Canadian Conservative Federal Budget Implications for small business and entrepreneurs

Small businesses will see few changes in the 2013 federal budget, but the Conservative document is getting generally positive reviews from the Canadian business community.

By: Jacob Serebrin Special to The Star, Published on Fri Mar 22 2013

Small businesses will see few changes in the 2013 federal budget, but the Conservative document is getting generally positive reviews from the Canadian business community.

Dan Kelly, president of the Canadian Federation of Independent Business, says he’s particularly pleased that the government has extended the hiring tax credit for small businesses.

The credit allows companies to deduct up to $1,000 from the additional EI premiums incurred from new hires.

“It’s a big one for our members,” he said.

One change that could help small business owners, when they’re ready to move on, is the increase to the lifetime capital gains tax deduction – from $750,000 to $800,000.

“That’s a really important thing for many small business owners, that’s their retirement plan,” says Kelly.

The deduction applies to small businesses that primarily operate in Canada and have few investments or foreign holdings.
According to Paul Woolford, a partner at KPMG Enterprise, the increase could mean up to $12,000 in tax savings.

He says this was “good news if you’re looking to sell your business.”

Carole Presseault, vice president of government and regulatory affairs at Certified General Accountants Association of Canada, says the increase will also help ease transitions from one business owner to another.

Some small business owners will be paying more in taxes, though, because the budget contains several adjustments to tax rates and credits that apply to non-eligible dividends.

According to Woolford, the net impact will see non-eligible dividends taxed at 21.22 per cent, an increase of a little more than one percentage point. Woolford warns that some provinces may follow suit and increase their tax rate on dividends as well.

The budget also includes some new venture capital support, including $60 million, over five years, for startup accelerators and incubators. The government will give the Businesses Development Bank of Canada $100 million to invest in companies that complete those programs.

The government also plans to renew funding for the Federal Economic Development Agency for Southern Ontario (FedDev Ontario), giving it $920 million over five years.
The Canadian Youth Business Foundation, a non-profit that provides support to entrepreneurs between 18 and 39, will also see it’s funding renewed, receiving $18 million over two years.

Olivier Letard, a CYBF board member, said the group is pleased with the announcement.

“This money will help us support young entrepreneurs that we believe in,” he says. “I’m happy to see that the government supports entrepreneurship and, especially, young entrepreneurs.”

Letard says he was also pleased to see the introduction of a new startup visa for entrepreneurs from other countries who want to come to Canada and start businesses.
According to Teri Kirk, founder and CEO of the Funding Portal, a website that helps businesses connect to government and private financing, “all of the new funding was in the form of grants and contributions.”

She sees this as part of a broader trend by the Conservative Government to move away from tax credit programs.

“We think that this is favourable, especially for small and medium-sized enterprises,” she says. “They provide up front funding, as opposed to after-the-fact reimbursement.”

The budget also includes plans for a jobs grant, which will see the Federal Government provide matching-funds of up to $5,000 per person for skills training programs. Employers and provincial governments will be expected to put in the rest.

Because details of the plan will have to be negotiated and approved by the provinces before it goes into effect, CFIB’s Kelly says he’s taking a wait-and-see attitude.
He says getting employers more involved in training is a step in the right direction, but wants to see support for informal and on-the-job training included.

Toronto Star | Toronto, Ontario