Advisor’s View: The Somber State of Small Business in Canada

The health indicators for small business in Canada show weaknesses that should be of concern to all Finance Ministers who face their own challenges in offsetting growing deficits and debt service costs with economic growth.   From new bankruptcy statistics (see below) to CFIB’s Business Barometer for March, the business outlook, at least in the short term is somber.  In addition, 77% of advisors who answered Knowledge Bureau Report’s March poll, believe the recent CEBA deadline will push more into bankruptcy.  

Gerald Campbell noted:  “The January deadline pushed many and I truly expect the March deadline will push more over the line.”

Ina Turner commented on some potential causes:  “The CEBA deadlines without more time for payment, will be pushing some business into insolvency, along with the lack of income during this period of the loan;  (also the), lack of letters to the business owners, in working on transferring all loans to a bank, so that they can received the $20k (forgivable loan) credit.”

Robert Litschel added a comment about the CERB received by business owners:  “I believe that this will push some of my clients into insolvency or, at least, a near insolvency position.  Most of these (clients) were caught up in the federal hype about how the CERB was so great but were also confused by the rules as they kept changing the rules (seemingly weekly).  A lot of clients decided it was just now worth the trouble to fight so the paid.  I actually have people who received zero dollars from CERB yet the government still wants them to pay back the fictitious amounts sent to them. Needless to say, those are under dispute.  A bad situation all around.

These real life stories are also reflected in the statistics from the Office of Superintendent of Bankruptcy.  Compared to 2019, bankruptcies in Canada are now up almost 31% and business insolvencies increased 41.4% in 2023 over 2022. Looking at 2024, the OSB notes:

“Business insolvencies for the 12‑month period ending February 29, 2024, increased by 58.1% compared with the 12‑month period ending February 28, 2023. Accommodation and food services, Retail trade and Construction registered the biggest increases in the number of insolvencies.”

For professional tax advisors, shoring up knowledge on tax reporting in these cases is important.  Subscribe to the Tax Tip Toolkit which includes access to EverGreen Explanatory Notes for guidance and direct access to required forms and procedures from the CRA.

We thank all advisors who took the time to answer this important poll.  This month we ask a question about a controversial move by CRA:

“Did you agree with the government’s last minute abort of the bare trust filing requirements on March 28, just one business day before the April 2 deadline?”