Battle heats up over small-business tax

The Greater Vancouver Board of Trade has grappled with some hot political issues over the years but it’s never seen a backlash like this one.

Prime Minister Justin Trudeau’s plan to overhaul the small-business tax system has triggered a tsunami of worried and angry inquiries to the business group’s office.

“We’ve never seen our members get up in arms quite like this,” board president Iain Black told me Wednesday. “We set up a link on our website so people could send an email directly to Ottawa voicing their concerns. We thought it would get 5,000 hits.

“There have now been 25,620 emails sent through that link — and rising fast. People are extremely concerned about their businesses.”

The government announced the proposed tax measures after a fasttracked consultation period during the dog days of summer.

Trudeau’s Liberals say they want to close loopholes in the system that entrepreneurs and small businesses use to reduce their tax bite. Some of the measures include restrictions on so-called “income sprinkling” where small-business owners pay wages, salaries or dividends to family members.

The government is also proposing an additional tax on “passive income” — money saved by a business in banks, stocks and investments. And it has targeted lifetime capital gains exemptions popular with family-run businesses.

“These are not ‘loopholes,’ ” fumed Black, who gave a piece of his mind on Wednesday to a federal parliamentary committee meeting in Richmond. “These rules have been in place and tested in the courts for 40 years.”

Now the Trudeau government is feeling the heat.

On Monday, federal Finance Minister Bill Morneau said the government will review the tax proposals.

“Changes are going to be required,” he said. “We do need to make sure we take into account people’s points of view.”

But the backlash is continuing and has spread to Victoria, where the opposition Liberals say the governing NDP should be speaking up against the proposed federal tax changes.

“The B.C. government needs to come forward with a very strong message to the prime minister,” said Liberal critic Coralee Oakes.

Finance Minister Carole James called for more “consultation,” admitting British Columbia has not pressed the federal government to back away from any specific changes. “More discussion is needed,” James said. “We don’t want unintended consequences to hit the small-business community.”

As for why she and Premier John Horgan are not talking tougher, she suggested quiet diplomacy is often a better tactic. “Keeping a constructive working relationship with the federal government is important,” she said, adding she’s “cautiously optimistic” the feds will come back with an improved set of tax reforms.

If they don’t — and the backlash gets uglier — there will be pressure on the B.C. government to get a helluva lot tougher.