Canada's small and medium-sized businesses saw few targeted measures for them in the budget as the federal government announced few new spending or tax measures.
However, employment insurance premiums will rise in 2011, and that will add costs to almost all small companies. The EI premium rate was frozen in 2009 and 2010, but it will be lifted next year. Rates will then be set by the Canada Employment Insurance Financing Board, subject to a 15-cent limit on annual changes.
Some businesses have expressed concern that higher EI premiums will hurt job creation because it could make companies more reticent to hire.
Small and medium-sized business are a key driver of the economy, accounting for about 98 per cent of all businesses in Canada and employing more than five million people.
“There were not many targeted measures, period. It wasn't a budget for that,” said Avery Shenfeld, chief economist at CIBC. “There's probably a realism across Canada [among smaller businesses] that the cupboard is bare, and the government has doled out huge amounts in the prior budget that there's not much left.”
Small business owners were disappointed by the lack of support. “They really haven't changed a heck of a lot that affects us [in the small business community],” said Mike Hachey, president of Egg Films, a production company in Halifax.
In an economy that is still very weak, the lack of any new benefits for struggling small companies was unhelpful, he added, particularly when small firms are such a key component of the economy. He described the higher EI premiums businesses will face next year as a “tax grab.”
The lack of support is a contrast to what is happening in the United States, where supporting small businesses -- through tax credits for hiring and enhanced access to credit -- has been a priority.
One small measure targeted to small businesses aims to promote innovation. The government will spend $40-million over two years to launch a new SME innovation commercialization program. The pilot program will support business efforts to develop new prototypes, but it will fund just 20 projects.
Andrew Dunn, managing partner for tax at consultants Deloitte Canada, said small business, like all companies, should be pleased that Finance Minister Jim Flaherty did not reverse an earlier decision to lower corporate income tax rates over the next couple of years. If he had reneged on that promise, it would have been bad news for all businesses, he said.
