FREDERICTON (NB) – As announced in the 2019-20 budget, the provincial government will not adopt a recent federal measure related to passive income that would have a negative impact on New Brunswick small businesses.

Finance Minister Ernie Steeves tabled today required legislative amendments to the New Brunswick Income Tax Act.

“We are making the right decision to support our small businesses and to energize our private sector,” said Steeves. “Maintaining the current rules for the New Brunswick small business limit will avoid a corporate income tax rate increase from 2.5 per cent to 14 per cent on active business income for those small businesses impacted by the federal changes. New Brunswick small businesses would have paid an estimated $10-12 million more annually in provincial corporate income tax. By not adopting these new federal measures, we are protecting our small businesses.”

The 2018 federal budget introduced changes to the tax treatment of private corporations intended to limit tax planning. One of these changes restricts access to the federal small business tax rate depending on the amount of passive income earned within the corporation.

“New Brunswick businesses have seen their budgets squeezed by increases in taxes, WorkSafe premiums, trade issues, energy costs and operational costs,” said Economic Development and Small Business Minister Mary Wilson, who is also minister responsible for Opportunities NB. “We need to support our New Brunswick businesses, and by bringing some important financial relief, our small and medium-sized companies will be in a better position to grow.”

“By not implementing the federal government’s passive investment measures, the Government of New Brunswick demonstrates that it listened to the concerns of small business owners,” said Louis-Philippe Gauthier, director of provincial affairs for New Brunswick, Canadian Federation of Independent Business. “This decision will reduce the tax burden on New Brunswick small businesses and allow them to reinvest or save in case of unforeseen situations.”

“The decision not to follow suit with the federal government in hiking taxes on passive income for small business is a big deal for businesses in New Brunswick and a sign that the government is making these decisions with a business lens,” said Krista Ross, chief executive officer of the Fredericton Chamber of Commerce. “In order to continue to provide the services that New Brunswickers need and deserve into the future, we have to maintain focus on growing the economy and this move is a step in that direction.”

Changes to the New Brunswick Income Tax Act would be retroactive to Jan. 1, 2019.