The federal Liberal government says it will lower the small business tax rate to 10 per cent in January and to nine per cent in 2019, the start of a week-long effort to stanch the bleeding from a self-inflicted political wound.
Prime Minister Justin Trudeau also says the government won't be changing the lifetime capital gains rule, which allows business owners to convert regular income of a corporation into capital gains, which are taxed at a lower rate.
Trudeau is making the announcement as his government faces widespread criticism for a package of controversial tax-reform proposals.
The small business tax rate is currently at 10.5 per cent and applies to the first $500,000 of active corporate income, and the government says lowering the rate will provide entrepreneurs with up to an additional $7,500 per year.
Combined, the government estimates the tax reductions will reduce Ottawa's revenues by about $2.9 billion over five years.
Trudeau campaigned in 2015 on a promise to reduce the small business tax rate to nine per cent from 11 per cent over three years - but he announced in Budget 2016 he would freeze the rate at 10.5 per cent, cancelling in the process a legislated reduction to nine per cent instituted by the previous Conservative government.
Faced with vocal opposition to tax proposals the Liberal government is now reviving the nine per cent promise. According to Liberal MPs, who were briefed at a closed-door caucus meeting early Monday morning, the reduction will be phased in over two years.
Finance Minister Bill Morneau says 9% small business tax rate will free up an extra $7,500 for small businesses to reinvest #cdnpoli pic.twitter.com/HTx1ZpGGVo
— NEWSTALK1010 (@NEWSTALK1010) October 16, 2017