The inability to write off provincial sales taxes is an obstacle to greater investment for 37 percent of small businesses in British Columbia, Saskatchewan, and Manitoba, according to the Canadian Federation of Independent Business’s “Removing roadblocks: Unlocking small business capital investment” report.
The report revealed that 32 percent of Canadian small businesses anticipated a decline in their capital investments over the next two years. CFIB’s data show that business investment in machinery and equipment dropped by 16 percent from 2013 to 2023, a drop that the CFIB said aggravates Canada’s productivity challenges.
“If we don’t improve our productivity and make it easier for businesses to equip workers with the tools and equipment they need to be more efficient, Canada risks falling behind its global competitors, losing entrepreneurs to other countries, and worsening the standard of living for all Canadians," said Bradlee Whidden, Western Canada senior policy analyst and report co-author, in a statement. "We will all feel the impacts, that’s why governments need to act now, and fast.”
Sixty-nine percent of businesses highlighted equipment expense as a significant deterrent to capital investment, while 56 percent pointed to high business costs and 50 percent to restrained cash flow.
The CFIB urged the federal government to simplify and permanently implement accelerated investment incentive and immediate expensing measures, accelerating write-offs. The federation also encouraged the government not to increase the inclusion rate of capital gains from 50 percent to 66.7 percent.
Moreover, the CFIB recommended that all levels of government cut corporate income tax rates to facilitate income reinvestment and accelerate permitting, processing, and impact assessments for major infrastructure projects, particularly in capital-intensive sectors.
“All governments have a role in tackling Canada’s productivity emergency by adopting policies that make it easier for businesses to make valuable investments,” said CFIB research analyst Francesca Basta in a statement. “Providing small businesses with the financial space and tools they need will increase productivity and boost economic activity, allowing for more production and lower prices at a time when Canadians need it.”
The complete “Removing roadblocks: Unlocking small business capital investment” report can be accessed here.