Smaller businesses pay between 20-23% more in taxes in Canada than in the U.S.: CFIB

A microbusiness (four employees) in Canada pays on average a whopping 20% more in taxes than a similar firm in the United States, finds a new report from the Canadian Federation of Independent Business (CFIB) that compares tax loads in all 10 Canadian provinces and 20 U.S. states. A small business (25 employees) pays 23% more in taxes than its U.S. counterpart.

Bradlee Whidden

“U.S. tariffs are not the only competitive issue facing Canadian small businesses,” said Bradlee Whidden, senior policy analyst and report co-author. “When you look at the numbers, it’s crystal clear: smaller businesses in Canada are already at a serious tax disadvantage, which was just made permanent by recent pro-small business changes in the United States through the Big Beautiful Bill. If Canada wants to compete and raise our standard of living, we need to cut taxes. Payroll taxes are heavy on both sides of the border, but the real gap is in corporate and property taxes. Here in Canada, that gap means less money going back into wages, business operations, and growth.”

On a province-by-province level, Quebec and Atlantic Canada performed poorly, while Western Canadian provinces ranked a bit higher, but still significantly below the average of U.S. states analyzed in the report. Even the most competitive provinces (B.C. for micro businesses, Saskatchewan for small firms) have an average tax burden higher than the vast majority of U.S. states, said the CFIB.

Among microbusinesses, the five best (1 – 5) and worst (26 – 30) jurisdictions are:

Among small businesses, the five best (1 – 5) and worst (26 – 30) jurisdictions are:

To improve Canada’s tax competitiveness and boost economic productivity, CFIB is calling on the federal and provincial governments to lower corporate income tax rates for small firms, and to increase the small business deduction threshold while indexing it to inflation moving forward. Additionally, municipal and provincial governments should reduce property taxes and close the property tax gap between commercial and residential properties, said the CFIB.

Juliette Nicolaÿ

“Trade disruptions have put the spotlight on Canada’s uphill battle to remain competitive with the United States. While we can’t control what other countries do, we can’t ignore the widening gap between Canadian small firms and their U.S. competitors,” said Juliette Nicolaÿ, CFIB’s policy analyst for national affairs and report co-author. “It’s time for governments to step up with policies that lower the cost of doing business in Canada.”

Read the full report. 
  
The CFIB is Canada’s largest association of small and medium-sized businesses with 100,000 members across every industry and region.

Mario Toneguzzi

Mario Toneguzzi is Managing Editor of Canada’s Entrepreneur. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 and 2024 as one of the top business journalists in the world by PR News. He was also named by RETHINK to its global list of Top Retail Experts 2024 and 2025.

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