Small businesses are the backbone of the Canadian economy. To support them, the federal government provides the Small Business Deduction (SBD), a lower tax rate that allows entrepreneurs to keep more of their earnings to reinvest in growth. However, for those choosing the co-operative model, this essential tool is currently broken.<\/p>\n\n\n\n
The “Co-operative Tax Penalty”<\/strong><\/p>\n\n\n\n In 2016, Bill C-29 introduced rules to stop large firms from “multiplying” SBD access. While the goal was fairness, the broad language inadvertently penalized independent small businesses simply because they are members of a co-operative.<\/p>\n\n\n\n An Incomplete Fix<\/strong><\/p>\n\n\n\n The government acknowledged this distortion in 2017 and 2019 by amending the Income Tax Act to exempt farmers and fishers. While welcome, this was an incomplete fix<\/strong> based on initial examples. Today, entrepreneurs in retail, manufacturing, services, and health care are still waiting for that same equity. We aren\u2019t seeking a new tax break; we are asking the government to complete the correction<\/strong> it already started.<\/p>\n\n\n\n Why This Matters<\/strong><\/p>\n\n\n\n Fixing the SBD powers the entire economy:<\/p>\n\n\n\n Learn more about this by reading our Small Business Deduction policy brief<\/a>.<\/p>\n\n\n\n\n