Proposed Business Tax Changes by the Canadian Government
As we approach the end of a busy September, most of our clients are settling in to some semblance of a normal schedule. Our summer was not so quiet this year. On July 18, 2017 the Government of Canada announced proposed changes to the tax system that will have far-reaching consequences on the economy and all incorporated small businesses.
If legislated, the proposed changes will affect income sprinkling, passive income and the capital gains exemption for Canadian corporations. The rationale for these changes is to create greater fairness in the tax system, specifically for the middle class, by eliminating “tax loopholes” used by the wealthy. One of the key issues is how one defines wealthy vs. middle class.
It is our opinion that these proposed changes will not only affect the wealthy or those that legitimately make use of the current rules to optimize their tax, but will also indirectly affect ALL private corporations. Alarmingly, most of the people who will be directly affected are actually middle class citizens – small business owners, entrepreneurs, shopkeepers and professionals-- who are supposed to be the beneficiary of the “fairness” being imposed. How is this fair?
In addition, there are private corporations not using these “tax loopholes” who will also be affected – since tax reporting will be much more complex to confirm they are within the new rules.
The big question is “what can I do?” If you are part of a professional or industry organization, make sure that they are addressing these issues on behalf of their membership. Many organizations are coming together to form The Coalition for Small Business Tax Fairness (currently 62 national organizations and counting).
We encourage you to get involved and make your opinion count before the October 2 deadline:
Sign a petition against these changes with the Canadian Federation of Independent Business
Use social media to call on Ottawa to extend the consultation period with the business community, together with the Vancouver Board of Trade and other business organizations coast to coast, by using the hashtag “HitThePauseButton
Write to your MP - below is a template letter that you can personalize and send:
Dear Members of Parliament,
As a member of B.C.’s business community, I am writing to express my concern with the Federal Government’s proposed changes to the tax treatment of privately held corporations. I strongly believe they will have a profound impact on the way we do business in this country.
If these changes are adopted, small and family-owned businesses will be challenged in their ability to survive difficult times, finance growth, pay taxes, manage capital, engage family members in the business, and plan for retirement.
Businesses will suffer from unintended consequences of the proposed legislation. With that in mind, I respectfully request that the Government reconsider these proposals and instead extend the consultation period, in order to engage the business community further.
Together we can address any shortcomings in tax policy without unfairly affecting independent businesses.
We suggest sending your letter to:
Hon Bill Morneau, Minister of Finance
Hon Justin Trudeau, Prime Minister of Canada
And your local MP
*Thanks to the Vancouver Board of Trade for providing this letter template.
Candace Nancke is the Managing Partner at Loren Nancke. In recognition of her contributions to the profession and the community, Candace has received multiple awards and has been designated as a Fellow of the Chartered Professional Accountants (FCPA/FCGA), one of the highest honours awarded to Canadian accountants. You can reach her at 604-904-3807 in Vancouver, British Columbia.