Canada's Business Formation Decline: Lessons from Top-Performing Nations

According to recent data from Statistics Canada, the number of active businesses in the country has been declining. Between March 2024 and March 2026, the total number of active businesses fell by 4,400, bringing the current count to approximately 935,000. This decline in business formation is a worrying trend for Canada's economy, as new businesses create jobs, drive innovation, and push established companies to improve.

The issue with Canadian entrepreneurship is not unique, the country ranks 17th out of 22 advanced economies in terms of business entries per capita, lagging behind countries like Estonia, Singapore, and France. In fact, while other major economies have seen significant increases in new businesses over the past decade, Canada's numbers have remained largely stagnant.

Researchers looked at several countries that excel at business formation, including Estonia, Singapore, Ireland, Israel, and France. These nations share common policy foundations, such as competitive taxation, less restrictive regulation, and more competition in product markets. For example, Estonia's tax system is designed to encourage long-term capital formation, with a single 22 percent corporate income tax rate and no tax on retained earnings.

Other countries have implemented targeted programs to support business growth. Singapore, for instance, combines a low headline corporate tax rate with incentives that reduce effective rates during the early growth phase. The country's digital infrastructure also makes it easy and affordable to start and scale businesses.