Getting an earful
Disgruntled professionals to speak at Senate finance committee hearings
Sydney lawyer Nicole LaFosse will get her turn at the microphone this morning to voice her opposition to the federal Liberals’ proposed changes to small business taxes.
The Senate national finance committee is meeting in Halifax with organizations and citizens aff ected by the federal government’s decision to make changes to the taxation of private corporations.
The committee has been holding hearings across the country and is expected to complete the study by Nov. 30 and report back to the Senate.
LaFosse, who will be representing the Cape Breton Barristers’ Society at today’s Senate committee hearing at the Westin Nova Scotian Hotel, said her arguments against the amendments to the Income Tax Act concern using investment income to plan for the future.
Th e use of income- sprinkling, the threshold for the amount of passive investment income to be taxed at a higher rate each year and potentially limiting access to services due to the changes, will form the basis of her talking points.
LaFosse admits there are some people who abuse the rules but says there is a much larger number of people who use the system fairly.
“In most circumstances, income- sprinkling is used for the benefit of your family. It’s used predominantly for children to put them through school,” LaFosse said in an interview with the Cape Breton Post.
It’s also used to assist with any associated health carerelated costs, she said.
The Liberals have promised to change the income-sprinkling rules, which is the practice of spreading — or sprinkling — income accrued through a corporation to family members, who would be taxed on that income at a lower rate.
Facing pressure from small business owners, last month Prime Minister Justin Trudeau said the rules around the practice would be simplified, but those details haven’t been made public yet.
LaFosse will offer her suggestions during her presentation to the Senate committee.
She said if income- sprinkling had a specified purpose such as to lessen costs associated with educational or health- care needs, it could deter abuse.
“I would prefer no changes at all but if we have to do something I think the way to cut it out is just to change the rules so that … ( it’s) made a little bit stricter in terms of its application.”
She also has issues with the proposed changes to passive investment and a $ 50,000 a year cap on savings that can be sheltered from a higher tax rate.
It was a change announced a month ago by Finance Minister Bill Morneau so that only three per cent of the “most wealthy” privately owned corporations will have to pay higher taxes.
LaFosse is concerned it’s unclear if the $ 50,000 a year rule is the amount saved by an individual or by a household. She said she doesn’t believe the proposed amendments are being applied equally.
“We’re defining the one per cent ( of Canadians) who can save that much ($ 50,000 a year) and it’s only going to apply to them. Whereas with income sprinkling, they’re just going to have it apply to everyone and they’re just not targeting the one per cent.”
There is also an issue specific to lawyers — the amount of pro bono work they accept each year.
It varies from lawyer to lawyer, but LaFosse, who said she commits to doing between 30 to 75 hours a year in free legal advice, adding that some of her colleagues said the changes will affect how much they contribute to their community.
“You’re not necessarily going to be willing to give up some of your earning time to do that free work.
“And it’s not by any means an ultimatum but it’s kind of a necessary evil if this ( proposed tax changes) goes through.”
Another Cape Bretoner will be speaking before the committee today. Dr. Craig Stone will be representing the Cape Breton Medical Staff Association.
He could not be reached for comment, however Doctors Nova Scotia has said with about 75 per cent of doctors in the province incorporated, the Income Tax Act as it stands now allows physicians to save for retirement and make up for the lack of formal sick benefits.