CRA implies that income on which the SBD is deliberately not claimed is subject to a punitive rate of corporate tax
It was suggested to CRA that a Quebec CCPC that was not eligible for the Quebec small business deduction might choose not to claim the federal SBD because, although this would increase its combined corporate tax from 22.3% to 26.9%, all its income could then be distributed as eligible dividends.
CRA demurred, indicating that not claiming the SBD would not have the effect of increasing the amount of taxable income which was eligible for the general rate reduction of 13% under s. 123.4(2): such taxable income is reduced by the amount of income eligible for the SBD, irrespective of whether it is claimed. This seems to suggest that the income on which the SBD could have been, but was not, claimed would be subject to corporate income tax of around 40%.
Neal Armstrong. Summary of 2017 Quebec CPA Roundtable, Q.1.1, 2016-0674221C6 Tr under s. 123.4(1) – full rate taxable income.