Canada’s Tax Code Overhaul Could Begin with Small Business — But Experts Warn the Hard Choices Still Lie Ahead

By Kekeletso Nkele, small.news Assistant

(small.news) — Wayne Long, MP for Saint John—Kennebecasis and Secretary of State for the Canada Revenue Agency and Financial Institutions, told The Canadian Press that the federal government plans to make tax changes gradually, with small businesses as a top priority before the fall budget, reports Global News.

Long, who is taking part in pre-budget talks with Finance Minister François-Philippe Champagne, said he has heard from small businesses across the country about the heavy paperwork required by the current tax system. He said the government is working on reducing these reporting rules, making the system easier for small businesses to handle.

He described the fall budget as the next step in the Liberal government’s economic plan, focused on attracting investment and encouraging growth after the problems caused by U.S. tariffs. He said a major unnamed international investor had said it might invest more money in Canada once Ottawa changed its tax rules and investment policies. However, he did not name the investor or give details.

The Finance Minister’s office declined to confirm or deny whether the government would proceed with the expert review of the corporate tax system pledged during the 2025 election campaign. A spokesperson said it would be “inappropriate” to speculate on prospective changes but that the minister has been clear about the budget’s emphasis on innovation, growth, and entrepreneurship.

What Has Already Changed

Over the past year, the Liberals have introduced a few tax changes. For businesses, the government allowed immediate deductions for new equipment purchases. For individuals, it lowered the lowest income tax rate by one percentage point and announced a trial for automatic tax filing starting next year. Critics from both business groups and the opposition say these steps, though positive, do not go far enough for the big changes many want.

Canada’s last major tax overhaul was in the 1980s under Prime Minister Brian Mulroney — a process that produced the goods and services tax.

The Opposition’s View

Conservative finance critic Michael Chong said the Liberals have made only small changes to a tax system he called outdated and harmful to the economy. He said that years of weak business investment and slow productivity in Canada are due to a tax code that drives money out of the country.

When asked what specific changes the Conservatives would make, Chong suggested establishing a group to recommend ways to update the system. Still, he did not promise any specific changes to tax rates or major reforms. The Conservative Party generally believes that high taxes discourage wealthy people and successful companies from doing business in Canada.

What Independent Experts Say

Several tax experts interviewed by The Canadian Press agreed that real reform is long overdue but warned that moving forward will require tough compromises.

Ryan Minor, director of tax at CPA Canada, offered an example illustrating the complexity. He said eliminating the small business deduction — which lets smaller firms pay a lower tax rate on their first $500,000 in earnings — could make tax rules simpler overall, but only if larger investment deductions for those businesses offset the savings. He pointed out that the political problem is any group losing out will fight changes unless they get something back.

Dan Kelly, president of the Canadian Federation of Independent Business, said he is hopeful about the government’s plans but will assess how serious they are in the fall budget. He criticized the government’s approach under former prime minister Justin Trudeau for relying on many scattered, specialized programs rather than simplifying the system. He said the complicated corporate tax system increases compliance costs and makes business owners worried about being audited.

Kelly said he is against removing the small business deduction and would rather see the income limit for the lower corporate tax rate increased from $500,000 to $700,000.

The Political and Fiscal Constraints

Many experts said that major tax reform is politically difficult because cutting taxes in one area means either accepting less government revenue or raising taxes elsewhere, and both choices carry political risks. Most agreed that big reform done all at once is easier for those involved to accept than small changes, which often face opposition from those who lose out.

Long said the government will need to find a political and economic balance and pointed out that the Liberals’ small parliamentary majority — which they did not have during the last budget season — gives them more freedom to push their plans than before.