Liberal Budget Seeks to Defer Future Cuts to Small Business Tax Rate

A Liberal campaign promise to cut the small business income tax rate appears to have itself landed on the chopping block.

Instead, the rate will remain at the current 10.5 per cent on the first $500,000 of active business income.

Today's federal budget says future decreases would be put off, but does not say when they might resume.

The move contradicts the Liberal campaign commitment to stick to the existing schedule that would have seen the small business income tax rate drop from 11 per cent last year to nine per cent by 2019.

That plan was part of the previous Conservative government's 2015 federal budget.

Finance Minister Bill Morneau did not directly answer a question on why the government decided to put off future decreases.

He told a news conference ahead of his budget speech that in his view, the budget was a good one for small business.

"We know that for small businesses the most important thing is to have an economy that's working,'' he said.

"That's what we want for Canada."

During the election, all three main parties were actively courting the support of small business by sticking to the Tories' small business tax rate plan.

But then Liberal leader Justin Trudeau created a minor controversy when he suggested small businesses set up as private corporations were a way for people to avoid paying taxes.

His political opponents pounced, with the NDP calling on him to apologize and the Conservatives accusing him of saying all small businesses were nothing but "tax scams."

Criticism also came from the Canadian Federation of Independent Businesses, which said there was no evidence to support Mr. Trudeau's assertion.

The Liberals countered that they were relying on studies by economists to back up their claim.

Despite that, they pledged to lower the rate to nine per cent by 2019, while at the same time ensure its benefits went to small businesses and not wealthy individuals.

Mr. Morneau said the Liberal budget's focus on the middle class benefits small business because it will provide them with more customers, as it will give more people more money to spend.

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