Canadian smaller businesses pay between 20-23 per cent more taxes than the U.S., claims CFIB report

Trump’s ‘Big Beautiful Bill’ will make things worse, says Canadian Federation of Independent Business

To improve Canada’s tax competitiveness and boost economic productivity, the Canadian Federation of Independent Business is calling on the federal and provincial governments to lower corporate income tax rates for small firms, and increase the small business deduction threshold while indexing it to inflation.

Quebec businesses overtaxed

The motion comes after the CFIB recently issued a report that compared business tax loads in Canada and the U.S., concluding that small businesses in Quebec and Atlantic Canada were among the most overcharged in the ten provinces.

A Canadian microbusiness (which the CFIB defines as being made up of four employees) pays on average a whopping 20% more in taxes than a similar firm in the United States, stated the report which compared tax loads in 10 Canadian provinces and 20 U.S. states.

By comparison, a small business (25 employees) pays 23% more in taxes than its U.S. counterpart, the CFIB found. But even the most competitive provinces (B.C. for micro businesses, Saskatchewan for small firms) had an average tax burden higher than the vast majority of U.S. states.

Trump’s ‘Big Beautiful Bill’

The CFIB notes that recent pro-small business changes in the United States through the “Big Beautiful Bill” driven through by President Donald Trump made the tax gap between the two countries even wider.

The conclusion the federation came to? “Canada needs to lower taxes or risk driving investment south of the border,” they said in a September 11 statement.

“U.S. tariffs are not the only competitive issue facing Canadian small businesses,” said Bradlee Whidden, a CFIB senior policy analyst and the report’s co-author.

“When you look at the numbers, it’s crystal clear: smaller businesses in Canada are already at a serious tax disadvantage, which was just made permanent by recent pro-small business changes in the United States through the Big Beautiful Bill.

“If Canada wants to compete and raise our standard of living, we need to cut taxes,” added Whidden. “Payroll taxes are heavy on both sides of the border, but the real gap is in corporate and property taxes. Here in Canada, that gap means less money going back into wages, business operations and growth.”

Quebec’s poor tax performance

On a province-by-province level, Quebec and Atlantic Canada performed the poorest, the CFIB said, while western Canadian provinces ranked a bit higher, but still significantly below the average of U.S. states that were analyzed.

However, even the most competitive provinces (B.C. for micro businesses, Saskatchewan for small firms) had an average tax burden higher than the vast majority of U.S. states, the CFIB concluded.

Among microbusinesses, the five best (1 – 5) and worst (26 – 30) jurisdictions in the report were:

Among small businesses, the five best (1 – 5) and worst (26 – 30) jurisdictions are:

In addition to the recommendation to the federal and provincial governments, the CFIB is also suggesting that municipalities, working in conjunction with provincial governments that oversee them, should reduce property taxes and close the property tax gap between commercial and residential properties.

“Trade disruptions have put the spotlight on Canada’s uphill battle to remain competitive with the United States,” said Juliette Nicolaÿ, the CFIB’s policy analyst for national affairs and the report’s other co-author.

Gap can’t be ignored, says analyst

“While we can’t control what other countries do, we can’t ignore the widening gap between Canadian small firms and their U.S. competitors,” she added. “It’s time for governments to step up with policies that lower the cost of doing business in Canada.”