Tax changes aimed at making system fair: PM

OTTAWA — Prime Minister Justin Trudeau says the government has no intention of stifling growth for small businesses and start-ups with its upcoming changes to the tax code.

Trudeau said Monday he has listened to the feedback and agrees with some of it, and that the government is now looking at balancing the need to make the tax code more fair without hurting investment.

“We need to make sure we are encouraging entrepreneurs, encouraging risk takers, encouraging success in the start-ups,” Trudeau told reporters at an event in Toronto.

The consultation period on the proposals ends next week and anxiety is high for business owners awaiting their fate and for politicians getting an earful from them.

There are three main facets to the Liberal tax changes, some of which Trudeau campaigned on.

The first affects business owners, including professionals such as doctors and lawyers, who have incorporated, and have effectively reduced their income tax burden by “sprinkling” their income among adult family members who may not be doing any work for the business in return. The government’s proposal is to create a test to ensure any income paid to family members is fair compensation for work actually provided.

The second aspect affects how corporations make investments that may be intended to benefit the owner rather than business but using income that is taxed at lower business rates than individual rates.

The third is about imposing new limits on converting business income into capital gains where it is taxed at lower amounts.

Conservatives say business owners take risks others don’t and don’t always have access to benefits such as employment insurance. They also say the changes affect middle-class business owners, who fall into the same category of middle-class Canadians.