Putting the small business lens on the 2024 provincial budget season in Canada

Prolonged high interest rates and inflation have significantly impacted Canada’s economy. In 2023, GDP growth slowed to 1.1% year-over-year and only modest improvement is expected in 2024. Alongside this weak growth, several worrisome trends continue to weigh on the economy: an increasing number of business insolvencies, slowing export growth, sluggish productivity, and weak investment intentions. Amid volatile global economic conditions, several provinces have presented their budgets for the upcoming year, highlighting the challenges of balancing both the books and regional priorities in such a difficult environment.

CFIB’s Your Voice omnibus survey conducted in December 2023 asked business owners to identify their top priorities for government action. The highest priority was addressing rising prices and the cost of doing business (77%), followed by reducing the overall tax burden (74%) and improving the quality and accessibility of healthcare (65%). The two highest priorities are consistent across all provinces, highlighting widespread concerns about economic pressures and the need for effective policy responses.

Top business issues for government action in 2024: Addressing rising prices and the cost of doing business (77%) and reducing the overall tax burden (74%)

Source:   The CFIB omnibus survey Your Voice – December 2023 survey, was conducted online December 7-19, 2023. A total of 2,966 small business owners from Canada answered the question above. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of +/- 1.8%, 19 times out of 20.

Question:  Heading into 2024, please indicate the level of priority you would like governments to place on the following issues. (Select one for each line) [•High priority]

Often one of the most important moments for a government each year to set the tone, clarify priorities and introduce important changes is its annual budget. This year, provincial budget season started on February 22 when British Columbia unveiled its budget for the 2024-2025 fiscal year (FY25) and ended on April 2 with the tabling of the Manitoba budget. The following table presents some of the key highlights of each budget, and each provincial budget is assessed from a small business perspective. A neutral assessment indicates that governments have taken a “do no harm” approach which is designed to avoid causing adverse effects on businesses. Positive assessments signal that governments have undertaken proactive measures aimed at supporting and promoting business growth. Conversely, negative assessments are given when policies introduced impede business operations or growth.

This year, no provincial government received a negative assessment. While virtually all governments received a neutral assessment for adopting a "do no harm" approach ─ Newfoundland and Labrador stood out with the only positive assessment.

2024-2025 provincial budgets – Assessment and key elements from a small business perspective

Source:   Provincial budgets and CFIB.

Of note is the fact that only two of the ten provincial budgets (New Brunswick and Alberta) plan to avoid budget deficits for the upcoming fiscal year, while only one (Newfoundland and Labrador) made improvements to small business taxation.

To address the concerns of small business, provincial budgets have also introduced various measures including targeted relief programs and subsidies to help businesses manage higher operating costs. Others have introduced tax reforms aimed at reducing the burden on both businesses and consumers. Additionally, several provinces are investing in healthcare infrastructure and services to improve quality and accessibility. Overall, provincial budgets fell short in providing support to small businesses.

Below is a summary of each provincial 2024-2025 budget, including notable measures addressing some of the small business concerns.

Newfoundland and Labrador:

CFIB assessment:

Notable measures:

• Reduction of the small business tax rate from 3% to 2.5% as well as additional tax credits.
• Commitment to red tape reduction (e.g., creation of business navigator position).

Nova Scotia:

CFIB assessment:

Notable measure:

• Increase of the personal income tax brackets, allowing workers and self-employed individuals to keep more of their earnings.

Prince Edward Island:

CFIB assessment:

Notable measures:

• Increase of the basic personal income tax credit to $14,200, in addition to increased taxation thresholds for each bracket and a reduction of tax rate at each bracket (except the top one, which will be increased).

New Brunswick:

CFIB assessment:

Notable measure:

• Introduction of a new provincial vaping tax.

Quebec:

CFIB assessment:

Notable measures:

• A $250 million cut in SME aid by eliminating a tax credit for experienced workers.
• Revenu Québec plan to implement an initiative to inform, educate and support SMEs.

Ontario:

CFIB assessment:

Notable measures:

• Extension of the gas and fuel tax cuts through the end of 2024.
• Elimination of the basic wine tax.
• Announced investments in key skills training

Manitoba:

CFIB assessment:

Notable measures:

• Extension of the fuel tax cut until September 2024.
• New $300 security rebate for homeowners and small business owners to purchase security equipment.
• Elimination of commission for businesses on PST
• Banning of the use of replacement workers and implementing card check certification for union
• Increasing minimum wage to $15.80.

Saskatchewan:

CFIB assessment:

Notable measure:

• Freeze of the small business tax rate at 1% for an additional year.

Alberta:

CFIB assessment:

Notable measures:

• Freeze of the non-residential education property tax rate at $3.76 per $1000 of assessment.
• A tax credit for out of province workers in the skilled trades, which is in addition to the Alberta is Calling attraction bonus.

British Columbia:

CFIB assessment:

Notable measure:

• Doubling of the Employer Health Tax payroll exemption threshold from $500,000 to $1 million.
• BC Electricity Affordability Credit. A credit for commercial and industrial customers. The average small business will save $400 per year.

Yukon:

CFIB assessment:

Notable measures:

• $2 million in the economic fund to help businesses pursuing innovation and diversification.
• $3.5 million to continue funding the Interim Electrical Rebate.

Northwest Territories:

CFIB assessment:

Notable measures:

• Property mill rates and some fees will be indexed to inflation and the carbon tax rate increased to $80 a carbon-equivalent tonne of greenhouse gas emissions on April 1, 2024.
• $30 million for a contribution to the Northwest Territories Power Corporation to address low water levels and avoid power rate increases for residents.

Nunavut:

CFIB assessment:

Notable measure:

• No new taxes and no income tax increases.

Small Business Confidence in Provincial government’s vision

While many governments have made efforts to support small businesses in their recent budgets, these measures may not be making a noticeable impact at the grassroots level. This disconnect has left small business owners with low confidence in their provincial governments’ ability to foster an environment that supports small business and entrepreneurship. While some regions show promising levels of confidence (AB, 61%; SK, 60%), the confidence level is below 37% for all other jurisdictions, and as low as 8% for British Columbia.

As such, it is evident that a concerted effort is needed to ensure that SMEs nationwide feel adequately supported and empowered to thrive. This requires a strategic and collaborative approach to address the diverse needs of the SME community across Canada.

In most provinces and territories, small business owners are not so confident that their government has a vision that supports small business and entrepreneurship

Source:   The CFIB omnibus survey Your Voice – November 2023 survey, was conducted online November 2-20, 2023. A total of 3,244 small business owners from Canada answered the question below. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of +/- 1.7%, 19 times out of 20.  

Question:  How confident are you that your provincial government has a vision that supports small business and entrepreneurship? (Select one)

To ensure that the measures implemented are well-aligned with the needs of the business community, CFIB urges each provincial government to actively involve SMEs in policy development and continuously monitor the effectiveness of these measures. They should also pay close attention to the positive small business-friendly measures that are being put in place by other provinces, to adopt best practices in a timely way. In doing so, governments can create a more supportive and resilient business environment.