Too Taxed to Grow: How Many Canadian SMBs Are Struggling Under the Tax Burden?

Canada’s small and medium‑sized businesses (SMBs) are sounding the alarm: taxes—across the board—are choking their ability to start, sustain, and scale operations. The statistics paint a stark picture of widespread pain:

1. Three‑quarters say taxes are a top barrier

In a September 2024 CFIB survey, 73 percent of small‑business owners cited a “high tax burden” as a primary reason they’d advise against starting a new business right now—second only to the cost of doing business itself (90 percent) and the broader economic situation (76 percent)

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2. Over half are actively struggling with tax costs

When asked about current operational challenges, 59 percent of SMBs reported they’re “struggling with taxes and operational costs,” signaling that tax pressures aren’t just theoretical but an everyday drain on resources

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3. Payroll levies are the worst offender

Among all tax types, 71 percent of small business owners singled out payroll‑related taxes (CPP, EI, workers’ compensation, and more) as the form that “most severely impedes their growth.” For a $50,000 salary, employers can face up to $6,632 in Quebec and over $5,000 in Ontario in payroll levies alone

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4. Demand for relief is nearly universal

The call for lower taxes isn’t niche—74 percent of business owners prioritize reducing the overall tax burden, and an overwhelming 93 percent back cutting the federal small‑business tax rate from 9 percent to 8 percent

CFIB

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5. Investment is being deferred or cancelled

Tax barriers aren’t just squeezing cash flow—they’re throttling growth plans. In CFIB’s “Removing Roadblocks” report, 37 percent of small businesses in B.C., Saskatchewan, and Manitoba cited their inability to write off provincial sales taxes as deterring capital investment—while 32 percent of all Canadian small firms anticipate a decline in machinery and equipment spending over the next two years

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6. Property taxes add insult to injury

In Atlantic Canada, SMBs pay two to three times the residential property‑tax rate—and over 70 percent of owners there say municipalities must limit commercial tax hikes to support local entrepreneurs

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Why This Matters

Cash‑flow crunch: With taxes consuming a large share of revenues, businesses have less to reinvest in hiring, equipment, or digital upgrades.

Competitive drag: Heavy tax bills make domestic operations less competitive against jurisdictions with leaner regimes.

Growth bottleneck: Deferred capital expenditures and shrinking margins slow innovation and productivity gains at a critical juncture.

Pathways to Relief

Advocate for rate cuts: Encourage federal and provincial leaders to lower small‑business and payroll tax rates.

Leverage credits and deductions: Work with tax professionals to maximize R&D credits, clean‑energy incentives, and other specialized relief.

Optimize structure: Consider holding companies or trusts to isolate passive assets and benefit from favourable rates.

Engage in dialogue: Join industry associations to press for targeted tax-policy reforms that address SMB pain points.

For Canada’s entrepreneurs, the current tax tide is more than a nuisance—it’s a barrier to growth, innovation, and competitiveness. Recognizing the depth of this challenge is the first step; pushing for meaningful reform is the next.