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Small Business Corporate Income Tax Rate Cut Benefits More Than 275,000 Businesses

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Small Business Corporate Income Tax Rate Cut Benefits More Than 275,000 Businesses

Ministry of Finance

By cutting the small business Corporate Income Tax (CIT) rate to 3.2 per cent from 3.5 per cent starting January 1, 2020, the government has fulfilled its promise to cut the rate by 8.7 per cent—the government is helping to create a more competitive environment for small businesses. This tax cut will deliver up to $1,500 in annual savings to more than 275,000 businesses.

This tax relief and other actions the government has taken to lower business costs will save small businesses $2.3 billion in 2020. Here are two potential scenarios on how these measures benefit small businesses.

Savings for a Local Business

To illustrate these savings to a small business, consider Sue's Bakery, a local business that employs 11 staff including four that earn minimum wage. In total, Sue's Bakery would see savings of $10,955 in 2020 from Ontario measures, including:

  • $935 in Ontario CIT relief from the small business CIT rate cut and from accelerated write-off measures for capital investments,
  • $780 in savings from the cancellation of the cap-and-trade carbon tax,
  • $2,295 from reduced WSIB premiums, and
  • $6,945 from keeping the minimum wage at $14 per hour.

Savings for a Small Manufacturer

To illustrate these savings for a small manufacturer, consider Omar's Auto Parts Manufacturing, which employs 20 staff including four that earn minimum wage. In total, Omar's Auto Parts would see savings of $22,565 in 2020 from Ontario measures, including:

  •  $5,045 in Ontario CIT relief from the small business CIT rate cut and from accelerated write-off measures for capital investments,
  •  $675 in savings from the cancellation of the cap-and-trade carbon tax,
  • $7,200 from reduced WSIB premiums, and
  • $9,645 from keeping the minimum wage at $14 per hour.

These are savings that can be reinvested to grow their businesses, buy more supplies and hire more people.

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Business and Economy Taxes and Benefits