The Canadian Federation of Independent Business (CFIB) has said Canada’s governments should prioritize the following to address the ongoing “entrepreneurial drought”: lowering the cost of doing business, reducing red tape, and adapting to the country’s evolving labour market.
CFIB’s recent report titled “Canada’s Entrepreneurial Drought, Part 2: Fixing Canada’s Shrinking Business Landscape” is the second in a two-part series tackling the increasing imbalance between Canadian business openings and closures.
The first report in the series called attention to the country’s “entrepreneurial drought” – defined as at least four consecutive quarters in which business exits exceeded entries – since early 2024, as revealed in CFIB’s research.
The CFIB found that Canada’s small business owners have shuttered more businesses than started them for six consecutive quarters, with 55 percent of owners declining to recommend beginning a business at this time.
“The entrepreneurial drought won’t fix itself,” said Brianna Solberg, CFIB director for the Prairies and the North, in a media release.
Michelle Auger, CFIB director of trade and marketplace competitiveness, described the federal spring economic statement as an opportunity for the Canadian government to combat this trend and boost confidence among businesses.
Suggested changes
The second report recommended practical reforms for Canada’s governments to achieve these objectives.
To decrease business costs, CFIB asked Canada’s governments to:
- Level the playing field to ensure that small businesses can access government programs and procurement processes
- Make it easier for such businesses to access and afford financing options
- Lower the federal small business corporate tax rate (SBCTR) to six percent from nine percent
CFIB urged provincial governments to permanently reduce their SBCTRs to zero percent by 2030. CFIB also asked both federal and provincial governments to raise SBCTR thresholds to at least $700,000 and index them to inflation.
To reduce red tape and streamline internal trade, CFIB asked Canada’s governments to:
- Measure and publicly report on the regulatory burden
- Introduce a “2 for 1” rule, which will abolish two regulations for every new one created
- Expand mutual recognition to cover food and alcohol
- Ensure the consistent and transparent application of the Canadian Mutual Recognition Agreement and provincial legislation, with minimal exemptions
To tackle labour market issues and improve business succession, CFIB asked Canada’s governments to:
- Improve training incentives and partnerships with educational institutions for a quality workforce
- Maintain and protect the Temporary Foreign Worker Program and engage with the business community before any future reforms
- Raise awareness, especially among young entrepreneurs, regarding the opportunities and advantages of buying existing businesses
- Permit small corporations to defer capital gains tax from a business transfer to the owner’s children
“Governments have spent years prioritizing big business needs, while small firms have been largely ignored,” Auger said in CFIB’s media release. “Canada cannot afford to keep losing more businesses than it gains, it’s time for all governments to put small businesses first and reverse the entrepreneurial drought.”
“Canada needs to give businesses clear reasons to start, stay and invest, yet current government policies are failing to inspire confidence among entrepreneurs,” Solberg added. “If governments are serious about Canada’s economic strength, competitiveness, and productivity growth, they need to start reflecting this in their policies.”