What is in Budget 2022 for Businesses?
Cutting Taxes for Canada's Growing Small Businesses
Small businesses currently benefit from a reduced federal tax rate of 9 percent on their first $500,000 of taxable income, compared to a general federal corporate tax rate of 15 percent. A business no longer has access to this lower rate once its level of capital employed in Canada reaches $15 million. However, phasing out access to the lower tax rate too quickly—and then requiring a small business to pay more in tax—can discourage some companies from growing and creating jobs.
- Budget 2022 proposes to gradually phase out access to the small business tax rate, with access to be fully phased out when taxable capital reaches $50 million, rather than at $15 million.
This would allow more medium-sized businesses to benefit from the reduced rate, increase the amount of income that can be eligible for the reduced rate, and deliver an estimated $660 million in tax savings over the 2022-2023 to 2026-2027 period that can be reinvested towards growing and creating jobs.
This measure would apply to taxation years that begin on or after Budget Day.
The government is also undertaking a review to assess whether the tax system provides adequate support to investments in growing businesses. The study will include an examination of the rollover for small business investments. This measure allows investors in small businesses to defer tax on capital gains.
Strengthening Supply Chain Infrastructure
The recent flooding in British Columbia—which cut off the flow of goods to and from the rest of Canada—reinforced the importance of our highways, railways, and ports as the backbone of our transportation system.
To help build more resilient and efficient supply chains, Budget 2022 proposes to provide $603.2 million over five years, starting in 2022-23, to Transport Canada, including:
- $450 million over five years to support supply chain projects through the National Trade Corridors Fund, which will help ease the movement of goods across Canada's transportation networks. This is in addition to the $4.2 billion allocated to the fund since 2017.
- $136.3 million over five years to develop industry-driven solutions to use data to make our supply chains more efficient, building on the success of initiatives like the West Coast Supply Chain Visibility Program. Of this amount, $19 million will be sourced from existing resources; and
- $16.9 million over five years, starting in 2022-23, to continue making Canada's supply chains more competitive by cutting needless red tape, including ensuring that regulations across various modes of cargo transportation (e.g., ship, rail) work effectively together.
These investments will help lower prices for Canadians; make our supply chains stronger; improve the ability of Canadian businesses to export their goods abroad, and deliver essential goods to our communities.
These investments will also complement the work the government is doing through the newly established National Supply Chain Task Force, which will work with industry, associations and experts to examine critical pressures and make recommendations regarding short- and long-term actions to strengthen the efficiency, and resiliency of transportation infrastructure and the reliability of Canada's supply chains.
Creating a Canadian Innovation and Investment Agency
A market-oriented innovation and investment agency—one with private-sector leadership and expertise—has helped countries like Finland and Israel transform themselves into global innovation leaders.
The Israel Innovation Authority has spurred the growth of R&D-intensive sectors, like the information and communications technology and autonomous vehicle sectors. In addition, the Finnish TEKES helped transform low-technology sectors like forestry and mining into high technology, prosperous, and globally competitive industries.
In Canada, an innovation and investment agency will proactively work with established Canadian industries and businesses to help them make the investments they need to innovate, grow, create jobs, and be competitive in the changing global economy.
- Budget 2022 announces the government's intention to create an operationally independent federal innovation and investment agency and proposes $1 billion over five years to support its initial operations. Final details on the agency's operating budget will be determined following further consultation later this year.
Launching a World-Leading Canada Growth Fund
- Budget 2022 proposes to establish the Canada Growth Fund to attract substantial private sector investment to help meet important national economic policy goals:
- To reduce emissions and contribute to achieving Canada's climate goals;
- To diversify our economy and bolster our exports by investing in the growth of low-carbon industries and new technologies across new and traditional sectors of Canada's industrial base; and
- To support the restructuring of critical supply chains in areas vital to Canada's future prosperity—including our natural resources sector.
The Canada Growth Fund will be a new public investment vehicle that will operate at arms-length from the federal government. It will invest using a broad suite of financial instruments, including debt, equity, guarantees, and specialized contracts. The fund will be initially capitalized at $15 billion over the next five years. It will invest on a concessionary basis, with the goal that for every dollar invested by the fund, it will aim to attract at least three dollars of private capital.
In standing up the Canada Growth Fund, the government intends to seek expert advice from within Canada and abroad. Following these consultations, details about the fund's launch will be included in the 2022 fall economic and fiscal update. Funding for the Canada Growth Fund will be sourced from the existing fiscal framework.
Tourism Relief Fund
- Started in 2021 with a budget of $500 million over two years (ending March 31, 2023), including $50 million dedicated explicitly to Indigenous tourism initiatives and $15 million for national initiatives.
This fund will position Canada to be a destination of choice when domestic and international travel is once again safe by empowering tourism businesses to create new or enhance existing tourism experiences and products to attract more local and domestic visitors and helping the sector reposition itself to welcome international visitors by providing the best Canadian tourism experiences we have to offer the world.
To read the Budget 2022 speech or to review the budget documents, please visit: https://budget.gc.ca/