With the federal budget for 2014 now in play, Canadian small businesses and startups are cautiously optimistic towards what Finance Minister Jim Flaherty has promised for the fiscal year to come.
Releasing the budget on Tuesday, the Harper government revealed a number of plans it has for 2014, with many of them impacting small to mid-sized businesses (SMBs) and startups.
Some of these plans are promising, but some of them don’t go far enough, says Dan Kelly, president and CEO of the Canadian Federation of Independent Business (CFIB). His organization awarded the federal budget a “bronze medal” for its efforts to boost SMBs.
“There were some good solid items for small business in the budget, but unfortunately there was also some backsliding on a couple of issues,” Kelly says. “But overall, progress on several small business issues.”
Last year’s budget featured more substantial plans, as the 2013 budget promised to bump up the Lifetime Capital Gains Exemption from $750,000 to $800,000, he adds. The government also expanded a hiring credit for firms who wanted to bring on new staff – something it got rid of this year.
Axing that hiring credit was one of two disappointments for the CFIB, as the government had pledged to spend $225 million a year on saving firms up to $1,000 in Employment Insurance (EI) premiums, in return for creating new jobs.
The CFIB was also hoping the federal government would make some changes to the dividend tax credit, but those didn’t materialize.
“We were really pushing for a cut in the small business corporate tax rate, and that didn’t happen in this budget either,” Kelly says. “To their credit, they actually did make reference to, once the budget is balanced, that they would look at further reductions for small business, but that didn’t happen in the 2014 budget.”
However, there has still been some good news – for example, the government has said it will help cut back on credit card processing fees. Small businesses will also be able to get loans for apprentices, as well grants for creating internships for students and young professionals.
The budget will also see a freeze in EI and Canada Pension Plans (CPP) among public servants, passing on fewer costs to taxpayers.
And what’s also helpful is the government’s promise to help small businesses “cut the red tape,” Kelly says.
One of the biggest pain points for small businesses is the amount of time they spend on remitting source deductions, which means collecting income tax, EI, and CPP premiums from employees’ paycheques, as well as contributing their own share of EI and CPP. With this budget, the Conservatives have promised to cut back on the frequency of remittances, meaning small businesses will be able to catch a break on the paperwork, he says.
For the startup and emerging tech space, this budget is also encouraging, says Victoria Lennox, co-founder and CEO of Startup Canada.
Given the economy is still in recovery mode, she was happy to see the government investing an additional $40 million in the Canada Accelerator and Incubator Program over the next four years, starting in 2015 and 2016. That will bring its total funding up to $100 million.
She also points to the government’s mention of mentorship for women entrepreneurs, as well as its support of young people who want to take internships at startups.
“Obviously it’s an austerity budget, but the way we see it is that it’s a leading budget for 2015 … One of the first things that could have been cut was a commitment to entrepreneurship as we look to focus on consumers and individual Canadians. So it was really great to see in an economic climate where we really need to cut back, that entrepreneurship is still a priority,” Lennox says, noting that one of the government’s top priorities is to balance the budget, given there will be a federal election next year.
Still, if this budget does anything at all, it indicates that IT is a priority for this government, says Lynda Leonard, senior vice-president of the Information Technology Association of Canada (ITAC).
“One of the things about the IT sector is that we’re kind of the first wave of the future,” she says.
“[The federal government understands] that jobs are changing, and that if we’re going to be competitive and continue to offer the standard of living that Canada prides itself in, we’re going to need to be focused on high value jobs, and jobs that are, in some form or fashion, rooted in technology and innovation.”
In its announcements on the budget, the federal government said it expects to post a $6.4 billion surplus for the 2015-2016 fiscal year.