Income-sprinkling shackled with more red tape

Morneau’s mess continues, Mark Bonokoski writes.

As Christmas approaches, Finance Minister Bill Morneau continues to gift-wrap the bill of goods that he is on the side of every hard-working and underpaid

Bob and Betty Cratchit in the land.

But he is more and more like Ebenezer Scrooge, one of those Bay Street elites whose entire life has been one of moneyed privilege, and who is therefore without an understanding of how difficult it is for average Canadians to get by.

Now, after dragging his feet for months, Morneau is going after passive investment income and income-sprinkling — the practice in which money, in the form of wages, is transferred from a family member in a high tax bracket to one in a lower bracket.

So, on Wednesday, Morneau rolled it out — and it was a cock-up from the get-go.

Even before Morneau had opened his mouth, the Senate finance committee called on him to put his proposed changes to the Income Tax

Act on hold and undertake a full review of the law.

The senators had spent most of the fall holding cross-country public hearings on Morneau’s plan to put restrictions of income-sprinkling and passive investment income that the Trudeau Liberals believe is akin to thievery.

They heard what has been making headlines from the moment Morneau began talking of the changes — that Canadians didn’t appreciate being called tax cheats, that most already pay more than their fair share of taxes at every level, and that the Liberals’ reckless spending had to be curbed before we are all taxed out of house and home.

According to Sen. Elizabeth Marshall, a Newfoundland Conservative and a chartered accountant, the Liberals have failed to do their homework.

So, they want Morneau to hit the pause button.

What Morneau first promised was diluted somewhat when he finally tabled his proposals on Wednesday.

The Liberals still plan to use tests that the government hopes will weed out those who benefit financially from business operations but have little day-to-day dealings with the company.

But the “reasonableness test,” which Morneau announced in July, has now been ratcheted down and will no longer be required for those over the age of 65, to those over 18 who work in the business at least 20 hours a week, and those over 25 who own 10 per cent or more of a business that earns less than 90 per cent of its income via the provision of services.

Nonetheless, the Senate finance committee’s report had it nailed.

“The difficulty of understanding and complying with the rules will lead to uncertainty, (and) foster tax appeals and litigation,” the report read. In other words, it will be a red tape nightmare.

Poor Bob Cratchit can’t win for losing.