Tax changes for P.E.I. businesses are a small step forward, says CFIB
P.E.I. corporate tax rate remains one of the highest in Canada, says business lobby
The Canadian Federation of Independent Business is welcoming P.E.I.'s tax changes for businesses but believes more can be done to support local owners and help them stay competitive.
"Definitely it's a step in the right direction, but it's just a small incremental step," said Frédéric Gionet, the director of Legislative Affairs for the CFIB in Atlantic Canada, said of the measure that came into effect a week ago.
P.E.I. has two types of tax rates for businesses: the small-business tax rate and the corporate tax rate.
The general tax rate for businesses has now dropped from 16 to 15 per cent, and although the small-business tax rate is staying at 1 per cent, the income threshold has gone up $100,000 to $600,000.
It means "every business operating in the province can claim more of their income under the lower rate of business tax," according to a news release from the Department of Finance.
Changes in effect July 1
The changes, initially announced in the provincial operating budget, came into effect on July 1, 2025. The province estimates it will save businesses more than $9 million.
"We've been asking the P.E.I. government for years to increase the small-business tax rate threshold," said Gionet. "We were asking for $700,000 and indexed inflation. So we'll keep working on that for sure, but that does help."
When it comes to the small-business tax rate, P.E.I. has one of the lowest in the country, while also now boasting one of the highest income thresholds.
The province's corporate tax rate remains one of the highest in Canada, however, said Gionet.
"We understand that this, you know, takes away revenue from government, but at the same time, these businesses do provide a lot of economic activity, employ a lot of people," he said.
"It has to be competitive. Otherwise we're just going to be driving businesses away."
More work to do, says CFIB
In Nova Scotia, the small-business tax rate sits at 1.5 per cent, while the small-business income threshold is $700,000.
"We have to look at our neighbours," he said.
"New future businesses, new young people wanting to start a business, it might be a disincentive to do so, looking at their own financial situation down the road if the tax rates are not there, are not favourable for them to grow and to be successful."
Still, he said the tax changes are a start.
"It also sends a signal that P.E.I. is, you know, trying to right the wrongs of their taxation," said Gionet.
"I think it's the first step that's going to need to have multiple other steps to be competitive on that landscape. And we want to encourage governments to do that, to find the ways to make P.E.I. competitive."