financial situation is single biggest challenge for 1 in 5 small business in February 2024

Source: The CFIB omnibus survey Your Voice – February 2024, was conducted online February 8-21, 2024. A total of 4,087 CFIB members who are owners of Canadian independent businesses, from all sectors and regions of the country answered the question above. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of +/- 1.5%, 19 times out of 20.
Question: What is the single biggest challenge your business is facing right now? (Select one) 

Survey findings also reveal that businesses across various sectors and sizes experience different challenges.

For instance, customer-facing sectors (arts, recreation & information, hospitality, retail and social services) appear to be the most impacted by financial challenges ─ they were hit particularly hard by the COVID-19 pandemic, while the construction and transportation sectors grapple primarily with labour shortages. This disparity in challenges is further highlighted when considering business size. Smaller businesses are more frequently confronted with financial and tax related challenges. In contrast, labour shortages become progressively more pronounced as a business grows larger.

Source: The CFIB omnibus survey Your Voice – February 2024, was conducted online February 8-21, 2024. A total of 4,087 CFIB members who are owners of Canadian independent businesses, from all sectors and regions of the country answered the question above. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of +/- 1.5%, 19 times out of 20.
Note: *Small sample size (<40).
Question: What is the single biggest challenge your business is facing right now? (Select one)

With nearly two-thirds (65%) of businesses dealing with pandemic-related debt, hovering around $108,000 on average, and a combo of reduced demand plus high borrowing costs due to higher interest rates, the financial strain is evident.

Labour shortages continue to significantly disrupt the recruitment and retention of workers, leading to widespread operational challenges. These shortages not only hinder day-to-day operations but also lead employers to work additional hours, reduce their business hours, and decline services and contracts. The cumulative effect not only drives up labor costs, but it delivers a considerable blow to the economy, costing Canadian small businesses over $38 billion in lost revenue opportunities.

Small businesses are also navigating turbulent waters of inflation, high input costs, and incremental tax burdens, including increases in Canada/Quebec Pension Plan premiums, Employment Insurance (EI) premiums, and the carbon tax.

Together these challenges place intense and unyielding pressure on the health of small businesses, complicating their path to recovery and growth in a post-pandemic landscape.

Federal tax relief: preferred measures

Recognizing these difficulties, there is a critical need for supportive measures to help alleviate the financial burden and foster a more conducive environment for small businesses. Insights from our February survey reveal a strong indication that small businesses are in favor of various tax reduction strategies to mitigate their challenges.

Regarding potential federal tax relief strategies, there is overwhelming support (93%) among small businesses for reducing the federal small business tax rate to 8% from the current 9%. Additionally, a significant majority (84%) advocate for increasing the federal small business deduction (SBD) to $700,000 from $500,000. There is also strong support (86%) for the provision of an EI credit and freezing the price of carbon at current rates (74%). Across sectors, there is consistent support for reducing the small business tax rate, raising the small business deduction, and introducing an EI credit.

Business owners’ level of support on potential federal government tax measures,
ordered by NET agreement

Source:  The CFIB omnibus survey Your Voice – February 2024, was conducted online February 8-21, 2024. A total of 3,762 CFIB members who are owners of Canadian independent businesses, from all sectors and regions of the country answered the question above. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of +/- 1.6%, 19 times out of 20.
Question: To what extent do you support or oppose to the following potential federal measures? 

Tax relief measures are seen as essential for providing businesses much-needed liquidity to address their current challenges. Given that it is costlier for small business to access financing to fund their growth, and that regulatory costs ─ particularly tax compliance costs ─ are disproportionately higher for small business, lower corporate taxes help to level the playing field with larger competitors. Corporate tax reductions could stimulate investment in machinery, equipment, and technology, which can help businesses to increase their productivity. Further, the federal SBD limit has remained unchanged at $500,000 since 2009 ─ had this limit had been adjusted annually for inflation, it would currently be close to $700,000, underscoring the urgency of this proposed adjustment.

A small business EI tax credit would allow businesses to reduce their wage costs. Given that small businesses often rely more heavily on labour, measures that reduce wage costs could help ease their financial strain, as well as to keep them competitive in the current labour market as they try to attract and retain talent. This measure echoes the success of similar initiatives in the past, like the Small Business Job Credit of 2015 and 2016.

Other notable measures that can help small business include raising the Lifetime Capital Gains Exemption (LCGE) to $1,250,000, supported by 81% of business owners. Additionally, there is considerable support for freezing the price of carbon at current rates, supported by 74% of business owners, the rate is slated to increase significantly on April 1, 2024.

The collective sentiment from our February 2024 survey underlines the currently fragile financial situation of many independent businesses in Canada, the still important challenge of labour shortages, and the crucial role of tax relief to foster a more conducive environment for small businesses, ultimately contributing to a more robust and dynamic economy.