Lib­er­als to weigh tax pro­posal back­lash at re­treat

Winnipeg Free Press - - NEWS - JOAN BRY­DEN AND ANDY BLATCHFORD

OT­TAWA — Lib­eral back­benchers have been get­ting an ear­ful this sum­mer from small-busi­ness own­ers out­raged by the Trudeau gov­ern­ment’s pro­pos­als to end what it calls “un­fair tax ad­van­tages.”

And now they’re pre­par­ing to un­leash the con­cerns of their con­stituents — and pres­sure Fi­nance Min­is­ter Bill Morneau to ad­just his plans — dur­ing the gov­ern­ment’s sum­mer cau­cus re­treat next week in Kelowna, B.C.

“From what I’m hear­ing right now, the high­est pri­or­ity thing is to en­gage in a mean­ing­ful dis­cus­sion of the pro­posed tax changes to Cana­dian-con­trolled, pri­vate cor­po­ra­tions,” said Stephen Fuhr, who rep­re­sents the rid­ing that en­com­passes Kelowna.

“There are a whole host of peo­ple — the ones that are on the re­ceiv­ing end of the tax pro­pos­als — that are not happy... My job is to de­liver their in­put or that mes­sage to my col­leagues.” Fuhr is far from alone.

Lib­eral cau­cus chair and Mon­treal MP Fran­cis Scarpa­leg­gia said, “I think we’re all hear­ing from small busi­ness” about the planned tax changes.

“The small-busi­ness peo­ple that I’m speak­ing to ob­vi­ously would like to see some changes... I’ve told them that I’m go­ing to take their con­cerns to Kelowna, for sure,” he said.

The back­lash from doc­tors, lawyers, ac­coun­tants and other small-busi­ness own­ers has been build­ing since midJuly, when Morneau re­leased a con­tro­ver­sial three-pronged plan aimed at clos­ing tax loop­holes used by a grow­ing num­ber of small busi­nesses, cre­at­ing what he called an “un­fair play­ing field.”

One change would re­strict the abil­ity of busi­ness own­ers to lower their tax rate by sprin­kling in­come to fam­ily mem­bers in lower tax brack­ets. Another would limit the use of pri­vate cor­po­ra­tions to make pas­sive in­vest­ments in things like stocks or real es­tate.

A third would limit the abil­ity to con­vert a cor­po­ra­tion’s reg­u­lar in­come into cap­i­tal gains, which are typ­i­cally taxed at a lower rate.

The gov­ern­ment is al­low­ing 75 days for con­sul­ta­tion on the pro­posed changes — a pe­riod that ends Oct. 2.

Back­benchers are hope­ful this means Morneau would be open to ad­just­ing the plan in or­der to ad­dress the con­cerns.

“There is a gen­uine out­rage among peo­ple who have made all their fi­nan­cial cal­cu­la­tions and plan­ning based upon a cer­tain set of tax as­sump­tions and are now see­ing those tax as­sump­tions chal­lenged,” Toronto MP John McKay said.

“I don’t know at this stage how lockedin the gov­ern­ment is on their pro­pos­als, but I do know there is sig­nif­i­cant out­rage among a rel­a­tively in­flu­en­tial group of peo­ple.”

Those peo­ple would be “re­ally ir­ri­tated” if the con­sul­ta­tion turns out to be strictly pro-forma, McKay added.

Win­nipeg Cen­tre MP Robert-Fal­con Ouel­lette said he’s heard com­plaints in his rid­ing about the pro­posed changes, but has also re­ceived feed­back from oth­ers who say it’s time for a more level play­ing field when it comes to taxes.

Ouel­lette, who rep­re­sents one of Canada’s poor­est rid­ings, sup­ports his gov­ern­ment’s plan and be­lieves a sys­tem that en­ables peo­ple to di­vide their in­come among fam­ily mem­bers in or­der to save on taxes is “in­her­ently un­fair.”

“How much in­come does one re­ally need to earn in life in or­der to have a good life?” Ouel­lette said.

“I think every­one has to con­trib­ute to help pay our taxes be­cause these gov­ern­ment ser­vices aren’t for free. They have a pos­i­tive im­pact on the world around us.”

Still, if nec­es­sary, he be­lieves Morneau will be open to changes, tweaks and sug­ges­tions.

Another Toronto MP, Rob Oliphant, said he’s heard from ac­coun­tants who op­pose the pro­pos­als and oth­ers who agree with Morneau that the loop­holes need to be closed.

“We have to make sure that we have a fair tax sys­tem that peo­ple have con­fi­dence in. At the same time, I think it’s in­cum­bent on us to make sure there’s no un­in­tended con­se­quences,” he said.

Fuhr said he’s heard from some tax pro­fes­sion­als that the re­stric­tion on pas­sive in­vest­ments could re­sult in fewer small-busi­ness own­ers in­vest­ing in rental prop­er­ties which could, in turn, ex­ac­er­bate the ex­ist­ing short­age of af­ford­able hous­ing.

“It may have an ad­verse ef­fect on the rental mar­ket and that’s some­thing that we’ve al­ready got an is­sue with so that’s some­thing we may want to con­sider.”

Fuhr is hop­ing the gov­ern­ment can find some mid­dle ground that in­creases tax fair­ness but avoids un­duly pe­nal­iz­ing small-busi­ness own­ers.

“I think there’s a me­di­ated so­lu­tion in there some­where. I think. I hope.”

BORIS MINKEVICH / WIN­NIPEG FREE PRESS FILES

Win­nipeg Cen­tre MP Robert-Fal­con Ouel­lette says he sup­ports his gov­ern­ment’s plan.

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