Compared with their US counterparts, average tax payments in Canada are 20 percent higher for microbusinesses (four employees) and 23 percent higher for small businesses (25 employees), revealed a report from the Canadian Federation of Independent Business (CFIB).
In a media release, CFIB explained that its new report compared tax loads in all 10 Canadian provinces and 20 US states.
CFIB shared that its report determined that Quebec and Atlantic Canada performed badly, while Western Canada did slightly better but still significantly worse than the average of US states surveyed.
According to CFIB, among microbusinesses, the five best (those ranked one to five) Canadian and US jurisdictions surveyed were all from the US, specifically:
- South Dakota
- North Dakota
- Wyoming
- Florida
- Texas
Meanwhile, the five worst (those ranked 26–30) jurisdictions surveyed were all Canadian, namely:
26. Newfoundland and Labrador
27. Prince Edward Island
28. Nova Scotia
29. New Brunswick
30. Quebec
Among small businesses, the five best Canadian and US jurisdictions surveyed were all from the US, specifically:
- South Dakota
- Wyoming
- North Dakota
- Florida
- Texas
On the other hand, the five worst jurisdictions surveyed were all Canadian, namely:
26. Nova Scotia
27. Prince Edward Island
28. Newfoundland and Labrador
29. New Brunswick
30. Quebec
“Trade disruptions have put the spotlight on Canada’s uphill battle to remain competitive with the United States,” said Juliette Nicolaÿ, CFIB policy analyst for national affairs and report co-author, in the media release.
“U.S. tariffs are not the only competitive issue facing Canadian small businesses,” added Bradlee Whidden, senior policy analyst and report co-author.
CFIB’s suggestions
CFIB said Canada’s federal and provincial governments should reduce the corporate income tax rates for small firms and raise the small business deduction threshold while indexing it to inflation to boost the country’s tax competitiveness and economic productivity.
“When you look at the numbers, it’s crystal clear: smaller businesses in Canada are already at a serious tax disadvantage, which was just made permanent by recent pro-small business changes in the United States through the Big Beautiful Bill,” Whidden said. “If Canada wants to compete and raise our standard of living, we need to cut taxes.”
In its media release, CFIB urged municipal and provincial governments to lower property taxes and address the property tax gap between commercial and residential properties.
“Payroll taxes are heavy on both sides of the border, but the real gap is in corporate and property taxes,” Whidden said in CFIB’s media release. “Here in Canada, that gap means less money going back into wages, business operations, and growth.”
“While we can’t control what other countries do, we can’t ignore the widening gap between Canadian small firms and their U.S. competitors,” Nicolaÿ said. “It’s time for governments to step up with policies that lower the cost of doing business in Canada.”