Tax change could affect some families earning less than $100K: analysis
A new analysis says roughly 900 Canadian families earning less than $100,000 a year will have to pay more taxes because of federal changes to tighten incomesharing rules for owners of small businesses.
The federal budget watchdog says measures to restrict how much income the owners of private corporations can sprinkle to family members, as a way to save on taxes, will cost an average of $2,200 more a year for each of the 900 households.
The income-sprinkling change was among a handful of measures Ottawa insists will target wealthy people who use corporate structures purely as a way to reduce their taxes.
The report by parliamentary budget officer Jean-denis Frechette found that close to 33,000 families could pay more taxes because of the income-sprinkling rule that came into effect Jan. 1.
Frechette’s analysis says about 11 per cent of the households affected by the changes earn less than $150,000 per year, while 83 per cent of them make less than $500,000 per year and two per cent bring in more than $1 mil- lion per year.
The budget office’s preferred estimate also says the changes could generate a tax windfall for Ottawa of about $400 million a year - double the $200-million a year projected in the recent federal budget.
The report, however, notes that the numbers crunched for the budget office estimates differ from those used by the Finance Department.
Frechette’s report also predicts the income- sprinkling change will bring in about $230 million in additional tax revenues for provincial governments in 201819 - with Ontario easily taking the largest share with a $160-million increase.
The Liberals’ income-sprinkling measure was part of Finance Minister Bill Morneau’s controversial tax-reform proposals for private corporations, which came under fire for months following their release last summer.
The vocal backlash, including public criticism by some Liberal backbenchers, included warnings the changes would hurt the very middle class the Trudeau government has claimed to be trying to help. The push back forced Morneau to eventually back away from some elements of his plan.
Conservative Leader Andrew Scheer says nations that believe in free trade need to present a united front against the protectionist moves coming out of the United States.
Scheer is in London meeting British politicians to promote a promise that if he is elected prime minister next year he will prioritize a free-trade agreement with the United Kingdom after it officially leaves the European Union.
However, he says a hot topic at most meetings is President Donald Trump’s proposal to impose steel and aluminum tariffs.
Scheer says countries like Canada, the U.K. and other members of the European Union which are committed to free trade need to stick together and convince the United States not to move forward with steel or any other new tariffs.
He says protectionism might appeal in the short term to people or communities who are struggling, but he says evidence shows long-term free trade is the best way to increase employment.
Scheer says his party is very concerned about the status of NAFTA negotiations and while he says any Canadian government would be challenged to deal with the Trump administration, the Liberals could have eased some anxieties by putting contingencies in the recent budget in the case NAFTA talks go badly.