Feds need to ex­tend tax con­sul­ta­tion dead­line


Busi­nesses across Canada are voic­ing well-founded con­cerns about the fed­eral govern­ment’s pro­posed tax changes for pri­vately held cor­po­ra­tions. The pro­posed leg­is­la­tion is one of the most sig­nif­i­cant changes to tax reg­u­la­tion in 50 years and the govern­ment has pro­vided a mere 75 days (dur­ing sum­mer) for feed­back.

The busi­ness com­mu­nity needs more time to as­sess th­ese com­plex changes to fully un­der­stand the wide­spread im­pact this will have on small to medium-sized busi­nesses.

We need Min­is­ter Bill Morneau to ex­tend the dead­line be­yond Oct. 2 to al­low for proper con­sul­ta­tion.

If im­ple­mented, th­ese changes will dras­ti­cally de­grade the fi­nan­cial sta­bil­ity of all small busi­nesses and not just a group of ‘highly paid in­di­vid­u­als who are re­luc­tant to pay their fair share of taxes.’

It will im­pact all in­cor­po­rated pri­vate busi­ness, such as: star­tups, cor­ner stores, farm­ers, or in­di­vid­u­als who of­fer ser­vices like lawyers, ac­coun­tants and other con­sul­tants.

In fair­ness, no one likes to pay more taxes, but we know the govern­ment also needs to re­form the cur­rent tax leg­is­la­tion to ad­dress sit­u­a­tions where in­di­vid­u­als do not pay their fair share.

How­ever, the pro­posed tax changes on in­come split­ting, hold­ing pas­sive in­come in a pri­vate cor­po­ra­tion, and con­vert­ing reg­u­lar in­come into cap­i­tal gains will ap­ply to all pri­vately held cor­po­ra­tions and not just the mi­nor­ity of high­in­come in­di­vid­u­als.

Why should we care if small busi­nesses can split in­come among fam­ily mem­bers, ac­cu­mu­late tax-ad­van­taged sav­ings, or max­i­mize the sale price of their busi­ness through cap­i­tal gains to fund their re­tire­ment?

Be­cause th­ese changes may stop peo­ple from open­ing new busi­nesses, or ex­ist­ing busi­nesses from re-in­vest­ing and ex­pand­ing, or it could cause the prices of ev­ery­day prod­ucts and ser­vices to go up as busi­nesses ab­sorb tax in­creases – all at a time when we need more busi­ness, more ex­pan­sion, more jobs and com­pet­i­tive pric­ing in At­lantic Canada.

We need leg­is­la­tion to sup­port small busi­ness in our re­gion, not hin­der it.

Most in­cor­po­rated pri­vate busi­nesses are owned by friends and neigh­bours who are at the core of our com­mu­ni­ties.

In fact, ac­cord­ing to Statis­tics Canada (July 2017), 85-90 per cent of busi­nesses across Canada are small-to-medium in size (80 per cent with fewer than 20 em­ploy­ees).

Th­ese busi­nesses cre­ate jobs lo­cally and to dras­ti­cally change the fi­nan­cial at­trac­tive­ness of op­er­at­ing a busi­ness by adding un­nec­es­sary risk will slow eco­nomic de­vel­op­ment in At­lantic Canada.

You see, un­like an ‘em­ployee,’ who may have ac­cess to a com­pany-spon­sored health plan, re­tire­ment plan, sick leave, maternity leave, or other ben­e­fits, a small busi­ness owner must pay for th­ese ben­e­fits.

They of­ten will put per­sonal as­sets at risk to fund their busi­ness, and fam­ily mem­bers of­ten help op­er­ate the busi­ness. Speak with any­one who has ever started a small busi­ness and they will tell you it takes sev­eral years to get it off the ground or to even make a profit be­fore they re­coup their startup costs.

At the heart of th­ese tax changes, is a pro­posal to im­pose ‘rea­son­able­ness tests’ that will dic­tate how much a fam­ily mem­ber who as­sists with busi­ness op­er­a­tions can be paid (known as in­come split­ting).

This pro­vi­sion is very vague and open to in­ter­pre­ta­tion.

We be­lieve more un­der­stand­ing and rigour to re­duce am­bi­gu­ity is a ‘rea­son­able ex­pec­ta­tion’ for busi­ness plan­ning and sta­bil­ity.

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