Ahead of the feds’ spring economic statement on Tuesday, the Canadian Federation of Independent Business (CFIB) is calling for measures to reverse the country’s shrinking small-business landscape, including measures to help smooth succession planning.
In the second part of a two-part report highlighting barriers to entrepreneurship, the CFIB identifies three broad priorities for the government: reduce costs for businesses, cut red tape and address the aging demographics of Canada’s labour market.
The report suggests several reforms related to these broader priorities, such as reducing the federal small-business corporate tax rate to 6% from 9%, raising the small-business corporate tax rate threshold to at least $700,000 both federally and provincially, eliminating two regulations for every new regulation, and allowing small corporations to defer tax on capital gains from the transfer of a business to the owner’s children.
In a letter to the finance minister earlier this month, the CFIB specified succession-planning measures such as an expansion of existing rollover provisions when selling a business and the introduction of a lower capital gains inclusion rate on a second tranche of gains above the lifetime capital gains exemption (LCGE). (The LCGE on the sale of small-business corporation shares and farming and fishing property on or after June 25, 2024, is $1.25 million, with indexation resuming for 2026.)
“Reinvigorating entrepreneurship is not only about supporting today’s small businesses,” the CFIB report, released on Monday, says. “It is also about ensuring Canada remains a country where individuals are willing and able to start, grow and pass on businesses.”
The report cites research that the value of business succession as a whole is potentially more than $2 trillion, yet nearly half of business owners have no succession plan. The report’s additional recommendations related to succession planning include matching skilled newcomers with owners looking to exit, and making the $10-million capital gains exemption permanent for employee ownership trusts.
The report also warns about the growing involvement of private equity firms in acquiring small and medium enterprises (SME).
“According to the Canadian Venture Capital and Private Equity Association, over 65% of private equity transactions in Canada occur in the SME space,” the report says. “Without stronger support for Canadian entrepreneurs to purchase these businesses, SMEs will continue to disappear, and markets will become increasingly consolidated under private equity ownership.”
The result would be fewer locally owned small and medium businesses, reduced competition, higher consumer prices and weaker economic resilience in communities, it says.
The first CFIB report on stalled entrepreneurship highlighted that business exits have outpaced business starts for six consecutive quarters.
The government’s capability to adequately address the concerns of small businesses will be reflected in its fiscal position, to be updated in the spring economic statement. Budget 2025 had projected a ballooning deficit of more than $78 billion for fiscal 2025–26, and some observers expect fiscal projections haven’t much changed since the budget was released last November.
The Mark Carney-led Liberal government has largely focused on new trading relationships and spending on defence and infrastructure as well as affordability measures such as temporarily suspending federal fuel excise tax rates. On Monday, the government announced Canada’s first national sovereign wealth fund for nation-building projects.