MP O’Toole and Harper Government Introduces Small Business Job Credit


Bowmanville – Erin O’Toole, Member of Parliament for Durham, today announced more action by the Harper Government to create jobs, growth and long-term prosperity: the introduction of the new Small Business Job Credit which is expected to save small businesses more than $550 million over the next two years.

The Small Business Job Credit will effectively lower small businesses’ Employment Insurance (EI) premiums from the current legislated rate of $1.88 to $1.60 per $100 of insurable earnings in 2015 and 2016. Any firm that pays employer EI premiums equal to or less than $15,000 in those years will be eligible for the credit. Almost 90% of all EI premium-paying businesses in Canada will receive the credit, reducing their EI payroll taxes by nearly 15%.

The Canada Revenue Agency will automatically calculate the credit on a business’ return, ensuring no new paper burden will be imposed on business owners.

In addition, all employers and employees will benefit from a substantial reduction in the EI premium rate in 2017 when the new seven-year break-even rate-setting mechanism takes effect. This will ensure that EI premiums are no higher than needed to pay for the EI program over time.

Quick Facts

  • Canada has created more than 1.1 million net new jobs since the height of the recession—one of the strongest job creation records in the Group of Seven (G-7).
  • In 2013, Canada leapt from sixth to second place in Bloomberg’s ranking of the most attractive destinations for business.
  • According to KPMG, total business tax costs in Canada are the lowest in the G-7 and 46% lower than those in the United States.
  • In September 2013, the Government announced a three-year freeze of the EI rate at its 2013 level of $1.88 to prevent it from rising to $1.93 in 2014, saving employers and employees an expected $660 million in 2014 alone.

Quotes

“Small businesses drive Canadian prosperity, representing about 50% of jobs in the private sector and a third of Canada’s gross domestic product. That is why we are taking action to make small businesses stronger. Our new Small Business Job Credit will lower taxes for business owners and make it easier for them to create jobs for Canadians. Canada has become an economic success story, but the global economy is fragile and there are geopolitical tensions. Therefore, we must continue taking action, as we have today, to create jobs, growth and long-term prosperity.”

-Hon. Joe Oliver, Minister of Finance

“Small business is the backbone of our local economy in Durham. I’m proud that our Government is responding to the needs of small business so that they can continue to create jobs and grow our economy. Since our Government took office in 2006 we have reduced taxes on small business by 34%.”

-Erin O’Toole, Member of Parliament for Durham

“This is a big one. This announcement will result in a 15% net reduction in Employment Insurance premiums paid by small businesses over the next two years. I couldn’t be more pleased to stand beside Finance Minister Oliver as he announces half a billion for small firms in payroll tax cuts—the most harmful form of taxation affecting job creation and employee wages. A 15% reduction in EI premiums will make it easier to hire new workers or invest in additional training to help entrepreneurs grow their business.”

-Dan Kelly, President of the Canadian Federation of Independent Business

Backgrounder

With today’s announcement, the Government is taking further steps to recognize the important contribution that small businesses across the country make to job creation and economic growth.

The Small Business Job Credit will apply to Employment Insurance (EI) premiums paid by small businesses in 2015 and 2016. The credit will be calculated as the difference between premiums paid at the legislated rate of $1.88 per $100 of insurable earnings and the reduced small business rate of $1.60 per $100 of insurable earnings in each of those years. Since employers pay 1.4 times the legislated rate, this 28-cent reduction in the legislated rate is equivalent to a reduction of 39 cents per $100 of insurable earnings in EI premiums paid by small employers. The 39-cent premium reduction will apply in addition to the premium reduction related to Quebec’s parental insurance plan, the Québec Parental Insurance Plan.

  • Any firm that pays employer EI premiums equal to or less than $15,000 in 2015 and/or 2016 will be eligible for the credit in those years.
  • As an example, a small business employing 14 employees, each earning $40,000, would ordinarily pay about $14,740 in EI premiums in 2015. However, since the total EI premiums paid by the employer are less than $15,000, it would be eligible under the Small Business Job Credit for a refund of about $2,200, which is the difference between employer premiums paid at the legislated rate versus the premiums calculated under the reduced small business rate ($12,540).
  • As another example, a small business employing 3 employees, each earning $25,000, would ordinarily pay about $1,975 in EI premiums in 2015. However, since the total EI premiums paid by the employer are less than $15,000, it would be eligible under the Small Business Job Credit for a refund of about $295, which is the difference between employer premiums paid at the legislated rate versus the premiums calculated under the reduced small business rate ($1,680).
  • Businesses will not have to apply. The Small Business Job Credit will be automatically administered by the Canada Revenue Agency, which will determine eligibility and calculate the amount of the credit. Once calculated, the credit will be applied against any outstanding debt and then the remaining amount, if any, will be refunded to the small business.
  • This measure is expected to save small employers more than $550 million over 2015 and 2016.
  • For more information, please refer to the Canada Revenue Agency website

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