Tax proposals still need work, critics say

“I’d say the level of alarm is still very high with respect to the package of changes as a whole. I think that this is still very, very tender . ... The business community has really only pressed pause here, it certainly hasn’t warmed up to the overall package.” Dan Kelly, CFIB

A coalition of industry associations says Bill Morneau must make more changes to the controversial tax proposals he first unveiled last summer to ensure he addresses deep, persistent concerns in the small-business community.

The group, which came together in recent months as a vocal opponent of the finance minister’s tax-reform plan, is urging him to go further - beyond the adjustments he made to calm an uproar that dogged him for months.

The message was delivered to Morneau on Monday as part of the coalition’s first official response since the government announced several amendments last month.

“While we thank you for making progress ... we remain very concerned by the remaining proposals that appear to be moving ahead,” said a letter sent to Morneau’s office from the Coalition for Small Business Tax Fairness, which represents about 80 associations.

The changes to Morneau’s plan followed an onslaught of complaints from doctors, lawyers, accountants, shop owners, farmers, premiers and even some Liberal backbenchers. They denounced the proposals, contending they would hurt the very middle class the Trudeau government claimed to be trying to help.

Prime Minister Justin Trudeau and Morneau argued the reforms were designed to ensure they targeted wealthy individuals who have used the incorporation of small businesses to gain what the government maintained was an unfair tax advantage.

But following a consultation period, Morneau took steps last month to quiet the backlash by tweaking two of the three proposals and abandoning the third one altogether.

Amid the outrage, the government also announced it would resurrect a 2015 campaign promise to cut taxes for small businesses. Trudeau promised to gradually trim the smallbusiness tax rate to nine per cent by 2019, down from its current level of 10.5 per cent.

The coalition acknowledged the progress but, after digesting and assessing the adjustments, it insisted the government has yet to go far enough.

“I’d say the level of alarm is still very high with respect to the package of changes as a whole,” said Dan Kelly, a coalition member and president of the Canadian Federation of Independent Business.

“I think that this is still very, very tender . ... The business community has really only pressed pause here, it certainly hasn’t warmed up to the overall package.”

Morneau ditched one of the proposals last month related to converting income into capital gains. The change, he said at the time, came in response to concerns the measure could have negative tax implications for small businesses following a death and create challenges for owners who hoped to pass their family businesses to the next generation.

The government also announced it would move ahead with its proposal to limit the ability of owners of private corporations from unfairly lowering their personal income taxes by sprinkling their earnings to family members who do not contribute to their companies.

However, the Liberals vowed to simplify the proposal.