Trudeau defiant on tax changes

PM says he’s open to tweaking but won’t abandon proposals in face of backlash

KELOWNA — Justin Trudeau insisted Wednesday that his government won’t back down on a controversial plan to end tax provisions that it says give some wealthy small-business owners an unfair advantage.

The prime minister delivered that message as he kicked off a Liberal caucus retreat, pre-empting backbenchers who’d come poised to press for changes to the tax plan after being inundated with complaints over the summer.

“I want to be clear,” Trudeau told the assembled MPs.

“People who make $50,000 a year should not pay higher taxes than people who make $250,000 a year.”

While he signalled a willingness to adjust the proposed tax changes, Trudeau was adamant that they won’t simply be abandoned in the face of a mounting backlash from doctors, lawyers, tax professionals, shopkeepers and others who’ve incorporated their small businesses in order to reduce their income tax bill.

“We are always open to better ways to fix that problem but we are going to fix that problem,” he said.

The backlash has been growing since mid-July, when Finance Minister Bill Morneau released a controversial, three-pronged plan to end tax provisions used by a growing number of small businesses, creating what he called an “unfair playing field.”

One change would restrict the ability of incorporated business owners to lower their tax rate by sprinkling income to family members in lower tax brackets, even if those family members do no work for the business. Another would limit the use of private corporations to make passive investments in things like stocks or real estate.

The third change would limit the ability to convert a corporation’s regular income into capital gains that are typically taxed at a lower rate.

Morneau insists the plan will affect only those who earn $150,000

or more and who still have money to shelter from tax after maxing out their RRSPs and tax-free savings accounts.

Morneau stressed Wednesday that the government is still consulting on the proposals and is prepared to make some adjustments to avoid any unintended consequences.

“We know that we need to get more information before we can actually come to conclusions,” he said.

However, he ruled out extending the Oct. 2 consultation deadline, as urged by the Canadian Chamber of Commerce.

The Canadian Medical Association has warned that the proposed changes would disproportionately impact young female doctors who rely on the tax measures to be able to afford to take maternity leave.

“We have a commitment to making sure that the work we do for Canada includes a focus on how we can have a really great performance for women in the economy, that we deal with issues around differences in pay, that we

deal with differences in terms of how women can be successful,” Morneau said.

“So nothing we will do will in any way jeopardize that. We’ll look at all these measures to make sure they’re not in any way causing (a) challenge for women.”

Ginette Petitpas Taylor, the new health minister, said she intends to meet soon with CMA president Gigi Osler to discuss her concerns.

Behind the closed doors of the caucus retreat, MPs aired the concerns they’ve heard from their constituents about the reforms. Insiders said views were mixed, with some backbenchers wanting to ditch outright one or more of the proposed changes and others seeking only a few tweaks.

Kelowna-Lake Country MP Stephen Fuhr said he’s satisfied the government is listening to its backbenchers.

“They’re absolutely open to hearing from all of us,” he said. “That’s our job, to deliver the message, and it’s their job to compile the data to come up with the best policy to serve all Canadians, and I’m convinced that they’re doing that.”