DAN KELLY
OTTAWA – Yesterday, the federal government shared new details on the Canadian Entrepreneurs’ Incentive (CEI) – measure that was proposed in the budget to offset some of the negative impact of the increase in the capital gains inclusion rate.
The CEI will reduce the amount of capital gains paid by some business owners when they sell the shares of their business.
While these changes do not fully offset the negative impact of the hike in the inclusion rate, CFIB is pleased that government moved forward on three of CFIB’s top four proposed amendments:
1. Farmers and fishers selling property will now have access to the program (only those selling shares were included before). Personal services businesses will also now have access to the incentive.
2. The founder rule has been dropped, allowing those who invest later to benefit.
3. The incentive will be phased in over five years, rather than 10.
These are all good moves, but the government did not move on one of the most critical changes – the need to expand the CEI to all entrepreneurs. It appears hundreds of thousands of small businesses will continue to be specifically excluded, including owners of restaurants, hotels as well as those in finance, insurance, real estate, arts, entertainment, recreation, and professionals like doctors, lawyers, accountants. It makes no sense to have a different tax treatment between a retail shop and a local restaurant.
The CEI itself is a positive measure. While the new amendments will help many, they will not benefit the many business owners who sell their assets rather than shares (other than farms/fishers) or those who have capital gains within their corporations. For them, the increase in the inclusion rate will hit hard.
CFIB will continue to push Ottawa to reverse the hike in the inclusion rate and expand the CEI to all SMEs.
Dan Kelly is President of CFIB
