In Canada, the small business tax rate is the tax rate paid by a small business. As of 2016, the small business tax rate is 10.5%, which stands despite significant controversy surrounding the government's broken promise to reduce that rate to 9%.
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Definitions
A small business in Canada is defined as a Canadian-based corporation with less than 100 employees and under $500,000 in annual income.
The general corporate tax rate is 28%. Small businesses are allowed to claim a "small business deduction" under the Income Tax Act; the deduction enumerated in that Act is deducted from the 28% general tax rate and means the net small business tax rate is as follows:
Conservative government reductions
As 97% of Canadian businesses are small businesses, political parties of all stripes have made promises to better help support and expand small businesses. Reviews such as Canada's Global Markets Action Plan urged the federal government to better support small businesses by increasing the deduction limits for small businesses and lowering the effective tax rates. Under the government of Stephen Harper, the small business tax rate was reduced by 2%; by the end of their mandate they had plans to further reduce the rate to 9%, but those plans were cancelled under the government of Justin Trudeau.
2015 election promises and promise broken by Liberal government
In the 2015 federal election, all three political parties (NDP, Conservative, Liberal) promised to carry on the Conservatives' promise in 2015 to reduce the tax rate to 9% by 2019. However, in the 2016 budget, the Liberals broke their promise and instead held the rate at 10.5%. This caused considerable outrage among the public and small businesses: Dan Kelly, the President of the Canadian Federation of Independent Business, said "it's a big fat broken promise." An analysis by the Parliamentary Budget Officer said the tax increase would cost 1,240 jobs and $850 million per year by 2020-2021.