Corporate and property taxes are eroding Canada's competitiveness with US firms
Canada’s small business, already facing significant economic challenges, are struggling to be competitive against US counterparts, due to significantly higher taxes.
The Canadian Federation of Independent Business (CFIB) says that a microbusiness in Canada (a firm with roughly 4 employees) pays about 20% more in taxes than a similar business operating in the US, while a small business (25 employees) faces a burden approximately 23% higher.
The comparison spans all ten provinces and twenty US states, with differences especially pronounced in Québec and Atlantic Canada, which fared worst.
The western provinces, though comparatively better, still lag behind most US states on tax competitiveness and even in the strongest provinces (British Columbia for microbusinesses and Saskatchewan for small businesses), the tax load remains above that in nearly all US states included in the report.
While payroll taxes are substantial in both countries, it is in corporate income taxes and property taxes that the gap is widest, meaning fewer resources are left over for wages, business operations, and growth in Canadian firms.
“US tariffs are not the only competitive issue facing Canadian small businesses,” says Bradlee Whidden, senior policy analyst and co-author at CFIB. “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. If Canada wants to compete and raise our standard of living, we need to cut taxes.”
To close the gap, CFIB recommends a suite of policy changes including reducing corporate tax rates for small firms, raising the threshold for the small business deduction (and indexing it to inflation), shrinking property taxes, and narrowing the split between commercial and residential property tax rates.
"Trade disruptions have put the spotlight on Canada's uphill battle to remain competitive with the United States. While we can't control what other countries do, we can't ignore the widening gap between Canadian small firms and their US competitors," says Juliette Nicolaÿ, CFIB's policy analyst for national affairs and report co-author. "It's time for governments to step up with policies that lower the cost of doing business in Canada."
