Taking a page out of its 2015 playbook when the government raised taxes on the wealthiest one per cent so that it could, in its words, “introduce a middle class tax cut for nearly nine million Canadians,” Finance Minister Bill Morneau on Monday linked a cut in the small business tax rate to a planned rethink, rework and partial abandonment of the recently-announced small business tax proposals.
On Monday, the government announced that the small business rate will drop to 10 per cent on Jan. 1, 2018 and to 9 per cent on Jan. 1, 2019. The rate, which is currently at 10.5 per cent, applies to the first $500,000 of active business income. The current rate came into effect on Jan. 1, 2016, shortly after the government came to office. The rate was frozen as the government “paused on further reductions in order to better understand the use of the small business tax deduction and the potential to be used as a tax planning tool for the wealthiest of Canadians."
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