Carney’s second budget will aim to help small businesses cut costs and invest more, sources say

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According to CFIB, business exits in Canada have outpaced new entries since early 2024, which is a big problem.

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“A successful handover keeps a business open and brings a new generation of entrepreneurs into the economy,” Corinne Pohlmann, CFIB’s executive vice-president of advocacy, was quoted as saying in a release. “Which is why governments need to pay attention and help make it easier to buy and sell a business.”

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Carney has raised the challenges of the Canadian economy’s mediocre productivity, a metric that reflects a country’s standard of living, and the lack of corporate investment. While last month’s productivity mega-deduction initiative and budget moves for small business would create extra incentives on both fronts, the government is also facing another large deficit and escalating debt.

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Champagne has indicated in recent months that the government will continue to err on the side of what he calls “investments” in the economy, instead of reducing the deficit. Champagne argues that Canada has the strongest fiscal position in the G7 and that leaves room to spend or cut taxes or other revenue sources, although some analysts say that position isn’t necessarily something to brag about.

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“I think Canadians can understand that we have a strong fiscal position and we’re investing in the things that will generate growth to the country,” he said in July.

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The proposed new mega-deduction, which the government estimates will cost the treasury $36.5-billion over the next five years, could also be included in the upcoming budget. Whether it’s included or presented as separate legislation, the measure will be one of the government’s biggest swings at boosting long-term growth.

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The government hopes that the deduction changes, announced last month at an international investors’ summit in Toronto, will spur investment, particularly in capital-intensive industries such as energy, mining, transportation, and technology. The changes are expected to cut Canada’s projected tax rate on new investment, a key metric for large investors, by slightly more than half, to about 6.4 per cent from 13 per cent.

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A government source emphasized that the mega-deduction will also help small and medium-sized businesses, on top of other moves the Carney government has already made: its buy-Canadian policy, removing the federal tax on gas and diesel, eliminating the federal portion of inter-provincial trade barriers, and others. But all of those policies, combined with an array of spending moves, has left Ottawa facing another massive deficit and a greater pile of red ink.

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In the government’s spring update, Champagne said the 2025–26 deficit was projected to be about $66.9 billion, down from the $78.3 billion that had been projected in last fall’s budget. That drop was due largely to a fiscal windfall from higher oil prices.

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While Ottawa has been amassing large piles of debt for more than half a century, the problem has grown substantially over the last few years. The federal government has now accumulated more than $1.3 trillion in total debt, almost half of which has been added over the last five years.

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National Post

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