Policy Forum: Editors' Introduction-Taxation of Small Business Kevin Milligan ~ Vancouver School of Economics ~ University of British Columbia

Policy Forum: Editors' Introduction-Taxation of Small Business

with Tim Edgar
Canadian Tax Journal, Vol. 63, No. 3, pp. 689-690. (2015)
Google Scholar entry.


The recent federal budget featured a headline corporate income tax proposal to phase in a 2 percentage point decrease in the rate applicable to active business income carried on by a qualifying Canadian-controlled private corporation (CCPC). Although the provision of a lower rate of corporate income tax has received some recent prominent criticism,2 this budget initiative clearly reflects the Conservative government's commitment to the lower rate of tax as one particular, and longstanding, tax-based policy instrument intended to address a range of familiar market failures assumed to be faced by the small business sector. With reductions in the general federal corporate income tax rate, the gap between the lower rate for qualifying income of qualifying ccpcs and the general rate had reduced to only 4 percentage points, and a plausible policy case could be made to eliminate that gap entirely. Moreover, such a policy course would be consistent with recent initiatives to maintain the integrity of the lower general corporate rate in the face of increased incorporations by personal services businesses intended to defer higher marginal personal rates on the associated income.


Published version, 2015: link.

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